-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CHG0Xjec7jdjNPe8IBKv9gzpRUdG1X+VmCX3VjdeihQ6ajFExoaS2nvR90YuhZxw yKdA6zXmu+AjWMTw33JOhg== 0000950109-02-002974.txt : 20020514 0000950109-02-002974.hdr.sgml : 20020514 ACCESSION NUMBER: 0000950109-02-002974 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 68 FILED AS OF DATE: 20020514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GILPIN VENTURE INC CENTRAL INDEX KEY: 0001173287 IRS NUMBER: 841177995 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-07 FILM NUMBER: 02647828 BUSINESS ADDRESS: STREET 1: 240 MAIN STREET CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACK HAWK/JACOBS ENTAINMENT LLC CENTRAL INDEX KEY: 0001173289 IRS NUMBER: 841344735 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-08 FILM NUMBER: 02647829 BUSINESS ADDRESS: STREET 1: 240 MAIN STREET CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLD DUST WEST CASINO INC CENTRAL INDEX KEY: 0001173288 IRS NUMBER: 841531817 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-09 FILM NUMBER: 02647830 BUSINESS ADDRESS: STREET 1: 240 MAIN STREET CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JALOU LLC CENTRAL INDEX KEY: 0001173345 IRS NUMBER: 311749671 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-01 FILM NUMBER: 02647821 BUSINESS ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 MAIL ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JACE INC CENTRAL INDEX KEY: 0001173344 IRS NUMBER: 721221055 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-02 FILM NUMBER: 02647823 BUSINESS ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 MAIL ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WINNERS CHOICE CASINO INC CENTRAL INDEX KEY: 0001173341 IRS NUMBER: 721227314 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-03 FILM NUMBER: 02647824 BUSINESS ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 MAIL ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JALOU II INC CENTRAL INDEX KEY: 0001173347 IRS NUMBER: 341926209 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-04 FILM NUMBER: 02647825 BUSINESS ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 MAIL ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIVERSIFIED OPPORTUNITIES GROUP LTD CENTRAL INDEX KEY: 0001024331 IRS NUMBER: 341828344 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-05 FILM NUMBER: 02647826 BUSINESS ADDRESS: STREET 1: 240 MAIN STREET CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 MAIL ADDRESS: STREET 1: 240 MAIN STREET CITY: BLACK HAWK STATE: CO ZIP: 804222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GILPIN HOTEL VENTURE CENTRAL INDEX KEY: 0001173286 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-06 FILM NUMBER: 02647827 BUSINESS ADDRESS: STREET 1: 240 MAIN STREET CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 MAIL ADDRESS: STREET 1: 240 MAIN STREET CITY: BLACK HAWK STATE: CO ZIP: 80422 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACK HAWK GAMING & DEVELOPMENT CO INC CENTRAL INDEX KEY: 0000896495 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 841158484 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-10 FILM NUMBER: 02647831 BUSINESS ADDRESS: STREET 1: 240 MAIN ST PO BOX 21 STREET 2: SUITE 170 CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 MAIL ADDRESS: STREET 1: 240 MAIN ST BOX S STREET 2: SUITE 400 CITY: BLACK HAWK STATE: CO ZIP: 80422 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GAMECO INC CENTRAL INDEX KEY: 0001173284 IRS NUMBER: 341959351 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242 FILM NUMBER: 02647832 BUSINESS ADDRESS: STREET 1: 240 MAIN STREET CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 MAIL ADDRESS: STREET 1: 240 MAIN STREET CITY: BLACK HAWK STATE: CO ZIP: 804222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LUCKY MAGNOLIA TRUCK STOP & CASINO LLC CENTRAL INDEX KEY: 0001173349 IRS NUMBER: 721268240 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-11 FILM NUMBER: 02647833 BUSINESS ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 MAIL ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JALOU CASHS LLC CENTRAL INDEX KEY: 0001173348 IRS NUMBER: 311750851 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-12 FILM NUMBER: 02647834 BUSINESS ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 MAIL ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOUMA TRUCK PLAZA & CASINO LLC CENTRAL INDEX KEY: 0001173343 IRS NUMBER: 721447916 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-13 FILM NUMBER: 02647835 BUSINESS ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 MAIL ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAYOU VISTA TRUCK PLAZA & CASINO LLC CENTRAL INDEX KEY: 0001173342 IRS NUMBER: 721460460 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-14 FILM NUMBER: 02647836 BUSINESS ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 MAIL ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RACELAND TRUCK PLAZA & CASINO LLC CENTRAL INDEX KEY: 0001173340 IRS NUMBER: 721478884 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88242-15 FILM NUMBER: 02647837 BUSINESS ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 BUSINESS PHONE: 3035821117 MAIL ADDRESS: STREET 1: 240 MAIN ST CITY: BLACK HAWK STATE: CO ZIP: 80422 S-4 1 ds4.txt S-4 REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on , 2002 Registration No. 333- ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM S-4 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ----------------- GAMECO, INC. (Exact name of registrant as specified in its charter) ----------------- Delaware (State or other jurisdiction of incorporation or organization) 7990 (Primary Standard Industrial Classification Code Number) 34-1959351 (I.R.S. Employer Identification Number) 240 Main Street, Black Hawk, Colorado 80422 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ----------------- Stephen R. Roark, Chief Financial Officer Gameco, Inc. 240 Main Street, Black Hawk, Colorado 80422 Telephone (303) 582-1117 (Name, address, including zip code, and telephone number, including area code, of agent for service) ----------------- Copy of all communications to: Robert A. Weible, Esq. Baker & Hostetler LLP 3200 National City Center 1900 East Ninth St. Cleveland, Ohio 44114-3485 ----------------- Approximate date of commencement of proposed sale of the securities to the public: As soon as practical after this registration statement becomes effective. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] ___________ If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] ___________ ----------------- CALCULATION OF REGISTRATION FEE ================================================================================
Proposed maximum Proposed offering maximum Amount of Title of each class of Amount to be price per aggregate registration securities to be registered /(1)(2)/ registered unit offering price fee - --------------------------------------------------------------------------------------------- 11 7/8% Senior Secured Notes Due 2009 $125,000,000 100% $125,000,000 $11,500 - --------------------------------------------------------------------------------------------- Guarantees of 11 7/8% Senior Secured Notes Due 2009 -- -- -- -- - ---------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- (1) Determined in accordance with Rule 457(f) promulgated under the Security Act of 1933, as amended. (2) Determined in accordance with Rule 457(n) of the Securities Act of 1933, as amended; no separate registration fee payable for the guarantees. ================================================================================ Note: Specific details relating to the fee calculation will be furnished in notes to the table, including references to the provisions of Rule 457 relied upon, if the basis of the calculation is not otherwise evident from the information presented in the table. THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT BECOMES EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE. TABLE OF ADDITIONAL REGISTRANTS Each of the following subsidiaries of Gameco, Inc. and each other subsidiary that is or becomes a guarantor of the securities registered hereby is hereby made a registrant.
Exact Name of Registrant State of Jurisdiction of Primary Standard Industrial I.R.S. Employer As Specified in its Charter Incorporation or Organization Classification Code Number Identification Number - --------------------------- ----------------------------- --------------------------- --------------------- Black Hawk Gaming & Colorado 7011 84-1158484 Development Company, Inc. Gold Dust West Casino, Inc. Nevada 7011 84-1531817 Black Hawk/Jacobs Colorado 7011 84-1344735 Entertainment, LLC Gilpin Hotel Venture Colorado 7011 None Gilpin Ventures, Inc. Colorado 7990 84-1177995 Jalou II Inc. Louisiana 7990 34-1926209 Winner's Choice Casino, Inc. Louisiana 7990 72-1227314 Diversified Opportunities Ohio 7990 34-1828344 Group Ltd. Jalou L.L.C. Louisiana 7990 31-1749671 Houma Truck Plaza & Louisiana 7990 72-1447916 Casino L.L.C. Jalou--Cash's L.L.C. Louisiana 7990 31-1750851 JACE, Inc. Louisiana 7990 72-1221055 Lucky Magnolia Truck Stop Louisiana 7990 72-1268240 and Casino, L.L.C. Bayou Vista Truck Plaza and Louisiana 7990 72-1460460 Casino, L.L.C. Raceland Truck Plaza and Louisiana 7990 72-1478884 Casino, L.L.C.
Address, Including Zip Code and Telephone Number, Including Area Codes of Registrant's Principal Registrant Executive Offices ---------- ---------------------- Black Hawk Gaming & 240 Main Street Development Company, Black Hawk, CO 80422 Inc. (303) 582-1117 Gold Dust West Casino, 444 Vine Street Inc. Reno, NV 89505 (303) 582-1117 Black Hawk/Jacobs 240 Main Street Entertainment, LLC Black Hawk, CO 80422 (303) 582-1117 Gilpin Hotel Venture 240 Main Street Black Hawk, CO 80422 (303) 582-1117 Gilpin Ventures, Inc. 240 Main Street Black Hawk, CO 80422 (303) 582-1117 Jalou II Inc. 10515 Colonial Downs Parkway New Kent, VA 23124 (303) 582-1117 Winner's Choice Casino, 2650 Highway 108 Inc. Sulphur, LA 70663 (303) 582-1117 Diversified Opportunities 1231 Main Street Group Ltd. Cleveland, Ohio 44113 (303) 582-1117 Jalou L.L.C. 10515 Colonial Downs Parkway New Kent, VA 23124 (303) 582-1117 Houma Truck Plaza & 1541 Grand Caillou Road Casino, L.L.C. Houma, LA 23124 (303) 582-1117 Jalou--Cash's L.L.C. 10515 Colonial Downs Parkway New Kent, VA 23124 (303) 582-1117 JACE, Inc. 213 West Park Avenue Thibodaux, LA 70301 (303) 582-1117 Lucky Magnolia Truck Stop 40235 Highway 16 and Casino, L.L.C. Denham Springs, LA 70706 (303) 582-1117 Bayou Vista Truck Plaza 1829 Highway 90 West and Casino, L.L.C. Bayou Vista, LA 70380 (303) 582-1117 Raceland Truck Plaza and 109 S. Service Road Casino, L.L.C. Raceland, LA 70394 (303) 582-1117 The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to Completion, dated June , 2002 PROSPECTUS $125,000,000 OFFER TO EXCHANGE NEW 11 7/8% SENIOR SECURED NOTES DUE 2009 FOR ANY AND ALL OUTSTANDING 11 7/8% SENIOR SECURED NOTES DUE 2009 OF GAMECO, INC. (TO BE RENAMED JACOBS ENTERTAINMENT, INC.) This prospectus (and accompanying letter of transmittal) relates to our proposed offer to exchange up to $125,000,000 aggregate principal amount of new 11 7/8% Senior Secured Notes due 2009 (the "New Notes"), which will be freely transferable, for any and all outstanding 11 7/8% Senior Secured Notes due 2009 issued in a private offering on February 8, 2002, which are subject to certain transfer restrictions (the "Old Notes," and together with the New Notes, the "notes"). The exchange offer expires at [ ], New York City time, on [ ], unless extended. The terms of the New Notes are substantially identical to the terms of the Old Notes, except that the New Notes will be freely transferable and issued free of any covenants regarding exchange and registration rights. New Notes will be exchanged for all Old Notes that are validly tendered and not validly withdrawn. Tenders of Old Notes may be withdrawn at any time prior to expiration of the exchange offer. The exchange offer is not conditioned on a minimum aggregate principal amount of Old Notes being tendered. It is, however, subject to certain conditions, including that it not violate applicable laws or any applicable interpretation of the Securities and Exchange Commission. The exchange of Old Notes for New Notes should not be a taxable event for United States federal income tax purposes. Holders of Old Notes do not have any appraisal or dissenters' rights in connection with the exchange offer. Old Notes not exchanged in the exchange offer will remain outstanding and will be entitled to the benefits of the Indenture, but, except under certain circumstances, will have no further exchange or registration rights under the Registration Rights Agreement. "Affiliates" of Gameco, Inc. (within the meaning of the Securities act of 1933) may not participate in the exchange offer. All broker-dealers must comply with the registration and prospectus delivery requirements of the Securities Act of 1933. See "Plan of Distribution" beginning on page [ ]. We do not intend to apply for listing of the New Notes on any securities exchange or to arrange for them to be quoted on any quotation system. ----------------- Please see "Risk Factors" beginning on page [ ] for a discussion of certain factors you should consider in connection with the exchange offer. ----------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE NEW NOTES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NONE OF THE NEVADA GAMING COMMISSION, THE NEVADA GAMING CONTROL BOARD, THE COLORADO LIMITED GAMING CONTROL COMMISSION OR ANY OTHER GAMING AUTHORITY HAS APPROVED OR DISAPPROVED OF THE NEW NOTES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS OR THE INVESTMENT MERITS OF THE NOTES OFFERED HEREBY. WE MAY AMEND OR SUPPLEMENT THIS PROSPECTUS FROM TIME TO TIME BY FILING AMENDMENTS OR SUPPLEMENTS AS REQUIRED. YOU SHOULD READ THIS ENTIRE PROSPECTUS (AND ACCOMPANYING LETTER OF TRANSMITTAL AND RELATED DOCUMENTS) AND ANY AMENDMENTS OR SUPPLEMENTS CAREFULLY BEFORE MAKING YOUR INVESTMENT DECISION. ----------------- Our principal executive offices are located at 240 Main Street, Black Hawk, Colorado 80422 Our telephone number is (303) 582-1117 The date of this prospectus is [ ] Note: Specific details relating to the fee calculation will be furnished in notes to the table, including references to the provisions of Rule 457 relied upon, if the basis of the calculation is not otherwise evident from the information presented in the table. THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT BECOMES EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE. TABLE OF ADDITIONAL REGISTRANTS Each of the following subsidiaries of Gameco, Inc. and each other subsidiary that is or becomes a guarantor of the securities registered hereby is hereby made a registrant.
Exact Name of Registrant State of Jurisdiction of Primary Standard Industrial I.R.S. Employer As Specified in its Charter Incorporation or Organization Classification Code Number Identification Number - --------------------------- ----------------------------- --------------------------- --------------------- Black Hawk Gaming & Colorado 7011 84-1158484 Development Company, Inc. Gold Dust West Casino, Inc. Nevada 7011 84-1531817 Black Hawk/Jacobs Colorado 7011 84-1344735 Entertainment, LLC Gilpin Hotel Venture Colorado 7011 None Gilpin Ventures, Inc. Colorado 7990 84-1177995 Jalou II Inc. Louisiana 7990 34-1926209 Winner's Choice Casino, Inc. Louisiana 7990 72-1227314 Diversified Opportunities Ohio 7990 34-1828344 Group Ltd. Jalou L.L.C. Louisiana 7990 31-1749671 Houma Truck Plaza & Louisiana 7990 72-1447916 Casino L.L.C. Jalou--Cash's L.L.C. Louisiana 7990 31-1750851 JACE, Inc. Louisiana 7990 72-1221055 Lucky Magnolia Truck Stop Louisiana 7990 72-1268240 and Casino, L.L.C. Bayou Vista Truck Plaza and Louisiana 7990 72-1460460 Casino, L.L.C. Raceland Truck Plaza and Louisiana 7990 72-1478884 Casino, L.L.C.
TABLE OF CONTENTS WHERE YOU CAN FIND ADDITIONAL INFORMATION.............................. ii FORWARD-LOOKING STATEMENTS............................................. iii PROSPECTUS SUMMARY..................................................... 1 SUMMARY OF THE TERMS OF THE EXCHANGE OFFER............................. 5 SUMMARY OF THE TERMS OF THE NEW NOTES.................................. 9 RISK FACTORS........................................................... 16 THE EXCHANGE OFFER..................................................... 25 USE OF PROCEEDS........................................................ 34 CAPITALIZATION......................................................... 36 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.................. 38 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME......... 42 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET................ 46 SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING DATA.......... 49 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................................ 51 BUSINESS............................................................... 65 REGULATION AND TAXATION................................................ 73 MANAGEMENT............................................................. 87 RELATED PARTY TRANSACTIONS............................................. 91 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......... 92 DESCRIPTION OF OTHER INDEBTEDNESS...................................... 93 DESCRIPTION OF THE NOTES............................................... 95 BOOK ENTRY; DELIVERY AND FORM.......................................... 146 REGISTRATION RIGHTS.................................................... 149 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.................. 151 PLAN OF DISTRIBUTION................................................... 157 LEGAL MATTERS.......................................................... 158 INDEPENDENT AUDITORS................................................... 158 INDEX TO FINANCIAL STATEMENTS.......................................... F-1
i WHERE YOU CAN FIND ADDITIONAL INFORMATION We have filed a registration statement on Form S-4 with the Securities and Exchange Commission, or the Commission, under the Securities Act of 1933, or Securities Act, with respect to the New Notes. This prospectus, which constitutes a part of the registration statement, omits certain information contained in the registration statement, and reference is made to the registration statement and the exhibits and schedules thereto for further information with respect to us and the New Notes offered hereby. This prospectus contains summaries of the material terms of certain documents and in each instance reference is made to the copy of such document filed as an exhibit to the registration statement. Each such summary is qualified in its entirety by such reference. Upon effectiveness of this registration statement, we will be subject to the informational reporting requirements of the Securities Exchange Act of 1934, or Exchange Act. We have agreed that, whether or not required to do so by the rules and regulations of the Commission (and within the time periods that are or would be prescribed thereby), for so long as any of the notes remain outstanding, we will furnish to the holders of the notes and file with the Commission (unless the Commission will not accept such a filing) (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if we were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by our certified independent accountants and (ii) all reports that would be required to be filed with the Commission on Form 8-K if we were required to file such reports. In addition, for so long as any of the Old Notes remain outstanding, we have agreed to make available, upon request, to any prospective purchaser or beneficial owner of the Old Notes in connection with any sale thereof the information required by Rule 144A(d)(4) under the Securities Act. In addition, this prospectus incorporates important business and financial information about the Company that is not included in or delivered with the document. INFORMATION MAY BE OBTAINED FROM US WITHOUT CHARGE AT GAMECO, INC., 240 MAIN STREET, BLACK HAWK, COLORADO 80422, ATTENTION: STEPHEN R. ROARK, CHIEF FINANCIAL OFFICER, TELEPHONE (303) 582-1117. TO OBTAIN TIMELY DELIVERY OF INFORMATION, WE MUST RECEIVE YOUR REQUEST NO LATER THAN FIVE (5) BUSINESS DAYS BEFORE THE EXPIRATION DATE OF THE EXCHANGE OFFER. This registration statement (including the exhibits and schedules hereto) and the periodic reports and other information may be inspected and copied at the public reference facilities of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. Copies of this material can be obtained from the Commission by mail at prescribed rates. Requests should be directed to the Commission's Public Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the Commission maintains a website (http://www.sec.gov) that contains such reports and other information that we have filed. ii FORWARD-LOOKING STATEMENTS We make "forward-looking statements" throughout this prospectus. Whenever you read a statement that is not simply a statement of historical fact (such as when we describe what we "believe," "expect" or "anticipate" will occur, and make other similar statements), you must remember that our expectations may not be correct, even though we believe they are reasonable. You should read this prospectus completely and with the understanding that actual future results may be materially different from our expectations. We will not update these forward-looking statements, even though our situation will change in the future. Whether actual results will conform with our expectations and predictions is subject to a number of risks and uncertainties, including those relating to or arising from: . our ability to integrate differing operations into one cohesive business; . capital expansions at our gaming and pari-mutuel wagering facilities; . the activities and success of our competitors; . our ability to maintain regulatory approvals for our businesses and to receive regulatory approvals for new businesses; . our dependence on key personnel; . the maintenance of agreements with Colonial Holdings' horsemen; . the possibility of legislation that may prohibit or limit continued operation of our gaming or pari-mutuel wagering properties; and . our ability to service the interest and make principal payments on the notes. iii PROSPECTUS SUMMARY The following summary does not contain all of the information that may be important to you. You should read this entire prospectus carefully, including the "Risk Factors" section and the financial statements (and related notes), before making an investment decision. Unless otherwise indicated, all references in this prospectus to "we," "us," "our" and similar terms, as well as references to "Gameco," refer to Gameco, Inc. and its subsidiaries. Our Company We are a geographically diversified gaming and pari-mutuel wagering company with properties in Colorado, Nevada, Louisiana and Virginia. We own and operate three land-based casinos, six truck plaza video gaming facilities and a horse racing track with three off-track wagering facilities. In addition, we are party to an agreement that entitles us to a portion of the gaming revenue from an additional truck plaza video gaming facility, and lease and operate a fourth off-track wagering facility. We acquired all of our gaming and pari-mutuel wagering properties and operations on February 22, 2002. All of our gaming facilities target local customers and emphasize revenues from slot machine play or video gaming, or both. For the year ended December 31, 2001, our pro forma net revenues and pro forma EBITDA (as defined in "Summary Unaudited Consolidated Pro Forma Financial and Other Data" below) were approximately $168 million and $35 million, respectively. See page 38 for unaudited consolidated proforma financial statements and page 13 for the calculation of pro forma EBITDA. The following table sets forth certain information and property level EBITDA (excluding corporate overhead) of our properties. See page 65 for detail calculations of EBITDA.
Year Ended As of December 31, 2001 December 31, 2001 -------------------------- ---------------------------- Approximate Percentage of Property Gaming Gaming Level Facility Square Gaming Table Revenue from EBITDA(1) Property Location Type Footage Machines Games Machines (in thousands) - -------- -------------------- ------------ ----------- -------- ----- ------------- -------------- The Lodge Casino........ Black Hawk, Colorado Land-based 25,000 870 23 91% $18,095 casino Gilpin Hotel Casino..... Black Hawk, Colorado Land-based 16,000 460 0 99 4,732 casino Gold Dust West Casino... Reno, Nevada Land-based 17,500 500 0 100 4,771 casino Louisiana Truck Plazas.. Louisiana Video 13,000 334 0 100 7,954 (various gaming locations) Colonial Downs Racetrack Horse racing and off-track wagering and pari- facilities............. Virginia mutuel (various wagering locations) N/A N/A N/A N/A 4,223 ------ ----- --- ------- Total................ 71,500 2,170 23 $39,775 ====== ===== === =======
- -------- (1) Property Level EBITDA excludes corporate overhead expense of approximately $4.3 million in the aggregate for all of our properties. Property Level EBITDA for the Louisiana Truck Plazas is presented on a pro forma basis. 1 Business Strategy and Competitive Strengths Our business strategy is to create a broad, geographically diversified base of gaming and pari-mutuel wagering properties that provide our customers with high quality experiences that build significant customer loyalty. We focus on attracting and fostering repeat business from local gaming patrons at our casino, truck plaza video gaming and pari-mutuel wagering facilities. Our local patrons are typically experienced gaming customers who seek convenient locations, high payouts, and a pleasant atmosphere. We believe that there are opportunities for growth and operational efficiencies in the markets in which we operate. Black Hawk, Colorado continues to be one of the fastest growing gaming markets in the country, having experienced a 20.7% compound annual growth in gaming revenue from 1998 through 2001. We believe that our two Black Hawk properties will continue to benefit from this growth, and plan to expand our Gilpin Hotel Casino property in Black Hawk to further capitalize on this opportunity. We believe that certain of our Louisiana truck plaza video gaming properties have not reached their full potential, as they have only recently commenced gaming operations. In addition, we may acquire or develop additional gaming properties catering to local gaming patrons in the future, further expanding our geographic diversity. Our strategy for our casino and video gaming operations is to continue to provide our customers with a user-friendly gaming environment featuring convenient locations, ample parking, good food at affordable prices and promotional incentives that reward frequent play. Our strategy for our horse racing operations is to be a competitive participant in the industry by capitalizing on our unique dirt and turf track facilities for live racing, hosting marquee racing events, and expanding our off-track wagering facility network under appropriate circumstances. Broad Geographic and Asset Diversification. We own and operate three land-based casinos, six truck plaza video gaming facilities and a horse racing track with three off-track wagering facilities, in four states. In addition, we are party to an agreement that entitles us to a portion of the gaming revenue from an additional truck plaza video gaming facility, and lease and operate an additional off-track wagering facility. We believe that because of our geographic and asset diversification, we are less dependent on results at a specific property or in a specific market to generate our cash flow. In addition, this geographic diversity helps mitigate our susceptibility to regional economic downturns or weather conditions. Strong Emphasis on Slot and Video Gaming Revenues. All of our gaming facilities emphasize slot machine or video gaming play, or both. We believe slot machine play to be the fastest growing, most consistently profitable and lowest risk segment of the gaming entertainment business. We offer a wide variety of games to attract customers and encourage them to play for longer periods of time, thereby promoting the stability of our gaming revenue. We intend to maximize slot and video gaming revenue by continuing to invest in state-of-the art equipment and systems and replacing older models with the most current product offerings in appropriate markets. Significant Barriers to Entry. There are significant regulatory and other barriers to entry in each of the markets in which we operate. In Black Hawk, Colorado these barriers include the limited availability of space in the approved gaming district, which is defined in the state constitution, and the high cost of acquiring land and constructing new gaming facilities. There are stringent licensing requirements and substantial licensing and compliance expenses attendant to commencing and conducting gaming operations in Nevada. In Louisiana, the barriers to entry include restrictions that require truck plaza video gaming facilities to meet specified minimum levels of diesel and total fuel sales, have a specified minimum site acreage and conduct 24-hour restaurant operations. These restrictions also prohibit the operation of more than 50 video gaming machines at any location, and require truck plaza video gaming facilities to be located only in those parishes that voted to continue video gaming during a one-time state-wide referendum in 1996. In Virginia, in all but the county in which we operate and one additional county, the operator of any competing horse racing track would need to secure passage of a 2 referendum in the locale in which the track is to be operated. Furthermore, licenses are available for only two additional off-track wagering facilities, and opening any off-track wagering facility in any locale other than those in which we currently operate would also require the passage of a referendum. Strong, Experienced Management Team. Our senior management team is an experienced group of industry veterans. Jeffrey P. Jacobs, our Chairman and Chief Executive Officer, has been Black Hawk Gaming's Chief Executive Officer since November 1996 and the Chief Executive Officer of Colonial Holdings since March 1997. Stephen R. Roark, our Chief Financial Officer and President of Casino Operations, has been Black Hawk Gaming's President since September 1995 and its Chief Financial Officer since 1993. Ian M. Stewart, our President of Pari-Mutuel Wagering and Video Poker Operations, has been President of Colonial Holdings since November 1998 and its Chief Financial Officer since June 1997. Thomas Lee Witherow, our Chief Operating Officer of Casino Operations, has over ten years of experience in the gaming industry. The three general managers of our casinos, who have a combined total of approximately 45 years of casino management experience, report directly to Mr. Witherow. Reid Smith and J. Richard Gottardi oversee the day-to-day operations of our truck plaza video gaming operations, have over 20 years of combined experience in the gaming industry and report directly to Mr. Stewart. We believe the expertise and experience of our management team will enable us to enhance the operation of our existing properties and any properties we may acquire in the future. Our Properties Our Casino Properties Our casino properties consist of The Lodge Casino at Black Hawk and the Gilpin Hotel Casino, both in Black Hawk, Colorado, and the Gold Dust West Casino in Reno, Nevada. The Lodge Casino is located on a 2.5 acre site that abuts State Highway 119, with approximately 25,000 square feet of gaming space on two floors containing 870 slot machines and 23 table games, 50 hotel rooms, three restaurants, four bars, and onsite parking for 600 vehicles. The Gilpin Hotel Casino is located on one acre in the heart of the historic district of Black Hawk, with approximately 16,000 square feet of gaming space containing 460 slot machines and four table games, two restaurants, four bars, and parking for 200 vehicles. The Gold Dust West Casino is located on 4.6 acres in Reno's central downtown gaming district, with approximately 17,500 square feet of gaming space containing 500 slot machines, a 6,600 square foot dining facility, 106 motel rooms and parking for 275 vehicles. Our Truck Plaza Video Gaming Properties Our truck plaza video gaming properties consist of six truck plaza video gaming facilities located in Louisiana and a share in the gaming revenues of an additional Louisiana truck plaza video gaming facility. Our properties include the Houma Truck Plaza and Casino in Houma; Winner's Choice Casino in Sulphur; Lucky Magnolia Truck Stop and Casino in St. Helena Parish; Bayou Vista Truck Plaza and Casino in Bayou Vista; Colonel's Truck Plaza and Casino in Thibodaux; and Raceland Truck Plaza and Casino in Raceland. We are also party to an agreement that entitles us to a portion of the gaming revenues from Cash's Truck Plaza and Casino in Lobdell. Each truck plaza features a convenience store, fueling operations, a 24-hour restaurant, and 50 video gaming devices (except for Lucky Magnolia Truck Stop and Casino and Raceland Truck Plaza and Casino, which have 40 and 44 video gaming devices, respectively). Our Horse Racing Track and Off-track Wagering Facilities We hold the only unlimited licenses in Virginia to own and operate a racetrack and off-track wagering facilities. Under these licenses, we own and operate the Colonial Downs Racetrack in New Kent, Virginia and three off-track wagering facilities, and lease and operate an additional off-track wagering facility. Our racetrack facility consists of a one and one-quarter mile dirt track and a 180-foot wide turf track, an outside grandstand that 3 seats approximately 4,000 patrons, two simulcast television amphitheaters, two covered patio-seating areas, four bars, a large concession food court, a gift shop, and wagering locations with approximately 100 tellers. Our off-track wagering facilities are located in Richmond, Chesapeake, Hampton, and Brunswick, Virginia. These facilities are structured to accommodate the needs of various patrons, from the seasoned handicapper to the novice wagerer, and provide patrons with a comfortable, upscale environment including a full bar and a range of restaurant services, and state of the art audio/video technology for receiving off-track import simulcast thoroughbred and harness racing from nationally-known racetracks. 4 SUMMARY OF THE TERMS OF THE EXCHANGE OFFER The Old Notes............... On February 8, 2002, we issued $125,000,000 aggregate principal amount of our 11 7/8% Senior Secured Notes due 2009 to CIBC World Markets Corp. in a private placement. CIBC World Markets Corp. and Libra Securities, LLC (whom we refer to as the "initial purchasers") then sold those notes to qualified institutional buyers in reliance on Rule 144A and Regulation S under the Securities Act. Because they were sold pursuant to exemptions from registration under the Securities Act, the Old Notes are subject to transfer restrictions. In connection with the issuance of the Old Notes, we entered into a registration rights agreement with the initial purchasers in which we agreed to either: (a) file with the Commission a registration statement covering the New Notes, use our best efforts to cause the registration statement to become effective under the Securities Act, and upon effectiveness of the registration statement, complete the exchange offer; or (b) cause the Old Notes to be registered under the Securities Act pursuant to a resale shelf registration statement. If we do not comply with our obligations under the Registration Rights Agreement, we will be required to pay certain liquidated damages. See "Registration Rights." The Exchange Offer.......... We are offering to exchange up to $125,000,000 principal amount of New Notes for an identical principal amount of Old Notes. Old Notes may be exchanged only in $1,000 increments. The terms of the New Notes are identical in all material respect to the terms of the Old Notes except that the New Notes have been registered under the Securities Act and will not bear legends restricting their transfer. The New Notes will evidence the same debt as the Old Notes and will be issued under and entitled to the benefits of the same indenture that governs the Old Notes. Holders of Old Notes do not have any appraisal or dissenters' rights in connection with the exchange offer. Because we have registered the New Notes, the New Notes will not be subject to transfer restrictions and holders of New Notes will have no registration rights. Consequences of Failure to Exchange............... If you do not exchange your Old Notes for New Notes pursuant to the exchange offer, you will still be subject to the restrictions on transfer of your Old Notes as described in the legend on the Old Notes. In general, you may not offer to sell or sell the Old Notes, except pursuant to a registration statement under the Securities Act or any exemption from registration thereunder and in compliance with applicable state securities laws. Resale of New Notes......... We believe you may offer for resale, resell or otherwise transfer the New Notes you receive in the exchange offer without further compliance with the registration and prospectus delivery provisions of the Securities Act unless you: 5 . are an "affiliate" of ours within the meaning of Rule 405 under the Securities Act; . are a broker-dealer who purchased Old Notes directly from us for resale under Rule 144A or Regulation S or any other exemption under the Securities Act; . acquired the New Notes other than in the ordinary course of your business; or . have an arrangement with any person to engage in the distribution of New Notes. Each broker-dealer who is issued New Notes in the exchange offer for its own account in exchange for Old Notes acquired by the broker-dealer as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the New Notes issued in the exchange offer. A broker-dealer may use this prospectus for an offer to resell, a resale or any other transfer of the New Notes issued to it in the exchange offer. Expiration Date and Time.... p.m., New York City time, on the later to occur of , 2002 or 30 business days after the date the registration statement is declared effective. See "The Exchange Offer--Expiration Date; Extensions; Amendments." Withdrawal Rights........... You may withdraw Old Notes you tendered by furnishing a written notice of withdrawal to the exchange agent or by complying with DTC's Automated Tender Offer Program System (ATOP) withdrawal procedures at any time before p.m. New York City time on the expiration date. See "The Exchange Offer--Withdrawal of Tenders." Accrued Interest on the New Notes and the Old Notes The New Notes will bear interest from February 8, 2002 or, if later, from the most recent date of payment of interest on the Old Notes. Accordingly, if you tender Old Notes that are accepted for exchange, you will not receive interest that is accrued but unpaid on the Old Notes at the time of tender. Conditions to the Exchange Offer..................... The exchange offer is subject only to the following conditions: . [regulatory approval from Nevada state gaming authorities] . the compliance of the exchange offer with applicable securities laws; . the proper tender of the Old Notes; . our receipt of certain representations made by the holders of the Old Notes, as described below; and . no judicial or administrative proceeding having been threatened that would limit us from proceeding with the exchange offer. 6 The exchange offer is not conditioned upon any minimum aggregate principal amount of Old Notes being tendered for exchange. Representations............. By participating in the exchange offer, you will represent to us that, among other things: . you will acquire the New Notes you receive in the exchange offer in the ordinary course of your business; . you are not engaging in and do not intend to engage in a distribution of the New Notes; . you do not have an arrangement or understanding with any person to participate in the distribution of the New Notes; and . you are not an "affiliate," as defined under Rule 405 of the Securities Act, of ours. Procedures for Tendering Old Notes..................... To accept the exchange offer, you must send the exchange agent either: . a properly completed and validly executed letter of transmittal; or . a computer-generated agent's message transmitted pursuant to DTC's ATOP System; and either . tendered Old Notes held in certificated form; or . a timely confirmation of book-entry transfer of your Old Notes into the exchange agent's account at DTC. Additional documents may be required if you tender pursuant to the guaranteed delivery procedures described below. For more information, see "The Exchange Offer--Procedures for Tendering." Tenders by Beneficial Owners If you are a beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee or are held in book-entry form and you wish to tender those Old Notes in the exchange offer, you should contact the registered holder as soon as possible and instruct the registered holder to tender on your behalf. See "The Exchange Offer--Procedures for Tendering." Guaranteed Delivery Procedures................ If you are unable to comply with the procedures for tendering, you may tender your Old Notes according to the guaranteed delivery procedures described in this prospectus under the heading "The Exchange Offer--Guaranteed Delivery Procedures." Certain United States Federal Tax Considerations See "Certain United States Federal Income Tax Considerations" for a discussion of U.S. federal income tax considerations you should consider before tendering Old Notes in the exchange offer. 7 Exchange Agent.............. Wells Fargo Bank Minnesota, National Association is serving as exchange agent for the exchange offer. The address and telephone number for the exchange agent is listed under "The Exchange Offer--Exchange Agent." 8 SUMMARY OF THE TERMS OF THE NEW NOTES The terms of the New Notes to be issued in the exchange offer are identical to the terms of the outstanding Old Notes except that we have registered the New Notes under the Securities Act. The notes issued in the exchange offer will evidence the same debt as the Old Notes, and both the Old Notes and the New Notes are governed by the same indenture. The terms and conditions described below are subject to important limitations and exceptions. The "Description of the Notes" section of this prospectus contains a more detailed description of the terms and conditions of the notes. The Offering of New Notes Securities Offered.......... $125,000,000 principal amount of 11 7/8/% senior secured notes. / Maturity Date............... February 1, 2009. Interest Rate............... 11 7/8/% per year. / Interest Payment Dates...... Each February 1 and August 1, beginning August 1, 2002. Security and Ranking........ The notes and the guarantees of our subsidiary guarantors will be secured by a first priority lien (subject to the exceptions described herein) on substantially all of our and the guarantors' respective current and future assets, other than the excluded assets, as described herein. We may not be able to grant security interests in certain of our assets and certain of our assets may be subject to prior liens. After the issuance of the New Notes, we may enter into a new senior secured credit facility, which we refer to as our "proposed new credit facility" in an amount up to $10.0 million. If we enter into the proposed new credit facility, the lien on the real property and related assets comprising The Lodge Casino and the Gilpin Hotel Casino in Black Hawk, Colorado granted to the lenders under such credit facility will be senior to the lien securing the notes and will, subject to certain conditions, limit the exercise of remedies under the security interests in such assets by the holders. Although we discuss our proposed new credit facility in this prospectus, including under "Risk Factors," there can be no assurance we will be able to enter into the proposed new credit facility or any alternative credit facility. Additionally, the real property comprising the Business Improvement District relating to The Lodge Casino is subject to a first priority lien in favor of the $5.5 million aggregate principal amount outstanding of Black Hawk Business Improvement District Special Assessment Bonds described herein and the notes will also be subject to such prior lien. See "Description of the Notes--Security." 9 The notes will rank senior in right of payment to all of our existing and future subordinated debt and equal in right of payment to all of our senior debt. As of December 31, 2001, on a pro forma basis, we would have had $ million of debt outstanding. Guarantees.................. Except as described below, all of our present and future restricted subsidiaries will guarantee the notes with unconditional guarantees of payment that will rank senior in right of payment to all of their existing and future subordinated debt and equal in right of payment to all of their existing and future senior debt. The entities that conduct our Virginia horse racing track and off-track wagering facilities are restricted subsidiaries but will not guarantee the notes. The notes will not be secured by the assets of these non-guarantor restricted subsidiaries but will be secured by a pledge of approximately $15.7 million of secured indebtedness of these non-guarantor restricted subsidiaries owed to us. Optional Redemption......... Except in the case of certain equity offerings by us, we cannot choose to redeem the notes prior to February 1, 2006. At any time from and after that date (which may be more than once), we can choose to redeem some or all of the notes at specified prices, plus accrued interest. Optional Redemption after Certain Equity Offerings.. At any time (which may be more than once) before February 1, 2005, we can choose to purchase up to 35% of the outstanding principal amount of the notes with money that we raise in certain equity offerings, as long as: . we pay 111.875% of the face amount of the notes bought, plus accrued interest; . we purchase the notes within 45 days after completing the offering; and . at least $81.25 million in aggregate principal amount of Old Notes and New Notes (65% of the principal amount of the Old Notes originally issued) remains outstanding after the purchase. Disposition Based Upon Gaming Laws.......... The notes are subject to redemption requirements imposed by laws and regulations of authorities in jurisdictions in which we conduct gaming and pari-mutuel wagering operations. See "Description of the Notes--Mandatory Disposition in Accordance with Gaming Laws." Change of Control Offer..... If we experience a change in control, we must offer to purchase your notes at 101% of their face amount, plus accrued interest. We might not be able to pay you the required price for notes you present to us at the time of a change in control, because we might not have enough funds at that time. 10 Asset Sale and Event of Loss Proceeds............. We may have to use the net cash proceeds from selling assets or from events of casualty loss to offer to purchase your notes at their face amount, plus accrued interest. Certain Indenture Provisions The indenture governing the notes limits what we (and most or all of our subsidiaries) may do. For example, the indenture limits our ability to: . incur more debt; . pay dividends and make distributions; . issue stock of subsidiaries; . make investments; . repurchase stock; . create liens; . enter into transactions with affiliates; . enter into sale-leaseback transactions; . merge or consolidate; and . transfer and sell assets. These limitations are subject to a number of important exceptions. Use of Proceeds............. We will not receive any proceeds upon completion of the exchange offer. See the "Use of Proceeds" section of this prospectus for further information. For more complete information about the notes, see the "Description of the Notes" section of this prospectus. 11 Risk Factors Before making an investment in the New Notes, you should consider carefully the information included in the "Risk Factors" section of this prospectus, as well as other information contained in this prospectus. Summary Unaudited Consolidated Pro Forma Financial and Other Data The following summary unaudited consolidated pro forma statement of income data of Gameco, Inc. for the year ended December 31, 2001, and the summary unaudited pro forma consolidated balance sheet data at December 31, 2001 were prepared by combining (i) the contribution to Gameco of certain historical assets and liabilities of Diversified Opportunities Group Ltd, (ii) the effect of the issuance of the Old Notes and the repayment of certain indebtedness, and (iii) the effect of the acquisitions of the publicly held shares of Black Hawk Gaming & Development Company, Inc. and Colonial Holdings, Inc., and the acquisition of certain Louisiana truck plaza gaming properties, discussed herein, in each case as if the transactions had occurred on January 1, 2001, for statement of income data purposes, and at December 31, 2001 for the balance sheet data. The following financial information is based on, and should be read in conjunction with, the historical consolidated financial statements and related notes of Black Hawk Gaming & Development Company, Inc., Diversified Opportunities Group Ltd., Jalou, Jalou II Inc., and Colonial Holdings, Inc. and the unaudited pro forma consolidated financial statements included elsewhere in this prospectus. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the acquisitions and the issuance of the Old Notes had occurred in an earlier period, nor is it necessarily indicative of our future operating results or financial position.
Year Ended December 31, 2001 ----------------- (in thousands, except ratios) Statement of Income Data: Net revenues............................................ $167,936 Operating income........................................ 23,860 Interest expense, net of interest income................ 18,571 Net income.............................................. 5,289 Balance Sheet Data (end of year): Cash and cash equivalents............................... 12,410 Total assets............................................ 225,555 Total long-term debt, including current maturities...... 146,577 Stockholders' equity.................................... 59,174 Other Financial Data: EBITDA (1).............................................. 35,235 Depreciation and amortization........................... 10,977 Financial Ratios Data: Ratio of senior debt to EBITDA(2)....................... 3.9x Ratio of net senior debt to EBITDA(3)................... 3.6x Ratio of total debt to EBITDA(4)........................ 4.2x Ratio of net debt to EBITDA(5).......................... 3.8x Ratio of EBITDA to interest expense(6).................. 1.9x Ratio of earnings to fixed charges(7)................... 1.3x
12 - -------- 1. EBITDA is defined as net income before interest expense, income taxes, depreciation and amortization and: . Is not intended to be a performance measure that should be regarded as an alternative either to operating income or net income nor as an indicator of operating performance, or as an alternative to the statement of cash flows as a measure of liquidity; . Is not intended to represent funds available for debt service, dividends, reinvestment or other discretionary uses; and . Should not be considered in isolation or as a substitute for measures of performance prepared in accordance with accounting principles generally accepted in the United States of America. EBITDA information is included in this prospectus because our management believes that EBITDA is a meaningful measure of performance commonly used in the gaming industry and by the investment community to analyze and compare companies such as ours. Our definition of EBITDA may not be identical to similarly titled measures reported by other companies. EBITDA for Gameco, Inc. is computed as follows:
2001 ------- EBITDA for the year ended December 31, 2001: Net income for the year ended December 31, 2001. $ 5,289 Depreciation and amortization................... 10,977 Interest........................................ 18,969 ------- EBITDA for the year ended December 31, 2001........ $35,235 =======
2. Senior debt includes the Old Notes, the Black Hawk Business Improvement District Special Assessment bonds, the Louisiana properties seller notes, and debt of Colonial Holdings, and is computed as follows:
2001 -------- Senior Debt: Old Notes......................................................... $120,050 Black Hawk Business Improvement District Special Assessment bonds. 5,299 Louisiana properties seller notes................................. 10,535 Debt of Colonial Holdings......................................... 1,693 -------- Total Senior Debt................................................. $137,577 ======== EBITDA for the year ended December 31, 2001.......................... $ 35,235 ======== Ratio of Senior Debt to EBITDA....................................... 3.9x ========
3. Net senior debt includes the Old Notes, the Black Hawk Business Improvement District Special Assessments bonds, the Louisiana properties seller notes, and debt of Colonial Holdings, net of cash and cash equivalents, and is computed as follows: 13
2001 -------- Net Senior Debt: Old Notes......................................................... $120,050 Black Hawk Business Improvement District Special Assessment bonds. 5,299 Louisiana properties seller notes................................. 10,535 Debt of Colonial Holdings......................................... 1,693 Less: cash and cash equivalents................................... (12,410) -------- Total Net Senior Debt............................................. $125,167 ======== EBITDA for the year ended December 31, 2001.......................... $ 35,235 ======== Ratio of Net Senior Debt to EBITDA................................... 3.6x ========
4. Total debt refers to all outstanding long-term debt, including current maturities, and is computed as follows:
2001 -------- Total Debt: Old Notes......................................................... $120,050 Black Hawk Business Improvement District Special Assessment bonds. 5,299 Debt of Colonial Holdings......................................... 1,693 Existing Louisiana properties seller notes........................ 4,740 New Louisiana properties seller notes............................. 5,795 Subordinated debt to affiliate.................................... 9,000 -------- Total Debt........................................................ $146,577 ======== EBITDA for the year ended December 31, 2001.......................... $ 35,235 ======== Ratio of Total Debt to EBITDA........................................ 4.2x ========
5. Net debt refers to all outstanding long-term debt, including current maturities, net of cash and cash equivalents, and is computed as follows:
2001 -------- Net Debt: Total debt.............................. $146,577 Less: cash and cash equivalents......... (12,410) -------- Total Net Debt............................. $134,167 ======== EBITDA for the year ended December 31, 2001 $ 35,235 ======== Ratio of Total Net Senior Debt to EBITDA... 3.8x ========
6. Ratio of EBITDA to interest expense is computed as follows:
2001 ------- EBITDA for the year ended December 31, 2001 $35,235 ======= Interest Expense........................... $18,969 ======= Ratio of EBITDA to Interest Expense........ 1.9x =======
14 7. For the purpose of determining the ratio of earnings to fixed charges, "earnings" consist of earnings before income tax expense plus fixed charges. "Fixed charges" consist of interest expense, including amortization of deferred financing costs, plus one-third of rental expense (this portion is considered to be representative of the interest factor), and is computed as follows:
2001 ------- Earnings: Pre-tax income from continuing operations.................... $ 5,289 Add: Fixed charges........................................... 20,777 ------- Total Earnings.................................................. $26,066 ======= Fixed Charges: Interest expense............................................. $18,969 Amortization of capitalized expenses related to indebtedness. 947 Estimated interest on rental expense......................... 861 ------- Total Fixed Charges............................................. $20,777 ======= Ratio of Earnings to Fixed Charges.............................. 1.3x =======
15 RISK FACTORS An investment in the New Notes is subject to a number of risks. You should consider carefully the following factors, as well as the additional information cross-referenced to the body of this prospectus and the other matters described in this prospectus. Risks Related to Our Indebtedness Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under the notes. We have a significant amount of indebtedness. As of December 31, 2001 we had total indebtedness of approximately $147 million and total stockholders' equity of $64 million. Our substantial indebtedness could have important consequences to you. For example, it could: . make it more difficult for us to satisfy our obligations with respect to the notes; . increase our vulnerability to general adverse economic and industry conditions; . require us to dedicate a substantial portion of our cash flow from operations to debt service, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, and other general corporate purposes; . limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; . limit our ability to fund a required regulatory redemption or a change of control offer; . place us at a competitive disadvantage to our competitors that have less debt; and . limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds. A failure to comply with those covenants could result in an event of default which, if not cured or waived, could have a significant adverse effect on us. The occurrence of any one of these events could have a material adverse effect on our business, financial condition, results of operations, prospects and ability to satisfy our obligations under the notes. In addition, subject to specified limitations in the indenture governing the notes, we may be able to incur limited additional indebtedness in the future. Our proposed new credit facility will permit borrowings of up to $10.0 million, and all of the security interests securing those borrowings will be contractually senior to the notes and guarantees, as provided in the intercreditor agreement among the trustee and the lenders under the proposed new credit facility. If new debt is added to our and our subsidiaries' current debt levels, the related risks we and they now face could intensify. Our indebtedness imposes restrictive covenants on us. The note indenture contains, and our proposed new credit facility may contain, certain restrictive covenants that, among other things, restrict our ability to: . incur more debt; . pay dividends and make distributions; . issue stock of subsidiaries; . make investments; 16 . repurchase stock; . create liens; . enter into transactions with affiliates; . enter into sale-leaseback transactions; . merge or consolidate; and . transfer and sell assets. We expect that our proposed new credit facility also will require us to meet a number of financial ratios and tests. The covenants governing the notes and the covenants governing our proposed new credit facility will restrict the operations of our subsidiaries and these limitations could impair our ability to meet such financial ratios and tests. In addition, our ability to meet these ratios and tests and to comply with our provisions governing our indebtedness may be affected by changes in economic or business conditions or other events beyond our control. Our failure to comply with our debt-related obligations could result in an event of default which, if not cured or waived, could result in an acceleration of our indebtedness. Acceleration of indebtedness outstanding under our proposed new credit facility or any of our other indebtedness may cause us to be unable to make interest payments on the notes and to repay the principal amount of the notes or may cause the guarantors to be unable to make payments under their guarantees. Complying with these covenants could materially limit our financial and operating flexibility and could cause us to take actions that we otherwise would not take or cause us not to take actions that we otherwise would take. Despite current indebtedness levels, we may still be able to incur substantially more debt, which could exacerbate the risks described above. We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The note indenture does not fully prohibit us or our subsidiaries from doing so. If new debt is added to our and our subsidiaries' current debt levels, the related risks that we and they now face could intensify. See "Description of the Notes." To service our indebtedness, we will require a significant amount of cash, the availability of which depends on many factors beyond our control. Our ability to make payments on and to refinance our indebtedness, including the notes, and to fund our operations, will depend on our ability to generate cash. This, to an extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our anticipated level of operations and revenue growth, we believe our cash flow from operations, available cash and future borrowings will be adequate to meet our liquidity needs for the next few years. However, we cannot assure you that our business will generate sufficient cash flow from operations or that borrowings will be available to us in amounts sufficient to enable us to pay our indebtedness, including the notes, or to fund our other liquidity needs. In addition, if we consummate significant acquisitions in the future, our cash requirements may increase significantly. If we are unable to generate sufficient cash flow and are unable to refinance or extend outstanding borrowings, we may have to: . reduce or delay planned expansion and capital expenditures; . sell assets; . restructure debt; or . raise additional capital. Furthermore, we may need to refinance all or a portion of our debt, including the notes, on or before maturity. We cannot assure you that we will be able to refinance any of our debt, including the notes, on commercially reasonable terms or at all. 17 Risks Related to Our Business We may face difficulties in integrating our operations and in managing facilities we may acquire or expand. We are conducting our casino operations, the Louisiana truck plaza operations and the racing and pari-mutuel wagering operations largely as they had been conducted before we acquired them. Nonetheless, we have conducted these businesses on a combined basis for only a limited amount of time, and the consolidation of control and managerial and administrative integration of these operations will require the continued dedication of management resources that may divert attention from our day-to-day business operations. This could materially harm our business, financial condition and results of operations. We cannot assure you that we will be able to manage the combined operations effectively or realize any of the anticipated benefits of our acquisitions. In addition, we may pursue expansion and acquisition opportunities and would face significant challenges in managing the expansion and acquisition efforts and in integrating the expanded or new operations into our existing business. Any failure to manage our growth effectively could materially harm our business, financial condition and results of operations. We face risks related to the development and expansion of our properties. We expect to use a portion of our available cash to remodel and expand The Gilpin Hotel Casino. These improvements are budgeted to cost approximately $6.0 million. While we expect construction and other disruptions during the renovation period that will temporarily adversely affect our business, we believe completion of these renovations will enable us to continue to compete effectively in the Black Hawk market and ultimately to improve our operating results. However, the remodeling and expansion process involves substantial risks, including the possibility of cost overruns and delays, market or site deterioration after construction has begun, and the emergence of additional competition. We face significant competition. The gaming industry is characterized by a high degree of competition among a large number of participants, many of which have financial and other resources that are greater than our resources. Competitive gaming activities include casinos, pari-mutuel wagering, video lottery terminals and other gaming devices, and other forms of legalized gaming. New or expanded operations by other persons can be expected to increase competition for our gaming operations and could have a material adverse impact on us. Casino Operations. Our casino operations are conducted in Black Hawk, Colorado and Reno, Nevada. Competition in the Black Hawk gaming market, which is the primary gaming market in Colorado, is intense. In addition, large, well-financed companies may continue to enter the Black Hawk and other Colorado markets through the purchase or expansion of existing facilities, which could materially harm our business, financial condition and results of operations. For example, the Black Hawk Casino by Hyatt, which is managed by an affiliate of Hyatt Corporation, opened in Black Hawk on December 20, 2001. The addition of the Black Hawk Casino by Hyatt added 1320 machines to the market. In addition to competing with other gaming facilities in Colorado as described above, we compete to a lesser degree, for both customers and potential future gaming sites, with gaming companies nationwide, including casinos in Nevada and several other states, and casinos on Native American lands in several states, many of which have substantially greater financial resources and experience in the gaming business. The expansion of legalized casino gaming to new jurisdictions throughout the United States may also affect competitive conditions. 18 The Gold Dust West Casino in Reno, Nevada encounters strong competition from large hotel and casino facilities and smaller casinos similar in size to the Gold Dust West Casino in the Reno area, which includes Sparks, Nevada. There is also competition from gaming establishments in other towns and cities in Nevada and, to a lesser extent, other jurisdictions in the United States where gaming has been legalized (including Native American gaming establishments). In addition, we believe that the introduction of casino gaming, or the expansion of presently conducted gaming activities (particularly at Native American establishments) in areas in or close to Nevada, such as California, Oregon, Washington, Arizona and western Canada, could materially harm our operations at our Reno property. Louisiana Truck Plaza Operations. The Louisiana truck plaza operations compete with other truck plazas located in Louisiana and other forms of gaming, such as land-based, riverboat and Native American casinos, as well as slot machines located at horseracing tracks and video poker machines located in bars, restaurants, hotels and off-track wagering facilities. Pari-mutuel Wagering Operations. We operate a racetrack in New Kent, Virginia, and off-track wagering facilities in Chesapeake, Richmond, Hampton and Brunswick, Virginia. We compete with racetracks located outside Virginia (including several in Delaware, Maryland, New Jersey, New York, Pennsylvania, and West Virginia, some of which augment their purses with slot machine revenues) and other forms of gaming, such as land-based casinos, including those in Atlantic City, New Jersey, and statewide lotteries in Virginia and neighboring states. We also face competition from a wide range of entertainment options, including live and televised sporting events and other recreational activities such as theme parks (Kings Dominion to the northwest and Busch Gardens to the southeast) and more recently internet-based pari-mutuel wagering and telephone account wagering on horse racing. We compete for wagering dollars and simulcast fees with live racing and races simulcast from racetracks in other states, particularly racetracks in neighboring states such as Charles Town in West Virginia, Pimlico Race Course, Laurel Park, and Rosecroft Raceway in Maryland, and Delaware Park in Delaware. For additional information regarding the competitive environment we face, see "Business--Competition." We face extensive regulation from gaming authorities. Licensing Requirements. As owners and operators of gaming and pari-mutuel wagering facilities, we are subject to extensive state and local and some Federal regulation. State and local authorities require us and our subsidiaries to demonstrate suitability to obtain and retain various licenses and require that we have registrations, permits and approvals to conduct gaming and wagering operations. Various regulatory authorities, including the Colorado Limited Gaming Control Commission, the Nevada Gaming Commission, the Nevada State Gaming Control Board, the Louisiana Gaming and Control Board and the Virginia Racing Commission may, for any reason set forth in the applicable legislation, limit, condition, suspend or revoke a license or registration to conduct gaming or wagering operations or prevent us from owning the securities of any of our gaming or wagering subsidiaries. Like all gaming and wagering operators in the jurisdictions in which we operate, we will need to apply periodically to renew our licenses or registrations. We cannot assure you that we will be able to obtain such renewals. Regulatory authorities may also levy substantial fines against us or seize our assets or those of our subsidiaries or of the people involved in violating gaming laws or regulations. Any of these events could materially harm our business, financial condition and results of operations. Gaming authorities in the United Sates can generally require that any beneficial owner of our securities, including holders of the notes, file an application for a finding of suitability. Under certain circumstances, we will have the right to redeem your notes or cause you to dispose of your notes in order to comply with gaming laws to which we are subject. See "Description of the Notes--Mandatory Disposition in Accordance with Gaming Laws." 19 Potential Changes in Regulatory Environment. From time to time, legislators and special interest groups have proposed legislation that would expand, restrict or prevent gaming or wagering operations in the jurisdictions in which we operate. Any expansion of gaming or wagering or restriction on or prohibition of our gaming or wagering operations could materially harm our business, financial condition and results of operations. Taxation. We believe that the prospect of significant additional revenue is one of the primary reasons that jurisdictions permit legalized gaming and wagering. As a result, gaming and wagering companies are typically subject to significant taxes and fees in addition to normal federal, state, local and provincial income taxes, and such taxes and fees are subject to increase at any time. We pay substantial taxes and fees with respect to all of our operations. From time to time, federal, state and local legislators and officials have proposed changes in tax laws, or in the administration of such laws, affecting the gaming and wagering industry. It is not possible to predict the likelihood of changes in tax laws or in the administration of such laws. Such changes, if adopted, could materially harm our business, financial condition and results of operations. Compliance with Other Laws. We are also subject to a variety of other rules and regulations, including zoning, environmental, construction and land-use laws and regulations governing the serving of alcoholic beverages. We depend on our key personnel. We are highly dependent on the services of Jeffrey P. Jacobs, Stephen R. Roark and Ian M. Stewart and other officers and key employees. The loss of the services of any of these individuals could materially harm our business, financial condition and results of operations. Economic conditions, seasonality and weather conditions could affect our operations. Our business, financial condition and results of operations may be harmed by general and local economic conditions. If the U.S. economy or the local economy in a market in which we operate suffers a downturn, our properties could be harmed as the disposable income of consumers or their willingness to patronize our operations declines, resulting in a decrease in the number of patrons at our properties or a decrease in the amount that patrons are willing to wager. In addition, seasonality and weather conditions can affect our results of operations. Our pari-mutuel wagering revenues are higher during scheduled live racing than at other times of the year. Adverse weather conditions can cause cancellation of or curtail attendance at outdoor races, thereby reducing wagering and our revenues. Attendance and wagering at both outdoor races and satellite wagering facilities can be harmed by holidays and other competing seasonal activities. Winter travel conditions can adversely affect patronage and revenues at our Colorado casinos. Although casino business is not seasonal, levels of gaming activity increase significantly during weekends and holidays, especially holiday weekends. We depend on agreements with Colonial Holdings' horsemen to operate our racing and wagering business. The Federal Interstate Horseracing Act and the Virginia Racing Act require Colonial Holdings to have written agreements with representative Virginia horsemen's groups in order to simulcast races. Our current agreements with the Virginia Horsemen's Benevolence and Protective Association (the "VaHBPA") and the Virginia Harness Horse Association (the "VHHA") expire on December 31, 2002. If we cannot reach agreement prior to the expiration of these agreements, the Virginia Racing Commission has the right to suspend our licenses to operate our racetrack and the off-track wagering facilities until agreements are in place. Although it is difficult to predict the likelihood of such an event, closure of the off-track wagering facilities would be detrimental to the horsemen groups as well as us since each horsemen group's primary source of purse funds is its percentage of wagering at the off-track facilities. Negotiation of new horsemen's agreements is not expected to commence until autumn 2002. 20 Energy price increases may adversely affect our costs and our revenues. Our casino and horse racing and pari-mutuel wagering operations use significant amounts of electricity and other forms of energy. Any substantial increase in the cost of the forms of energy we use may negatively affect our results of operations. In addition, consumer energy or gasoline price increases may reduce the disposable income of our potential customers or their willingness to patronize our operations and correspondingly reduce our patronage and revenues. Furthermore, a fuel price increase may impact fuel sales in Louisiana making it more difficult to meet minimum fuel sale requirements. Risks Related to the Offering Your right to receive payments on the notes will be effectively subordinated to payments under our proposed new credit facility and any equipment financing to the extent of the collateral securing this other debt. The proceeds from the collateral securing the notes may not be sufficient to pay all amounts owed under the notes if an event of default occurs, even if the fair market value of the collateral would otherwise be sufficient to pay the amounts owed under the notes. The notes and guarantees will be effectively subordinated to (a) up to $10.0 million principal amount of indebtedness that may be incurred under the proposed new credit facility with respect to the assets securing the proposed new credit facility, pursuant to the intercreditor agreement described below, and (b) any future equipment financing and purchase money debt, in each case to the extent of the assets securing that indebtedness. As a result, upon any distribution to our creditors or the creditors of any subsidiary guarantors in bankruptcy, liquidation, reorganization or similar proceedings, or following acceleration of our indebtedness or an event of default under such indebtedness, our lenders under our proposed new credit facility, our equipment financing and our purchase money indebtedness will be entitled to be repaid in full from the proceeds of the assets securing such indebtedness, or the sale of the equipment subject to such equipment financing, before any payment is made to you from such proceeds. There can be no assurance that the fair market value of the collateral securing the notes would be sufficient to pay the amounts due under the notes, even absent the proposed new credit facility, any equipment financing and any purchase money debt. The trustee under the indenture and the lenders under our proposed new credit facility will enter into an intercreditor agreement to govern the relationships among them and their obligations and rights. Financing by multiple lenders with security interests in common collateral may result in increased complexity and lack of flexibility in a debt restructuring or other work-out relating to us. Furthermore, under the intercreditor agreement, the trustee's remedies in the event of a default will be limited. Under the intercreditor agreement, if the notes become due and payable prior to the stated maturity or are not paid in full at the stated maturity at a time during which we have indebtedness outstanding under our credit facility, the trustee will not have the right to foreclose upon the assets securing the proposed new credit facility unless and until the lenders under the proposed new credit facility fail to take steps to exercise remedies with respect to or in connection with the collateral within 180 days following notice to such lenders of the occurrence of an event of default under the indenture. In addition, the intercreditor agreement will prevent the trustee and the holders of the notes from pursuing remedies with respect to the assets securing the proposed new credit facility in an insolvency proceeding. The intercreditor agreement also will provide that the net proceeds from the sale of the assets securing the proposed new credit facility will first be applied to repay indebtedness outstanding under the credit facility and thereafter to the holders of the notes. The value of the collateral securing the notes may not be sufficient to pay all amounts owed under the notes if an event of default occurs. A large portion of the collateral securing the notes consists of our casinos, truck plazas and personal property, which depreciate in value over time. As a result, if an event of default occurs with respect to the notes, we cannot assure you that the liquidation of the collateral securing the notes will produce sufficient proceeds to pay all amounts owed under the notes. The value of the collateral at any time will depend on market and other economic conditions, including the availability of suitable buyers for the collateral. If the proceeds are insufficient, the deficiency would be an unsecured obligation. There can be no assurance that you would recover any deficiency. 21 Not all of our subsidiaries will guarantee the notes. Not all of our subsidiaries will guarantee the notes. The subsidiaries comprising our Virginia horse racing track and off-track wagering facilities do not guarantee the notes. Non-guarantor subsidiaries have no obligations to make payments to us or in respect of the notes. In the event of a bankruptcy, liquidation or reorganization of any non-guarantor subsidiary, the creditors of such subsidiary (including trade creditors) will generally be entitled to payment of their claims from the assets of such subsidiary before any assets are made available for distribution to us as a stockholder. After paying its own creditors, a non-guarantor subsidiary may not have any remaining assets available for payment to you as a holder of notes. As a result, the notes are effectively junior in right of payment to the obligations of non-guarantor subsidiaries. At December 31, 2001, after giving pro forma effect to this offering and the recent acquisitions, the indebtedness of our non-guarantor subsidiaries would have been approximately $17.4 million, of which $15.7 million of secured indebtedness will be owed to Gameco. Gameco will pledge this indebtedness as security for the notes offered hereby. The security interests securing such indebtedness cover a substantial portion of the assets of our Virginia subsidiaries (except for deeds of trust on the off-track wagering facilities). However, the perfection of this pledge of the security interests securing such indebtedness, as well as the enforcement of this security interest by the trustee, is subject to approval of the Virginia gaming authority. The trustee's ability to realize on the collateral securing the notes may be limited. The trustee's ability to foreclose on the pledged shares and other collateral comprising our gaming businesses is limited by relevant gaming laws. Regulations of the gaming authorities in the several states in which we operate provide that no person may acquire an interest in a gaming licensee or enforce a security interest in the stock of a corporation that is the holder of a gaming license or that owns stock in such a corporation without the prior approval of the gaming authority. As such, neither the trustee nor any holder is permitted to operate or manage any gaming business or assets unless that person has been licensed under applicable law for that purpose. Gaming law requires that any person who proposes to own shares of licensed corporations or of registered holding corporations must be found suitable as a stockholder of such corporations by the applicable gaming authority and other relevant gaming authorities before acquiring ownership of those interests. Consequently, it would be necessary for the trustee to file an application with the gaming authorities requesting approval to enforce the security interest in any pledged stock and obtain that approval before it may take any steps to enforce the security interest. Additionally, the trustee must file applications with the gaming authorities requesting approval to enforce a security interest in our gaming assets before it may take steps to enforce the security interest. Moreover, it would be necessary for a prospective purchaser of the pledged stock or of the gaming assets to file the necessary applications, be investigated, and be licensed or found suitable by the gaming authorities before acquiring the gaming assets or the pledged stock through the foreclosure sale. These requirements may therefore limit the number of potential bidders who would participate in any foreclosure sale and may delay the sale of any pledged stock or other gaming assets, either of which could have an adverse effect on the proceeds received from those sales. In addition, the trustee's ability to foreclose on and sell the collateral will be subject to the procedural restrictions of state real estate law and the Uniform Commercial Code. Furthermore, the right of the trustee to foreclose upon and sell the collateral is likely to be significantly impaired by applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or against us or any of our subsidiaries prior to, or possibly even after, the trustee has repossessed and disposed of the collateral. We are a holding company and will depend on the business of our subsidiaries to satisfy our obligations under the notes. We are a holding company. Substantially all of the operations necessary to fund payment on the notes are conducted by our subsidiaries. Our ability to make payment on the notes depends on our subsidiaries' cash flow and their payment of funds to us. Our subsidiaries' ability to make payments to us depends on their earnings, the terms of their indebtedness, business and tax considerations, legal and regulatory restrictions and economic conditions. 22 We may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture. Upon the occurrence of certain specific kinds of change of control events, we will be required to offer to repurchase all outstanding notes. However, it is possible that we will not have sufficient funds at the time of such a change of control to make the required repurchase of notes. The change of control provisions may not protect you in a transaction in which we incur a large amount of debt, including a reorganization, restructuring, merger or other similar transaction, because that kind of transaction may not involve any shift in voting power or beneficial ownership, or may not involve a shift large enough to trigger a change of control as defined in the note indenture. See "Description of the Notes--Repurchase at the Option of Holders--Change of Control." The Notes were issued with original issue discount. As a result, you will generally be required for United States federal income tax purposes to include in gross income accrued original issue discount on the Notes before the receipt of a cash payment on account thereof, and in the event of a bankruptcy of the Company, a Note holder's claim would not include any unamortized original discount. Original issue discount (the difference between the notes' stated redemption price at maturity and their issue price) will accrue from the issue date of the notes, and purchasers of the notes generally will be required to include such amounts in gross income for United States federal income tax purposes in advance of their receipt of the cash payments to which the income is attributable. See "Certain United States Federal Income Tax Consequences." If a bankruptcy case is commenced by or against us under the United States Bankruptcy Code after the issuance of the notes, the claim of a holder of the Notes may be limited to an amount equal to the sum of (1) the Notes' issue price, (2) accrued and unpaid interest thereon through the date of the bankruptcy filing, and (3) that portion of the original issue discount deemed to have accrued from the issue date through the date of the bankruptcy filing. Any original issue discount deemed not to have accrued as of the date of any such bankruptcy filing would constitute "unmatured interest" and would not be allowed under the Bankruptcy Code. Accordingly, the holder's claim would likely be less than the notes' stated redemption price at maturity. Federal and state statutes allow courts, under specific circumstances, to void guarantees, subordinate claims in respect of indebtedness and require debt holders to return payments received from guarantors. Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a court could void a guarantee of one or more of our subsidiaries or claims related to the notes or subordinate a subsidiary's guarantee to all of our other debts or all other debts of the guarantor if, among other things, we or the guarantor, at the time we or it incurred the indebtedness evidenced by its guarantee: . received less than reasonably equivalent value or fair consideration for the incurrence of that indebtedness; and . we were or the guarantor was insolvent or rendered insolvent by reason of that incurrence; . we were or the guarantor was engaged in a business or transaction for which our or the guarantor's remaining assets constituted unreasonably small capital; or . we or the guarantor intended to incur, or believed that we or it would incur, debts beyond our or its ability to pay those debts as they mature. In addition, a court could void any payment by us or the guarantor pursuant to the notes or a guarantee and require that payment to be returned to us or the guarantor, or to a fund for the benefit of our creditors or the creditors of the guarantor. 23 The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if: . the sum of its debts, including contingent liabilities, were greater than the fair saleable value of all of its assets, . the present fair saleable value of its assets were less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature, or . it could not pay its debts as they become due. We believe that we and the guarantors will have received reasonably equivalent value and fair consideration for the incurrence of the indebtedness and obligations represented by the notes and the guarantees. On the basis of historical financial information, recent operating history and other factors, we believe that we and each subsidiary guarantor, after giving effect to its guarantee of these notes, will not be insolvent, will not have unreasonably small capital for the business in which we are or it is engaged and will not have incurred debts beyond our or its ability to pay such debts as they mature. There can be no assurance, however, as to what standard a court would apply in making those determinations or that a court would agree with our conclusions in this regard. Members of the Jacobs family own a controlling interest in our capital stock and may significantly influence our affairs or may pursue other activities that compete with us. Jeffrey P. Jacobs, our Chairman and Chief Executive Officer, owns 50% of our common shares and a trust controlled by Richard E. Jacobs, his father, owns the remaining 50% of our common shares. Each has the ability significantly to influence our affairs, including the election of our directors and transactions including mergers, consolidations or sales of assets. In addition, none of Jeffrey P. Jacobs, Richard E. Jacobs or any of the entities which either of them control is restricted from pursuing other opportunities which may compete for business with our operations. Risks Related to the Exchange Offer If you do not properly tender your Old Notes, you will continue to hold unregistered Old Notes and your ability to transfer Old Notes will be adversely affected. We will only issue New Notes in exchange for Old Notes that are timely received by the exchange agent together with all required documents, including a properly completed and signed letter of transmittal. Therefore, you should allow sufficient time to ensure timely delivery of the Old Notes and you should carefully follow the instructions on how to tender your Old Notes. Neither we nor the exchange agent are required to tell you of any defects or irregularities with respect to your tender of the Old Notes. If you do not tender your Old Notes or if we do not accept your Old Notes because you did not tender your Old Notes properly, then, after we consummate the exchange offer, you will continue to hold Old Notes that are subject to the existing transfer restrictions. In addition, if you tender your Old Notes for the purpose of participating in a distribution of the New Notes, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the New Notes. If you are a broker-dealer that receives New Notes for your own account in exchange for Old Notes that you acquired as a result of market-making activities or any other trading activities, you will be required to acknowledge that you will deliver a prospectus in connection with any resale of those New Notes. After the exchange offer is consummated, if you continue to hold any Old Notes, you may have difficulty selling them because there will be fewer Old Notes outstanding. In addition, if a large amount of Old Notes are not tendered or are tendered improperly, the limited amount of New Notes that would be issued and outstanding after we consummate the exchange offer could reduce the market price of the New Notes. 24 There may not be a liquid market for resale of the New Notes. The New Notes are new securities for which there currently is no market. Although the initial purchasers have informed us that they intend to make a market in the New Notes, they are not obligated to do so and any such market-making may be discontinued at any time without notice. In addition, the market-making activity may be limited during the pendency of the exchange offer. Accordingly, there can be no assurance as to the development or liquidity of any market for the New Notes. We do not intend to apply for listing of the New Notes on any securities exchange or for quotation of the New Notes on the Nasdaq National Market or otherwise. The liquidity of, and trading market for, the New Notes also may be adversely affected by general declines in the market for similar securities. Any such decline may occur independently of our financial performance and prospects. THE EXCHANGE OFFER Purpose and Effect of the Exchange Offer On February 8, 2002, we issued $125,000,000 aggregate principal amount of Old Notes to CIBC World Markets Corp. in a transaction not registered under the Securities Act. The sale of the Old Notes was made in reliance on an exemption from registration under the Securities Act. The initial purchasers then sold the Old Notes to qualified institutional buyers under Rule 144A or Regulation S of the Securities Act. Because the Old Notes have been sold pursuant to exemptions from registration, the Old Notes are subject to transfer restrictions. In connection with the issuance of the Old Notes, we entered into a registration rights agreement with the initial purchasers that requires us to: . file with the Commission a registration statement under the Securities Act covering the New Notes; . use our best efforts to cause the registration statement to become effective under the Securities Act; and . complete the exchange offer upon effectiveness of the registration statement. A copy of the registration rights agreement with the initial purchasers has been filed with the Commission as Exhibit 4. to our registration statement. Any discussion of the terms of the registration rights agreement is qualified in its entirety by reference to the complete agreement. Following the completion of the exchange offer, holders of the Old Notes not tendered will not have any further registration rights other than as set forth in the paragraphs below, and those Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for the Old Notes may be adversely affected. Upon completion of the exchange offer, holders of New Notes will have no registration rights. Resale of New Notes Based on existing interpretations of the Securities Act by the staff of the Commission described in several no-action letters to third parties, we believe that, subject to the exceptions set forth below, the New Notes issued in the exchange offer may be offered for resale, resold and otherwise transferred by you without further compliance with the registration and prospectus delivery provisions of the Securities Act unless you: . are an "affiliate" of ours within the meaning of Rule 405 under the Securities Act; . are a broker-dealer who purchased Old Notes directly from us for resale under Rule 144A or Regulation S or any other available exemption under the Securities Act; . acquired the New Notes other than in the ordinary course of your business; or . have an arrangement with any person to engage in the distribution of New Notes. 25 Broker-dealers that are receiving New Notes for their own account must have acquired the Old Notes as a result of market-making or other trading activities in order to participate in the exchange offer. Each broker-dealer that receives New Notes for its own account under the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the New Notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be admitting that it is an "underwriter" within the meaning of the Securities Act. We are required to allow broker-dealers to use this prospectus following the exchange offer in connection with the resale of New Notes received in exchange for Old Notes acquired by broker-dealers for their own account as a result of market-making or other trading activities. If required by applicable securities laws, we will, upon written request, make this prospectus available to any broker-dealer for use in connection with a resale of New Notes for a period of 180 days after the consummation of the exchange offer. See "Plan of Distribution." Terms of the Exchange Offer Upon the terms and subject to the conditions stated in this prospectus and in the letter of transmittal, we will accept all Old Notes validly tendered by you and not withdrawn before 5:00 p.m. New York City time on the expiration date. After authentication of the New Notes by the trustee or an authenticating agent, we will issue $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes accepted in the exchange offer. You may tender some or all of your Old Notes pursuant to the exchange offer. However, Old Notes may be tendered only in integral multiples of $1,000 in principal amount. The terms of the New Notes are identical in all material respects to the terms of the Old Notes except that the New Notes have been registered under the Securities Act and will not bear legends restricting transfer. The New Notes will evidence the same debt as the Old Notes and will be issued under and entitled to the benefits of the same indenture. As of the date of this prospectus, $125,000,000 aggregate principal amount of the Old Notes was outstanding. By tendering your Old Notes for New Notes in the exchange offer and signing or agreeing to be bound by the letter of transmittal, you will represent to us that: . you will acquire the New Notes you receive in the exchange offer in the ordinary course of your business; . you are not engaging in and do not intend to engage in a distribution of the New Notes; . you do not have an arrangement or understanding with any person to participate in the distribution of the New Notes; and . you are not an "affiliate," as defined under Rule 405 of the Securities Act, of ours. This prospectus, together with the accompanying letter of transmittal, is initially being sent to all registered holders of the Old Notes. There will be no fixed record date for determining registered holders of Old Notes entitled to participation in the exchange offer. We intend to conduct the exchange offer as required by the Exchange Act, and the rules and regulations of the Commission under the Exchange Act, including Rule 14e-1, to the extent applicable. Rule 14e-1 describes unlawful tender practices under the Exchange Act. This section requires us, among other things: . to hold our exchange offer open for at least 20 business days; . to give 10 days notice of any change in certain terms of this offer; and . to issue a press release in the event of an extension of the exchange offer. 26 The exchange offer is not conditioned upon any minimum aggregate principal amount of Old Notes being tendered. We will be considered to have accepted Old Notes tendered according to the procedures in this prospectus when, as and if we have given oral or written notice of acceptance to the exchange agent. See "--Exchange Agent." The exchange agent will act as agent for the tendering holders of the Old Notes for the purpose of receiving New Notes from us and delivering New Notes to those holders. If any tendered Old Notes are not accepted for exchange because of an invalid tender or the occurrence of other events described in this prospectus, certificates for these unaccepted Old Notes will be returned, at our cost, to the tendering holder of the Old Notes or, in the case of Old Notes tendered by book-entry transfer, into the holder's account at DTC according to the procedures described below, as soon as practicable after the expiration date. If you tender Old Notes in the exchange offer, you will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes related to the exchange of Old Notes in the exchange offer. We will pay all charges and expenses, other than applicable taxes, in connection with the exchange offer. See "--Solicitation of Tenders; Fees and Expenses." Expiration Date; Extensions; Amendments The exchange offer will expire at 5:00 p.m., New York City time, on the later to occur of or 30 business days after the date that notice of the exchange offer is first mailed to the holders of Old Notes. We expressly reserve the right, in our sole discretion: . to delay acceptance of any Old Notes or to terminate the exchange offer and to refuse to accept Old Notes not previously accepted, if any of the conditions described below shall not have been met and is not waived by us; . to amend the terms of the exchange offer in any manner; . to purchase or make offers for any Old Notes that remain outstanding subsequent to the expiration date; and . to the extent permitted by applicable law, to purchase Old Notes in the open market, in privately negotiated transactions or otherwise. Any delay in acceptance, termination, extension, or amendment will be followed as promptly as practicable by oral or written notice to the exchange agent and by making a public announcement. If the exchange offer is amended in a manner determined by us to constitute a material change, we will promptly disclose the amendment in a manner reasonably calculated to inform you of the amendment. Without limiting the manner in which we may choose to make public announcements of any delay in acceptance, termination, extension, or amendment of the exchange offer, we shall have no obligation to publish, advise, or otherwise communicate any public announcement, other than by making a timely release to a financial news service. You are advised that we may extend the exchange offer in the event some of the holders of the Old Notes do not tender on a timely basis. In order to give these noteholders the ability to participate in the exchange and to avoid the significant reduction in liquidity associated with holding an unexchanged note, we may elect to extend the exchange offer until all outstanding Old Notes are tendered. Interest on the New Notes The New Notes will bear interest from February 8, 2002 or, if later, from the most recent date of payment of interest on the Old Notes. Accordingly, if you tender Old Notes that are accepted for exchange, you will not 27 receive interest that is accrued but unpaid on the Old Notes at the time of tender. Interest on the New Notes will be payable semi-annually on each February 1 and August 1, commencing on the next interest payment date. Procedures for Tendering Only a holder of Old Notes may tender Old Notes in the exchange offer. If you are a beneficial owner whose Old Notes are registered in the name of your broker, dealer, commercial bank, trust company or other nominee or are held in book-entry form and wish to tender, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. If you are a beneficial owner and wish to tender on your own behalf, you must, before completing and executing the letter of transmittal and delivering your Old Notes, either make appropriate arrangements to register ownership of the Old Notes in your name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. Your tender will constitute an agreement between you and us according to the terms and subject to the conditions described in this prospectus and in the letter of transmittal. If you desire to tender Old Notes and cannot comply with the procedures set forth herein for tender on a timely basis or your Old Notes are not immediately available, you must comply with the procedures for guaranteed delivery set forth in "--Guaranteed Delivery Procedures." The method of delivery to the exchange agent of Old Notes, the letter of transmittal and all other required documents is at your election and risk. Delivery of such documents will be considered made only when the exchange agent actually receives them or they are deemed received under the ATOP procedures described below. In all cases, sufficient time should be allowed to assure delivery to the exchange agent before the expiration date. No letter of transmittal or Old Notes should be sent to us. You may also request that your respective brokers, dealers, commercial banks, trust companies or nominees effect the tender for you, in each case as described in this prospectus and in the letter of transmittal. Old Notes Held in Certificated Form For you to validly tender Old Notes held in physical form, the exchange agent must receive, before 5:00 p.m. New York City time on the expiration date, at its address set forth in this prospectus: . a properly completed and validly executed letter of transmittal, or a manually signed facsimile thereof, together with any signature guarantees and any other documents required by the instructions to the letter of transmittal, and . certificates for tendered Old Notes. Old Notes Held in Book-Entry Form We understand that the exchange agent will make a request promptly after the date of the prospectus to establish accounts for the Old Notes at DTC for the purpose of facilitating the exchange offer, and subject to their establishment, any financial institution that is a participant in DTC may make book-entry delivery of Old Notes by causing DTC to transfer the Old Notes into the exchange agent's account for the Old Notes using DTC's procedures for transfer. If you desire to transfer Old Notes held in book-entry form with DTC, the exchange agent must receive, before 5:00 p.m. New York City time on the expiration date, at its address set forth in this prospectus, a confirmation of book-entry transfer of the Old Notes into the exchange agent's account at DTC, which is referred to in this prospectus as a "book-entry confirmation," and: . a properly completed and validly executed letter of transmittal, or manually signed facsimile thereof, together with any signature guarantees and other documents required by the instructions in the letter of transmittal; or . an agent's message transmitted pursuant to DTC's Automated Tender Offer Program. 28 Tender of Old Notes Using DTC'S Automated Tender Offer Program (ATOP) The exchange agent and DTC have confirmed that the exchange offer is eligible for DTC's Automated Tender Offer Program. Accordingly, DTC participants may electronically transmit their acceptance of the exchange offer by causing DTC to transfer Old Notes held in book-entry form to the exchange agent in accordance with DTC's ATOP procedures for transfer. DTC will then send a book-entry confirmation, including an agent's message to the exchange agent. The term "agent's message" means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering Old Notes that are the subject of that book-entry confirmation that the participant has received and agrees to be bound by the terms of the letter of transmittal, and that we may enforce such agreement against such participant. If you use ATOP procedures to tender Old Notes you will not be required to deliver a letter of transmittal to the exchange agent, but you will be bound by its terms just as if you had signed it. Signatures Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an "eligible institution" unless the Old Notes tendered with the letter of transmittal are tendered: . by a registered holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" in the letter of transmittal; or . for the account of an "eligible institution." An "eligible institution" is a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc.; a commercial bank or trust company having an office or correspondent in the United States; an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act; or an "eligible institution" that is a participant in a recognized medallion guarantee program. If the letter of transmittal is signed by a person other than the registered holder or DTC participant who is listed as the owner, the Old Notes must be endorsed or accompanied by appropriate bond powers which authorize the person to tender the Old Notes on behalf of the registered holder or DTC participant who is listed as the owner, in either case signed as the name of the registered holder who appears on the Old Notes or the DTC participant who is listed as the owner. If the letter of transmittal or any Old Notes or bond powers are signed or endorsed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, those persons should so indicate when signing, and unless waived by us, evidence satisfactory to us of their authority to so act must be submitted with the letter of transmittal. If you tender your notes through ATOP, signatures and signature guarantees are not required. Determinations of Validity All questions as to the validity, form, eligibility, including time of receipt, acceptance and withdrawal of the tendered Old Notes will be determined by us in our sole discretion. Our determinations will be final and binding. We reserve the absolute right to reject any and all Old Notes not properly tendered or any Old Notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defects, irregularities or conditions of tender as to particular Old Notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within the time we shall determine. Although we intend to notify holders of defects or irregularities related to tenders of Old Notes, neither we nor the exchange agent nor any other person will be under any duty to give notification of defects or irregularities related to tenders of Old Notes nor will any of them incur liability for 29 failure to give notification. Tenders of Old Notes will not be considered to have been made until such defects or irregularities have been cured or waived. Any Old Notes received by the exchange agent that we determine are not properly tendered or the tender of which is otherwise rejected by us and as to which the defects or irregularities have not been cured or waived by us will be returned by the exchange agent to the tendering holder unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date. Guaranteed Delivery Procedures If you wish to tender your Old Notes and: . your Old Notes are not immediately available; . you cannot complete the procedure for book-entry transfer on a timely basis; . you cannot deliver your Old Notes, the letter of transmittal or any other required documents to the exchange agent before the expiration date; or . you cannot complete a tender of Old Notes held in book-entry form using DTC's ATOP procedures on a timely basis, then, you may effect a tender if you tender through an eligible institution as defined under "--Procedures for Tendering--Signatures," or if you tender using ATOP's guaranteed delivery procedures. A tender of Old Notes made by or through an eligible institution will be accepted if: . before 5:00 p.m., New York City time, on the expiration date, the exchange agent receives from an eligible institution a properly completed and duly executed notice of guaranteed delivery, by facsimile transmittal, mail or hand delivery, that: (1) sets forth the name and address of the holder, the certificate number or numbers of the holder's Old Notes and the principal amount of the Old Notes tendered, (2) states that the tender is being made, and (3) guarantees that, within five business days after the expiration date, a properly completed and validly executed letter of transmittal or facsimile, together with certificates representing the Old Notes to be tendered in proper form for transfer, or a book-entry confirmation, and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent; and . the properly completed and executed letter of transmittal or a facsimile, together with the certificates representing all tendered Old Notes in proper form for transfer, or a book-entry confirmation, and all other documents required by the letter of transmittal are received by the exchange agent within five business days after the expiration date. A tender made through DTC's Automated Tender Offer Program will be accepted if: . before 5:00 p.m., New York City time, on the expiration date, the exchange agent receives an agent's message from DTC stating that DTC has received an express acknowledgment from the participant in DTC tendering the Old Notes that it has received and agrees to be bound by the notice of guaranteed delivery; and . the exchange agent receives, within five business days after the expiration date, either: (1) a book-entry confirmation transmitted via DTCs ATOP procedures; or (2) a properly completed and executed letter of transmittal or a facsimile, together with the certificates representing all tendered Old Notes in proper form for transfer, or a book-entry confirmation, and all other documents required by the letter of transmittal. Upon your request, the exchange agent will send to you a notice of guaranteed delivery so that you may tender your Old Notes according to the guaranteed delivery procedures described above. 30 Withdrawal of Tenders You may withdraw Old Notes you tendered at any time before 5:00 p.m. New York City time on the expiration date. To withdraw a tender of Old Notes in the exchange offer: . a written or facsimile transmission of a notice of withdrawal must be received by the exchange agent at its address listed below before 5:00 p.m., New York City time, on the expiration date; or . you must comply with the appropriate DTC ATOP procedures. Any notice of withdrawal must: . specify the name of the person having deposited the Old Notes to be withdrawn; . identify the Old Notes to be withdrawn, including the certificate number or numbers and principal amount of the Old Notes or, in the case of Old Notes transferred by book-entry transfer, the name and number of the account at the depositary to be credited; . be signed by the same person and in the same manner as the original signature on the letter of transmittal by which the Old Notes were tendered, including any required signature guarantee, or be accompanied by documents of transfer sufficient to permit the trustee for the Old Notes to register the transfer of the Old Notes into the name of the person withdrawing the tender; and . specify the name in which any of the Old Notes are to be registered, if different from that of the person who deposited the Old Notes to be withdrawn. All questions as to the validity, form and eligibility, including time of receipt, of the withdrawal notices will be determined by us, and our determinations will be final and binding on all parties. Any Old Notes so withdrawn will be judged not to have been tendered for purposes of the exchange offer, and no New Notes will be issued in exchange for those Old Notes unless you validly retender the Old Notes so withdrawn. If your Old Notes that have been tendered are not accepted for exchange, they will be returned to you without cost to you or, in the case of Old Notes tendered by book-entry transfer, into your account at DTC according to the procedures described above. This return or crediting will take place as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. You may retender properly withdrawn Old Notes by following one of the procedures described above under "--Procedures for Tendering" at any time before the expiration date. Conditions The exchange offer is subject only to the following conditions: . regulatory approvals of Nevada state gaming authorities; . the compliance of the exchange offer with securities laws; . the proper tender of the Old Notes; . our receipt of the required representations by the holders of the Old Notes described above; and . no judicial or administrative proceeding being pending or threatened that would limit us from proceeding with the exchange offer. The foregoing conditions are for our sole benefit and we may assert them regardless of the circumstances giving rise to any such condition or we may waive them in whole or in part at any time and from time to time in our sole discretion. Our failure at any time to exercise any of the forgoing rights does not constitute a waiver of that right. Each of these rights is an ongoing right that we may assert at any time and from time to time. In addition, we will not accept for exchange any Old Notes tendered, and no New Notes will be issued in exchange for those Old Notes, if at such time any stop order is threatened or in effect with respect to the 31 registration statement of which this prospectus constitutes a part or with respect to the qualification of the indenture under the Trust Indenture Act of 1939. Exchange Agent Wells Fargo Bank Minnesota, National Association, the trustee under the indenture, has been appointed as exchange agent for the exchange offer. In this capacity, the exchange agent has no fiduciary duties and will be acting solely on the basis of our directions. You should direct requests for assistance and requests for additional copies of this prospectus or of the letter of transmittal to the exchange agent at the address below. You should send certificates for Old Notes, letters of transmittal and any other required documents to the exchange agent addressed as follows: By Hand or Overnight Courier and by Registered or Certified Mail: Wells Fargo Bank Minnesota, National Association Gameco Exchange Agent 213 Court Street, Suite 920 Middletown, CT 06457 Attention: Robert Reynolds By Facsimile (for eligible institutions only): (860) 704-6219 Attention: Robert Reynolds For information, call: Robert Reynolds (860) 704-6216 Delivery of the letter of transmittal to an address other than as listed above or transmission of instructions via facsimile other than as described above does not constitute a valid delivery of the letter of transmittal. Solicitation of Tenders; Fees and Expenses We will bear the expenses of soliciting tenders. The principal solicitation under the exchange offer is being made by mail. Our officers and regular employees and our affiliates may make additional solicitations in person, by telegraph, telephone or telecopier. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or other persons soliciting acceptances of the exchange offer. We, however, will pay the exchange agent reasonable and customary fees for its services and will reimburse the exchange agent for its reasonable out-of-pocket costs and expenses in connection with the exchange offer and will indemnify the exchange agent for all losses and claims incurred by it as a result of the exchange offer. We will pay the expenses to be incurred in connection with the exchange offer, including fees and expenses of the exchange agent and trustee, accounting and legal fees and printing costs. Transfer Taxes You will not be obligated to pay any transfer tax in connection with the exchange, unless you instruct us to register New Notes in the name of, or request that notes not tendered or not accepted in the exchange offer be returned to, a person other than you. Under those circumstances, you will be responsible for the payment of any applicable transfer tax. 32 Accounting Treatment The New Notes will be recorded at the same carrying value as the Old Notes, as reflected in our accounting records on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized by us upon the closing of the exchange offer. We will amortize the expenses of the exchange offer over the term of the New Notes. Participation in the Exchange Offer; Untendered Notes Participation in the exchange offer is voluntary. Holders of the Old Notes are urged to consult their financial and tax advisors in making their own decisions on what action to take. As a result of the making of, and upon acceptance for exchange of all Old Notes tendered under the terms of, this exchange offer, we will have fulfilled a covenant contained in the registration rights agreement. If you do not tender your Old Notes in the exchange offer, you will continue to hold your Old Notes and will be entitled to all the rights, subject to certain limitations, applicable to the Old Notes under the indenture. Holders of Old Notes will no longer be entitled to any rights under the registration rights agreement, which terminate and cease to have effect upon consummation of this exchange offer. All untendered Old Notes will continue to be subject to the restrictions on transfer described in the indenture. To the extent that Old Notes are tendered and accepted in the exchange offer, the trading market for untendered Old Notes could be adversely affected. The reduction in the number of outstanding Old Notes following the exchange will probably significantly reduce the liquidity of the untendered notes. If you do not exchange your restricted Old Notes for registered New Notes pursuant to the exchange offer, you will continue to be subject to the restrictions on transfer of the restricted notes as described in the legend on the notes. In general, the restricted notes may be offered or sold only if registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not currently anticipate that we will register the restricted notes under the Securities Act. However, under limited circumstances we may be required to file with the Commission a shelf registration statement to cover resales of the restricted notes by the holders of Old Notes who satisfy conditions relating to the provision of information in connection with the shelf registration statement. We may in the future seek to acquire untendered Old Notes in the open market or through privately negotiated transactions, through subsequent exchange offers or otherwise. The terms of any such purchases or offers could differ from the terms of the exchange offer. We intend to make any acquisition of Old Notes in accordance with the applicable requirements of the Exchange Act, and the rules and regulations of the Commission under the Exchange Act, including Rule 14e-1, to the extent applicable. We have no present plan to acquire any Old Notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any Old Notes that are not tendered in the exchange offer. Holders of Old Notes do not have any appraisal or dissenters' rights in connection with the exchange offer. 33 USE OF PROCEEDS We will not receive any proceeds in connection with the exchange offer. In consideration for issuing the New Notes in exchange for the Old Notes as described in this prospectus, we will receive, retire and cancel the Old Notes. We used the proceeds of the sale of the Old Notes to: . Refinance the outstanding indebtedness and other obligations of Black Hawk Gaming; . Finance the merger consideration payable to Black Hawk Gaming shareholders and option holders; . Refinance the debt incurred by Jalou L.L.C. to acquire Bayou Vista Truck Plaza and Casino and Lucky Magnolia Truck Stop and Casino and the debt incurred for the acquisition by Jalou L.L.C. of Raceland Truck Plaza and Casino; . Refinance the debt incurred by Jalou II to acquire Colonel's Truck Plaza and Casino; . Finance the merger consideration payable to Colonial Holdings shareholders and option holders; . Pay accrued interest and other expenses owed by Colonial Holdings to CD Entertainment, an affiliate of Jeffrey P. Jacobs; and . Pay transaction fees and expenses related to the offering of the Old Notes and the recent acquisitions. As part of the recent acquisitions, entities controlled by Jeffrey P. Jacobs and The Richard E. Jacobs Revocable Trust contributed to us substantially all of their direct and indirect interests in Diversified and certain of its affiliates, including Jalou L.L.C. and Jalou II, in exchange for our issuance to them of our common stock. We did not pay any cash consideration in connection with that contribution. The following table illustrates the uses of the net proceeds from the sale of the Old Notes together with prior or concurrent funding from other sources:
(dollars in thousands) ----------- Sources: Proceeds of Old Notes(1).................................................. $120,050 New Louisiana properties seller notes(2).................................. 5,795 Cash...................................................................... 7,469 -------- Total sources......................................................... $133,314 ======== Uses: Repayment of Black Hawk Gaming obligations(3)............................. $ 59,946 Black Hawk Gaming acquisition consideration(6)............................ 36,980 Louisiana truck plaza acquisition consideration(4)........................ 20,282 Colonial Holdings acquisition consideration(7)............................ 4,820 Payment of accrued interest, advances and other payables to affiliates(5). 3,240 Remaining transaction fees and expenses(8)................................ 8,046 -------- Total uses............................................................ $133,314 ========
- -------- (1) Reflects unamortized offering discount of approximately $4.95 million. (2) Notes issued to the sellers of Colonel's Truck Plaza and Casino, Raceland Truck Plaza and Casino, Bayou Vista Truck Plaza and Casino and Lucky Magnolia Truck Stop and Casino. The notes bear interest at a rate of 8.5% per annum, mature on April 30, 2009, and are in the principal amount of $2.2 million, $1.1 million, $1.7 million and $0.8 million, respectively. Each such note is secured by a second mortgage on the facility to which the note relates, and the Old Notes and Exchange Notes are and will be secured by a first priority mortgage on each such facility. 34 (3) Includes indebtedness of $58.8 million that was the outstanding portion as of December 31, 2001 of Black Hawk Gaming's four-year, $75.0 million reducing revolving credit facility with Wells Fargo Bank. Outstanding amounts under the facility bore interest at a blended rate equal to 8.94% per annum and had a final maturity of April 2004. In addition, as of December 31, 2001, the interest rate swap liability was $1.1 million ($1.9 million, net of associated income tax benefit of approximately $0.8 million). This credit facility was terminated upon repayment on February 22, 2002. (4) On January 11, 2002, Jalou L.L.C. purchased Bayou Vista Truck Plaza and Casino and Lucky Magnolia Truck Stop and Casino, and Jalou II Inc. purchased Colonel's Truck Plaza and Casino. In addition, on February 22, 2002, Jalou L.L.C. purchased Raceland Truck Plaza and Casino. The aggregate purchase price for these acquisitions was approximately $20.3 million, subject to post-closing adjustments, and is financed by: . promissory notes issued to the sellers of such properties totaling approximately $5.8 million; . $5.7 million of funds borrowed from The Richard E. Jacobs Revocable Trust, bearing no interest, which was repaid with proceeds from the Old Notes; and . the remainder of funds borrowed from unaffiliated third party lenders, bearing interest at a weighted average rate of 6.7%. All such borrowings from The Trust and the unaffiliated third party lender were repaid with a portion of the net proceeds of the offering of the Old Notes. (5) Includes $1.8 million of accrued interest as of December 31, 2001 under convertible promissory notes between CD Entertainment Ltd., as lender, and Colonial Holdings and Colonial Downs, L.P., as borrowers. These notes were contributed to Gameco, Inc. as part of the acquisitions described in (7) below. These notes were modified to (1) reduce the outstanding principal amount due to $15.7 million through the forgiveness of $10.0 million of indebtedness, (2) eliminate any amortization payments, (3) eliminate the conversion feature and (4) extend the maturity to February 1, 2009. Colonial Holdings and Colonial Downs are able to elect, at their option, to pay interest in cash or in kind. Also includes $750,000 in credit enhancement fees for 1999 and 2000, working capital advance of $500,000 in 2001 and other miscellaneous receivables of approximately $200,000 due from Colonial Holdings. (6) The Black Hawk Gaming acquisition consideration was determined by negotiation with the Special Committee of the Board of Directors of Black Hawk Gaming, which engaged an independent investment banking firm to assist it in determining and negotiating a fair and equitable purchase price. The acquisition was approved by shareholder vote on January 4, 2002. (7) The Colonial Holdings acquisition consideration was determined by negotiation with the Special Committee of the Board of Directors of Colonial Holdings, which engaged an independent investment banking firm to assist it in determining and negotiating a fair and equitable purchase price. The acquisition was approved by shareholder vote on January 11, 2002. (8) The remaining transaction fees and expenses are comprised primarily of professional fees associated with the issuance of the Old Notes, and the redemption of the Old Notes for the New Notes. 35 CAPITALIZATION The following table sets forth our consolidated cash and cash equivalents and capitalization as of December 31, 2001, on a pro forma basis including all of our recent acquisitions and the application of net proceeds of the Old notes as described under "Use of Proceeds." As of December 31, 2001, Gameco was a holding company with an insignificant amount of assets and liabilities. You should read this information in conjunction with the information under "Use of Proceeds," "Selected Consolidated Historical Financial and Operating Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the financial statements and notes thereto included elsewhere in this prospectus.
As of December 31, 2001 ----------------- (dollars in thousands) Cash and cash equivalents..................................... $ 11,604 ======== Long-term debt, including current maturities: Proposed new credit facility(1)............................ Proceeds of Old Notes(2)................................... $120,050 Black Hawk special assessment bonds(3)..................... 5,299 Indebtedness of Colonial Holdings(4)....................... 1,693 Existing Louisiana properties seller notes(5).............. 4,740 New Louisiana properties seller notes(6)................... 5,795 Subordinated debt to affiliates(7)......................... 9,000 -------- Total long-term debt, including current maturities..... 146,577 Stockholders' equity.......................................... 63,627 -------- Total capitalization................................... $210,204 ========
- -------- (1) We may enter into a proposed new senior credit facility in an amount up to $10.0 million. See "Description of Other Indebtedness." (2) Reflects unamortized offering discount of approximately $4.95 million. (3) Black Hawk Business Improvement District Special Assessment Bonds, issued in March 1999, in one tranche of $2.0 million and another tranche of $4.0 million. The interest rate on the $2.0 million tranche is 6.25% per annum, and the $4.0 million tranche bears interest at the rate of 6.5% per annum. The $2.0 million tranche has a final maturity of December 1, 2004, and the $4.0 million tranche has a final maturity of December 1, 2011. The bonds are secured by a first priority lien on the real property comprising the Black Hawk Improvement District relating to The Lodge Casino, which ranks senior to the security for the notes offered hereby. See "Description of Other Indebtedness" for more information. (4) Indebtedness includes a note payable to the Maryland Jockey Club, or MJC, in the amount of $1.2 million as of December 31, 2001, bearing interest at 7.75%, payable in quarterly installments of interest plus principal of $72,500 and maturing December 2005. Colonial Holdings has an additional note payable to MJC in the amount of $0.3 million, bearing interest at the prime rate (4.75% at December 31, 2001) and maturing January 2002. Colonial Holdings also has a note payable to Citizens and Farmers Bank in the amount of $0.1 million as of December 31, 2001, bearing interest at 8.5%, payable in monthly installments of $15,000, maturing August 2002 and secured by a lien on certain equipment, which ranks prior to the security for payment of the notes offered hereby. Finally, Colonial Holdings has a series of notes used to finance various insurance premiums payable to certain insurance companies in the aggregate amount of $0.03 million as of December 31, 2001, bearing interest at 8.36%. See "Description of Other Indebtedness" for more information. (5) Winner's Choice Casino, Inc., the Jalou II subsidiary that owns Winner's Choice Casino, is the obligor on a note dated February 7, 2001, as amended on September 26, 2001, in the principal amount of $1.2 million, payable to the former owners of the facility. Jalou-Cash's L.L.C., the Jalou L.L.C. subsidiary that owns a revenue interest in Cash's Truck Plaza and Casino, is the obligor on a note dated February 7, 2001, as amended on September 26, 2001, in the principal amount of $1.7 million, payable to the former owner of 36 the facility. Houma Truck Plaza & Casino, L.L.C., the Jalou L.L.C. subsidiary that owns the Houma Truck Plaza and Casino, is the obligor on a note dated February 7, 2001, as amended on September 26, 2001, in the principal amount of $1.8 million, payable to the former owner of the facility's gaming devices. Each of these notes bears interest at 8.0% per annum until October 1, 2001 and 8.5% per annum thereafter, matures on March 31, 2009, and is secured by a second mortgage and pledge of the leasehold interest or security interest in the revenue interest on the facility to which it relates and a lien on the land, building and equipment. On acquisition, these seller notes were assumed by and became obligations of Gameco. See "Description of Other Indebtedness" for more information. (6) Notes payable issued to the sellers of Colonel's Truck Plaza and Casino, Raceland Truck Plaza and Casino, Bayou Vista Truck Plaza and Casino and Lucky Magnolia Truck Stop and Casino. The notes payable bear interest at a rate of 8.5% per annum, mature on April 30, 2009, and are in the principal amount of $2.2 million, $1.1 million, $1.7 million and $0.8 million, respectively. Each such note is secured by a second mortgage on the facility to which the note relates and the Old Notes and Exchange Notes are and will be secured by a first priority mortgage on each such facility. On acquisition, these notes were assumed by and became obligations of Gameco. See "Description of Other Indebtedness" for more information. (7) Notes payable to The Richard E. Jacobs Revocable Trust and Jeffrey P. Jacobs in the amounts of $8.0 million and $1.0 million, respectively, as of December 31, 2001, each bearing interest at 12.0%, with semi-annual interest only payments beginning July 1, 2002 and continuing until maturity on January 31, 2010, at which time the principal balance plus any unpaid interest becomes due. These notes were assumed by Gameco and are subordinate to the obligations of the Old Notes and Exchange Notes. See "Description of Other Indebtedness" for more information. 37 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The unaudited pro forma consolidated financial statements set forth below are presented to show the Gameco, Inc. financial statements after the impact of the offering of the Old Notes, the recent acquisitions, and the related matters described under "Use of Proceeds." The following unaudited pro forma consolidated statement of income for the year ended December 31, 2001 and the unaudited pro forma consolidated balance sheet as of December 31, 2001 give effect to the following transactions: . the contribution to Gameco of certain historical assets and liabilities of Diversified Opportunities Group. Diversified's consolidated financial statements include the accounts of Colonial Holdings because Diversified owned over 50.0% of Colonial Holdings' voting shares at December 31, 2001; . the acquisition by Gameco of the publicly held shares of Black Hawk Gaming; . the contribution to Gameco of the stock of Jalou II; . the acquisition by Gameco of the publicly held shares of Colonial Holdings; . the acquisition by Jalou L.L.C., a wholly owned subsidiary of Diversified, and Jalou II Inc., of two Louisiana entities that own the Houma Truck Plaza and Casino and Winner's Choice Casino, as well as an acquired interest in the gaming revenues of Cash's Truck Plaza and Casino, which occurred in February 2001; . the 2002 acquisitions by Jalou L.L.C. and Jalou II Inc. of four other Louisiana entities that own Colonel's Casino Truck Plaza, Raceland Truck Plaza and Casino, Bayou Vista Truck Plaza and Casino and Lucky Magnolia Truck Stop and Casino; and . the issuance and sale of $125.0 million in principal amount of Old Notes on February 8, 2002. Jeffrey P. Jacobs and The Richard E. Jacobs Revocable Trust contributed substantially all of their interests in Diversified and their combined 100% interest in Jalou II in exchange for the common stock of Gameco. On the acquisition date, immediately prior to the acquisition of the publicly held shares of Black Hawk Gaming and Colonial Holdings, Diversified owned 100% of Jalou L.L.C., approximately 43.5% of Colonial Holdings, approximately 32% of Black Hawk Gaming, and a 25% interest in the Lodge Casino at Black Hawk (the remaining 75% of which was owned by Black Hawk Gaming). The exchange of Gameco shares for the interests in Diversified and Jalou II was accounted for as a combination of entities under common control, which is similar to the pooling of interests method of accounting for business combinations. The ownership interest of the Jalou entities and the acquisition dates for each property, are as follows: Jalou LLC--Houma Truck Plaza and Casino and an interest in the gaming revenues of Cash's Truck Plaza and Casino were acquired on February 7, 2001. Bayou Vista Truck Plaza and Casino and Lucky Magnolia Truck Stop and Casino were acquired on January 11, 2002, and Raceland Truck Plaza and Casino was acquired on February 22, 2002. Jalou II--Winner's Choice Casino was acquired on February 7, 2001, and Colonel's Truck Plaza and Casino was acquired on January 11, 2002. These acquisitions were recorded using the purchase method of accounting for business combinations, and the total purchase price for the properties acquired in 2002 was approximately $20,282,000. Gameco acquired the remaining 31% of Colonial Holding's common stock and outstanding stock options for approximately $4,644,000, which was recorded using the purchase method of accounting for business combinations. Gameco also acquired the remaining 68% of Black Hawk Gaming's common stock for approximately $36,980,000. This transaction was recorded using the purchase method of accounting for business combinations. 38 The unaudited pro forma statement of income has been prepared assuming all of the transactions referred to above occurred on January 1, 2001. The unaudited pro forma balance sheet as of December 31, 2001 has been prepared assuming all of those transactions occurred on that date. The purchase method of accounting requires the aggregate purchase price to be allocated to assets acquired based on their estimated fair value. For purposes of the unaudited pro forma consolidated financial statements, the allocation of the purchase price is based on management's best estimates. The final allocation of the purchase price for the assets acquired will be determined within a reasonable time after the consummation of the transactions and will be based on a complete evaluation of the assets acquired. Accordingly, the information presented herein may differ from the final purchase price allocation. Specifically, the valuations of property and equipment are subject to independent appraisals which are expected to be completed in 2002. Furthermore, the identification of and allocations to identifiable intangible assets is subject to refinement. However, the Company does not anticipate material changes from the amounts presented herein. For the 2001 Louisiana acquisitions and Gold Dust West, amortization expense has been recorded for the goodwill arising from the acquisitions as they were completed prior to July 1, 2001. As all other acquisitions occurred after July 1, 2001, goodwill amortization will not be recorded for purposes of the pro forma financial statements. The unaudited pro forma statement of income does not include the impact of nonrecurring charges or credits directly attributable to the transactions. In the opinion of management, all adjustments have been made that are necessary to present fairly the pro forma data. The unaudited pro forma consolidated financial statements should be read in conjunction with the related notes. The unaudited pro forma consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the results of operations or financial position that would have been achieved had the transactions reflected therein been consummated as of the dates indicated or of the results of operations or financial position for any future periods. 39 Gameco Unaudited Pro Forma Consolidated Statements of Income Year Ended December 31, 2001 (in thousands)
Louisiana Louisiana Truck Truck Plaza Plazas Results for Diversified Black Hawk Acquired Period Prior to Pro Forma Gameco(1) Opportunities(2) Gaming(3) Jalou II(4) in 2002(5) Acquisitions(6) Adjustments --------- ---------------- ---------- ----------- ---------- --------------- ----------- NET REVENUES................. $ $ 39,070 $ 98,549 $6,284 $19,875 $1,192 $ (1,541)(a) 4,576(b) (69)(c) COSTS AND EXPENSES: Direct expenses........... 26,399 42,752 4,335 12,067 648 3,977(b) Selling, general and administrative expenses.. 7,344 32,229 1,334 5,128 259 (1,541)(a) (600)(b) (192)(e) 255(f) (139)(c) (1,145)(d) (3)(c) Depreciation and amortization............. 2,527 7,789 201 834 22 (396)(g) Transaction fees and expenses................. 624 1,374 (1,998)(h) -- -------- -------- ------ ------- ------ --------- Total operating expenses.............. 36,894 84,144 5,870 18,029 929 (1,790) OPERATING INCOME............. 2,176 14,405 414 1,846 263 4,756 INTEREST EXPENSE, NET......................... (3,274) (5,089) (396) (489) (31) 2,151(i) (11,443)(i) -------- -------- ------ ------- ------ --------- INCOME (LOSS) BEFORE EQUITY INVESTMENTS, MINORITY INTEREST AND INCOME TAXES............ (1,098) 9,316 18 1,357 232 (4,536) EQUITY IN EARNINGS OF INVESTMENTS................. 3,377 (3,377)(a) MINORITY INTEREST............ 1,258 (2,030) 772(a) -- -------- -------- ------ ------- ------ --------- INCOME (LOSS) BEFORE INCOME TAXES................ 3,537 7,286 18 1,357 232 (7,141) INCOME TAXES................. (3,117) 3,117(j) -- -------- -------- ------ ------- ------ --------- NET INCOME................... $ $ 3,537 $ 4,169 $ 18 $ 1,357 $ 232 $ (4,024) == ======== ======== ====== ======= ====== =========
Gameco Pro Forma --------- NET REVENUES................. 167,936 COSTS AND EXPENSES: Direct expenses........... 90,178 Selling, general and administrative expenses.. 42,921 Depreciation and amortization............. 10,977 Transaction fees and expenses................. --------- Total operating expenses.............. 144,076 OPERATING INCOME............. 23,860 INTEREST EXPENSE, NET......................... (18,571) --------- INCOME (LOSS) BEFORE EQUITY INVESTMENTS, MINORITY INTEREST AND INCOME TAXES............ 5,289 EQUITY IN EARNINGS OF INVESTMENTS................. MINORITY INTEREST............ --------- INCOME (LOSS) BEFORE INCOME TAXES................ 5,289 INCOME TAXES................. --------- NET INCOME................... $ 5,289 =========
- -------- (1) Gameco did not conduct any operations and did not incur any start-up costs during the year ended December 31, 2001. See pro forma balance sheet for deferred debt offering costs. (2) Includes the accounts of Colonial Holdings, Inc. for the entire year and Jalou L.L.C. properties (Houma Truck Plaza and Casino and an interest in the gaming revenues of Cash's Truck Plaza and Casino) acquired in February 2001, for the period subsequent to the acquisition date through December 31, 2001. (3) Includes the results of Gold Dust West, acquired by Black Hawk Gaming in January 2001, for the period subsequent to the acquisition date through December 31, 2001. (4) Includes the results of the Winner's Choice Casino, acquired in February 2001, for the period subsequent to the acquisition date through December 31, 2001. 40 (5) Includes the accounts of four Louisiana truck plaza gaming properties acquired in 2002 (Colonel's Truck Plaza and Casino, Lucky Magnolia Truck Stop and Casino, Bayou Vista Truck Plaza and Casino, and Raceland Truck Plaza and Casino). (6) Includes the results of the Louisiana properties acquired in February 2001 (Houma Truck Plaza and Casino, Winner's Choice Casino and an interest in the gaming revenues of Cash's Truck Plaza and Casino) for the period from January 1, 2001 to the February 2001 acquisition date. 41 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands) (a) To eliminate equity in earnings of investments, minority interest earnings and management fees charged to Black Hawk Gaming by Diversified. The management contract was cancelled upon the acquisition of Black Hawk Gaming on February 22, 2002. (b) To eliminate third party management contracts related to the truck plazas that were cancelled upon acquisition of such truck plazas, and record the expense that will be incurred to perform the services provided under the cancelled contracts. The cancelled management contract includes amounts paid to an entity owned by the seller, which included an element of compensation. Actual management contract expenses will be incurred based on a contract with a third party. Furthermore, to reclassify state gaming taxes, which had been netted against gaming revenue under the former contracts to conform to the presentation of state gaming taxes of other entities acquired, as follows:
Year Ended December 31, 2001 ------------ To reclassify state gaming taxes out of revenue.............................................. $3,657 To add back seller-related management contract fee previously deducted from revenue.......... 1,519 To eliminate management fee charged to Jalou II by Colonial Holdings at $50 per month. This contract was cancelled effective February 22, 2002......................................... (600) ------ Revenue adjustment........................................................................... $4,576 ====== To reclassify state gaming taxes from revenue................................................ $3,657 To record expense to be incurred to perform services provided under the cancelled third party management contracts....................................................................... 320 ------ Direct expense adjustment.................................................................... $3,977 ======
(c) To eliminate the operations of the Cajun Haven restaurant from Diversified's operations, which were not assumed by Gameco, Inc. (d) To remove Diversified Opportunities corporate expenses related to certain assets and liabilities held by Diversified that were not contributed to Gameco, as described in (c) to the notes to the unaudited pro forma consolidated balance sheet, and record additional expense related to increase in a business development contract with an affiliated entity. The corporate expenses primarily relate to payroll and airplane expenses for business development activities of the owners of Diversified that will not be incurred by Gameco.
Year Ended December 31, 2001 ------------ Eliminate Diversified Opportunities corporate expense............. $(1,370) Record additional expense related to business development contract 225 ------- Selling, general and administrative expense adjustments........... $(1,145) =======
(e) To remove Black Hawk Gaming and Colonial Holdings costs related to the investor relations function (public relations costs, corporate stock transfer costs, directors' fees, etc.) of $192 annually. These costs for the investor relations function are no longer necessary because there is no publicly traded stock. (f) To adjust officers' compensation to terms of new employment agreements. (g) To record the depreciation and amortization effect of the acquisitions described herein. 42
Year Ended December 31, 2001 ------------ Additional depreciation on write-up of fixed assets for Louisiana truck plazas to be acquired...................................... $ 91 Elimination of amortization of deferred financing fees of Black Hawk Gaming indebtedness that was repaid......................... (709) Reduction of depreciation due to write-down of Colonial Holdings' fixed assets upon acquisition.................................... (307) Additional amortization of identifiable intangible assets.......... 529 ----- Depreciation and amortization adjustment........................... $(396) =====
(h) Elimination of one-time transaction fees and expenses associated with consummating the offering of the Old Notes and the recent acquisitions described herein. (i) To record net increase in interest expense:
Year Ended December 31, 2001 ------------ Historical interest expense........................................ $ 9,279 Elimination of interest expense on $34,000 of related party debt not assumed...................................................... (2,151) ------- 7,128 Additional pro forma interest adjustment........................... 11,443 ------- Pro forma interest expense based on pro forma debt outstanding of $146,577......................................................... $18,571 =======
Pro forma and historical interest expense is presented net of interest income of $398 for the year ended December 31, 2001, and is based on the following: . The Notes ($125,000 at 11.875%). . Amortization of $4,950 discount. . Black Hawk Special Assessment Bonds ($5,299 at rates ranging from 6.25% to 6.5%). . Indebtedness of Colonial Holdings ($1,693 at rates ranging from 4.75% to 8.5%). . Louisiana property seller notes ($10,535 at rates ranging from 8% to 8.5%). . Subordinated debt to affiliates ($9,000 at 12%). . Amortization of $6,632 of deferred transaction fees. (j) To eliminate income tax expense as Gameco, Inc. is a Subchapter "S" corporation, and therefore, its owners are liable for the taxes on their share of the corporation's taxable income. 43 Gameco Unaudited Pro Forma Consolidated Balance Sheet December 31, 2001 (in thousands)
Black Diversified Hawk Louisiana Truck Gameco Opportunities Gaming Jalou II Plazas Acquired Pro Forma (1) (2) (3) (4) in 2002 (5) Adjustments Gameco Pro Forma ------ ------------- -------- -------- --------------- ----------- ---------------- ASSETS CURRENT ASSETS: Cash and equivalents.. $ 4,229 $ 15,677 $ 418 $ 825 $ (550)(a) $ 12,410 (7,469)(b) (722)(c) 2(h) Other.................... 2,589 2,727 202 805 (1,563)(c) 4,213 (547)(d) ------ -------- -------- ------ ------- -------- -------- Total current assets............ 6,818 18,404 620 1,630 (10,849) 16,623 ------ -------- -------- ------ ------- -------- -------- PROPERTY AND 1,812 (a) EQUIPMENT, net.......... 64,650 88,281 3,204 8,872 (528)(c) 154,010 (12,281)(e) ------ -------- -------- ------ ------- -------- -------- OTHER ASSETS: Goodwill, net......... 10,470 19,016 1,104 402 73(a) 37,348 4,869(e) 1,414(b) Identifiable intangible assets............... 8,046(a) 8,046 Investments........... 21,031 (196)(c) (13,031)(e) (7,804)(f) Other.................... 1,334 136 3,993 (1,543)(b) 9,528 6,632(b) (246)(c) (778)(d) ------ -------- -------- ------ ------- -------- -------- Total other assets............ 1,334 31,637 23,009 1,104 402 1,889 54,922 ------ -------- -------- ------ ------- -------- -------- TOTAL ASSETS............. $1,334 $103,105 $129,694 $4,928 $10,904 $(24,410) $225,555 ====== ======== ======== ====== ======= ======== ========
44 Gameco Unaudited Pro Forma Consolidated Balance Sheet December 31, 2001 (in thousands)
Diversified Black Hawk Louisiana Truck Gameco Gameco Opportunities Gaming Jalou II Plazas Acquired Pro Forma Pro (1) (2) (3) (4) in 2002 (5) Adjustments Forma ------ ------------- ---------- -------- --------------- ----------- -------- LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable and $1,334 $ 4,823 $ 10,328 $ 384 $ 344 $ (346)(a) 19,804 accrued expenses............... 2,937(c) Advances from affiliates........ 2,111 (2,111)(a) Notes payable--related parties, current........................ 21,400 16 (21,400)(g) 16 Current maturities of long-term debt........................... 737 387 3,104 (960)(a) 3,268 ------ -------- -------- ------ ------- -------- -------- Total current liabilities...... 1,334 26,960 10,715 400 5,559 (21,880) 23,088 ------ -------- -------- ------ ------- -------- -------- LONG-TERM LIABILITIES: Long-term debt.................. 4,484 63,711 1,209 3,246 (5,385)(a) 14,260 (58,800)(b) 5,795(b) Senior secured notes, due 2009.. 120,050(b) 120,050 Notes payable--related parties.. 19,003 2,280 (12,300)(g) 8,983 Other liabilities............... 2 ,613 (1,910)(b) -- (703)(d) ------ -------- -------- ------ ------- -------- -------- Total long-term liabilities.... 23,487 66,324 3,489 3,246 46,747 143,293 ------ -------- -------- ------ ------- -------- -------- TOTAL LIABILITIES................. 1,334 50,447 77,039 3,889 8,805 24,867 166,381 ------ -------- -------- ------ ------- -------- -------- MINORITY INTERESTS................ 17,308 7,413 (17,523)(e) (7,198)(f) EQUITY............................ 35,350 45,242 1,039 2,099 (2,099)(a) 59,174 (3,597)(b) (6,192)(c) (622)(d) (45,242)(e) (606)(f) 33,700(g) 2(h) ------ -------- -------- ------ ------- -------- -------- TOTAL LIABILITIES AND EQUITY........................... $1,334 $103,105 $129,694 $4,928 $10,904 $(24,410) $225,555 ====== ======== ======== ====== ======= ======== ========
- -------- (1) Amounts included in Gameco represent deferred offering costs associated with the issuance of the Old Notes. (2) Includes the accounts of Colonial Holdings, Inc. and Jalou L.L.C. properties (Houma Truck Plaza and Casino and an interest in the gaming revenues of Cash's Truck Plaza and Casino). (3) Includes the accounts of Gold Dust West acquired by Black Hawk Gaming in January 2001. (4) Includes the accounts of the Winner's Choice Casino. (5) Includes the accounts of four Louisiana truck plaza gaming properties acquired in 2002 (Colonel's Truck Plaza and Casino, Lucky Magnolia Truck Stop and Casino, Bayou Vista Truck Plaza and Casino, and Raceland Truck Plaza and Casino). 45 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (Dollars in Thousands) (a) To record the acquisition of the entities which own the following Louisiana truck plaza video gaming facilities: Colonel's Truck Plaza and Casino, Luck Magnolia Truck Stop and Casino, Bayou Vista Truck Plaza and Casino, and Raceland Plaza and Casino. The aggregate purchase price is approximately $20,282, with an estimated $1,812 write-up of fixed assets to fair value. Debt of $20,282 was incurred to fund the acquisition. The pro forma adjustments to record the acquisition are as follows: Purchase price................................................................... $20,282 ======= Book value of net assets acquired................................................ $ 2,099 Purchase adjustments: Cash not acquired............................................................ (550) Liabilities not assumed...................................................... 8,802 Identifiable intangible asset--device use rights............................. 1,364 Estimated fair value of fixed assets in excess of book value................. 1,812 ------- Estimated fair value of tangible and intangible identifiable net assets acquired. 13,527 ------- Goodwill......................................................................... $ 6,755 =======
Also, to record the following reclassifications from goodwill to other identifiable intangible assets, for the 2001 truck stop acquisitions, as follows: Cash's--Revenue rights............. $6,000 Houma--Device use rights........... 341 Winner's Choice--Device use rights. 341 ------ $6,682 ======
Revenue rights and device use rights will be amortized over 50 years and 5 years, respectively, representing the initial terms of the related agreements. (b) The following table illustrates the estimated uses of the net proceeds of the offering of the Old Notes and concurrent funding from other sources: 46 Sources: Proceeds of Old Notes (2).................................................. $120,050 New Louisiana properties seller notes...................................... 5,795 Cash....................................................................... 7,469 -------- Total sources.................................................................. $133,314 ======== Uses: Repayment of Black Hawk Gaming obligations................................. $ 59,946 Black Hawk Gaming acquisition consideration................................ 36,980 Louisiana truck plaza acquisitions consideration........................... 20,282 Colonial Holdings acquisition consideration................................ 4,820 Payment of accrued interest, advances and other payables to affiliates..... 3,240 Remaining transaction fees and expenses (1)................................ 8,046 -------- Total uses..................................................................... $133,314 ========
- -------- (1) $1,334 of balance accrued at December 31, 2001. Pro Forma Debt Outstanding as of December 31, 2001: Long-term debt, including current maturities: Proceeds of Old Notes (2)........................... $120,050 Black Hawk special assessment bonds................. 5,299 Indebtedness of Colonial Holdings................... 1,693 Existing Louisiana properties seller notes.......... 4,740 New Louisiana properties seller notes............... 5,795 Subordinated debt to affiliate...................... 9,000 -------- Total long-term debt, including current maturities..... $146,577 ========
- -------- (2) Reflects unamortized offering discount of approximately $4.95 million, whichwill be amortized over the seven year term of the notes. Total transaction fees and expenses of $6,632 will be capitalized and amortized to interest expense over the seven year term of the Notes. As of December 31, 2001, the interest rate swap liability was $1,146 related to the Black Hawk Gaming indebtedness to be repaid ($1,910, net of associated income tax benefit of approximately $764). The amount of the interest rate swap liability did not vary materially from the date of issuance of the Old Notes. To eliminate deferred financing costs of $1,543 related to Black Hawk Gaming indebtedness to be repaid. 47 (c) To eliminate certain assets and liabilities held by Diversified Opportunities that were not contributed to Gameco, Inc., as follows: Cash............................................................... $ 722 Miscellaneous receivables, prepaid expenses and security deposits.. 442 Management fee receivable from The Lodge Casino.................... 139 Transaction fees receivable........................................ 982 ------ Total receivables.................................................. 1,563 Property and equipment, including ownership interest in airplane... 528 Option to acquire land............................................. 196 Capitalized acquisition costs...................................... 246 Accounts payable................................................... (318) Restore affiliated interest payable, advance, and other payables thatwere previously eliminated upon consolidation, as offsetting assets were not contributed...................................... 3,255 ------ 2,937 ------ Net assets not conveyed............................................ $6,192 ======
(d) To eliminate deferred income taxes as Gameco, Inc. is a Subchapter "S" corporation, and therefore, its owners will be liable for the taxes on their share of the corporation's taxable income. (e) To record acquisition of Colonial Holdings and Black Hawk Gaming shares, held by unaffiliated parties, summarized as follows:
Black Colonial Hawk Holdings Gaming -------- ------- Purchase price................................................... $ 4,820 $36,980 Diversified Opportunities existing investment balance............ 13,219 13,031 -------- ------- Total investment................................................. 18,039 50,011 Net assets acquired.............................................. 30,320 45,242 -------- ------- Excess (deficiency) of total investment over net assets acquired. $(12,281) $ 4,869 ======== =======
The excess of total investment for Black Hawk Gaming is preliminarily allocated to goodwill and the deficiency for Colonial Holdings is allocated to property and equipment. (f) To eliminate intercompany investments and minority interests. (g) To eliminate related party debt not assumed by Gameco, Inc. of $33,700. (h) To capitalize the common stock of Gameco, $2 to cash and equity 48 SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING DATA Black Hawk Gaming The following selected consolidated historical financial data of Black Hawk Gaming & Development Company, Inc. as of December 31, 1997, 1998, 1999, 2000 and 2001 and for each of the five years ended December 31, 2001 is derived from the financial statements audited by Deloitte & Touche LLP, independent auditors. The selected consolidated historical financial data should be read in conjunction with the consolidated financial statements of Black Hawk Gaming & Development Company, Inc. and notes thereto, and other financial information included herein.
Year Ended December 31, ---------------------------------------------- 1997 1998 1999 2000 2001 ------- -------- -------- ------- -------- Statements of Operations Data: Net revenues...................................... $ 1,136 $ 43,161 $ 79,607 $78,874 $ 98,549 Total costs and expenses.......................... 1,382 36,077 65,147 65,240 84,144 ------- -------- -------- ------- -------- Operating (loss) income........................... (246) 7,084 14,460 13,634 14,405 Interest income/(expense), net.................... 124 (2,566) (4,341) (3,138) (5,089) Minority interest................................. 0 (469) (1,768) (2,060) (2,030) Equity in earnings of joint venture............... 2,813 1,018 ------- -------- -------- ------- -------- Income before income taxes and extraordinary item. 2,691 5,067 8,351 8,436 7,286 Provision for income taxes........................ 1,071 1,901 2,928 2,975 3,117 ------- -------- -------- ------- -------- Income before extraordinary item.................. 1,620 3,166 5,423 5,461 4,169 ------- -------- -------- ------- -------- Extraordinary item................................ 86 46 ------- -------- -------- ------- -------- Net income........................................ $ 1,706 $ 3,212 $ 5,423 $ 5,461 $ 4,169 ======= ======== ======== ======= ======== Balance Sheet Data (end of period): Current assets.................................... $ 1,267 $ 12,424 $ 12,104 $10,907 $ 18,404 Total assets...................................... 49,304 102,062 101,080 97,476 129,694 Current liabilities............................... 3,111 11,717 11,285 11,005 10,715 Convertible note payable to shareholder Long-term debt and other liabilities.............. 12,897 51,978 45,181 35,669 66,324 Minority interest................................. 6,705 7,542 8,115 8,740 7,413 Stockholders' equity.............................. 26,591 30,825 36,499 42,062 45,242 Other Financial Data: Ratio of earnings to fixed charges (1)............ 2.06 2.02 2.95 3.51 2.49
(1) See Exhibit 12.1 for calculations. 49 DIVERSIFIED The following selected consolidated historical financial data of Diversified Opportunities Group Ltd. as of December 31, 1998, 1999, 2000 and 2001 and for each of the four years ended December 31, 2001 is derived from the financial statements audited by BDO Seidman, LLP, independent public accountants. The selected consolidated historical financial data should be read in conjunction with the consolidated financial statements of Diversified Opportunities Group Ltd. and notes thereto, and other financial information included herein. For comparative purposes, the results of Colonial Holdings, Inc., which are included in the consolidated results of Diversified Opportunities Group Ltd. beginning in 1998, the year in which voting control was acquired by Diversified, are shown as of December 31, 1997 as they represent the majority of the operating revenues and costs for this period. The selected consolidated historical financial data of Colonial Holdings, Inc. as of December 31, 1997 and for the year then ended was derived from the financial statements audited by BDO Seidman, LLP, independent public accountants. The selected consolidated historical financial data should be read in conjunction with the consolidated financial statements of Colonial Holdings, Inc., and notes thereto, and other financial information included herein.
Year Ended December 31, -------------------------------------------- 1997(1) 1998 1999 2000 2001 ------- ------- ------- ------- -------- (in thousands) Statements of Operations Data: Total revenues......................................... $23,647 $30,647 $30,851 $30,708 $ 39,070 Total operating expenses............................... 24,114 33,623 28,090 30,548 36,894 ------- ------- ------- ------- -------- Income (loss) from operations.......................... (467) (2,976) 2,761 160 2,176 Interest (expense) income, net......................... 559 (2,842) (3,091) (3,104) (3,774) Gain on sale of assets................................. -- 1,622 -- -- -- Other.................................................. (84) -- -- -- -- Equity in earnings of investments and minority interest -- 5,472 4,143 5,399 4,635 ------- ------- ------- ------- -------- Net income (loss)...................................... $ 8 $ 1,276 $ 3,813 $ 2,455 $ 3,537 ======= ======= ======= ======= ======== Balance Sheet Data (end of period): Current assets......................................... $ 6,013 $ 3,630 $ 3,885 $ 3,097 $ 6,818 Total assets........................................... 67,875 86,876 86,977 88,770 103,105 Current liabilities.................................... 15,480 16,974 21,058 6,362 26,960 Long-term debt and other liabilities................... 15,474 27,475 20,050 34,860 23,487 Minority interest...................................... -- 23,832 20,116 18,567 17,308 Stockholders' equity................................... 36,921 18,595 25,753 28,981 35,350 Other Financial Data: Ratio of earnings to fixed charges (2)................. .41x 1.30x 1.98x 1.63x 1.89x
- -------- (1) Colonial Holdings Inc. was not consolidated with Diversified prior to 1998, and therefore, only Colonial Holdings, Inc. is presented in 1997. (2) See Exhibit 12.1 for calculations. 50 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section discusses the results of our operations on a historical basis and on a pro forma basis. You should read the following discussion and analysis in conjunction with the sections entitled "Selected Historical Financial and Operating Data" and "Unaudited Pro Forma Consolidated Financial Statements" as well as the audited consolidated financial statements appearing elsewhere in this prospectus. Certain statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations constitute "forward-looking statements," which statements involve risks and uncertainties. See "Forward-Looking Statements." Historical information, other than revenues, may not necessarily be meaningful, as our cost structure and capitalization following the transactions contemplated by this prospectus are significantly different. Further, the historical information should not necessarily be taken as a reliable indicator of our future performance with respect to our recent acquisitions. Introduction We were formed to acquire and operate the Black Hawk Gaming, Louisiana truck plaza and Colonial Holdings businesses described in this prospectus. These acquisitions were consummated on February 22, 2002. We are a geographically diversified gaming and pari-mutuel wagering company with properties in Colorado, Nevada, Louisiana and Virginia. We own and operate three land-based casinos, six truck plaza video gaming facilities and a horse racing track with three off-track wagering facilities. In addition, we are a party to an agreement that entitles us to a portion of the gaming revenue from an additional truck plaza video gaming facility and we lease and operate a fourth off-track wagering facility. We have elected to be taxed under the provisions of Subchapter "S" of the Internal Revenue Code of 1986. Under those provisions, the owners of our company pay income taxes on our taxable income. Black Hawk Gaming General Revenues The majority of Black Hawk Gaming's revenues are generated from its three land based casino properties. Two of these casinos are located in Black Hawk and our third casino is in Reno, Nevada. Black Hawk Gaming's consolidated casino revenues are generally defined as the "casino win," which is the amount of money wagered less the amount paid out in prizes. Black Hawk Gaming's consolidated net revenue is generally defined by casino win reduced by various promotional allowances and incentive programs that it offers to patrons and includes revenues from food and beverage, hotel and other revenues. Black Hawk Gaming utilizes the food and beverage department of each of its properties to drive its revenues by offering a wide selection of high quality food choices at reasonable prices. Additionally, we have 50 hotel rooms at The Lodge Casino and 106 hotel rooms at our Reno property, which we can offer to players, thereby enhancing their visit to the Black Hawk and Reno areas, respectively. Generally, our incentive programs reward players who play frequently by offering various prizes and rewards, which further enhance the revenues of our operations. Results of Operations Year Ended December 31, 2001 Compared To Year Ended December 31, 2000 Net Revenues. Black Hawk Gaming generated net revenues of $98.5 million for the year ended December 31, 2001 compared to $78.9 million for the same period of 2000. The increase in net revenues of $19.6 million or 25% is the result of net revenues generated from the Gold Dust West Casino (acquired on January 4, 2001) of $18.5 million and an increase in net revenues generated at The Lodge Casino of $2.6 million, offset by a decrease in net revenues at the Gilpin Hotel Casino of $1.5 million. 51 Black Hawk Gaming believes the increase in net revenues at The Lodge Casino is due to the overall growth in the Black Hawk market as well as a market shift towards larger gaming facilities within the City of Black Hawk. This shift adversely impacted the results of operations at the Gilpin Hotel Casino, which resulted in a decrease in its net revenues for the year ended December 31, 2001 over the same period of 2000. Costs and Expenses. Black Hawk Gaming's total costs and expenses (which include depreciation and amortization and privatization and other non-recurring costs) were $84.1 million for the year ended December 31, 2001 compared to $65.2 million for the same period of 2000. The overall increase of $18.9 million or 29% was the result of costs and expenses associated with the Gold Dust West of $15.8 million as well as increases in costs and expenses at The Lodge Casino of approximately $2.4 million and privatization and other non-recurring costs of $1.5 million. These costs and expenses were partially offset by a reduction in costs and expenses at the Gilpin Hotel Casino of $.8 million. The increase in costs and expenses at The Lodge is primarily attributable to an increase in our marketing, general and administrative costs of approximately $1.1 million, an increase in our labor costs of an additional $1.1 million (which generally comprises an increase in employee benefits of $.8 million and an overall increase in compensation to employees of $.3 million) and an increase in other costs and expenses of $.2 million. The primary reduction in costs and expenses of the Gilpin totaling $.8 million was generally the result of savings realized in a reduction of the overall workforce along with their related benefits of $.7 and a reduction in other general and administrative costs totaling $.1 million. Privatization Costs and Other Non-Recurring Costs. During the year ended December 31, 2001, Black Hawk Gaming incurred transaction fees and expenses and other non-recurring costs associated with the recent acquisition of approximately $1.5 million. These costs include fees paid to financial advisors hired to identify strategic alternatives and consult with Black Hawk Gaming regarding those alternatives as well as fees paid to legal counsel and the Special Committee of the Board of Directors of Black Hawk Gaming in its analysis of the buyout offer. Also included in privatization and other non-recurring costs is a total of $135,000 in fines assessed by the Colorado Division of Gaming pursuant to the issuance of a stipulation and agreement for each property alleging certain violations of Internal Control Minimum Procedures. Black Hawk Gaming has strengthened and enhanced certain of its procedures to address these specific violations and does not anticipate future violations surrounding these issues. Interest Expense. Black Hawk Gaming had interest expense totaling $5.1 million during the year ended December 31, 2001 compared to $3.1 million for the same period of 2000. The increase of $2.0 million or 65% is primarily the result of interest expense of $1.8 million on borrowings associated with the acquisition of the Gold Dust West Casino, an increase in interest expense at The Lodge Casino of $.4 million due to increased borrowings at The Lodge in order to make additional distributions during the year to the partners of the LLC that own The Lodge. These increases were partially offset by a reduction in interest expense at the Gilpin Hotel Casino level of $.2 million, which is due to an overall reduction in borrowings of The Gilpin during the year. Our total interest expense amounts are net of interest income totaling $.2 million and $.3 million during the year ended December 31, 2001 and 2000, respectively. Depreciation and Amortization. Black Hawk Gaming had depreciation and amortization of $7.8 million for the year ended December 31, 2001 compared to $5.7 million for the same period of 2000. The overall increase of $2.1 million, or 37%, is primarily due to the depreciation and amortization incurred by the Gold Dust West Casino of $2.0 million. As further discussed under Recent Accounting Pronouncements, the implementation of Financial Accounting Standards No. 142 ("SFAS 142"), which is effective January 1, 2002, will result in the discontinuance of goodwill amortization. Accordingly, the Company will no longer recognize the amortization of goodwill as a recurring expense. The Company will, however, be required to periodically ascertain the appropriate carrying value of goodwill and determine whether or not an impairment cost should be recognized. Total amortization costs incurred for 2001 and 2000 totaled approximately $1.5 million and $.4 million, respectively. Minority Interest. Minority interest for the year ended December 31, 2001 totaled $2.0 million compared to $2.1 million for the same period of 2000. Minority interest represents the 25% share of The Lodge Casino's income (before eliminating inter-company transactions), which is owned by Diversified. 52 Income Taxes. Black Hawk Gaming's effective income tax rate for the years ended December 31, 2001 and 2000 was 42% and 35% respectively, which resulted in income tax expense of $3.1 million and $3.0 million, respectively. The unique tax characteristics of the individual components of Black Hawk Gaming's income before income taxes determine its overall effective tax rate. Due to the significant costs incurred in association with the recent acquisition and the non-deductible nature of a substantial portion of those costs, Black Hawk Gaming's effective income tax rate for the year ended December 31, 2001 increased to 42% as compared to 35% for the comparable period of the prior year. As a result of the offering and completion of the acquisitions described herein, it is anticipated that Black Hawk Gaming will be a qualified Subchapter "S" subsidiary and that Gameco will elect to have the tax liability of Black Hawk Gaming pass through to its individual shareholders. As a result, Black Hawk Gaming will no longer recognize income tax expense. Net Income. As a result of the factors discussed above, Black Hawk Gaming reported net income of $4.2 million for the year ended December 31, 2001 compared to $5.5 million for the same period of 2000, resulting in a decrease in net income of $1.3 million or 24%. Fiscal Year Ended December 31, 2000 Compared To Fiscal Year Ended December 31, 1999 The following discussion relating to changes in net revenues and cost and expenses for the fiscal year ended December 31, 2000 compared to December 31, 1999, and reflects the reclassifications contemplated by EITF 00-22 as further discussed in "Selected Consolidated Historical Financial and Operating Data--Black Hawk Gaming." Net Revenues. Black Hawk Gaming generated net revenues of $78.8 million during the year ended December 31, 2000 compared to $79.6 million for the same period of 1999. The slight decrease in net revenues of $0.8 million is the result of an increase in net revenues at The Lodge Casino of $1.9 million offset by decreases in net revenues at the Gilpin Hotel Casino of $2.7 million. Black Hawk Gaming attributes the increased gaming revenues at The Lodge Casino to the propensity of casino patrons to visit larger casinos with a greater variety of amenities like The Lodge Casino. Black Hawk Gaming attributes the decline in gaming revenue at the Gilpin Hotel Casino to the significant development of larger gaming facilities similar to The Lodge Casino. Costs and Expenses. Black Hawk Gaming's total costs and expenses were $65.2 million for the year ended December 31, 2000 compared to $65.1 million for the same period of 1999. The overall increase of $0.1 million or 1% was the result of increases in labor costs of $0.9 million, slot participation expense of $0.8 million, marketing related costs (excluding busing) of $1.3 million, and repairs and maintenance of $0.2 million. Increased costs and expenses were offset by reductions in gaming taxes of $0.5 million, bus program costs of $1.8 million, food and beverage cost of sales of $0.2 million, net returned check expense after collections of $69,000, corporate overhead expenses of $0.2 million, and other net expenses of $0.3 million. Interest Expense. Black Hawk Gaming had net interest expense totaling $3.1 million for the year ended December 31, 2000 compared to $4.3 million for the same period of 1999. The decrease of $1.2 million or 28% is primarily the result of paying down its debt by approximately $9.8 million at various times during the year. Depreciation and Amortization. Black Hawk Gaming had depreciation and amortization of $5.7 million for the year ended December 31, 2000 compared to $5.4 million for the same period of 1999. The increase of $0.3 million or 6% is generally due to the net increase in our depreciable assets. Depreciation and amortization primarily relates to buildings, equipment, and intangible assets. Minority Interest. Minority interest for the year ended December 31, 2000 totaled $2.0 million compared to $1.8 million for the same period of 2000. Minority interest represents the 25% share of The Lodge Casino's income (before eliminating inter-company transactions) that is owned by affiliated entities acquired in the recent acquisitions. 53 Income Taxes. Black Hawk Gaming's effective income tax rate for the year ended December 31, 2000 resulted in income tax expense of $3.0 million compared to $2.9 million for the same period of 1999. The unique tax characteristics of the individual components of Black Hawk Gaming's income before income taxes determine its overall effective tax rate. Net Income. As a result of the factors discussed above, Black Hawk Gaming reported net income of $5.5 million for the year ended December 31, 2000 compared to $5.4 million for the same period of 1999. Fiscal Year Ended December 31, 1999 Compared To Fiscal Year Ended December 31, 1998 The following discussion relating to changes in net revenues and cost and expenses for the fiscal year ended December 31, 1999 compared to December 31, 1998, reflects the reclassifications contemplated by EITF 00-22 as further discussed in "Selected Consolidated Historical Financial and Operating Data--Black Hawk Gaming." Net Revenues. Black Hawk Gaming generated net revenues of $79.6 million during the year ended December 31, 1999 compared to $43.1 million for the same period of 1998. The increase in net revenues of $36.5 million or 85% is primarily the result of the acquisition of the other half of the Gilpin Hotel Casino as well as the opening of The Lodge Casino. Costs and Expenses. Black Hawk Gaming's total costs and expenses were $65.1 million for the year ended December 31, 1999 compared to $36.0 million for the same period of 1998. The overall increase of $29.1 million or 81% is primarily a result of an increase in salaries, wages, gaming taxes and marketing costs due to the opening of The Lodge Casino and the acquisition of the other half of the Gilpin Hotel Casino. During 1999 Black Hawk Gaming's total payroll, including benefits, was $14.4 million at The Lodge Casino, $6.8 million at the Gilpin Hotel Casino and $1.1 million at the corporate level. Black Hawk Gaming paid gaming taxes totaling $13.9, including $9.9 million at The Lodge Casino and $4.0 at the Gilpin Hotel Casino. Black Hawk Gaming incurred marketing costs of $12.9 million, including $8.3 million at The Lodge Casino and $4.6 million at the Gilpin Hotel Casino. Interest Expense. Black Hawk Gaming had net interest expense totaling $4.3 million for the year ended December 31, 1999 compared to $2.6 million for the same period of 1998. The increase of $1.7 million or 65% is the result of the debt incurred in order to develop and construct The Lodge Casino, as well as to acquire the other half of the Gilpin Hotel Casino. Depreciation and Amortization. Black Hawk Gaming had depreciation and amortization of $5.4 million for the year ended December 31, 1999 compared to $2.6 million for the same period of 1998. The increase of $2.8 million or 108% is primarily the result of the acquisition of the other half of the Gilpin Hotel Casino as well as the opening of The Lodge Casino. Minority Interest. Minority interest for the year ended December 31, 1999 totaled $1.8 million compared to $0.5 million for the same period of 1998. Minority interest represents the 25% share of The Lodge Casino's income (before eliminating intercompany transactions) that is owned by affiliated entities acquired in the recent acquisitions. Income Taxes. Black Hawk Gaming's effective income tax rate for the year ended December 31, 1999 resulted in income tax expense of $2.9 million compared to $1.9 million for the same period of 1998. The unique tax characteristics of the individual components of our income before income taxes determine our overall effective tax rate. Net Income. As a result of the factors discussed above, Black Hawk Gaming reported net income of $5.4 million for the year ended December 31, 1999 compared to $3.2 million for the same period of 1998, resulting in an increase in net income of $2.2 million or 69%. The increase in net income is almost entirely from the acquisition of the other half of the Gilpin Hotel Casino as well as the opening of The Lodge Casino. 54 Liquidity and Capital Resources The net cash provided by operating activities was $13.7 million during the year ended December 31, 2001 compared to net cash provided by operating activities of $12.9 million for the same period of 2000. Net cash used in investing activities for the year ended December 31, 2001 was $30.9 million. The uses of funds included payments for equipment purchases and additions to Black Hawk Gaming's casinos of $5.0 million and payments to acquire the Gold Dust West Casino of $26.0 million. These uses of funds were partially offset by the proceeds from the sale of equipment of $.1 million. Net cash used in investing activities for the year ended December 31, 2000 was $3.5 million. The primary uses of funds included payments for equipment purchases and additions to our casinos totaling $2.4 million and payments related to the acquisition of the Gold Dust West Casino of $.5 million. These uses of funds were partially offset by the proceeds from the sale of equipment totaling $.1 million. The net cash provided by financing activities during the year ended December 31, 2001 totaled $24.3 million. These sources of funds included proceeds from Black Hawk Gaming's revolving credit facility of $36.5 million. These sources were reduced by payments on special assessment bonds of $.4 million, payments on long-term debt of $.4 million, payments to amend the reducing revolving credit facility of $.6 million, payments on the reducing and revolving credit facility of $7.6 million, and distributions to the 25% minority interest owners of The Lodge Casino of $3.4 million representing the portion of earnings of The Lodge Casino which are applicable to the minority interest owners. The net cash used in financing activities during the year ended December 31, 2000 totaled $11.2 million. These uses of funds included payments on special assessment bonds totaling $.3 million, payments on long-term debt of $.4 million, payments on the reducing and revolving credit facility of $9.1 million, and distributions to the 25% minority interest owner of The Lodge Casino of $1.4 million representing the portion of earnings of The Lodge Casino which are applicable to the minority interest owners. These uses of funds were partially offset by other financing activities of $.1 million. As of December 31, 2001, Black Hawk Gaming had working capital of approximately $7.7 million compared to negative working capital of approximately $99,000 at December 31, 2000. The increase in working capital is primarily attributable to the increase in cash and cash equivalents from $8.5 million at December 31, 2000 to $15.7 million at December 31, 2001. This increase in cash is due to management's decision to conserve funds and limit debt pay-downs due to the pending merger on February 22, 2002. Through December 31, 2001 Black Hawk Gaming had incurred approximately $1.5 million in costs relating to the recent acquisitions consisting principally of investment banking, legal, accounting and other fees. Market Risk Disclosures On February 22, 2002, Gameco, Inc. acquired Black Hawk Gaming. As a result, Black Hawk Gaming's variable rate debt and interest rate swap were paid off. We have no other instruments for which market risk disclosures are applicable. Significant Estimates and Critical Accounting Policies The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America 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 periods. We periodically evaluate our policies, and the estimates and assumptions related to these policies. We operate in a highly regulated industry. For both our Black Hawk, Colorado and Reno, Nevada operations, we are subject to regulations that describe and regulate operating and internal control procedures. The majority of our casino revenue is in the form of cash, personal checks or gaming chips and tokens, which by their nature do not require complex estimations. We estimate certain liabilities with payment periods that extend for longer than several 55 months. Such estimates include our slot club liabilities, outstanding gaming chip and token liability, self insured medical and workers' compensation liabilities, and litigation costs. We believe that these estimates are reasonable based on our past experience with the business and based upon our assumptions related to possible outcomes in the future. Future actual results will likely differ from these estimates. We have determined that the following accounting policies and related estimates are critical to the preparation of our consolidated financial statements. Long-lived Assets We have a significant investments in long-lived property and equipment. We estimate that the undiscounted future cash flows expected to result from the use of these assets exceeds the current carrying value of these assets. Any adverse change to the estimate of these undiscounted cash flows could necessitate an impairment charge that would adversely affect operating results. We estimate the useful lives for our assets based on historical experience, estimates of assets' commercial lives, and the likelihood of technological obsolescence. Should the actual useful life of a class of assets differ from the estimated useful life, we would record an impairment charge. We review useful lives and obsolescence and assess the commercial viability of these assets periodically. Deferred Tax Assets We utilize estimates related to cash flow projections related to the application of SFAS 109 for the realization of deferred tax assets. Our estimates are based on recent operating results and budgets for future operating results. However, as previously discussed, Gameco, Inc. acquired Black Hawk Gaming on February 22, 2002. Gameco, Inc. is a subchapter "S" corporation and the owners of Gameco will pay income taxes on its taxable income. Accordingly, estimates regarding the realization of deferred tax assets is no longer applicable as a result of the buyout. The Louisiana Truck Plazas The Louisiana truck plaza video gaming properties consist of six truck plaza gaming facilities located in Louisiana and a share in the gaming revenues of an additional truck plaza. On February 7, 2001, Jalou L.L.C. acquired the Houma Truck Plaza and Casino in Houma and a share in the gaming revenues from Cash's Truck Plaza and Casino in Lobdell and Jalou II acquired Winner's Choice Casino in Sulphur. On January 11, 2002, Jalou L.L.C. acquired Lucky Magnolia Truck Stop and Casino in St. Helena Parish and Bayou Vista Truck Plaza and Casino in Bayou Vista, and on February 22, 2002 acquired Raceland Truck Plaza and Casino in Raceland. On January 11, 2002, Jalou II acquired Colonel's Truck Plaza and Casino in Thibodaux. Each truck plaza features a convenience store, fueling operations, a 24-hour restaurant and 50 video gaming devices (except for Lucky Magnolia Truck Stop and Casino and Raceland Truck Plaza and Casino, which have 40 and 44 video gaming devices respectively). General The Louisiana truck plazas' revenues are comprised of (i) revenue from video poker gaming machines; (ii) sales of gasoline and diesel fuel; (iii) sales of groceries, trucker supplies and sundry items through their convenience stores; (iv) sales of food and beverages in their restaurants and bars; and (v) miscellaneous commissions on ATMs, pay phones and lottery sales. During the period these truck plazas were owned by the sellers, 20% of the truck plazas' gaming revenue was paid to an affiliated corporation that owned and maintained the gaming devices. All video poker activity is reported instantaneously via a computer phone line directly to the Louisiana State Police. The Louisiana truck plazas' revenues are heavily dependent on meeting the minimum gallons of fuel sales requirements necessary to operate video poker gaming machines in Louisiana. These requirements must be complied with on a quarterly basis. In the event of noncompliance, a portion of the video poker machines must be 56 turned off by the Louisiana State Police. Management believes that the Louisianna truck plazas will continue to meet the fuel sales requirements necessary to operate video poker gaming machines in Louisiana at current levels. Results of Operations For purposes of the following analysis of the truck plazas' results of operations, the following table sets forth the date each of the Louisiana truck plaza video gaming facilities opened and commenced gaming operations.
Commenced Gaming Property Opened Operations -------- -------------- ---------------- Winner's Choice Casino.............. February 1994 March 1994 Cash's Casino....................... July 1998 March 1999 Houma Truck Plaza and Casino........ September 1999 November 1999 Lucky Magnolia Truck Stop and Casino January 2000 May 2000 Bayou Vista Truck Plaza and Casino.. January 2000 June 2000 Colonel's Truck Plaza and Casino.... September 1999 August 2000 Raceland Truck Plaza and Casino..... October 2000 March 2001
Year Ended December 31, 2001 Compared To Year Ended December 31, 2000 Net revenues. The Louisiana truck plazas generated net revenues of $35.1 million for the year ended December 31, 2001 compared to $24.5 million for the year ended December 31, 2000. This increase is due to the opening of Raceland Truck Plaza and Casino and its initial months of video gaming operations and a full 12 months of video gaming at Lucky Magnolia Truck Stop and Casino, Bayou Vista Truck Plaza and Casino and Colonel's Truck Plaza and Casino. In addition, following the acquisition of Houma Truck Plaza and Casino and Winner's Choice Casino on February 7, 2001, the agreement by the sellers to pay 20% of the total gaming revenues of such truck plazas to an affiliated corporation was terminated. Costs and Expenses. The Louisiana truck plazas' costs and expenses were $30.0 million for the year ended December 31, 2001 compared to $21.0 million for the same period in 2000. This increase is due to the opening of Raceland Truck Plaza and Casino in October 2000 and its initial months of video gaming and the full year of video gaming at certain properties as shown above. Interest Expense. The Louisiana truck plazas had interest expense of $2.1 million for the year ended December 31, 2001 compared to $.8 million for the same period in 2000. The increase is also due to increased debt levels related to Houma Truck Plaza and Casino, Winner's Choice Casino and a share in the gaming revenue from Cash's Truck Plaza and Casino in each case since their acquisition on February 7, 2001 by Jalou L.L.C. and Jalou II. Earnings Before Interest, Taxes, Depreciation and Amortization. The Louisiana truck plazas reported EBITDA of $6.1 million for the year ended December 31, 2001 compared to $4.4 million for the same period in 2000, resulting in an increase in EBITDA of $1.7 million. This increase is due to the opening of Raceland Truck Plaza and Casino in October 2000 and its initial months of video gaming, a full year of video gaming at certain properties and the termination of the payment to an affiliated corporation described above. Fiscal Year Ended December 31, 2000 Compared To Fiscal Year Ended December 31, 1999 Net revenues. The Louisiana truck plazas generated net revenues of $24.5 million for the year ended December 31, 2000 compared to $6.7 million for the year ended December 31, 1999. The increase in revenues is due to the opening of Bayou Vista Truck Plaza and Casino in January 2000 and Raceland Truck Plaza and Casino in October 2000; a full year of operations other than gaming for Houma Truck Plaza and Casino, 57 Colonel's Truck Plaza and Casino and Lucky Magnolia Truck Stop and Casino, all of which opened in the latter half of 1999; and the initial months of gaming at certain properties as described above. During 1999, only Winner's Choice Casino was open and conducting gaming operations for the entire year. Costs and Expenses. The Louisiana truck plazas' costs and expenses were $21.0 million for the year ended December 31, 2000 compared to $5.9 million for the same period in 1999. The increase is the result of the opening of the new locations and the initial months of gaming at certain properties as described above. Interest Expense. The Louisiana truck plazas had interest expense of $0.8 million for the year ended December 31, 2000 compared to $0.2 million for the year ended 1999. The increase is the result of financing the opening of new locations as described above. Earnings Before Interest, Taxes, Depreciation and Amortization. As a result of the factors discussed above, the Louisiana truck plazas reported EBITDA of $4.4 million for the year ended December 31, 2000 compared to $1.1 million for the same period in 1999, resulting in an increase in EBITDA of $3.3 million. Liquidity and Capital Resources Cash and cash equivalents were $3.0 million as of December 31, 2001 compared to $1.6 million as of December 31, 2000. The net cash provided by operating activities for the year ended December 31, 2001 was $5.1 million compared to $2.7 million for the year ended December 31, 2000. This increase is primarily due to the opening and commencement of gaming at Raceland Truck Plaza and Casino, a full year of video gaming at certain properties and the termination of the payment to an affiliated corporation as described above. Net cash used by investing activities for the year ended December 31, 2001 was $17.8 million compared to $9.5 million for the year ended December 31, 2000. Investing activities for the year ended December 31, 2001 primarily consisted of the acquisition of Winner's Choice Casino, Houma Truck Plaza and Casino and a share in the gaming revenue of Cash's Truck Plaza and Casino. Investing activities for the year ended December 31, 2000 primarily consisted of truck plaza construction activities. Cash provided by financing activities was $14.1 million for the year ended December 31, 2001. This consisted of the proceeds from $9.0 million of subordinated debt from an affiliate, $4.7 million of notes payable issued to sellers of Houma Truck Plaza and Casino and Winner's Choice Casino and a share in the gaming revenues of Cash's Truck Plaza and Casino (the "Sellers") and $4.0 million of contributed capital less $.8 million of principal payments made by the sellers and distributions of $2.8 million to the sellers. Colonial Holdings General Colonial Holdings' revenues are comprised of (i) pari-mutuel commissions from wagering on races broadcast from out-of-state racetracks to Colonial Holdings' off-track wagering facilities and the Track using import simulcasting; (ii) wagering at the Track and Colonial Holdings' off-track wagering facilities on its live races; (iii) admission fees, program and racing form sales, and certain other ancillary activities; (iv) net income from food and beverage sales and concessions; (v) fees from wagering at out-of-state locations on races run at the Track using export simulcasting; and (vi) from February 2001 through February 2002, management fees for the operation of the Louisiana truck plazas owned by Jalou L.L.C. and Jalou II. Colonial Holdings' revenues are heavily dependent on the operations of its off-track wagering facilities. Revenues from the off-track wagering facilities help support live racing at the Track. The amount of revenue Colonial Holdings earns from each wager depends on where the race is run and where the wagering takes place. 58 Revenues from import simulcasting of out-of-state races and from wagering at the Track and at the off-track wagering facilities on races run at the Track consist of the total amount wagered at Colonial Holdings' facilities, less the amount paid as winning wagers. The percentage of each dollar wagered on horse races that must be returned to the public as winning wagers (typically about 79%) is legislated by the state in which a race takes place. Revenues from export simulcasting consist of amounts payable to Colonial Holdings by the out-of-state racetracks and their simulcast facilities with respect to wagering on races run at the Track. Results of Operations Fiscal Year Ended December 31, 2001 Compared To Fiscal Year Ended December 31, 2000 Total Revenues. Colonial Holdings generated total revenues for the year ended December 31, 2001 of $30.1 million compared to $29.2 million for the same period of 2000. The increase of total revenues of $.9 million or 3.1% is due primarily to an increase in revenue from the off-track wagering facilities and the addition of $.6 million in revenue from the management of the Louisiana truck plazas. Revenue at the off-track wagering facilities increased for the year ended December 31, 2001 because the off-track wagering facilities were closed for two days during the year ended December 31, 2000 due to weather and had limited operations for several more days with limited simulcast signals due to the closure of several Northeastern tracks. Direct Operating Expenses. Colonial Holdings' direct operating costs were $24.2 million for the year ended December 31, 2001 compared to $23.7 million for the same period of 2000. Direct operating expenses increased 2.1% for the year ended December 31, 2001 from the same period of 2000. Purse expense increased $.3 million for the year ended December 31, 2001 compared to the same period of 2000 due to increased per racing day purses. Fees, pari-mutuel taxes, simulcast and other direct expenses increased $.2 million for the year ended December 31, 2001, compared to the same period of the 2000. The increase in other direct expenses correlated to the increase in handle during the period. Selling, General and Administrative Expenses and Transaction Fees and Expenses. Colonial Holdings' selling, general and administrative expenses were $3.3 million for the year ended December 31, 2001 compared to $4.0 million for the same period of 2000, representing a decrease of 17.5%. Colonial Holdings incurred transaction fees and expenses relating to the recent acquisitions of $.6 million for the year ended December 31, 2001. Interest Expense. Colonial Holdings had net interest expense totaling $2.7 million for each of the years ended December 31, 2001 and December 31, 2000. Net Loss. Colonial Holdings reported a net loss of $2.4 million and $2.9 million for the year ended December 31, 2001 and December 31, 2000, respectively. Fiscal Year Ended December 31, 2000 Compared To Fiscal Year Ended December 31, 1999 Total Revenues. Colonial Holdings generated total revenues of $29.2 million for the year ended December 31, 2000 compared to $29.3 million for the same period of 1999. The decrease in total revenues of $0.1 million is the result of a decrease of $0.1 million in live harness meet revenue and a $0.4 million decrease in revenues from the off-track wagering facilities, offset by an increase of $0.4 million in thoroughbred meet revenue. Direct Operating Expenses. Colonial Holdings' direct operating costs were $23.7 million for the year ended December 31, 2000 compared to $21.0 million for the same period of 1999. The overall increase of $2.7 million or 12.9% is primarily the result of increases in purse expense, fees, simulcast and other direct expenses. Purse expense increased to $5.7 million for 2000 from $3.5 million for 1999 due to new agreements with the Virginia Horsemen's Benevolent and Protective Association, or VaHBPA and the Virginia Harness Horse Association, or VHHA. Selling, General and Administrative Expenses. Colonial Holdings' selling, general and administrative expenses were $4.0 million for the year ended December 31, 2000 compared to $4.8 million for the same period of 1999, a decrease of $0.8 million or 16.7%. This reduction was due to the termination of the consulting 59 agreement with Premier One Development Company, the settlement of litigation and the nonrecurring expenses in 1999 related to Colonial Holdings' unsuccessful effort to obtain a racetrack license in Dumfries, Virginia. Other racing center and corporate selling, general and administrative expenses increased $0.1 million attributable primarily to increased insurance costs offsetting reductions in other areas. Interest Expense. Colonial Holdings had net interest expense totaling $2.7 million for the year ended December 31, 2000 compared to $2.8 million for the same period of 1999. The decrease in net interest expense is due to a non-recurring interest provision related to an arbitration award in June 1999 and cessation of guarantee fees in August 2000 due to the refinancing of Colonial Holdings' debt. Net Loss. Colonial Holdings reported a net loss of $2.9 million for the year ended December 31, 2000 compared to $1.1 million for the same period of 1999, resulting in an increase in net loss of $1.8 million. Fiscal Year Ended December 31, 1999 Compared To Fiscal Year Ended December 31, 1998 Total Revenues. Colonial Holdings generated total revenues of $29.3 million for the year ended December 31, 1999 compared to $29.4 million for the same period of 1998. The decrease in total revenues of $0.1 million is the result of a decrease of $1.2 million in live harness meet revenue and a $0.3 million decrease in revenues from the live thoroughbred meet, offset by an increase of $1.4 million at the off-track wagering facilities. Direct Operating Expenses. Colonial Holdings' direct operating costs were $21.0 million for the year ended December 31, 1999 compared to $25.3 million for the same period of 1998. The overall decrease of $4.3 million or 17.0% is principally attributable to decreases in purse expense, fees, simulcast and other direct expenses. Purse expense decreased to $3.5 million for 1999 from $6.1 million for 1998 due to the new thoroughbred and amended harness horsemen's contracts. Selling, General and Administrative Expenses. Colonial Holdings' selling, general and administrative expenses were $4.8 million for the year ended December 31, 1999 compared to $6.1 million for the same period of 1998, resulting in a decrease of $1.3 million or 21.3% from 1998 primarily as a result of efforts to reduce personnel and other expenses. These savings were achieved in spite of nonrecurring legal and consulting fees relating to an arbitration award amount of approximately $0.7 million and costs relating to the unsuccessful effort to develop a new racetrack and simulcast wagering center in Dumfries, Virginia, of $0.3 million. Interest Expense. Colonial Holdings had net interest expense totaling $2.8 million for the year ended December 31, 1999 compared to $1.8 million for the same period of 1998. The increase in interest expense was primarily a result of an increase in debt from $24.2 million at December 31, 1998 to $27.7 million at December 31, 1999, the provision for interest of $0.3 million relating to an arbitration award and a $0.4 million loan guarantee fee to a shareholder which had been waived in 1998. Net Loss. Colonial Holdings reported a net loss of $1.1 million during the year ended December 31, 1999 compared to $5.3 million for the same period of 1998, resulting in a decrease in net loss of $4.2 million. Liquidity and Capital Resources Since its inception, Colonial Holdings has incurred aggregate net losses of approximately $12.6 million and had a working capital deficit of $5.1 million at December 31, 2001. Colonial Holdings has been largely dependent on the financial support of its principal stockholder who, through affiliated entities and related parties, was the holder as of December 31, 2001 of $26.2 million of debt from Colonial Holdings and Colonial Downs. In connection with its merger agreement with Gameco, Colonial Holdings' principal shareholder has contributed $0.7 million in working capital as of December 31, 2001. After adjusting the net loss of $2.4 million for the year ended December 31, 2001 for non-cash items such as depreciation and amortization, $.6 million of cash was used. The increase in accounts payable and other operating liabilities provided $1.4 million of cash. This was offset by the increases in accounts receivable and 60 other assets, which used $.1 million of cash. The increase in horsemen's deposits net of purses due to horsemen used $.2 million of cash. As a result, total cash provided by operating activities was $.5 million. Investing activities, consisting of capital expenditures and decreases in construction payables, utilized approximately $.7 million of cash. Financing activities provided approximately $.1 million of cash. Total cash and cash equivalents decreased by $.1 million for the year ended December 31, 2001 to $1.0 million. For 2001, the adoption of a provision in the thoroughbred horsemen's agreement allowed Colonial Holdings to contribute less than 5.25% of handle early in the year and more than 5% later in the year, for an aggregate annual contribution of 5.25% of the thoroughbred handle. Because of the timing of the 2001 thoroughbred meet, sufficient funding had not yet accumulated in the purse account to support the agreed upon purse structure at the time the meet began. In an agreement among the VaHBPA, Jeffrey P. Jacobs and another individual, Jeffery P. Jacobs and the other individual advanced $1.9 million to the horsemen by deposits to the purse account to facilitate the payment of purses. The advance was repaid to Jeffrey P. Jacobs and the other individual from the purse account as the funds became available through purse account funding from Colonial Holdings. Gameco Pro Forma Liquidity and Capital Resources We used the net proceeds of the offering of the Old Notes plus cash from our combined companies of $128 million to acquire the equity of Black Hawk Gaming for $37 million, pay off its existing reducing revolving credit facility totaling approximately $60 million and pay interest rate swap breakage costs of $1.1 million (net of tax benefit); acquire the equity of Colonial Holdings for $4.8 million; pay the cash portion of the purchase price for the Louisiana truck plazas of $14.5 million; pay accrued interest, advances and other payables to affiliates of $3.2 million; and pay remaining transaction fees and expenses incurred subsequent to December 31, 2001, totaling an estimated $2.4 million. In addition, we issued $5.8 million of promissory notes to the sellers of the Louisiana truck plazas we acquired. At December 31, 2001, after giving pro forma effect to the recent acquisitions, cash and cash equivalents would have been $11 million. Our total debt on a pro forma basis would have been $143 million. Our pro forma EBITDA for the year ended December 31, 2001 would have been $35 million. Purses for races at Colonial Downs racetrack are funded from contributions from wagers placed at its off-track wagering facilities and at the racetrack during the course of a full calendar year. In 2001, Colonial Holdings moved the commencement of its thoroughbred race meet from September to June. As a consequence, purse funds for the meet had not been fully funded as of the commencement of the meet from wagers at the off-track wagering facilities. To cover this timing gap in the funding of the purses, Jeffrey P. Jacobs and another individual loaned approximately $1.9 million to the thoroughbred horsemen's purse account. The thoroughbred purse account is beneficially owned by the VaHBPA, the representative thoroughbred horsemen group, and the VaHBPA and Colonial Downs, L.P. are joint signatories. The loan was made in July 2001 and repaid in full by the end of November 2001 from contributions made to the thoroughbred purse account during this period. As long as the thoroughbred race meet is held in the summer, there will continue to be a funding gap. Although this funding gap is not an obligation of Colonial Holdings, if the gap is not funded in any year through a loan to the thoroughbred purse account, Colonial Holdings will either need to reduce the amount of daily purses (for example, in 2002, from $0.2 million per day to $0.1 million per day) or reduce the number of race days (for example, in 2002, from 26 to 13). Either reduction may adversely affect Colonial Holdings' revenues. Colonial Holdings has made arrangements for 2002 regarding this funding gap as part of Colonial Holdings' overall contract with the VaHBPA. We expect to enter into a new $10.0 million senior credit facility during the second quarter of 2002. However, there can be no assurance that we will be able to successfully negotiate a proposed new credit facility or any alternative credit facility. At the time we enter into the proposed new credit facility, we anticipate the trustee under the indenture will enter into an intercreditor agreement with the lender under the proposed new credit facility which, among other things, will subordinate the liens securing the notes and the guarantees to the ndebtedness under the proposed new credit facility with respect to the assets securing the proposed new credit facility. See "Description of Other Indebtedness" and "Description of the Notes--Security." 61 On February 8, 2002, we successfully completed the offering of $125,000,000 of our senior secured notes with a coupon of 11 7/8%. Our future liquidity, which includes our ability to make semi-annual interest payments, depends upon the future success of the overall entity. Our ability to incorporate and integrate our operations successfully will be a significant factor in the overall generation of our cash flows from operations. At present, we do not have any off-balance sheet arrangements or transactions with unconsolidated, limited purpose entities nor are any contemplated in the future. Presently, we believe that our cash flow from operations, cash and cash equivalents and our anticipated senior $10 million credit facility discussed above will be adequate to meet our debt service obligations as well as our capital expenditure requirements for the next twelve months. However, we can give no assurance that these sources of cash will be sufficient to enable us to do so. Further, in addition to our normal capital expenditure requirements, we have planned a $6.0 million expansion of the Gilpin Hotel Casino beginning early in the third quarter of this year, and we anticipate that we will pursue the acquisition of other properties and engage in new development opportunities. We believe we will be able to pay for our expansion project of the Gilpin Hotel Casino out of our existing cash flow over the next nine months (the estimated construction time of the addition). However, we may need to enter into new financing arrangements (including the proposed new credit facility) and raise additional capital in the future. We can give no assurance that we will be able to raise capital or obtain the necessary sources of liquidity and financing on favorable terms, if at all. Additionally, any debt financing that we may incur in the future will increase the amount of our total outstanding indebtedness and our debt service requirements and heighten the related risks we currently face. We also face the risk that there could be a decline in the demand for our product, which would reduce our ability to generate funds from operations. While we believe, on a pro forma basis, our cash flows are geographically diverse, at present we do have a significant concentration of cash flows generated in the Black Hawk market. Should the Black Hawk gaming market decline or become saturated or should the competition successfully reduce our market share, we would suffer a decline in funds generated from operations. If this were to occur, there exists the possibility that our credit rating could be downgraded, which would reduce our ability to access the capital markets and obtain additional or alternative financing. Following provides disclosure concerning Gameco, Inc. obligations and commitments to make future payments under contracts, such as debt and lease agreements, and purchase and other long-term obligations.
Payments Due by Period - ------------------------------------------- Less than 1 1-3 4-5 After 5 Contractual Obligations Total Year Years Years Years ----------------------- -------- ----------- ------ ------ -------- Long-Term Debt (1)................ $146,577 $3,332 $3,764 $3,066 $136,415 Operating Leases (2).............. 12,531 1,461 940 630 9,500 Other Long-Term Obligations (3)... 5,440 476 952 952 3,060 -------- ------ ------ ------ -------- Total Contractual Cash Obligations $164,548 $5,269 $5,656 $4,648 $148,975 ======== ====== ====== ====== ========
- -------- (1) Long-term debt includes amounts owing under the terms of the Old Notes, the Black Hawk special assessment bonds, indebtedness of Colonial Holdings, the existing and new Louisiana Properties' seller notes, and the subordinated debt to affiliate. (2) Operating leases include a land and warehouse lease for the Company's subsidiary in Reno, Nevada, as well as other leases for property and equipment. (3) Other long-term obligations include the commitment of the Company's truck stop operations to pay $1 per video poker machine per day, plus $1,000 per machine annually in licensing, to an outside party to maintain its video poker machines in its truck stop premises. 62 In addition, Gameco, Inc. has the following commitments and obligations: . Gameco, Inc. through its subsidiary Jalou II, Inc. has entered into a fuel contract with a supplier continuing through February 7, 2006, with up to five one year renewals at the option of Jalou II, Inc. Under the terms of the contract, Jalou II, Inc. must purchase an average of 15,000 gallons of diesel fuel per month, calculated on a calendar quarter basis. . Gameco, Inc., through its subsidiary Colonial, has entered into an agreement with a totalisator company which provides wagering services and designs, programs, and manufactures totalisator systems for use in wagering applications. The basic terms of the agreement state that the totalisator company shall provide totalisator services to Colonial for all wagering held at Colonial's facilities through 2004 at a rate of .365% of handle. In addition, Colonial agreed to use certain equipment provided by the totalisator company. . Gameco, Inc., through the Lucky Magnolia Truck Stop and Casino, has an obligation to pay 4.9% of its net video poker revenue, after associated state taxes, for as long as video poker machines are operated on the property. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments" ("SFAS 133"). SFAS 133, as amended by SFAS 137 and 138, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. SFAS 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. SFAS 133 requires that an entity recognize all derivatives as either assets or liabilities and measure those instruments at fair market value. None of the entities we acquired have derivative instruments either in hedging activities or as investments. Accordingly, our adoption of SFAS 133, as amended, did not have a material impact on the financial position or results of operations of any of the entities. The SEC has issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 is effective in the fourth quarter of fiscal years beginning after December 15, 1999. SAB 101 summarizes appropriate criteria to be considered in determining recognition of revenue. Adoption of SAB 101 did not have a material impact on the financial position or results of operations of any of the entities acquired. In March 2000, the FASB issued interpretation No. 44 ("FIN 44"), Accounting For Certain Transactions Involving Stock Compensation, an Interpretation of APB Opinion No. 25. FIN 44 clarifies the application of applying APB No. 25 for (a) the definition of employee for purposes of applying APB 25, (b) the criteria for determining whether a plan qualifies as a noncompensatory plan, (c) the accounting consequences of various modifications to a previously fixed stock option or award and (d) the accounting for an exchange of stock compensation awards in a business combination. FIN 44 became effective July 2, 2000, but certain of its conclusions cover specific events that occur after either December 15, 1998 or January 12, 2000. Adoption of FIN 44 did not have a material effect on the financial position or results of operations of any of the entities acquired. In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations," which is effective July 1, 2001. SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. We do not believe that the adoption of SFAS 141 will have a significant impact on the financial statements of any of the entities acquired. In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which is effective January 1, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the 63 identification of reporting units for purposes of assessing potential future impairments of goodwill. SFAS 142 also requires us to complete a transitional goodwill impairment test six months from the date of adoption and further requires us to evaluate the carrying value of goodwill for impairment annually thereafter. We are currently assessing but have not yet determined the impact of SFAS 142 on the financial position and results of operations of each of the entities acquired. In August 2001, the FASB issued SFAS No. 143, "Accounting For Asset Retirement Obligations." This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset, except for certain obligations of lessees. This standard requires entities to record the fair value of a liability for an asset retirement obligation in the period incurred. When the liability is initially recorded, the entity capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. We are required to adopt the provisions of SFAS No. 143 at the beginning of 2002. We do not believe the adoption of this statement will have an impact on the financial position or results of operations of any of the entities acquired. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." This statement also amends ARB No. 51, "Consolidated Financial Statements," to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. This statement requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. This statement also broadens the presentation of discontinued operations to include more disposal transactions. We are required to adopt the provisions of this statement at the beginning of 2002. We do not believe that the adoption of this statement will have an impact on the financial position or results of operations of any of the entities acquired. Market Risk Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates, and commodity prices. On February 8, 2002 we issued $125.0 million in 11 7/8% senior secured notes due in 2009. The proceeds of these notes were used to finance our recent acquisitions and for working capital purposes. All debt currently bears interest at a fixed rate. We currently do not invest in derivative financial instruments, interest rate swaps or other similar investments to alter interest rate exposure. 64 BUSINESS Introduction We are a geographically diversified gaming and pari-mutuel wagering company with properties in Colorado, Nevada, Louisiana and Virginia. We own and operate three land-based casinos, six truck plazas featuring video gaming facilities and a horse racing track with three off-track wagering facilities. In addition, we are party to an agreement that entitles us to a portion of the gaming revenue from an additional truck plaza video gaming facility and lease and operate a fourth off-track wagering facility. We acquired all of these properties and interests on February 22, 2002. All of our gaming facilities target local customers and emphasize revenues from slot machine play or video gaming, or both. For the year ended December 31, 2001, after giving effect to the acquisitions referred to above and our issuance of the Old Notes and use of the proceeds thereof as described under "Use of Proceeds," our annualized pro forma net revenues and annualized pro forma EBITDA were approximately $168 million and $35 million, respectively. The following table sets forth certain information and property level EBITDA (excluding corporate overhead) of our properties:
Year Ended As of December 31, 2001 December 31, 2001 -------------------------- ---------------------------- Approximate Percentage of Gaming Gaming Property Level Square Gaming Table Revenue from EBITDA (1) Property Location Facility Type Footage Machines Games Machines (in thousands) - -------- ------------ ---------------- ----------- -------- ----- ------------- -------------- The Lodge Casino................. Black Hawk, Land-based 25,000 870 23 91% 18,095 Colorado casino Gilpin Hotel Casino.............. Black Hawk, Land-based 16,000 460 0 99 4,732 Colorado casino Gold Dust West Casino............ Reno, Nevada Land-based 17,500 500 0 100 4,771 casino Louisiana Truck Plazas........... Louisiana Video gaming 13,000 334 0 100 7,954 (various locations) Colonial Downs Racetrack and off- Horse racing and track wagering facilities....... Virginia pari-mutuel (various wagering locations) N/A N/A N/A N/A 4,223 ------ ----- --- ------- Total......................... 71,500 2,170 23 $39,775 ====== ===== === =======
- -------- (1) Property Level EBITDA excludes corporate overhead expense of approximately $4.3 million in the aggregate for all of our properties. Property Level EBITDA for the Louisiana Truck Plazas is presented on a pro forma basis. The following table sets forth the components of Property Level EBITDA for the year ended December 31, 2001, for each of the properties:
Colonial Downs Louisiana and The Lodge Gilpin Hotel Gold Dust Truck Plazas Off-Track Facilities Casino Casino West Casino ------------ -------------------- --------- ------------ ----------- Net income (loss) for the year ended December 31, 2001............................................ $3,466 $ (265) $ 8,119 $2,453 $ 900 Depreciation and amortization.................... 1,804 1,733 3,960 1,792 2,020 Interest......................................... 2,075 2,755 2,933 487 1,851 Management fees.................................. 609 3,083 Transaction fees and expenses.................... 624 ------ ------ ------- ------ ------ Property level EBITDA for the year ended December 31, 2001........................................ $7,954 $4,223 $18,095 $4,732 $4,771 ====== ====== ======= ====== ======
65 Business Strategy and Competitive Strengths Our business strategy is to create a broad, geographically diversified base of gaming and pari-mutuel wagering properties that provide our customers with high quality experiences that build significant customer loyalty. We focus on attracting and fostering repeat business from local gaming patrons at our casino, truck plaza video gaming and pari-mutuel wagering facilities. Our local patrons are typically experienced gaming customers who seek convenient locations, high payouts, and a pleasant atmosphere. We believe that there are opportunities for growth and operational efficiencies in the markets in which we operate. Black Hawk, Colorado continues to be one of the fastest growing gaming markets in the country, having experienced a 20.7% compound annual growth in gaming revenue from 1998 through 2001. We believe that our two Black Hawk properties will continue to benefit from this growth, and plan to expand our Gilpin Hotel Casino property in Black Hawk to further capitalize on this opportunity. We believe that certain of our Louisiana truck plaza video gaming properties have not reached their full potential as they have only recently commenced gaming operations. In addition, we may acquire or develop additional gaming properties catering to local gaming patrons in the future, further expanding our geographic diversity. Our strategy for our casino and video gaming operations is to continue to provide our customers with a user-friendly gaming environment featuring convenient locations, ample parking, good food at affordable prices and promotional incentives that reward frequent play. Our business strategy for our horse racing operations is to be a competitive participant in the industry by capitalizing on our unique dirt and turf track facilities for live racing, hosting marquee racing events, and expanding our off-track wagering facility network under appropriate circumstances. Broad Geographic and Asset Diversification. We own and operate three land-based casinos, six truck plaza video gaming facilities and a horse racing track with three off-track wagering facilities, in four states. In addition, we are party to an agreement that entitles us to a portion of the gaming revenue from an additional truck plaza video gaming facility, and lease and operate an additional off-track wagering facility. We believe that, because of our geographic and asset diversification, we are less dependent on results at a specific property or in a specific market to generate our cash flow. In addition, this diversity helps mitigate our susceptibility to regional economic downturns or weather conditions. Strong Emphasis on Slot and Video Gaming Revenues. All of our gaming properties emphasize slot machine or video gaming play, or both. We believe slot machine play to be the fastest growing, most consistently profitable and lowest risk segment of the gaming entertainment business. We offer a wide variety of games to attract customers and encourage them to play for longer periods of time, thereby promoting the stability of our gaming revenue. We intend to maximize slot and video gaming revenue by continuing to invest in appropriate markets in state-of-the art equipment and systems and replacing older models with the most current product offerings. Significant Barriers to Entry. There are significant regulatory and other barriers to entry in each of the markets in which we operate. In Black Hawk, Colorado these barriers include the limited availability of space in the approved gaming district, which is defined in the state constitution, and the high cost of acquiring land and constructing new gaming facilities. There are stringent licensing requirements and substantial licensing and compliance expenses attendant to commencing and conducting gaming operations in Nevada. In Louisiana, the barriers to entry include restrictions that require truck plaza video gaming facilities to meet specified minimum levels of diesel and total fuel sales, have a specified minimum site acreage and conduct 24-hour restaurant operations. These restrictions also prohibit the operation of more than 50 video gaming machines at any location, and require truck plaza video gaming facilities to be located in parishes that approved video gaming during a one time state-wide referendum in 1996. In Virginia, in all but the county in which we operate and one additional county, the operator of any competing horse racing track would need to secure passage of a referendum in the locale in which the track is to be operated. In addition, licenses are available for only two additional off-track wagering facilities, and opening any off-track wagering facility in any locale other than those in which we operate would similarly require the passage of a referendum. 66 Strong, Experienced Management Team. Our senior management team is an experienced group of industry veterans. Jeffrey P. Jacobs, our Chairman and Chief Executive Officer, has been Black Hawk Gaming's Chief Executive Officer since November 1996 and the Chief Executive Officer of Colonial Holdings since March 1997. Stephen R. Roark, our Chief Financial Officer and President of Casino Operations, has been Black Hawk Gaming's President since September 1995 and its Chief Financial Officer since 1993. Ian M. Stewart, our President of Pari-Mutuel Wagering and Video Poker Operations, has been President of Colonial Holdings since November 1998 and its Chief Financial Officer since June 1997. Thomas Lee Witherow, our Chief Operating Officer of Casino Operations, has over ten years of experience in the gaming industry. The three general managers of our casinos, who have a combined total of approximately 45 years of casino management experience, report directly to Mr. Witherow. Reid Smith and J. Richard Gottardi oversee the day-to-day operations of our truck plaza video gaming operations, have over 20 years of combined experience in the gaming industry and report directly to Mr. Stewart. We believe the expertise and experience of our management team will enable us to enhance the operation of our existing properties and any properties we may acquire in the future. Our Properties The Lodge Casino--Black Hawk, Colorado The Lodge Casino in Black Hawk, Colorado, which commenced operations in June 1998, is one of 21 land-based casinos located in the gaming district of Black Hawk. The Lodge services the greater Denver metropolitan area population of approximately 2.2 million located 40 miles east of Black Hawk, as well as customers from nearby communities such as Boulder and Fort Collins, Colorado and Cheyenne, Wyoming. We believe that The Lodge's customers are primarily day trip patrons, approximately 70% of whom reside in the greater Denver metropolitan area. As of December 31, 2001, the Black Hawk market had approximately 10,500 gaming devices generating approximately $ million in revenues for the twelve months then ended. We are one of the largest gaming facilities in the market and strive to offer a larger average number of gaming devices, a wider variety of amenities and more convenient free parking for patrons. The Lodge is located on a 2.5 acre site that abuts State Highway 119, with approximately 25,000 square feet of gaming space on two floors containing 900 slot machines and 25 table games, 50 hotel rooms, three restaurants, four bars and onsite parking for 600 vehicles. Our property includes a buffet and The White Buffalo Grille, an upscale dining facility. Black Hawk has no significant lodging facilities other than our facility and the Isle of Capri, which completed construction of a 237-room hotel at its Black Hawk casino in mid-2000. We utilize computerized slot data tracking systems that allow us to track individual play and payouts and develop mailing lists for special events, contest play and promotions. The Lodge participates in busing programs with unaffiliated transportation companies who transport patrons to Black Hawk/Central City from the market areas described above. Black Hawk Gaming has obtained an exemption as a common carrier from the Colorado Public Utilities Commission and may elect to operate its own busing program in the future. The Gilpin Hotel Casino--Black Hawk, Colorado The Gilpin Hotel Casino, which commenced operations in October 1992, is a 37,000 square foot facility located on a one acre site in the central Black Hawk gaming district. We expanded our facility through the acquisition of an adjacent casino in early 1994. We were one of the first casinos opened in Colorado following the legalization of casino gaming in 1991. We offer 460 slot machines and four table games, two restaurants and four bars. We also offer slot club, busing and other promotional programs, and have available to our customers 200 surface parking spots in the heart of historic Black Hawk. We plan to remodel and expand the Gilpin Hotel Casino beginning in the third quarter of 2002 to place all gaming operations on a single floor and to upgrade and renovate the overall structure. These improvements are budgeted to cost approximately $6.0 million. While we expect construction and other disruptions during the renovation period will temporarily adversely affect our business, we believe completion of these renovations will enable us to continue to compete effectively in the Black Hawk market and ultimately to improve our operating results. 67 The Gold Dust West Casino--Reno, Nevada The Gold Dust West Casino, located on 4.6 acres in Reno's central downtown gaming district, has been operating since 1978. The casino caters to residents of Reno and surrounding areas and has about 17,500 square feet of gaming space, currently accommodating 500 slot machines. We offer the Wildwood Restaurant, a 6,600 square foot dining facility, 106 motel rooms, and surface parking for 275 vehicles. We implemented a slot player tracking system in September 2001, which should facilitate improvement of the casino's operating results. The Reno/Sparks, Nevada market area generated approximately $1.0 billion of gaming revenues during the year ended December 31, 2000, up 6.0% from $986.5 million of gaming revenues in 1999. There were approximately [35] casinos in the Reno/Sparks market area at December 31, 2001. Louisiana Gaming Properties Our truck plaza properties consist of six truck plaza video gaming facilities located in Louisiana and a share in the gaming revenues from an additional Louisiana truck plaza gaming facility. Our properties include the Houma Truck Plaza and Casino in Houma; Winner's Choice Casino in Sulphur; Lucky Magnolia Truck Stop and Casino in St. Helena Parish; Bayou Vista Truck Plaza and Casino in Bayou Vista; Colonel's Truck Plaza and Casino in Thibodaux; and Raceland Truck Plaza and Casino in Raceland. We are also party to an agreement that entitles us to a portion of the gaming revenues from Cash's Truck Plaza and Casino in Lobdell. Each truck plaza features a convenience store, fueling operations, a 24-hour restaurant, and 50 video poker devices (except for Lucky Magnolia Truck Stop and Casino and Raceland Truck Plaza and Casino, which have 40 and 44 devices respectively). The Louisiana video gaming industry consists of video gaming in 31 of Louisiana's 64 parishes. The industry is highly regulated and video gaming machines can only be placed in qualifying bars, restaurants, hotels, off-track wagering facilities and truck plazas. In order to qualify for video gaming, a truck plaza must offer diesel fuel, gasoline, a convenience store, a restaurant and a place for truck drivers to shower and sleep. Our video gaming machines are located in a separate gaming room that is designed to provide a pleasant casino-like atmosphere. As of December 31, 2001, Louisiana had 112 licensed truck plazas. The Louisiana truck plaza video gaming market caters primarily to local residents, whom we believe contribute to the vast majority of truck plaza gaming revenue. We believe that most of our video gaming customers live within a five-mile radius of our properties. Colonial Downs--New Kent, Virginia Colonial Downs, which opened in 1997, is a racetrack in New Kent, Virginia, which primarily conducts pari-mutuel wagering on thoroughbred and harness racing. The track facility was designed to provide patrons with a pleasant atmosphere to enjoy quality horse racing. The outside grandstand area, located on the first floor of the track facility, has an occupancy capacity of approximately 4,000 patrons. Also located on the first floor of the track facility are two simulcast television amphitheaters, two covered patio-seating areas, four bars, a large concession food court, gift shop, and wagering locations with approximately 72 tellers. The Jockey Club, which is in the main grandstand area located on the third floor of the track facility, includes a full-service dining area with a seating capacity of 548 patrons, two separate lounge areas, and additional wagering locations with 24 tellers. The Turf Club is a private club and contains 10 luxury suites with skybox seating located on the fourth floor of the track facility and has a wagering location with four tellers. The one and one-quarter mile dirt track is one of the largest tracks in the United States and its 180-foot wide turf track is the largest turf track in North America. These unique configurations have attracted and are expected to continue to attract quality horses to the track. Colonial Downs has conducted more than 80% of its thoroughbred races over the turf course for the last two years, thereby establishing the track as a major turf racing center in the Mid-Atlantic region. Colonial Downs is developing the Virginia Derby, a turf race for three-year old thoroughbreds, into the marquee event of the thoroughbred meet. 68 Off-track Wagering Facilities, Virginia In addition to our racetrack facility, we own and operate three off-track wagering facilities and lease and operate a fourth facility in Virginia. These facilities provide simulcast pari-mutuel wagering on thoroughbred and harness racing from our racetrack and selected other racetracks throughout the United States. Our off-track wagering facilities are located in Richmond, Chesapeake, Hampton, and Brunswick. These facilities employ state of the art audio/video technology for receiving quality import simulcast thoroughbred and harness racing from nationally known racetracks. The facilities are structured to accommodate the needs of various patrons, from the seasoned handicapper to the novice wagerer, and provide patrons with a comfortable, upscale environment including a full bar and a range of restaurant services. In addition, self-serve automated wagering equipment is available to patrons in order to make wagering more user-friendly to the novice and more efficient for the expert. This equipment, with touch-screen interactive terminals and personalized portable wagering terminals, provides patrons with current odds information and enables them to place wagers and credit winning tickets to their accounts without waiting in line. Under current law, before we can open the two remaining off-track wagering facilities permitted by our license, we are required to win approval through a local referendum process in the municipalities in which the facilities will be located. Competition General We face intense competition in each of the markets in which we operate. Our existing gaming facilities compete directly with other gaming properties and activities in Colorado, Nevada, Louisiana and Virginia. We expect this competition to increase as new gaming operators enter our markets, existing competitors expand their operations, gaming activities expand in existing jurisdictions and gaming is legalized in new jurisdictions. Several of our competitors have significantly better name recognition and more marketing and financial resources than we do. We cannot predict with any certainty the effects of existing and future competition on our operating results. We also compete with other forms of gaming and entertainment such as online computer gaming, bingo, pull-tab games, card parlors, sports books, pari-mutuel or telephonic betting on horse racing and dog racing, state-sponsored lotteries, video lottery terminals, and video poker terminals. In the future, we may compete with gaming at other venues. We also compete with gaming operators in other gaming jurisdictions such as Las Vegas, Nevada and Atlantic City, New Jersey. Our competition includes casinos located on Native American reservations throughout the United States, which have the advantage of being exempt from certain state and federal taxes. Some Native American tribes are either establishing or are considering the establishment of gaming at additional locations. Expansion of existing gaming jurisdictions and the development of new gaming jurisdictions and casinos on Native American-owned lands would increase competition for our existing and future operations. In addition, increased competition could limit new opportunities for us or result in the saturation of certain gaming markets. Casino Properties. We believe the primary competitive factors in the Black Hawk, Colorado market are location, availability and convenience of parking; number and types of slot machines and gaming tables; and types and pricing of amenities, including food; name recognition; and overall atmosphere. We believe our Colorado casinos generally compete favorably based on these factors. Our Colorado casinos are on opposite sides of Main Street in Black Hawk. Because of their proximity, our Black Hawk casinos compete for some of the same customers. Further, there were 21 other casinos operating in Black Hawk on December 31, 2001. There were 10,500 gaming devices (slot machines, blackjack and poker tables) in Black Hawk as of December 31, 2001. 69 Central City is located adjacent to Black Hawk and provides the most direct competition to the gaming establishments in Black Hawk. There were five casinos operating in Central City with approximately 1,700 gaming devices as of December 31, 2001. Black Hawk has historically enjoyed a competitive advantage over Central City in large part because access by State Highway 119 (currently the only major access to Black Hawk from the Denver metropolitan area and Interstate 70) requires customers to drive by and, in part, through Black Hawk to reach Central City. Central City has acquired portions of a right-of-way and is taking steps toward formation of an entity to construct a road from I-70, commonly referred to as the Southern Access, and it is likely that Central City will continue pursuing financing for this route. If the Southern Access is constructed as proposed, it would be possible for certain traffic that currently passes through Black Hawk to proceed directly to Central City from Interstate 70. Even if the new route were constructed, motorists driving from the Denver metropolitan area would still have the option of choosing to go either to Black Hawk or Central City without having to drive through the other town. Large, well-financed companies may enter the Black Hawk and other Colorado markets through the purchase or expansion of existing facilities, which could have a material adverse effect on our results of operations and financial position. The Black Hawk Casino by Hyatt opened in December 2001. It presently has no hotel rooms but may construct them at some point in the future. The Black Hawk Casino by Hyatt is directly across the street from The Lodge Casino. The facility opened with approximately 1,320 slot machines and 24 table games on a single, ground level floor, and will have a parking garage accommodating 800 vehicles. No other casinos are currently under construction in Black Hawk or Central City. The casinos in Cripple Creek, located a driving distance of 110 miles to the south of the Black Hawk and Central City markets, and two Native American casinos located in the southwestern corner of the state, constitute the only other casino gaming venues in the state of Colorado. We believe that Cripple Creek, located 45 miles west of Colorado Springs, provides only limited competition to the Black Hawk market. In addition to competing with other gaming facilities in Colorado as described above, Black Hawk Gaming competes to a lesser degree, for both customers and potential future gaming sites, with gaming companies nationwide, including casinos in Nevada and several other states, and casinos on Native American lands in several states, many of which have substantially greater financial resources and experience in the gaming business. The expansion of legalized casino gaming to new jurisdictions throughout the United States may also affect competitive conditions. The Gold Dust West Casino encounters strong competition from large hotel and casino facilities and smaller casinos similar in size to the Gold Dust West Casino in the Reno area, which includes Sparks, Nevada. There is also competition from gaming establishments in other towns and cities in Nevada and, to a lesser extent, other jurisdictions in the United States where gaming has been legalized (including Native American gaming establishments). There are approximately 36 licensed casinos in the Reno/Sparks area. In Reno, we compete with these other properties principally on the basis of location and parking while also directly appealing to the "locals" market. Additional competition may come from the expansion or construction of other hotel and casino properties or the upgrading of other existing facilities in the Reno area. In addition, we believe that the introduction of casino gaming, or the expansion of presently conducted gaming activities (particularly at Native American establishments) in areas in or close to Nevada, such as California, Oregon, Washington, Arizona and western Canada, could adversely affect operations at our Reno property. The ability to maintain our competitive position in Reno will require the expenditure of sufficient funds for such items as updating slot machines to reflect changing technology, periodic refurbishing of rooms and public service areas, and replacing obsolete equipment on an ongoing basis. Truck Plaza Operations. Our Louisiana truck plaza operations face competition from land-based and riverboat casinos throughout Louisiana and on the Mississippi Gulf Coast, casinos on Native American lands and 70 other non-casino gaming opportunities within Louisiana. The Louisiana Riverboat Economic Development and Gaming Control Act limits the number of gaming casinos in Louisiana to 15 riverboat casinos statewide and one land-based casino in New Orleans. Fourteen of the 15 available riverboat licenses are issued and the 15th is approved for issuance in Lake Charles. The newly licensed riverboat casino will compete with Winner's Choice Casino. Our video gaming operations also face competition from other truck plaza video gaming facilities located in surrounding areas, as well as competition from Louisiana horse racing facilities, some of which have been authorized to operate video gaming machines, and restaurants and bars with video gaming machines. As of December 31, 2001, there were 112 truck plazas in Louisiana licensed to operate video gaming devices. Horse Racing and Pari-mutuel Wagering Operations. We compete with racetracks located outside Virginia (including several in Delaware, Maryland, New Jersey, New York, Pennsylvania, and West Virginia, some of which augment their purses with slot machine revenues) and other forms of gaming, such as land-based casinos, including those in Atlantic City, and statewide lotteries in Virginia and neighboring states. The possible legalization of other forms of gaming in Virginia, such as Native American or riverboat casinos, could have an adverse effect on our performance. Although bills for the creation of riverboat casinos have failed in the Virginia legislature, proponents of riverboat gaming in Virginia may continue to seek legislative approval. Additionally, certain Native American tribes are considering seeking federal recognition. We have competed and will compete for wagering dollars and simulcast fees with live racing and races simulcast from racetracks in other states, particularly racetracks in neighboring states such as Charles Town in West Virginia, Pimlico Race Course, Laurel Park, and Rosecroft Raceway in Maryland, and Delaware Park in Delaware. We believe that our existing management agreement with The Maryland Jockey Club will continue to promote coordination of thoroughbred events between Maryland and Virginia. However, if the Virginia or Maryland Racing Commissions do not approve either party's proposed racing days, or if the Virginia-Maryland thoroughbred racing circuit is otherwise unsuccessful, our track may compete directly with Pimlico Race Course and Laurel Park in Maryland. We anticipate that we will experience adverse effects from the continued legalization of video lottery terminals and slot machines in neighboring states such as Delaware and West Virginia. Racetracks with video lottery terminals or slot machines generally are required to devote a significant portion of terminal and machine revenues to the purses for which horses race. As a result, those racetracks may be able to offer higher purses, which can make it difficult for us to attract horsemen to race at our track. We also are encountering competition for patrons in Virginia that are participating in account wagering operated outside Virginia through the ability to watch live horse racing via home satellite television. Although this wagering may not be legal in Virginia, patrons are establishing accounts with operators outside of Virginia and placing wagers over the telephone while watching races at home via satellite. Colonial Holdings, through its subsidiaries, holds the only license to own and operate a racetrack with off-track wagering facilities. Other temporary licenses have been granted to operate a racetrack for up to 14 days of live racing but the holder of such a license is not permitted by law to own or operate any off-track wagering facilities. Nonetheless, the Virginia Racing Commission could issue another license for a racetrack with off-track wagering facilities following a thorough application and regulatory process, including the passage of a local referendum approving the locating of a racetrack in such locality. Another fully licensed racetrack would compete directly with us. Colonial Holdings also faces competition from a wide range of entertainment options, including live and televised sporting events and other recreational activities such as theme parks (Kings Dominion to the northwest and Busch Gardens to the southeast) and more recently internet-based pari-mutuel wagering and account wagering on horse racing. 71 Employees and Labor Relations As of December 31, 2001, we have approximately 1000 full-time and part time employees at our facilities in Black Hawk, Colorado and Reno, Nevada, 325 employees at our facilities in Virginia and 70 employees at our facilities in Louisiana. Employees include cashiers, dealers, food and beverage service personnel, facilities maintenance, security, valet, accounting, marketing, and personnel services. We consider relations with our employees to be good. None of our employees are represented by any union or other labor organization. Legal Proceedings On February 27, 2001, a shareholder of Black Hawk Gaming filed a purported shareholder class action lawsuit against Black Hawk Gaming and its directors in Colorado District Court for the County of Gilpin under the caption Joseph Brecher v. Timothy Knudsen, et al., Case No. 01CV13. The plaintiff alleges, among several other things, that the price offered by us for Black Hawk Gaming is unconscionable, unfair and grossly inadequate, that there is no adequate process to ensure that Black Hawk Gaming's shareholders receive the highest price attainable for their shares, and that the defendants, acting in concert and utilizing nonpublic information, are violating their fiduciary duties. On March 1, 2001, another purported class action lawsuit was filed in the Colorado District Court, County of Gilpin, under the caption Mary Bonsall v. Black Hawk Gaming & Development Co. [sic], Inc., et al., Case No. 01-CV-16. The allegations in this case are essentially the same as those in the case described above. On May 11, 2001, this case and the case described above were consolidated. The plaintiffs in both actions seek preliminary and permanent injunctive relief restraining the defendants from proceeding with the transaction and unspecified compensatory or rescissory damages, and, if the transaction is consummated, rescinding the transaction, together with unspecified compensatory or rescissory damages, and attorneys' fees and costs. Black Hawk Gaming's Board of Directors believes that it and the special committee it has appointed have met and will continue to meet their respective fiduciary obligations with respect to our acquisition of Black Hawk Gaming. Black Hawk Gaming believes the suits are without merit and will vigorously contest them; however, Black Hawk Gaming is unable to predict whether it or any of its director co-defendants will ultimately be subject to any material loss or expense. On May 25, 2001, a lawsuit was filed in The United States District Court for the District of Colorado (Case No. 01-D-0964) by Central City, several casino operators located in Central City and others against the City of Black Hawk, the Black Hawk Casino Owners Association and several casino operators located in Black Hawk, including Black Hawk Gaming. The suit alleges that the defendants caused economic harm to the plaintiffs by engaging in a conspiracy and scheme to harm competition, restrain trade and monopolize the gaming industry in the Gilpin County, Colorado market in violation of federal and state constitutional, statutory and common law. Also, the complaint alleges that starting in 1996 the City of Black Hawk began interfering in Central City's plans to construct a road directly from Interstate 70 to Central City. The plaintiffs seek compensatory, treble and exemplary damages against the defendants in amounts to be proven at trial along with interest, costs and attorneys' fees. Black Hawk Gaming believes that this lawsuit is without merit and intends to contest it vigorously. 72 REGULATION AND TAXATION Regulation Gaming Regulation and Licensing--Colorado 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 Division, under the supervision of the Gaming Commission, has been granted broad power to ensure compliance with Colorado law and regulations adopted thereunder (collectively, the "Colorado Regulations"). 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. The Division may also conduct detailed background checks of persons who lend money to or invest money in a licensee. It is illegal to operate a gaming facility without a license issued by the Gaming Commission. The Gaming Commission is empowered to issue five types of gaming and gaming related licenses. The licenses are revocable and nontransferable. Black Hawk Gaming's failure or inability to obtain and maintain necessary gaming licenses would have a material adverse effect on its gaming operations. The Colorado casinos were granted retail/operator licenses concurrently with their openings. The licenses are subject to continued satisfaction of suitability requirements and must be renewed annually. The current licenses for both Colorado casinos were renewed on May 14, 2001. There can be no assurance that the Colorado casinos can successfully renew their licenses in a timely manner from year to year. All persons employed by Black Hawk Gaming who are involved, directly or indirectly, in gaming operations in Colorado also are required to obtain various forms of gaming licenses. 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 that a casino is open for business. Messrs. Jacobs and Roark and Stanley Politano (Black Hawk Gaming's Secretary), among others, hold key licenses. The Gaming Commission closely regulates the suitability of persons owning or seeking to renew an interest in a gaming license, and the suitability of a licensee can be adversely affected by persons associated with the licensee. Additionally, any person or entity having any direct interest in Black Hawk Gaming or any casino directly or indirectly owned by Black Hawk Gaming may be subject to administrative action, including personal history and background investigations. The actions of persons associated with Gameco, such as its management or employees, could jeopardize any licenses held by Black Hawk Gaming. All of Black Hawk Gaming's directors are required to be found suitable as associated persons. As a general rule, under the Colorado Regulations, it is a criminal violation for any person to have a legal, beneficial, voting or equitable interest, or right to receive profits, in more than three retail/operator gaming licenses in Colorado. Black Hawk Gaming has an interest in two such licenses. Any expansion opportunities that we may have in Colorado are limited to one more license. The Colorado Division of Gaming may require any person having an interest in a licensee or an applicant for a license to provide background information, information on sources of funding, and a sworn statement that the interested person or applicant is not holding that interest for another party. The Gaming Commission may, at its discretion, require any person having an interest in a licensee to undergo a full background investigation and to pay for that investigation in the same manner as an applicant for a license. A background investigation includes an examination of one's personal history, financial associations, character, record, and reputation, as well as the people with whom a person has associated. The Gaming Commission has the right to request information from any person directly or indirectly interested in, or employed by, a licensee, and to investigate the moral character, honesty, integrity, prior 73 activities, criminal record, reputation, habits and associations of (i) all persons licensed pursuant to the Colorado Limited Gaming Act, (ii) all officers, directors and stockholders of a licensed privately held corporation, (iii) all officers, directors and stockholders holding either a 5% or greater interest or a controlling interest in a licensed publicly traded corporation, (iv) any person who as agent, consultant, advisor or otherwise, exercises a significant influence upon the management or affairs of a publicly traded corporation, (v) all general partners and all limited partners of a licensed partnership, (vi) all persons that have a relationship similar to that of an officer, director or stockholder of a corporation (such as members and managers of a limited liability company), (vii) all persons supplying financing or lending money to any licensee connected with the establishment or operation of limited gaming, and (viii) all persons having a contract, lease or ongoing financial or business arrangement with any licensee, if such contract, lease or arrangement relates to limited gaming operations, equipment, devices or premises. If the Gaming Commission determines that a person or entity is not suitable to own a direct or indirect voting interest in Black Hawk Gaming or Gameco, Black Hawk Gaming may be sanctioned unless the person or entity disposes of its voting interest. Sanctions may include the loss of the casino 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 provisions that permit the repurchase of the voting interests of any person found to be unsuitable. Black Hawk Gaming's Articles of Incorporation include the required provisions. The Gaming Commission also has the power to require Black Hawk Gaming to suspend or dismiss its 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. The Commission or the Director of the Division of Gaming may review a licensee's gaming contracts, require changes in the contract before the licensee's application is approved or participation in the contract is allowed, and require a licensee to terminate its participation in any gaming contract. The Gaming Commission has enacted Rule 4.5, which imposes requirements on publicly traded corporations holding gaming licenses in Colorado and on gaming licenses owned directly or indirectly by a publicly traded corporation, whether through a subsidiary or intermediary company. The term "publicly traded corporation" includes corporations, firms, limited liability companies, trusts, partnerships and other forms of business organizations. Such requirements automatically apply to any ownership interest held by a publicly traded corporation, holding company or intermediary company thereof, when the ownership interest directly or indirectly is, or will be upon approval of the Gaming Commission, 5% or more of the entire licensee. In any event, if the Gaming Commission determines that a publicly traded corporation, or a subsidiary, intermediary company or holding company has the actual ability to exercise influence over a licensee, regardless of the percentage of ownership possessed by that entity, the Gaming Commission may require the entity to comply with the disclosure regulations contained in Rule 4.5. Under Rule 4.5, gaming licensees, affiliated companies and controlling persons commencing a public offering of voting securities must notify the Gaming Commission no later than ten business days after the initial filing of a registration statement with the Securities and Exchange Commission. Licensed publicly traded corporations are also required to send proxy statements to the Division of Gaming within five days after their distribution. Licensees to whom Rule 4.5 applies must include in their charter documents provisions that: restrict the rights of the licensees to issue voting interests or securities except in accordance with the Colorado Gaming Act and the Colorado Regulations; void the transfer of voting securities or other voting interests issued in violation of the Colorado Gaming Act and the Colorado Regulations until the issuer ceases to be subject to the jurisdiction of the Gaming Commission or until the Gaming Commission, by affirmative act, validates the transfer; and provide that holders of voting interests or securities of licensees found unsuitable by the Gaming Commission may, within 60 days of such finding of unsuitability, be required to sell their interests or securities back to the issuer at the lesser of the cash equivalent of the holders' investment or the market price as of the date 74 of the finding of unsuitability. Alternatively, the holders may, within 60 days after the finding of unsuitability, transfer the voting interests or securities to a person suitable to the Gaming Commission. Until the voting interests or securities are held by suitable persons, the issuer may not pay dividends or interest, the securities may not be voted, they may not be included in the voting or securities of the issuer, and the issuer may not pay any remuneration in any form to the holders of the securities. Notification must be given to the Division of Gaming of the acquisition of direct or indirect beneficial ownership of: . 5% or more of any class of voting securities of a publicly traded corporation that is required to include in its articles of organization the Rule 4.5 charter language provisions; or . 5% or more of the beneficial interest in a gaming licensee directly or indirectly through any class of voting securities of any holding company or intermediary company of a licensee, referred to as qualifying persons. Notification must be made by persons acquiring these interests. Such persons must submit all requested information to the Division of Gaming, are subject to a finding of suitability as required by the Division of Gaming or the Gaming Commission, and must be informed of these requirements by the licensee. A person other than an institutional investor whose interest equals 10% or more of a publicly traded corporation or a 10% beneficial interest in a gaming licensee must apply to the Gaming Commission for a finding of suitability within 45 days after acquiring such securities. An institutional investor who, individually or in association with others, acquires, directly or indirectly, the beneficial ownership of 15% or more of any class of voting securities or 15% of the beneficial interest in a gaming licensee must apply to the Gaming Commission for a finding of suitability within 45 days after acquiring such interests. Licensees must also notify any qualifying persons of these requirements. Whether or not so notified, qualifying persons are responsible for complying with these requirements. The Colorado Regulations also provide for exemption from the requirements for a finding of suitability when the Gaming Commission finds such action to be consistent with the purposes of the Colorado Gaming Control Act. The Gaming Commission may determine that anyone with a material relationship to, or material involvement with, a licensee or an affiliated company must apply for a finding of suitability or must apply for a key employee license. Pursuant to Rule 4.5, persons found unsuitable by the Gaming Commission must be removed from any position as an officer, director, or employee of a licensee, or of a holding or intermediary company. Such unsuitable persons also are prohibited from any beneficial ownership of the voting securities of any such entities. Licensees, or affiliated entities of licensees, are subject to sanctions for paying dividends or distributions to persons found unsuitable by the Gaming Commission, or for recognizing voting rights of, or paying a salary or any remuneration for services to, unsuitable persons. Licensees or their affiliated entities also may be sanctioned for failing to pursue efforts to require unsuitable persons to relinquish their interests. The Gaming Commission must provide prior approval of any sale, lease, purchase, conveyance, or acquisition of an interest in a casino licensee, except as provided in Rule 4.5 relating to publicly traded corporations. 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 or consume alcohol in the casino. Slot machines, black jack, poker and other approved variations of those games and video poker are the only permitted games, with a maximum single wager of $5.00. Colorado casinos may not extend credit to gaming patrons. The Colorado Constitution and Regulations restrict the percentage of space a casino may use for gaming to 50% of any floor and 35% of the overall square footage 75 of the building in which the casino is located. Effective July 1 of each year, Colorado establishes the gross gaming revenue tax rate for the ensuing 12 months. Under the Colorado Constitution, the rate can be increased to as much as 40% of adjusted gross proceeds. Colorado has both raised and lowered gaming tax rates since they were initially set in 1991. Currently, the maximum gaming tax rate is 20%. Gaming Regulation and Licensing--Nevada The ownership and operation of casino gaming facilities in Nevada, including Black Hawk Gaming's Gold Dust West Casino, are subject to the Nevada Gaming Control Act and the regulations promulgated thereunder (the "Nevada Act") and to the licensing and regulatory control of the Nevada Gaming Commission (the "Nevada Commission"), the Nevada State Gaming Control Board (the "Nevada Board"), and various local ordinances and regulations, including, without limitation, those of the City of Reno (collectively, the "Nevada Gaming Authorities"). The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keeping and filing periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheting and fraudulent practices; and (v) providing a source of state and local revenues through taxation and licensing fees. Change in such laws, regulations and procedures could have an adverse effect on Black Hawk Gaming's Nevada gaming operations. Gold Dust West Casino, Inc., ("Gold Dust West"), Black Hawk Gaming's subsidiary that conducts gaming operations in Nevada, is required to be licensed by the Nevada Gaming Authorities. Gaming licenses require the periodic payment of fees and taxes and are not transferable. Black Hawk Gaming is currently registered by the Nevada Commission as an intermediary company and has been found suitable to own the stock of Gold Dust West, which is a corporate licensee ("Corporate Licensee") under the terms of the Nevada Act. Gameco is currently registered by the Nevada Commission as an intermediary company and has been found suitable as the sole shareholder of Black Hawk Gaming. Gameco has filed an application with the Nevada Board and Nevada Commission for registration as a publicly traded corporation (a "Registered Corporation") in conjunction with the exchange offer. Registered Corporations are required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information that the Nevada Commission may require. No person may become a stockholder of, or holder of an interest in, or receive any percentage of profits from, a Corporate Licensee without first obtaining licenses and approvals from the Nevada Gaming Authorities. Gameco, Black Hawk Gaming, the Gold Dust West Casino and Black Hawk Gaming's controlling persons, directors and certain officers have obtained from the Nevada Gaming Authorities the various registrations, findings of suitability, approvals, permits and licenses required in order to engage in gaming activities in Reno, Nevada. The following regulatory requirements are applicable to Gameco, Black Hawk Gaming and Gold Dust West. The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, Gameco, Black Hawk Gaming or Gold Dust West in order to determine whether that individual is suitable or should be licensed as a business associate of a gaming licensee. The officers, directors and shareholders of Gameco must file applications with and be licensed or found suitable by the Nevada Gaming Authorities. The officers, directors and certain key employees of Gold Dust West must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. The officers, directors and key employees of Gameco and Black Hawk Gaming who are actively and directly involved in the gaming activities of Gold Dust West may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause that they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a 76 finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position. If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with Gameco, Black Hawk Gaming or Gold Dust West, the companies involved would have to sever all relationships with that person. In addition, the Nevada Commission may require Gameco, Black Hawk Gaming or Gold Dust West to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada. Gameco, Black Hawk Gaming and Gold Dust West are required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information that the Nevada Commission may require. Substantially all of Gameco's, Black Hawk Gaming's and Gold Dust West's material loans, leases, sales of securities and similar financing transactions must be reported to or approved by the Nevada Commission. If it were determined that the Nevada Act was violated by Gameco, Black Hawk Gaming or Gold Dust West, the registrations or gaming licenses that Gameco, Black Hawk Gaming and Gold Dust West hold could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, Gameco, Black Hawk Gaming, Gold Dust West and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor could be appointed by the Nevada Commission to operate the Gold Dust West Casino and, under certain circumstances, earnings generated during the supervisor's appointment (except for reasonable rental value of the casino) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of the gaming licenses of Gold Dust West or the appointment of a supervisor could (and revocation of any gaming license would) have a material adverse effect on Gameco's gaming operations, financial condition and results of operations. Any beneficial holder of a Registered Corporation's voting securities (or rights to acquire such securities), regardless of the number of shares owned, may be required to file an application, be investigated and have its suitability as a beneficial holder of the Registered Corporation's voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership, limited liability company or trust, it must submit detailed business and financial information, including a list of beneficial owners. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation. The Nevada Act requires any person who acquires beneficial ownership of more than 5% of a Registered Corporation's voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of a Registered Corporation's voting securities apply to the Nevada Commission for a finding of suitability within 30 days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an "institutional investor," as defined in the Nevada Act, that acquires more than 10%, but not more than 15%, of our voting securities may apply to the Nevada Commission for a waiver of a finding of suitability if that institutional investor holds the voting securities for investment purposes only. An institutional investor will not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of our board of directors, any change in our corporate charter, bylaws, management, policies or operations, or of any of our gaming affiliates, or any other action that the Nevada Commission finds to be inconsistent with holding our voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by 77 securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. We will be subject to disciplinary action if, after we receive notice that a person is unsuitable to be a stockholder or to have any other relationship with us, we (i) pay that person any dividend or interest on our voting securities, (ii) allow that person to exercise, directly or indirectly, any voting right conferred through securities held by that person, (iii) pay remuneration in any form to that person for services rendered or otherwise, or (iv) fail to pursue all lawful efforts to require that unsuitable person to relinquish its voting securities including, if necessary, the immediate purchase of the voting securities for cash at fair market value. Additionally, the City of Reno has the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming licensee operating in Reno. The Nevada Commission may, in its discretion, require the holder of any of our debt or similar securities, such as the Old Notes or New Notes, to file applications, be investigated and be found suitable to own our debt securities if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. If the Nevada Commission determines that a person is unsuitable to own those securities, then pursuant to the Nevada Act, we can be sanctioned, including by revocation of our approvals, if without the prior approval of the Nevada Commission, we (i) pay to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognize any voting right by the unsuitable person in connection with our securities; (iii) pay the unsuitable person remuneration in any form; or (iv) make any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction. The pledge of the stock of Black Hawk Gaming and Gold Dust West ("Stock Pledge") and of the stock of any future subsidiary that obtains a registration or gaming license in Nevada ("Future Subsidiary"), and the restrictions on the transfer of and agreement not to encumber the equity securities of Black Hawk Gaming, Gold Dust West or any Future Subsidiary (collectively, "Stock Restrictions") in respect of the Old Notes and the New Notes require the approval of the Nevada Commission on the recommendation of the Nevada Board before becoming effective. Such approvals have been granted. An approval of the Stock Pledge by the Nevada Commission does not constitute approval to foreclose on the Stock Pledge. Separate approval would be required to foreclose on the Stock Pledge and transfer ownership of the stock and that approval would require the licensing of the indenture trustee or other secured party ("Secured Party"), unless that licensing is waived on application of the Secured Party. No assurance can be given that approval to foreclose on the Stock Pledge would be granted, or that the Secured Party would be licensed or receive a waiver of licensing requirements. Foreclosure of the lien on collateral consisting of gaming devices in respect of the Old Notes and the New Notes and the taking of possession of those gaming devices may require the prior licensing of the Secured Party as a distributor by the Nevada Commission. However, the Nevada Act provides that in the case of foreclosure of a lien by a person holding a security interest for which gaming devices are security in whole or part, the Nevada Board may authorize the disposition of the gaming devices without requiring a distributor's license. No assurance can be given that the Nevada Board would grant such approval or that if that approval were not granted, the Secured Party would be granted a license as a distributor. Black Hawk Gaming and Gameco are required to maintain a current stock ledger in Nevada that may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make the required disclosure may be grounds for finding the record holder 78 unsuitable. We are also required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require our stock certificates to bear a legend indicating that the securities are subject to the Nevada Act. To date, the Nevada Commission has not imposed such a requirement on us. Black Hawk Gaming and Gameco may not make a public offering of their securities without the prior approval of the Nevada Commission if the securities or proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. The exchange offer will qualify as a public offering under the terms of the Nevada Act and will require the prior approval of the Nevada Commission. The following transactions must also be approved in conjunction with approval of the exchange offer: (i) the issuance of guarantees by Black Hawk Gaming and Gold Dust West in respect of the New Notes; and (ii) the hypothecation of the assets of Gold Dust West as security for the New Notes. Gameco must also be approved as a Registered Corporation in conjunction with the exchange offer. Gameco has filed an application requesting those approvals. However, there can be no assurance that the approvals will be granted, or that they will be granted on a timely basis. Changes in control of Gameco or Black Hawk Gaming through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person by which it obtains control of Gameco or Black Hawk Gaming, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of us must satisfy the Nevada Board and Nevada Commission on a variety of stringent standards prior to assuming control of us. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction. The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities, and corporate defense tactics affecting Nevada corporate gaming licensees, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices on Nevada's gaming industry and to further Nevada's policy to: (i) assure the financial stability of corporate gaming licensees and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before we can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by us in response to a tender offer made directly to our stockholders for the purposes of acquiring control of us. License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the Nevada licensee's operations are conducted. Depending on the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based on either (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. A casino entertainment tax is also paid by casino operations where entertainment is furnished in connection with the selling or serving of food or refreshments or the selling of merchandise. See "--Taxation" below. Any person who is licensed, required to be licensed, registered, or required to be registered, or is under common control with any such person (collectively, "Licensees"), and who is or proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation by the Nevada Board for its participation in that foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, foreign Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. The licensees are also subject to disciplinary action by the Nevada Commission if 79 they knowingly violate any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in activities or enter into associations that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employ, contract with or associate with a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the grounds of personal unsuitability. Gaming Regulation and Licensing--Louisiana Video gaming in Louisiana is regulated by the Louisiana Gaming Control Board, which is part of the Department of Public Safety and Corrections. The enforcement arm thereof in charge of licensing and criminal investigations is the Video Gaming Division of the Louisiana State Police, likewise a part of the Department of Public Safety and Corrections. The Gaming Section of the Attorney General's Office provides all legal counsel and representation with respect to all matters involving licensing actions and any other litigation issue relative to gaming and involving either the Louisiana Gaming Control Board (hereinafter the "Board") or the Video Gaming Division of the Louisiana State Police (hereinafter the "Division"). The Video Draw Poker Devices Control Law, which governs our operations in Louisiana, is contained within the Louisiana Revised Statutes at Title 27:301 et seq. (the "act") with accompanying regulations being promulgated by the Board pursuant to the statutory authority contained within the act. The video draw poker regulations are in Title 42 of the Louisiana Administrative Code at Sections 2401 et seq. The act gives the Board broad authority and discretion in the licensing of persons for video draw poker operations within the State of Louisiana. Generally, a person may not be licensed for video draw poker if he has been convicted in any jurisdiction of any of the following offenses within 10 years prior to the date of the application for a video draw poker license or less than 10 years has elapsed between the date of application for a video draw poker license and the successful completion or service of any sentence, deferred adjudication, or period of probation or parole for any such offense: (i) Any offense punishable by imprisonment for more than one year; (ii) Theft or any crime involving false statements or declarations; or (iii) gambling, as defined by the laws or ordinances of any municipality, any parish, any state, or the United States. The act and its corresponding regulations further provide that an application for a video draw poker license may be denied if it contains any material omission of information. An applicant must also not be delinquent in state or federal income taxes, penalties or interest or delinquent in the payment of any sales taxes, penalties, or interest to either the state or any local governing authority of the parish or municipality in which the establishment is located. There are several general suitability requirements for licensure. Specifically, the law requires that an applicant for a video draw poker license be: (i) a person of good character, honesty, and integrity; (ii) a person whose prior activities, arrest or criminal record if any, reputation, habits, and associations do not pose a threat to the public interest of Louisiana or to the effective regulation of video draw poker, and do not create or enhance the dangers of unsuitable, unfair, or illegal practices, methods, and operations in the activities authorized by the act and financial arrangements incidental thereto; and (iii) a person who is likely to conduct business as authorized by the act in complete compliance with the act. The suitability standards must be met by every person who has or controls directly or indirectly more than a five percent ownership, income, or profit interest in an entity that has or applies for a license in accordance with the act, or who receives more than a five percent revenue interest in the form of a commission, finder's fee, loan repayment, or any other business expense related to the gaming operation, or who has the ability, in the opinion of the Division, to exercise a significant influence over the activities of a licensee authorized or to be authorized by the act. For the purposes of the act, all gaming related associations, outstanding loans, promissory notes, or other financial indebtedness of an applicant or licensee must be revealed to the Division for the purposes of determining significant influence and suitability. While significant influence is determined on a case by case basis, it has generally been interpreted to include any person who is an officer or director of any juridical entity 80 that is an applicant for a video draw poker license as well as the spouse of any person having more than a five percent (5%) ownership, income, or profit interest in an applicant as well as the spouse of any officer or director of any juridical entity applicant. The suitability criteria law makes an exception for institutional investors. An institutional investor of any applicant otherwise required to be found suitable or qualified pursuant to the act is presumed suitable or qualified upon submitting documentation to the Board and the Division sufficient to establish qualifications as an institutional investor as described below, and upon certifying that: (i) it owns, holds, or controls publicly traded securities issued by a licensee or permittee or a holding, intermediate, or parent company of a licensee or permittee in the ordinary course of business for investment purposes only; (ii) it does not exercise influence over the affairs of the issuer of the securities or over any licensed or permitted subsidiary of the issuer of the securities; and (iii) it does not intend to exercise influence over the affairs of the issuer of the securities, or over any licensed or permitted subsidiary of the issuer of the securities, in the future, and that it agrees to notify the Board in writing within thirty days if that intent should change. The exercise of voting privileges with regard to publicly traded securities is not deemed to constitute the exercise of influence over the affairs of a licensee. The act also provides that this exception is not to be construed to preclude the Board or the Division from investigating the suitability or qualifications of an institutional investor should the Board or Division become aware of facts or information which may result in such institutional investor being found unsuitable or disqualified. An institutional investor is defined in the act as: (i) a plan or trust established and maintained by the United States Government, a state, or a political subdivision of a state for the benefit of their respective employees; (ii) an investment company that is registered under the Investment Company Act of 1940; (iii) a collective investment trust registered with the United States Securities and Exchange Commission; (iv) a mutual fund; (v) a life insurance company or property and casualty company; (vi) a federal or state bank; or (vii) an investment advisor registered under the Investment Advisors Act of 1940. If any person required to be found qualified or suitable fails to provide all or part of the documents or information required by the Board or the Division, and if, as a result, any person holding a license issued pursuant to the act is not or may no longer be qualified or suitable, the Board will issue, under penalty of revocation of the license, a condition naming the person who failed to provide all or part of the documents or information required by the Board or the Division, and declaring that such person may not: (i) receive dividends or interest on securities of a corporation holding a license, if the person has or controls directly or indirectly more than a five percent ownership, income, or profit interest in such corporation; (ii) exercise directly, or through a trustee or nominee, a right conferred by securities of a corporation holding a license, if the person has or controls directly or indirectly more than a five percent ownership, income, or profit interest in such corporation; (iii) receive remuneration or other economic benefit from any person holding a license issued pursuant to the provisions of the act; (iv) exercise significant influence over the activities of a person holding a license issued pursuant to the provisions of the act; or (v) continue owning or holding a security of a corporation holding a license if the person has or controls directly or indirectly more than a five percent ownership, income, or profit interest in such corporation. In order to operate video draw poker devices in Louisiana a person must have both an establishment license and a device owner license. The establishment license permits the placement by a licensed device owner of video draw poker devices on the licensed premises. A device owner license permits the licensed entity to place and operate video draw poker devices at licensed establishments. In many cases, an establishment licensed for the placement of video draw poker devices will contract with a licensed device owner for video draw poker device placement services for a percentage of the video draw poker revenues. A licensed establishment may also, however, be a licensed device owner. A licensed device owner entity must be majority owned by a person who has resided within the State of Louisiana for a period of two years. Licensed establishments in Louisiana may be a restaurant, bar, motel or hotel, a Louisiana State Racing Commission licensed pari-mutuel wagering facility, a Louisiana State Racing Commission licensed off-track 81 wagering facility, or a qualified truck stop facility. Generally, a licensed establishment pays to a device owner a percentage of the net device revenues generated by video draw poker devices placed at its business premises. There is no law that governs the minimum amount that a device owner must be compensated for its services. Restaurants and bars may contain up to three video draw poker devices and a hotel or motel may have three video draw poker devices in each of its lounges and restaurants, up to a total of twelve for each hotel or motel. A pari-mutuel wagering facility and a licensed off-track wagering facility may have an unlimited number of video draw poker devices. A truck stop facility may have up to fifty video draw poker devices, with the number being determined by the amount of fuel sales of the truck stop facility. A restaurant, bar, motel or hotel, pari-mutuel wagering facility, and off-track wagering facility pays an initial non-refundable licensing and processing fee of $1,100. A truck stop facility pays an initial licensing and processing fee of $10,100. A license must be renewed every five years but a renewal fee is required each year. The non-refundable annual renewal and processing fee for a restaurant, bar, motel or hotel, pari-mutuel wagering facility, and off-track wagering facility is $200. The non-refundable annual renewal and processing fee for a truck stop facility is $1,100. In addition to the licensing fee, the device owner collects all funds deposited in each video draw poker device and is required to remit to the State of Louisiana on a bi-weekly basis a franchise payment in an amount equal to a percentage of the net device revenue derived from the operation of each video draw poker device owned by him. The amount of the percentage is based on the type of licensed establishment authorized by the Board for the placement of video draw poker devices, as follows: (i) a restaurant, bar, tavern, cocktail lounge, club, motel, or hotel--26%; (ii) a qualified truck stop facility--32.5%; and (iii) a pari-mutuel wagering facility or off-track wagering facility--22.5%. The number of video draw poker devices permissible in a qualified truck stop facility is based on average monthly fuel sales, as follows: (i) 100,000 gallons of fuel, of which at least 40,000 gallons are diesel--not more than 50 devices; (ii) 75,000 gallons of fuel, of which at least 30,000 gallons are diesel--not more than 40 devices; (iii) 50,000 gallons of fuel, of which at least 10,000 are diesel--not more than 35 devices. Once licensed, if a truck stop facility sells less than an average of 50,000 gallons per month but more than 25,000 gallons per month in any calendar quarter, the truck stop facility will not be permitted to operate any video draw poker devices in the following calendar quarter. A qualified truck stop facility that sells less than an average of 25,000 gallons per month will be subject to revocation of its video draw poker license. Bulk sales or transfers may not be used to calculate monthly averages. The fuel facility is required to offer fuel for sale in the regular course of business at retail, at a price at least six percent (6%) above the delivered cost of the fuel. In addition, under the act, a qualified truck stop facility is required to have at least five developed contiguous acres and sell fuel, lubricating oil, and other vehicular merchandise, such as batteries, tires, or vehicle parts for eighteen-wheel tractor-trailers, and also meet all of the following criteria: (i) it must be located adjacent to a major state or interstate highway, as defined by the Board (within 2,000 feet of a major state highway or U.S. interstate highway); (ii) it must have an on-site restaurant with all of the following features: (a) provides seating for at least 50 patrons; (b) provides full table service for sit-down meals; (c) is open 24 hours a day; and (d) offers a varied menu; (iii) it must have parking areas with each of the following: (a) a stable parking area for at least 50 18-wheel tractor-trailer motor vehicles, either paved or concrete (or otherwise certified and approved), to support 18-wheel tractor-trailer motor vehicles and their loads, constructed according to industry specifications, subject to approval by the Board and the Division; (b) parking of sufficient size is allowed for safe ingress and egress; (c) parking areas for other vehicles around business entrance ways and exits shall not constitute parking areas for 18-wheel tractor-trailer motor vehicles; (iv) it must have diesel and gasoline fuel; (v) it must have on-site repair service facilities for 18-wheel tractor-trailer motor vehicles; (vi) it must have at least four of the following amenities: (a) a separate truckers' television lounge; (b) a full-service laundry facility located in a convenient area for truckers' use; (c) private showers for men and women, not located in an area open to general public restroom facilities; (d) a travel store with items commonly referred to as truckers' supplies (items commonly used only by commercial motor vehicles); (e) truck scales; (f) separate truckers' telephones; and (g) 82 permanent storage facilities for fuel; (vii) it must have an area separated for adult patronage only; and (viii) it must have, if available, a Class A--General retail permit or a Class A--Restaurant permit, as defined in Part II of Chapter 1 or Part II of Chapter 2 of Title 26 of the Louisiana Revised Statutes of 1950, to serve or sell alcoholic beverages for on-premises consumption. All suitability information and applications required to be submitted with respect to the six Louisiana truck plazas currently owned by our affiliates have been submitted to the Board and the Division. As such, those facilities may operate indefinitely until such time as the suitability of each owner is approved. If an adverse licensing recommendation is made, our affiliates may continue to operate the video gaming devices during the pendency of the available appeals from that determination. Jeffrey P. Jacobs and Richard E. Jacobs, the principals of the entities that own those two facilities, have been approved under the Louisiana suitability criteria described above in connection with their purchase of a Louisiana restaurant featuring video gaming devices. However, because the Board and the Division conduct a new suitability investigation in connection with each acquisition of a facility at which video gaming devices are to be operated, regardless of prior approvals, there can be no guarantee that a suitability approval will ultimately result with respect to the six truck plazas or any of the other truck plazas that we propose to acquire. Gaming Regulation and Licensing--Virginia Colonial Holdings' success is dependent upon continued government and public acceptance of horse racing as a form of legalized gaming. Although Colonial Holdings believes that pari-mutuel wagering on horse racing will continue to be legal in Virginia, gaming has come under increasing scrutiny nationally and locally. The National Gaming Commission conducted a comprehensive legal and factual study of gambling in the United States and existing federal, state, and local policies and practices with respect to the legalization or prohibition of gambling activities. The commission published its findings and recommendations in 1999. It is not possible to predict the future impact of any of these recommendations on Colonial Holdings and its operations; however, adoption of these recommendations could have a material adverse effect on Colonial Holdings' business. Opposition to the Virginia Racing Act has been unsuccessfully introduced in the Virginia legislature in the past, but additional legislative opposition may arise in the future. Any repeal or material amendment of the Virginia Racing Act could have a material adverse effect on Colonial Holdings' business of pari-mutuel wagering. Under the Virginia Racing Act, the Virginia Racing Commission is vested with control over all aspects of horse racing with pari-mutuel wagering and the power to prescribe regulations and conditions under which such racing and wagering are conducted. The Virginia Racing Commission is responsible for, among other things, (i) conducting a review annually of the Colonial Holdings' track and off-track wagering facility licenses, (ii) annually approving Colonial Holdings' proposed schedule of racing days, (iii) approving new or modified types of pari-mutuel wagering pools requested by Colonial Holdings, (iv) issuing permits to all officers, directors, racing officials, and other employees of Colonial Holdings, and (v) approving simulcast schedules at the track and at the off-track wagering facilities. The Virginia Racing Commission also has the authority to promulgate regulations pertaining to Colonial Holdings' track facilities, equipment, safety and security measures, and controls the issuing of licenses and permits for participants in pari-mutuel racing, including Colonial Holdings employees at the track and at the off-track wagering facilities. In addition, the Virginia Racing Commission must approve any acquisition or continuing ownership of a 5% or greater interest in Colonial Holdings. Action by the Virginia Racing Commission that is inconsistent with the Colonial Holdings' business plan could have a material adverse effect on Colonial Holdings. During the 2000 session of the Virginia General Assembly, an amendment to the Racing Act was passed that requires Colonial Holdings to enter into contracts with each representative horsemen's group and provides for it to contribute to the purse account of the respective breed a minimum of 5% of the first $75 million of simulcast amounts wagered ("handle"), 6% of the next $75 million and 7% of all handle over $150 million. The existing contracts with the Virginia Horsemen's Benevolence and Protective Association (the "VaHBPA") and the Virginia Harness Horse Association (the "VHHA") contain these statutory provisions. The amendment also 83 provides for the breakage generated by pari-mutuel wagering to be allocated 70% to capital expenditures and 30% to backstretch benevolent activities. Prior to this amendment, Colonial Holdings received all breakage. Finally, the amendment empowers the Commission to summarily suspend Colonial Holdings' licenses if it believes the Racing Act or the regulations have been violated. In addition, the Interstate Horse Racing Act also requires that we secure the consent of the VaHBPA and the VHHA to the export simulcasting of races. These consents are usually contained in the agreement between each group and us. The licenses issued by the Virginia Racing Commission to Colonial Holdings are for a period of not less than 20 years, but are subject to annual review by the Virginia Racing Commission. It is possible that such licenses will not be renewed or that such licenses could be suspended or revoked by the Virginia Racing Commission for violations of the Virginia Racing Act or Virginia Racing Commission rules. Our current agreements with the VaHBPA and the VHHA expire on December 31, 2002. Negotiations of new agreements are expected to commence in the autumn of 2002. In the event we cannot reach agreement prior to the expiration of these agreements, the Virginia Racing Commission has the right to suspend our licenses to operate our racetrack and the off-track wagering facilities until agreements are in place. We believe that we will have new agreements in place before the expiration of the existing agreements. Although it is difficult to the predict the likelihood of such an event, closure of the off-track wagering facilities would be detrimental to the horsemen's groups as well as us since each horsemen's group's primary source of purse funds is its percentage of wagering at the off-track facilities. Colonial Holdings, the track and the off-track wagering facilities are also subject to a variety of other laws and regulations, including zoning, construction, and land-use laws and the regulations of the Virginia Alcoholic Beverage Control Board. Such laws and regulations may affect the selection of racing center sites because of parking, traffic flow, and other similar considerations. Any interruption or termination of Colonial Holdings' ability, or that of its concessionaires, to serve alcoholic beverages could have a material adverse effect on Colonial Holdings. Gaming Regulation--Federal Colonial Holdings' interstate simulcast operations are subject to the Federal Interstate Horse Racing Act, which regulates interstate off-track wagering. In order to conduct wagering on import simulcasting at the track or any racing center, the Interstate Horse Racing Act requires Colonial Holdings to obtain the consent of the Virginia Racing Commission, the consent of the racing commission of the state where the horse racing meet originates, and the consent of the representative horsemen groups in the origination state. To conduct export simulcasting, Colonial Holdings must obtain the consent of the Virginia Horseman's Benevolent and Protective Association or the Virginia Harness Horse Association, and the Virginia Racing Commission. Also, in the case of off-track wagering to be conducted at any of Colonial Holdings' off-track wagering facilities, the Interstate Horse Racing Act requires Colonial Holdings to obtain the approval of all currently operating horse racetracks within 60 miles of the off-track wagering facilities or if there are no currently operating tracks within 60 miles, the approval of the closest operating horse racetrack, if any, in an adjoining state. Significant delay in obtaining or failure to obtain these consents or approvals could have a material adverse effect on Colonial Holdings. Liquor Regulation The sale of alcoholic beverages in Colorado is subject to licensing, control and regulation by certain Colorado state and local agencies (the "Liquor Agencies"). Subject to certain exceptions, all persons who directly or indirectly own 5% or more of a company or its casino must file applications with and are subject to investigation by the Liquor Agencies. The Liquor Agencies also may investigate persons who, directly or indirectly, lend money to liquor licensees. All liquor licenses are renewable, are revocable and are not transferable. The Liquor Agencies have broad powers to limit, condition, suspend or revoke any liquor license. Any disciplinary action by the Liquor Agencies or any failure to renew or other revocation of any of our liquor licenses would have a material adverse effect on our operations and Black Hawk Gaming's Colorado casinos. 84 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. Black Hawk Gaming's Colorado casinos have gaming tavern liquor licenses. Accordingly, our expansion and diversification opportunities in Colorado are limited by these licensing restrictions. The sale of alcoholic beverages in Reno, Nevada, is subject to licensing, control and regulation by the City of Reno. All licenses are revocable and are not transferable. The agencies involved have full power to limit, condition, suspend or revoke any such license, and any such disciplinary action could (and revocation would) have a material adverse effect on the operations of the Gold Dust West Casino. Alcohol regulation within the State of Louisiana is performed primarily by the Office of Alcohol and Tobacco Control (the "Board"). The Commissioner of the Board is given broad discretion in the granting and denial of state alcohol permits. While permits are issued on a state level, the local municipality is also permitted to provide for concurrent local licensing. The state alcohol regulatory scheme is contained at Title 26:1 of the Louisiana Revised Statutes (hereinafter referred to as the "act"). Generally, no permit may be issued if the applicable premises is located three hundred feet or less, as fixed by the local municipal ordinance, of a public playground or of a building used exclusively as a church or synagogue, public library, or school. Local municipalities are also permitted to regulate the opening and closing hours of permitted businesses as well as to prohibit the sale of alcoholic beverages altogether by referendum vote of the people within the municipality. A local municipality may also regulate via zoning designations the permissibility or prohibition of the permitting of businesses that sell alcoholic beverages within that municipality. All Louisiana video gaming truck plaza facilities are currently licensed by the applicable state and local alcohol licensing authorities. The sale of alcoholic beverages in Virginia is subject to licensing, control and regulation by the Virginia Department of Alcoholic Beverage Control (the "Virginia ABC Board"), a Virginia state agency. The Virginia ABC Board issues licenses based upon the type of beverage, type of establishment or place of consumption. Virginia ABC laws include the responsibility of the licensee to maintain complete and accurate records, certain restrictions on advertising and certain food sale requirements. Before receiving a Virginia ABC license, an applicant must satisfy several requirements. The Virginia ABC Board will conduct an extensive background investigation (to include a criminal history review as well as contacts with the local governing body of each license application) and will contact local officials, residents and business people in the vicinity of the establishment to ascertain if any objections exist. The background investigation will be completed for all principal owners of the proposed licensee. Administrative hearings are available to afford all interested parties the opportunity to present any concerns with respect to an application. A licensee is required to maintain financial responsibility for its business, including timely payment of all taxes, creditor obligations and other bills, and must keep accurate records of all such transactions. Mixed beverage licensees must record sales and purchases of all mixed beverages, food and non-alcoholic beverages. Mixed beverage licensees must submit annual review reports to the Virginia ABC Board showing all purchases and sales of alcoholic beverages during the year as well as an accurate inventory. Finally, the Virginia ABC Board imposes certain restrictions and limitations on advertising, the use of advertising materials and promotions. If Virginia ABC agents discover license violations, a disciplinary hearing will typically be conducted with a Virginia ABC hearing officer. Any aggrieved localities and members of the community may attend the hearing and present any additional or relevant objections or complaints concerning the license. The Virginia ABC Board has broad power to limit, condition, suspend or revoke any license granted on discovery of any violation. Any disciplinary action by the Virginia ABC Board or any failure to renew or any revocation of a liquor license would likely have a material adverse effect on the operation of Colonial Holdings' track and off-track wagering facilities. 85 Taxation Gaming operators in Colorado are subject to state and local taxes and fees in addition to ordinary federal and state income taxes. The City of Black Hawk has imposed an annual license fee, currently $750, for each gaming device installed in a casino. In addition, Colorado has a gross gaming revenue tax (gross gaming revenue (also called "adjusted gross proceeds") being generally defined as the total amount wagered less the total amount paid out in prizes). Currently, gaming tax rates are as follows:
Tax as Percentage of Annual Amount of Adjusted Adjusted Gross Proceeds Gross Proceeds ----------------------- ------------------------- .25%.......... $ 0- 2,000,000 2%........... 2,000,001- 4,000,000 4%........... 4,000,001- 5,000,000 11%........... 5,000,001-10,000,000 16%........... 10,000,001-15,000,000 20%........... 15,000,001 and above
Both of Black Hawk Gaming's Colorado casinos are subject to the maximum rate. Neither the Colorado constitution nor the gaming statutes require that gaming tax rates be graduated, as they currently are. Under the Colorado constitution, the Colorado Gaming Commission could increase the top rate to as much as 40%. A more recent tax limitation amendment to the Colorado constitution, however, states that neither the state nor any local government may increase a tax rate without an affirmative vote of the people; therefore, there is a question as to whether the Colorado Gaming Commission could constitutionally increase the state tax levied on gross gaming revenues without such a vote. The Colorado legislature rejected this argument after the top tax rate was increased to 20% in 1996, and no court was asked to rule on the applicability of the tax limitation amendment to gaming tax rates. In Nevada, license fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to Washoe County. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either: (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. A casino entertainment tax is also paid by casino operations where entertainment is furnished in connection with the selling or serving of food or refreshments or the selling of merchandise. Presently the state tax in Nevada on adjusted gross revenue from gaming is 6.25%. Video gaming operators in truck plazas in Louisiana are subject to state and local taxes and fees in addition to ordinary federal and state income taxes. The state of Louisiana has imposed a franchise tax of 32.5% of the net device revenue from each video gaming device located at a truck plaza. The net device revenue is the amount remaining after all winnings have been paid. This franchise tax is collected twice per month by the Louisiana state police based on the data that is provided directly to them from the devices. There is also an annual state establishment license fee of $1,000. In addition, the state imposes a device operation fee of $1,000 per year per device, which is paid quarterly, and each parish imposes an annual occupational license tax of up to $50 per device. Colonial Holdings is subject to a number of federal, state and local taxes and fees. These include fees to support the Virginia Breeders' Fund, taxes payable to the Commonwealth of Virginia, taxes and admission charges payable to New Kent County, where the track is located, and taxes payable to localities in which off-track wagering facilities are located based upon the amount of monies wagered both at the track and at the off-track wagering facilities. Colonial Holdings believes that the public acceptance of pari-mutuel wagering on horse races, as well as other forms of gaming, is based, in part, on the governmental revenues it generates from taxes and fees on such activities. It is possible that gaming activities, including horse racing, may become a target for additional federal, state, or local taxes and fees. A significant increase in such taxes or fees or the creation of significant additional taxes or fees could have a material adverse effect on us. 86 MANAGEMENT Directors, Executive Officers and Other Key Employees The following table provides information regarding our directors and executive officers and key employees of Black Hawk Gaming, Colonial Holdings and the Louisiana properties as of the date of this prospectus:
Age Position --- -------- Jeffrey P. Jacobs.. 47 Chief Executive Officer, President, Secretary, Treasurer and Chairman of the Board Richard E. Jacobs.. 76 Director Stephen R. Roark... 54 Chief Financial Officer and President of Casino Operations Ian M. Stewart..... 47 President of Pari-Mutuel Wagering and Video Poker Operations Thomas Lee Witherow 45 Chief Operating Officer of Casino Operations Reid M. Smith...... 44 Vice President of Video Poker Operations J. Richard Gottardi 43 Vice President of Video Poker Operations
Jeffrey P. Jacobs is our Chairman, Chief Executive Officer, President, Secretary and Treasurer. From 1996 to present, he served as Chairman and Chief Executive Officer of Diversified Opportunities Group Ltd., a company co-founded by Mr. Jacobs and his father, Richard E. Jacobs, and based in Cleveland, Ohio, that has investments in gaming companies and ventures. Diversified was acquired by Gameco on February 22, 2002. From 1975 to present, Mr. Jacobs has also served as Chairman and Chief Executive Officer of Jacobs Investments, Inc., a company engaged in the development, construction and operation of residential and commercial real estate projects in Ohio. He is also involved in a variety of private equity transactions and investments. Mr. Jacobs served in the Ohio House of Representatives from 1982 until 1986. He is also Chairman and Chief Executive Officer of Colonial Holdings, and Chairman and Chief Executive Officer of Black Hawk Gaming. Richard E. Jacobs is our Director. Mr. Jacobs was Chairman of the Board, President and Chief Executive Officer of Cleveland Indians Baseball Company, Inc. from its inception in 1998 to February 2000. From 1986 to 1998, Mr. Jacobs was Chairman of the Board, President and Chief Executive Officer of Cleveland Baseball Corporation, which previously served as the general partner of the partnership that now owns the Cleveland Indians Baseball team. Mr. Jacobs is also Chairman of the Board and Chief Executive Officer of The Richard E. Jacobs Group Inc., a real estate management and development company. Stephen R. Roark is currently our Chief Financial Officer and President of Casino Operations. He has been employed as Chief Financial Officer of Black Hawk Gaming since August 1993. Mr. Roark became a director of Black Hawk Gaming in 1994. He was elected President of Black Hawk Gaming in September 1995. Prior to that time he was an independent consultant in the Denver area rendering financial and accounting assistance to companies in the public marketplace. Mr. Roark has 17 years of public accounting experience having served as a partner with a local accounting firm based in Denver and as a partner with a national accounting firm. Mr. Roark was with Hanifen, Imhoff and Prudential Securities, Inc. for three years and is a member of the American Institute of Certified Public Accountants and the Colorado Society of Certified Public Accountants. Mr. Roark obtained his B.S.B.A. in Accounting from the University of Denver in 1973. Ian M. Stewart is currently our President of Pari-Mutuel Wagering and Video Poker Operations. He has served as President of Colonial Holdings since November 1998 and its Chief Financial Officer since June 1997. From January 1998 through November 1998, Mr. Stewart served as Chief Operating Officer of Colonial Holdings. Mr. Stewart was Chief Financial Officer for Barber Martin & Associates from March 1997 to June 1997. From October 1994 to March 1997, Mr. Stewart served as a consultant and a temporary Chief Financial Officer for several Virginia-based businesses. From December 1989 to September 1994, Mr. Stewart was Vice President and CFO of Hat Brands, Inc. Mr. Stewart is a certified public accountant. 87 Thomas Lee Witherow is currently our Chief Operating Officer of Casino Operations. He has been employed as Chief Operating Officer of Black Hawk Gaming since August 2001. Prior to joining Black Hawk Gaming, Mr. Witherow owned and operated a hospitality consulting business in Memphis, Tennessee and provided consulting services to casinos, restaurants and hotels in the United States and the Caribbean. Prior to that time, Mr. Witherow was a Senior Vice President with Harrah's Entertainment, Inc. for seven years and operated casinos in Tunica, Mississippi; Bow, Washington; and Vicksburg, Mississippi. Prior to joining Harrah's Entertainment, Inc., Mr. Witherow was a General Manager for The Promus Companies and operated Embassy Suites hotels in Memphis, Dallas, Kansas City and Charlotte. Mr. Witherow obtained his B.S.W. degree from Virginia Commonwealth University in 1979 and his M.B.A. from Wake Forest University in 1991. Reid M. Smith is currently our Vice President of Video Poker Operations. He has served as Vice President of Operations for Jalou L.L.C. since February 2001. From July 1999 through January 2001, Mr. Smith served as Director of Food and Beverage and Director of Guest Services for Colonial Holdings. From June 1998 through June 1999, Mr. Smith served as Director of Racing Center Operations for Colonial Holdings. From July 1997 through May 1998, Mr. Smith served as Director of Food and Beverage for Virginia Concessions, Inc. Mr. Smith has over 20 years of experience in the Food and Beverage industry, serving as Multi-unit Regional Manager and General Manager of several high volume restaurants for T.G.I. Fridays. J. Richard Gottardi is currently our Vice President of Video Poker Operations. He has served as Vice President of Jalou L.L.C. since January 2001. Mr. Gottardi has sixteen years of gaming experience and has held various positions both in the operational and financial areas. From 1992 until 1998, he was Vice President and General Manager of Video Services, Inc., a video poker operation in Louisiana that is a subsidiary of Alliance Gaming Corp. He is a graduate of Pennsylvania State University. Summary Compensation Table Prior to 2002, Gameco has paid no compensation to any of its executive officers or directors. Because we are a subchapter "S" corporation and our stockholders, rather than we, pay taxes on our income, we also anticipate making distributions to our shareholders in amounts sufficient to enable them to make the required tax payments. We expect to formulate additional incentive compensation plans for upper management and selected middle management personnel based on Gameco's achievement of multi-year financial and growth objectives. The terms of the incentive compensation plans will be established by Gameco's Board of Directors. 88 The following table sets forth information regarding the compensation paid by Gameco, Black Hawk Gaming and Colonial Holdings for services rendered in all capacities since 1998:
Long-Term Compensation --------------------------------- Awards Payouts - - Annual ------------ -------------------- Compensation Other Annual Restricted Securities LTIP All Other -------------------- Compensation Stock Underlying Payouts Compensation Name of Officer/Director Year Salary ($) Bonus ($) ($) Award(s) ($) Options/SARs ($) ($) - ------------------------ ---- ---------- --------- ------------ ------------ (#) ------- ------------ Jeffrey P. Jacobs(1)... 2001 420,000 75,000 -- -- -- -- -- 2000 420,000 75,000 -- -- 45,000 -- -- 1999 420,000 137,000 -- -- -- -- -- 1998 320,000 50,000 -- -- -- -- -- Stephen R. Roark(2).... 2001 250,000 62,500 -- -- -- -- -- 2000 250,000 62,500 -- -- -- -- -- 1999 220,000 60,000 -- -- 45,000 -- -- 1998 138,000 35,000 -- -- -- -- -- Ian M. Stewart(3)...... 2001 192,500 30,000 -- -- -- -- 187,500 2000 150,000 -- -- -- -- -- -- 1999 135,584 -- -- -- -- -- -- 1998 120,000 -- -- -- -- -- -- Thomas Lee Witherow(4). 2001 225,000 25,000 -- -- -- -- --
- -------- (1) Jeffrey P. Jacobs was Chief Executive Officer of Black Hawk Gaming and Colonial Holdings for the years 1998, 1999 and 2000. The annual compensation for such periods reflects the aggregate compensation he received for his services at both Black Hawk Gaming and Colonial Holdings. His compensation for 2001 was for services rendered to Gameco. The securities referred to in 1999 are those of Black Hawk Gaming only. (2) Stephen R. Roark was President of Black Hawk Gaming for the periods indicated above. The securities referred to in 1999 are those of Black Hawk Gaming only. (3) Ian M. Stewart was President of Colonial Holdings for the periods indicated above. Mr. Stewart received $187,500 from Diversified Opportunities Group Ltd. in 2001 pursuant to a consulting agreement. See "Related Party Transactions." (4) Thomas Lee Witherow has been the Chief Operating Officer of Black Hawk Gaming since August 2001. We have entered into a three year employment agreement with Jeffrey P. Jacobs effective as of February 22, 2002 that contains customary terms and conditions and provides for a base salary of $500,000 per year. Mr. Jacobs is also entitled to receive a bonus of up to 33% of his base salary, with the percentage to be established by Gameco's Board of Directors. Mr. Jacobs is entitled to the present value of his base salary for the unexpired term of the agreement if he is terminated without cause, plus a pro rata portion of the bonus to which he would be entitled for the portion of the year in which the termination occurred. We have entered into a three year employment agreement with Richard E. Jacobs effective as of February 22, 2002 that contains customary terms and conditions and provides for a base salary of $250,000 per year. Mr. Jacobs is also entitled to receive a bonus of up to 33% of his base salary, with the percentage to be established by Gameco's Board of Directors. Mr. Jacobs is entitled to the present value of his base salary for the unexpired term of the agreement if he is terminated without cause, plus a pro rata portion of the bonus to which he would be entitled for the portion of the year in which the termination occurred. We have entered into a two year employment agreement with Stephen R. Roark effective as of February 22, 2002 that contains customary terms and conditions and provides for a base salary of $250,000 per year. Mr. Roark is also entitled to receive a bonus of up to 33% of his base salary, with the percentage to be established by Gameco's Board of Directors. Mr. Roark is entitled to the present value of his base salary for the unexpired term of the agreement if he is terminated without cause, plus a pro rata portion of the bonus to which he would be entitled for the portion of the year in which the termination occurred. 89 We have entered into a two year employment agreement with Ian M. Stewart effective as of February 22, 2002 that contains customary terms and conditions and provides for a base salary of $200,000 for the first year of the agreement and $215,000 for the second year of the agreement. Mr. Stewart is also entitled to receive a bonus of up to 33% of his base salary, with the percentage to be established by Gameco's Board of Directors. Mr. Stewart is entitled to the present value of his base salary for the unexpired term of the agreement if he is terminated without cause, plus a pro rata portion of the bonus to which he would be entitled for the portion of the year in which the termination occurred. We have entered into an employment agreement with Thomas Lee Witherow effective as of February 22, 2002 that contains customary terms and conditions, provides for a base salary of $225,000 per year and expires on July 31, 2004. Mr. Witherow is also entitled to receive a bonus of up to 33% of his base salary, with the percentage to be established by Gameco's Board of Directors. Mr. Witherow is entitled to the present value of his base salary for the unexpired term of the agreement if he is terminated without cause, plus a pro rata portion of the bonus to which he would be entitled for the portion of the year in which the termination occurred. 90 RELATED PARTY TRANSACTIONS We were formed by Jeffrey P. Jacobs and the Trust to acquire Black Hawk Gaming, the Louisiana truck plazas and Colonial Holdings. We accomplished these acquisitions by merging an acquisition subsidiary into Black Hawk Gaming, issuing Company stock to Jeffrey P. Jacobs and the Trust in exchange for their interests in Diversified and the Louisiana truck plazas, and merging another acquisition subsidiary into Colonial Holdings Black Hawk Gaming, the Louisiana truck plaza entities and Colonial Holdings have had various business relationships with other entities owned and controlled by Jeffrey P. Jacobs, Richard E. Jacobs and their affiliates. Those relationships and transactions were terminated on the closing of the acquisitions referred to above, except as described below. In order to assist Black Hawk Gaming in its efforts to research, develop, perform due diligence on and possibly acquire new gaming opportunities, it entered into an agreement with Premier One Development Company effective October 1, 1997. On May 9, 2000, Premier merged into Jacobs Investments Management Co. Inc., 82% of which is owned by Jeffrey P. Jacobs and the remaining 18% of which is owned in equal portions by two directors of Colonial Holdings. Black Hawk Gaming paid or accrued $225,000 for Jacobs Investments Management Company's services during the year ended December 31, 2000, and paid or accrued $168,750 for those services through December 31, 2001. The agreement expires on December 31, 2002, but is expected to be extended with Gameco at the rate of $450,000 annually until December 31, 2009. Virginia Concessions, L.L.C., which is beneficially owned by Jeffrey P. Jacobs, has an agreement with Colonial Holdings to provide food and beverage concessions at Colonial Holdings' off-track wagering facilities. Colonial Holdings manages and administers Virginia Concessions' business in exchange for all of the earnings (or losses) from Virginia Concessions' food and beverage sales. Pursuant to an agreement with Diversified Opportunities Group Ltd., Ian M. Stewart receives compensation for consulting services to Diversified in connection with its acquisition of the Louisiana truck plaza video gaming facilities. Diversified paid to Mr. Stewart $187,000 in 2001 and an additional $150,000 in 2002 for his services in connection with the acquisition of the Louisiana truck plaza video gaming facilities acquired by Gameco in February 2002 and Mr. Stewart may be entitled to an additional $37,500 for the acquisition by Diversified or any of its subsidiaries or affiliates of certain additional truck plaza video gaming facilities. The agreement also contains a two year non-compete clause with respect to any aspect of the operations of those truck plaza facilities. See "Description of Other Indebtedness" for a description of certain Louisiana properties and Colonial Holdings indebtedness payable to entities controlled by Jeffrey P. Jacobs and Richard E. Jacobs that will remain outstanding after the consummation of the exchange offer. 91 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 31, 2002 and after giving effect to our recent acquisitions, for (i) each stockholder who is known by us to own beneficially more than 5% of our common stock, (ii) each director and executive officer, and (iii) all of our directors and executive officers as a group. Except as otherwise indicated, we believe, based on information furnished by the persons named in this table, that such persons have voting and investment power with respect to all shares of common stock beneficially owned by them, subject to community property laws, where applicable. As of December 31, 2001, there were 1,500 shares of our common stock outstanding.
Number Shareholder of Shares Percentage ----------- --------- ---------- Jeffrey P. Jacobs.............................. 750 50% 1001 North U.S. Highway 2 Suite 710 Jupiter, FL 33477 Richard E. Jacobs.............................. 750 50 25425 Center Ridge Road Cleveland, Ohio 41445 ----- --- All executive officers and directors as a group 1,500 100% ===== ===
All 750 shares beneficially owned by Richard E. Jacobs are owned by The Richard E. Jacobs Revocable Trust, of which Richard E. Jacobs is the sole trustee. 92 DESCRIPTION OF OTHER INDEBTEDNESS In addition to the Old Notes, we have other indebtedness that is currently outstanding. Gameco Indebtedness. We may enter into a proposed new senior secured credit facility in an amount up to $10.0 million. Although we discuss our proposed new credit facility in this prospectus, including under "Risk Factors," there can be no assurance that we will be able to enter into our proposed new credit facility or any alternative credit facility. When and if we enter into the proposed new credit facility, we expect the trustee under the Indenture (as collateral agent) will enter into an intercreditor agreement with the lenders under our proposed new credit facility which, among other things, will subordinate the liens securing the notes on the real property and related assets comprising The Lodge Casino at Black Hawk and the Gilpin Hotel Casino to the liens securing the indebtedness under such proposed new credit facility. See "Description of the Notes--Security." Gameco is the obligor on notes to Jeffrey Jacobs and the Trust. The note held by Jeffrey Jacobs is in the amount of $1.0 million, and the note held by the Trust is in the amount of $8.0 million. Both notes are dated February 22, 2002, mature on January 31, 2010 and bear interest at a rate of 12% per annum. We must make semi-annual interest-only payments until maturity, at which time the entire principal balance plus any unpaid interest becomes due. These notes are unsecured and expressly subordinated to the Old Notes and New Notes pursuant to a subordination agreement. See "Description of the Notes--Subordination and Intercreditor Agreements." Black Hawk Gaming Indebtedness. Black Hawk Gaming is the beneficiary of $6.0 million of site improvements financed by Black Hawk Business Improvement District Special Assessment Bonds. The bonds were issued in March 1999, in one tranche of $2.0 million and another tranche of $4.0 million. At December 31, 2001, $1.5 million is outstanding on the $2.0 million tranche, bearing interest at a rate of 6.25% per annum, and has a final maturity of December 1, 2004. All of the $4.0 million tranche is outstanding as of December 31, 2001, bearing interest at the rate of 6.5% per annum and has a final maturity of December 1, 2011. Although Black Hawk Gaming is not the issuer of the debt, it is responsible for payment of all principal and interest thereon through special assessment taxes. The required payments are secured by a first priority lien on certain real property comprising the Black Hawk Improvement District, relating to The Lodge Casino, which ranks prior to the security for payment of the Old Notes and New Notes. Louisiana Properties Indebtedness. Winner's Choice Casino, Inc., an indirect Gameco subsidiary that owns Winner's Choice Casino, was the original obligor on a note in the principal amount of $1.2 million, payable to Claude M. Penn, Jr. and George D. Lockhart, the former owners of the facility. Jalou-Cash's L.L.C., an indirect Gameco subsidiary that owns a revenue interest in Cash's Truck Plaza and Casino, was the original obligor on a note in the principal amount of $1.7 million, payable to Seabuckle Gaming, Inc., the former owner of the facility's gaming devices. Houma Truck Plaza & Casino, L.L.C., an indirect Gameco subsidiary that owns the Houma Truck Plaza and Casino, was the original obligor on a note in the principal amount of $1.8 million, payable to Claude M. Penn Jr., the former owner of the facility. All of these notes are dated February 7, 2001 and were amended as of September 26, 2001. Each of these notes bears interest at the rate of 8% per annum until October 1, 2001 and 8.5% per annum thereafter, payable semi-annually, with the principal payable in one lump sum on March 31, 2009. Gameco has assumed all of the obligations under these notes. Each of these notes is secured by a second mortgage and pledge of the leasehold interest or security interest in the revenue interest on the facility to which it relates and a lien on the land, building and equipment. See "Description of the Notes--Subordination and Intercreditor Agreements." Lucky Magnolia Truck Stop and Casino, L.L.C., the Jalou L.L.C. subsidiary that owns Lucky Magnolia Truck Stop and Casino, is the obligor on a note in the principal amount of $0.7 million, payable to Claude M. Penn, Jr., the former owner of the facility. Bayou Vista Truck Plaza and Casino, L.L.C., the Jalou L.L.C. subsidiary that owns Bayou Vista Truck Plaza and Casino, is the obligor on a note in the principal amount of $1.7 million, payable to Claude M. Penn, Jr., the former owner of the facility. JACE, Inc., the Jalou II subsidiary 93 that owns Colonel's Truck Plaza and Casino, is the obligor on a note in the principal amount of $2.2 million, payable to Claude M. Penn, Jr., the former owner of the facility. All of these notes are dated January 11, 2002. Each of these notes bears interest at the rate of 8.5% per annum, payable semi-annually, with the principal payable in one lump sum on April 30, 2009. Gameco has assumed all of the obligations under these notes. Each of these notes is secured by a second mortgage and pledge of the leasehold interest or security interest in the revenue interest on the facility to which it relates and a lien on the land, building and equipment. See "Description of the Notes--Subordination and Intercreditor Agreements." Colonial Holdings Indebtedness. Colonial Holdings has aggregate indebtedness of approximately $1.6 million to the Maryland Jockey Club, which is evidenced by one note dated January 15, 1999, with an outstanding principal balance of approximately $1.2 million at December 31, 2001, bearing interest at the rate of 7.75% per annum. The January 15, 1999 note matures in December 2005, with interest only payable quarterly until January 1, 2001, and principal plus interest, in equal quarterly installments, payable over the remaining five year term. Colonial Holdings also financed the purchase of racetrack lighting equipment by issuing a note payable to Citizens and Farmers Bank, which was refinanced on August 21, 2001. The new note, which matures on August 21, 2002, had a principal amount of $.12 million at December 31, 2001, bears interest at a rate of 8.5% per annum and requires a monthly principal payment of $15,000. Citizens and Farmers Bank has a purchase money security interest in the equipment purchased with the proceeds of the note, which ranks prior to the security for payment of the notes offered hereby. Colonial Holdings and Colonial Downs, L.P. originally borrowed $25.7 million from CD Entertainment Ltd. pursuant to a certain Amended and Restated Loan Agreement dated August 30, 2000. The amount of the loans was reduced to $15.7 million through the forgiveness of $10.0 million in indebtedness in connection with our February 22, 2002 acquisition of Colonial Holdings, and the Amended and Restated Loan Agreement was amended accordingly. To evidence that indebtedness, Gameco holds a note from Colonial Holdings in the principal amount of $5.7 million and a note from Colonial Downs in the principal amount of $10.0 million. These notes are pledged as security for the Old Notes and the New Notes. In addition, these notes were modified to (1) eliminate any amortization payments and (2) extend the maturity to February 1, 2009. Colonial Holdings and Colonial Downs will be able to elect, at their option, to pay interest in cash or in kind. These notes are secured by a deed of trust on the Colonial Downs racetrack and a blanket lien on substantially all of the assets of Colonial Holdings and its subsidiaries, including pledges of partnership interests and stock. In addition, as of December 31, 2001 Colonial Holdings had a series of notes used to finance various insurance premiums payable to certain insurance companies in the aggregate amount of $27,075, which bore interest at rates ranging from 7.5% to 8.3% per annum. These notes mature in May 2002 and are fully amortized over their respective terms through equal monthly payments. 94 DESCRIPTION OF THE NOTES You can find the definitions of certain terms used in this description under the subheading "--Certain Definitions." In this description, the word "Company" refers only to Gameco, Inc. and not to any of its Subsidiaries. The Company will issue the New Notes under an Indenture (the "Indenture") among itself, the Guarantors and Wells Fargo Bank Minnesota, National Association, as trustee (the "Trustee"). References to Notes in this section include both the New Notes and any Old Notes that remain outstanding following the completion of the exchange offer. The terms of the Notes include those set forth in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Collateral Documents referred to under the caption "--Security" define the terms of the security interests that will secure the Notes. The following description is a summary of the material provisions of the Indenture, the Registration Rights Agreement and the Collateral Documents, all of which have been filed as exhibits to this registration statement. This summary does not restate those agreements in their entirety. We urge you to read the Indenture, the Notes and the Collateral Documents because they, and not this description, define your rights as holders of the Notes. Certain defined terms used in this description but not defined below under "--Certain Definitions" have the meanings assigned to them in the Indenture. Brief Description of the Notes and the Guarantees The Notes The Notes: . are general obligations of the Company; . are secured by a first priority Lien (subject to Permitted Liens and certain customary encumbrances permitted by the Collateral Documents) on substantially all of the assets of the Company, whether now owned or hereafter acquired including, without limitation, the Capital Stock of all of the Company's Subsidiaries (other than Non-Guarantor Restricted Subsidiaries, but including the Capital Stock of any Unrestricted Subsidiary held by the Company or a Restricted Subsidiary) and all intercompany notes for money owed to the Company by its Subsidiaries including cash and Cash Equivalents except to the extent a Lien cannot be perfected through the filing of a UCC-1 financing statement or through the obtaining of "control" (as defined in the Uniform Commercial Code) (other than proceeds from the Collateral) or licenses (excluding gaming licenses) to the extent that such licenses can be encumbered under applicable law; . are pari passu in right of payment to all senior borrowings of the Company; . are senior in right of payment to any future subordinated Indebtedness of the Company; and . are unconditionally Guaranteed by the Guarantors. The Guarantees The Notes are Guaranteed by the Guarantors and will be Guaranteed by all of the Company's future Restricted Subsidiaries (other than Non-Guarantor Restricted Subsidiaries). Each Subsidiary Guarantee of the Notes: . is secured by a first priority Lien (subject to Permitted Liens and certain customary encumbrances permitted by the Collateral Documents) on substantially all of the assets of the applicable Guarantor, whether now owned or hereafter acquired including, without limitation, the Capital Stock of all of such 95 Guarantor's Subsidiaries (including, without limitation, the Capital Stock of any Unrestricted Subsidiary held by such Guarantor or a Restricted Subsidiary of such Guarantor) and all intercompany notes for money owed to such Guarantor by its Subsidiaries including cash and Cash Equivalents except to the extent a Lien cannot be perfected through the filing of a UCC-1 financing statement or through the obtaining of "control" (as defined in the Uniform Commercial Code) (other than proceeds from the Collateral) and licenses (excluding gaming licenses) to the extent that such licenses can be encumbered under applicable law; . is pari passu in right of payment with any future senior Indebtedness of the Guarantor; and . is senior in right of payment with any future subordinated Indebtedness of the Guarantor. The following Subsidiaries are "Restricted Subsidiaries" and are Guarantors of the Notes. Black Hawk Gaming & Development Company, Inc. . Black Hawk Gaming (owns Gold Dust West Casino, Inc., a Nevada corporation ("Gold Dust"), Gilpin Ventures, Inc., a Colorado corporation ("Gilpin Ventures"), a 50% interest in Gilpin Hotel Venture, a Colorado partnership ("Gilpin Hotel Venture"), and a 75% interest in Black Hawk/Jacobs Entertainment LLC, a Colorado limited liability company ("Black Hawk LLC")), . Gold Dust (owns and operates the Gold Dust West Casino in Reno, Nevada), . Gilpin Ventures (owns a 50% interest in Gilpin Hotel Venture), and . Gilpin Hotel Venture (owns a 100% interest in the Gilpin Hotel & Casino in Black Hawk, Colorado), . Black Hawk LLC (owns The Lodge Casino in Black Hawk, Colorado). Diversified Opportunities Group Ltd. . Diversified Opportunities Group Ltd. ("Diversified"), an Ohio limited liability company (owns Jalou L.L.C., a Louisiana limited liability company ("Jalou") and a 25% interest in Black Hawk LLC), . Jalou (owns Houma Truck Plaza & Casino, L.L.C., a Louisiana limited liability company ("Houma Truck Plaza"), Bayou Vista Truck Plaza and Casino, L.L.C., a Louisiana limited liability company ("Bayou Vista"), Lucky Magnolia Truck Stop and Casino L.L.C., a Louisiana limited liability company ("Lucky Magnolia"), Jalou-Cash's L.L.C., a Louisiana limited liability company ("Jalou-Cash's") and Raceland Truck Plaza and Casino, L.L.C., a Louisiana limited liability company ("Raceland")), . Houma Truck Plaza (owns the Houma Truck Plaza and Casino in Houma, Louisiana), . Bayou Vista (owns the Bayou Vista Truck Plaza and Casino in Bayou Vista, Louisiana), . Lucky Magnolia (owns the Lucky Magnolia Truck Stop and Casino in St. Helena Parish, Louisiana), . Jalou-Cash's (owns a revenue interest in a lease with Cash's Casino in Port Allen, Louisiana), and . Raceland (owns the Raceland Truck Plaza and Casino in Raceland, Louisiana). Jalou II . Jalou II Inc., a Louisiana corporation ("Jalou II") (owns Winner's Choice, Inc., a Louisiana corporation ("Winner's Choice") and JACE, Inc., a Louisiana corporation ("Colonel's")), . Winner's Choice (owns Winner's Choice Casino in Sulphur, Louisiana), and . Colonel's (owns Colonel's Truck Plaza and Casino in Thibodaux, Louisiana). 96 In addition, the following entities are Wholly Owned Restricted Subsidiaries which are not Guarantors of the Notes and are designated as "Non-Guarantor Restricted Subsidiaries" under the Indenture: Colonial Holdings, Inc. . Colonial (owns Stansley Racing Corp., a Virginia corporation ("Stansley"), Colonial Downs, L.P., a Virginia limited partnership ("Colonial Downs"), and Colonial Holdings Management, Inc., a Virginia corporation ("Colonial Management")), . Stansley (holds the Virginia operators' license for racetrack and off-track wagering facilities in Virginia), . Colonial Downs (owns the pari-mutuel wagering facilities and a leasehold interest in Colonial Downs Racetrack), and . Colonial Management (manages the Louisiana truck plaza video gaming facilities). Non-Guarantor Restricted Subsidiaries have no obligations to make payments to us or in respect of the Notes. In the event of a bankruptcy, liquidation or reorganization of any Non-Guarantor Restricted Subsidiary, the creditors of such Subsidiary (including trade creditors) will generally be entitled to payment of their claims from the assets of such Subsidiary before any assets are made available for distribution to us as a stockholder. After paying its own creditors, a Non-Guarantor Restricted Subsidiary may not have any remaining assets available for payment to you as a holder of Notes. As a result, the Notes are effectively junior in right of payment to the obligations of Non-Guarantor Restricted Subsidiaries. As of December 31, 2001, after giving pro forma effect to our February 2002 acquisitions and the issuance of the Old Notes, Colonial and its Subsidiaries would have had $ million of outstanding Indebtedness of which $ million would be owed to one of the Company's Wholly Owned Restricted Subsidiaries that will be a Guarantor of the Notes. Such Indebtedness will be pledged to the Trustee as Collateral securing the Notes (the "Pledged Colonial Notes"). In addition, under the circumstances described below under the subheading "--Certain Covenants--Designation of Restricted and Unrestricted Subsidiaries," we will be permitted to designate certain of our Subsidiaries as "Unrestricted Subsidiaries." Our Unrestricted Subsidiaries will not be subject to many of the restrictive covenants in the Indenture. Our Unrestricted Subsidiaries will not Guarantee the Notes. Principal, Maturity and Interest If all of the Old Notes are tendered in the exchange offer, we will issue $125.0 million aggregate principal amount of New Notes in this offering. The Company may issue additional notes (the "Additional Notes") from time to time after this offering (without limitation as to principal amount), provided, that the Additional Notes may not be issued with original issue discount as determined under Section 1271, et seq., of the Internal Revenue Code of 1986, as amended. Any offering of Additional Notes is subject to the covenant described below under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." The Notes and any Additional Notes issued under the Indenture would be treated as a single class for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. The Company will issue New Notes in denominations of $1,000 and integral multiples of $1,000. The New Notes will mature on February 1, 2009. Interest on the New Notes will accrue at the rate of 11 7/8% per annum and will be payable semi-annually in arrears on February 1 and August 1, commencing on August 1, 2002. The Company will make each interest payment to the Holders of record on the immediately preceding January 15 and July 15. Interest on the Notes will accrue from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. 97 Methods of Receiving Payments on the Notes If a Holder has given wire transfer instructions to the Company, the Company will pay all principal, interest, premium and Additional Interest, if any, on that Holder's Notes in accordance with those instructions. All other payments on Notes will be made at the office or agency of the Paying Agent and Registrar within the City and State of New York unless the Company elects to make interest payments by check mailed to the Holders at their addresses set forth in the register of Holders. Paying Agent and Registrar for the Notes The Trustee will initially act as Paying Agent and Registrar. The Company may change the Paying Agent or Registrar without prior notice to the Holders, and the Company or any of its Subsidiaries may act as Paying Agent or Registrar. Transfer and Exchange A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The Holder will be treated as the owner of the Notes it holds for all purposes. Subsidiary Guarantees The Guarantors unconditionally jointly and severally Guarantee the Company's obligations under the Notes (each a "Subsidiary Guarantee"). The obligations of each Guarantor under its Subsidiary Guarantee and the grant by each Guarantor of the Liens on the Collateral of such Guarantor to secure its obligations under its Subsidiary Guarantee will be limited as necessary to prevent that Subsidiary Guarantee and grant of security from constituting a fraudulent conveyance under applicable law. Such amount could be substantially less than the obligations under the Notes. In addition, any limitation on the amounts payable by a Guarantor under its Subsidiary Guarantee in accordance with such law will result in a corresponding limitation on the ability of the Trustee to realize upon the Collateral pledged by such Guarantor. See "Risk Factors--Federal and state statutes allow courts, under specific circumstances, to void guarantees, subordinate claims in respect of indebtedness and require debt holders to return payments received from guarantors." Security Pursuant to the Collateral Documents, the Notes and the Subsidiary Guarantees are secured by a first priority Lien (subject to Permitted Liens (including, without limitation, Liens on the Credit Agreement Collateral securing the Obligations under the Credit Agreement) and certain customary encumbrances permitted by the Collateral Documents) on the Collateral. The Company and each of the Guarantors assigned, granted and pledged as Collateral to the Trustee for the benefit of the Trustee and the Holders a first priority Lien (subject to Permitted Liens (including, without limitation, Liens on the Credit Agreement Collateral securing the Obligations under the Credit Agreement) and certain customary encumbrances permitted by the Collateral Documents) on each of the following items or types of Collateral whether now owned or hereafter acquired: . all right, title and interest (including, without limitation, fee and leasehold estates) of the Company and the Guarantors in and to any and all parcels of real property, together with all easements, hereditaments and appurtenances relating thereto, and all other improvements, accessions, alterations, replacements and repairs thereto and all leases and rents and other income, issues or profits derived from the foregoing interests; 98 . all right, title and interest of the Company and the Guarantors in and to any and all equipment, machinery, furniture, furnishings and fixtures, together with all additions, accessions, improvements, alterations, replacements and repairs thereto; . all Capital Stock (other than the Capital Stock of Non-Guarantor Restricted Subsidiaries) owned and intercompany notes (including, without limitation, the Pledged Colonial Notes) held by the Company or any of the Guarantors; . all intellectual property including, without limitation, all trademarks, service marks, patents, copyrights, trade secrets and other proprietary information; . all inventory, supplies and other personal property (including cash and Cash Equivalents except to the extent a Lien cannot be perfected through the filing of a UCC-1 financing statement or through the obtaining of "control" (as defined in the Uniform Commercial Code) (other than proceeds from the Collateral); . all general intangibles and contract rights relating to any and all of the foregoing including, without limitation, all material agreements, licenses and permits entered into by, or granted to, the Company and the Guarantors in connection with the development, construction, maintenance, ownership and operation of the Company's or such Guarantor's properties; . the Collateral Account and all Trust Monies; and . all proceeds and products of any and all of the foregoing including, without limitation, proceeds of insurance, condemnation awards, tax refunds and other similar property or claims with respect to any and all of the foregoing. The personal property Collateral is pledged pursuant to a security agreement by and among the Company, the Guarantors and the Trustee (the "Security Agreement"). The real property Collateral is secured pursuant to mortgages (the "Mortgages") made in favor of the Trustee, as mortgagee and assignee. If the Company enters into the Credit Agreement, the Trustee, on behalf of the Holders, will enter into an intercreditor agreement (the "Senior Intercreditor Agreement") substantially in the form of the intercreditor agreement attached as an exhibit to the Indenture. Pursuant to the terms of the Senior Intercreditor Agreement, the Trustee will acknowledge that the Lien on the Credit Agreement Collateral securing the Company's obligations under the Credit Agreement is senior to the Lien on such collateral securing the Company's and the applicable Guarantor's obligations under the Notes and the Guarantees of the Guarantors. Under the Senior Intercreditor Agreement, if the Notes become due and payable prior to the stated maturity thereof for any reason or are not paid in full at the stated maturity thereof at a time during which Indebtedness is outstanding under the Credit Agreement, the Trustee will not have the right to foreclose upon the Credit Agreement Collateral unless and until the lenders under the Credit Agreement fail to take steps to exercise remedies with respect to or in connection with the Credit Agreement Collateral within 180 days following notice to such lenders of the occurrence of an Event of Default under the Indenture. The Collateral release provisions of the Indenture permit the release of items of Collateral which are the subject of an Asset Sale and in other circumstances upon compliance with certain conditions. See "--Possession, Use and Release of Collateral." In addition, the Indenture permits the Company and the Guarantors to create Liens arising pursuant to Purchase Money Obligations and Capital Lease Obligations, and the Notes and the Guarantees are effectively subordinated to such Purchase Money Obligations and Capital Lease Obligations and other obligations secured by such Liens to the extent of any assets serving as collateral for such Indebtedness. See the definition of "Permitted Liens" under "--Certain Definitions." As a result, the assets subject to such Liens are available to pay Obligations in respect of the Notes, if at all, only after such Purchase Money Obligation and Capital Lease Obligation has been paid in full. Cash and Cash Equivalents, to the extent a Lien can be perfected through the filing of a UCC-1 financing statement or through the obtaining of "control" (as defined in the Uniform Commercial Code) (other than proceeds from the Collateral), are included within the 99 Collateral. In addition, certain of the Company's and the Guarantor's intangible assets that may be significant to its operations, such as computer software licenses, Gaming Licenses and other related licenses and permits, by their terms can not be encumbered and, accordingly, are not included in the property subject to the Lien of the Collateral Documents so long as the prohibition on encumbering them exists. If an Event of Default occurs under the Indenture, the Trustee, on behalf of the Holders, in addition to any rights or remedies available to it under the Indenture, may take such actions as it deems advisable to protect and enforce its rights in the Collateral, including, without limitation, the institution of foreclosure proceedings in accordance with the Collateral Documents and applicable law. The proceeds received by the Trustee from any foreclosure will be applied by the Trustee, first, to pay the expenses of such foreclosure and fees and other amounts then payable to the Trustee under the Indenture and the Collateral Documents, and thereafter, to pay the principal of, premium, if any, and accrued interest on the Notes. The Indenture permits the release of Collateral without the substitution of additional Collateral under certain circumstances, as described under "--Repurchase at the Option of Holders--Asset Sales" and "--Repurchase at the Option of Holders--Events of Loss." See "--Possession, Use and Release of Collateral." The Collateral will also be released as security for the Notes and the Subsidiary Guarantees upon the release of any Guarantor as described under "--Certain Covenants--Merger, Consolidation or Sale of Assets." The proceeds of any sale of the Collateral following an Event of Default may not be sufficient to satisfy payments due on the Notes. No appraisals of the Collateral have been prepared in connection with the offering of the Old Notes or the Exchange Offer. Moreover, the amount to be received upon the sale of Collateral will be dependent upon numerous factors, including the condition, age and useful life of the Collateral at the time of the sale, as well as the timing and manner of the sale. In addition, the ability of the Holders to realize upon the Collateral may be limited pursuant to applicable laws, including gaming, bankruptcy or securities laws. By its nature, some or all of the Collateral will be illiquid and may have no readily ascertainable market value. Likewise, there can be no assurance that the Collateral will be saleable, or, if saleable, that there will not be substantial delays in its liquidation. To the extent that Liens, rights or easements granted to third parties encumber assets located on property owned by the Company or the Guarantors, such third parties have or may exercise rights and remedies with respect to the property subject to such Liens that could adversely affect the value of the Collateral and the ability of the Trustee or the Holders to realize or foreclose on Collateral. 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 purchase or sell gaming equipment hold a valid Gaming License or permit and require the approval of the applicable Gaming Authorities for any transfer of a Gaming License. No Person can hold an owner's license 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 an owner or operator of gaming establishments. The applicant for qualification, a finding of suitability or licensing must pay an application fee and 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 another entity that could obtain the appropriate license to own, operate or sell such assets. This licensing process could be lengthy, taking several months at a minimum. 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, either of which events could have an adverse effect on the sale price of such Collateral. Therefore, the practical value of realizing on the Collateral may, without the appropriate approvals, be limited. 100 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 prior to the Trustee having repossessed and disposed of the Collateral. Under the Bankruptcy Code, a secured creditor 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 in certain circumstances to continue to retain and to use collateral owned as of the date of the bankruptcy filing (and the proceeds, products, offspring, rents or profits of such collateral to the extent provided by the Collateral Documents and by 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. In view of the lack of a precise definition of the term "adequate protection" and the broad discretionary powers of a bankruptcy court, it is impossible to predict how long payments under the Notes could be delayed following commencement of a bankruptcy case, whether or when the Trustee could repossess or dispose of the Collateral 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." Furthermore, if a bankruptcy court determines the value of the Collateral is not sufficient to repay all amounts due on the Notes, the Holders would hold secured claims to the extent of the value of the Collateral to which the Holders are entitled, and would hold unsecured claims with respect to such shortfall. Applicable Federal bankruptcy laws do not permit the payment or accrual of post-petition interest, costs and attorneys' fees during a debtor's bankruptcy case unless the claims are oversecured or the debtor is solvent at the time of reorganization. In addition, if the Company becomes the subject of a bankruptcy case, the bankruptcy court, among other things, may avoid certain transfers made by the entity that is the subject of the bankruptcy filing, including, without limitation, transfers held to be fraudulent conveyances or preferences. Subordination and Intercreditor Agreements The Trustee, on behalf of the Holders, has entered into (i) an intercreditor agreement (the "Seller Intercreditor Agreement") with the holders of the Louisiana Properties Seller Notes and (ii) a separate subordination and intercreditor agreement (the "Jacobs Subordination and Intercreditor Agreement" and, together with the Seller Intercreditor Agreement, the "Intercreditor Agreements") with certain affiliates of the Principals that are holders of the Jacobs Subordinated Louisiana Properties Notes, each of which was acknowledged by the Company and the Subsidiaries that are parties to the Louisiana Properties Notes. The Jacobs Subordination and Intercreditor Agreement provides that: (1) the Obligations of the Company and each Subsidiary under the Jacobs Subordinated Louisiana Properties Notes are expressly subordinated and junior in right of payment to all Obligations of the Company and such Subsidiary under the Indenture and the Notes; (2) the Holders are entitled to indefeasibly receive payment in full in cash of all amounts due on or in respect of all Obligations of the Company or any such Subsidiary under the Indenture and the Notes before the holders of the Jacobs Subordinated Louisiana Properties Notes are entitled to receive or retain any payment of any kind on the Jacobs Subordinated Louisiana Properties Notes in the event of any distribution to creditors of the Company or any Subsidiary in any (a) bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or any Subsidiary or to their respective assets; (b) liquidation or dissolution or other winding-up of the Company or any Subsidiary; (c) assignment for the benefit of creditors of the Company or any Subsidiary; or (d) marshaling of assets or liabilities of the Company or any Subsidiary; and (3) for so long as the Notes remain outstanding, and provided that no Default or Event of Default shall have occurred and be continuing, the Company or such Subsidiary may make regular scheduled payments of interest (but not principal) in respect of the Jacobs Subordinated Louisiana Properties Notes, provided that no such payment may be made if: 101 (a) a payment Default on the Notes occurs and is continuing; or (b) any non-payment Default on the Notes occurs and is continuing and the holders of the Jacobs Subordinated Louisiana Properties Notes receive a notice of such non-payment Default (a "Payment Blockage Notice") from the Trustee or any Holder. Payments on the Jacobs Subordinated Louisiana Properties Notes may be resumed: (i) in the case of a payment Default, upon the date on which such payment Default is cured, waived in writing or otherwise ceases to exist; and (ii) in case of a non-payment Default, the earlier of the date on which such non-payment Default is cured, waived in writing or otherwise ceases to exist or 180 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of the Notes has been accelerated. Notwithstanding clause (ii) above, the Company will not be prohibited from making payments on the Jacobs Subordinated Louisiana Properties Notes for more than an aggregate of 180 days within any period of 360 consecutive days. The Jacobs Subordination and Intercreditor Agreement further provides that for so long as any of the Notes are outstanding, no holder of a Jacobs Subordinated Louisiana Properties Note may take any enforcement action with respect to the Obligations of the Company or any Subsidiary under such Jacobs Subordinated Louisiana Properties Note until the earlier of the acceleration of the Notes or the passage of 180 days from the delivery of notice to the Trustee by such holder of a Jacobs Subordinated Louisiana Properties Note of the occurrence of any event that entitles such holder to accelerate the Company's or such Subsidiary's Obligations under the Jacobs Subordinated Louisiana Properties Note held by such holder. In addition, the Seller Intercreditor Agreement provides for the allocation of rights between the Trustee and the holders of the Louisiana Properties Seller Notes with respect to the Mortgaged Louisiana Property and the enforcement provisions with respect thereto. So long as the Notes remain outstanding, the Holders will have the exclusive right to determine the circumstances and manner in which Mortgaged Louisiana Property shall be disposed of, including but not limited to, the determination of whether to release all or any portion of the Mortgaged Louisiana Property from the Lien created by the Collateral Documents and whether to foreclose on the Mortgaged Louisiana Property following an Event of Default. The Seller Intercreditor Agreement also provides, among other things, that so long as the Notes remain outstanding (i) the Trustee has a security interest in the Mortgaged Louisiana Property senior and prior to the security interest of the holders of the Louisiana Properties Seller Notes therein, (ii) all decisions with respect to the Mortgaged Louisiana Property, including the time and method of any disposition thereof, will be made by the Trustee, (iii) as between the Obligations under the Indenture and the Obligations under the Louisiana Properties Seller Notes, proceeds of the Mortgaged Louisiana Property will be applied first, to the outstanding Obligations under the Notes, with any remaining proceeds to be paid to the holders of the Louisiana Properties Seller Notes for application in accordance with the provisions of Louisiana Properties Seller Notes, (iv) the Trustee and the holders of the Louisiana Properties Seller Notes will not contest each other's security interest in and Liens on their respective collateral or contest the validity of the documents governing the Notes or the Louisiana Properties Seller Notes, respectively, (v) the Trustee and the holders of the Louisiana Properties Seller Notes each agree not to take any action or vote inconsistent with the Seller Intercreditor Agreement, (vi) the holders of the Louisiana Properties Seller Notes agree that the Trustee will have the sole and exclusive right to adjust settlement for insurance coverage on collateral securing the Notes and that the proceeds of insurance or condemnation proceedings with respect to such collateral will be paid to the Trustee, (vii) if any holder of the Louisiana Properties Seller Notes receives proceeds of Mortgaged Louisiana Property other than as expressly permitted by the Seller Intercreditor Agreement, such proceeds will be received by such Person in trust and turned over to the Trustee, (viii) subject to certain exceptions, if the Trustee releases or agrees to release its Lien 102 on any Mortgaged Louisiana Property, and sends the holders of the Louisiana Properties Seller Notes notice thereof in writing, which notice states that the Mortgaged Louisiana Property will be sold free and clear of the Liens of the Trustee and the holders of the Louisiana Properties Seller Notes, the holders of the Louisiana Properties Seller Notes will be deemed to have consented to such sale and the Lien of the holders of the Louisiana Properties Seller Notes on such Mortgaged Louisiana Property shall be automatically released and terminated, (ix) the holders of the Louisiana Properties Seller Notes waive any right to marshaling of the collateral securing the Notes and (x) the holders of the Louisiana Properties Seller Notes will not directly or indirectly seek to foreclose or realize upon, judicially or non-judicially, any Mortgaged Louisiana Property or take any other enforcement action against or in respect of the Mortgaged Louisiana Property unless and until the Obligations under the Notes have been indefeasibly paid in full in cash. Optional Redemption At any time prior to February 1, 2005, the Company may on one occasion redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price of 111.875% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date, with the net cash proceeds of any Equity Offering; provided that: (1) at least $81.25 million (65%) in aggregate principal amount of the Notes remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and (2) the redemption occurs within 45 days after the date of the closing of such Equity Offering. Except pursuant to the preceding paragraph, the Notes will not be redeemable at the Company's option prior to February 1, 2006. After February 1, 2006, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, thereon, to the applicable redemption date, if redeemed during the 12-month period beginning on February 1 of the years indicated below:
Year Percentage ---- ---------- 2006 105.938% 2007 102.969% 2008 100.000%
Mandatory Disposition in Accordance with Gaming Laws Each Holder, by accepting the Notes, is deemed to have agreed (to the extent permitted by applicable law) that if the Gaming Authority of any jurisdiction in which the Company or any of its Subsidiaries conducts or proposes to conduct gaming requires that a Person who is a Holder or a beneficial owner of any of the Notes must be licensed or found suitable under applicable 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 price of the lesser of (a) such Person's cost and (b) 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the earlier of the date of redemption 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 Holder or beneficial owner applying for a license or finding of suitability must pay all costs of the licensure or investigation for such finding. 103 Mandatory Redemption The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. Repurchase at the Option of Holders Change of Control If a Change of Control occurs, each Holder will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of that Holder's Notes on the terms set forth in the Indenture (a "Change of Control Offer"). In the Change of Control Offer, the Company will offer to repurchase each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Additional Interest, if any, thereon, to the date of purchase (the "Change of Control Payment"). Within ten days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice (the "Change of Control Payment Date"), which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the Indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control provisions of the Indenture by virtue of such compliance. On the Change of Control Payment Date, the Company will, to the extent lawful: (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer; (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an officers' certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail to each Holder so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The provisions described above that require the Company to make a Change of Control Offer following a Change of Control will be applicable regardless of whether any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. 104 The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the properties or assets of the Company and its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder to require the Company to repurchase such Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Subsidiaries taken as a whole to another Person or group may be uncertain. Asset Sales The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or Capital Stock issued or sold or otherwise disposed of; (2) such fair market value is determined by the Company's Board of Directors and evidenced by a resolution of the Board of Directors set forth in an officers' certificate delivered to the Trustee; (3) at least 85% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes of this provision, each of the following shall be deemed to be cash: (a) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet), of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability; and (b) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are contemporaneously (subject to ordinary settlement periods) converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received in that conversion); (4) if such Asset Sale involves the disposition of Collateral, subject to the terms of the Senior Intercreditor Agreement with respect to the Credit Agreement Collateral, the Company or such Subsidiary has complied with the provisions described under "--Possession, Use and Release of Collateral"; and (5) if such Asset Sale involves the disposition of Collateral, subject to the terms of the Senior Intercreditor Agreement with respect to the Credit Agreement Collateral, the Net Proceeds thereof shall be paid directly by the purchaser of the Collateral to the Trustee for deposit into the Collateral Account, and, if any property other than cash or Cash Equivalents is included in such Net Proceeds, such property shall be made subject to the Lien of the Indenture and the applicable Collateral Documents. Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company (or the Restricted Subsidiary, as the case may be) may apply such Net Proceeds to (1) make capital expenditures, (2) the acquisition of all or substantially all of the assets or, or a majority of the Voting Stock of another Permitted Business, (3) the acquisition of other long-term assets in another Permitted Business (each of clauses (1), (2) and (3) above, either individually or in the aggregate, "Replacement Assets"), (4) to the extent that such Asset Sale relates to Credit Agreement Collateral, retire and permanently reduce Indebtedness incurred under the Credit Agreement; provided, that in the case of a revolver or similar arrangement that makes credit available, such commitment is permanently reduced by such amount, and (5) to the extent such Asset Sale relates to assets which constitute collateral securing other pari passu Indebtedness incurred in compliance with the terms of the Indenture, to repay such pari passu Indebtedness in accordance with the terms thereof; provided, that any 105 Replacement Assets acquired with any Net Proceeds shall be owned by the Company or by the Restricted Subsidiary that made the Asset Sale and shall not be subject to any Liens (and the Company or such Restricted Subsidiary, as the case may be, shall execute and deliver to the Trustee such Collateral Documents or other instruments as shall be reasonably necessary to cause such Replacement Assets to become subject to a Lien in favor of the Trustee, for its benefit and for the benefit of the holders of the Notes, securing its obligations under the Notes or its Subsidiary Guarantee, as the case may be, and otherwise shall comply with the provisions of the Indenture applicable to After-Acquired Property) other than Permitted Liens. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will make an Asset Sale Offer to all Holders to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, and will be payable in cash. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, remaining Excess Proceeds solely to the extent such Excess Proceeds do not arise out of any Asset Sale involving Collateral shall be released to the Company and may be used free and clear of the Lien of the Collateral Documents for general corporate purposes. If the aggregate principal amount of Notes tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis based on the principal amount of Notes tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. Subject to the terms of the Senior Intercreditor Agreement with respect to the Credit Agreement Collateral, all Net Proceeds of any Collateral shall, pending their application in accordance with this covenant or the release thereof in accordance with the provisions described under "--Possession, Use and Release of Collateral" and "--Use of Trust Monies," be deposited in the Collateral Account under the Indenture. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sales provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of the Indenture by virtue of such compliance. Events of Loss In the event of an Event of Loss, the Company or the affected Restricted Subsidiary of the Company, as the case may be, may apply the Net Loss Proceeds from such Event of Loss to the rebuilding, repair, replacement or construction of improvements to the property affected by such Event of Loss (the "Subject Property"), with no concurrent obligation to offer to purchase any of the Notes; provided, however, that: (1) the Company delivers to the Trustee within 90 days of such Event of Loss a written opinion from a reputable contractor that the Subject Property can be rebuilt, repaired, replaced or constructed in, and operated in, substantially the same condition as it existed prior to the Event of Loss within 360 days of the Event of Loss; and (2) an officers' certificate certifying that the Company has available from Net Loss Proceeds or other sources sufficient funds to complete the rebuilding, repair, replacement of construction described in clause (1) above. Any Net Loss Proceeds that are not reinvested or not permitted to be reinvested as provided in the first sentence of this covenant will be deemed "Excess Loss Proceeds." When the aggregate amount of Excess Loss Proceeds exceeds $5.0 million, the Company will make an offer (an "Event of Loss Offer") to all holders to purchase or redeem with the proceeds of Events of Loss the maximum principal amount of Notes that may be 106 purchased out of the Excess Loss Proceeds. The offer price in any Event of Loss Offer will be equal to 100% of the principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, and will be payable in cash. If any Excess Loss Proceeds remain after consummation of an Event of Loss Offer, the Company may use such Excess Loss Proceeds for any purpose not otherwise prohibited by the Indenture and the Collateral Documents; provided that any remaining Excess Loss Proceeds shall remain subject to the Lien of the Collateral Documents. If the aggregate principal amount of Notes tendered pursuant to an Event of Loss Offer exceeds the Excess Loss Proceeds, the trustee will select the Notes to be purchased on a pro rata basis based on the principal amount of Notes tendered. Subject to the terms of the Senior Intercreditor Agreement with respect to the Credit Agreement Collateral, all Net Loss Proceeds shall, pending their application in accordance with this covenant or the release thereof in accordance with the provisions described under "--Possession, Use and Release of Collateral" and "--Use of Trust Monies," be deposited in the Collateral Account under the Indenture. With respect to any Event of Loss pursuant to clause (4) of the definition of "Event of Loss" that has a fair market value (or replacement cost, if greater) in excess of $5.0 million, the Company (or the affected Guarantor, as the case may be), shall be required to receive consideration (i) at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an officers' certificate delivered to the Trustee) of the assets subject to the Event of Loss and (ii) at least 85% of which is in the form of cash or Cash Equivalents. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Event of Loss Offer. To the extent that the provisions of any applicable securities laws or regulations conflict with the Event of Loss provisions of the Indenture, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Event of Loss provisions of the Indenture by virtue of such compliance. Selection and Notice If less than all of the Notes are to be redeemed at any time, the Trustee will select Notes for redemption as follows: (1) if the Notes are listed, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or (2) if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate, provided that (x) no Notes of $1,000 or less shall be redeemed in part; and (y) if a partial redemption is made with the proceeds of any Equity Offering, selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to the procedures of the Depository Trust Company), unless such method is otherwise prohibited. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder to be redeemed at its registered address. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to that Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion of the original Note will be issued in the name of the Holder thereof upon cancellation of the original 107 Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. Certain Covenants Restricted Payments The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Capital Stock (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Capital Stock in their capacity as such (other than (x) dividends or distributions payable in Capital Stock (other than Disqualified Stock) of the Company or (y) dividends or distributions payable to the Company or a Wholly Owned Restricted Subsidiary of the Company that is a Guarantor); (2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Capital Stock of the Company; (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any unsecured Indebtedness that is pari passu in right of payment with the Notes or the Subsidiary Guarantees or any Indebtedness that is subordinated to the Notes or the Subsidiary Guarantees, except a payment of interest or principal at the Stated Maturity thereof; or (4) make any Restricted Investment, (all such payments and other actions set forth in clauses (1) through (4) above being collectively referred to as "Restricted Payments") unless, at the time of and after giving effect to such Restricted Payment: (1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (2) the Company would, 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 four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock"; and (3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of the Indenture (excluding Restricted Payments permitted by clauses (2), (3) and (5) of the next succeeding paragraph), is less than the sum, without duplication, of: (a) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the date of the Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (b) 100% of the aggregate net cash proceeds received by the Company since the date of the Indenture as a contribution to its common equity capital or from the issue or sale of Capital Stock of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Capital Stock (other than Capital Stock (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company), plus 108 (c) to the extent that any Restricted Investment that was made after the date of the Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment, plus (d) $2.0 million. So long as no Default or Event of Default has occurred and is continuing or would be caused thereby, the preceding provisions will not prohibit: (1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; (2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or any unsecured, pari passu Indebtedness of the Company or Wholly Owned Restricted Subsidiary that is a Guarantor or of any Capital Stock of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of Capital Stock of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3) (b) of the preceding paragraph; (3) the defeasance, redemption, repurchase or other acquisition of unsecured, pari passu Indebtedness or subordinated Indebtedness of the Company or any Wholly Owned Restricted Subsidiary that is a Guarantor with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (4) the repurchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company or any Restricted Subsidiary of the Company held by any member of the Company's (or any of its Restricted Subsidiaries') management (excluding the Principals and Related Parties) pursuant to any management equity subscription agreement or stock option agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Capital Stock shall not exceed $500,000 in any 12-month period; and (5) with respect to each tax year that the Company qualifies as a Flow Through Entity, the distribution by the Company to the holders of Capital Stock of the Company of an amount equal to the product of (i) the amount of aggregate net taxable income allocated by the Company to the holders of Capital Stock of the Company for such period (computed by netting net losses allocated to the Company for such period against net income allocated to the Company for such period and by reducing such net income by any net losses allocated to the Company in any prior period to the extent such losses (x) have not previously been deducted in determining such holder's tax liability for any prior year and (y) may be used by such holder against such net income) and (ii) the Presumed Tax Rate for such period. The amount distributable under this paragraph (5) shall be adjusted to take into account the effect of alternative minimum tax, if applicable. The distributions described in this paragraph (5) are referred to as "Tax Distributions." The payment of the Tax Distributions is subject to (A) the Company providing an officers' certificate and opinion of counsel to the effect that the Company and each Subsidiary in respect of which the Tax Distributions are being made qualify as Flow Through Entities for Federal income tax purposes and for the states and localities in respect of which the Tax Distributions are being made, prior to the first payment of Tax Distributions in a calendar year and (B) at the time of the Tax Distribution, the most recent audited financial statements of the Company provided to the Trustee pursuant to the covenant described under the caption "--Reports," provide that the Company and each such Subsidiary were treated as Flow Through Entities for the period of the financial statements. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the assets or securities proposed to be transferred or issued to or by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant shall be determined by the Board of Directors 109 whose resolution with respect thereto shall be delivered to the Trustee. The Board of Directors' determination must be based upon an opinion or appraisal issued by an independent accounting, appraisal or investment banking firm if the fair market value exceeds $2.0 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an officers' certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this "Restricted Payments" covenant were computed, together with a copy of any fairness opinion or appraisal required by the Indenture. Incurrence of Indebtedness and Issuance of Preferred Stock The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, Guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company will not permit any of its Restricted Subsidiaries to issue any shares of Preferred Stock; provided, however, that if no Default or Event of Default has occurred and is continuing at the time of or as a consequence of the incurrence of such Indebtedness, the Company and any Guarantor may incur Indebtedness (including Acquired Debt) if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred is at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred at the beginning of such four-quarter period. The first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Indebtedness"): (1) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness under the Credit Agreement in an aggregate principal amount not to exceed $10.0 million at any time outstanding, less the amount of any such Indebtedness retired with the Net Proceeds from any Asset Sale applied to permanently reduce the outstanding amounts or commitments referred to in clause (4) of the second paragraph under "Repurchase at the Option of Holders--Asset Sales"; (2) the incurrence by the Company and any Wholly Owned Restricted Subsidiary of Indebtedness represented by Purchase Money Obligations and Capital Lease Obligations in an aggregate principal amount or accreted value, as applicable, not to exceed the greater of (x) $5.0 million and (y) 15% of Consolidated EBITDA of the Company and its Restricted Subsidiaries for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such Indebtedness is incurred; (3) the incurrence by the Company and its Restricted Subsidiaries of the (a) Existing Indebtedness and (b) Acquired Pending Acquisitions Indebtedness; (4) the incurrence by the Company and the Guarantors of Indebtedness represented by $125.0 million aggregate principal amount of the Old Notes and the related Subsidiary Guarantees to be issued on the date of the Indenture and the New Notes and the related Subsidiary Guarantees to be issued pursuant to the Registration Rights Agreement; (5) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by the Indenture to be incurred under the first paragraph of this covenant or clauses (2), (3), (4), (5), or (10) of this paragraph; (6) the incurrence by the Company or any of its Wholly Owned Restricted Subsidiaries of intercompany Indebtedness solely between or among the Company and any Wholly Owned Restricted Subsidiary; provided, however, that: 110 (a) such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Subsidiary Guarantee, in the case of a Guarantor; and (b) (i) any subsequent issuance or transfer of Capital Stock that results in any such Indebtedness being held by a Person other than the Company or a Wholly Owned Restricted Subsidiary thereof and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly Owned Restricted Subsidiary thereof, shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Wholly Owned Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); (7) the incurrence by the Company or any Restricted Subsidiary of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding; provided that the notional principal amount of each such Hedging Obligation does not exceed the principal amount of the Indebtedness to which such Hedging Obligation relates; (8) the guarantee by the Company or any of the Restricted Subsidiaries of Indebtedness (other than Non-Recourse Indebtedness of an Unrestricted Subsidiary) of the Company or a Guarantor that was permitted to be incurred by another provision of this covenant; (9) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock; provided, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued; (10) the incurrence by the Company or any of its Wholly Owned Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (10), not to exceed $5.0 million at any one time outstanding, provided, that the amount of Indebtedness incurred pursuant to this clause (10) by Non-Guarantor Restricted Subsidiaries shall not exceed $1.0 million in the aggregate for all such Non-Guarantor Restricted Subsidiaries at any one time outstanding; and (11) the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Indebtedness; provided, however, that if any such Indebtedness ceases to be Non-Recourse Indebtedness of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (11). The Company will not incur any Indebtedness (including Permitted Indebtedness) that is contractually subordinated in right of payment to any other Indebtedness of the Company unless such Indebtedness is also contractually subordinated in right of payment to the Notes on substantially identical terms; provided, however, that no Indebtedness of the Company shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company solely by virtue of being unsecured. For purposes of determining compliance with this "Incurrence of Indebtedness and Issuance of Preferred Stock" covenant, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (11) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company will be permitted to classify such item of Indebtedness on the date of its incurrence, in any manner that complies with this covenant. 111 Liens The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind on any property or asset now owned or hereafter acquired or on any income or profits therefrom or assign any right to receive income therefrom, except Permitted Liens. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries; (2) make loans or advances to the Company or any of its Restricted Subsidiaries; or (3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (1) Existing Indebtedness as in effect on the date of the Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in such Existing Indebtedness, as in effect on the date of the Indenture; (2) the Indenture, the Notes and the Subsidiary Guarantees; (3) applicable law; (4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the Indenture to be incurred; (5) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (6) Purchase Money Obligations or Capital Lease Obligations for property acquired or leased in the ordinary course of business that impose restrictions of the nature described in clause (2) of the first paragraph above of this covenant on the property so acquired; (7) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition; (8) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (9) Liens securing Indebtedness that limit the right of the debtor to dispose of the assets subject to such Lien; and (10) restrictions imposed by Gaming Authorities on the payment of dividends by entities holding Gaming Licenses. 112 Merger, Consolidation or Sale of Assets The Company may not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole (without giving effect to any property or assets of any Unrestricted Subsidiary), in one or more related transactions, to another Person; unless: (1) either: (a) the Company is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia (the "Surviving Entity"); (2) the Surviving Entity (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes, the Indenture, the Registration Rights Agreement and the Collateral Documents pursuant to agreements reasonably satisfactory to the Trustee; (3) immediately after such transaction no Default or Event of Default exists; (4) the transaction would not result in the loss, suspension or material impairment of any Gaming License unless a comparable replacement Gaming License is effective prior to or simultaneously with the loss, suspension or material impairment; (5) the Surviving Entity: (a) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction; and (b) will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock"; (6) the Surviving Entity causes such amendments, supplements or other instruments to be filed and recorded in such jurisdictions as may be required by applicable law to preserve and protect the Lien of the Collateral Documents on the Collateral owned by or transferred to the Surviving Entity, together with such financing statements as may be required to perfect any security interests in such Collateral which maybe perfected by the filing of a financing statement under the Uniform Commercial Code of the relevant states; (7) the Collateral owned by or transferred to the Surviving Entity shall: (a) continue to constitute Collateral under the Indenture and the Collateral Documents, (b) be subject to the Lien in favor of the Trustee for its benefit and for the benefit of the Holders of the Notes, and (c) not be subject to any Lien other than Permitted Liens; (8) the property and assets of the Person which is merged or consolidated with or into the Surviving Entity, to the extent that they are property or assets of the types which would constitute Collateral under the Collateral Documents, shall be treated as After-Acquired Property and the Surviving Entity shall take such action as may be reasonably necessary to cause such property and assets to be made subject to the Lien of the Collateral Documents in the manner and to the extent required in the Indenture; and (9) such transaction would not require any Holder or Beneficial Owner of Notes to obtain a Gaming License or be qualified or found suitable under the law of any applicable gaming jurisdiction; provided 113 that such Holder or Beneficial Owner would not have been required to obtain a Gaming License or be qualified or found suitable under the laws of any applicable gaming jurisdiction in the absence of such transaction. No Guarantor may, directly or indirectly, consolidate or merge with or into another Person (whether or not such Guarantor is the surviving corporation) unless: (1) either: (a) the Guarantor is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Guarantor) is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia (the "Surviving Guarantor Entity"); (2) the Surviving Guarantor Entity (if other than the Guarantor) assumes all the obligations of the Guarantor under its Subsidiary Guarantee, the Indenture, the Registration Rights Agreement and the Collateral Documents pursuant to agreements reasonably satisfactory to the Trustee; (3) immediately after such transaction no Default or Event of Default exists; (4) the transaction would not result in the loss, suspension or material impairment of any Gaming License unless a comparable replacement Gaming License is effective prior to or simultaneously with the loss, suspension or material impairment; (5) the Company: (a) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction; and (b) will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock"; (6) the Surviving Guarantor Entity causes such amendments, supplements or other instruments to be filed and recorded in such jurisdictions as may be required by applicable law to preserve and protect the Lien of the Collateral Documents on the Collateral owned by or transferred to the Surviving Guarantor Entity, together with such financing statements as may be required to perfect any security interests in such Collateral which may be perfected by the filing of a financing statement under the Uniform Commercial Code of the relevant states; (7) the Collateral owned by or transferred to the Surviving Guarantor Entity shall: (a) continue to constitute Collateral under the Indenture and the Collateral Documents, (b) be subject to the Lien in favor of the Trustee for the benefit of the Holders, and (c) not be subject to any Lien other than Permitted Liens; (8) the property and assets of the Person which is merged or consolidated with or into the Surviving Guarantor Entity, to the extent that they are property or assets of the types which would constitute Collateral under the Collateral Documents, shall be treated as After-Acquired Property and the Surviving Guarantor Entity shall take such action as may be reasonably necessary to cause such property and assets to be made subject to the Lien of the Collateral Documents in the manner and to the extent required in the Indenture; and (9) such transaction would not require any Holder or Beneficial Owner of Notes to obtain a Gaming License or be qualified or found suitable under the law of any applicable gaming jurisdiction; provided that such Holder or Beneficial Owner would not have been required to obtain a Gaming License or be qualified or found suitable under the laws of any applicable gaming jurisdiction in the absence of such transaction. 114 The Indenture will provide that in the event of: (x) a sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise; or (y) a sale or other disposition of all of the Capital Stock of any Guarantor, in each case to a Person which is not the Company or a Restricted Subsidiary (other than a Non-Guarantor Restricted Subsidiary) or an Affiliate of the Company; then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the Capital Stock of such Guarantor) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee, the Indenture and the Collateral Documents; provided that: (1) the Net Proceeds of such sale or other disposition are applied in accordance with the provisions described under "--Repurchase at the Option of Holders--Asset Sales"; and (2) all obligations of such Guarantor under all of its Guarantees of, and under all of its pledges of assets or other Liens which secure, Indebtedness of the Company or any of its Subsidiaries, shall also terminate. This "Merger, Consolidation or Sale of Assets" covenant will not apply to a sale, assignment, transfer, conveyance or other disposition of assets solely between or among the Company and any of its Wholly Owned Restricted Subsidiaries that is a Guarantor. Designation of Restricted and Unrestricted Subsidiaries The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would be in compliance with the conditions set forth in the definition of "Unrestricted Subsidiary"; provided that in no event shall any business regulated by any Gaming Authority be transferred to or held by an Unrestricted Subsidiary. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an Investment made as of the time of such designation and will either reduce the amount available for Restricted Payments under the first paragraph of the covenant described above under the caption "--Restricted Payments" or reduce the amount available for future Investments under one or more clauses of the definition of Permitted Investments, as the Company shall determine in a manner which complies with the requirements of such covenant or definition, as applicable. That designation will only be permitted if such Restricted Payment or Investment would be permitted at that time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors giving effect to such designation and an officers' certificate certifying that such designation complied with the conditions set forth in the definition of "Unrestricted Subsidiary" and was permitted by the covenant described above under the caption "--Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the conditions for continued designation as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock," the Company shall be in default of such covenant. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default. Upon the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, such Restricted Subsidiary (unless such Restricted Subsidiary is a Non-Guarantor Restricted Subsidiary) shall execute a supplemental indenture to become a Guarantor and shall become a party to all applicable Collateral Documents. 115 Transactions with Affiliates The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless: (1) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and (2) the Company delivers to the Trustee: (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $500,000, a resolution of the Board of Directors set forth in an officers' certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions (i) involving aggregate consideration in excess of $2.0 million or (ii) to which clause (a) above applies and in respect of which there are no disinterested directors, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an independent accounting, appraisal or investment banking firm. The following items shall not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the immediately preceding paragraph: (1) subject to clause (2) of this paragraph, any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary; (2) any employment, consulting or other similar compensation agreements with the Principals, so long as the annual compensation paid under all such agreements with the Principals by the Company and its Restricted Subsidiaries does not exceed $1.0 million in the aggregate in any 12-month period; (3) transactions solely between or among the Company and/or its Wholly Owned Restricted Subsidiaries that are Guarantors; (4) payment of reasonable directors fees to Persons who are not otherwise Affiliates of the Company; (5) sales of Capital Stock of the Company (other than Disqualified Stock) to Affiliates of the Company; (6) fees paid to Premier One Development for the provision of casino property development advisory services rendered to the Company not to exceed $450,000 in any 12-month period plus an amount equal to the documented out-of-pocket expenses of Premier One Development incurred in connection with rendering such services; and (7) Restricted Payments that are permitted by the provisions of the Indenture described above under the caption "--Restricted Payments." Additional Subsidiary Guarantees If the Company or any of its Restricted Subsidiaries (other than a Non-Guarantor Restricted Subsidiary) acquires or creates another Subsidiary after the date of the Indenture, then that newly acquired or created Subsidiary must become a Guarantor and execute a supplemental indenture and deliver an opinion of counsel to the Trustee within ten business days of the date on which it was acquired or created (except all Subsidiaries that have been properly designated as Unrestricted Subsidiaries in accordance with the Indenture for so long as they continue to constitute Unrestricted Subsidiaries). 116 Notwithstanding the preceding paragraph, the Indenture will provide that if any Non-Guarantor Restricted Subsidiary, directly or indirectly, provides any Guarantee of or other credit support for any Indebtedness of the Company or any Restricted Subsidiary (other than any other Non-Guarantor Restricted Subsidiary), the Company will cause such Non-Guarantor Restricted Subsidiary to execute and deliver to the Trustee a supplemental indenture and, if required by the provisions of the Indenture, the applicable Collateral Documents, each in form and substance reasonably satisfactory to the Trustee pursuant to which such Non-Guarantor Restricted Subsidiary shall unconditionally Guarantee all of the Company's Obligations under the Notes on the terms set forth in such supplemental indenture and shall grant a security interest in the Collateral on the terms set forth in the Indenture and such Collateral Documents. Notwithstanding that the Company may not be required to do so by the terms of this covenant, the Company may at any time, at its option, designate any Non-Guarantor Restricted Subsidiary as a Guarantor. Additional Collateral; Acquisition of Assets or Property Concurrently with the (i) designation of a Non-Guarantor Restricted Subsidiary as a Guarantor or (ii) acquisition by the Company or any Restricted Subsidiary of any assets or property of the type which constitutes Collateral with a fair market value (as determined by the Board of Directors of the Company) in excess of $100,000 individually or $250,000 in the aggregate, to the extent not prohibited by Gaming Authorities or applicable Gaming Laws, the Company shall, or shall cause the applicable Restricted Subsidiary to, among other things: (1) in the case of personal property, execute and deliver to the Trustee such Uniform Commercial Code financing statements or take such other actions as shall be necessary or (in the opinion of the Trustee) desirable to perfect and protect the Trustee's lien on and security interest in such assets or property and the first priority thereof (subject only to Permitted Liens and to such other exceptions as shall be acceptable to the Trustee); (2) in the case of real property, execute and deliver to the Trustee: (a) a mortgage, deed of trust or deed to secure debt or a leasehold mortgage, deed of trust or deed to secure debt, as appropriate, in form and substance reasonably acceptable to the Trustee under which the Company or such Restricted Subsidiary shall grant to the Trustee a first priority lien on and security interest in such real property and any related fixtures (subject only to Permitted Liens and such other exceptions as shall be acceptable to the Trustee); and (b) title insurance (in form and substance as required by the Indenture) covering such real property in an amount at least equal to the purchase price of such real property; and (3) promptly deliver to the trustee such opinions of counsel as the Trustee may reasonably require with respect to the foregoing (including opinions as to enforceability and perfection of security interests). Further Assurances The Company will, and will cause each of its Restricted Subsidiaries to, execute and deliver such additional instruments, certificates or documents, and take all such actions as may be reasonably required from time to time in order to: (1) carry out more effectively the purposes of the Collateral Documents; (2) create, grant, perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and the Liens created, or intended to be created, by the Collateral Documents; and (3) ensure the protection and enforcement of any of the rights granted or intended to be granted to the Trustee under any other instrument executed in connection therewith. 117 Upon the exercise by the Trustee or any Holder of any power, right, privilege or remedy under the Indenture or any of the Collateral Documents which requires any consent, approval, recording, qualification or authorization of any governmental authority (including any Gaming Authority), the Company will, and will cause each of its Restricted Subsidiaries to, execute and deliver all applications, certifications, instruments and other documents and papers that may be required from the Company or any of its Restricted Subsidiaries for such governmental consent, approval, recording, qualification or authorization. Impairment of Security Interests The Company will not, and will not permit any of its Restricted Subsidiaries to, (i) take or omit to take any action with respect to the Collateral that might or would have the result of affecting or impairing the security interest in the Collateral in favor of the Trustee for its benefit and for the benefit of the Holders or (ii) grant to any Person (other than the Trustee for its benefit and for the benefit of the Holders) any interest whatsoever in the Collateral, in each case except as expressly provided for in the Indenture or the Collateral Documents. Sale and Leaseback Transactions The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; provided that the Company or any Guarantor may enter into a sale and leaseback transaction if: (1) the Company or such Guarantor could have incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction under the Fixed Charge Coverage Ratio test in the first paragraph of the covenant described above under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock"; (2) the gross cash proceeds of that sale and leaseback transaction are at least equal to the fair market value, as determined in good faith by the Board of Directors and set forth in an officers' certificate delivered to the Trustee, of the property that is the subject of that sale and leaseback transaction; and (3) the transfer of assets in that sale and leaseback transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, the covenant described above under the caption "--Repurchase at the Option of Holders--Asset Sales." Limitation on Issuances and Sales of Capital Stock in Wholly Owned Restricted Subsidiaries The Company will not, and will not permit any of its Restricted Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock in any Wholly Owned Restricted Subsidiary of the Company to any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company), unless: (1) such transfer, conveyance, sale, lease or other disposition is of all the Capital Stock in such Wholly Owned Restricted Subsidiary; and (2) the cash Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with the covenant described above under the caption "--Repurchase at the Option of Holders--Asset Sales." In addition, the Company will not permit any Wholly Owned Restricted Subsidiary of the Company to issue any of its Capital Stock (other than, if necessary, shares of its Capital Stock constituting directors' qualifying shares) to any Person other than to the Company or a Wholly Owned Restricted Subsidiary of the Company. Business Activities The Company will not, and will not permit any Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Subsidiaries taken as a whole. 118 Payments for Consent The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid and is 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. Insurance The Company will, and will cause its Restricted Subsidiaries to, maintain insurance with carriers against such risks and in such amounts as is customarily carried by similar businesses with such deductibles, retentions, self insured amounts and coinsurance provisions as are customarily carried by similar businesses of similar size, including, without limitation, property and casualty and, in the case of Collateral, will comply with the provisions of the Collateral Documents relating thereto. Reports Whether or not required by the Commission, so long as any Notes are outstanding, the Company will furnish to the Holders, within the time periods specified in the Commission's rules and regulations: (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by the Company's certified independent accountants; (2) if the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in Management's Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company; and (3) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, following the consummation of the exchange offer contemplated by the Registration Rights Agreement, whether or not required by the Commission, the Company will file a copy of all of the information and reports referred to in clauses (1), (2) and (3) above with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company and the Subsidiary Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Events of Default and Remedies Each of the following is an Event of Default: (1) default for 30 days in the payment when due of interest on, or Additional Interest with respect to, the Notes; (2) default in payment when due of the principal of, or premium, if any, on the Notes; 119 (3) failure by the Company or any of its Subsidiaries to comply with the provisions described under the captions "--Repurchase at the Option of Holders--Change of Control," "--Repurchase at the Option of Holders--Asset Sales," "--Repurchase at the Option of Holders--Events of Loss," "--Certain Covenants--Restricted Payments," "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" or "--Certain Covenants--Merger, Consolidation or Sale of Assets;" (4) failure by the Company or any of its Subsidiaries for 30 days after notice from the Trustee or Holders of not less than 25% in aggregate principal amount of the Notes then outstanding to comply with any of the other covenants or agreements contained in the Indenture; (5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Company or any of its Subsidiaries (or the payment of which is Guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, if that default: (a) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or (b) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (6) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (7) breach by the Company or any Guarantor of any representation or warranty or agreement in the Collateral Documents, the repudiation by the Company or any Guarantor of any of its obligations under the Collateral Documents or the unenforceability or invalidity of the Collateral Documents against the Company or any Guarantor for any reason; (8) any revocation, suspension, expiration without any previous or concurrent renewal, or loss of any Gaming License of the Company or any of its Restricted Subsidiaries for more than 60 days (other than any voluntary relinquishment of a Gaming License if such relinquishment, in the reasonable good faith judgment of the Board of Directors of the Company, evidenced by a resolution of such Board, is both desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and would not in any material respect impair the Company's ability to pay principal and interest on the Notes or materially impair the value of the Collateral); (9) the cessation or suspension of any gaming operations of the Company or any of its Restricted Subsidiaries for more than 30 days that, individually or in the aggregate, represent in excess of 5% of the Company's consolidated net revenues for its most recently completed four fiscal quarters for which financial statements are available (other than any voluntary cessation of gaming operations if such cessation, in the reasonable good faith judgment of the Board of Directors of the Company, evidenced by a resolution of such Board, is both desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and would not in any material respect impair the Company's ability to pay principal and interest on the Notes or materially impair the value of the Collateral); (10) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; (11) any failure to perform or comply with the provisions of the Indenture or the Escrow Agreement described under "--Special Mandatory Redemption" above; and (12) certain events of bankruptcy or insolvency with respect to the Company or any of the Restricted Subsidiaries described in the Indenture. 120 In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or Additional Interest, if any) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or Additional Interest, if any, on, or the principal of, the Notes. In the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture. Upon becoming aware of any Default or Event of Default, the Company is required to deliver to the Trustee a statement specifying such Default or Event of Default. Possession, Use and Release of Collateral Unless an Event of Default shall have occurred and be continuing, the Company will have the right to remain in possession and retain exclusive control of the Collateral (other than any cash, securities, obligations and Cash Equivalents constituting part of the Collateral and deposited with the Trustee and other than as set forth in the Collateral Documents), to freely operate the Collateral and to collect, invest and dispose of any income thereon. Release of Collateral. The Company and the Guarantors, as the case may be, will have the right to obtain a release of items of Collateral (other than certain Trust Monies) (the "Released Collateral") subject to a sale or other disposition, and the Trustee will release the Released Collateral from the Lien of the relevant Collateral Document and reconvey the Released Collateral to the Company or any such Guarantor upon compliance with the condition that the Company deliver to the Trustee, among other things, the following: (a) a notice from the Company requesting the release of Released Collateral, (i) specifically describing the proposed Released Collateral, (ii) specifying the fair market value of such Released Collateral on a date within 60 days of such notice (the "Valuation Date"), (iii) stating that the consideration to be received in respect of the Released Collateral is at least equal to the fair market value of the Released Collateral, (iv) stating that the release of such Released Collateral will not impair the value of the remaining Collateral or interfere with the Trustee's ability to realize such value and will not impair the maintenance and operation of the remaining Collateral, (v) confirming the sale of, or an agreement to sell, such Released Collateral in a bona fide sale to a person that is not an Affiliate of the Company or, if such sale is to a person that is an Affiliate, confirming that such sale is made in compliance with the provisions described in "--Certain Covenants--Transactions with Affiliates," (vi) certifying that if the 121 sale of such Released Collateral constitutes an Asset Sale, such Asset Sale complies with the terms and conditions of the Indenture with respect thereto, including, without limitation, the provisions set forth in "--Repurchase at the Option of Holders--Asset Sales," and (vii) if there is to be a substitution of property for the Released Collateral subject to the Asset Sale, specifying the property intended to be substituted for the Released Collateral to be disposed of; (b) an officers' certificate of the Company stating that (i) such sale covers only the Released Collateral, (ii) all Net Proceeds, if any, from the sale of any of the Released Collateral will be applied pursuant to the provisions of the Indenture in respect of Asset Sales, (iii) there is no Default or Event of Default in effect or continuing on the date thereof or the Valuation Date, (iv) the release of the Collateral will not result in a Default or Event of Default under the Indenture, and (v) all conditions precedent in the Indenture relating to the release have been complied with; and (c) all documentation required by the Trust Indenture Act, if any, prior to the release of the Released Collateral by the Trustee and, if there is to be a substitution of property for the Released Collateral subject to the Asset Sale, all documentation necessary to effect the substitution of such new Collateral and to subject such new Collateral to the Lien of the relevant Collateral Documents. The Company also shall be entitled, subject to compliance with the conditions set forth therein, to obtain the release of Collateral which has been taken by eminent domain, condemnation or in similar circumstances. The Company shall be entitled to obtain a full release of all of the Collateral following legal defeasance or covenant defeasance of the Indenture as described above under "--Legal Defeasance and Covenant Defeasance." Disposition of Collateral Without Release. Notwithstanding the provisions of "Release of Collateral" above, so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom, the Company and the Guarantors may, among other things, without any release or consent by the Trustee, conduct ordinary course activities with respect to Collateral in accordance with the provisions of the Indenture, including selling or otherwise disposing of, in any transaction or series of related transactions, any property subject to the Lien of the Collateral Documents which has become worn out or obsolete and which either has an aggregate fair market value of $50,000 or less, or which is replaced by property of substantially equivalent or greater value which becomes subject to the Lien of the Collateral Documents as After-Acquired Property; abandoning, terminating, cancelling, releasing or making alterations in or substitutions of any leases or contracts subject to the Lien of the Indenture or any of the Collateral Documents; surrendering or modifying any franchise, license or permit subject to the Lien of the Indenture or any of the Collateral Documents which it may own or under which it may be operating; altering, repairing, replacing, changing the location or position of and adding to its structures, machinery, systems, equipment, fixtures and appurtenances; demolishing, dismantling, tearing down, scrapping or abandoning any Collateral if, in the good faith opinion of the Board of Directors of the Company, such demolition, dismantling, tearing down, scrapping or abandonment is in the best interest of the Company; granting a nonexclusive license of any intellectual property; and abandoning intellectual property which has become obsolete and not used in the business. Use of Trust Monies All Trust Monies (including, without limitation, all Net Proceeds and Net Loss Proceeds) shall, subject to the terms of the Senior Intercreditor Agreement with respect to the Credit Agreement Collateral, be held by the Trustee as a part of the Collateral securing the Notes and, so long as no Event of Default shall have occurred and be continuing, may, subject to certain conditions set forth in the Indenture, at the direction of the Company be applied by the Trustee from time to time to the payment of the principal of, premium, if any, and interest on any Notes at maturity or upon redemption or retirement, or to the purchase of Notes upon tender or in the open market or otherwise, in each case in compliance with the Indenture. 122 The Trustee shall be entitled to apply any Trust Monies held by the Trustee to cure any Event of Default. Trust Monies deposited with the Trustee shall be invested in Cash Equivalents pursuant to the direction of the Company and, so long as no Default or Event of Default shall have occurred and be continuing, the Company shall be entitled to any interest or dividends accrued, earned or paid on such Cash Equivalents. No Personal Liability of Directors, Officers, Employees and Stockholders No director, officer, employee, incorporator or stockholder of the Company or of any Guarantor, as such, shall have any liability for any obligations of the Company or of the Guarantors under the Notes, the Indenture, the Subsidiary Guarantees, the Collateral 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 issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. Legal Defeasance and Covenant Defeasance The Company may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes and all obligations of the Guarantors discharged with respect to their Subsidiary Guarantees ("Legal Defeasance") except for: (1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Additional Interest, if any, on such Notes when such payments are due from the trust referred to below; (2) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust; (3) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's and the Guarantor's obligations in connection therewith; and (4) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company and the Guarantors released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with those covenants shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance: (1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, and interest and premium and Additional Interest, if any, on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (2) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance 123 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; (3) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming 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; (4) no Default or Event of Default shall have occurred and be continuing either: (a) on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit); or (b) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (6) the Company must have delivered to the Trustee an opinion of counsel to the effect that, assuming no intervening bankruptcy of the Company between the date of deposit and the 91st day following the deposit and assuming that no Holder is an "insider" of the Company under applicable bankruptcy law, after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (7) the Company must deliver to the Trustee an officers' certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (8) the Company must deliver to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Amendment, Supplement and Waiver Except as provided in the next three succeeding paragraphs, the Indenture, the Collateral Documents or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (2) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants described above under the caption "--Repurchase at the Option of Holders"); (3) reduce the rate of or change the time for payment of interest on any Note; 124 (4) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Additional Interest, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); (5) make any Note payable in money other than that stated in the Notes; (6) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of, or interest or premium or Additional Interest, if any, on the Notes; (7) waive a redemption payment with respect to any Note (other than a payment required by one of the covenants described above under the caption "--Repurchase at the Option of Holders"); (8) release any Guarantor from any of its obligations under its Subsidiary Guarantee or the Indenture, except in accordance with the terms of the Indenture; (9) make any change to the provisions of the Indenture relating to the special mandatory redemption described under the caption "--Special Mandatory Redemption" in a way that would adversely effect the rights of any of the Holders; (10) adversely affect the ranking of the Notes; or (11) make any change in the preceding amendment and waiver provisions. Notwithstanding the foregoing, Collateral may be released with the consent of the Holders of at least 75% in aggregate principal amount of the then outstanding Notes in addition to the release of Collateral expressly permitted by the Indenture and the Collateral Documents. Notwithstanding the preceding, without the consent of any Holder, the Company, the Guarantors and the Trustee may amend or supplement the Indenture or the Notes: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated Notes in addition to or in place of certificated Notes; (3) to provide for the assumption of the Company's obligations to Holders in the case of a merger or consolidation or sale of all or substantially all of the Company's assets; (4) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any such Holder; or (5) to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. Satisfaction and Discharge The Indenture will be discharged and will cease to be of further effect as to all Notes issued thereunder, when: (1) either: (a) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to 125 be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Additional Interest, if any, and accrued interest to the date of maturity or redemption; (2) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound; (3) the Company or any Guarantor has paid or caused to be paid all sums payable by it under the Indenture; and (4) the Company has delivered irrevocable instructions to the Trustee under the Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be. In addition, the Company must deliver an officers' certificate and an opinion of counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. Concerning the Trustee If the Trustee becomes a creditor of the Company or any Guarantor, the Indenture limits its right to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur and be continuing, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. Additional Information Anyone who receives this prospectus may obtain a copy of the Indenture and the Collateral Documents without charge by writing to the Company at 240 Main Street, Black Hawk, Colorado 80422, Attention: Chief Financial Officer. Certain Definitions Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Acquired Black Hawk Indebtedness" means Indebtedness represented by, collectively, (1) $1.5 million in aggregate principal amount at maturity of 6.25% Series 1999A Black Hawk Business Improvement District, Gilpin, Colorado, Special Improvement District No. 1997-2 Special Assessment Bonds due December 1, 2004 126 and (2) $4.0 million in aggregate principal amount at maturity of 6.50% Series 1999B Black Hawk Business Improvement District, Gilpin, Colorado, Special Improvement District No. 1997-2 Special Assessment Bonds due December 1, 2011, which bonds are secured by a first priority Prior Lien on certain real property comprising the Black Hawk Business Improvement District relating to The Lodge Casino in favor of the Black Hawk Business Improvement District Special Assessment Bonds. "Acquired Colonial Holdings Indebtedness" means (1) $15.7 million in principal amount of Indebtedness incurred pursuant to a certain Amended and Restated Loan Agreement, dated August 30, 2000, as amended to the date of issuance of the Notes by and among Colonial Downs, Colonial and CD Entertainment which is secured by a Lien on substantially all of the assets of Colonial and its Subsidiaries (other than its off-track wagering facilities); (2) a note payable to Citizens and Farmers Bank in the principal amount of $120,000 as of December 31, 2001, less any repayments thereof, bearing interest at the rate of 8.5%, maturing in August 2002, and secured by a first priority Lien on the racetrack lighting equipment purchased with the proceeds of the note; (3) a note payable to the Maryland Jockey Club in the principal amount of $1,245,148 as of December 31, 2001, less any repayments thereof, bearing interest at the rate of 7.75%, maturing in December 2005; and (4) a note payable to the Maryland Jockey Club in the principal amount of $300,308 as of December 31, 2001, less any repayments thereof, bearing interest at the prime rate and maturing in January 2002. "Acquired Debt" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Acquired Louisiana Properties Indebtedness" means, collectively, (1) a certain promissory note maturing at March 31, 2009, in the principal amount of $1,208,571.40, dated February 7, 2001, as amended on September 26, 2001, between Winner's Choice Casino, Inc. as borrower, and Claude M. Penn, Jr. and George D. Lockhart, as creditors, accruing interest in the amount of 8.0% until October 1, 2001 and 8.5% thereafter, secured by a second mortgage on the property comprising Winner's Choice in the parish of Calcasieu, city of Sulphur, Louisiana in favor of Claude M. Penn, Jr. and George D. Lockhart; (2) a certain promissory note maturing at March 31, 2009, in the principal amount of $1,809,160, dated February 7, 2001, as amended on September 26, 2001, between Houma Truck Plaza & Casino, L.L.C., as borrower, and Claude M. Penn, Jr., as creditor, accruing interest in the amount of 8.0% until October 1, 2001 and 8.5% thereafter; (3) a certain promissory note maturing at March 31, 2009, in the principal amount of $1,718,857.10, dated February 7, 2001, as amended on September 26, 2001, between Jalou-Cash's L.L.C., as borrower and Seabuckle Gaming, Inc., as creditor, accruing interest in the amount of 8.0% until October 1, 2001 and 8.5% thereafter, secured by a second security interest in the revenue accruing under a certain Video Draw Poker Device Agreement dated April 24, 1998 by and between Cash's Casino, Inc. and Southern Trading Corporation, as successor to Seabuckle Gaming Inc.; (4) a certain promissory note maturing at April 30, 2009, in the principal amount of $788,000, dated January 11, 2002, between Lucky Magnolia Truck Stop and Casino, L.L.C., as borrower and Claude 127 M. Penn, Jr., as creditor, accruing interest in the amount of 8.5%, secured by a second mortgage on the property comprising the Lucky Magnolia Truck Stop and Casino, which is located in the parish of St. Helena, city of Denham Springs, Louisiana in favor of Claude M. Penn, Jr.; (5) a certain promissory note maturing at April 30, 2009, in the principal amount of $1,679,142.86, dated January 11, 2002, between Bayou Vista Truck Plaza and Casino, L.L.C., as borrower and Claude M. Penn, Jr., as creditor, accruing interest in the amount of 8.5%, secured by a second mortgage on the property comprising the Bayou Vista Truck Plaza and Casino, which is located in the parish of St. Mary, city of Bayou Vista, Louisiana in favor of Claude M. Penn, Jr.; (6) a certain promissory note maturing at April 30, 2009, in the principal amount of $2,171,428.57, dated January 11, 2002, between JACE, Inc., as borrower and Claude M. Penn, Jr., as creditor, accruing interest in the amount of 8.5%, secured by a second mortgage on the property comprising the Colonel's Truck Plaza and Casino, which is located in the parish of Terribonne, city of Thibodaux, Louisiana in favor of Claude M. Penn, Jr.; (7) a certain promissory note maturing 7.25 years from the date of issuance, in the principal amount not to exceed $1,200,000, to be dated the date of the acquisition of the property, between Raceland Truck Plaza and Casino, as borrower and Claude M. Penn, Jr., as creditor, accruing interest in the amount of 8.5%, secured by a second mortgage on the property comprising the Raceland Truck Plaza and Casino, which is located in the parish of Lafourche, city of Raceland, Louisiana in favor of Claude M. Penn, Jr.; (8) a certain unsecured subordinated promissory note, maturing January 31, 2010, in the principal amount of $1.0 million to be dated on or after the date of the issuance of the Notes between the Company as borrower and Jeffrey P. Jacobs as creditor, accruing interest in the amount of 12% until maturity; and (9) a certain unsecured subordinated promissory note, maturing January 31, 2010, in the principal amount of $8.0 million to be dated on or after the date of the issuance of the Notes between the Company as borrower and The Richard E. Jacobs Revocable Trust as creditor, accruing interest in the amount of 12% until maturity. As of February 22, 2002, each of the promissory notes described in clauses (1) through (7) above was assumed by and became an obligation of the Company and is subject to the Seller Intercreditor Agreement. Each of the promissory notes described in clauses (8) and (9) above is subject to the Jacobs Subordination and Intercreditor Agreement. "Acquired Pending Acquisitions Indebtedness" means, collectively, the Acquired Black Hawk Indebtedness, the Acquired Colonial Holdings Indebtedness and the Acquired Louisiana Properties Indebtedness. "Additional Interest" has the meaning assigned to such term under "Registration Rights." "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" shall have correlative meanings. "After-Acquired Property" means assets or property acquired after the date of the Indenture which are required to constitute Collateral pursuant to the provisions of the Indenture. 128 "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets or rights; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption "--Repurchase at the Option of Holders--Change of Control" and/or the provisions described above under the caption "--Certain Covenants--Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant; and (2) the issuance of Capital Stock in any of the Company's Restricted Subsidiaries or the sale of Capital Stock in any of its Subsidiaries. Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales: (1) any single transaction or series of related transactions that involves assets having a fair market value of less than $500,000; (2) a transfer of assets solely between or among the Company and its Wholly Owned Restricted Subsidiaries that are Guarantors; provided that such assets (to the extent constituting Collateral) shall remain subject to the Lien of the Collateral Documents; (3) an issuance of Capital Stock by a Wholly Owned Restricted Subsidiary that is a Guarantor to the Company or to another Wholly Owned Restricted Subsidiary that is a Guarantor; provided that such Capital Stock shall constitute After-Acquired Property and shall be made subject to the Lien of the Collateral Documents in accordance with the provisions of the Indenture; (4) the sale or lease of equipment, accounts receivable or other assets in the ordinary course of business; (5) the sale or other disposition of cash or Cash Equivalents in the ordinary course of business; and (6) a Restricted Payment or Permitted Investment that is permitted by the covenant described above under the caption "--Certain Covenants--Restricted Payments." "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP. "Bankruptcy Code" means Title 11, U.S. Code or any similar federal or state law for relief of debtors. "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning. "Black Hawk Permitted Liens" means the Liens securing the Acquired Black Hawk Indebtedness to the extent and in the manner such Liens exist on the date of the Indenture. "Board of Directors" means: (1) with respect to a corporation, the board of directors of the corporation; (2) with respect to a partnership, the Board of Directors of the general partner of the partnership; and 129 (3) with respect to any other Person, the board or committee of such Person serving a similar function. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person; and, in the case of each of the foregoing, all warrants, options or rights to acquire the foregoing. "Cash Equivalents" means: (1) United States dollars; (2) securities issued or directly and fully Guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition; (3) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500.0 million; (4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; (5) commercial paper maturing within six months after the date of acquisition and having a rating of at least A-1 from Moody's Investors Service, Inc. or P-1 from Standard & Poor's (a division of The McGraw-Hill Companies, Inc.); and (6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition. "Change of Control" means the occurrence of any of the following: (1) any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), other than the Principals and Related Parties, becomes the Beneficial Owner of more than 33 1/3% of the total voting power of the Company's Voting Stock, and the Principals and Related Parties Beneficially Own, in the aggregate, a lesser percentage of the total voting power of the Voting Stock of the Company than such other Person or Group and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Company; (2) there is consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any Person or Group, together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of the Indenture) other than to the Principals and Related Parties; 130 (3) the adoption of a plan relating to the liquidation or dissolution of the Company; (4) there is consummated any consolidation or merger of the Company in which the Company is not the continuing or surviving Person or pursuant to which the Common Stock of the Company would be converted into cash, securities or other property, other than a merger or consolidation of the Company in which the holders of the Capital Stock of the Company outstanding immediately prior to the consolidation or merger hold, directly or indirectly, at least a majority of the voting power of the surviving corporation immediately after such consolidation or merger; or (5) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Code" means the Internal Revenue Code, as amended. "Collateral" means, collectively, all of the property and assets described in the first paragraph under "--Security," together with all other property and assets that are from time to time subject to the Lien of the Collateral Documents. "Collateral Account" means the collateral account established pursuant to the Indenture. "Collateral Documents" means, collectively, the Mortgages, the Security Agreement, the Intercreditor Agreements, the Senior Intercreditor Agreement, the Escrow Agreement and all other mortgages, deeds of trust, pledge agreements, collateral assignments, security agreements, fiduciary transfers, debentures, fiduciary assignments or other instruments evidencing or creating any security interests or Liens in favor of the Trustee on behalf of itself and the Holders (whether directly or by assignment) in all or any portion of the Collateral, in each case, as amended, amended and restated, extended, renewed, supplemented or otherwise modified from time to time, in accordance with the terms thereof. "Colonial Holdings Permitted Liens" means the Liens securing the Indebtedness described in clause (2) of the definition of "Acquired Colonial Holdings Indebtedness," to the extent and in the manner such Liens exist on the date of the Indenture. "Commission" means the Securities and Exchange Commission. "Consolidated EBITDA" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus: (1) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; plus (2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period (including, without limitation, any Tax Distributions taken into account in calculating Consolidated Net Income), to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (3) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus 131 (4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; plus (5) without duplication of any items described above, to the extent such amounts were deducted in computing Consolidated Net Income, the costs and expenses of the Company incurred in connection with (i) the consummation of the issuance and sale of the Notes to the initial purchasers and (ii) the consummation of the Pending Acquisitions; minus (6) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash expenses of, a Subsidiary of the Company shall be added to Consolidated Net Income to compute Consolidated EBITDA of the Company only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Wholly Owned Restricted Subsidiary thereof; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; (4) the cumulative effect of a change in accounting principles shall be excluded; (5) any net gain (but not loss) resulting from an Asset Sale by the Person in question or any of its Restricted Subsidiaries other than in the ordinary course of business shall be excluded; (6) extraordinary gains and losses shall be excluded; and (7) in the case of any Person that is a Flow Through Entity during such period, an amount equal to the maximum amount of Tax Distributions made or which may be made to the holders of Capital Stock of such Person in respect of the net taxable income allocated by such Person to such holders for such period shall be included as though such amounts had been paid as income taxes directly by the Company. 132 "Consolidated Net Worth" means, with respect to any specified Person as of any date, the sum of: (1) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date; plus (2) the respective amounts reported on such Person's balance sheet as of such date 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 such Person upon issuance of such Preferred Stock. "Contested Collateral Lien Conditions" shall mean, with respect to any Permitted Lien of the type described in clauses (1), (2) and (6) of the definition of Permitted Lien, the following conditions: (1) any proceeding instituted contesting such Lien shall conclusively operate to stay the sale or forfeiture of any portion of the Collateral on account of such Lien; (2) at the option and upon request of the Trustee, the Company or any Guarantor, as applicable, shall maintain cash reserves in an amount sufficient to pay and discharge such Lien and the Trustee's reasonable estimate of all interest and penalties related thereto; and (3) such Lien shall in all respects be subject and subordinate in priority to the Lien and security interest crated and evidenced by the Collateral Documents, except if and to the extent that the law or regulation creating, permitting or authorizing such Lien provides that such Lien is or must be superior to the Lien and security interest created and evidenced by the Collateral Documents. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who: (1) was a member of such Board of Directors on the date of the Indenture; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Credit Agreement" means (a) any credit agreement, dated on or after the date of the Indenture, by and among the Company, one or more of its Subsidiaries and the financial institutions acting as lenders and/or agents thereunder (including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith) and (b) any amendment, modification, supplement, refunding, refinancing or replacement thereof) that has terms and conditions (including with respect to applicable interest rates and fees) customary for similar facilities extended to borrowers comparable to the Company, in each case, that does not permit the Company and such Subsidiaries to incur Indebtedness in an aggregate principal amount at any time outstanding in excess of $10.0 million. "Credit Agreement Collateral" means all of the real property owned or leased by the Company or a Subsidiary on which The Lodge Casino and the Gilpin Hotel Casino in Black Hawk, Colorado is located, together with all easements, right, title and interest (including, without limitation, fee and easehold estates) of the Company and the Subsidiaries in and to any and all parcels of real property, together with all easements, hereditaments and appurtenances relating thereto, and all other improvements, accessions, alterations, replacements and repairs thereto and all leases and rents and other income, issues or profits derived from the foregoing interests and all right, title and interest of the Company and the Subsidiaries in and to any and all equipment, machinery, furniture, furnishings and fixtures, together with all additions, accessions, improvements, alterations, replacements and repairs thereto. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. 133 "Disqualified Stock" means 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, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under the caption "--Certain Covenants--Restricted Payments." "Equity Offering" means any public offering or private sale of Capital Stock (other than Disqualified Stock) of the Company pursuant to which the Company receives net proceeds of at least $10.0 million. "Event of Loss" means, with respect to any property or asset (tangible or intangible, real or personal) constituting Collateral, any of the following: (1) any loss, destruction or damage of such property or asset; (2) 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; (3) 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; or (4) any settlement in lieu of clauses (2) or (3) above. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the date of the Indenture until such amounts are repaid. "Fixed Charge Coverage Ratio" means with respect to any specified Person for any period, the ratio of the Consolidated EBITDA of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of Preferred Stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of calculating the Fixed Charge Coverage Ratio: (1) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated EBITDA for such reference period shall be calculated on a pro forma basis in accordance with Regulation S-X under the Securities Act, but without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income; 134 (2) the Consolidated EBITDA attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded; and (3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date. "Fixed Charges" means, with respect to any specified Person for any period, the sum, without duplication, of: (1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations; plus (2) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; plus (3) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus (4) the amount of all dividends, whether paid or accrued and whether or not in cash, on any series of Preferred Stock of such Person or any of its Restricted Subsidiaries, other than dividends on Capital Stock payable solely in Capital Stock of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company. "Flow Through Entity" means an entity that: (1) for Federal income tax purposes constitutes (a) an "S corporation", as defined in Section 1361(a) of the Code, (b) a "qualified subchapter S subsidiary", as defined in Section 1361(b)(3)(B) of the Code, (c) a "partnership", within the meaning of Section 7701(a)(2) of the Code, other than a "publicly traded partnership", as defined in Section 7704 of the Code, or (d) an entity that is disregarded as an entity separate from its owner under the Code, the Treasury regulations or any published administrative guidance of the Internal Revenue Service; and (2) for state and local jurisdictions in respect of which Tax Distributions are being made, is subject to treatment on a basis under applicable state or local income tax law substantially similar to a Federal Flow Through Entity. "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 or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Gaming Authorities" means any agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of the United States or foreign government, any state, province or city or other political subdivision, whether now or hereafter existing, or any officer or official thereof, including, 135 without limitation, the gaming commission and any other agency with authority to regulate any gaming operation or proposed gaming operation owned, managed or operated by the Company or any of its Restricted Subsidiaries. "Gaming Law" means any gaming laws or regulations of any jurisdictions to which the Company or any of its Subsidiaries is or may at any time after the date of the Indenture be subject. "Gaming Licenses" means every material license, material franchise, material registration, material qualification, findings of suitability or other material approval or authorization required to own, lease, operate or otherwise conduct or manage riverboat, dockside or land-based gaming activities in any state or jurisdiction in which the Company or any of its Restricted Subsidiaries conducts business, and all applicable liquor licenses. "Government Securities" means direct obligations of, or obligations Guaranteed by, the United States of America for the payment of which Guarantee or obligations the full faith and credit of the United States is pledged and which are not callable or redeemable at the option of the issuer thereof. "Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "Guarantors" means each Restricted Subsidiary that executes a Subsidiary Guarantee in accordance with the Indenture and their respective successors and assigns. "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under: (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (2) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Holder" means a Person in whose name a Note is registered on the Registrar's books. "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) in respect of banker's acceptances; (4) representing Capital Lease Obligations; (5) in respect of the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (6) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes (i) all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person), (ii) to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of any other Person, and (iii) all Disqualified Stock issued by such Person with the amount of such Disqualified Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. 136 The amount of any Indebtedness outstanding as of any date shall be: (1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and (2) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Stock. "Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the form of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Capital Stock or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Capital Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Wholly Owned Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Capital Stock of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "--Certain Covenants--Restricted Payments." The acquisition by the Company or any Subsidiary of the Company of a Person that holds an Investment in a third Person shall be deemed to be an Investment by the Company or such Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person in an amount determined as provided in the final paragraph of the covenant described above under the caption "--Certain Covenants--Restricted Payments." "Jacobs Subordinated Louisiana Properties Notes" means the notes referred to in clauses (8) and (9) of the definition of "Acquired Louisiana Properties Indebtedness," as the same may be amended or otherwise modified from time to time in accordance with the terms of the Indenture and the Jacobs Subordination and Intercreditor Agreement. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Louisiana Properties Notes" means, collectively, the Jacobs Subordinated Louisiana Properties Notes and the Louisiana Properties Seller Notes. "Louisiana Properties Permitted Junior Liens" means the Liens securing the Indebtedness described in clauses (1) through (7) inclusive of the definition of "Acquired Louisiana Properties Indebtedness", to the extent and in the manner such Liens exist on the date of the Indenture (except in the case of clause (7) which shall be to the extent and in the manner such Liens exist on the date such indebtedness is incurred), which Liens are junior in right of and subject to the prior rights of the Lien securing the Notes in the manner provided for in the Seller Intercreditor Agreement. 137 "Louisiana Properties Seller Notes" means the notes referred to in clauses (1) through (7) inclusive of the definition of "Acquired Louisiana Properties Indebtedness," as the same may be amended or otherwise modified from time to time in accordance with the terms of the Indenture and the Seller Intercreditor Agreement. "Mortgaged Louisiana Property" means the property and assets secured by the Louisiana Properties Permitted Junior Liens. "Net Income" means, with respect to any specified Person for any period the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends to the extent such Preferred Stock dividends do not reduce net income as determined in accordance with GAAP. "Net Loss Proceeds" means the aggregate cash proceeds received by the Company or any Guarantor in respect of any Event of Loss, including, without limitation, insurance proceeds, condemnation awards or damages awarded by any judgment, net of the direct costs in recovery of such Net Loss Proceeds (including, without limitation, legal, accounting, appraisal and insurance adjuster fees and any relocation expenses incurred as a result thereof), amounts required to be applied to the repayment of Indebtedness secured by a Prior Lien (including, without limitation, any Permitted Lien which is a Prior Lien) on the asset or assets that were the subject of such Event of Loss, and any taxes paid or payable as a result thereof. "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, sales commissions, and any relocation expenses incurred as a result thereof, and taxes paid or payable as a result thereof, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, amounts required to be applied to the repayment of Indebtedness by a Prior Lien (including, without limitation, any Permitted Lien that is a Prior Lien) on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "Non-Guarantor Restricted Subsidiary" means each of Colonial Holdings, Stansley, Colonial Downs and Colonial Management, and each of their respective Subsidiaries to the extent not otherwise required to be a Guarantor under the Indenture. "Non-Recourse Indebtedness" means Indebtedness: (1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender; (2) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (3) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Notes" means the 11/7/8% Senior Secured Notes due 2009 to be issued by the Company, and any Additional Notes. / "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. 138 "Paying Agent" means an office or agency maintained by the Company within the City and State of New York where Notes may be presented for payment. "Pending Acquisitions" means: (1) the acquisition of Black Hawk Gaming pursuant to the Agreement and Plan of Merger, dated as of April 25, 2001, as amended on November 12, 2001, among Black Hawk Gaming, the Company and BH Acquisition; (2) the acquisition of Diversified and its Subsidiaries which collectively own and operate the Louisiana truck plaza video gaming properties (including, without limitation, the acquisition of Raceland) described in the Company's Offering Memorandum dated February 1, 2002 pursuant to an Exchange Agreement dated February 22, 2002 on or after the date of the issuance of the Notes among the Company, Jeffrey P. Jacobs and The Richard E. Jacobs Revocable Trust; and (3) the acquisition of Colonial pursuant to the Agreement and Plan of Merger, dated as of June 11, 2001, as amended on November 16, 2001, among Colonial, the Company and Gameco Acquisition. (These acquisitions were consummated on February 22, 2002). "Permitted Business" means the ownership and operation of one or more gaming or pari-mutuel businesses, including without limitation, casinos, hotels, racetracks and video poker truck stops, in the United States of America. "Permitted Investments" means: (1) any Investment in the Company or in a Wholly Owned Restricted Subsidiary of the Company that is a Guarantor; (2) any Investment in Cash Equivalents; (3) any Investment by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment: (a) such Person becomes a Wholly Owned Restricted Subsidiary of the Company and a Guarantor; or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the Company that is a Guarantor; (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "--Repurchase at the Option of Holders--Asset Sales"; (5) any acquisition of assets solely in exchange for the issuance of Capital Stock (other than Disqualified Stock) of the Company; and (6) Hedging Obligations. "Permitted Liens" means: (1) inchoate Liens for taxes, assessments or governmental charges or levies not yet due and payable or delinquent and Liens for taxes, assessments or governmental charges or levies, which (i) are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien, or (ii) in the case of any such charge or claim which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; 139 (2) Liens in respect of property of the Company or any Restricted Subsidiary imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers', warehousemen's, materialmen's, landlord's and mechanics' liens and other similar Liens arising in the ordinary course of business, and (i) which do not in the aggregate materially detract from the value of the property or assets of the Company and its Restricted Subsidiaries, taken as a whole, and do not materially impair the use thereof in the operation of the business of the Company and its Restricted Subsidiaries, taken as a whole, (ii) which are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien, and (iii) in the case of any such Lien which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; (3) (a) Liens on property and assets of the Company existing on the date of the Indenture other than Liens of third parties on the Collateral and (b) upon consummation of the Pending Acquisitions, the Louisiana Properties Permitted Junior Liens the Black Hawk Permitted Liens and the Colonial Holdings Permitted Liens; (4) easements, rights-of-way, restrictions (including zoning restrictions), covenants, encroachments, protrusions and other similar charges or encumbrances, and minor title deficiencies on or with respect to any real property, in each case whether now or hereafter in existence, not (i) securing Indebtedness, (ii) individually or in the aggregate materially impairing the value or marketability of such real property and (iii) individually or in the aggregate materially interfering with the conduct of the business of the Company or any Restricted Subsidiary at such real property; (5) Liens arising out of judgments or awards not resulting in a Default and in respect of which the Company or any Restricted Subsidiary shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall be secured a subsisting stay of execution pending such appeal or proceedings; provided that the aggregate amount of all such judgments or awards (and any cash and the fair market value of any property subject to such Liens) does not exceed $5.0 million at any time outstanding; (6) Liens (other than any Lien imposed by the United States Employee Retirement Income Security Act of 1974, as amended) (i) imposed by law or deposits made in connection therewith in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security or public utility obligations, (ii) incurred in the ordinary course of business to secure the performance of tenders, statutory obligations (other than excise taxes), surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) or (iii) arising by virtue of deposits made in the ordinary course of business to secure liability for premiums to insurance carriers; provided that (x) with respect to clauses (i), (ii) and (iii) hereof such Liens are set amounts not yet due and payable or delinquent or, to the extent such amounts are so due and payable, such amounts are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien, (y) to the extent such Liens are not imposed by law, such Liens shall in no event encumber any property other than cash and Cash Equivalents and (z) in the case of any such Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; provided, further that the aggregate amount of deposits at any time pursuant to clause (ii) and clause (iii) shall not exceed $1.0 million in the aggregate; (7) leases with respect to the assets or properties of the Company or any Restricted Subsidiary or its respective Subsidiaries, in each case entered into in the ordinary course of the Company or any 140 Restricted Subsidiary business so long as such leases are subordinate in all respects to the Liens granted and evidenced by the Collateral Documents and do not, individually or in the aggregate, (i) interfere in any material respect with the ordinary conduct of the business of the Company or any Restricted Subsidiary and (ii) materially impair the use (for its intended purposes) or the value of the property subject thereto; (8) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any Restricted Subsidiary in the ordinary course of business in accordance with the past practices of the Company or any Restricted Subsidiary; (9) Liens arising pursuant to Purchase Money Obligations or Capital Lease Obligations incurred pursuant to the covenant described above under "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock"; provided that (i) the Indebtedness secured by any such Lien (including refinancings thereof) does not exceed 100% of the cost of the property being acquired or leased at the time of the incurrence of such Indebtedness and (ii) any such Liens attach only to the property being financed pursuant to such Purchase Money Obligations or Capital Lease Obligations and do not encumber any other property of the Company or any Subsidiary (it being understood that all Indebtedness to a single lender shall be considered to be a single Purchase Money Obligation, whether drawn at one time or from time to time); (10) bankers' Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by the Company or any Restricted Subsidiary, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided that in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness; (11) other than in connection with the Pending Acquisitions, Liens on assets of a Person existing at the time such Person is acquired or merged with or into or consolidated with the Company or any Restricted Subsidiary (and not created in anticipation or contemplation thereof) in accordance with the provisions of the Indenture; provided that such Liens were in existence prior to the contemplation of the merger or consolidation and do not extend to assets not subject to such Liens at the time of acquisition (other than improvements thereon) and are no more favorable to the lienholders than the existing Lien; (12) Liens (other than with respect to the property or assets constituting Collateral) incurred in the ordinary course of business of the Company or any Restricted Subsidiary with respect to obligations (other than Indebtedness) that do not in the aggregate exceed $2.0 million at any time outstanding; (13) Liens securing obligations under the Indenture, the Notes, the Subsidiary Guarantees and the Collateral Documents; (14) Liens securing Acquired Debt (and any Permitted Refinancing Indebtedness which refinances such Acquired Debt) incurred in accordance with the covenant described under "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock"; provided that (a) such Liens secured the Acquired Debt at the time of and prior to the incurrence of such Acquired Debt by the Company or a Restricted Subsidiary and were not granted in connection with, or in anticipation of the incurrence of such Acquired Debt by the Company or a Restricted Subsidiary and (b) such Liens do not extend to or cover any property or assets of the Company or of any of the Restricted Subsidiaries other than the property or assets that secured the Acquired Debt prior to the time such Indebtedness became Acquired Debt of the Company or a Restricted Subsidiary; (15) licenses of the patents, patent applications, trademarks, trademark applications, service marks, service mark applications, trade names, copyrights, trade-secrets, know-how and processes, granted by the 141 Company or any Restricted Subsidiary in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of the Company or any Restricted Subsidiary; (16) Liens arising under applicable Gaming Laws; provided that no such Lien constitutes a Lien securing repayment of Indebtedness; (17) Liens in favor of the Company or any Guarantor; provided that such Liens shall be subject to the Lien of the Collateral Documents; and (18) Liens on the Credit Agreement Collateral securing the Company's or any Restricted Subsidiary's Obligation under the Credit Agreement; provided, that the Company and its Subsidiaries shall have granted a Lien in favor of the Trustee on all assets securing such Credit Agreement as provided for in the Indenture and the Senior Intercreditor Agreement; provided, however, that no Liens shall be permitted to exist, directly or indirectly, on any Capital Stock, intercompany notes or other securities constituting Collateral. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest thereon and the amount of all expenses and premiums incurred in connection therewith); (2) such Permitted Refinancing Indebtedness has a final maturity date the same as or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "Preferred Stock" means any Capital Stock of a Person, however designated, which entitles the holder thereof to a preference with respect to dividends, distributions or liquidation proceeds of such Person over the holders of other Capital Stock issued by such Person. "Premier One Development" means Premier One Development Company, an Ohio corporation, and its successors and assigns. "Presumed Tax Rate", for any holder of Capital Stock of the Company or any Guarantor with respect to any period, means (i) with respect to the excess, if any, of ordinary income over ordinary loss (as determined for U.S. federal income tax purposes and, for this purpose, including items taxable at the same rate as ordinary income, 142 such as net short-term capital gain) allocated to such holder for such period, the sum of the maximum marginal individual (or corporate, if such holder is taxed as a corporation) U.S. federal, state and local income tax rates applicable to such income taking into account the deductibility of state and local income taxes for U.S. federal income tax purposes, and (ii) with respect to the net capital gain (as determined for U.S. federal income tax purposes) allocated to such holder for such period, the sum of the maximum marginal individual (or corporate, if such holder is a corporation) U.S. federal, state and local income tax rates applicable to such income taking into account the deductibility of state and local income taxes for U.S. federal income tax purposes. For purposes of the definition of "Presumed Tax Rate", the maximum marginal individual (or corporate, if applicable) U.S. federal, state or local income tax rate for each holder of capital Stock shall be the highest such marginal individual (or corporate, if applicable) U.S. federal, state or local income tax rate applicable to any holder of Capital Stock. "Principals" means Jeffrey P. Jacobs and Richard E. Jacobs. "Prior Lien" shall have the meaning assigned to such term in the applicable Collateral Documents. "Purchase Money Obligations" of any Person means any obligations of such Person to any seller or any other Person incurred or assumed to finance the purchase, or the cost of construction or improvement, of real or personal property to be used in the business of such Person or any of its Subsidiaries in an amount that is not more than 100% of the cost, or fair market value, as appropriate, of such property, and incurred within 90 days after the date of such acquisition (excluding accounts payable to trade creditors incurred in the ordinary course of business). "Registrar" means the agent appointed as security registrar for the purpose of registering Notes and transfers of Notes. "Registration Rights Agreement" means the Registration Rights Agreement among Gameco and the Initial Purchasers dated February 8, 2002 relating to, among other things, a registered exchange offer relating to the Old Notes. "Related Party" means: (1) any parent, spouse, sibling or lineal descendant of any Principal; or (2) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Principals and/or such other Persons referred to in the immediately preceding clause (1). "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Securities Act" means the Securities Act of 1933, as amended. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. 143 "Subsidiary" means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof). "Trust Monies" means all cash and Cash Equivalents received by the Trustee: (1) upon the release of Collateral from the Lien of the Indenture or the Collateral Documents, including all Net Proceeds and Net Loss Proceeds and all moneys received in respect of the principal of all purchase money, governmental and other obligations; (2) pursuant to the Collateral Documents; (3) as proceeds of any sale or other disposition of all or any part of the Collateral by or on behalf of the Trustee or any collection, recovery, receipt, appropriation or other realization of or from all or any part of the Collateral pursuant to the Indenture or any of the Collateral Documents or otherwise; or (4) for application as provided in the relevant provisions of the Indenture or any Collateral Document or which disposition is not otherwise specifically provided for in the Indenture or in any Collateral Document; provided, however, that Trust Monies shall in no event include any property deposited with the Trustee for any redemption, legal defeasance or covenant defeasance of Notes, for the satisfaction and discharge of the Indenture or to pay the purchase price of Notes pursuant to a Change of Control Offer or Asset Sale Offer. "Unrestricted Subsidiary" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors, but only to the extent that such Subsidiary: (1) has no Indebtedness other than Non-Recourse Indebtedness; (2) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Capital Stock or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (5) has at least one director on its Board of Directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. 144 "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness. "Wholly Owned Restricted Subsidiary" of any specified Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person and/or by one or more Wholly Owned Restricted Subsidiaries of such Person. 145 BOOK ENTRY; DELIVERY AND FORM Except as set forth below, the New Notes will be issued in registered, global form in minimum denominations of $1,000 and integral multiples of $1,000 in excess of $1,000. New Notes will be issued at the closing of the exchange offer only upon tender of Old Notes in accordance with the procedures set forth in this prospectus and the letter of transmittal. The New Notes initially will be represented by one or more notes in registered, global form without interest coupons (collectively, the "Global Notes"). The Global Notes will be deposited upon issuance with the trustee as custodian for The Depository Trust Company ("DTC"), in New York, New York, and registered in the name of DTC or its nominee, in each case for credit to an account of a direct or indirect participant in DTC as described below. Except as set forth below, the Global Notes may be transferred, in whole but not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for notes in certificated form except in the limited circumstances described below. See "--Exchange of Global Notes for Certificated Notes." Except in the limited circumstances described below, owners of beneficial interests in the Global Notes will not be entitled to receive physical delivery of notes in certificated form. So long as the Global Note Holder is the registered owner of the New Notes, the Global Note Holder will be considered the sole Holder under the indenture of any notes evidenced by the Global Notes. Beneficial Owners of notes evidenced by the Global Notes will not be considered the owners or Holders of the notes under the indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the trustee thereunder. Neither Gameco nor the trustee will have any responsibility or liability for any aspect of the records of DTC or for maintaining, supervising or reviewing any records of DTC relating to the notes. Depository Procedures The following description of the operations and procedures of DTC are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. Gameco takes no responsibility for these operations and procedures and urges investors to contact the system or their participants directly to discuss these matters. DTC has advised us that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the initial purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants. DTC has also advised us that, pursuant to procedures established by it, ownership of these interests in the Global Notes will be shown on, and the transfer of ownership of these interests will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interest in the Global Notes). Investors in the Global Notes who are Participants in DTC's system may hold their interests therein directly through DTC. Investors in the Global Notes who are not Participants may hold their interests therein indirectly through organizations which are Participants in such system. All interests in a Global Note may be subject to the procedures and requirements of DTC. The laws of some states require that certain Persons take physical delivery 146 in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to such Persons will be limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants, the ability of a Person having beneficial interests in a Global Note to pledge such interests to Persons that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests. Except as described below, owners of interests in the Global Notes will not have notes registered in their names, will not receive physical delivery of notes in certificated form and will not be considered the registered owners or "Holders" thereof under the indenture for any purpose. Payments in respect of the principal of, and interest and premium and liquidated damages, if any, on a Global Note registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered Holder under the indenture. Under the terms of the indenture, DTC, Gameco and the trustee will treat the Persons in whose names the notes, including the Global Notes, are registered as the owners of the notes for the purpose of receiving payments and for all other purposes. Consequently, neither Gameco, the trustee nor any agent of Gameco or the trustee has or will have any responsibility or liability for: (1) any aspect of DTC's records or any Participant's or Indirect Participant's records relating to or payments made on account of beneficial ownership interest in the Global Notes or for maintaining, supervising or reviewing any of DTC's records or any Participant's or Indirect Participant's records relating to the beneficial ownership interests in the Global Notes; or (2) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants. DTC has advised us that its current practice, upon receipt of any payment in respect of securities such as the New Notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the Beneficial Owners of notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the trustee or Gameco. Neither Gameco nor the trustee will be liable for any delay by DTC or any of its Participants in identifying the Beneficial Owners of the notes, and Gameco and the trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes. Transfers between Participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds. DTC has advised us that it will take any action permitted to be taken by a Holder of New Notes only at the direction of one or more Participants to whose account DTC has credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount of the New Notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the New Notes, DTC reserves the right to exchange the Global Notes for legended notes in certificated form, and to distribute such notes to its Participants. Although DTC has agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among Participants in DTC, it is under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. Neither Gameco nor the trustee nor any of their respective agents will have any responsibility for the performance by DTC or its Participants or Indirect Participants of their respective obligations under the rules and procedures governing their operations. 147 Exchange of Global Notes for Certificated Notes A Global Note is exchangeable for definitive New Notes in registered certificated form ("Certificated Notes") if: (1) DTC (a) notifies Gameco that it is unwilling or unable to continue as depositary for the Global Notes or (b) has ceased to be a clearing agency registered under the Exchange Act, and, in either case, Gameco fails to appoint a successor depositary; (2) Gameco, at its option, notifies the trustee in writing that it elects to cause the issuance of the Certificated Notes; or (3) there has occurred and is continuing a Default or Event of Default with respect to the Notes. In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon prior written notice given to the trustee by or on behalf of DTC in accordance with the indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures) and will bear the applicable restrictive legend referred to in the Indenture (which is attached as Exhibit 4. to this registration statement) unless that legend is not required by applicable law. Same Day Settlement and Payment Gameco will make payments in respect of the New Notes represented by the Global Notes (including principal, premium, if any, interest and Liquidated Damages, if any) by wire transfer of immediately available funds to the accounts specified by the Global Note Holder. Gameco will make all payments of principal, interest and premium and liquidated damages, if any, with respect to Certificated Notes, by mailing a check to the registered address of each Holder thereof. The notes represented by the Global Notes are expected to trade in DTC's Same-Day Funds Settlement System, and any permitted secondary market trading activity in such New Notes will, therefore, be required by DTC to be settled in immediately available funds. 148 REGISTRATION RIGHTS We have entered into a Registration Rights Agreement pursuant to which we have agreed, for the benefit of the holders of the Old Notes, that we will, at our cost, (1) within 120 days after the date of the indenture, file a registration statement (the "Exchange Offer Registration Statement") with the Securities and Exchange Commission, or the Commission, with respect to a registered offer to exchange (the "Exchange Offer") the Old Notes for New Notes that will have terms substantially identical in all material respects to the Old Notes, except that the New Notes will not contain terms with respect to transfer restrictions, and will be guaranteed by the guarantors on terms substantially identical in all material respects to the guarantees, (2) within 210 days after the date of the indenture, use our best efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act. Upon the Exchange Offer Registration Statement being declared effective, we will offer the New Notes in exchange for surrender of the Old Notes, and (3) keep the Exchange Offer open for not less than 30 business days (or longer if required by applicable law) after the date notice of the Exchange Offer is mailed to the holders of the Old Notes. For each Old Note surrendered to us pursuant to the Exchange Offer, the holder of such note will receive a New Note having a principal amount equal to that of the surrendered note. Under existing Commission interpretations, the New Notes would in general be freely transferable after the Exchange Offer without further registration under the Securities Act, so long as, in the case of broker-dealers, a prospectus meeting the requirements of the Securities Act is delivered as required. We have agreed for a period of 180 days after consummation of the Exchange Offer to make available a prospectus meeting the requirements of the Securities Act to any broker-dealer for use in connection with any resale of any such New Notes acquired as described below. A broker-dealer that delivers such a prospectus to purchasers in connection with such resales will be subject to certain of the civil liability provisions under the Securities Act, and will be bound by the provisions of the Exchange Offer Registration Rights Agreement (including certain indemnification rights and obligations). Each holder of Old Notes that wishes to exchange such notes for New Notes in the Exchange Offer will be required to make certain representations including representations that (1) any New Notes to be received by it will be acquired in the ordinary course of its business; (2) it has no arrangement with any person to participate in the distribution of the New Notes; and (3) it is not an "affiliate," as defined in Rule 405 of the Securities Act, of us or any of the guarantors, or if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If the holder is not a broker-dealer, it will be required to represent that it is not engaged in, and does not intend to engage in, the distribution of the New Notes. If the holder is a broker-dealer that will receive New Notes for its own account in exchange for notes that were acquired as a result of market-making activities or other trading activities, it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. In the event that applicable interpretations of the staff of the Commission do not permit us to effect such an Exchange Offer, or if for any other reason the Exchange Offer is not consummated within 255 days of the issue date of the Old Notes or, under certain circumstances, if the initial purchasers shall so request, we will, at our own expense, (1) as promptly as practicable, file a shelf registration statement covering resales of the Old Notes (the "Shelf Registration Statement"); 149 (2) use our best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act; and (3) use our best efforts to keep effective the Shelf Registration Statement until the earlier of the disposition of the Old Notes covered by the Shelf Registration Statement or two years after the original issue date of the Old Notes. We will, if a Shelf Registration Statement is filed and declared effective, provide to each holder of the Old Notes copies of the prospectus which is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement for the Old Notes has become effective and take certain other actions as are required to permit unrestricted resales of the Old Notes. A holder of the Old Notes that sells such notes pursuant to the Shelf Registration Statement generally would be required to be named as a selling securityholder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such a holder (including certain indemnification rights and obligations). Although we intend to file one of the registration statements described above there can be no assurance that such registration statement will be filed or, if filed, that it will become effective. If we fail to comply with the requirements described above or if such registration statement fails to become effective, then, as liquidated damages, additional interest shall become payable in respect of the notes as follows: (1) If (a) the Exchange Offer Registration Statement or Shelf Registration Statement is not filed within 120 days after the date of the indenture or (b) notwithstanding that we have consummated or will consummate an Exchange Offer, we are required to file a Shelf Registration Statement and such Shelf Registration Statement is not filed on or prior to the date required by the Registration Rights Agreement; (2) If (a) an Exchange Offer Registration Statement or Shelf Registration Statement is not declared effective within 210 days after the date of the indenture or (b) notwithstanding that we have consummated or will consummate an Exchange Offer, we are required to file a Shelf Registration Statement and such Shelf Registration Statement is not declared effective by the Commission on or prior to the 90th day following the date on which such Shelf Registration Statement was filed; or (3) If either (a) we have not exchanged the New Notes for all notes validly tendered in accordance with the terms of the Exchange Offer on or prior to the 255th day after the date of the indenture or (b) the Exchange Offer Registration Statement ceases to be effective at any time prior to the time that the Exchange Offer is consummated or (c) if applicable, the Shelf Registration Statement ceases to be effective at any time prior to the second anniversary of the date of the indenture; (each such event referred to in clauses (1) through (3) above, a "Registration Default"), the sole remedy available to holders of the Old Notes will be the immediate assessment of additional interest ("Additional Interest") as follows: the per annum interest rate on the Old Notes will increase by 1.0%, and the per annum interest rate will increase by an additional 0.50% for each subsequent 90-day period during which the Registration Default remains uncured, up to a maximum additional interest rate of 2.0% per annum in excess of the interest rate on the cover of this prospectus. All Additional Interest will be payable to holders of the Old Notes in cash on each interest payment date, commencing with the first such date occurring after any such Additional Interest commences to accrue, until such Registration Default is cured. After the date on which such Registration Default is cured, the interest rate on the Old Notes will revert to the interest rate originally borne by the Old Notes (as shown on the cover of this prospectus). The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Registration Rights Agreement, a copy of which will be available upon request to the Company. 150 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES Scope of Discussion The following general discussion summarizes certain material United States federal income tax consequences that apply to beneficial owners of the notes who acquire the notes at their original issue price for cash and hold the notes as a "capital asset," generally, for investment, under Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). This summary, however, does not consider state, local or foreign tax laws. In addition, it does not include all of the rules which may affect the United States tax treatment of your investment in the notes. For example, special rules not discussed here may apply to you if you are: . a broker-dealer, a dealer in securities or a financial institution; . an S corporation; . a bank; . a thrift; . an insurance company; . a tax-exempt organization; . a partnership or other pass-through entity; . subject to the alternative minimum tax provisions of the Code; . holding the notes as part of a hedge, straddle or other risk reduction or constructive sale transaction; . a person with a "functional currency" other than the U.S. dollar; or . United States expatriate. This discussion only represents our best attempt to describe certain United States federal income tax consequences that may apply to you based on current United States federal tax law. We have not sought and will not seek any rulings from the Internal Revenue Service regarding the matters discussed below. This discussion may in the end inaccurately describe the federal income tax consequences which are applicable to you because the law may change, possibly retroactively, and because the IRS or any court may disagree with this discussion. If you are a partner in a partnership, you should consult your own tax advisor regarding special rules that may apply. This summary may not cover your particular circumstances because it does not consider foreign, state or local tax rules, disregards certain federal tax rules such as the estate and gift taxes, and does not describe future changes in federal tax rules. Please consult your tax advisor rather than relying on this general description. Exchange of Old Notes Pursuant to the Exchange Offer The exchange of Old Notes for New Notes pursuant to the exchange offer will not be a taxable event for United States federal income tax purposes. You will not recognize gain or loss upon the receipt of New Notes. If you are not exempt from United States federal income tax, you will be subject to such tax on the same amount, in the same manner and at the same time as you would have been as a result of holding the Old Notes. If you are a cash-basis holder who is exchanging Old Notes for New Notes, you will not recognize in income any accrued and unpaid interest on the Old Notes by reason of the exchange. The basis and holding period of the New Notes will be the same as the basis and holding period of the corresponding Old Notes. United States Holders If you are a "United States Holder," as defined below, this section applies to you. Otherwise, the section "Non-United States Holders," applies to you. 151 Definition of United States Holder. You are a "United States Holder" if you are the beneficial owner of a note and you are, for United States federal income tax purposes: . a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the "substantial presence" test under Section 7701(b) of the Code; . a corporation created or organized in the United States or under the laws of the United States or of any political subdivision of the United States; . an estate, the income of which is subject to United States federal income tax regardless of its source; . a trust, if a United States court can exercise primary supervision over the administration of the trust and one or more United States persons can control all substantial decisions of the trust, or if the trust was in existence on August 20, 1996 and has elected to continue to be treated as a United States person. Taxation of Stated Interest. Generally, you must include the interest on the notes in ordinary income: . when it accrues, if you use the accrual method of accounting for United States federal income tax purposes; or . when you receive it, if you use the cash method of accounting for United States federal income tax purposes. Original Issue Discount. The notes were issued with original issue discount ("OID") for United States federal income tax purposes. The amount of OID on a note is the excess of a note's "stated redemption price at maturity" over its "issue price." Generally, the "stated redemption price at maturity" of a note is the amount payable at maturity (other than qualified stated interest). The "issue price" is the first price at which a substantial amount of notes are sold for money (excluding sales to bond houses, brokers or similar persons or organizations acting as underwriters, placement agents or wholesalers). U.S. Holders generally must include OID in gross income for United States federal income tax purposes on an annual basis under a constant yield accrual method regardless of their regular method of tax accounting. As a result, U.S. Holders will include OID in income in advance of the receipt of cash attributable to such income. However, U.S. Holders of the notes generally will not be required to include separately in income cash payments received on such notes, to the extent such payments constitute payments of OID which were previously accrued and included in income. The amount of OID includible in income by a U.S. Holder of a note is the sum of the "daily portions" of OID with respect to the note for each day during the taxable year or portion thereof in which such U.S. Holder holds such note. A daily portion is determined by allocating to each day in any "accrual period" a pro rata portion of the OID that accrued in such period. The "accrual period" of a note may be of any length and may vary in length over the term of the note, provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs either on the first or last day of an accrual period. The amount of OID that accrues with respect to any accrual period is the product of the note's "adjusted issue price" at the beginning of such accrual period and its yield to maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of such period) less any qualified stated interest allocable to the accrual period. The "adjusted issue price" of a note at the start of any accrual period is equal to its issue price, increased by OID previously includible in income for each prior accrual period and decreased by any payments made on such note (other than payments of qualified stated interest). Market Discount. The market discount rules discussed below apply to any note purchased after original issue at a price less than its "revised issue price." Generally the "revised issued price" of a note is equal to the issue price of the note, plus the aggregate amount of OID includible in the gross income of all prior holders of such note for all periods prior to such purchase, less the amount of any payments made on such note other than payments of qualified stated interest. 152 If a United States Holder of a note, other than a holder who purchased the note upon original issuance, acquires the note for an amount that is less than its principal amount (i.e., at a market discount), and such difference exceeds a statutorily-defined DE MINIMIS amount, and the United States Holder thereafter recognizes gain upon a disposition or retirement of the note, then the United States Holder will recognize ordinary income at the time of the disposition in the amount of the lesser of the gain recognized and the portion of the market discount that accrued on a ratable basis (or, if elected, on a constant interest rate basis). In addition, market discount with respect to a note may be taxable to a United States Holder to the extent of appreciation in the value of the note at the time of certain otherwise nontaxable transactions (i.e., gifts). Absent an election to include market discount in income as it accrues, a United States Holder of a market discount note may be required to defer a portion of any interest expense that may otherwise be deductible on any indebtedness incurred or maintained to purchase or carry such note until the United States Holder disposes of the note in a taxable transaction. Any market discount will be considered to accrue ratably during the period from the date of acquisition to the maturity date of the note, unless the United States Holder elects to accrue the market discount using a constant interest method. A United States Holder may elect to include market discount in income currently as it accrues (on either a ratable or constant interest method), in which case the rule described above regarding deferral of interest deductions will not apply. This election to include market discount in income currently, once made, applies to all market discount obligations acquired after the first taxable year to which the election applies and may not be revoked without the consent of the Internal Revenue Service. Amortizable Bond Premium. If a U.S. Holder's initial tax basis in a note exceeds its stated redemption price at maturity, such holder generally will be considered to have acquired the note with "amortizable bond premium" and will not have to include any OID in income with respect to such note. The amount of amortizable bond premium is computed based on the redemption price on an earlier call date if such computation results in a smaller amortizable bond premium attributable to the period of such earlier call date. A U.S. Holder generally may elect to amortize such premium using the constant yield to maturity method. The amount amortized in any year generally will be treated as a reduction of a holder's interest income on the note. If the amortizable bond premium allocable to a year exceeds the amount of interest allocable to that year, the excess would be allowed as a deduction for that year but only to the extent that a holder's prior interest inclusions exceed bond premium deductions on the note. The election to amortize the premium on a constant yield to maturity method, once made, generally applies to all bonds held or subsequently acquired by a U.S. Holder on or after the first day of the first taxable year to which the election applies. A U.S. Holder may not revoke this election without the consent of the IRS. Acquisition Premium. If a U.S. Holder purchases a note for an amount that is in excess of its adjusted issue price but less than or equal to its stated redemption price at maturity, such U.S. Holder will generally be considered to have purchased the note with "acquisition premium" in an amount equal to the excess of the holder's adjusted basis in the note immediately after it is acquired over the adjusted issue price of the note. The "daily portion" of OID that would otherwise accrue with respect to a note will be reduced by an amount equal to such daily portion of OID multiplied by a fraction, the numerator of which is the excess of the holder's adjusted basis in the note immediately after it is acquired over the adjusted issue price of the note, and the denominator of which is the remaining OID to be accrued on the note. Alternatively, a U.S. Holder purchasing a note with acquisition premium may elect to compute OID accruals by treating the purchase as a purchase at original issue and apply the mechanics of the constant yield method. Sale or Other Taxable Disposition of the Notes. You must recognize taxable gain or loss on the sale, exchange, redemption, retirement or other taxable disposition of a note. The amount of your gain or loss equals the difference between the amount you receive for the note (in cash or other property, valued at fair market value), except to the extent amounts received are attributable to accrued interest on the note, minus your adjusted tax basis in the note. Your tax basis in the note equals the price you paid for the note increased by any OID included in your income. 153 Your gain or loss will generally be a long-term capital gain or loss if you have held the note for more than one year. Otherwise, it will be a short-term capital gain or loss. Long-term capital gains of certain non-corporate holders are generally taxed at lower rates than items of ordinary income. The use of capital losses is subject to limitations. Payments attributable to accrued interest which you have not yet included in income will be taxed as ordinary interest income. Liquidated Damages/Exchange with New Notes. We intend to take the position that the likelihood of our failing to exchange New Notes for Old Notes pursuant to the registration rights agreement and this exchange offer is remote. However, if we fail to exchange the notes, you must include the payment of additional interest as ordinary income only when such payment is accrued or paid, in accordance with your own method of accounting. The exchange of Old Notes for New Notes pursuant to the exchange offer and the registration rights agreement will not be a taxable event. Your basis in the Old Notes will carry over to the registered notes received and the holding period of the registered notes will include the holding period of the Old Notes surrendered. Information Reporting and Backup Withholding. We will report to holders of the notes and to the IRS the amount of any interest paid and OID accrued on the notes in each calendar year and the amounts of tax withheld, if any, with respect to such payments. You may be subject to a backup withholding tax when you receive interest payments on a note or proceeds upon the sale or other disposition of the note. Certain holders (including, among others, corporations, financial institutions and certain tax-exempt organizations) are generally not subject to backup withholding. In addition, the backup withholding tax will not apply to you if you provide to us or our paying agent your correct social security or other taxpayer identification number, or TIN, in the prescribed manner unless: . the IRS notifies us or our paying agent that the TIN you provided is incorrect; . you underreport interest and dividend payments that you receive on your tax return and the IRS notifies us or our paying agent that withholding is required; . you fail to certify under penalties of perjury that you are not subject to backup withholding. The backup withholding tax rate is 30% for payments made during the years 2002 and 2003, 29% for payments made during the years 2004 and 2005, and 28% for payments made during the years 2006 through 2009. If the backup withholding tax does apply to you, you may use the amounts withheld as a refund or credit against your United States federal income tax liability as long as you provide certain information to the IRS. United States Holders should consult their tax advisors as to their qualification for exemption from backup withholding and the procedures for obtaining such exemption. Non-United States Holders The following general discussion is limited to the United States federal income tax consequences relevant to a "Non-United States Holder." A "Non-United States Holder" is any beneficial owner of a note that is for United States federal income tax purposes a nonresident alien, or a corporation, estate, or trust that is not a United States Holder. Interest. Portfolio Interest Exemption. You will generally not have to pay United States federal income tax on interest (including OID) paid on the notes because of the "portfolio interest exemption" if either: . you represent that you are not a United States person for United States federal income tax purposes and you provide your name and address to us or our paying agent on a properly executed IRS Form W-8BEN (or a suitable substitute form) signed under penalties of perjury; or 154 . a securities clearing organization, bank, or other financial institution that holds customers' securities in the ordinary course of its business holds the note on your behalf, certifies to us or our paying agent under penalties of perjury that it has received IRS Form W-8BEN (or a suitable substitute form) from you or from another qualifying financial institution intermediary, and provides a copy of the Form W-8BEN (or a suitable substitute form) to us or our paying agent. You will not, however, qualify for the portfolio interest exemption described above if: . you own, actually or constructively, 10% or more of the total combined voting power of all classes of our capital stock entitled to vote; . you are a controlled foreign corporation with respect to which we are a "related person" within the meaning of Section 864(d)(4) of the Code; . you are a bank receiving interest described in Section 881(c)(3)(A) of the Code; or . the interest received in connection with the Notes constitutes (or the IRS determines that such interest constitutes) contingent interest as described in Section 871(h)(4) of the Code. Withholding Tax if the Interest Is Not Portfolio Interest. If you do not claim, or do not qualify for, the benefit of the portfolio interest exemption, you may be subject to a 30% withholding tax on the gross amount received, unless reduced or eliminated by an applicable income tax treaty. However, if the payments of interest on a note are effectively connected with the conduct by you of a trade or business in the United States, such payments will be subject to United States federal income tax on a net basis at the rates applicable to United States persons generally (and, if paid to corporate holders, may also be subject to a 30% branch profits tax). If payments are subject to United States federal income tax on a net basis in accordance with the rules described in the preceding sentence, such payments will not be subject to United States withholding tax so long as you provide us or our paying agent with a properly executed IRS Form W-8ECI. Non-United States Holders should consult any applicable income tax treaties, which may provide for a lower rate of withholding tax, exemption from or reduction of the branch profits tax, or other rules different from those described above. Generally, in order to claim any treaty benefits you must submit a properly executed IRS Form W-8BEN. Reporting. We may report annually to the IRS and to you the amount of interest (including OID) paid to you, and the tax withheld, if any, with respect to you. Sale or Other Disposition of Notes. You will generally not be subject to United States federal income tax or withholding tax on gain recognized on a sale, exchange, redemption, retirement, or other disposition of a note unless: . such gain is effectively connected with the conduct by you of a trade or business within the United States, in which case such gain will be subject to United States federal income tax on a net basis at the rates applicable to United States persons generally; . you are an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or . you are subject to Internal Revenue Code provisions applicable to certain United States expatriates. Backup Withholding and Information Reporting. Payments From United States Office. If you receive payments of interest or principal directly from us or through the United States office of a custodian, nominee, agent or broker, you may be subject to both backup withholding and information reporting. 155 With respect to interest payments made on the notes, however, backup withholding and information reporting will not apply if you certify, generally on a Form W-8BEN (or Form W-8ECI) or substitute form, that you are not a United States person in the manner described above under the heading "Non-United States Holders--Interest." Moreover, with respect to proceeds received on the sale, exchange, redemption, or other disposition of a note, backup withholding or information reporting generally will not apply if you properly provide, generally on Form W-8BEN (or Form W-8ECI) (or a suitable substitute form), a statement that you are an "exempt foreign person" for purposes of the broker reporting rules, and other required information. If you are not subject to United States federal income or withholding tax on the sale or other disposition of a note, as described above under the heading "Non-United States Holders--Sale or Other Disposition of Notes," you will generally qualify as an "exempt foreign person" for purposes of the broker reporting rules. Payments From Foreign Office. If payments of principal and interest are made to you outside the United States by or through the foreign office of your foreign custodian, nominee or other agent, or if you receive the proceeds of the sale of a note through a foreign office of a "broker," as defined in the pertinent United States Treasury Regulations, you will generally not be subject to backup withholding or information reporting. You will, however, be subject to backup withholding and information reporting if the foreign custodian, nominee, agent or broker has actual knowledge or reason to know that you are a United States person. You will also be subject to information reporting, but not backup withholding, if the payment is made by a foreign office of a custodian, nominee, agent or broker that has certain relationships to the United States unless the broker has in its records documentary evidence that you are a Non-United States Holder and certain other conditions are met. Refunds. Any amounts withheld under the backup withholding rules may be refunded or credited against the Non-United States Holder's United States federal income tax liability, if the required information is furnished to the IRS. The information reporting requirements may apply regardless of whether withholding is required. Copies of the information returns reporting interest and withholding also may be made available to the tax authorities in the country in which a Non-United States Holder is a resident under the provisions of an applicable income tax treaty or other agreement. This summary does not completely describe the withholding regulations. Please consult your tax advisor to determine how the withholding regulations apply to your particular circumstances. 156 PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for private notes if such private notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for at least 180 days after the exchange offer is completed, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. We will not receive any proceeds from any sale of New Notes by broker-dealers or any other person. New Notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of any such notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit of any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the exchange offer is completed, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holder of private notes) other than commissions or concessions of any brokers or dealers and the fees of any advisors or experts retained by holders of Old Notes, and will indemnify the holders of the private notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. 157 LEGAL MATTERS The validity of the notes offered hereby will be passed upon for us by Baker & Hostetler, Cleveland, Ohio. EXPERTS The financial statement of Gameco, Inc. included in this prospectus has been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, which report expresses an unqualified opinion and includes an explanatory paragraph to describe the issuance of debt on February 8, 2002 and certain acquisitions occurring on February 22, 2002, and is included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The financial statements of Black Hawk Gaming & Development Company, Inc. and subsidiaries included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, which report expresses an unqualified opinion and includes explanatory paragraphs on the adoption of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and the acquisition of the Company on February 22, 2002, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The financial statements of Diversified Opportunities Group Ltd. as of December 31, 2001 and 2000, and for each of the three years in the period ended December 31, 2001 included in this prospectus have been audited by BDO Seidman, LLP, independent public accountants, as stated in their report appearing herein, and are included in reliance upon such reports given upon the authority of said firm as experts in auditing and accounting. The financial statements of Jalou as of December 31, 2001 and 2000, and for the years then ended included in this prospectus have been audited by BDO Seidman, LLP, independent public accountants, as stated in their report appearing herein, and are included in reliance upon such reports given upon the authority of said firm as experts in auditing and accounting. The financial statements of Jalou II Inc. as of December 31, 2001, and for the year then ended included in this prospectus have been audited by BDO Seidman, LLP, independent public accountants, as stated in their report appearing herein, and are included in reliance upon such reports given upon the authority of said firm as experts in auditing and accounting. The financial statements of Colonial Holdings, Inc. as of December 31, 2001 and 2000, and for each of the three years in the period ended December 31, 2001 included in this prospectus have been audited by BDO Seidman, LLP, independent public accountants, as stated in their report appearing herein, and are included in reliance upon such reports given upon the authority of said firm as experts in auditing and accounting. 158 INDEX TO FINANCIAL STATEMENTS
Page ---- GAMECO, INC. Balance Sheet........................................................ F-3 Notes to Balance Sheet............................................... F-4 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. Consolidated Balance Sheets December 31, 2001 and 2000............... F-8 Consolidated Statements of Income for the Years Ended December 31, 2001, 2000 and 1999................................................ F-9 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2001, 2000 and 1999................................... F-10 Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999............................................ F-11 Notes to Consolidated Financial Statements for the Years Ended December 31, 2001, 2000 and 1999................................... F-12 DIVERSIFIED OPPORTUNITIES GROUP LTD. Consolidated Balance Sheets.......................................... F-28 Consolidated Statements of Income.................................... F-29 Consolidated Statements of Members' Equity........................... F-30 Consolidated Statements of Cash Flows................................ F-31 Notes to Consolidated Financial Statements........................... F-32 JALOU Combined Balance Sheets.............................................. F-47 Combined Statements of Income and Owners' Equity..................... F-48 Combined Statements of Cash Flows.................................... F-49 Summary of Accounting Policies....................................... F-50 Notes to Combined Financial Statements............................... F-53 JALOU II, INC. (an S Corporation) Consolidated Balance Sheet........................................... F-57 Consolidated Statement of Income and Retained Earnings............... F-58 Consolidated Statement of Cash Flows................................. F-59 Summary of Accounting Policies....................................... F-60 Notes to Consolidated Financial Statements........................... F-63 COLONIAL HOLDINGS, INC. Consolidated Balance Sheets.......................................... F-66 Consolidated Statements of Operations................................ F-67 Consolidated Statements of Stockholders' Equity...................... F-68 Consolidated Statements of Cash Flows................................ F-69 Notes to Consolidated Financial Statements........................... F-70
F-1 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Gameco, Inc. We have audited the accompanying balance sheet of Gameco, Inc. as of December 31, 2001. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit of the balance sheet provides a reasonable basis for our opinion. In our opinion, such balance sheet presents fairly, in all material respects, the financial position of Gameco, Inc. as of December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. As more fully described in Note 3 to the balance sheet, on February 8, 2002, Gameco completed a $125,000,000 private placement that was used to fund the acquisitions described in Note 4. DELOITTE & TOUCHE LLP Denver, Colorado May 10, 2002 F-2 GAMECO, INC. BALANCE SHEET DECEMBER 31, 2001 ASSETS OTHER ASSETS--Debt issue costs................................................... $1,334,267 ---------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES--Accounts payable............................................ 1,334,267 ---------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY--Common stock; $.01 par value; 1,500 shares authorized; none issued and outstanding......................................................... ---------- Total stockholders' equity................................................ ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................................... $1,334,267 ==========
See notes to balance sheet. F-3 GAMECO, INC. NOTES TO BALANCE SHEET AS OF DECEMBER 31, 2001 (Dollars in thousands) 1. BUSINESS AND ORGANIZATION Gameco, Inc. ("Gameco" or the "Company") was formed on April 17, 2001, as an S-Corporation to become a geographically diversified gaming and pari-mutuel wagering company with properties in Colorado, Nevada, Louisiana, and Virginia. The Company's sole shareholders, who each own 50% of Gameco's common stock, are Jeffrey P. Jacobs and the Richard E. Jacobs Revocable Trust, of which Richard E. Jacobs is the sole trustee (collectively, "Jacobs"). As a result of the transactions described in Notes 3 and 4, effective February 22, 2002, Gameco owns and operates three land based casinos, six truck plaza video gaming facilities, and a horse racing track with three off-track wagering facilities. In addition, the Company receives a percentage of gaming revenue from an additional truck plaza video gaming facility and leases and operates a fourth off-track wagering facility. Until these acquisitions were completed, the Company had not conducted any operations. 2. SIGNIFICANT ACCOUNTING POLICES Debt Issue Costs--Debt issue costs represent costs incurred to complete the Company's $125,000 Senior Secured Notes private placement described in Note 3. These costs have been capitalized and will be amortized using the effective interest method over the seven-year life of the related Senior Secured Notes. In addition, the Company incurred an additional $5,298 in similar costs during 2002 which will also be capitalized and amortized over seven years. Income Taxes--No current or deferred income taxes have been reflected in the accompanying balance sheet of the Company since these taxes are the responsibility of the shareholders. Recently Issues Accounting Standards--In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, Business Combinations ("SFAS No. 141"). SFAS No. 141 improves the transparency of the accounting and reporting for business combinations by requiring that all business combinations be accounted for under the purchase method. This Statement is effective for all business combinations initiated after June 30, 2001. The Company adopted SFAS No. 141 on January 1, 2002, and the adoption of SFAS No. 141 did not have any impact on the Company's financial position or results of operations (see Note 4). In July 2001, FASB issued SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"). This Statement applies to intangibles and goodwill acquired after June 30, 2001, as well as goodwill and intangibles previously acquired. Under SFAS No. 142, goodwill as well as other intangibles determined to have an indefinite life will no longer be amortized; however, these assets will be reviewed for impairment on a periodic basis. The Company adopted SFAS No. 142 on January 1, 2002, and the adoption of SFAS No. 142 did not have any impact on the Company's financial position or results of operations. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144). SFAS No. 144 supercedes current accounting guidance relating to impairment of long-lived assets and provides a single accounting methodology for long-lived assets to be disposed of, and also supercedes existing guidance with respect to reporting the effects of the disposal of a business. The Company adopted SFAS No. 144 on January 1, 2002, and the adoption of SFAS No. 144 did not have any impact on the Company's financial position or results of operations. 3. LONG TERM DEBT On February 8, 2002, Gameco completed a $125,000 private placement of 11 7/8% Senior Secured Notes (the "Notes") due 2009, with interest payable on each February 1 and August 1, with payments beginning F-4 GAMECO, INC. NOTES TO BALANCE SHEET--(Continued) AS OF DECEMBER 31, 2001 August 1, 2002. The Notes were issued at a 3.96% discount from their principal amount, resulting in a discount of $4,950 which is being amortized using the effective interest method over the expected life of the Notes. The proceeds of the Notes were primarily used to fund the acquisition of the common stock of the entities described in Note 4, and to refinance certain debt of these entities in connection with the acquisitions. The Notes are secured by substantially all of the assets of the acquired entities. 4. ACQUISITIONS On February 22, 2002, Gameco simultaneously completed the acquisition of a 100% interest in entities in which Jacobs owns either a full, majority, or minority interest. The entities involved in the transaction, and the accounting treatment for the components of the acquisitions are described below. Diversified Opportunities Group, Ltd. ("Diversified") and Jalou L.L.C. and Jalou II (collectively, "Jalou")--Jacobs contributed substantially all of its interests in Diversified and its 100% interest in Jalou II in exchange for 100% of the common stock of Gameco. On the acquisition date, prior to the acquisition of the remaining shares of the entities described below, Diversified owned 100% of Jalou L.L.C., approximately 44% of Colonial Holdings, Inc. ("Colonial"), approximately 32% of Black Hawk Gaming & Development Company. Inc. ("Black Hawk"), and a 25% interest in the Lodge Casino at Black Hawk (the "Lodge"), located in Black Hawk, Colorado, of which the remaining 75% is owned by Black Hawk. The exchange of Gameco shares for the interests of Diversified and Jalou II on February 22, 2002, was accounted for as a combination of entities under common control which is similar to the pooling of interests method of accounting for business combinations. Accordingly, Gameco's results from January 1, 2002, through February 22, 2002, will include 44%, 32%, and 25% of the operations of Colonial, Black Hawk, and the Lodge, respectively, and 100% of the operations of these entities thereafter as a result of the acquisition of the remaining shares of these entities on February 22, 2002. Furthermore, as described in more detail below, the operations of the Jalou properties acquired in 2001 will be included in Gameco's 2002 results from January 1, 2002, and the operations of the Jalou properties acquired in 2002 will be included in Gameco's results for the period subsequent to their respective acquisition dates. Jalou--Jalou owns and operates six truck plaza video gaming facilities, and receives a percentage of gaming revenue from an additional truck plaza video gaming facility in Louisiana. The ownership interest of the Jalou entities and the acquisition dates for each property, is as follows. Jalou LLC--Houma Truck Plaza and Casino and an interest in the gaming revenues of Cash's Truck Plaza and Casino were acquired on February 7, 2001. Bayou Vista Truck Plaza and Casino and Lucky Magnolia Truck Stop and Casino were acquired on January 11, 2002, and Raceland Truck Plaza and Casino was acquired on February 22, 2002. Jalou II--Winner's Choice Casino was acquired on February 7, 2001, and Colonels Truck Plaza and Casino was acquired on January 11, 2002. These acquisitions were recorded using the purchase method of accounting for business combinations, and the total purchase price for these properties acquired in 2002 was approximately $20,282,000. Colonial--Colonial owns and operates and a horse racing track with three off-track wagering facilities, and leases and operates a fourth off-track wagering facility in Virginia. On February 22, 2002, Gameco acquired the remaining 31% of Colonial's common stock for approximately $4,820 which was recorded using the purchase method of accounting for business combinations, and accordingly, 100% of Colonial's operations will be included in Gameco's results for the period subsequent to the acquisition date. F-5 GAMECO, INC. NOTES TO BALANCE SHEET--(Continued) AS OF DECEMBER 31, 2001 Black Hawk--Black Hawk owns a 75% interest in the Lodge and a 100% interest in both the Gilpin Hotel and Casino and the Gold Dust West Casino, located in Black Hawk, Colorado, and Reno, Nevada, respectively. On February 22, 2002, Gameco acquired the remaining 56% of Black Hawk's common stock for approximately $36,980 and assumed and refinanced approximately $59,950 of Black Hawk's outstanding debt. This transaction was recorded using the purchase method of accounting for business combinations, and accordingly, 100% of Black Hawk's operations will be included in Gameco's results for the period subsequent to the acquisition date. The following table summarizes the values assigned to assets acquired and liabilities assumed as of February 22, 2002. Gameco is in the process of obtaining third-party valuations of its tangible assets and identification and valuation of its intangible assets; thus, the allocation of purchase price is subject to refinement. However, Gameco does not anticipate material changes from the amounts presented below.
Black Colonial Jalou Hawk Totals - -------- ------- -------- -------- Current assets................. $ 3,327 $ 5,825 $ 12,441 $ 21,053 Property and equipment, net.... 49,410 15,302 87,700 152,412 Other assets................... 728 262 8,968 9,958 Goodwill....................... 11,876 23,885 35,761 Identifiable intangible assets. 8,046 8,046 ------- ------- -------- -------- Total assets acquired....... 53,465 40,771 132,994 227,230 ------- ------- -------- -------- Current liabilities............ 8,282 2,033 9,181 19,496 Long-term debt................. 17,517 26,299 102,761 146,577 ------- ------- -------- -------- Total liabilities assumed... 25,799 28,332 111,942 166,073 ------- ------- -------- -------- Net assets acquired..... $27,666 $12,439 $ 21,052 $ 61,157 ======= ======= ======== ========
Identifiable intangible assets are comprised of $6,000 in revenue rights associated with the acquisition of Cash's Truck Plaza and Casino, and $2,046 in device use rights associated with the acquisitions of Houma Truck Plaza and Casino, Bayou Vista Truck Plaza and Casino, Lucky Magnolia Truck Stop and Casino, Raceland Truck Plaza and Casio, Winner's Choice Casino and Colonels Truck Plaza and Casino. The revenue rights and the device use rights will be amortized over 50 years and 5 years, respectively, representing the initial terms of the related agreements. Goodwill resulting from the transactions is attributable to anticipated future cash flows associated with the acquired entities. F-6 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Black Hawk Gaming & Development Company, Inc. Black Hawk, Colorado We have audited the accompanying consolidated balance sheets of Black Hawk Gaming & Development Company, Inc. and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. 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 auditing standards generally accepted in the United States of America. 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, such consolidated financial statements present fairly, in all material respects, the financial position of Black Hawk Gaming & Development Company, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 2 to the consolidated financial statements, on January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133 Accounting for Derivative Instruments and Hedging Activities. As discussed in Note 1 to the consolidated financial statements, on February 22, 2002, Black Hawk Gaming & Development Company, Inc. was acquired by an entity formed by its principal stockholder. DELOITTE & TOUCHE LLP Denver, Colorado March 22, 2002 F-7 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2001 AND 2000
2001 2000 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents.............................................. $ 15,676,901 $ 8,518,464 Accounts receivable.................................................... 116,985 740,804 Inventories............................................................ 551,944 535,231 Prepaid expenses....................................................... 1,511,111 671,546 Deferred income tax.................................................... 546,906 440,470 ------------ ------------ Total current assets................................................ 18,403,847 10,906,515 LAND....................................................................... 18,973,620 15,413,619 GAMING FACILITIES: Building and improvements.............................................. 63,573,285 58,109,038 Equipment.............................................................. 24,766,407 18,487,936 Accumulated depreciation............................................... (19,032,468) (14,134,293) ------------ ------------ Total gaming facilities............................................. 69,307,224 62,462,681 OTHER ASSETS: Goodwill, net of accumulated amortization of $2,825,759 and $1,369,615 for 2001 and 2000, respectively............................ 19,016,410 5,374,461 Other assets........................................................... 3,215,432 3,318,973 Deferred income tax.................................................... 777,922 ------------ ------------ TOTAL...................................................................... $129,694,455 $ 97,476,249 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses.................................. $ 4,635,700 $ 5,095,255 Income taxes payable................................................... 665,723 225,000 Accrued payroll........................................................ 556,149 526,931 Gaming taxes payable................................................... 2,766,977 2,673,927 Property taxes payable................................................. 753,656 940,655 Slot club liability.................................................... 949,375 760,297 Current portion of long-term debt...................................... 387,354 783,587 ------------ ------------ Total current liabilities........................................... 10,714,934 11,005,652 LONG-TERM DEBT AND OTHER LIABILITIES: Reducing and revolving credit facility................................. 58,800,000 29,900,000 Bonds payable.......................................................... 4,911,708 5,298,624 ------------ ------------ Total long-term debt................................................ 63,711,708 35,198,624 Interest rate swap liability........................................... 1,910,897 Deferred income tax liability.......................................... 701,967 469,920 ------------ ------------ Total liabilities................................................... 77,039,506 46,674,196 ------------ ------------ COMMITMENTS AND CONTINGENCIES MINORITY INTEREST.......................................................... 7,412,971 8,739,694 STOCKHOLDERS' EQUITY: Preferred stock; $.001 par value; 10,000,000 shares authorized; none issued and outstanding........................................... Common stock; $.001 par value; 40,000,000 shares authorized; 4,154,400 and 4,126,757 shares issued and outstanding, respectively... 4,154 4,127 Additional paid-in capital............................................. 18,753,219 18,569,538 Accumulated other comprehensive loss................................... (1,172,725) Retained earnings...................................................... 27,657,330 23,488,694 ------------ ------------ Total stockholders' equity.......................................... 45,241,978 42,062,359 ------------ ------------ TOTAL...................................................................... $129,694,455 $ 97,476,249 ============ ============
See notes to consolidated financial statements. F-8 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 and 1999
2001 2000 1999 ------------ ------------ ------------ REVENUES: Casino revenue.............................. $100,698,614 $ 81,987,862 $ 81,902,996 Food and beverage revenue................... 11,930,869 9,152,795 8,827,171 Hotel revenue............................... 1,392,179 1,047,558 1,106,287 Other....................................... 1,626,413 744,190 740,369 ------------ ------------ ------------ Total revenues.......................... 115,648,075 92,932,405 92,576,823 Promotional allowances.................. (17,099,049) (14,057,615) (12,970,296) ------------ ------------ ------------ Net revenues............................ 98,549,026 78,874,790 79,606,527 ------------ ------------ ------------ COSTS AND EXPENSES: Casino operations........................... 31,367,788 26,014,337 25,260,708 Food and beverage operations................ 10,745,009 8,210,397 8,624,562 Hotel operations............................ 639,701 469,011 416,642 Marketing, general and administrative....... 32,093,399 24,800,259 25,400,938 Privatization and other non-recurring costs. 1,509,344 Depreciation and amortization............... 7,788,636 5,746,136 5,443,119 ------------ ------------ ------------ Total costs and expenses................ 84,143,877 65,240,140 65,145,969 ------------ ------------ ------------ OPERATING INCOME............................... 14,405,149 13,634,650 14,460,558 Interest income............................. 182,038 285,255 244,682 Interest expense............................ (5,271,324) (3,423,609) (4,585,725) ------------ ------------ ------------ INCOME BEFORE MINORITY INTEREST AND INCOME TAXES............................. 9,315,863 10,496,296 10,119,515 MINORITY INTEREST.............................. (2,029,731) (2,059,744) (1,767,717) ------------ ------------ ------------ INCOME BEFORE INCOME TAXES..................... 7,286,132 8,436,552 8,351,798 ------------ ------------ ------------ PROVISION FOR INCOME TAXES: Current..................................... 3,097,724 2,574,652 2,696,104 Deferred.................................... 19,772 400,942 232,896 ------------ ------------ ------------ 3,117,496 2,975,594 2,929,000 ------------ ------------ ------------ NET INCOME..................................... $ 4,168,636 $ 5,460,958 $ 5,422,798 ============ ============ ============
See notes to consolidated financial statements. F-9 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
Accumulated Common Stock Additional Other ---------------- Paid-in Comprehensive Retained Shares Amount Capital Loss Earnings Total --------- ------ ------- ------------- ----------- ----------- BALANCES, JANUARY 1, 1999................................. 4,087,346 $4,087 $18,216,385 $12,604,938 $30,825,410 Exercise of stock options....................... 22,863 23 139,252 139,275 Compensation under nonqualified stock options.................................. 111,068 111,068 Net income........................................ 5,422,798 5,422,798 --------- ------ ----------- ----------- ----------- ----------- BALANCES, DECEMBER 31, 1999............................... 4,110,209 4,110 18,466,705 18,027,736 36,498,551 Stock issued for compensation................... 1,548 2 9,998 10,000 Exercise of stock options....................... 15,000 15 92,835 92,850 Net income...................................... 5,460,958 5,460,958 --------- ------ ----------- ----------- ----------- ----------- BALANCES, DECEMBER 31, 2000............................... 4,126,757 4,127 18,569,538 23,488,694 42,062,359 Stock issued for compensation................... 3,476 4 25,996 26,000 Exercise of stock options....................... 24,167 23 157,685 157,708 Comprehensive income: Transition adjustment as a result of the adoption of Statement of Financial Accounting Standards No. 133, net of income taxes.................................. $ 367,941 367,941 Reclassification adjustment for amortization of cumulative transition adjustment, included in net income, net of income taxes......................................... (157,691) (157,691) Unrealized loss on interest rate swap, net of income taxes.................................. (1,382,975) (1,382,975) Net income........................................ 4,168,636 4,168,636 --------- ------ ----------- ----------- ----------- ----------- Total comprehensive income...................... 2,995,911 ----------- BALANCES, DECEMBER 31, 2001............................... 4,154,500 $4,154 $18,753,219 $(1,172,725) $27,657,330 $45,241,978 ========= ====== =========== =========== =========== ===========
See notes to consolidated financial statements. F-10 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999 ------------ ------------ ------------ OPERATING ACTIVITIES: Net income..................................................................... $ 4,168,636 $ 5,460,958 $ 5,422,798 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................................................ 7,788,636 5,746,136 5,443,119 Change in fair value of interest rate swap, net.............................. 74,815 Minority interest............................................................ 2,029,731 2,059,744 1,767,717 Loss on sale of equipment.................................................... 133,333 146,535 85,185 Noncash compensation......................................................... 26,000 12,500 121,068 Deferred taxes............................................................... 19,772 400,942 232,896 Changes in operating assets and liabilities, net of the impact of acquisition: Accounts receivable........................................................... 623,819 (550,760) (25,967) Inventories................................................................... 30,412 21,951 (2,689) Prepaid expenses and other assets............................................. (1,340,602) (21,999) (2,533,117) Accounts payable, accrued expenses and other current liabilities.......................................................... 116,554 (325,191) 1,498,983 ------------ ------------ ------------ Net cash provided by operating activities.................................. 13,671,106 12,950,816 12,009,993 ------------ ------------ ------------ INVESTING ACTIVITIES: Construction and equipping of gaming facility.................................. (4,966,906) (2,407,334) (3,260,592) Acquisition costs related to the Gold Dust West................................ (2,384) (696,411) Deposit related to the Gold Dust West.......................................... (500,000) Acquisition of the Gold Dust West, net of cash acquired........................ (26,000,000) Proceeds from the sale of equipment............................................ 109,766 91,534 51,519 ------------ ------------ ------------ Net cash used in investing activities...................................... (30,859,524) (3,512,211) (3,209,073) ------------ ------------ ------------ FINANCING ACTIVITIES: Proceeds from GHC revolving line of credit..................................... 6,573,122 Proceeds from bonds............................................................ 6,000,000 Proceeds from reducing and revolving credit facility........................... 36,500,000 47,940,534 Proceeds from the City of Black Hawk for public improvements................... 380,000 Payments on bonds.............................................................. (362,239) (339,137) Payment to retire construction loan............................................ (32,317,500) Payment to retire GHC revolving line of credit................................. (12,706,000) Payment to refinance pre-existing debt......................................... (2,222,015) Payment to amend reducing and revolving credit facility........................ (571,247) Payments on long-term debt and GHC revolving line of credit.................... (420,913) (378,252) (8,874,275) Payments on reducing and revolving credit facility............................. (7,600,000) (9,100,000) (13,167,977) Distributions to minority interest owner....................................... (3,356,454) (1,435,337) (1,193,951) Exercise of stock options...................................................... 157,708 92,850 139,275 ------------ ------------ ------------ Net cash provided by (used in) financing activities........................ 24,346,855 (11,159,876) (9,448,787) ------------ ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................. $ 7,158,437 $ (1,721,271) $ (647,867) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR..................................... 8,518,464 10,239,735 10,887,602 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS, END OF YEAR........................................... $ 15,676,901 $ 8,518,464 $ 10,239,735 ============ ============ ============ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest......................................................... $ 5,387,720 $ 3,392,236 $ 4,550,322 ============ ============ ============ Cash paid for income taxes..................................................... $ 2,357,000 $ 2,893,334 $ 2,453,299 ============ ============ ============
See notes to consolidated financial statements. F-11 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 1. BUSINESS Black Hawk Gaming & Development Company, Inc. and subsidiaries (the "Company" or "BHWK") is an owner, developer and operator of gaming properties in Black Hawk, Colorado. Through April 23, 1998, the Company owned a 50% interest in the Gilpin Hotel Venture ("GHV"), which owned the Gilpin Hotel Casino, which the Company developed and has managed since 1992. On April 24, 1998, the Company acquired the other 50% interest in GHV and related land for $10 million (see Note 3). In November 1996, the Company entered into an Amended and Restated Purchase Agreement and an Operating Agreement to form Black Hawk/Jacobs Entertainment LLC (the "LLC") for the purpose of developing and managing a casino/hotel/parking complex in Black Hawk, Colorado, The Lodge Casino at Black Hawk (the "Lodge"). During the second quarter of 1998, the Company completed the development of the casino portion of the Lodge, which opened for business on June 24, 1998. On August 17, 1998, the hotel portion of the project opened, and on November 6, 1998, the parking garage opened. The total cost of the casino/hotel/parking complex was approximately $74 million (see Note 4). On January 4, 2001, the Company purchased the assets and operating business of the Gold Dust Motel, Inc. d/b/a Gold Dust West (the "GDW"), located in Reno, Nevada, for $26.5 million (see Note 5). In addition, included within the Company is BHWK corporate ("Corporate"). Generally, Corporate operations are not a profit center, but rather a managerial entity which directs the overall operations of the Company. On February 22, 2002, an entity formed by the Company's principal stockholder, Chairman of the Board and Chief Executive Officer, Jeffrey P. Jacobs, acquired all of the outstanding shares of the Company that he did not already own, for $12.00 per share resulting in a total aggregate purchase price of $36,980,000. The Company's stockholders approved this transaction on January 4, 2002. During 2001, the Company incurred $1,374,344 in connection with this transaction, and has recorded these costs in privatization and other non-recurring costs in the accompanying 2001 consolidated statement of income. 2. SIGNIFICANT ACCOUNTING POLICIES Consolidation--The accompanying consolidated balance sheets as of December 31, 2001 and 2000, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2001, include the accounts of the Company, the GHV, and beginning on January 4, 2001, the Company's 100% ownership interest in the GDW. All inter-company transactions and balances have been eliminated in consolidation. The Company also records minority interest, which reflects the portion of the equity and earnings of the LLC which are applicable to the 25% minority interest owners of the LLC. Cash Equivalents--The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Inventory--Inventory consists of food and beverages, chips and tokens and uniforms and are recorded at the lower of cost (first-in, first-out method) or market. F-12 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Gaming Facilities--Building and improvements and equipment are depreciated using the straight-line method over the estimated useful lives of the assets (39 years for building and improvements, and 5 to 7 years for equipment). Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred. Gains or losses on disposal of assets are recognized as incurred. Goodwill--Goodwill represents the excess purchase price over the fair value of the net identifiable assets acquired related to the Company's acquisition of the 50% interest in GHV and related land, the Company's 50% share of pre-existing goodwill of GHV, and the Company's acquisition of the GDW. Amortization of goodwill is provided using the straight-line method over 15 years. Debt Issue Costs--Debt issue costs are capitalized and amortized, using the straight-line method (which approximates the effective interest method), over the life of the related loan. Slot Club Liability--The Company's casinos offer customers the ability to become members in their respective slot clubs. Once a member, the customer can insert a special card into slot and video poker machines while playing in the Company's casinos to earn "points." Based on their point totals, members receive various cash rewards and gift prizes. The Company accrues the cost of points as they are earned by the members of the slot clubs. Outstanding Gaming Chip and Token Liability--When customers exchange cash for gaming chips and tokens, the Company has a liability as long as those chips and tokens are not redeemed or won by the house. That liability is established by determining the difference between the total chips and tokens placed in service and the actual inventory of chips and tokens in custody or under the control of the casinos. The chip and token liability is adjusted periodically to reflect an estimate of chips and tokens that will never be redeemed, such as chips and tokens that have been lost or taken as souvenirs. Casino Revenues--Casino revenues are the net winnings from gaming activities, which is the difference between gaming wins and losses. Hotel, Food and Beverage, and Other Revenue--The Company recognizes hotel, food and beverage and other revenue at the time that goods or services are provided. Promotional Allowances--Gross revenues include the retail amount of hotel and food and beverages provided gratuitously to customers which amounted to $8,125,376, $6,556,640 and $6,079,643 for the years ended December 31, 2001, 2000 and 1999, respectively. When computing net revenues, the retail amount of hotel and food and beverages gratuitously provided to customers is deducted from gross revenues as promotional allowances. The estimated cost of such complimentary services is charged to casino operations and was $4,148,760, $3,273,000 and $3,123,000 for the years ended December 31, 2001, 2000 and 1999, respectively. (See additional discussion of amounts affecting promotional allowance in the EITF 00-14 and EITF 00-22 paragraphs below). Income Taxes--The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. SFAS No. 109 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Long-Lived Assets--The Company periodically evaluates the value of long-lived assets, including goodwill, for potential impairment. If an impairment is indicated, based on estimated undiscounted future cash flows that are less than the carrying value of the asset, such impaired assets are written down to their estimated fair value. As of December 31, 2001 and 2000, management determined that there was no impairment of the Company's long-lived assets. F-13 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Minority Interest--The Company records minority interest, which reflects the portion of the equity and earnings of the LLC which are applicable to the minority interest owners of the LLC. Stock Issued for Services--Common stock was issued, or accrued for issuance, to directors in 2001, 2000, and 1999 for services, and was valued at the market value as of the date awarded. Included in marketing, general and administrative expenses in the consolidated statements of income for the years ended December 31, 2001, 2000 and 1999 is $13,500, $12,500 and $10,000, respectively, of expenses related to stock issued or accrued for services. Employee Stock Compensation Plans--The Company uses the intrinsic value method to account for stock options and similar stock-based employee compensation plans. The exercise price of stock options issued to employees equals the market price of the stock on the measurement date, and therefore, the Company does not record compensation expense on stock options granted to employees. Options granted to non-employees are valued at estimated fair value and charged to operations as earned. See Note 9 for discussion of the Company's stock options plans. Operating Segments--As of January 4, 2001, the Company acquired the GDW (see Note 5). This acquisition expanded the Company's operations into a second gaming jurisdiction other than Black Hawk, Colorado creating a new operating segment as defined by SFAS No. 131, Disclosures about Segments of anEnterprise and Related Information ("SFAS No. 131") (see Note 13). Derivative Financial Instruments--The Company uses derivative instruments to manage exposures to interest rate risk. The Company's primary objective for holding derivatives is to minimize the risks associated with the impact of interest rate exposure. Specifically, the Company uses interest rate swaps, as cash flow hedging instruments, to manage its exposure to interest rate risk on its variable-rate debt. The Company does not enter into derivative transactions for trading purposes, or for fixed rate debt. Derivative financial instruments taken alone may expose the Company to varying degrees of market and credit risk in excess of amounts recognized in the financial statements. However, when used for hedging purposes, these instruments typically reduce overall interest rate risk. The Company controls the credit risk of its financial contracts through credit approvals, limits, and monitoring procedures. As the Company enters into derivative transactions only with high quality institutions, no losses associated with non-performance on its derivative financial instrument have occurred or are expected to occur. Effective January 1, 2001 the Company adopted SFAS No. 133, Accounting for Derivative Instrumentsand Hedging Activities ("SFAS No. 133"). SFAS No. 133, as amended and interpreted, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. If the derivative has been designated in a fair-value hedge, the changes in the fair value of the derivative and the hedged item are recognized in earnings. If the derivative has been designated in a cash-flow hedge, changes in the fair value of the derivative are recorded in other comprehensive income net of taxes, and recognized in the income statement when the hedged item affects earnings. SFAS No. 133 defines new requirements for designation and documentation of hedging relationships as well as ongoing effectiveness assessments in order to use hedge accounting. For a derivative that does not qualify as a hedge, changes in fair value are recognized in current earnings. The adoption of SFAS No. 133 resulted in the Company recording a $367,941 gain (net of $200,059 in taxes) in accumulated other comprehensive loss as a transition adjustment for its derivative instrument which had been designated in a hedging relationship that addressed the variable cash flow exposure of a forecasted transaction prior to adopting SFAS No. 133. (See Note 7). F-14 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Use of Estimates--The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America 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 periods. Significant estimates used by the Company include the estimated useful lives for depreciable and amortizable assets and estimated cash flows in assessing the recoverability of long-lived assets. Actual results could differ from those estimates. Reclassifications--Certain reclassifications have been made in the 2000 and 1999 financial statements to conform with the classifications used in 2001. These reclassifications had no effect on the Company's financial position or net income. Recently Issued Accounting Standards--In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, Business Combinations ("SFAS No. 141"). SFAS No. 141 improves the transparency of the accounting and reporting for business combinations by requiring that all business combinations be accounted for under the purchase method. This Statement is effective for all business combinations initiated after June 30, 2001. The Company adopted SFAS No. 141 on July 1, 2001, and the adoption of SFAS No. 141 did not have a material impact on the Company's financial position or results of operations. In July 2001, FASB issued SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"). This Statement applies to intangibles and goodwill acquired after June 30, 2001, as well as goodwill and intangibles previously acquired. Under SFAS No. 142, goodwill as well as other intangibles determined to have an indefinite life will no longer be amortized; however, these assets will be reviewed for impairment on a periodic basis. The Company adopted SFAS No. 142 on January 1, 2002, and although it is still reviewing the provisions of SFAS No. 142, management's preliminary assessment is that the Statement will not have a material impact on the Company's financial position or results of operations. During the years ended December 31, 2001, 2000 and 1999, amortization expense on goodwill was $1,456,144, $437,886 and $562,023, respectively. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"). SFAS No. 144 supercedes current accounting guidance relating to impairment of long-lived assets and provides a single accounting methodology for long-lived assets to be disposed of, and also supercedes existing guidance with respect to reporting the effects of the disposal of a business. SFAS No. 144 was adopted January 1, 2002, without a material impact on the Company's financial position or results of operations. In January 2001, FASB announced that the Emerging Issues Task Force ("EITF") had reached a final consensus on EITF 00-22, Accounting for 'Points' and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to Be Delivered in the Future ("EITF 00-22"). EITF 00-22 requires that certain sales incentives provided by vendors that entitle a customer to receive a reduction in the price of a product or service based on a specified cumulative level of transactions be recognized as a reduction in revenue. This issue is scoped broadly to include all industries that utilize point or other loyalty programs, including the hospitality and gaming industries. During 2001, the Company adopted this standard and reflected $4,829,838 of player point redemption expenses as a component of promotional allowances. The Company also reclassified $4,390,958 and $4,235,787 of similar costs incurred during 2000 and 1999, respectively, from marketing, general and administrative expenses to promotional allowances to conform with the 2001 presentation of such expenses. F-15 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) In March 2001, the FASB announced that the EITF had reached a final consensus on EITF 00-14, Accounting for Certain Sales Incentives ("EITF 00-14"). EITF 00-14 requires when recognized, the reduction in or refund of the selling price of the product or service resulting from any cash sales incentive should be classified as a reduction of revenue. The consensus reached should be applied no later than in financial statements for the period beginning after December 15, 2001, with earlier adoption encouraged. During 2001, the Company adopted this standard and reflected $4,143,835 of coupon expenses as a component of promotional allowances. The Company also reclassified $3,110,017 and $2,654,866 of similar costs incurred during 2000 and 1999, respectively, from marketing, general and administrative expenses to promotional allowances to conform with the 2001 presentation of such expense. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB No. 101"), as amended. SAB No. 101 clarifies existing accounting principles related to revenue recognition in financial statements. The Company adopted SAB No. 101 during the fourth quarter of 2000. The adoption of SAB No.101 did not affect the Company's revenue recognition practices. 3. GILPIN HOTEL VENTURE In May 1991, the Company entered into an agreement to purchase a one-half interest in undeveloped land and an historic hotel property known as the Gilpin Hotel, both located in Black Hawk, Colorado. Simultaneously, the Company entered into a joint venture agreement (the "Agreement") to form GHV with Gilpin Ventures, Inc. ("GVI"), the owners of the remaining one-half interest in the properties, for the purpose of developing and operating a limited-stakes gaming and restaurant facility, the Gilpin Hotel Casino (the "Gilpin"). The Gilpin opened for business in October 1992. Each party owned 50% of GHV. Under the terms of the Agreement, the Company was the manager of the joint venture. On April 24, 1998, the Company acquired the other 50% interest in GHV and related land for $10,000,000. The acquisition was accounted for by the Company under the purchase method of accounting and accordingly, 100% of GHV's results of operations are included in the accompanying financial statements. 4. BLACK HAWK/JACOBS ENTERTAINMENT LLC In December 1994, the Company signed a joint venture agreement with Jacobs Entertainment, Inc. ("Jacobs") of Cleveland, Ohio, to develop a major casino/hotel/parking structure complex in Black Hawk, Colorado, named The Lodge Casino at Black Hawk. Construction of the 250,000 square foot project began in January 1997. The casino portion of the project was completed and opened for business on June 24, 1998. As a result of the refinements during the development process, it was decided to incorporate a three-story overflow parking structure into the Lodge project. Two stories of the overflow parking structure provide parking for the Lodge, and the third-story of the structure provides a portion of the parking for the Gilpin Hotel Casino. The hotel portion of the project and the garage were completed during August 1998 and November 1998, respectively. On November 12, 1996, the Company entered into an agreement with Diversified Opportunities Group, Inc. ("Diversified") and BH Entertainment Ltd. ("BH") (both affiliates of Jacobs) whereby Diversified, BH and the Company created the LLC in which the Company is a 75% member and the Jacobs' affiliates are a 25% member. 5. GOLD DUST WEST CASINO--ACQUISITION On January 4, 2001, the Company purchased the assets and operating business of the GDW, a casino and motel located in Reno, Nevada, for $26,500,000. This transaction was recorded using the purchase method of accounting for business combinations, and accordingly, 100% of the GDW's operations are included in the Company's results for the period subsequent to the acquisition date. F-16 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company obtained an appraisal of the assets of the GDW at the date of acquisition, and the total purchase price, including approximately $698,000 of transaction costs, was allocated to the GDW assets as follows: Cash....................................... $ 45,000 Land....................................... 3,560,000 Building, furniture, fixtures and equipment 7,701,000 Other assets............................... 96,000 Acquisition costs.......................... 698,000 Goodwill................................... 15,098,000 ----------- Total purchase price....................... $27,198,000 ===========
Assuming the GDW acquisition had occurred on January 1, 2000, for the year ended December 31, 2000, net revenues would have been $97,899,205, and net income would have been $6,295,331. The pro forma financial information is not necessarily indicative of either the results of operations that would have occurred had this agreement been effective on January 1, 2000, or of future operations. 6. LONG-TERM DEBT Long-term debt consists of the following at December 31:
2001 2000 ----------- ----------- Reducing and revolving credit facility amended January 4, 2001, upon acquisition of GDW; a four year reducing and revolving facility totaling $75 million; interest accrues at either the prime rate published by Wells Fargo Bank or the LIBOR rate plus an applicable margin based upon financial ratios maintained by the Company (approximately 8.94% for the quarter ended December 31, 2001); two quarterly reductions in availability commence January 2002 at $1,875,000 each, the next four quarterly reductions in availability commencing July 2002 of $2,812,500 each, with the following four quarterly reductions in availability commencing July 2003 of $3,750,000 each, until April 16, 2004, when the balance of the facility is due Substantially all of the assets of the Company, GHV, the LLC and the GDW are pledged as collateral under the facility................. $58,800,000 $29,900,000 Bonds payable; issued in two series with interest payments varying between 6.25% and 6.50%; principal and interest payments approximating $360,000 are due semi-annually beginning in June 2000 continuing until December 2011; secured by the street and other infrastructure improvements made by the LLC.............................. 5,298,624 5,660,863 Note payable; payments of $40,863, including principal and interest at 11.66% per annum due monthly through 2001, when the remaining principal and interest balance is due; secured by GHV equipment.......... 420,910 Other...................................................................... 438 438 ----------- ----------- 64,099,062 35,982,211 Less current portion....................................................... 387,354 783,587 ----------- ----------- Total...................................................................... $63,711,708 $35,198,624 =========== ===========
F-17 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) On December 21, 2000, the Company entered into the first amendment to its existing reducing and revolving credit facility with an effective date of January 4, 2001, the acquisition date of the assets and operating business of the GDW. On January 4, 2001, the Company borrowed $30,500,000 on this credit facility, of which $27,198,000 was used to fund the acquisition. The first amendment to the Company's credit agreement increased the aggregate reducing and revolving credit facility to $75,000,000. Debt issue costs of $483,000 were incurred on this transaction and are being amortized over the life of the related debt, in accordance with the Company's accounting policy. In conjunction with the Company's acquisition on February 22, 2002, discussed in Note 1, $1,543,264 in capitalized debt issue costs related to the Company's Wells Fargo reducing and revolving credit facility were charged to operations during the first quarter of 2002. The reducing and revolving credit facility contains a number of affirmative and negative covenants, which among other things require the Company to maintain certain financial ratios and refrain from certain actions without the approval of the bank syndicate group's concurrence. As of December 31, 2001, the Company is in compliance with all such debt covenants. Scheduled principal payments as of December 31, 2001, are as follows: 2002...... $ 387,354 2003...... 6,713,273 2004...... 52,941,427 2005...... 471,498 2006...... 503,617 Thereafter 3,081,893 ----------- Total..... $64,099,062 ===========
In conjunction with the Company's acquisition discussed in Note 1, the Company's reducing and revolving credit facility was paid. 7. DERIVATIVE FINANCIAL INSTRUMENT As discussed in Note 2, the Company is a party to an interest rate swap agreement with off-balance-sheet risk. This derivative transaction is used to hedge interest rate risk in the Company's variable rate debt. Prior to its termination on February 16, 2001, the interest rate swap agreement ("IRS No. 1") provided that, on a quarterly basis, the Company paid a fixed rate of 5.18% on the notional amount of $35,000,000 and received a payment based on LIBOR applied to the notional amount. Gains or losses on the interest rate exchange were included in interest expense as realized or incurred. From January 1, 2001 through February 16, 2001, the Company recorded a $318,000 charge to interest expense due to the devaluation of IRS No. 1. Although the transition adjustment was reflected in other comprehensive loss, subsequent changes in the value of IRS No. 1 are reflected in the income statement because the swap was not designated as a hedging instrument as defined by SFAS No. 133. As a result of terminating IRS No. 1, the Company reclassified $157,691 (net of $85,921 in taxes) of the transition gain from other comprehensive loss to interest expense representing the amortization over its original term. F-18 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) On February 16, 2001, the Company terminated IRS No. 1 and simultaneously entered into a new interest rate swap agreement ("IRS No. 2"), with the same counterparty, with an initial notional amount of $50,000,000 including scheduled reductions of $10,000,000 each at December 31, 2002 and December 31, 2003, until final maturity on April 16, 2004. IRS No. 2 provides that, on a quarterly basis, the Company pays a fixed rate of 5.46% on the notional amount of $50,000,000 and receives a payment based on LIBOR applied to the notional amount. IRS No. 2 has been documented and designated as a cash flow hedge as defined by SFAS No. 133. Derivative losses included in other comprehensive loss for the year ended December 31, 2001 amounted to $1,382,975 net of $777,922 in taxes reflecting the decline in market value of IRS No. 2. Derivative losses included in accumulated other comprehensive loss are charged to earnings at the time interest expense is recognized on the Wells Fargo Bank debt. Derivative losses of $426,351 net of $239,823 in taxes on IRS No. 2 were reclassified to interest expense in 2001. In conjunction with the Company's acquisition on February 22, 2002, discussed in Note 1, the Company terminated its $50,000,000 interest rate swap with a charge to operations of $2,655,000. 8. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosure of estimated fair value of the Company's financial instruments has been determined by the Company using available market information and generally accepted valuation methodologies. However, considerable judgment is required to interpret market data in order to develop the estimates of fair value. Accordingly, the estimates herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The asset (liability) amounts for the Company's financial instruments are as follows:
2001 2000 -------------------------- -------------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value ------------ ------------ ------------ ------------ Liabilities--Debt..... $(64,099,062) $(64,099,062) $(35,982,000) $(35,982,000) Interest Rate Swap Agreement........ (1,910,897) (1,910,897) 568,000
The estimation methodologies utilized by the Company are summarized as follows: Debt--The fair value of variable-rate debt is estimated to be equal to its carrying amount. The fair value of fixed rate debt is estimated to be equal to its carrying amount, based on the prevailing market interest rates for debt of similar dollar amount, maturity and risk. Interest Rate Swap Agreement--The fair value of the interest rate swap agreement is based on the present value of estimated payments that would be received or paid by the Company over the term of the swap, based on the forward interest rate swap curve as of December 31, 2001 and 2000, respectively. F-19 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The estimated fair value of the Company's other financial instruments, such as cash and cash equivalents, accounts receivable and accounts payable, have been determined to approximate carrying value based on the short-term nature of those financial instruments. 9. STOCK OPTIONS The Company currently has two stock option plans: the 1994 Employees' Incentive Stock Option Plan ("1994 Plan") and the 1996 Incentive Stock Option Plan ("1996 Plan"). The 1994 Plan provides for the grant of incentive stock options to officers, directors and employees of the Company for 300,000 shares of common stock. The 1996 Plan provides for the grant of stock options, including incentive stock options and non-qualified stock options for 500,000 shares of common stock. At December 31, 2001, there were 25,483 shares available for future grants under the 1994 Plan, and 100,600 shares were available for future grants under the 1996 Plan. Stock option transactions are summarized as follows:
Weighted Average Number of Exercise Price Exercise Price Shares Per Share Per Share --------- -------------- -------------- Outstanding at January 1, 1999.. 545,913 $5.63- $8.38 $5.86 Granted.......... 93,000 $6.25- $8.38 $7.23 Exercised........ (22,863) $6.19 $6.19 Forfeited........ (25,750) $5.63- $8.38 $5.71 ------- Outstanding at December 31, 1999 590,300 $5.63- $8.38 $6.07 ------- Granted.......... 45,000 $6.46 $6.46 Exercised........ (15,000) $6.19 $6.19 Forfeited........ (4,250) $8.38 $8.38 ------- Outstanding at December 31, 2000 616,050 $5.63- $8.38 $6.08 ------- Exercised........ (24,167) $6.19- $8.38 $6.53 Forfeited........ (77,633) $5.63- $8.38 $6.93 ------- Outstanding at December 31, 2001 514,250 $5.63- $8.38 $5.93 =======
Options granted under the 1994 Plan generally vest proportionately over three years on June 30 following the grant date. Options granted under the 1996 Plan generally vest proportionately over three years on each of the first, second, and third anniversary dates of the grant. The number of stock option shares exercisable at December 31, 2001 was 449,250. These stock options have a weighted average exercise price of $5.84 per share. As discussed in Note 2, the Company follows the intrinsic value method to account for stock options issued to employees, resulting in no compensation expense since options are granted at market price. Had compensation cost for the Company's plans been determined based on the fair value of the options at the grant date, the Company's net income would have been reduced to the pro forma amounts indicated below:
2001 2000 1999 ---------- ---------- ---------- Net income--as reported $4,168,636 $5,460,958 $5,422,798 Net income--pro forma.. $4,088,125 $5,322,587 $5,233,447
F-20 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The weighted average fair value of the stock options granted was $0 in 2001, $4.06 in 2000 and $4.60 in 1999. The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in 2000 and 1999: risk-free interest rate of 5.11%, and 5.50%, respectively; expected dividend yield of 0%; expected life of three years; and expected volatility of 124.07% and 98.613%, respectively. The outstanding stock options at December 31, 2001 have a weighted average remaining contractual life of 4.69 years. On November 12, 1996, the Company issued options for 85,000 shares of common stock to non-employees, which vest one-third on each anniversary date of the grant. The fair value of the options was $333,200, which was amortized to operations over the vesting period. The consolidated financial statements for the years ended December 31, 2001, 2000 and 1999 reflect compensation expense of $0, $0 and $111,068, respectively, related to the vesting of the non-qualified options. In conjunction with the Company's acquisition discussed in Note 1, all options outstanding on that date became 100% vested, and the Company recognized a $3,121,346 charge to operations on February 22, 2002 representing the difference between the respective options' strike price and the per share acquisition price of $12.00. 10. INCOME TAXES Income tax expense includes the following current and deferred provisions for the years ended December 31:
2001 2000 1999 ---------- ---------- ---------- Current. $3,097,724 $2,574,652 $2,696,104 Deferred 19,772 400,942 232,896 ---------- ---------- ---------- Total... $3,117,496 $2,975,594 $2,929,000 ========== ========== ==========
Income tax expense includes the following federal and state components for the years ended December 31:
2001 2000 1999 ---------- ---------- ---------- Federal $2,783,338 $2,730,107 $2,562,875 State.. 334,158 245,487 366,125 ---------- ---------- ---------- Total.. $3,117,496 $2,975,594 $2,929,000 ========== ========== ==========
The Company's income tax expense for the years ended December 31, 2001, 2000 and 1999 varies from the amount expected by applying the federal tax rate due to the following items:
2001 2000 1999 ---------- ---------- ---------- Expected federal income tax expense....... $2,477,285 $2,868,428 $2,839,611 State income taxes, net of federal benefit 188,711 258,158 258,906 Non-deductible privatization costs........ 406,125 Other, net................................ 45,375 (150,992) (169,517) ---------- ---------- ---------- Total..................................... $3,117,496 $2,975,594 $2,929,000 ========== ========== ==========
F-21 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company's deferred income taxes at December 31, 2001 and 2000, are comprised of the following:
2001 2000 ---------- -------- Deferred income tax assets: Accrued expenses............................. $ 546,906 $440,470 Derivative financial instrument.............. 777,922 ---------- -------- Total gross deferred income tax assets....... 1,324,828 440,470 Deferred income tax liabilities: Land and gaming facilities basis differences. 171,899 295,973 Start-up costs and intangible assets......... 424,229 173,947 Derivative financial instrument.............. 105,839 ---------- -------- Total gross deferred income tax liabilities.. 701,967 469,920 ---------- -------- Net deferred income tax asset (liability)....... $ 622,861 $(29,450) ========== ========
Net deferred income tax expense allocated to stockholders' equity was $(672,083), $0 and $0 for the years ended December 31, 2001, 2000 and 1999, respectively. Although realization is not assured, management has evaluated the available evidence about future taxable income and other possible sources of realization of deferred income tax assets. A valuation allowance against deferred income tax assets at December 31, 2001 and 2000, is not considered necessary because management believes it is more likely than not the deferred income tax asset will be fully realized. On March 11, 2002, the Company and the LLC received notice from the Internal Revenue Service asserting deficiencies in federal corporate income taxes for the Company's 1998 tax year. The proposed adjustment indicates an increase to taxable ordinary income for the 1998 tax year of $1,192,762, and relates to the deductibility of depreciation taken against certain costs incurred by the LLC to build and improve public assets. The Company and the LLC have analyzed these matters and believe it has meritorious defenses to the deficiencies asserted by the Internal Revenue Service. The Company and the LLC will contest the asserted deficiencies through the administrative appeals process. The Company and the LLC believe that any amounts assessed for the 1998 and future tax years will not have a material effect on the Company's financial position or results of operations. Due to the preliminary nature of this proceeding, management is unable to reasonably estimate the amount, or range of amounts, of any potential income tax liability associated with the notice. In conjunction with the Company's acquisition on February 22, 2002, discussed in Note 1, during 2002 the Company filed an election to change its tax status as a C-Corporation to an S-Corporation. Upon conversion to an S-Corporation, no provision for federal income taxes will be reflected in the Company's financial statements as the stockholders will report any taxable income or loss of the Company on their personal tax returns. In addition, upon conversion to an S-Corporation the Company will charge net deferred tax assets to operations, as a component of income tax expense. The Company will also record a deferred income tax liability related to built-in gains based on the tax effect of the difference between the fair market value and tax basis of any assets for which management does not have the ability and intent to hold for 10 years after the Company's election to convert to an S-Corporation. The amount of the deferred income tax liability has not yet been determined. Management's preliminary assessment is that recognition of any deferred income tax liability will not have a material impact on the Company's financial position or results of operations. F-22 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 11. RELATED PARTIES The Company and Diversified share a management fee of 5% of adjusted gross gaming proceeds for the gaming operations of the LLC. For the first year of operations, the sharing ratio of this management fee was disbursed 60% to the Company and 40% to Diversified. For all subsequent periods of operations, the management fee is disbursed 50% to the Company and 50% to Diversified. During the periods ended December 31, 2001, 2000 and 1999, Diversified was paid $1,541,229, $1,453,473 and $1,274,033, respectively, for management fees from the LLC. An officer, director and significant stockholder of the Company and certain of his affiliates received an annual credit enhancement fee of 2% of the amount guaranteed, as defined, for personally guaranteeing the Company's construction loan used in the development of the Lodge. Total credit enhancement fees paid during the years ended December 31, 2001, 2000 and 1999 were $0, $0 and $226,693, respectively. Effective October 1, 1997, the Company entered into an agreement with an affiliate of an officer, director and significant stockholder of the Company to assist the Company in its efforts to research, develop, perform due diligence and possibly acquire new gaming opportunities. The agreement, as amended, expires December 31, 2002. The annual cost to the Company under the agreement was $225,000 in 2001, 2000, and 1999. 12. COMMITMENTS AND CONTINGENCIES On February 27, 2001, a stockholder of the Company filed a class action lawsuit against the Company and its Board of Directors in Colorado District Court for the County of Gilpin. The plaintiff alleges, among other things, that the buyout proposal is being dictated by Mr. Jacobs, the Company's principal stockholder, at a price which is grossly unfair and unconscionable to other stockholders and is designed to serve only his best interests. Further, the plaintiff alleges than an adequate process is not in place to seek other bids or to achieve the highest price attainable for the public's shares. The plaintiff alleges that Mr. Jacobs has proprietary corporate information and economic power which is unfair to public stockholders. Finally, the plaintiff alleges that the individual defendants are acting in concert with Mr. Jacobs and therefore breaching their fiduciary duties to the stockholders. The plaintiff seeks to enjoin the transaction, rescind the transaction if it is consummated, and recover unspecified compensatory or recissory damages and legal fees and costs. On March 1, 2001, another purported class action lawsuit was filed in the Colorado District Court, County of Gilpin against the Company and its Board of Directors. The allegations in this case are, in essence, the same as those described immediately above. The relief sought by the plaintiffs is also essentially the same. The Company's Board of Directors believes that it and the Special Committee it has appointed have met and will continue to meet their respective fiduciary obligations. The Company believes both suits are without merit, will be vigorously contested, and neither suit will result in a material liability; however, no assurance can be given in this regard. Along with the Company, the LLC and other LLC members were named as defendants in an action for trespass brought in late January 1998. The action was dismissed without prejudice on January 3, 1999. A trustee was appointed by the court on December 22, 1998 to represent the purported interests of the former plaintiff, if any. The trustee filed a similar action in September 1999 against the previous defendants, including the Company, containing essentially the same allegations as the previous case. Subsequent to year end, the Company settled this action for $58,000. The full amount of the settlement has been accrued as of December 31, 2001, and is included as a component of accounts payable and accrued expenses, and marketing, general and administrative expenses, in the accompanying consolidated financial statements. F-23 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) On June 25, 1999, a complaint against the LLC and John Does 1-3 was filed by a casino operating downstream from these casinos. The complaint alleges, among other things, that the plaintiff is being damaged by subsurface water flows onto its property from the LLC property and the properties of John Does 1-3. The LLC has denied all liability and has turned the matter over to its insurance carrier for defense. The Company does not believe the suit has merit and will continue to defend against the allegations alleged by the plaintiff. The Company does not believe the suit will result in any material liability; however, no assurance can be given in this regard. The Company is also involved in routine litigation arising in the ordinary course of business. These matters are believed by the Company to be covered by appropriate insurance policies. On January 1, 1997, the Gilpin Hotel Casino Employees' 401(k) Plan (re-named Black Hawk Gaming & Development Company's 401(k) Plan on March 31, 1999) (the "Plan") was organized and began accepting contributions on September 1, 1997. The Plan is a defined contribution plan covering eligible employees of the Company. The Plan allows eligible employees to make tax-deferred contributions that are matched by the Company up to a specified level. The Company contributed approximately $273,809, $237,000 and $161,000 to the Plan for the years ended December 31, 2001, 2000 and 1999, respectively. 13. SEGMENT INFORMATION As defined by SFAS No. 131, the Company has two geographically defined reportable segments comprised of (1) the Gilpin and the Lodge, in Black Hawk, Colorado and (2) the GDW, in Reno, Nevada. The Corporate operations represent all other revenues and expenses, and they are also shown. All inter-segment and inter-company transactions and balances have been eliminated. The casinos in Black Hawk, Colorado, primarily serve the residents of metropolitan Denver, Colorado. As such, the Company believes that significantly all revenues are derived from within 150 miles of that geographic area. The casino in Reno, Nevada, caters to the "locals" market. The Company believes that significantly all revenues are derived from Reno, Nevada and surrounding areas. The accounting policies of these segments are the same as those described in Note 2. Segment financial information as of and for the years ended December 31, 2001, 2000 and 1999 is presented as follows. Segment financial information as of and for the years ended December 31, 2000 and 1999 is not presented for the Reno, Nevada segment as the Company did not operate in that segment prior to January 2001. F-24 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2001 2000 1999 ----------- ----------- ----------- Net revenues: Black Hawk, Colorado............................... $80,038,394 $78,874,790 $79,606,527 Reno, Nevada....................................... 18,510,632 ----------- ----------- ----------- Total net revenues.................................... $98,549,026 $78,874,790 $79,606,527 =========== =========== =========== Depreciation and amortization: Black Hawk, Colorado............................... $ 5,752,538 $ 5,736,113 $ 5,435,206 Reno, Nevada....................................... 2,020,209 Corporate.......................................... 15,889 10,023 7,913 ----------- ----------- ----------- Total depreciation and amortization................... $ 7,788,636 $ 5,746,136 $ 5,443,119 =========== =========== =========== Operating income: Black Hawk, Colorado............................... $15,397,279 $15,767,484 $16,799,975 Reno, Nevada....................................... 2,730,756 Corporate.......................................... (3,722,886) (2,132,834) (2,339,417) ----------- ----------- ----------- Total operating income................................ 14,405,149 13,634,650 14,460,558 =========== =========== =========== Interest income: Black Hawk, Colorado............................... $ 136,266 $ 261,431 $ 210,764 Reno, Nevada....................................... 20,135 Corporate.......................................... 25,637 23,824 33,918 ----------- ----------- ----------- Total interest income................................. $ 182,038 $ 285,255 $ 244,682 =========== =========== =========== Interest expense: Black Hawk, Colorado............................... $(3,420,550) $(3,423,609) $(4,585,725) Reno, Nevada....................................... (1,850,774) ----------- ----------- ----------- Total interest expense................................ $(5,271,324) $(3,423,609) $(4,585,725) =========== =========== =========== Income before minority interest and income taxes: Black Hawk, Colorado............................... $12,112,995 $12,605,306 $12,425,014 Reno, Nevada....................................... 900,117 Corporate.......................................... (3,697,249) (2,109,010) (2,305,499) ----------- ----------- ----------- Total income before minority interest and income taxes $ 9,315,863 $10,496,296 $10,119,515 =========== =========== =========== Provision for income taxes, Corporate................. $ 3,117,496 $ 2,975,594 $ 2,929,000 =========== =========== ===========
F-25 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, December 31, 2001 2000 ------------ ------------ Total assets: Black Hawk, Colorado............... $ 96,033,561 $ 94,375,942 Reno, Nevada....................... 30,089,875 Corporate.......................... 23,782,897 27,408,707 ------------ ------------ Total assets................... 149,906,333 121,784,649 ------------ ------------ Corporate adjustments and eliminations (20,211,878) (24,308,400) ------------ ------------ Consolidated total assets............. $129,694,455 $ 97,476,249 ============ ============ Additions to long lived assets: Black Hawk, Colorado............... $ 2,766,121 $ 2,379,568 Reno, Nevada....................... 2,125,999 Corporate.......................... 74,786 27,766 ------------ ------------ Total additions to long lived assets.. $ 4,966,906 $ 2,407,334 ============ ============ Long-term debt: Black Hawk, Colorado............... $ 41,411,708 $ 35,198,624 Reno, Nevada....................... 22,300,000 ------------ ------------ Total long-term debt.................. $ 63,711,708 $ 35,198,624 ============ ============
F-26 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Members Diversified Opportunities Group Ltd. We have audited the accompanying consolidated balance sheets of Diversified Opportunities Group Ltd. and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, members' equity, and cash flows for each of the three years in the period ended December 31, 2001. 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 did not audit the financial statements of Black Hawk Gaming & Development, Inc. (Black Hawk), the investment in which, as discussed in Note 3 to the consolidated financial statements, is accounted for under the equity method of accounting. The investment in Black Hawk was $13,031,000 and $11,684,000 as of December 31, 2001 and 2000, respectively, and the equity in its net income was $1,347,000, $1,773,000 and $1,760,000, respectively, for each of the three years in the period ended December 31, 2001. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Black Hawk, is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Diversified Opportunities Group Ltd. and subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. BDO SEIDMAN, LLP Richmond, Virginia April 12, 2002 F-27 DIVERSIFIED OPPORTUNITIES GROUP LTD. CONSOLIDATED BALANCE SHEETS
December 31, December 31, 2001 2000 ------------ ------------ (In Thousands) ASSETS Current assets Cash and cash equivalents.......................................... $ 4,229 $ 2,281 Accounts receivable................................................ 1,148 351 Accounts receivable--affiliates.................................... 1,057 178 Prepaid expenses, inventory and other assets....................... 384 287 -------- ------- Total current assets........................................... 6,818 3,097 Property, plant and equipment Land and improvements.............................................. 15,852 15,640 Buildings and improvements......................................... 50,306 48,586 Equipment, furnishings, and fixtures............................... 4,701 3,497 Leasehold improvements............................................. 1,124 1,124 -------- ------- 71,983 68,847 Less accumulated depreciation and amortization..................... 7,333 5,451 -------- ------- Property, plant and equipment, net............................. 64,650 63,396 -------- ------- Investments........................................................... 21,031 20,514 Goodwill and other intangibles, net................................... 10,470 703 Other................................................................. 136 1,060 -------- ------- Total assets................................................... $103,105 $88,770 ======== ======= LIABILITIES AND MEMBERS' EQUITY Current liabilities Accounts payable and accrued liabilities........................... $ 4,823 $ 4,226 Current maturities of long-term debt and capital lease obligations. 737 936 Current maturities of long-term debt--related parties.............. 21,400 1,200 -------- ------- Total current liabilities...................................... 26,960 6,362 Long-term debt and capital lease obligations.......................... 4,484 1,160 Long-term debt--related parties....................................... 19,003 33,700 -------- ------- Total liabilities.............................................. 50,447 41,222 Minority interest..................................................... 17,308 18,567 Commitments and contingencies Members' equity....................................................... 35,350 28,981 -------- ------- Total liabilities and members' equity.......................... $103,105 $88,770 ======== =======
The accompanying notes are an integral part of the consolidated financial statements. F-28 DIVERSIFIED OPPORTUNITIES GROUP LTD. CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31, ------------------------- 2001 2000 1999 ------- ------- ------- (In Thousands) Revenues Gaming.............................................. $32,300 $27,419 $27,285 Other............................................... 6,770 3,289 3,566 ------- ------- ------- Total revenues.................................. 39,070 30,708 30,851 ------- ------- ------- Operating expenses Direct operating expenses........................... 26,399 22,052 19,420 Selling, general, and administrative expenses....... 7,344 6,777 6,831 Depreciation and amortization....................... 2,527 1,719 1,839 Transaction fees and expenses....................... 624 -- -- ------- ------- ------- Total operating expenses........................ 36,894 30,548 28,090 ------- ------- ------- Income from operations................................. 2,176 160 2,761 Interest expense, net.................................. (3,274) (3,104) (3,091) ------- ------- ------- Loss before equity in investments and minority interest (1,098) (2,944) (330) Equity in earnings of investments...................... 3,377 3,833 3,528 Minority interest in loss.............................. 1,258 1,566 615 ------- ------- ------- Net income............................................. $ 3,537 $ 2,455 $ 3,813 ======= ======= =======
The accompanying notes are an integral part of the consolidated financial statements. F-29 DIVERSIFIED OPPORTUNITIES GROUP, LTD. CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
(In Thousands) -------------- Members' Equity, December 31, 1998................... $18,595 Net income........................................ 3,813 Contributions..................................... 2,000 Distributions..................................... (475) Equity investment acquisition adjustment (Note 3). 1,820 ------- Members' Equity, December 31, 1999................... 25,753 Net income........................................ 2,455 Contributions..................................... 2,000 Distributions..................................... (1,227) ------- Members' Equity, December 31, 2000................... 28,981 Net income........................................ 3,537 Contributions..................................... 3,002 Distributions..................................... (170) ------- Members' Equity, December 31, 2001................... $35,350 =======
The accompanying notes are an integral part of the consolidated financial statements. F-30 DIVERSIFIED OPPORTUNITIES GROUP LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, -------------------------- 2001 2000 1999 -------- ------- ------- (In Thousands) Operating Activities Net income...................................................... $ 3,537 $ 2,455 $ 3,813 Equity income and minority interest............................. (4,635) (5,399) (4,143) Depreciation and amortization................................... 2,527 1,719 1,839 (Increase) decrease in accounts receivable and other assets..... (1,533) (460) 29 Increase (decrease) in accounts payable and accrued liabilities. 597 1,173 (575) -------- ------- ------- Net cash provided (absorbed) by operating activities........ 493 (512) 963 -------- ------- ------- Investing Activities Acquisition costs (Note 2)...................................... (12,104) (860) -- Purchase of fixed assets........................................ (915) (901) (500) Payment of construction payables................................ -- (1,850) (1,046) Additions to notes receivable................................... (900) -- -- Payments received on notes receivable........................... 900 -- -- Funds expended for investments.................................. (208) (173) (62) Distributions received on investments........................... 3,222 1,427 1,193 -------- ------- ------- Net cash provided (absorbed) by investing activities........ (10,005) (2,357) (415) -------- ------- ------- Financing Activities Contributions from members...................................... 3,002 2,000 2,000 Distributions to members........................................ (170) (1,227) (475) Proceeds from long-term debt.................................... 10,232 193 700 Payments on long-term debt...................................... (1,604) (1,123) (1,303) Net increase (decrease) in credit line.......................... -- 2,200 (966) -------- ------- ------- Net cash provided (absorbed) by financing activities........ 11,460 2,043 (44) -------- ------- ------- Increase (Decrease) in Cash........................................ 1,948 (826) 504 Cash, beginning of year............................................ 2,281 3,107 2,603 -------- ------- ------- Cash, end of year.................................................. $ 4,229 $ 2,281 $ 3,107 ======== ======= =======
The accompanying notes are an integral part of the consolidated financial statements. F-31 DIVERSIFIED OPPORTUNITIES GROUP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization, Description of Business and Significant Accounting Policies Organization Diversified Opportunities Group Ltd. (the "Company" or "Diversified") is organized under the laws of the State of Ohio to develop, acquire, hold, manage and dispose of investments in businesses and entities involved in, or associated with, the gaming industry. The members of the Company are The Richard E. Jacobs Revocable Trust and Jacobs Entertainment Ltd., (controlled by Jeffrey P. Jacobs). The Company was formed as a limited liability company. As such, each member's liability is limited to its capital contributions and any obligations to make capital contributions. The term of the Company expires December 31, 2036. Principles of Consolidation The consolidated financial statements include Diversified, and its subsidiaries, BH Entertainment Ltd. (98%), CD Entertainment Ltd. (98%) and its subsidiary Colonial Holdings, Inc. (61% voting interest), and Jalou LLC (100%). All significant intercompany accounts and transactions have been eliminated. Description of Business--Colonial Holdings, Inc. Colonial Holdings, Inc., ("Colonial") formerly Colonial Downs Holdings, Inc., a Virginia corporation, was incorporated in 1996. Colonial owns and operates, through its wholly-owned subsidiaries, Colonial Downs Racetrack (the "Track") in New Kent, Virginia, which primarily conducts pari-mutuel wagering on thoroughbred and standardbred horse racing. Colonial also operates four Racing Centers which provide simulcast pari-mutuel wagering on thoroughbred and standardbred horse racing from selected racetracks throughout the United States. The Company owns, directly, or through its wholly-owned subsidiaries, the operating licenses for the racetrack and the Chesapeake, Richmond, Hampton, and Brunswick Racing Centers; the property for the Richmond, Hampton, and Brunswick Racing Centers; the rights to apply for licenses to own and operate up to two additional Racing Centers in Virginia; the 345 acres on which the racetrack exists; and the racetrack facilities and certain related infrastructure. Description of Business--Jalou, LLC Jalou, LLC ("Jalou") was incorporated in 2000 to purchase and operate truck stops, which consist of a restaurant, a convenience store with fuel pumps, and a video poker casino. Jalou's video gaming operations are regulated by the Louisiana Gaming Control Board (the "LGCB"). The Louisiana State Police's Video Gaming Division ("the Division") serves under the jurisdiction of LGCB. The Division's primary functions are to conduct investigations of applicants and submit application findings to LGCB for licensing determination, enforce all applicable video gaming regulations and monitor licenses and gaming devices statewide. For truck stop video gaming enterprises, such as Jalou's, the number of video gaming devices is determined by average monthly fuel sales. Based on the level of fuel sales, Jalou can operate up to a maximum of 50 gaming devices, per location. Reclassifications Certain reclassifications have been made to the prior years' financial statements to conform to 2001 presentation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. F-32 DIVERSIFIED OPPORTUNITIES GROUP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Cash and Cash Equivalents The Company considers all demand deposits and time deposits with original maturities of three months or less to be cash equivalents. Inventories Inventories are stated at the lower of FIFO cost (first-in, first-out method) or market. Inventories consist of fuel, convenience, and restaurant items at Jalou's truck stop operations. Property, Plant and Equipment Property, plant and equipment are stated at historical cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets. Estimated useful lives used are as follows: Land improvements................... 20 to 40 years Building and improvements........... 5 to 40 years Equipment, furnishings, and fixtures 2 to 20 years Leasehold improvements.............. 7 to 40 years
Costs of betterments, renewals, and major replacements are capitalized. Maintenance, repairs and minor replacements are expensed as incurred. Gains and losses from dispositions are included in the results from operations. Revenue Colonial primarily derives revenue from its share of wagering on import simulcasting at its Racing Centers on races simulcasted from other racetracks. Revenue also is derived from live racing at the Track as well as export simulcasting of its live racing to other racetracks. It also realizes revenue through the management of certain truck stops and gaming assets owned by Jalou II, a related entity. Jalou recognizes revenue at the time of sale for convenience store items, fuel, and restaurant sales. Video poker revenue is recorded net of gaming wins and losses. Horsemen's Purse and Awards Amounts due under agreements with the Virginia Horsemen's Benevolent and Protective Association, Inc. and the Virginia Harness Horse Association are accrued based on the terms of the agreements. Funds for purses for future live race meets are held in restricted cash accounts. As of December 31, 2001 and 2000, approximately $705,000 and $602,000, respectively, were held in the restricted cash accounts. Colonial deposits 30% of breakage revenue into a Benevolent Fund account, as required by law. As of December 31, 2001 and 2000, approximately $101,000 and $63,000 of breakage revenue were included in restricted cash accounts. Goodwill and Other Intangibles Goodwill and other intangibles include the excess of the cost of purchased businesses over the fair value of the net tangible assets acquired and licensing costs associated with Colonial's racetrack and racing centers. Goodwill and other intangibles are being amortized using the straight-line method over 15 years and licensing costs are being amortized over the license period of twenty years. See New Accounting Pronouncements. Long-Lived Assets The carrying values of long-lived assets, principally identifiable intangibles, property, plant and equipment, are reviewed for potential impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, as determined based on the undiscounted cash flows over the remaining amortization periods. If there is evidence of impairment, the carrying value of the related assets would be reduced by the estimated shortfall of discounted cash flows. F-33 DIVERSIFIED OPPORTUNITIES GROUP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Fair Value of Financial Instruments The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practical to estimate. Cash and Cash Equivalents--The carrying amount approximates the fair value due to the short maturity of the cash equivalents. Long-Term Debt--The fair value of the Company's long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The carrying amount approximates fair value since the Company's interest rates approximate current interest rates. Concentration of Credit Risk Financial instruments which potentially subject the Company to credit risk consist of cash equivalents, including horsemen's deposits. The Company's policy is to limit the amount of credit exposure to any one financial institution and place funds with financial institutions evaluated as being creditworthy. At December 31, 2001 the Company had cash deposits which exceeded federally insured limits by approximately $2,994,000. Income Taxes No provision has been made for federal and state income taxes of the Company and Jalou since these taxes are the responsibility of the members. Members share net income and loss in accordance with allocations specified in the Operating Agreement. No provision has been made for Colonial operations since it has had operating losses. New Accounting Standards In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments" ("SFAS 133"). SFAS 133, as amended by SFAS 137 and 138, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. SFAS 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. SFAS 133 requires that an entity recognize all derivatives as either assets or liabilities and measure those instruments at fair market value. Presently, the Company does not use derivative instruments either in hedging activities or as investments. Accordingly, the adoption of SFAS 133, as amended, did not have an impact on the Company's financial position or results of operations. In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, "Business Combinations" ("SFAS 141), and No. 142, "Goodwill and Other Intangible Assets" (SFAS 142"). SFAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 also requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that the Company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142. F-34 DIVERSIFIED OPPORTUNITIES GROUP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company's 2001 acquisitions were accounted for using the purchase method. As of December 31, 2001, the net carrying amount of goodwill and other intangibles related to the acquisitions is approximately $9,878,000. Amortization expense during the year ended December 31, 2001 was approximately $599,000. Currently, the Company is assessing but has not yet determined how the adoption of SFAS 141 and SFAS 142 will impact its financial position and results of operations. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions". This statement also amends ARB No. 51, "Consolidated Financial Statements", to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. This statement requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. This statement also broadens the presentation of discontinued operations to include more disposal transactions. SFAS 144 is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. Currently, the Company is assessing but has not determined how the adoption of SFAS 144 will impact its financial position and results of operations. 2. Acquisitions The Company, through its wholly owned subsidiary Jalou, LLC ("Jalou"), acquired Houma Truck Stop and Casino, LLC and a percentage of operating cash flow of Cash's Truck Stop and Casino (the "Purchased Companies") on February 7, 2001. The acquisitions were accounted for under the purchase method of accounting and as such, the consolidated financial statements include the results of operations of the acquired entities from the date of acquisitions to December 31, 2001. A summary of the acquisitions is approximately as follows: Fair value of assets acquired, net of liabilities Property and equipment......................... $ 2,221,000 Inventory and other, net....................... 266,000 ----------- Net assets acquired............................ 2,487,000 Acquisition cost............................... 12,964,000 ----------- Excess of acquisition cost over fair value of net tangible assets acquired................. $10,477,000 ===========
At December 31, 2000, approximately $960,000 of prepaid acquisition costs, related to the above acquisitions, was included in "Other" assets of the consolidated balance sheets of the Company. The unaudited consolidated results of operations on a proforma basis as though the Purchased Companies had been acquired as of the beginning of 1999 are as follows (in thousands):
Year ended December 31, ----------------------- 2000 1999 ------- ------- Net revenue...................................... $36,697 $32,247 Net income....................................... 3,560 3,619
The proforma financial information is not necessarily indicative of the operating results that would have occurred had the acquisitions been consummated as of the above date, nor are they indicative of future operating results. F-35 DIVERSIFIED OPPORTUNITIES GROUP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 3. Investments Investment in Colonial Holdings, Inc. During 1996, the Company through its subsidiary CD Entertainment Ltd., acquired a 50% interest in Colonial Downs, L.P., a Virginia limited partnership, for a $2,000,000 cash investment. In March 1997, the Company's partnership investment in Colonial Downs, L.P. was exchanged for 1,500,000 shares of Class B common shares of Colonial Holdings, Inc., which then conducted an initial public offering (IPO) of its stock that resulted in a total of 7,250,000 shares outstanding (Class A shares 5,000,000; Class B shares 2,250,000). As a result of the IPO, the Company retained approximately a 22% equity interest and a 46% voting interest in Colonial. In September 1998, the Company purchased 1,140,000 shares of Class A common shares of Colonial Holdings, Inc., in the open market for $1,408,875. As a result, the Company increased its equity and voting interests to approximately 36% and 53%, respectively. In July 1999, the Company received 510,000 Class B and 15,000 Class A shares of Colonial Holdings, Inc. common stock at the agreed-upon value of $2.50 per share as full payment on a note receivable. As a result the Company increased its equity and voting interests to approximately 44% and 69%, respectively. In addition, a cumulative adjustment of approximately $1,820,000 was recorded during 1999, as an equity increase to account for the book value of its investment over the Company's cost. In September 2001, the Company converted 790,000 shares of Colonial Class B common stock to Class A common stock. As a result of the conversion, the Company's equity and voting interests changed to approximately 44% and 61%, respectively. Investment in Black Hawk Gaming & Development, Inc. (Black Hawk) During 1996, the Company acquired 190,476 shares at $5.25 per share, and acquired 1,333,333 shares during 1997 in settlement of a convertible note for the agreed value of $5.25 per share of common stock of Black Hawk, representing a cumulative 32.3% ownership share of the company. Black Hawk is a holding company, which owns, develops and operates gaming properties. F-36 DIVERSIFIED OPPORTUNITIES GROUP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company accounts for its interest in Black Hawk under the equity method of accounting. Under this method, the Company records its share of the income attributable to its share of Black Hawk as an increase to the investment and reduces its investment for actual distributions received. In January 2001, Black Hawk acquired Gold Dust West Casino, which was accounted for under the purchase method of accounting, resulting in the recording of goodwill of approximately $15 million. Condensed data for Black Hawk is as follows (in thousands): Balance Sheets
December 31, December 31, 2001 2000 ------------ ------------ Assets Cash............................. $ 15,677 $ 8,518 Gaming facilities................ 69,307 62,637 Land............................. 18,974 15,239 Accounts receivable.............. 117 741 Goodwill......................... 19,016 5,374 Other assets..................... 6,603 4,967 -------- ------- $129,694 $97,476 ======== ======= Liabilities and Shareholders' Equity Accounts payable and accruals.... $ 10,327 $10,223 Bonds payable and other.......... 5,299 6,082 Bank notes payable............... 58,800 29,900 Other liabilities................ 2,613 470 -------- ------- Total liabilities................... 77,039 46,675 Minority interest................... 7,413 8,739 Shareholders' equity................ 45,242 42,062 -------- ------- $129,694 $97,476 ======== =======
Statements of Income
Year Ended December 31, ------------------------- 2001 2000 1999 ------- ------- ------- Revenues, net..................... $98,549 $78,875 $79,606 Operating expenses................ 84,144 65,240 65,146 ------- ------- ------- Operating income.................. 14,405 13,635 14,460 Interest expense, net............. 5,089 3,139 4,340 ------- ------- ------- Income before minority interest... 9,316 10,496 10,120 Minority interest................. (2,030) (2,060) (1,768) Income taxes...................... (3,117) (2,975) (2,929) ------- ------- ------- Net income........................ $ 4,169 $ 5,461 $ 5,423 ======= ======= ======= Equity in net income of investment $ 1,347 $ 1,773 $ 1,760 ======= ======= =======
F-37 DIVERSIFIED OPPORTUNITIES GROUP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Investment in Black Hawk/Jacobs Entertainment, LLC During 1996, the Company acquired approximately 25% interest (24% through its subsidiary, BH Entertainment Ltd.) in Black Hawk/Jacobs Entertainment LLC, which is a joint venture with Black Hawk. The joint venture owns The Lodge Casino in Black Hawk, Colorado. The Company shares profit and loss and receives a management fee in accordance with the allocations specified within the Operating Agreement. The Company accounts for its interest in the Joint Venture under the equity method of accounting. Under this method, the Company records its share of the income attributable to its share of the Joint Venture as an increase to the investment, and reduces its investment for actual distributions received. Condensed data for the Joint Venture is as follows (in thousands): Balance Sheets
December 31, --------------- 2001 2000 ------- ------- Assets Cash.......................... $ 8,134 $ 5,503 Gaming facilities............. 50,227 52,239 Land.......................... 11,471 11,471 Accounts receivable........... 70 276 Other assets.................. 2,293 2,181 ------- ------- $72,195 $71,670 ======= ======= Liabilities and Members' Equity Accounts payable and accruals. $ 6,539 $ 6,945 Notes payable................. 36,004 29,766 ------- ------- Total liabilities................ 42,543 36,711 Members' equity.................. 29,652 34,959 ------- ------- $72,195 $71,670 ======= =======
Statements of Income
Year Ended December 31, ----------------------- 2001 2000 1999 ------- ------- ------- Revenues, net..................... $59,631 $56,957 $55,659 Operating expenses................ 48,677 46,377 45,566 ------- ------- ------- Operating income.................. 10,954 10,580 10,093 Interest expense, net............. 2,835 2,341 3,022 ------- ------- ------- Net income........................ $ 8,119 $ 8,239 $ 7,071 ======= ======= ======= Equity in net income of investment $ 2,030 $ 2,060 $ 1,768 ======= ======= =======
F-38 DIVERSIFIED OPPORTUNITIES GROUP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 4. Management and Consulting Agreement Colonial entered into a Management and Consulting Agreement (the "Agreement") with Maryland-Virginia Racing Circuit, Inc., an affiliate of the Maryland Jockey Club ("MJC"), to provide experienced management for the Track and Racing Centers and to create a Virginia-Maryland thoroughbred racing circuit. Under the Agreement, Maryland Jockey Club agreed to suspend live racing at their racetracks, Laurel Park and Pimlico Race Course, during Colonial's live thoroughbred meets. Parties to the Agreement also agreed to exchange simulcast signals for their live meets at no cost to either party. An amendment to the Agreement (the "Amended Agreement") was signed by both parties on January 15, 1999, which restructured among other terms MJC's responsibilities as manager and the management fee paid to MJC. Effective July 1, 1999, MJC became responsible for Colonial's Racing Centers as well as the live standardbred and thoroughbred meets. MJC no longer is reimbursed for expenses incurred while acting as manager of these operations. Under the Amended Agreement, the management fees were reduced from 2% of amounts wagered at Colonial's facilities (other than on live standardbred meets conducted at the Track), to 1.0% of the first $75 million of the aggregate gross amounts wagered in any calendar year in the Commonwealth of Virginia excluding certain conditions specified in the Amended Agreement ("Handle") and 2.0% of all amounts wagered in excess of $75 million per calendar year. Management fees relating to Colonial's new Racing Centers will be either 2% or 3.25% of Handle depending upon their location and the amount of Handle. The Agreement will remain in effect for as long as Colonial owns or operates the Track, not to exceed a term of 50 years. At Colonial's option, Colonial may terminate the agreement any time after 25 years upon payment of a fee equal to 17 times the average management fee paid during the three years immediately preceding such termination. Management fees incurred in 2001, 2000 and 1999 were approximately $1.7 million for each of the three years then ended. 5. Long-Term Debt, Notes Payable-Related Parties, and Capital Leases Long-Term Debt, Notes Payable-Related Parties, and Capital Leases, consisted of the following:
December 31, December 31, 2001 2000 ------------ ------------ Note payable to an affiliate of a Member maturing July 31, 2002, $30,000,000 revolving credit agreement, with interest at LIBOR plus 1.65% (approximately 3.74% at December 31, 2001) and annual commitment fees of $75,000, guaranteed by another member of the Company....................................................................................... $20,200,000 $20,200,000 Note payable to an affiliate of a Member maturing August 30, 2005, with monthly principal payments of $100,000 plus interest at 8.93%................................................... 13,500,000 14,700,000 Notes payable to affiliates, maturing January 31, 2010, semi-annual payments of interest only at 12%, beginning March 31, 2002, secured by a mortgage on certain real property.............. 6,703,591 -- Notes payable to an individual maturing March, 2007 with interest at 8.5%, secured by land, building, and related improvements............................................................ 3,528,017 -- Note payable to Maryland Jockey Club, maturing December 2005, bearing interest at a rate of 7.75% payable quarterly for the first two years, and equal installments of interest and principal to be paid quarterly over the remaining five year term of the note, beginning in the first quarter of 2001......................................................................... 1,245,148 1,450,000 Note payable to Maryland Jockey Club, bearing interest at the prime rate (4.75% at December 31, 2001), maturing in January 2002........................................................... 300,308 300,308 Note payable to a bank, maturing August 2002, bearing interest at 8.5%, with monthly principal payment of $15,000, collateralized by certain fixed assets.......................... 120,000 300,000 Notes payable to an insurance company, maturing in 2001, bearing interest at 7.52%............. 27,075 45,398 ----------- ----------- 45,624,139 36,995,706 Less current maturities........................................................................ 22,137,383 2,135,706 ----------- ----------- Long term debt................................................................................. $23,486,756 $34,860,000 =========== ===========
F-39 DIVERSIFIED OPPORTUNITIES GROUP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Total interest paid for the years ended December 31, 2001, 2000 and 1999, was approximately $3,500,000, $3,200,000 and $3,000,000, respectively. Scheduled maturities of notes payable as of December 31, 2001 are as follows (in thousands): 2002...... $22,137,383 2003...... 1,490,000 2004...... 1,490,000 2005...... 10,190,000 2006...... 85,148 Thereafter 10,231,608 ----------- $45,624,139 ===========
6. Income taxes Deferred income tax assets (liabilities) of Colonial consist of the following (in thousands):
December 31, December 31, 2001 2000 ------------ ------------ Assets Net operating loss............ $ 6,285 $ 5,131 Liabilities...................... Depreciation and amortization. (1,674) (1,374) ------- ------- Net deferred tax asset........... 4,611 3,757 Valuation allowance.............. (4,611) (3,757) ------- ------- Deferred tax asset............... $ -- $ -- ======= =======
At December 31, 2001, Colonial has net operating loss carryforwards of approximately $16.5 million for income tax purposes that expire in years 2012 through 2020. A valuation allowance has been recognized to reduce the deferred tax assets by the entire amount. As described in Note 12, on February 22, 2002 Colonial completed a merger with an affiliate of the principal shareholder, which repurchased all outstanding common stock not owned by the principal shareholder and his affiliates. As a result of these transactions, utilization of the net operating carryforwards may be significantly limited, thereby resulting in the expiration of a portion of the carryforwards prior to offsetting future taxable income. 7. Employee Benefit Plans In June 1998, Colonial implemented a 401(k) Plan in which all full time and part time employees are eligible to participate after six months of employment. Employees may elect to make pre-tax contributions up to 15% of their annual salary or the applicable statutory maximum limits to the 401(k) Plan. Colonial makes discretionary matching contributions (subject to statutory limits) in an amount equal to 20% of the first 6% of the employee's contribution. Colonial contributions are fully vested after three years of employment. The Company's contributions to the 401(k) Plan were approximately $9,000, $9,100 and $10,400 for 2001, 2000 and 1999, respectively. F-40 DIVERSIFIED OPPORTUNITIES GROUP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 8. Related Party Transactions Upon consummation of Colonial's IPO in 1997, Colonial entered into a five year consulting agreement at $75,000 per year with the Vice Chairman of the Board of Directors of Colonial. Virginia Concessions, L.L.C., ("VAC"), an affiliate, has an agreement with Colonial to manage the food and beverage concessions at it's Racing Centers. The amended agreement states that Colonial receives 100% of VAC's net income or loss. VAC had net income of approximately $63,000, $70,000 and $141,000 (unaudited) in 2001, 2000 and 1999. Accounts receivable from VAC related to these agreements amount to approximately $280,000 and $243,000 at December 31, 2001 and 2000, respectively. Colonial filed an arbitration claim against Norglass, Inc., the general contractor engaged to manage the construction of the Track, and an affiliate of a shareholder of Colonial, in which Norglass counterclaimed. In August 1999, the American Arbitration Association rendered a decision favorable to Norglass. Colonial was ordered to pay Norglass $1,965,000 in the arbitration. In addition, Colonial was ordered to pay interest of approximately $285,000 and arbitration costs of approximately $98,000. Colonial settled with Norglass in September 1999 for a total of $2,325,000, of which $475,000 was paid in October 1999 and the remaining balance of $1,850,000 plus interest at 6% was paid in September 2000. Under an agreement with Premier Development Co. ("Premier"), an affiliate of a shareholder of the Company, Colonial paid consulting fees of $225,000 during the year ended December 31, 1999. The agreement between Premier and Colonial expired December 31, 1999. In addition, Diversified paid Premier consulting fees of $475,000, $475,000 and $250,000 for the years ended December 31, 2001, 2000 and 1999, respectively. The Company reimburses an affiliate of one of its members for it's out-of-pocket costs incurred in carrying out the business of the Company. Amounts reimbursed were approximately $1,009,000, $731,000 and $441,000 for the years ended December 31, 2001, 2000 and 1999, respectively. At December 31, 2001 and 2000, the Company had amounts receivable from affiliates of approximately $1,057,000 and $178,000, respectively, for expenses paid by the Company on the affiliates behalf. Under terms of the Operating Agreement, members may make Preference Capital Contributions. To the extent of such Unreturned Preference Capital Contributions, that member is entitled to a 6.5% per annum preferred Return. No Preference Capital Contributions were made in 2001 and 2000. In 1999, a member of the Company made non-cash Preference Capital Contributions of $400,100. These contributions are not subject to a Preferred Return. During 2001, the Company entered into a consulting agreement with the President of Colonial, which provides for compensation related to the acquisition of certain Louisiana truck plaza video poker gaming facilities. Amounts paid under the agreement as of December 31, 2001 were $187,500. Under the terms of the contract, up to an additional $187,500 may be paid upon the successful acquisition of certain other truck plaza video gaming facilities. 9. Commitments and Contingencies Colonial has entered into an agreement with a totalisator company which provides wagering services and designs, programs, and manufactures totalisator systems for use in wagering applications. The basic terms of the agreement state that the totalisator company shall provide totalisator services to Colonial for all wagering held at Colonial's facilities through 2004 at a rate of .365% of handle. In addition, Colonial agreed to use certain equipment provided by the totalisator company. F-41 DIVERSIFIED OPPORTUNITIES GROUP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Colonial has entered into agreements with a company which provides broadcasting and simulcasting equipment and services. These agreements expire at various times through 2002. Total expense incurred for totalisator, and broadcasting and simulcasting equipment was approximately $1,421,000, $1,755,000 and $1,604,000 for the years ended December 31, 2001, 2000 and 1999, respectively. Colonial leases automobiles, building space, and certain equipment under operating leases expiring at various dates. Total rental expense under these non-cancelable leases was approximately $240,000, $243,200 and $230,000 for the years ended December 31, 2001, 2000 and 1999, respectively. The following are the future estimated minimum commitment relating to non-cancelable operating agreements and leases:
Broadcasting Simulcasting and Year ended December 31, Totalisator Other Total ----------------------- ------------ -------- ---------- 2002.......... $690,000 $186,000 $ 876,000 2003.......... -- 163,000 163,000 2004.......... -- 118,000 118,000 2005.......... -- 58,000 58,000 2006.......... -- -- -- -------- -------- ---------- $690,000 $525,000 1,215,000 ======== ======== ==========
The Company entered into an agreement on February 7, 2001 with an outside party to maintain video poker machines on the Company's premises. The Company pays a fee to the outside party, who is the licensed owner and operator of the machines, which includes the state tax of 32.5% on net machine revenue plus $1 per machine per day of operations and approximately $50,000 of annual state licensing fees. The Company incurred approximately $780,000 of expense under this agreement from February 7, 2001 through December 31, 2001. 10. Horsemen's Agreement Purse agreements are negotiated with the respective horsemen's groups, the Virginia Horsemen's Benevolent and Protective Association ("VaHBPA") for thoroughbred and the Virginia Harness Horse Association ("VHHA") for standardbred. Colonial entered into a new agreement with the VHHA as of August 1, 2000 relating to standardbred racing at the Racetrack and simulcast standardbred racing at Colonial's satellite racing facilities. Pursuant to the agreement, and in compliance with a law passed during the 2000 session of the Virginia General Assembly Colonial contributes five percent (5%) of the first $75 million of simulcast Handle, six percent (6%) of the next $75 million of simulcast Handle, and seven percent (7%) of all Handle in excess of $150 million to the purse account of the VHHA. Simulcast standardbred Handle has not exceeded $75 million in the four-year operation of the satellite wagering facilities. The agreement with the VHHA automatically renews year to year unless notice is given prior to November 1 of a party's election not to renew the agreement. In accordance with the Virginia Racing Act, Colonial deposits approximately 8.5% of the Handle generated by live standardbred racing at the Track. In 2001, Colonial agreed to allow approximately $.4 million of purse funds to be used for live harness racing at another track in Virginia. Standardbred purse expense for 2001, 2000 and 1999 was approximately $1.4 million, $1.6 million and $.9 million, respectively. F-42 DIVERSIFIED OPPORTUNITIES GROUP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Colonial entered into a three year agreement with the VaHBPA, effective January 1, 1999, that set a minimum payment of $3.125 million for 1999 purses, with 25 days of live racing with average daily purses of no less than $125,000. Of the total $3.125 million guaranteed payments, $1.5 million was considered to be an advance of purse money due in years 2000 and 2001. In 2001 and 2000, Colonial paid 5 1/4% of the Handle generated on simulcast thoroughbred racing to the thoroughbred purse account. In 2000, the VaHBPA repaid $750,000 of the advance plus interest thereon back to Colonial, effectively reducing Colonial's 2000 purse expense. In 2001, the VaHBPA repaid $600,000 of the advance plus interest thereon back to Colonial, effectively reducing the Company's 2001 purse expense. In 2001, Colonial entered into a one year agreement with the VaHBPA, effective January 1, 2002. Pursuant to the agreement, and in compliance with a law passed during the 2000 session of the Virginia General Assembly, Colonial contributes five percent (5%) of the first $75 million of simulcast Handle, six percent (6%) of the next $75 million of simulcast Handle, and seven percent (7%) of all Handle in excess of $150 million to the purse account of the VaHBPA. Simulcast thoroughbred Handle has not exceeded $100 million since the commencement of operations of the satellite wagering facilities. In addition, in accordance with the Virginia Racing Act, Colonial must continue to deposit approximately 8.5% of the Handle generated by live thoroughbred racing conducted at the Track. Colonial has also agreed starting in 2002 to contribute a portion of the revenue it receives from export simulcasting to the thoroughbred purse account. Thoroughbred purse expense for 2001, 2000 and 1999 was approximately $4.7 million, $4.2 million and $2.6 million, respectively. 11. Stock Options Colonial implemented a stock option plan on March 31, 1997. Options granted under the plan may be either Incentive Stock Options or Non-qualified Stock Options, based on the discretion of the Board of Directors. The maximum aggregate number of shares which may be optioned and sold under the plan is 395,000 shares of Colonial's Class A Common Stock. The exercise price per share for Incentive Options will be no less than the fair value of the stock at the grant date. The exercise of Non-qualified Options is determined by the Board of Directors on the grant date. The term of the plan is ten years. On June 14, 1999, 20,000 granted and outstanding options were repriced from $10.45 to $1.7875 per share. On December 15, 1998, 195,000 granted and outstanding options were repriced from $9.50 per share to $1.00 per share. The following tables summarize activity of the Stock Option Plan and the stock options outstanding at December 31, 2001: F-43 DIVERSIFIED OPPORTUNITIES GROUP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Weighted Average Available Exercise for Options Price Grant Outstanding -------- --------- ----------- Balance at December 31, 1998 $2.93 55,000 245,000 Granted..................... 1.50 (15,000) 15,000 Forfeited................... 1.00 21,200 (21,200) Shares added to plan........ -- 95,000 -- ------- ------- Balance at December 31, 1999 2.28 156,200 238,800 Granted..................... 1.06 (2,500) 2,500 Forfeited................... 1.00 3,200 (3,200) ------- ------- Balance at December 31, 2000 2.29 156,900 238,100 Granted..................... -- -- -- Forfeited................... 1.00 1,600 (1,600) ------- ------- Balance at December 31, 2001 $2.30 158,500 236,500 ======= =======
Options Outstanding Options Exercisable -------------------------------- ------------------- Weighted Weighted Weighted Average Average Average Remaining Exercise Exercise Number Contractual Price Per Number Price Per Range of Exercise Prices of Shares Life (years) Share of Shares Share ------------------------ --------- ------------ --------- --------- --------- $1.00--1.79....... 206,500 6.42 $ 1.11 154,340 $ 1.10 $10.45............ 30,000 5.22 10.45 30,000 10.45 ------- ------- 236,500 6.38 $ 2.30 184,340 $ 2.62 ======= =======
In October 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123"). SFAS 123 establishes alternative methods of accounting and disclosure for employee stock-based compensation arrangements. The Company has elected to use the intrinsic value method of accounting as prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, for stock options granted to the Company's employees. This method does not result in the recognition of compensation expense when employee stock options are granted if the exercise price of the option equals or exceeds the fair market value of the stock at the date of grant. If the accounting provisions of SFAS 123 had been adopted, the effect on 2001, 2000 and 1999 income would have been less than $10,000. For purposes of computing the proforma amounts indicated above, the fair value of each option on the date of grant is estimated using the Black-Scholes option pricing model with the following assumptions for the years ended December 31, 2000 and 1999, respectively: no dividend yield, expected volatility of 70% and 50%, risk-free interest rate of 6.62% and 6.08%, and expected lives of two to ten years. Substantially all options become vested and exercisable evenly over a five-year period. The weighted average fair value of options granted during the years ended December 31, 2000 and 1999 are $.76 and $1.38 per share, respectively. There were no options granted in 2001. F-44 DIVERSIFIED OPPORTUNITIES GROUP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 12. Merger During 2001, Gameco, Inc. and subsidiaries, an entity controlled by Jeffrey P. Jacobs, entered into agreements to acquire each share of common stock not currently owned by Mr. Jacobs or his affiliates, of Black Hawk and Colonial for a cash price of $12.00 per share and $1.12 per share, respectively . In conjunction with the acquisitions and mergers, certain assets and liabilities of the Company would be contributed to Gameco, Inc. All of the above transactions were completed during February 2002. 13. Segment Information Through Jalou, in February 2001, the Company acquired a video poker truck plaza and an interest in the net revenues derived from video poker from a second truck plaza, as described in Note 2. Prior to February 2001, the majority of the Company's operations were derived from Colonial since the majority of Diversified's assets consist of equity investments. As required by Financial Accounting Standards Board Statement No. 131, "Disclosure about Segments of an Enterprise and Related Information" the following segment information is presented (in thousands) for Colonial, Jalou, and Diversified, respectively, as of and for the year ended December 31, 2001, after elimination of inter-segment transactions. The accounting policies for each segment are the same as those described in the summary of significant accounting policies of Note 1 in the consolidated financial statements.
Colonial Jalou Diversified Eliminations Total -------- ------- ----------- ------------ -------- Total assets.......................... $64,985 $14,479 $64,911 $(41,270)(a) $103,105 Net revenues.......................... 30,102 7,733 1,610 (375)(b) 39,070 Operating income...................... 309 2,191 51 (375)(b) 2,176 Depreciation and amortization......... 1,733 740 54 (2,527) Equity in earnings of investments, and minority interest in loss........... -- -- 4,635 -- 4,635
- -------- (a) Primarily represents the elimination of intercompany investments and debt. (b) Represents elimination of Colonial management fee income received from Jalou. F-45 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Jalou We have audited the accompanying combined balance sheets of Jalou as of December 31, 2001 and 2000, and the related combined statements of income and owners' equity, and cash flows for the years then ended. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform our 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 combined financial position of Jalou at December 31, 2001 and 2000, and the combined results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. During the first quarter of 2002, all of the Jalou entities not acquired as of December 31, 2001 were acquired by Diversified or its affiliates. BDO Seidman, LLP Richmond, Virginia March 29, 2002 F-46 Jalou Combined Balance Sheets
December 31, ----------------------- 2001 2000 ----------- ----------- ASSETS Current Assets Cash and cash equivalents.................................................... $ 824,904 $ 1,586,175 Accounts receivable (Note 4)................................................. 296,931 692,375 Inventory.................................................................... 409,093 570,523 Prepaid and other............................................................ 99,151 106,463 ----------- ----------- Total Current Assets............................................................ 1,630,079 2,955,536 ----------- ----------- Property and Equipment (Notes 1 and 2) Land......................................................................... 1,448,000 2,075,930 Buildings and improvements................................................... 6,123,954 9,191,386 Equipment, furniture and fixtures............................................ 2,508,057 3,975,701 ----------- ----------- 10,080,011 15,243,017 Less accumulated depreciation................................................ 1,208,184 1,124,047 ----------- ----------- Property and Equipment, net..................................................... 8,871,827 14,118,970 ----------- ----------- Other Assets Goodwill, net of amortization of $100,440 and $66,958, respectively (Note 1). 401,752 435,234 Deferred costs............................................................... -- 12,630 ----------- ----------- Total Other Assets.............................................................. 401,752 447,864 ----------- ----------- $10,903,658 $17,522,370 =========== =========== LIABILITIES AND OWNERS' EQUITY Current Liabilities Advances from affiliates, net (Note 4)....................................... $ 1,048,063 $ 4,548,138 Advances from owners (Note 4)................................................ 1,062,166 503,995 Accounts payable............................................................. 255,208 283,143 Accrued liabilities.......................................................... 89,129 105,319 Current maturities of long-term debt (Note 2)................................ 3,104,130 1,350,289 ----------- ----------- Total Current Liabilities....................................................... 5,558,696 6,790,884 Long-Term Debt, less current maturities (Note 2)................................ 3,246,156 9,778,331 ----------- ----------- Total Liabilities............................................................... 8,804,852 16,569,215 ----------- ----------- Commitments and Contingencies (Note 3) Owners' Equity.................................................................. 2,098,806 953,155 ----------- ----------- $10,903,658 $17,522,370 =========== ===========
See accompanying summary of accounting policies and notes to combined financial statements. F-47 Jalou Combined Statements of Income and Owners' Equity
Year ended December 31, ------------------------ 2001 2000 ----------- ----------- Revenues Fuel............................. $10,917,795 $14,437,824 Video poker, net (Note 4)........ 6,244,644 6,650,011 Other............................ 3,904,980 3,383,643 ----------- ----------- Total revenues...................... 21,067,419 24,471,478 Cost of Sales (Note 4).............. 12,714,870 15,707,995 ----------- ----------- Gross profit........................ 8,352,549 8,763,483 Operating Expenses.................. 6,243,123 5,310,314 ----------- ----------- Income from operations.............. 2,109,426 3,453,169 Interest Expense, net............... 520,136 811,185 ----------- ----------- Net Income.......................... 1,589,290 2,641,984 Owners' Equity, at beginning of year 953,155 974,449 Contributions....................... 2,355,469 -- Withdrawals......................... (2,799,108) (2,663,278) ----------- ----------- Owners' Equity, at end of year...... $ 2,098,806 $ 953,155 =========== ===========
See accompanying summary of accounting policies and notes to combined financial statements. F-48 Jalou Combined Statements of Cash Flows
Year Ended December 31, ------------------------ 2001 2000 ----------- ----------- Reconciliation of Net Income to Cash Provided by Operating Activities Net Income........................................................ $ 1,589,290 $ 2,641,984 Depreciation and amortization..................................... 855,899 940,295 Bad debt expense.................................................. 327,575 -- Changes in assets and liabilities Increase in accounts receivable............................... (22,751) (647,774) Increase in inventories....................................... (7,239) (362,289) Increase in other assets...................................... (28,645) (81,149) Increase in accounts payable.................................. 31,459 183,917 Increase in accrued liabilities............................... 14,597 69,400 ----------- ----------- Cash provided by operating activities................................ 2,760,185 2,744,384 ----------- ----------- Investing Activities Disposal of net assets............................................ 387,087 -- Purchases of property and equipment............................... (263,450) (9,494,722) ----------- ----------- Cash provided (absorbed) by investing activities..................... 123,637 (9,494,722) ----------- ----------- Financing Activities Increase (decrease) in advances from owners'...................... and affiliates, net............................................... (924,945) 2,322,287 Proceeds from notes payable and long-term debt.................... -- 7,070,822 Payments on notes payable and long-term debt...................... (806,548) (649,585) Owner withdrawals................................................. (1,913,600) (579,735) ----------- ----------- Cash provided (absorbed) by financing activities..................... (3,645,093) 8,163,789 ----------- ----------- Net Increase (Decrease) in Cash and Cash Equivalents................. $ (761,271) $ 1,413,451 Cash and Cash Equivalents, at beginning of of year................... 1,586,175 172,724 ----------- ----------- Cash and Cash Equivalents, at end of year............................ $ 824,904 $ 1,586,175 =========== =========== Supplemental Disclosures of Cash Flow Cash paid for interest............................................ $ 500,000 $ 811,000 Noncash distributions to owners................................... 885,508 2,083,543 Noncash contributions by owners................................... 2,355,469 --
See accompanying summary of accounting policies and notes to combined financial statements. F-49 Jalou Summary of Accounting Policies Nature of Business Jalou (the "Company") owns and operates truck stop facilities each of which consist of a restaurant, a convenience store with fuel pumps and a video poker casino. Basis of Presentation The entities included in the combined financial statements are those that have been or will be acquired by Diversified Opportunities Group, Ltd. ("Diversified") or its affiliates. The combined financial statements have been prepared as if the following entities had operated as a single group which were under common control prior to acquisitions by Diversified. All significant intercompany accounts and transactions have been eliminated. See Note 1 to the combined financial statements for further discussion. Winner's Choice Truck Stop, Inc. ("Winners') (presented for historical periods prior to February 7, 2001) Houma Truck Plaza and Casino, LLC (owner and operator of Pelican Palace Casino) ("Houma") (presented for historical periods prior to February 7, 2001) JACE, Inc. (owner and operator of Colonels Truck Plaza and Casino) Lucky Magnolia Truck Plaza and Casino, LLC ("Lucky Magnolia") Bayou Vista Truck Plaza and Casino, LLC ("Bayou Vista") Raceland Truck Plaza and Casino, LLC ("Raceland") Cash's Casino (40% of net video poker revenue) ("Cash's") (presented for historical periods prior to February 7, 2001) Regulation The Company's video gaming operations are regulated by the Louisiana Gaming Control Board (the "LGCB"). The Louisiana State Police's Video Gaming Division (the "Division") serves under the jurisdiction of the LGCB. The Division's primary functions are to conduct investigations of applicants and submit application findings to the LGCB for licensing determination, enforce all applicable video gaming regulations and monitor licensees and gaming devices statewide. For truck stop video gaming enterprises, such as the Company's, up to a maximum of 50 gaming devices may operate per facility determined by quarterly fuel sales. A decline in fuel sales could negatively impact operating results by reducing the number of machines operating. Cash and cash Equivalents For the purposes of preparing the Company's financial statements, investments with maturities of less than three months are considered to be cash equivalents. F-50 Jalou Summary of Accounting Policies--(Continued) Inventories Inventories are stated at the lower of FIFO cost (first-in, first-out method) or market. Inventories consist of fuel, convenience and restaurant items. Property and Equipment Property and equipment are recorded at cost. Depreciation is computed using accelerated methods based on the estimated useful lives of the assets. The estimated useful lives are as follows:
Years ----- Buildings and improvements........ 15-39 Equipment, furniture, and fixtures 5-15
Goodwill Goodwill is stated at the excess amount of the purchase price over net assets acquired. Goodwill was being amortized over 15 years on a straight-line basis through 2001. Long-Lived Assets The carrying amount of long-lived assets and certain intangibles is reviewed for possible impairment whenever there are events or changes in circumstances that indicate the carrying amount of assets may not be recoverable based on undiscounted future operating cash flows. The Company has determined no impairment has occurred. Income Taxes The Companies are partnerships or subchapter S corporations for income tax filing purposes and, consequently, no income tax provision has been provided. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets 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. Revenue Recognition The Company recognizes revenue at the time of sale for convenience store items, fuel and restaurant sales. Video poker income is recorded net of state taxes and operating fees, and fees for the use of video poker devices owned by a related party (Note 4). F-51 Jalou Summary of Accounting Policies--(Continued) New Accounting Pronouncements In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, "Business Combinations" ("SFAS 141), and No. 142, "Goodwill and Other Intangible Assets" (SFAS 142"). SFAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 also requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that the Company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142. As of December 31, 2001, the net carrying amount of goodwill from prior acquisitions is approximately $402,000. Amortization expense during each of the years ended December 31, 2001 and 2000 was approximately $34,000. The impact of SFAS 141 and SFAS 142 on the financial position and results of operations of the entities included in the combined Company will be assessed subsequent to the acquisitions in 2002 by Diversified and affiliates. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions". This statement also amends ARB No. 51, "Consolidated Financial Statements", to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. This statement requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. This statement also broadens the presentation of discontinued operations to include more disposal transactions. SFAS 144 is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. SFAS 144 is not expected to impact the financial position and results of operations of the entities included in the combined Company. F-52 Jalou Notes to Combined Financial Statements 1. Acquisitions The combined financial statements of the Company have been prepared as if the net assets and operations of the entities named in the "Summary of Accounting Policies" had operated as a single group. A summary of financial data included in the combined financial statements for acquisitions completed in 2001 and entities acquired in 2002 in order to bring the entities under common control is included in the table below. The 2001 financial statements exclude the operations and cash flows from the acquisition date of the entities acquired by Diversified Opportunities Group Ltd. ("Diversified"), through its subsidiary, and Jalou II, Inc. on February 7, 2001. Entities purchased by Diversified were Houma and Cash's. Jalou II, Inc., an affiliate of Diversified, purchased Winner's. The acquisitions were completed by Diversified and affiliates during the first quarter of 2002 for the remaining entities.
Year ended December 31, ----------------------- 2001 2000 ----------- ----------- Acquisition--completed during 2001 Revenues........................ $ 1,191,641 $11,570,855 Net income...................... 231,429 2,845,404 Assets.......................... -- 5,735,831 Acquisitions--completed during 2002 Revenues........................ $19,875,778 $12,900,623 Net income (loss)............... 1,357,861 (203,420) Assets.......................... 10,903,658 11,786,539
2. Long-Term Debt Long-term debt consists of the following:
December 31, --------------------- 2001 2000 ---------- ---------- Note payable to a bank due on demand, with interest at 8.75% payable monthly, collateralized by building and related improvements.................................... $ 229,770 $ 255,043 Note payable to a bank maturing February 2003, with interest at prime (4.75% at December 31, 2001), collateralized by building and related improvements........................... 1,747,863 2,000,000 Mortgage note payable with interest beginning to accrue at prime plus 1.5% on July 1, 2001 until maturity in June 2003, secured by a deed of trust on certain real property......... 600,000 600,000 Note payable to a bank with interest at prime (4.75% at December 31, 2001) and monthly payments of principal and interest of $50,580 until maturity in December 2002, collateralized by building and related improvements......... 2,445,718 2,862,749
F-53 Jalou Notes to Combined Financial Statements--(Continued)
December 31, ---------------------- 2001 2000 ---------- ----------- Installment loans with interest rates at 9.00%, payable in monthly installments through February 2005, collateralized by equipment........................................ $ 20,195 $ 25,582 Note payable to a bank maturing January 2005, with interest at 8.5%, collateralized by a building and related improvements............................................... 1,306,740 1,413,460 Note payable to a bank with interest at 7.75% and monthly payments of principal and interest of $18,001 until maturity in November 2004, collateralized by building and related improvements (satisfied February 7, 2001).......................... -- 1,396,903 Note payable to bank with interest at 7.68% and monthly payments of principal and interest of $30,000 until maturity in April 2004, collateralized by building and related improvements (satisfied February 7, 2001).................................................. -- 2,220,793 Note payable to an individual with interest at 7.68% and monthly payments of principal and interest of $10,062 until maturity in April 2004, secured by a deed of trust on on certain real estate (satisfied February 7, 2001)....................................... -- 354,090 ---------- ----------- Total................................................................ 6,350,286 11,128,620 Less current maturities.............................................. 3,104,130 1,350,289 ---------- ----------- Long-term debt....................................................... $3,246,156 $ 9,778,331 ========== ===========
F-54 Jalou Notes to Combined Financial Statements--(Continued) The aggregate amounts of long-term debt maturing in each of the next five years and thereafter are as follows:
December 31, Amount ------------ ---------- 2002..... $3,104,130 2003..... 2,185,240 2004..... 145,000 2005..... 915,916 ---------- Total.... $6,350,286 ==========
3. Commitments and Contingencies The Company leases certain property and equipment under operating leases expiring at various dates. Future minimum lease payments under these operating leases having initial or remaining noncancellable lease terms in excess of one year at December 31, 2001 were approximately $15,000 per year through 2009. Total rent expense was approximately $25,000 and $56,000 for the years ended December 31, 2001 and 2000, respectively. Lucky Magnolia has an obligation to pay an individual 4.9% of its net video poker revenue, after associated state taxes, for as long as video poker machines are operated on the current property. Expenses incurred under the agreement were approximately $62,000 and $35,000 for the years ended December 31, 2001 and 2000, respectively. 4. Related Parties The Company has net advances outstanding from owners and affiliates of the owners which total $2,110,229 and $5,052,133 at December 31, 2001 and 2000, respectively. The advances are non-interest bearing and were primarily incurred to fund the operations of new truck stop casinos during their start-up period. The Company has agreements with a related party to maintain video poker machines at each of the Company's casino locations. Net video poker revenue consists of fees received from the related party, who is the licensed owner and operator of the machines, equal to approximately 80% of the net machine revenue after state taxes and fees. The Company recorded net revenue related to this agreement of $6,244,644 and $6,650,011 for the years ended December 31, 2001 and 2000, respectively. Accounts receivable includes fees receivable under this agreement of approximately $55,000 and $120,000 as of December 31, 2001 and 2000, respectively. The Company purchased approximately $7,700,000 of fuel from an affiliated company of an owner during each of the years ended December 31, 2001 and 2000, respectively. F-55 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Jalou II, Inc. We have audited the accompanying consolidated balance sheet of Jalou II, Inc. (an S Corporation) as of December 31, 2001, and the related consolidated statements of income and retained earnings, and cash flows for the year then ended. 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform our 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Jalou II, Inc. at December 31, 2001, and the consolidated results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. BDO Seidman, LLP Richmond, Virginia March 28, 2002 F-56 Jalou II, Inc. (an S Corporation) Consolidated Balance Sheet
December 31, 2001 ----------------- ASSETS Current Cash and cash equivalents..................................... $ 418,479 Accounts receivable........................................... 95,281 Inventory..................................................... 93,944 Prepaid and other............................................. 12,500 ---------- Total current assets...................................... 620,204 ---------- Property and equipment (Notes 1 and 2) Land.......................................................... 995,377 Buildings and improvements.................................... 1,561,757 Equipment, furniture and fixtures............................. 802,286 ---------- 3,359,420 Less accumulated depreciation................................. (155,232) ---------- Property and equipment, net...................................... 3,204,188 ---------- Other assets Goodwill, net of accumulated amortization of $46,183 (Note 1). 921,010 Other assets.................................................. 183,055 ---------- Total other assets........................................ 1,104,065 ---------- ` $4,928,457 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable.............................................. $ 54,436 Accrued liabilities (Note 2).................................. 112,413 Due to affiliates, net (Note 3)............................... 217,951 ---------- Total current liabilities................................. 384,800 Long-term debt (Note 2).......................................... 3,504,980 ---------- Total liabilities......................................... 3,889,780 ---------- Commitments and contingencies (Note 4) Stockholders' equity Common stock and paid-in capital.............................. 1,020,626 Retained earnings............................................. 18,051 ---------- Total stockholders' equity................................ 1,038,677 ---------- $4,928,457 ==========
See accompanying summary of accounting policies and notes to consolidated financial statements. F-57 Jalou II, Inc. (an S Corporation) Consolidated Statement of Income and Retained Earnings
Year Ended December 31, 2001 ----------------- Revenues Fuel...................................... $3,215,110 Video poker (Note 4)...................... 2,216,350 Other..................................... 852,403 ---------- Total revenues........................ 6,283,863 Cost of sales (Note 4)....................... 4,334,793 ---------- Gross profit................................. 1,949,070 Operating expenses (Notes 3 and 4)........... 1,534,985 ---------- Income from operations....................... 414,085 Interest expense, net (Note 2)............... 396,034 ---------- Net income and retained earnings, end of year $ 18,051 ==========
See accompanying summary of accounting policies and notes to consolidated financial statements. F-58 Jalou II, Inc. (an S Corporation) Consolidated Statement of Cash Flows
Year Ended December 31, 2001 ----------------- Reconciliation of net income to cash provided by operating activities Net income......................................... $ 18,051 Depreciation and amortization...................... 201,415 Changes in assets and liabilities Increase in accounts receivable................ (95,281) Increase in due to affiliates, net............. 217,951 Increase in inventories........................ (46,125) Increase in other assets....................... (12,500) Increase in accounts payable................... 54,436 Increase in accrued liabilities................ 112,413 ----------- Cash provided by operating activities................. 450,360 ----------- Investing activities Purchases of property and equipment................ (37,621) Acquisition (Note 1)............................... (4,336,811) ----------- Cash absorbed by investing activities................. (4,374,432) ----------- Financing activities Capital contributions.............................. 1,020,626 Other assets....................................... (183,055) Proceeds from long-term debt....................... 3,504,980 ----------- Cash provided by financing activities................. 4,342,551 ----------- Net increase in cash and cash equivalents, and balance at end of year...................................... $ 418,479 ===========
See accompanying summary of accounting policies and notes to consolidated financial statements. F-59 Jalou II, Inc. (an S Corporation) Summary of Accounting Policies Nature of Business Jalou II, Inc. is the holding company for Winner's Choice Truck Stop, Inc. ("Winner's") which was acquired February 7, 2001 (collectively the "Company"), and owns and operates a truck stop facility consisting of a restaurant, a convenience store with fuel pumps, and a video poker casino. The consolidated statement of income includes Winner's results from February 7, 2001 through December 31, 2001. Jalou II, Inc. had no operations prior to the Winner's acquisition. See Note 1 to the financial statements. Principles of Consolidation All significant intercompany accounts and transactions have been eliminated. Regulation The Company's video gaming operations are regulated by the Louisiana Gaming Control Board (the "LGCB"). The Louisiana State Police's Video Gaming Division (the "Division") serves under the jurisdiction of the LGCB. The Division's primary functions are to conduct investigations of applicants and submit application findings to the LGCB for licensing determination, enforce all applicable video gaming regulations and monitor licensees and gaming devices statewide. For truck stop video gaming enterprises, such as the Company's, the number of video gaming devices is determined by quarterly fuel sales. Based on the level of fuel sales, the Company can operate up to a maximum of 50 gaming devices. The Company's level of quarterly fuel sales at December 31, 2001 allowed it to operate 50 devices, however, should fuel sales decline and the number of gaming devices be reduced, the Company's revenue and income could decrease. Cash and Cash Equivalents For the purposes of preparing the Company's financial statements, investments with maturities of less than three months are considered to be cash equivalents. Inventories Inventories are stated at the lower of FIFO cost (first-in, first-out method) or market. Inventories consist of fuel, retail convenience and restaurant items. Property and Equipment Property and equipment are recorded at cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. The estimated useful lives are as follows:
Years ----- Buildings and improvements....... 7-39 Equipment, furniture and fixtures 7-15
Long-Lived Assets The carrying amount of long-lived assets and certain intangibles is reviewed for possible impairment whenever there are events or changes in circumstances that indicate the carrying amount of assets may not be recoverable based on undiscounted future operating cash flows. The Company has determined no impairment has occurred. F-60 Jalou II, Inc. (an S Corporation) Summary of Accounting Policies--(Continued) Income Taxes The Company has elected for income tax purposes to be treated as an S Corporation and, consequently, the stockholders will report their proportional share of the income of the Company on their income tax returns. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets 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. Revenue Recognition The Company recognizes revenue at the time of sale for convenience store items, fuel, and restaurant sales. Video poker revenue is recorded net of gaming wins and losses. Goodwill Goodwill is stated at the excess amount of the purchase price over net assets acquired. Goodwill was being amortized over 15 years on a straight-line basis through 2001. New Accounting Pronouncements In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, "Business Combinations" ("SFAS 141), and No. 142, "Goodwill and Other Intangible Assets" (SFAS 142"). SFAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 also requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that the Company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142. The Company's 2001 acquisition was accounted for using the purchase method. Goodwill was being amortized over a 15 year period on a straight-line basis. As of December 31, 2001, the net carrying amount of goodwill is approximately $921,000. Amortization expense during the year ended December 31, 2001 was approximately $46,000. Currently, the Company is assessing but has not yet determined how the adoption of SFAS 141 and SFAS 142 will impact its financial position and results of operations. F-61 Jalou II, Inc. (an S Corporation) Summary of Accounting Policies--(Continued) In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions". This statement also amends ARB No. 51, "Consolidated Financial Statements", to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. This statement requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. This statement also broadens the presentation of discontinued operations to include more disposal transactions. SFAS 144 is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. Currently, the Company is assessing but has not determined how the adoption of SFAS 144 will impact its financial position and results of operations. F-62 Jalou II, Inc. (an S Corporation) Notes to Consolidated Financial Statements 1. Acquisition Jalou II, Inc. purchased the operations and certain assets of Winner's Choice Truck Stop, Inc. ("Winner's") through acquisition of all outstanding shares of Winner's on February 7, 2001. A summary of the acquisition is as follows: Fair value of assets acquired Property and equipment.................................... $3,321,799 Inventory and other assets, net........................... 47,819 ---------- 3,369,618 Acquisition cost............................................. 4,336,811 ---------- Excess of acquisition cost over fair value of assets acquired $ 967,193 ==========
2. Long-Term Debt Long-term debt consists of the following:
December 31, 2001 ----------------- Notes payable to affiliates with interest at 12% and semi-annual interest only payments beginning March 31, 2002 until maturity on January 31, 2010 collateralized by land, buildings and related improvements................... $2,296,409 Note payable to an individual maturing March 2007 with interest at 8.5% payable semi-annually, secured by land, buildings and related improvements........... 1,208,571 ---------- Total.......................................................................... 3,504,980 Less current maturities........................................................ -- ---------- Long-term debt................................................................. $3,504,980 ==========
The long-term debt described herein reflects amendments to terms including interest rate, payment of interest, and maturity of principal. The amendments were executed during the first quarter of 2002. Accrued liabilities include approximately $86,000 of interest payable to affiliates as of December 31, 2001. Interest expense incurred during 2001 on long-term debt to affiliates was approximately $309,000. 3. Related Parties The Company has a management agreement with a related party for certain services provided by the related party. Management fees for the period February 7, 2001 through December 31, 2001 were approximately $235,000 of which approximately $37,000 is included in due to affiliates at December 31, 2001. Due to affiliates also includes various costs paid by affiliates on behalf of the Company. 4. Commitments and Contingencies The Company entered into a fuel contract with a supplier effective February 8, 2001 continuing through February 7, 2006 with up to five one year renewals at the option of the Company. The Company purchased approximately $3 million of fuel from the supplier during 2001. F-63 Jalou II, Inc. (an S Corporation) Notes to Consolidated Financial Statements--(Continued) The Company entered into an agreement on February 7, 2001 with an outside party to maintain video poker machines on the Company's premises. The Company pays a fee to the outside party, who is the licensed owner and operator of the machines, which includes the state tax of 32.5% on net machine revenue plus $1 per machine per day of operations and approximately $50,000 of annual state licensing fees. The Company incurred approximately $780,000 of expense under this agreement from February 7, 2001 through December 31, 2001. 5. Supplemental Cash Flow Disclosure Interest of approximately $311,000 was paid during the year ended December 31, 2001. 6. Subsequent Event In February 2002, pursuant to a reorganization of affiliates under common control, all outstanding shares of the Company were acquired by Gameco, Inc., an affiliate. F-64 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Stockholder of Colonial Holdings, Inc. We have audited the accompanying consolidated balance sheets of Colonial Holdings, Inc. and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2001. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Colonial Holdings, Inc. and subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. The Company has been and will continue to be largely dependent on the financial support of affiliates of the principal stockholder. As described in Note 11 to the financial statements, on February 22, 2002 the Company completed a merger with Gameco, Inc. of which Jeffrey P. Jacobs is a principal stockholder. Pursuant to the merger, Gameco, Inc. acquired all outstanding common stock not owned directly or indirectly by Jeffrey P. Jacobs and affiliates. BDO SEIDMAN, LLP Richmond, Virginia March 22, 2002 F-65 COLONIAL HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (In Thousands, Except Per Share Data)
December 31, December 31, 2001 2000 ------------ ------------ ASSETS Current assets: Cash and cash equivalents..................... $ 977 $ 1,119 Horsemen's deposits........................... 806 602 Accounts receivable........................... 393 351 Prepaid expenses and other assets............. 161 97 -------- -------- Total current assets...................... 2,337 2,169 Property, plant and equipment Land and improvements......................... 15,849 15,640 Buildings and improvements.................... 48,818 48,586 Equipment, furnishings, and fixtures.......... 3,236 2,972 Leasehold improvements........................ 1,124 1,124 -------- -------- 69,027 68,322 Less accumulated depreciation and amortization................................ 7,115 5,433 -------- -------- Property, plant and equipment, net........ 61,912 62,889 Licensing costs, net of accumulated amortization of $384 and $337, respectively.... 656 703 Other assets..................................... 80 92 -------- -------- Total assets.............................. $ 64,985 $ 65,853 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.............................. $ 2,294 $ 2,377 Purses due horsemen........................... 341 306 Accrued liabilities and other................. 4,100 2,679 Current maturities of long-term debt.......... 737 936 -------- -------- Total current liabilities................. 7,472 6,298 Long-term debt, less current maturities.......... 955 1,160 Notes payable--related parties................... 26,238 25,738 -------- -------- Total liabilities......................... 34,665 33,196 Commitments and contingencies Stockholders' equity Class A, common stock, $0.01 par value; 12,000 shares authorized; 5,848 and 5,025 shares issued and outstanding......... 58 50 Class B, common stock, $0.01 par value; 3,000 shares authorized; 1,445 and 2,242 shares issued and outstanding......... 15 23 Additional paid-in capital.................... 42,892 42,873 Accumulated deficit........................... (12,645) (10,289) -------- -------- Total stockholders' equity................ 30,320 32,657 -------- -------- Total liabilities and stockholders' equity.................................. $ 64,985 $ 65,853 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. F-66 COLONIAL HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data)
Years Ended December 31, ------------------------- 2001 2000 1999 ------- ------- ------- Revenues Pari-mutuel and simulcasting commissions...... $27,781 $27,366 $27,285 Other......................................... 2,321 1,836 2,066 ------- ------- ------- Total revenues............................ 30,102 29,202 29,351 Operating expenses Direct operating expenses Purses, fees, and pari-mutuel taxes......... 12,174 11,767 9,564 Simulcast and other direct expenses......... 11,992 11,936 11,418 ------- ------- ------- Total direct operating expenses........... 24,166 23,703 20,982 Selling, general, and administrative expenses. 3,270 3,941 4,829 Privatization expenses........................ 624 -- -- Depreciation and amortization................. 1,733 1,724 1,839 ------- ------- ------- Total operating expenses.................. 29,793 29,368 27,650 ------- ------- ------- Income (loss) from operations.................... 309 (166) 1,701 Interest expense................................. (2,755) (2,826) (2,905) Interest income.................................. 90 123 65 ------- ------- ------- Loss before income taxes...................... (2,356) (2,869) (1,139) Provision for (benefit from) income taxes........ -- -- -- ------- ------- ------- Net Loss.................................. $(2,356) $(2,869) $(1,139) ======= ======= ======= Loss per common share data--basic and diluted Loss per share................................ $ (0.32) $ (0.39) $ (0.16) Weighted average number of shares outstanding. 7,280 7,267 7,260
The accompanying notes are an integral part of the consolidated financial statements. F-67 COLONIAL HOLDINGS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In Thousands)
Common Stock -------------------------- Class A Class B Additional Total ------------- ------------ Paid-In Accumulated Stockholders' Shares Amount Shares Amount Capital (Deficit) Equity ------ ------ ------ ------ ---------- ----------- ------------- Balance at December 31, 1998.... 5,008 $50 2,242 $23 $42,842 $ (6,281) $36,634 Stock in lieu of directors' fees 17 -- -- -- 31 -- 31 Net loss........................ -- -- -- -- -- (1,139) (1,139) ----- --- ----- --- ------- -------- ------- Balance at December 31, 1999.... 5,025 50 2,242 23 42,873 (7,420) 35,526 Net loss........................ -- -- -- -- -- (2,869) (2,869) ----- --- ----- --- ------- -------- ------- Balance at December 31, 2000.... 5,025 50 2,242 23 42,873 (10,289) 32,657 Stock in lieu of directors' fees 26 -- -- -- 19 -- 19 Conversion of Class B common stock......................... 797 8 (797) (8) -- -- -- Net loss........................ -- -- -- -- -- (2,356) (2,356) ----- --- ----- --- ------- -------- ------- Balance at December 31, 2001.... 5,848 $58 1,445 $15 $42,892 $(12,645) $30,320 ===== === ===== === ======= ======== =======
The accompanying notes are an integral part of the consolidated financial statements. F-68 COLONIAL HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands)
Years Ended December 31, -------------------------- 2001 2000 1999 ------- -------- ------- Operating Activities Net loss....................................................................... $(2,356) $ (2,869) $(1,139) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization............................................... 1,728 1,696 1,680 Amortization of finance costs............................................... 5 28 159 Deferred income taxes and other............................................. -- 1 31 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable and other assets................. (94) (23) 44 Increase in trade accounts payable and accrued liabilities.................. 1,393 1,107 342 Decrease (increase) in horsemen's deposits and purses....................... (169) 181 (485) ------- -------- ------- Net cash provided by operating activities...................................... 507 121 632 ------- -------- ------- Investing activities: Capital expenditures........................................................ (705) (399) (500) Decrease in construction payables........................................... (40) (1,850) (1,046) ------- -------- ------- Net cash used in investing activities.......................................... (745) (2,249) (1,546) ------- -------- ------- Financing activities: Proceeds from long-term debt................................................ 500 25,932 2,375 Payments on long-term debt.................................................. (404) (23,998) (1,303) ------- -------- ------- Net cash provided by financing activities...................................... 96 1,934 1,072 ------- -------- ------- Net change in cash and cash equivalents................................. (142) (194) 158 Cash and cash equivalents, beginning of year................................... 1,119 1,313 1,155 ------- -------- ------- Cash and cash equivalents, end of year......................................... $ 977 $ 1,119 $ 1,313 ======= ======== ======= Supplemental Cash Flow Information: Cash paid for interest...................................................... $ 1,552 $ 2,320 $ 2,083 Supplemental disclosure of noncash investing and financing activities: Conversion of accounts payable to long-term debt............................ -- -- 2,485
The accompanying notes are an integral part of the consolidated financial statements. F-69 COLONIAL HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001 1. Description of Business and Significant Accounting Policies Description of Business Colonial Holdings, Inc., ("Colonial") formerly Colonial Downs Holdings, Inc., a Virginia corporation, was incorporated in 1996. Colonial owns and operates, through its wholly-owned subsidiaries, Colonial Downs Racetrack (the "Track") in New Kent, Virginia, which primarily conducts pari-mutuel wagering on thoroughbred and standardbred horse racing. Colonial also owns and operates three Racing Centers and leases and operates a fourth Racing Center which provide simulcast pari-mutuel wagering on thoroughbred and standardbred horse racing from selected racetracks throughout the United States. The Company owns, directly, or through its wholly-owned subsidiaries, the owner and operating licenses for the racetrack and the Chesapeake, Richmond, Hampton, and Brunswick Racing Centers; the property for the Richmond, Hampton, and Brunswick Racing Centers; the rights to apply for licenses to own and operate up to two additional Racing Centers in Virginia; the 345 acres on which the racetrack exists; and the racetrack facilities and certain related infrastructure. Principles of Consolidation The consolidated financial statements include Colonial and its subsidiaries, Colonial Downs, L.P. ("Partnership"), Stansley Racing Corp. ("SRC"), and Colonial Holdings Management, Inc. ("CM"), collectively with Colonial, the "Company". All significant intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 The Company considers all demand deposits and time deposits with original maturities of three months or less to be cash equivalents. Property, Plant and Equipment Property, plant and equipment are stated at historical cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets. Estimated useful lives used are as follows: Land improvements.......................................... 20 to 40 years Building and improvements.................................. 5 to 40 years Equipment, furnishings, and fixtures....................... 2 to 20 years Leasehold improvements..................................... 7 to 40 years
Depreciation expense was $1,682,000, $1,666,000 and $1,631,000 for fiscal years 2001, 2000 and 1999, respectively. F-70 COLONIAL HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Costs of betterments, renewals, and major replacements are capitalized. Maintenance, repairs and minor replacements are expensed as incurred. Gains and losses from dispositions are included in the results from operations. Licensing Costs and Amortization Licensing costs, which are being amortized over the twenty-year license period, consist primarily of professional fees associated with the application for the racetrack licenses and related licensing fees for the Racing Centers. Revenue The Company primarily derives revenue from import simulcasting, which is the Company's share of wagering at its Racing Centers on races simulcasted from other racetracks. Revenue also is derived from live racing at the Track as well as export simulcasting of its live racing to other racetracks. The Company also generates fee revenue for managing the operation of truckstops and gaming assets owned by an affiliate of the Company's largest shareholder. Horsemen's Purse and Awards Amounts due under agreements with the Virginia Horsemen's Benevolent and Protective Association, Inc. and the Virginia Harness Horse Association (Note 8) are paid based on the terms of the agreements. Funds for purses for future live race meets are held in restricted cash accounts. As of December 31, 2001 and 2000 approximately $705,000 and $539,000, respectively, were held in the restricted cash accounts. The Company deposits 30% of breakage revenue into a Benevolent Fund account, as required by law. As of December 31, 2001 and 2000, approximately $101,000 and $63,000, respectively, were included in restricted cash accounts for the Benevolent Fund. Long-Lived Assets The carrying values of long-lived assets, principally identifiable intangibles, property, plant and equipment, are reviewed for potential impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, as determined based on the undiscounted cash flows over the remaining amortization periods. If there is evidence of impairment, the carrying value of the related assets would be reduced by the estimated shortfall of discounted cash flows. Fair Value of Financial Instruments The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practical to estimate. Cash and Cash Equivalents--The carrying amount approximates the fair value due to the short maturity of the cash equivalents. Long-Term Debt and Capital Lease Obligations--The fair value of the Company's long-term debt and capital lease obligations is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The carrying amount approximates fair value since the Company's interest rates approximate current interest rates. F-71 COLONIAL HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Reclassifications Certain reclassifications have been made in the prior years' financial statements in order to conform to the December 31, 2001 presentation. Concentration of Credit Risk Financial instruments which potentially subject the Company to credit risk consist of cash equivalents, including horsemen's deposits, and accounts receivable. The Company's policy is to limit the amount of credit exposure to any one financial institution and place funds with financial institutions evaluated as being creditworthy. At December 31, 2001 the Company had cash deposits, including restricted cash, which exceeded federally insured limits by approximately $1,426,000. The concentration of credit risk, with respect to accounts receivable, is limited through the Company's credit evaluation. The Company does not require collateral on its receivables and historically has not incurred significant credit losses. Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilutive effect of securities (which can consist of stock options and warrants) that could share in earnings of an entity. The Company had no securities which had a dilutive effect on earnings per share for years ended December 31, 2001, 2000 and 1999. New Accounting Standards In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments" ("SFAS 133"). SFAS 133, as amended by SFAS 137 and 138, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. SFAS 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. SFAS 133 requires that an entity recognize all derivatives as either assets or liabilities and measure those instruments at fair market value. Presently, the Company does not use derivative instruments either in hedging activities or as investments. Accordingly, the adoption of SFAS 133, as amended, did not have an impact on the Company's financial position or results of operations. In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations," which is effective July 1, 2001. SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. We do not believe that the adoption of SFAS 141 will have a significant impact on the Company's financial position or results of operations. In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which is effective January 1, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill. SFAS 142 also requires us to complete a transitional goodwill impairment test six months from the date of adoption and further requires us to evaluate the carrying value of goodwill for impairment annually thereafter. We do not believe that the adoption of SFAS 142 will have a significant impact on the Company's financial position or results of operations. F-72 COLONIAL HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." This statement also amends ARB No. 51, "Consolidated Financial Statements," to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. This statement requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. This statement also broadens the presentation of discontinued operations to include more disposal transactions. We are required to adopt the provisions of this statement at the beginning of 2002. We do not believe that the adoption of this statement will have an impact on the financial position or results of operations of the Company. 2. Management and Consulting Agreement The Company entered into a Management and Consulting Agreement (the "Agreement") with Maryland-Virginia Racing Circuit, Inc., an affiliate of the Maryland Jockey Club ("MJC"), to provide experienced management for the Track and Racing Centers and to create a Virginia-Maryland thoroughbred racing circuit. Under the Agreement, Maryland Jockey Club agreed to suspend live racing at their racetracks, Laurel Park and Pimlico Race Course, during the Company's live thoroughbred meets. Parties to the Agreement also agreed to exchange simulcast signals for their live meets at no cost to either party. An amendment to the Agreement (the "Amended Agreement") was signed by both parties on January 15, 1999, which restructured among other terms MJC's responsibilities as manager and the management fee paid to MJC. Effective July 1, 1999, MJC became responsible for the Company's Racing Centers as well as the live standardbred and thoroughbred meets. MJC no longer is reimbursed for expenses incurred while acting as manager of these operations. Under the Amended Agreement, the management fees were reduced from 2% of amounts wagered at the Company's facilities (other than on live standardbred meets conducted at the Track), to 1.0% of the first $75 million of the aggregate gross amounts wagered in any calendar year in the Commonwealth of Virginia excluding certain conditions specified in the Amended Agreement ("Handle") and 2.0% of all amounts wagered in excess of $75 million per calendar year. Management fees relating to potential new Racing Centers will be either 2% or 3.25% of Handle depending upon their location and the amount of Handle. The Agreement will remain in effect for as long as the Track is operated as a horse racetrack under its current license from the Virginia Racing Commission, not to exceed a term of 50 years. At the Company's option, the Company may terminate the agreement any time after 25 years upon payment of a fee equal to 17 times the average management fee paid during the three years immediately preceding such termination. Management fees incurred in 2001, 2000 and 1999 were approximately $1.7 million for each of the three years then ended. F-73 COLONIAL HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 3. Long-Term Debt and Notes Payable-Related Parties Long-Term Debt and Notes Payable-Related Parties, consisted of the following:
December 31, ----------------------- 2001 2000 ----------- ----------- Credit facility payable to CD Entertainment, Ltd., maturing June 2005, with monthly interest payments at 9.96% and principal payments of $1 million each due June 30, 2002, 2003 and 2004, with all unpaid principal and interest due 2005, collateralized by substantially all assets of the Company.................... $26,237,937 $25,737,937 Note payable to Maryland Jockey Club, maturing December 2005, bearing interest at a rate of 7.75% payable quarterly for the first two years and equal installments of interest and principal to be paid quarterly over the remaining five year term of the note, beginning in the first quarter of 2001................................... 1,245,148 1,450,000 Note payable to Maryland Jockey Club, bearing interest at prime, payable monthly, principal payable in 2002.......................................................... 300,308 300,308 Note payable to a bank, maturing August 2002, bearing interest at 8.5%, with monthly principal payment of $15,000, collateralized by certain fixed assets....... 120,000 300,000 Note payable to an insurance company, maturing May 2002, bearing interest at 8.36%.............................................................................. 27,075 45,398 ----------- ----------- 27,930,468 27,833,643 Less current maturities.............................................................. 737,383 935,706 Current maturities--related parties.................................................. -- -- ----------- ----------- 27,193,085 26,897,937 Less long-term debt--related parties................................................. 26,237,937 25,737,937 ----------- ----------- Long-term debt....................................................................... $ 955,148 $ 1,160,000 =========== ===========
In August 2000, the Company entered into an agreement with CD Entertainment Ltd. ("CD Entertainment"), an affiliate of the Chairman, CEO, and stockholder of the Company, to refinance the $15 million in loans from PNC Bank ("PNC") that came due on June 30, 2000. The refinanced former PNC debt and the Company's existing debt to related parties was consolidated into a $25.7 million credit facility with a term of five years and an interest rate of 9.96%. Under the terms of the Credit facility, principal payments of $1 million each were due on June 30, 2002, 2003 and 2004 with the balance due on June 30, 2005. In addition, the Company agreed to make an additional annual principal payment commencing in 2002 contingent upon the Company's annual cash flow. The Company's racetrack property serves as collateral for the loan. Additionally, the Company has pledged its limited partnership interest in Colonial Downs, L.P. and its shares of Stansley Racing Corp., both of which are subsidiaries of the Company, to CD Entertainment. The Company received additional loans totaling $500,000 during 2001 from CD Entertainment. The Company also received a $200,000 advance from CD Entertainment during 2001, which is included in accounts payable as of December 31, 2001. In February 2002, CD Entertainment and the Company merged with Gameco, Inc. (see Note 11). In conjunction with the merger, $10 million of the original $25.7 million due from the Company was forgiven. The maturity of the remaining debt was extended to February 1, 2009. The principal payment requirements were eliminated and the Company was given the option of either paying the interest currently or accruing the interest and adding it to the principal balance that will be due at maturity. The maturities of long-term debt at December 31, 2001 reflect the terms of the new agreement with CD Entertainment and Gameco. Accrued interest to related parties was $2.5 million and $1.3 million at December 31, 2001 and 2000, respectively. F-74 COLONIAL HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Scheduled maturities of notes payable obligations as of December 31, 2001, are as follows: 2002.......................................... $ 737,383 2003.......................................... 290,000 2004.......................................... 290,000 2005.......................................... 290,000 2006.......................................... 85,148 Thereafter (excluding $10 million forgiveness) 16,237,937 ------------ $17,930,468. ============
4. Income Taxes Deferred income tax assets (liabilities) consist of the following:
December 31, ------------------------- 2001 2000 1999 ------- ------- ------- (In Thousands) Assets Net operating loss............ $ 6,285 $ 5,131 $ 3,795 Liabilities Depreciation and amortization. (1,674) (1,374) (848) ------- ------- ------- Net deferred tax asset........... 4,611 3,757 2,947 Valuation allowance.............. (4,611) (3,757) (2,947) ------- ------- ------- Deferred tax asset............... $ -- $ -- $ -- ======= ======= =======
Income tax (benefit) as reported differs from the amounts computed by applying the statutory federal income tax rate to pre-tax loss as follows:
Year Ended December 31, ---------------------- 2001 2000 1999 ------ ------ ------ Income taxes at statutory rate..................................................... $ (801) $ (975) $ (386) Increases (decreases) resulting from state taxes, net of federal income tax benefit (93) (113) (45) Other.............................................................................. 40 278 36 Valuation allowance................................................................ 854 810 395 ------ ------ ------ $ -- $ -- $ -- ====== ====== ======
At December 31, 2001, the Company has net operating loss carryforwards of approximately $16.5 million for income tax purposes that expire in years 2012 through 2021. A valuation allowance has been recognized to reduce the deferred tax assets by the entire amount. As described in Note 11, on February 22, 2002 the Company completed a merger with an affiliate of the principal shareholder, which repurchased all outstanding common stock not owned by the principal shareholder and his affiliates. As a result of these transactions, utilization of the net operating loss carryforwards may be significantly limited, thereby resulting in the expiration of a portion of the carryforwards prior to offsetting future taxable income. F-75 COLONIAL HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 5. Employee Benefit Plans In June 1998, the Company implemented a 401(k) Plan in which all full time and part time employees are eligible to participate after six months of employment. Employees may elect to make pre-tax contributions up to 15% of their annual salary or the applicable statutory maximum limits to the 401(k) Plan. The Company makes discretionary matching contributions (subject to statutory limits) in an amount equal to 20% of the first 6% of the employee's contribution. Company contributions are fully vested after three years of employment. The Company's contributions to the 401(k) Plan were approximately $9,000, $9,100 and $10,400 for 2001, 2000 and 1999, respectively. 6. Related Party Transactions Upon consummation of the Initial Public Offering, ("IPO"), in 1997, the Company entered into a five year consulting agreement at $75,000 per year with the Vice Chairman of the Board of Directors. Total expense under the agreement was $75,000 for each of the years ended December 31, 2001, 2000 and 1999. Virginia Concessions, L.L.C., ("VAC"), an affiliate of a shareholder, has an agreement with the Company to manage the food and beverage concessions at the Company's Racing Centers. The amended agreement states that the Company records 100% of VAC's net income or loss. VAC had unaudited net income of approximately $63,000, $70,000 and $141,000 in 2001, 2000 and 1999, respectively. Accounts receivable from VAC related to these agreements amounted to approximately $280,000, $243,000 and $245,000 at December 31, 2001, 2000 and 1999, respectively. The Company filed an arbitration claim against Norglass, the general contractor engaged to manage the construction of the Track and an affiliate of a shareholder, in which Norglass counterclaimed. In August 1999, the American Arbitration Association rendered a decision favorable to Norglass. Colonial Downs, L.P. was ordered to pay Norglass $1,965,000 in the arbitration. In addition, Colonial Downs, L.P. was ordered to pay interest of approximately $285,000 and arbitration costs of approximately $98,000. The Company settled with Norglass, in September 1999 for a total of $2,325,000, of which $475,000 was paid in October 1999 and the remaining balance of $1,850,000 plus interest at 6% was paid in September 2000. Pursuant to an agreement to provide credit support to the Company, Diversified Opportunities Group Ltd. ("Diversified"), an affiliate of a shareholder, is entitled receive an annual fee equal to 3% of the amount of any letters of credit or guarantees provided to the Company (subject, in the case of a letter of credit, to a minimum annual fee of $50,000). The 1998 fee of $450,000 is not payable until such time that the Company has successfully opened two satellite wagering facilities in Northern Virginia. If such events do not occur by January 1, 2007, the fee will be waived in its entirety. Costs incurred under this agreement were $450,000 in 1999 and $300,000 in 2000. This agreement was terminated in connection with the refinancing of the Company's long term debt in August 2000. In August 2000, the Company entered into an agreement with CD Entertainment, an affiliate of the Chairman and CEO of the Company, to refinance the $15 million in loans from PNC Bank that came due on June 30, 2000. The refinanced former PNC debt and the Company's existing debt to related parties was consolidated into a $25.7 million credit facility with a term of five (5) years and an interest rate of 9.96%. The Company's racetrack property serves as collateral for the loan. Additionally, the Company has pledged its limited partnership interest in Colonial Downs, L.P. and its shares of Stansley Racing Corp., both of which are subsidiaries of the Company, to CD Entertainment. In 2000, Colonial Holdings Management, Inc., a subsidiary of the Company, entered into an agreement to manage and provide accounting services for truckstops in Louisiana owned by an affiliate of the Chairman, CEO and principal shareholder of the Company. The agreement may be terminated on 60 days written notice. In February 2001, these services commenced and revenue related to this agreement totaled $.6 million in 2001. F-76 COLONIAL HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 7. Commitments and Contingencies The Company has entered into an agreement with a totalisator company which provides wagering services and designs, programs, and manufactures totalisator systems for use in wagering applications. The basic terms of the agreement state that the totalisator company shall provide totalisator services to the Company for all wagering held at the Company's facilities through 2004 at a rate of .365% of handle. In addition, the Company agreed to use certain equipment provided by the totalisator company. The Company has entered into agreements with a company which provides broadcasting and simulcasting equipment and services. These agreements expire at various times through 2002. Total expense incurred for totalisator, and broadcasting and simulcasting equipment was approximately $1,421,000, $1,755,000 and $1,604,000 for the years ended December 31, 2001, 2000 and 1999, respectively. The Company leases automobiles, building space, and certain equipment under operating leases expiring at various dates. Total rental expense under these non-cancelable leases was approximately $240,000, $243,200 and $230,000 for the years ended December 31, 2001, 2000 and 1999, respectively. The following are the future estimated minimum commitment relating to non-cancelable operating agreements and leases:
Broadcasting, Simulcasting Year ended December 31, & Totalisator Other Total - ----------------------- ------------- -------- ---------- 2002................................... $690,000 $186,000 $ 876,000 2003................................... -- 163,000 163,000 2004................................... -- 118,000 118,000 2005................................... -- 58,000 58,000 2006................................... -- -- -- -------- -------- ---------- $690,000 $525,000 $1,215,000 ======== ======== ==========
8. Horsemen's Agreement Purse agreements are negotiated with the respective horsemen's groups, the Virginia Horsemen's Benevolent and Protective Association ("VaHBPA") for thoroughbred and the Virginia Harness Horse Association ("VHHA") for standardbred. The Company has an agreement in place with the VHHA that is effective through December 31, 2002 relating to standardbred racing at the Racetrack and simulcast standardbred racing at the Company's satellite racing facilities. Pursuant to the agreement, and in compliance with a law passed during the 2000 session of the Virginia General Assembly, the Company contributes five percent (5%) of the first $75 million of amounts wagered ("Handle") on simulcast races, six percent (6%) of the next $75 million of simulcast Handle, and seven percent (7%) of all Handle in excess of $150 million to the purse account of the VHHA. Simulcast standardbred Handle has not exceeded $75 million since the commencement of operations of the satellite wagering facilities. The agreement with the VHHA automatically renews year to year unless notice is given prior to November 1 of a party's election not to renew the agreement. In accordance with the Virginia Racing Act, the Company deposits approximately 8.5% of the Handle generated by live standardbred racing at the Track. In 2001, the Company agreed to allow approximately $.4 million of purse funds to be used for live harness racing at another track in Virginia. Standardbred purse expense for 2001, 2000 and 1999 was approximately $1.4 million, $1.6 million and $.9 million, respectively. F-77 COLONIAL HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company entered into a three year agreement with the VaHBPA, effective January 1, 1999, that set a minimum payment of $3.125 million for 1999 purses, with 25 days of live racing with average daily purses of no less than $125,000. Of the total $3.125 million guaranteed payments, $1.5 million was considered to be an advance of purse money due in years 2000 and 2001. In 2001, the Company paid 5 1/4% of the Handle generated on simulcast thoroughbred racing to the thoroughbred purse account. In 2000, the VaHBPA repaid $750,000 of the advance plus interest thereon back to the Company, effectively reducing the Company's 2000 purse expense. In 2001, the VaHBPA repaid $600,000 of the advance plus interest thereon back to the Company, effectively reducing the Company's 2001 purse expense. In 2002, the Company entered into a one year agreement with the VaHBPA, effective January 1, 2002. Pursuant to the agreement, and in compliance with a law passed during the 2000 session of the Virginia General Assembly, the Company contributes five percent (5%) of the first $75 million of simulcast Handle, six percent (6%) of the next $75 million of simulcast Handle, and seven percent (7%) of all Handle in excess of $150 million to the purse account of the VaHBPA. Simulcast thoroughbred Handle has not exceeded $100 million since the commencement of operations of the satellite wagering facilities. In addition, in accordance with the Virginia Racing Act, the Company must continue to deposit approximately 8.5% of the Handle generated by live thoroughbred racing conducted at the Track. The Company has also agreed starting in 2002 to contribute a portion of the revenue it receives from export simulcasting to the thoroughbred purse account. Thoroughbred purse expense for 2001, 2000 and 1999 was approximately $4.7 million, $4.2 million and $2.6 million, respectively. 9. Stock Options The Company implemented a stock option plan on March 31, 1997. Options granted under the plan may be either Incentive Stock Options or Non-qualified Stock Options, based on the discretion of the Board of Directors. The maximum aggregate number of shares which may be optioned and sold under the plan is 395,000 shares of Class A Common Stock. The exercise price per share for Incentive Options will be no less than the fair value of the stock at the grant date. The exercise of Non-qualified Options is determined by the Board of Directors on the grant date. The term of the plan is ten years. On June 14, 1999, 20,000 granted and outstanding options were repriced from $10.45 to $1.7875 per share. On December 15, 1998, 195,000 granted and outstanding options were repriced from $9.50 per share to $1.00 per share. The following tables summarize activity of the Stock Option Plan and the stock options outstanding at December 31, 2001:
Weighted Average Exercise Available Options Price for Grant Outstanding -------- --------- ----------- Balance at December 31, 1998..................... $2.93 55,000 245,000 Granted.......................................... 1.50 (15,000) 15,000 Forfeited........................................ 1.00 21,200 (21,200) Shares added to plan............................. -- 95,000 -- ----- ------- ------- Balance at December 31, 1999..................... 2.28 156,200 238,800 Granted.......................................... 1.06 (2,500) 2,500 Forfeited........................................ 1.00 3,200 (3,200) ----- ------- ------- Balance at December 31, 2000..................... 2.29 156,900 238,100 Granted.......................................... -- -- -- Forfeited........................................ 1.00 1,600 (1,600) ----- ------- ------- Balance at December 31, 2001..................... $2.30 158,500 236,500 ===== ======= =======
F-78 COLONIAL HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Options Outstanding Options Exercisable - - -------------------------------- ------------------- Weighted Weighted Weighted Average Average Average Remaining Exercise Exercise Number Contractual Price Per Number Price Per Range of Exercise Prices of Shares Life (years) Share of Shares Share - ------------------------ --------- ------------ --------- --------- --------- $ 1.00--1.79............... 206,500 6.42 $ 1.11 154,340 $ 1.10 $10.45..................... 30,000 5.22 10.45 30,000 10.45 ------- ---- ------ ------- ------ 236,500 6.38 $ 2.30 184,340 $ 2.62 ======= =======
In October 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123"). SFAS 123 establishes alternative methods of accounting and disclosure for employee stock-based compensation arrangements. The Company has elected to use the intrinsic value method of accounting as prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, for stock options granted to the Company's employees. This method does not result in the recognition of compensation expense when employee stock options are granted if the exercise price of the option equals or exceeds the fair market value of the stock at the date of grant. If the accounting provisions of SFAS 123 had been adopted, the effect on 2001, 2000 and 1999 loss would have been as follows (In Thousands, Except Per Share Data):
2001 2000 1999 ------- ------- ------- Net loss: Reported........................................ $(2,356) $(2,869) $(1,139) Proforma........................................ $(2,356) $(2,871) $(1,148) Basic and diluted loss per share: Reported........................................ $ (0.32) $ (0.39) $ (0.16) Proforma........................................ $ (0.32) $ (0.39) $ (0.16)
For purposes of computing the proforma amounts indicated above, the fair value of each option on the date of grant is estimated using the Black-Scholes option pricing model with the following assumptions for the years ended December 31, 2000 and 1999, respectively: no dividend yield, expected volatility of 70% and 50%, risk-free interest rate of 6.62% and 6.08%, and expected lives of seven and two to ten years. Substantially all options become vested and exercisable evenly over a five-year period. The weighted average fair value of options granted during the years ended December 31, 2000 and 1999 are $.76 and $1.38 per share, respectively. There were no options granted in 2001. 10. Quarterly Financial Data (Unaudited) Condensed quarterly consolidated financial data, in thousands (except per share data), is shown as follows:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter ----------- ----------- ----------- ----------- 2001 quarterly information: Net revenue................. $7,405 $7,232 $7,656 $ 7,809 Gross profit................ 1,663 1,602 1,425 1,246 Net loss.................... (127) (560) (832) (837) Loss per share.............. (0.01) (0.08) (0.11) (0.12) 2000 quarterly information: Net revenue................. $6,900 $6,975 $7,656 $ 7,671 Gross profit................ 1,727 1,560 1,425 787 Net loss.................... (186) (328) (832) (1,523) Loss per share.............. (0.03) (0.05) (0.11) (0.20)
F-79 COLONIAL HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 11. Merger On March 1, 2001, the Company announced that its Board of Directors received an offer from Jeffrey P. Jacobs, Chairman of the Board, Chief Executive Officer, and the Company's principal shareholder, to acquire the Company. Upon receipt of the offer, the Company formed a Special Committee of the Board of Directors ("Special Committee") to evaluate the proposal. Mr. Jacobs indirectly owned approximately 43.5% of the stock of the Company. He proposed a transaction to purchase all of the remaining shares for a cash price of $1.00 per share. On June 11, 2001, upon the recommendation of the Special Committee, the Company executed the Agreement and Plan of Merger with Gameco, Inc. ("Gameco"), an entity controlled by Jeffrey P. Jacobs. Under the agreement, Gameco would acquire each share of common stock not currently owned by Mr. Jacobs or his affiliates for a cash price of $1.10 per share. On July 31, 2001, the Virginia Racing Commission approved the acquisition by Gameco of a more than five (5%) interest in the entities licensed by the Commission. On November 15, 2001, upon the recommendation of the Special Committee, the Company's Board of Directors agreed to an amendment to the merger agreement. Pursuant to the amendment, the Company agreed to extend the closing date to no later than April 1, 2002. In exchange for the extension, Gameco and Mr. Jacobs agreed to increase the offer price from $1.10 per share to $1.12 per share. On January 10, 2002, the Company held a special shareholder's meeting and the shareholders voted to approve and adopt the Agreement and Plan of Merger dated as of June 11, 2001, as amended. On February 22, 2002, the Company completed the merger with Gameco and Gameco Acquisition, Inc. Gameco paid $1.12 per share, in cash, for each share of common stock not owned by Mr. Jacobs, or his affiliates. In addition, all options were repurchased for the difference between $1.12 per share and the exercise prices. Mr. Jacobs and his affiliates contributed their shares to Gameco. The Company's stock ceased to be publicly held on this date and the Company became a wholly-owned subsidiary of Gameco. In addition, Gameco, which became the holder of the Company's $25.7 million debt to CD Entertainment, forgave $10 million of such debt, and extended the maturity date of the remaining debt to February 1, 2009. In addition, the management agreement with Colonial Management was terminated. The Company incurred approximately $.6 million in legal and professional fees related to the privatization process in 2001. The Company estimates that it will incur approximately $.3 million of privatization costs in 2002 as a result of the merger. F-80 No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to exchange only the notes offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date. Through and including , 2002 (25 days after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription. PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. Indemnification of Directors and Officers Section 145 of the Delaware General Corporation Law (the "DGCL") makes provision or the indemnification of officers and directors of corporations in terms sufficiently broad to indemnify the officers and directors of the registrant under certain circumstances for liabilities (including reimbursement of expenses incurred) arising under the Securities Act. Gameco's Certificate of Incorporation (the "Certificate") provides that to the fullest extent permitted by Delaware law or another applicable law, a director of Gameco shall not be liable to Gameco or its stockholders for monetary damages for breach of fiduciary duty as a director. Under current Delaware law, liability of a director may not be limited (i) for any breach of the director's duty of loyalty to Gameco or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) in respect of certain unlawful dividend payments or stock redemptions or repurchases and (iv) for any transaction from which the director derives an improper personal benefit. The effect of the provision of the Certificate is to eliminate the rights of Gameco and its stockholders (through stockholders' derivative suits on behalf of Gameco) to recover monetary damages against a director for breach of the fiduciary duty of care as a director (including breaches resulting from negligent or grossly negligent behavior) except in the situations described in clauses (i) through (iv) above. This provision does not limit or eliminate the rights of Gameco or any stockholder to seek nonmonetary relief such as an injunction or rescission in the event of a breach of a director's duty of care. In addition, Gameco's Bylaws (the "Bylaws") provide that Gameco shall indemnify its officers, directors, employees and Agents to the extent permitted by the General Corporation Law of Delaware. We have in force and effect policies insuring our directors and officers against losses which they or any of them will become legally obligated to pay by reason of any actual or alleged error or misstatement or misleading statement or act or omission or neglect or breach of duty by the directors and officers in the discharge of their duties, individually or collectively, or any matter claimed against them solely by reason of their being directors or officers. Such coverage is limited by the specific terms and provisions of the insurance policies. ITEM 21. Exhibits and Financial Statement Schedules (b) Exhibits
Exhibit No. Description - ------- ----------- 2.1 Agreement and Plan of Merger dated as of April 25, 2001, among Black Hawk Gaming & Development Company, Inc., Gameco, Inc., and BH Acquisition, Inc. 2.2 Amendment to Agreement and Plan of Merger dated as of November 12, 2001 among Black Hawk Gaming & Development Company, Inc., Gameco, Inc. and BH Acquisition, Inc. 2.3 Exchange Agreement dated February 22, 2002 among Gameco, Inc., Jeffrey P. Jacobs and The Richard E. Jacobs Revocable Trust. 2.4 Agreement and Plan of Merger dated as of June 11, 2001 among Colonial Holdings, Inc., Gameco, Inc. and Gameco Acquisitions, Inc. 2.5 Amendment to Agreement and Plan of Merger dated as of November 16, 2001 among Colonial Holdings, Inc., Gameco, Inc., and Gameco Acquisition, Inc. 2.6 Agreement and Plan of Merger, dated February 22, 2002 between Gameco, Inc. and Jacobs Entertainment, Inc.
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Exhibit No. Description - ------- ----------- 3.1 Certificate of Incorporation of Gameco, Inc. 3.2 By-Laws of Gameco, Inc. 3.3 Articles of Incorporation of Black Hawk Gaming & Development Company, Inc. 3.4 By-Laws of Black Hawk Gaming & Development Company 3.5 Articles of Incorporation of Gold Dust West Casino, Inc. 3.6 Code of By-laws of Gold Dust West Casino, Inc. 3.7 Articles of Organization of Black Hawk/Jacobs Entertainment, LLC 3.8 Operating Agreement of Black Hawk/Jacobs Entertainment, LLC 3.9 Joint Venture Agreement of Gilpin Hotel Venture 3.10 Articles of Incorporation of Gilpin Ventures, Inc. 3.11 By-Laws of Gilpin Ventures, Inc. 3.12 Article of Incorporation of Jalou II Inc. 3.13 By-Laws of Jalou II Inc. 3.14 Articles of Incorporation of Winner's Choice Casino, Inc. 3.15. By-Laws of Winner's Choice Casino, Inc 3.16. Articles of Organization of Diversified Opportunities Group Ltd 3.17 Articles of Organization of Jalou L.L.C. 3.18 Articles of Organization of Houma Truck Plaza & Casino, L.L.C. 3.19 Articles of Organization of Jalou-Cash's L.L.C. 3.20 Articles of Incorporation of JACE, Inc. 3.21 Articles of Organization of Lucky Magnolia Truck Stop and Casino, L.L.C. 3.22 Articles of Organization of Bayou Vista Truck Plaza and Casino, L.L.C. 3.23 Articles of Organization of Raceland Truck Plaza and Casino, L.L.C. 3.24 Articles of Incorporation of JACE, Inc. 4.1 Indenture dated February 8, 2002 by and among Gameco, Inc., certain guarantors and Wells Fargo Bank Minnesota, National Association relating to 11 7/8% Senior Secured Notes due 2009 4.2 Form of Gameco, Inc. 11 7/8% Senior Secured Notes due 2009 (included as part of the Indenture at Exhibit 4.1) 4.3 Supplemental Indenture dated February 22, 2002 by and among Gameco, Inc. certain guarantors and Wells Fargo Bank Minnesota, National Association relating to 11 7/8% Senior Secured Notes due 2009 4.4 Form of Subsidiary Guaranty for 11 7/8% Senior Secured Notes due 2009 (included as part of the Indenture at 4.1) 4.5 Registration Rights Agreement dated as of February 8, 2002 by and among Gameco, Inc., certain guarantors, CIBC World Markets Corp. And Libra Securities, LLC 4.6 Security Agreement dated February 8, 2002 among Gameco, Inc., certain guarantors and Wells Fargo Bank Minnesota, National Association as Trustee 4.7 Amendment to the Security Agreement dated February 22, 2002 among Gameco, Inc., certain guarantors and Wells Fargo Bank Minnesota, National Association
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Exhibit No. Description - ------- ----------- 4.8 Joinder Agreements dated February 22, 2002 between Wells Fargo Bank Minnesota, National Association and each guarantor 4.9 Guaranty of each guarantor dated February 22, 2002 4.10 Fee and Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreements and fixture filings by Black Hawk/Jacobs Entertainment LLC and Gilpin Hotel Venture to the Public Trustee of Gilpin County, State of Colorado, as Trustee for the Benefit of Wells Fargo Bank Minnesota, National Association as Beneficiary, dated February 22, 2002 4.11 Fee and Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreements and fixture filings by Gold Dust Casino, Inc. to the First American Title Company of Nevada, as Trustee for the Benefit of Wells Fargo Bank Minnesota, National Association as Beneficiary, dated February 22, 2002 4.12 Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and fixture filing by Houma Truck Plaza & Casino, L.L.C. to Wells Fargo Bank Minnesota, National Association, as Trustee dated February 22, 2002 4.13 Mortgage, Assignment of Leases and Rents, Security Agreements and fixture filing by Winners Choice Casino, Inc. to Wells Fargo Bank Minnesota, National Association as Trustee dated February 22, 2002 4.14 Mortgage, Assignment of Leases and Rents, Security Agreements and fixture filing by Raceland Truck Plaza and Casino, LLC to Wells Fargo Bank Minnesota, National Association as Trustee dated February 22, 2002 4.15 Mortgage, Assignment of Leases and Rents, Security Agreements and fixture filing by Bayou Vista Truck Plaza and Casino, LLC to Wells Fargo Bank Minnesota, National Association as Trustee dated February 22, 2002 4.16 Mortgage, Assignment of Leases and Rents, Security Agreements and fixture filing by Lucky Magnolia Truck Stop and Casino, L.L.C. to Wells Fargo Bank Minnesota, National Association as Trustee dated February 22, 2002 4.17 Mortgage, Assignment of Leases and Rents, Security Agreements and fixture filing by JACE, Inc. to Wells Fargo Bank Minnesota, National Association as Trustee dated February 22, 2002 4.18 Collateral Assignment of Deeds of Trust, Assignments of Rents and Leases, Security Agreements and fixture filings and other loan documents by Gameco, Inc. to Wells Fargo Bank Minnesota, National Association as Trustee dated February 22, 2002. 4.19 Escrow Agreement between Gameco, Inc. and Wells Fargo Bank Minnesota, National Association dated February 22, 2002 5.1 Opinion of Baker & Hostetler LLP 10.1 Consulting Agreement between Diversified Opportunities Group Ltd. and Ian M Stewart dated January 1, 2001. 10.2 Executive Employment Agreement between Gameco, Inc. and Jeffrey P. Jacobs dated February 22, 2002. 10.3 Executive Employment Agreement between Gameco, Inc. and Richard E. Jacobs dated February 22, 2002. 10.4 Executive Employment Agreement between Gameco, Inc. and Stephen R. Roark dated February 22, 2002. 10.5 Executive Employment Agreement between Gameco, Inc. and Ian M. Stewart dated February 22, 2002.
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Exhibit No. Description - ------- ----------- 10.6 Executive Employment Agreement between Gameco, Inc. and Thomas L. Witherow dated February 22, 2002. 10.7 Standardbred Horsemen's Contract effective January 1, 2002 among Colonial Downs L.P. Stansley Racing Corp. and The Virginia Harness Horse Association. 10.8 Thoroughbred Horsemen's Agreement dated February 20, 2002 between Colonial Downs L.P. and the Virginia Horsemen's Benevolent and Protective Association. 12.1 Statement regarding computation of Ratios 21.1 Subsidiaries of Gameco, Inc. 23.1 Consent of Deloitte & Touche LLP for Gameco, Inc. 23.2 Consent of Baker & Hostetler LLP (included in Exhibit 5.1) 23.3 Consent of BDO Seiman LLP 23.4 Consent of Deloitte & Touche LLP for Black Hawk Gaming & Development Company, Inc. 25.1 Statement of Eligibility of Trustee on Form T-1 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery
Financial statement schedules are omitted because of the absence of conditions under which they are required or because the required information is provided in the consolidated financial statements or notes thereto. ITEM 22. Undertakings The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of a registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, each registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, on the company being acquired involved therein, that was not the subject of and included in the registration statement when it becomes effective. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jupiter, State of Florida, on this 9th day of May, 2002. GAMECO, INC. By: /s/ JEFFREY P. JACOBS ----------------------------- Jeffrey P. Jacobs Chairman of the Board, Chief Executive Officer and President KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated:
Signature Title Date --------- ----- ---- /s/ JEFFREY P. JACOBS Chairman of the May 9, 2002 - ----------------------------- Board, Chief Executive Officer, President, Treasurer, Jeffrey P. Jacobs Secretary (Principal Executive Officer) /s/ STEPHEN R. ROARK President of Casino May 9, 2002 - ----------------------------- Operations and Stephen R. Roark Chief Financial Officer (Principal Financial and Accounting Officer) /s/ RICHARD E. JACOBS Director May 9, 2002 - ----------------------------- Richard E. Jacobs
II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jupiter, State of Florida, on this 9th day of May, 2002. BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. By: /s/ JEFFREY P. JACOBS ----------------------------- Jeffrey P. Jacobs Chief Executive Officer and Director KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date --------- ----- ---- /s/ JEFFREY P. JACOBS Chief Executive Officer, Chairman of May 9, 2002 - ----------------------------- the Board and Sole Director Jeffrey P. Jacobs (Principal Executive Officer) /s/ STEPHEN R. ROARK May 9, 2002 - ----------------------------- President (Principal Financial and Stephen R. Roark Accounting Officer) II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jupiter, State of Florida, on this 9th day of May, 2002. GOLD DUST WEST CASINO, INC. By: /s/ JEFFREY P. JACOBS ----------------------------- Jeffrey P. Jacobs Chairman of the Board, and President KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date --------- ----- ---- /s/ JEFFREY P. JACOBS Chairman of the Board, May 9, 2002 - ----------------------------- President and Jeffrey P. Jacobs Director (Principal Executive Officer) /s/ STEPHEN R. ROARK Secretary, Treasurer and May 9, 2002 - ----------------------------- Director Stephen R. Roark (Principal Financial and Accounting Officer) II-7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jupiter, State of Florida, on this 9th day of May, 2002. BLACK HAWK/JACOBS ENTERTAINMENT, LLC By: Black Hawk Gaming & Development Company, Inc., its co-Manager /s/ JEFFREY P. JACOBS Jeffrey P. Jacobs, Chief Executive Officer By: Diversified Opportunities Group Ltd. By: Gameco, Inc., its Manager /s/ JEFFREY P. JACOBS Jeffrey P. Jacobs, President KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated. Signature Title Date --------- ----- ---- /s/ JEFFREY P. JACOBS Policy Board Member May 9, 2002 - ----------------------------- (Principal Executive Officer) Jeffrey P. Jacobs /s/ STEPHEN R. ROARK Policy Board Member May 9, 2002 - ----------------------------- (Principal Financial and Stephen R. Roark Accounting Officer) /s/ STANLEY POLITANO Policy Board Member - ----------------------------- May 9, 2002 Stanley Politano /s/ DAVID C. GRUNENWALD Policy Board Member May 9, 2002 - ----------------------------- David C. Grunenwald II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Black Hawk, State of Colorado, on this 9th day of May, 2002. GILPIN HOTEL VENTURE By: /s/ Stephen R. Roark ----------------------------- Stephen R. Roark President KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date --------- ----- ---- /S/ STEPHEN R. ROARK President (Principal May 9, 2002 - ----------------------------- Executive, Financial and Stephen R. Roark Accounting Officer) BLACK HAWK GAMING AND Joint Venturer . May 9, 2002 DEVELOPMENT COMPANY, INC /S/ JEFFREY P. JACOBS - ----------------------------- Jeffrey P. Jacobs, Chief Executive Officer GILPIN VENTURES, INC. Joint Venturer May 9, 2002 /S/ STEPHEN R. ROARK - ----------------------------- Stephen R. Roark, President II-9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Black Hawk, State of Colorado, on this 9th day of May, 2002. GILPIN VENTURES, INC. By: /s/ STEPHEN R. ROARK ----------------------------- Stephen R. Roark President and Director KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date --------- ----- ---- /s/ STEPHEN R. ROARK President and May 9, 2002 - ----------------------------- Director (Principal Stephen R. Roark Executive, Financial and Accounting Officer) /s/ STANLEY POLITANO Director May 9, 2002 - ----------------------------- Stanley Politano II-10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of New Kent, State of Virginia, on this 9th day of May, 2002. JALOU II INC. By: /s/ Ian M. Stewart ----------------------------- Ian M. Stewart President and Director KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date --------- ----- ---- /s/ IAN M. STEWART President and Director May 9, 2002 - ----------------------------- (Principal Executive Ian M. Stewart Officer) /s/ REID M. SMITH Secretary, Treasurer and May 9, 2002 - ----------------------------- Executive Vice-President Reid M. Smith (Principal Financial and Accounting Officer) /s/ JEFFREY P. JACOBS Chairman of the Board and May 9, 2002 - ----------------------------- Director Jeffrey P. Jacobs II-11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of New Kent, State of Virginia, on this 9th day of May, 2002. WINNER'S CHOICE CASINO, INC. By: /s/ Ian M. Stewart ----------------------------- Ian M. Stewart President and Director KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date --------- ----- ---- /s/ Ian M. Stewart President and Director May 9, 2002 - ----------------------------- (Principal Executive Ian M. Stewart Officer) /s/ Reid M. Smith Secretary, Treasurer May 9, 2002 - ----------------------------- and Executive Vice-President Reid M. Smith (Principal Financial and Accounting Officer) /s/ Jeffrey P. Jacobs Chairman of the Board and May 9, 2002 - ----------------------------- Director Jeffrey P. Jacobs II-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jupiter, State of Florida, on this 9th day of May, 2002. DIVERSIFIED OPPORTUNITIES GROUP LTD. Gameco, Inc. By: /s/ JEFFREY P. JACOBS ------------------------------- Jeffrey P. Jacobs, President KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date --------- ----- ---- GAMECO, INC. By: /s/ JEFFREY P. JACOBS Manager May 9, 2002 - ----------------------------- Jeffrey P. Jacobs, President II-13 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of New Kent, State of Virginia, on this 9th day of May, 2002. JALOU L.L.C. By: /S/ IAN M. STEWART ----------------------------- Ian M. Stewart, President and Manager KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date --------- ----- ---- /S/ IAN M. STEWART President and Manager May 9, 2002 - ----------------------------- (Principal Executive Ian M. Stewart Officer) /S/ REID M. SMITH Secretary, Treasurer and May 9, 2002 - ----------------------------- Executive Vice-President Reid M. Smith and Manager (Principal Financial and Accounting Officer) /S/ JEFFREY P. JACOBS Chairman and Manager May 9, 2002 - ----------------------------- Jeffrey P. Jacobs II-14 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of New Kent, State of Virginia, on this 9th day of May, 2002. HOUMA TRUCK PLAZA & CASINO, L.L.C. By: /s/ IAN M. STEWART --------------------------------- Ian M. Stewart President and Manager KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date --------- ----- ---- /s/ IAN M. STEWART President and Manager May 9, 2002 - ----------------------------- (Principal Executive Ian M. Stewart Officer) /s/ REID M. SMITH Secretary, Treasurer, and May 9, 2002 - ----------------------------- Executive Vice-President Reid M. Smith and Manager (Principal Financial Accounting Officer) /s/ JEFFREY P. JACOBS Chairman and Manager May 9, 2002 - ----------------------------- Jeffrey P. Jacobs II-15 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of New Kent, State of Virginia, on this 9th day of May, 2002. JALOU - CASH'S L.L.C. By: /s/ IAN M. STEWART ----------------------------- Ian M. Stewart President and Manager KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date --------- ----- ---- /s/ IAN M. STEWART President and Manager May 9, 2002 - ----------------------------- (Principal Executive Officer) Ian M. Stewart /s/ REID M. SMITH Secretary, Treasurer and May 9, 2002 - ----------------------------- Executive Vice-President and Reid M. Smith Manager (Principal Financial and Accounting Officer) /s/ JEFFREY P. JACOBS Chairman and Manager May 9, 2002 - ----------------------------- Jeffrey P. Jacobs II-16 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of New Kent, State of Virginia, on this 9th day of May, 2002. JACE, INC. By: /s/ Ian M. Stewart ----------------------------- Ian M. Stewart President and Director KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date --------- ----- ---- /s/ Ian M. Stewart President and May 9, 2002 - ----------------------------- Director (Principal Ian M. Stewart Executive Officer) /s/ Reid M. Smith Secretary, Treasurer May 9, 2002 - ----------------------------- and Executive Reid M. Smith Vice-President (Principal Financial and Accounting Officer) /s/ Jeffrey P. Jacobs Chairman of the Board and May 9, 2002 - ----------------------------- Director Jeffrey P. Jacobs II-17 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of New Kent, State of Virginia, on this 9th day of May, 2002. LUCKY MAGNOLIA TRUCK STOP AND CASINO, L.L.C. By: /s/ IAN M. STEWART ------------------------------------- Ian M. Stewart President and Manager KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date --------- ----- ---- /s/ IAN M. STEWART President and Manager May 9, 2002 - ----------------------------- (Principal Executive Ian M. Stewart Officer) /s/ REID M. SMITH Secretary, Treasurer, and May 9, 2002 - ----------------------------- Executive Vice-President Reid M. Smith and Manager (Principal Financial Accounting Officer) /s/ JEFFREY P. JACOBS Chairman and Manager May 9, 2002 - ----------------------------- Jeffrey P. Jacobs II-18 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of New Kent, State of Virginia, on this 9th day of May, 2002. BAYOU VISTA TRUCK PLAZA AND CASINO, L.L.C. By: /S/ IAN M. STEWART ----------------------------------- Ian M. Stewart President and Manager KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date --------- ----- ---- /S/ IAN M. STEWART President and Manager May 9, 2002 - ----------------------------- (Principal Executive Ian M. Stewart Officer) /S/ REID M. SMITH Secretary, Treasurer, May 9, 2002 - ----------------------------- Executive Vice-President Reid M. Smith and Manager (Principal Financial and Accounting Officer) /s/ Jeffrey P. Jacobs Chairman and Manager May 9, 2002 - ----------------------------- Jeffrey P. Jacobs II-19 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of New Kent, State of Virginia, on this 9th day of May, 2002. RACELAND TRUCK PLAZA AND CASINO, L.L.C. By: /s/ IAN M. STEWART ---------------------------------- Ian M. Stewart President and Manager KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey P. Jacobs and Stephen R. Roark or either one of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Signature Title Date --------- ----- ---- /S/ IAN M. STEWART President and Manager May 9, 2002 - ----------------------------- (Principal Executive Ian M. Stewart Officer) /s/ REID M. SMITH Secretary, Treasurer, and May 9, 2002 - ----------------------------- Executive Vice-President Reid M. Smith and Manager (Principal Financial Accounting Officer) /s/ JEFFREY P. JACOBS Chairman and Manager May 9, 2002 - ----------------------------- Jeffrey P. Jacobs II-20
Exhibit No. Description - ------- ----------- 2.1 Agreement and Plan of Merger dated as of April 25, 2001, among Black Hawk Gaming & Development Company, Inc., Gameco, Inc., and BH Acquisition, Inc. 2.2 Amendment to Agreement and Plan of Merger dated as of November 12, 2001 among Black Hawk Gaming & Development Company, Inc., Gameco, Inc. and BH Acquisition, Inc. 2.3 Exchange Agreement dated February 22, 2002 among Gameco, Inc., Jeffrey P. Jacobs and The Richard E. Jacobs Revocable Trust. 2.4 Agreement and Plan of Merger dated as of June 11, 2001 among Colonial Holdings, Inc., Gameco, Inc. and Gameco Acquisitions, Inc. 2.5 Amendment to Agreement and Plan of Merger dated as of November 16, 2001 among Colonial Holdings, Inc., Gameco, Inc., and Gameco Acquisition, Inc. 2.6 Agreement and Plan of Merger, dated February 22, 2002 between Gameco, Inc. and Jacobs Entertainment, Inc. 3.1 Certificate of Incorporation of Gameco, Inc. 3.2 By-Laws of Gameco, Inc. 3.3 Articles of Incorporation of Black Hawk Gaming & Development Company, Inc. 3.4 By-Laws of Black Hawk Gaming & Development Company 3.5 Articles of Incorporation of Gold Dust West Casino, Inc. 3.6 Code of By-laws of Gold Dust West Casino, Inc. 3.7 Articles of Organization of Black Hawk/Jacobs Entertainment, LLC 3.8 Operating Agreement of Black Hawk/Jacobs Entertainment, LLC 3.9 Joint Venture Agreement of Gilpin Hotel Venture 3.10 Articles of Incorporation of Gilpin Ventures, Inc. 3.11 By-Laws of Gilpin Ventures, Inc. 3.12 Article of Incorporation of Jalou II Inc. 3.13 By-Laws of Jalou II Inc. 3.14 Articles of Incorporation of Winner's Choice Casino, Inc. 3.15. By-Laws of Winner's Choice Casino, Inc 3.16. Articles of Organization of Diversified Opportunities Group Ltd 3.17 Articles of Organization of Jalou L.L.C. 3.18 Articles of Organization of Houma Truck Plaza & Casino, L.L.C. 3.19 Articles of Organization of Jalou-Cash's L.L.C. 3.20 Articles of Incorporation of JACE, Inc. 3.21 Articles of Organization of Lucky Magnolia Truck Stop and Casino, L.L.C. 3.22 Articles of Organization of Bayou Vista Truck Plaza and Casino, L.L.C. 3.23 Articles of Organization of Raceland Truck Plaza and Casino, L.L.C. 3.24 Articles of Incorporation of JACE, Inc. 4.1 Indenture dated February 8, 2002 by and among Gameco, Inc., certain guarantors and Wells Fargo Bank Minnesota, National Association relating to 11 7/8% Senior Secured Notes due 2009 4.2 Form of Gameco, Inc. 11 7/8% Senior Secured Notes due 2009 (included as part of the Indenture at Exhibit 4.1)
Exhibit No. Description - ------- ----------- 4.3 Supplemental Indenture dated February 22, 2002 by and among Gameco, Inc. certain guarantors and Wells Fargo Bank Minnesota, National Association relating to 11 7/8% Senior Secured Notes due 2009 4.4 Form of Subsidiary Guaranty for 11 7/8% Senior Secured Notes due 2009 (included as part of the Indenture at 4.1) 4.5 Registration Rights Agreement dated as of February 8, 2002 by and among Gameco, Inc., certain guarantors, CIBC World Markets Corp. And Libra Securities, LLC 4.6 Security Agreement dated February 8, 2002 among Gameco, Inc., certain guarantors and Wells Fargo Bank Minnesota, National Association as Trustee 4.7 Amendment to the Security Agreement dated February 22, 2002 among Gameco, Inc., certain guarantors and Wells Fargo Bank Minnesota, National Association 4.8 Joinder Agreements dated February 22, 2002 between Wells Fargo Bank Minnesota, National Association and each guarantor 4.9 Guaranty of each guarantor dated February 22, 2002 4.10 Fee and Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreements and fixture filings by Black Hawk/Jacobs Entertainment LLC and Gilpin Hotel Venture to the Public Trustee of Gilpin County, State of Colorado, as Trustee for the Benefit of Wells Fargo Bank Minnesota, National Association as Beneficiary, dated February 22, 2002 4.11 Fee and Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreements and fixture filings by Gold Dust Casino, Inc. to the First American Title Company of Nevada, as Trustee for the Benefit of Wells Fargo Bank Minnesota, National Association as Beneficiary, dated February 22, 2002 4.12 Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and fixture filing by Houma Truck Plaza & Casino, L.L.C. to Wells Fargo Bank Minnesota, National Association, as Trustee dated February 22, 2002 4.13 Mortgage, Assignment of Leases and Rents, Security Agreements and fixture filing by Winners Choice Casino, Inc. to Wells Fargo Bank Minnesota, National Association as Trustee dated February 22, 2002 4.14 Mortgage, Assignment of Leases and Rents, Security Agreements and fixture filing by Raceland Truck Plaza and Casino, LLC to Wells Fargo Bank Minnesota, National Association as Trustee dated February 22, 2002 4.15 Mortgage, Assignment of Leases and Rents, Security Agreements and fixture filing by Bayou Vista Truck Plaza and Casino, LLC to Wells Fargo Bank Minnesota, National Association as Trustee dated February 22, 2002 4.16 Mortgage, Assignment of Leases and Rents, Security Agreements and fixture filing by Lucky Magnolia Truck Stop and Casino, L.L.C. to Wells Fargo Bank Minnesota, National Association as Trustee dated February 22, 2002 4.17 Mortgage, Assignment of Leases and Rents, Security Agreements and fixture filing by JACE, Inc. to Wells Fargo Bank Minnesota, National Association as Trustee dated February 22, 2002 4.18 Collateral Assignment of Deeds of Trust, Assignments of Rents and Leases, Security Agreements and fixture filings and other loan documents by Gameco, Inc. to Wells Fargo Bank Minnesota, National Association as Trustee dated February 22, 2002. 4.19 Escrow Agreement between Gameco, Inc. and Wells Fargo Bank Minnesota, National Association dated February 22, 2002 5.1 Opinion of Baker & Hostetler LLP 10.1 Consulting Agreement between Diversified Opportunities Group Ltd. and Ian M Stewart dated January 1, 2001.
Exhibit No. Description - ------- ----------- 10.2 Executive Employment Agreement between Gameco, Inc. and Jeffrey P. Jacobs dated February 22, 2002. 10.3 Executive Employment Agreement between Gameco, Inc. and Richard E. Jacobs dated February 22, 2002. 10.4 Executive Employment Agreement between Gameco, Inc. and Stephen R. Roark dated February 22, 2002. 10.5 Executive Employment Agreement between Gameco, Inc. and Ian M. Stewart dated February 22, 2002. 10.6 Executive Employment Agreement between Gameco, Inc. and Thomas L. Witherow dated February 22, 2002. 10.7 Standardbred Horsemen's Contract effective January 1, 2002 among Colonial Downs L.P. Stansley Racing Corp. and The Virginia Harness Horse Association. 10.8 Thoroughbred Horsemen's Agreement dated February 20, 2002 between Colonial Downs L.P. and the Virginia Horsemen's Benevolent and Protective Association. 12.1 Statement regarding computation of Ratios 21.1 Subsidiaries of Gameco, Inc. 23.1 Consent of Deloitte & Touche LLP for Gameco, Inc. 23.2 Consent of Baker & Hostetler LLP (included in Exhibit 5.1) 23.3 Consent of BDO Seiman LLP 23.4 Consent of Deloitte & Touche LLP for Black Hawk Gaming & Development Company, Inc. 25.1 Statement of Eligibility of Trustee on Form T-1 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery
Financial statement schedules are omitted because of the absence of conditions under which they are required or because the required information is provided in the consolidated financial statements or notes thereto. EX-2.1 3 dex21.txt AGREEMENT AND PLAN OF MERGER DATED 4/25/2001 Exhibit 2.1 AGREEMENT AND PLAN OF MERGER DATED AS OF April 25, 2001 AMONG BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC., GAMECO, INC. AND BH ACQUISITION, INC. TABLE OF CONTENTS Page ---- ARTICLE I THE MERGER; CLOSING ............................................. 1 Section 1.01. The Merger ............................................ 1 Section 1.02. Effective Time ........................................ 1 Section 1.03. Effects of the Merger ................................. 1 Section 1.04. Conversion of Shares .................................. 1 Section 1.05. Payment of Shares ..................................... 2 Section 1.06. Stock Options ......................................... 4 Section 1.07. The Closing ........................................... 4 Section 1.08. Dissenters' Rights .................................... 4 ARTICLE II THE SURVIVING CORPORATION; DIRECTORS AND OFFICERS .............. 5 Section 2.01. Articles of Incorporation ............................. 5 Section 2.02. Bylaws ................................................ 5 Section 2.03. Directors and Officers ................................ 5 ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY .................................................... 5 Section 3.01. Organization and Qualification ........................ 5 Section 3.02. Authority; Non-Contravention; Approvals ............... 5 Section 3.03. Proxy Statement and Other SEC Filings ................. 7 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY .................. 7 Section 4.01. Organization and Qualification ........................ 7 Section 4.02. Capitalization ........................................ 8 Section 4.03. Subsidiaries .......................................... 8 Section 4.04. Authority; Non-Contravention; Approvals ............... 9 Section 4.05. Reports and Financial Statements ...................... 10 Section 4.06. Absence of Undisclosed Liabilities .................... 10 Section 4.07. Absence of Certain Changes or Events .................. 11 Section 4.08. Litigation ............................................ 11 Section 4.09. Proxy Statement and Other SEC Filings ................. 11 Section 4.10. No Violation of Law ................................... 11 Section 4.11. Compliance with Agreements ............................ 11 Section 4.12. Taxes ................................................. 12 Section 4.13. Employee Benefit Plans; ERISA ......................... 12 Section 4.14. Labor Controversies ................................... 14 Section 4.15. Environmental Matters ................................. 14 Section 4.16. Title to Assets ....................................... 15 Section 4.17. Company Stockholders' Approval ........................ 15 Section 4.18. Brokers and Finders ................................... 15 i Page ---- ARTICLE V COVENANTS ....................................................... 16 Section 5.01. Conduct of Business by the Company Pending the Merger ............................................... 16 Section 5.02. Control of the Company's Operations .................. 18 Section 5.03. Acquisition Transactions ............................. 18 Section 5.04. Access to Information ................................ 18 Section 5.05. Notices of Certain Events ............................ 19 Section 5.06. Meeting of the Company's Stockholders ................ 20 Section 5.07. Proxy Statement and Other SEC Filings ................ 20 Section 5.08. Public Announcements ................................. 21 Section 5.09. Expenses and Fees .................................... 21 Section 5.10. Agreement to Cooperate ............................... 21 Section 5.11. Directors' and Officers' Indemnification ............. 22 Section 5.12. Financing ............................................ 24 Section 5.13. Parent Letter of Credit .............................. 24 ARTICLE VI CONDITIONS TO THE MERGER ....................................... 25 Section 6.01. Conditions to the Obligations of Each Party .......... 25 Section 6.02. Conditions to Obligation of the Company to Effect the Merger ............................................... 25 Section 6.03. Conditions to Obligations of Parent and Subsidiary to Effect the Merger .................................... 26 ARTICLE VII TERMINATION ................................................... 26 Section 7.01. Termination .......................................... 26 ARTICLE VIII MISCELLANEOUS ................................................ 27 Section 8.01. Effect of Termination ................................ 27 Section 8.02. Nonsurvival of Representations and Warranties ........ 28 Section 8.03. Notices .............................................. 28 Section 8.04. Interpretation ....................................... 29 Section 8.05. Miscellaneous ........................................ 29 Section 8.06. Counterparts ......................................... 29 Section 8.07. Amendments; No Waivers ............................... 29 Section 8.08. Entire Agreement ..................................... 30 Section 8.09. Severability ......................................... 30 Section 8.10. Specific Performance ................................. 30 ii AGREEMENT AND PLAN OF MERGER This AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of April 25, 2001 by and among Gameco, Inc., a Delaware corporation ("Parent"), BH Acquisition, Inc., a Colorado corporation and wholly owned subsidiary of Parent ("Merger Subsidiary"), and Black Hawk Gaming & Development Company, Inc., a Colorado corporation (the "Company"). Parent, Merger Subsidiary and the Company are referred to collectively herein as the "Parties." WHEREAS, the respective Boards of Directors of Parent, Merger Subsidiary and the Company have each approved the merger of Merger Subsidiary with and into the Company on the terms and subject to the conditions set forth in this Agreement (the "Merger"); NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: ARTICLE I THE MERGER; CLOSING Section 1.01. The Merger. Upon the terms and subject to the conditions of ---------- this Agreement, and in accordance with the Colorado Business Corporation Act, Articles 101 to 117 of Title 7 of the Colorado Revised Statutes (the "CBCA"), Merger Subsidiary shall be merged with and into the Company at the Effective Time (as defined in Section 1.02). Following the Merger, the separate existence of Merger Subsidiary shall cease and the Company shall continue as the surviving corporation (the "Surviving Corporation") and a wholly-owned subsidiary of Parent, and shall succeed to and assume all the rights and obligations of Merger Subsidiary in accordance with the CBCA. Section 1.02. Effective Time. The Merger shall become effective when -------------- articles of merger (the "Articles of Merger"), executed in accordance with the relevant provisions of the CBCA, are filed with the Secretary of State of the State of Colorado; provided, however, that, upon mutual consent of the constituent corporations to the Merger, the Articles of Merger may provide for a later date of effectiveness of the Merger not more than 30 days after the date the Articles of Merger are filed. When used in this Agreement, the term "Effective Time" shall mean the date and time at which the Articles of Merger are accepted for record or such later time established by the Articles of Merger. The filing of the Articles of Merger shall be made on the date of the Closing (as defined in Section 1.07). Section 1.03. Effects of the Merger. The Merger shall have the effects set --------------------- forth in Section 7-111-106 of the Colorado Revised Statutes. Section 1.04. Conversion of Shares. At the Effective Time, by virtue of the -------------------- Merger and without any action on the part of Parent, Merger Subsidiary, the Company or the holders of any of the following securities: (a) each issued and outstanding share of the Company's common stock, par value $.001 per share ("Company Common Stock"), held by the Company as treasury stock and each issued and outstanding share of Company Common Stock owned by any subsidiary of the Company, Parent, Merger Subsidiary or any other subsidiary of Parent shall be canceled and retired and shall cease to exist, and no payment or consideration shall be made with respect thereto; (b) each issued and outstanding share of Company Common Stock, other than shares of Company Common Stock referred to in paragraph (a) above, shall be converted into the right to receive an amount in cash, without interest, equal to $12.00 (the "Merger Consideration"). At the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration, without interest; and (c) each issued and outstanding share of capital stock or ownership interest of Merger Subsidiary shall be converted into one fully paid and nonassessable share of common stock, par value $.001 per share, of the Surviving Corporation. Section 1.05. Payment of Shares. (a) Prior to the Effective Time, Parent ----------------- shall appoint a bank or trust company reasonably satisfactory to the Company to act as disbursing agent (the "Disbursing Agent") for the payment of Merger Consideration upon surrender of certificates representing the shares of Company Common Stock. Parent will enter into a disbursing agent agreement with the Disbursing Agent, in form and substance reasonably acceptable to the Company. At or prior to the Effective Time, Parent shall deposit or cause to be deposited with the Disbursing Agent in trust for the benefit of the Company's stockholders cash in an aggregate amount necessary to make the payments pursuant to Section 1.04 to holders of shares of Company Common Stock (such amounts being hereinafter referred to as the "Exchange Fund"). The Disbursing Agent shall invest the Exchange Fund, as the Surviving Corporation directs, in direct obligations of the United States of America, obligations for which the full faith and credit of the United States of America is pledged to provide for the payment of all principal and interest or commercial paper obligations receiving the highest rating from either Moody's Investors Service, Inc. or Standard & Poor's, a division of The McGraw Hill Companies, or a combination thereof, provided that, in any such case, no such instrument shall have a maturity exceeding three months. Any net profit resulting from, or interest or income produced by, such investments shall be payable to the Surviving Corporation. The Exchange Fund shall be used only as provided in this Agreement. (b) Promptly (but no later than five days) after the Effective Time, the Surviving Corporation shall cause the Disbursing Agent to mail to each person who was a record holder as of the Effective Time of an outstanding certificate or certificates which immediately prior to the Effective Time represented shares of Company Common Stock (the "Certificates"), and whose shares were converted into the right to receive Merger Consideration pursuant to Section 1.04(b), a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Disbursing Agent) and instructions for use in effecting the surrender of the Certificates in exchange for payment of the Merger Consideration. Upon surrender to the Disbursing Agent of a Certificate, together with such letter of transmittal duly executed and such other documents as may be reasonably required by the Disbursing Agent, the holder of such Certificate shall be paid promptly in exchange therefor cash in an amount equal to the product of the number of shares of Company Common Stock represented by such Certificate multiplied by the Merger Consideration, and such Certificate shall forthwith be canceled. No interest will be paid or -2- accrue on the cash payable upon the surrender of the Certificates. If payment is to be made to a person other than the person in whose name the Certificate surrendered is registered, it shall be a condition of payment that the Certificate so surrendered be properly endorsed or otherwise be in proper form for transfer and that the person requesting such payment pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered in accordance with this Section 1.05, each Certificate (other than Certificates representing shares of Company Common Stock owned by any subsidiary of the Company, Parent, Merger Subsidiary or any other subsidiary of Parent and shares of Company Common Stock held in the treasury of the Company, which have been canceled) shall represent for all purposes only the right to receive the Merger Consideration in cash multiplied by the number of shares of Company Common Stock evidenced by such Certificate, without any interest thereon. (c) From and after the Effective Time, there shall be no registration of transfers of shares of Company Common Stock which were outstanding immediately prior to the Effective Time on the stock transfer books of the Surviving Corporation. From and after the Effective Time, the holders of shares of Company Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares of Company Common Stock except as otherwise provided in this Agreement or by applicable law. All cash paid upon the surrender of Certificates in accordance with this Article I shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock previously represented by such Certificates. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, such Certificates shall be canceled and exchanged for cash as provided in this Article I. At the close of business on the day of the Effective Time the stock ledger of the Company shall be closed. (d) At any time more than 365 days after the Effective Time, the Surviving Corporation shall be entitled to require the Disbursing Agent to deliver to it any funds which had been made available to the Disbursing Agent and not disbursed in exchange for Certificates (including, without limitation, all interest and other income received by the Disbursing Agent in respect of all such funds). Thereafter, holders of shares of Company Common Stock shall look only to the Surviving Corporation (subject to the terms of this Agreement, abandoned property, escheat and other similar laws) as general creditors thereof with respect to any Merger Consideration that may be payable, without interest, upon due surrender of the Certificates held by them. If any Certificates shall not have been surrendered prior to five years after the Effective Time (or immediately prior to such time on which any payment in respect hereof would otherwise escheat or become the property of any governmental unit or agency), the payment in respect of such Certificates shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. Notwithstanding the foregoing, none of Parent, the Company, the Surviving Corporation nor the Disbursing Agent shall be liable to any holder of a share of Company Common Stock for any Merger Consideration in respect of such share of Company Common Stock delivered to a public official pursuant to any abandoned property, escheat or other similar law. (e) If any Certificate has been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen, or destroyed and, if required by the Surviving Corporation, the posting by such person of a bond in such reasonable -3- amount as the Surviving Corporation may direct as indemnity against any claim that may be made against the Surviving Corporation with respect to such Certificate, the Disbursing Agent will deliver in exchange for such lost, stolen, or destroyed Certificate, the appropriate Merger Consideration with respect to the shares of Company Common Stock formerly represented by that Certificate. (f) The Surviving Corporation or the Disbursing Agent, as the case may be, may deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock such amounts as the Surviving Corporation or the Disbursing Agent, as the case may be, may be required to deduct and withhold with respect to the making of any such payment under the Internal Revenue Code of 1986, as amended, or any provision of state, local, or foreign tax law, including without limitation withholdings required in connection with payments under Section 1.06. To the extent withheld by the Surviving Corporation or the Disbursing Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holders of the shares of Company Common Stock in respect of which such deduction and withholding was made. Section 1.06. Stock Options. At the Effective Time, each unexercised ------------- option, whether or not then vested or exercisable in accordance with its terms, to purchase shares of Company Common Stock (the "Options") previously granted by the Company or any of its subsidiaries shall be canceled automatically and the Parent shall or shall cause the Surviving Corporation to provide the holder thereof with a lump sum cash payment equal to the product of (i) the total number of shares of Company Common Stock subject to such Option immediately prior to the Effective Time and (ii) the excess (if any) of the Merger Consideration over the exercise price per share of Company Common Stock subject to such Option. Section 1.07. The Closing. The closing of the transactions contemplated by ----------- this Agreement (the "Closing") shall take place at the executive offices of the Company in Denver, Colorado, commencing at 9:00 a.m. local time on the second business day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the Parties will take at the Closing) or such other place and date as the Parties may mutually determine (the "Closing Date"). Section 1.08. Dissenters' Rights. Notwithstanding anything in this ------------------ Agreement to the contrary, shares of Company Common Stock outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger and who has dissented from the Merger in accordance with Article 113 of the CBCA ("Dissenting Shares") shall not be converted into the right to receive the Merger Consideration as provided in Section 1.04(b), unless and until such holder fails to perfect or withdraws or otherwise loses his right to payment under the CBCA. If, after the Effective Time, any such holder fails to perfect or withdraws or loses his right to such payment, such Dissenting Shares shall thereupon be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration, if any, to which such holder is entitled, without interest thereon. The Company shall give Parent and Merger Subsidiary prompt notice of any notice of dissent received by Company and, prior to the Effective Time, Parent and Merger Subsidiary shall have the right to participate in all negotiations and proceedings with respect to such dissents. Prior to the Effective Time, Company shall not, except with the prior written consent of Parent and Merger Subsidiary, make any payment with respect to, or settle or offer to settle, any such dissents. -4- ARTICLE II THE SURVIVING CORPORATION; DIRECTORS AND OFFICERS Section 2.01. Articles of Incorporation. The Articles of Incorporation of ------------------------- the Company in effect at the Effective Time shall be the articles of incorporation of the Surviving Corporation until amended in accordance with applicable law and this Agreement. Section 2.02. Bylaws. The bylaws of Merger Subsidiary in effect at the ------ Effective Time shall be the bylaws of the Surviving Corporation, until amended in accordance with applicable law and this Agreement. Section 2.03. Directors and Officers. The directors of Merger Subsidiary ---------------------- immediately prior to the Effective Time shall be the directors of the Surviving Corporation as of the Effective Time. The officers of the Company shall be the officers of the Surviving Corporation as of the Effective Time, subject to the right of the Board of Directors of the Surviving Corporation to appoint or replace officers. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY Parent and Merger Subsidiary jointly and severally represent and warrant to the Company that, except as set forth in the Disclosure Schedule dated as of the date hereof and signed by an authorized officer of Parent (the "Parent Disclosure Schedule"), it being agreed that disclosure of any item on the Parent Disclosure Schedule shall be deemed disclosure with respect to all Sections of this Agreement if the relevance of such item is reasonably apparent from the face of the Parent Disclosure Schedule: Section 3.01. Organization and Qualification. Parent is a corporation and ------------------------------ Merger Subsidiary is a corporation, in each case duly organized, validly existing and in good standing under the laws of the state of its incorporation and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. Each of Parent and Merger Subsidiary is qualified to transact business and is in good standing in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified and in good standing would not reasonably be expected to have Parent Material Adverse Effect. In this Agreement, the term "Parent Material Adverse Effect" means an effect that is materially adverse to (i) the business, financial condition or ongoing operations of Parent and its subsidiaries, taken as a whole or (ii) the ability of Parent or any of its subsidiaries to obtain financing for or to consummate any of the transactions contemplated by this Agreement. Section 3.02. Authority; Non-Contravention; Approvals. (a) Each of Parent --------------------------------------- and Merger Subsidiary has full corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, including without limitation, the consummation of the financing of the Merger pursuant to the Financing Arrangement (as defined in Section 3.04) (the "Financing"). This Agreement and the Merger have been approved and adopted by the Boards of Directors of Parent and Merger Subsidiary and Parent as the sole stockholder of Merger Subsidiary, and no other corporate or similar proceeding on the part of -5- Parent or Merger Subsidiary is necessary to authorize the execution and delivery of this Agreement or the consummation by Parent and Merger Subsidiary of the transactions contemplated hereby, including without limitation, the Financing. This Agreement has been duly executed and delivered by each of Parent and Merger Subsidiary and, assuming the due authorization, execution and delivery hereof by the Company, constitutes a valid and legally binding agreement of each of Parent and Merger Subsidiary enforceable against each of them in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) general equitable principles. (b) The execution, delivery and performance of this Agreement by each of Parent and Merger Subsidiary and the consummation of the Merger and the transactions contemplated hereby, including without limitation the Financing, do not and will not violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, security interest or encumbrance upon any of the properties or assets of Parent or any of its subsidiaries under any of the terms, conditions or provisions of (i) the respective certificates of incorporation or bylaws of Parent or any of its subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any court or governmental authority applicable to Parent or any of its subsidiaries or any of their respective properties or assets, subject, in the case of consummation, to obtaining (prior to the Effective Time) the Parent Required Statutory Approvals (as defined in Section 3.02(c)), or (iii) any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument, obligation or agreement of any kind (each a "Contract" and collectively "Contracts") to which Parent or any of its subsidiaries is now a party or by which Parent or any of its subsidiaries or any of their respective properties or assets may be bound or affected, except, with respect to any item referred to in clause (ii) or (iii), for any such violation, conflict, breach, default, termination, acceleration or creation of liens, security interests or encumbrances that would not reasonably be expected to have a Parent Material Adverse Effect and would not materially delay the consummation of the Merger. (c) Except for (i) the filings by Parent required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), if any, (ii) applicable filings with the Securities and Exchange Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii) filing of Articles of Merger with the Secretary of State of the State of Colorado in connection with the Merger, and (iv) filings with and approvals by any regulatory authority with jurisdiction over the Company's, Parent's or any Parent affiliate's gaming operations required under any Federal, state, local or foreign statute, ordinance, rule, regulation, permit, consent, approval, license, judgment, order, decree, injunction or other authorization governing or relating to the current or contemplated casino and gaming activities and operations of the Company, Parent or any Parent affiliate, including the Nevada Gaming Control Act and the rules and regulations promulgated thereunder, and the Colorado Limited Gaming Act and the rules and regulations promulgated thereunder and all other rules and regulations, statutes and ordinances having authority or with which compliance is required for the conduct of gambling, gaming and casino activities (collectively, the "Gaming Laws") (the filings and approvals referred to in clauses (i) through (iv) being collectively referred to as the "Parent Required Statutory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of, any governmental or regulatory body -6- or authority is necessary for the execution and delivery of this Agreement by Parent or Merger Subsidiary, or the consummation by Parent or Merger Subsidiary of the transactions contemplated hereby, including without limitation, the Financing, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not made or obtained, as the case may be, would not reasonably be expected to have a Parent Material Adverse Effect and would not materially delay the consummation of the Merger. Section 3.03. Proxy Statement and Other SEC Filings. None of the ------------------------------------- information supplied by Parent or its subsidiaries for inclusion in (i) any proxy statement to be distributed in connection with the Company's meeting of stockholders to vote upon this Agreement and the transactions contemplated hereby (the "Proxy Statement"), at the time of the mailing of the Proxy Statement and any amendments or supplements thereto, or at the time of the meeting of stockholders of the Company to be held in connection with the transactions contemplated by this Agreement, or (ii) the Schedule 13E-3 with respect to the transactions contemplated hereby (the "Transaction Statement") at the time of the filing thereof with the SEC or at any time the Transaction Statement is amended or supplemented, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. Section 3.04. Brokers and Finders. Except as disclosed in the Parent ------------------- Disclosure Schedule, Parent has not entered into any contract, arrangement or understanding with any person or firm which may result in the obligation of the Company to pay any investment banking fees, finder's fees or brokerage fees in connection with the transactions contemplated hereby. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent and Merger Subsidiary that, except as set forth in the disclosure schedule dated as of the date hereof and signed by an authorized officer of the Company (the "Company Disclosure Schedule"), it being agreed that disclosure of any item on the Company Disclosure Schedule shall be deemed disclosure with respect to all Sections of this Agreement if the relevance of such item is reasonably apparent from the face of the Company Disclosure Schedule: Section 4.01. Organization and Qualification. The Company is a corporation ------------------------------ duly organized, validly existing and in good standing under the laws of the State of Colorado and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. The Company is qualified to transact business and is in good standing in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified and in good standing would not reasonably be expected to have a Company Material Adverse Effect. In this Agreement, the term "Company Material Adverse Effect" means an effect that is materially adverse to (i) the business, financial condition or ongoing operations of the Company and its subsidiaries, taken as a whole or (ii) the ability of the Company to consummate any of the transactions contemplated by this Agreement or the ability of the Parties hereto to retain any Material Gaming License. A "Material Gaming License" is a license or similar authorization under any Gaming Law without which Parent or the Company, as the case may be, would be prohibited from operating any of its gaming properties -7- in the state in which such property is located. True, accurate and complete copies of the Company's Articles of Incorporation and bylaws, in each case as in effect on the date hereof, including all amendments thereto, have heretofore been delivered to Parent. Section 4.02. Capitalization. (a) The authorized capital stock of the -------------- Company consists of (1) 40,000,000 shares of Company Common Stock and (2) 10,000,000 shares of preferred stock, par value $.001 per share ("Company Preferred Stock"). As of March 31, 2001, (i) 4,126,757 shares of Company Common Stock were issued and outstanding, all of which shares of Company Common Stock were validly issued and are fully paid, nonassessable and free of preemptive rights, and no shares of Company Preferred Stock were issued and outstanding, (ii) no shares of Company Common Stock and no shares of Company Preferred Stock were held in the treasury of the Company, (iii) 543,750 shares of Company Common Stock were reserved for issuance upon exercise of Options issued and outstanding. Assuming the exercise of all outstanding options, as of March 31, 2001, there would be 4,670,507 shares of Company Common Stock issued and outstanding. Since March 31, 2001, except as permitted by this Agreement or as set forth in the Company Disclosure Schedule, (i) no shares of capital stock of the Company have been issued except in connection with the exercise of the instruments referred to in the second sentence of this Section 4.02(a) and (ii) no options, warrants, securities convertible into, or commitments with respect to the issuance of, shares of capital stock of the Company have been issued, granted or made. (b) Except as set forth in Section 4.02(a), as of the date hereof, there are no outstanding subscriptions, options, calls, contracts, commitments, understandings, restrictions, arrangements, rights or warrants, including any right of conversion or exchange under any outstanding security, instrument or other agreement and including any rights plan or other anti-takeover agreement, obligating the Company or any subsidiary of the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of the capital stock of the Company or obligating the Company or any subsidiary of the Company to grant, extend or enter into any such agreement or commitment. There are no outstanding stock appreciation rights or similar derivative securities or rights of the Company or any of its subsidiaries. Except as disclosed in the Company SEC Reports or as otherwise contemplated by this Agreement, there are no voting trusts, irrevocable proxies or other agreements or understandings to which the Company or any subsidiary of the Company is a party or is bound with respect to the voting of any shares of capital stock of the Company. Section 4.03. Subsidiaries. Each direct and indirect subsidiary of the ------------ Company is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has the requisite power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted and each subsidiary of the Company is qualified to transact business, and is in good standing, in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary; except, in all cases, where the failure to be so organized, existing, qualified and in good standing would not, singly or in the aggregate with all other such failures, reasonably be expected to have a Company Material Adverse Effect. All of the outstanding shares of capital stock of or other equity interests in each subsidiary of the Company are validly issued, fully paid, nonassessable and free of preemptive rights. There are no subscriptions, options, warrants, rights, calls, contracts or other commitments, understandings, restrictions or arrangements relating to the issuance or sale with respect to any shares of capital stock of or other equity interests in any subsidiary of the Company, including -8- any right of conversion or exchange under any outstanding security, instrument or agreement. For purposes of this Agreement, the term "subsidiary" means, with respect to any specified person (the "Owner") any other person of which more than 50% of the total voting power of shares of capital stock or other equity interests entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, trustees or other governing body thereof is at the time owned or controlled, directly or indirectly, by such Owner or one or more of the other subsidiaries of such Owner. Section 4.04. Authority; Non-Contravention; Approvals. (a) The Company has --------------------------------------- the requisite corporate power and authority to enter into this Agreement and, subject to the Company Stockholders' Approval (as defined in Section 6.01(a)) with respect solely to the Merger, to consummate the transactions contemplated hereby. This Agreement and the Merger have been approved and adopted by the Board of Directors of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Agreement or, except for the Company Stockholders' Approval with respect solely to the Merger, the consummation by the Company of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company, and, assuming the due authorization, execution and delivery hereof by Parent and Merger Subsidiary, constitutes a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) general equitable principles. (b) The execution, delivery and performance of this Agreement by the Company and the consummation of the Merger and the transactions contemplated hereby do not and will not violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, contractually require any offer to purchase or any prepayment of any debt, or result in the creation of any lien, security interest or encumbrance upon any of the properties or assets of the Company or any of its subsidiaries under any of the terms, conditions or provisions of (i) the respective articles or certificates of incorporation or bylaws or other governing instruments of the Company or any of its Material Subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any court or governmental authority applicable to the Company or any of its subsidiaries or any of their respective properties or assets, subject, in the case of consummation, to obtaining (prior to the Effective Time) the Company Required Statutory Approvals (as defined in Section 4.04(c)) and the Company Stockholders' Approval, or (iii) any Contract to which the Company or any of its subsidiaries is now a party or by which the Company or any of its subsidiaries or any of their respective properties or assets may be bound or affected, subject, in the case of consummation, to obtaining (prior to the Effective Time) consents required from commercial lenders, lessors or other third parties as specified in Section 4.04(b) of the Company Disclosure Schedule, except, with respect to any item referred to in clause (ii) or (iii), for any such violation, conflict, breach, default, termination, acceleration or creation of liens, security interests or encumbrances that would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect and would not materially delay the consummation of the Merger. (c) Except for (i) the filings by the Company required by the HSR Act, (ii) the filing of the Proxy Statement and the Transaction Statement with the SEC pursuant to the -9- Exchange Act, (iii) the filing of Articles of Merger with the Secretary of State of the State of Colorado in connection with the Merger, (iv) any filings with or approvals from authorities required solely by virtue of the jurisdictions in which Parent or its subsidiaries conduct any business or own any assets, and (v) filings with and approvals in respect of Gaming Laws (the filings and approvals referred to in clauses (i) through (v) and those disclosed in Section 4.04(c) of the Company Disclosure Schedule being collectively referred to as the "Company Required Statutory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of, any governmental or regulatory body or authority is necessary for the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not made or obtained, as the case may be, would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect and would not materially delay the consummation of the Merger. Section 4.05. Reports and Financial Statements. Since January 1, 1998, the -------------------------------- Company has filed with the SEC all forms, statements, reports and documents (including all exhibits, post-effective amendments and supplements thereto) (the "Company SEC Reports") required to be filed by it under each of the Securities Act, the Exchange Act and the respective rules and regulations thereunder, all of which, as amended if applicable, complied when filed in all material respects with all applicable requirements of the applicable act and the rules and regulations thereunder. As of their respective dates, the Company SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The audited consolidated financial statements of the Company included in its Annual Report on Form 10-K for the year ended December 31, 2000 (the "Company Financial Statements") have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as may be indicated therein or in the notes thereto) and present fairly in all material respects the financial position of the Company and its subsidiaries as of the dates thereof and the results of their operations and changes in financial position for the periods then ended. Section 4.06. Absence of Undisclosed Liabilities. Except as disclosed in ---------------------------------- the Company SEC Reports or the Company Disclosure Schedule, neither the Company nor any of its subsidiaries had at December 31, 2000, or has incurred since that date and as of the date hereof, any liabilities or obligations (whether absolute, accrued, contingent or otherwise) of any nature, except (a) liabilities, obligations or contingencies (i) which are accrued or reserved against in the Company Financial Statements or reflected in the notes thereto or (ii) which were incurred after December 31, 2000 in the ordinary course of business and consistent with past practice, (b) liabilities, obligations or contingencies which (i) would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, or (ii) have been discharged or paid in full prior to the date hereof in the ordinary course of business, and (c) liabilities, obligations and contingencies which are of a nature not required to be reflected in the consolidated financial statements of the Company and its subsidiaries prepared in accordance with generally accepted accounting principles consistently applied. Section 4.07. Absence of Certain Changes or Events. Since the date of the ------------------------------------ most recent Company SEC Report filed prior to the date of this Agreement that contains consolidated financial statements of the Company, there has not been any Company Material Adverse Effect. -10- Section 4.08. Litigation. Except as referred to in the Company SEC Reports, ---------- there are no claims, suits, actions or proceedings pending or, to the knowledge of the Company, threatened against, relating to or affecting the Company or any of its subsidiaries, before any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator that would reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. Except as referred to in the Company SEC Reports, neither the Company nor any of its subsidiaries is subject to any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator which prohibits the consummation of the transactions contemplated hereby or would reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. Section 4.09. Proxy Statement and Other SEC Filings. None of the ------------------------------------- information supplied by the Company or any of its subsidiaries for inclusion in (i) the Proxy Statement, at the time of the mailing of the Proxy Statement and any amendments or supplements thereto, or at the time of the meeting of stockholders of the Company to be held in connection with the transactions contemplated by this Agreement, or (ii) the Transaction Statement at the time of the filing thereof with the SEC or at any time the Transaction Statement is amended or supplemented, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Proxy Statement and the Transaction Statement will comply as to form in all material respects with all applicable laws, including the provisions of the Exchange Act and the rules and regulations promulgated thereunder, except that no representation is made by the Company with respect to information supplied by Parent, Merger Subsidiary or any stockholder of Parent for inclusion therein. Section 4.10. No Violation of Law. Except as disclosed in the Company SEC ------------------- Reports filed prior to the date of this Agreement, neither the Company nor any of its subsidiaries is in violation of or has been given written (or, to the knowledge of the Company's executive officers, oral) notice of any violation of, any law, statute, order, rule, regulation, ordinance or judgment (including, without limitation, any applicable environmental law, ordinance or regulation) of any governmental or regulatory body or authority, except for violations which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. Except as disclosed in the Company SEC Reports filed prior to the date of this Agreement, to the knowledge of the Company, no investigation or review by any governmental or regulatory body or authority is pending or threatened, nor has any governmental or regulatory body or authority indicated an intention to conduct the same, other than, in each case, those the outcome of which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. The Company and its subsidiaries are not in violation of the terms of any permit, license, franchise, variance, exemption, order or other governmental authorization, consent or approval necessary to conduct their businesses as presently conducted (collectively, the "Company Permits"), except for delays in filing reports or violations which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. Section 4.11. Compliance with Agreements. Except as disclosed in the -------------------------- Company SEC Reports, neither the Company nor any of its subsidiaries is in breach or violation of or in default in the performance or observance of any term or provision of, and no event has occurred which, with lapse of time or action by a third party, would result in a default under, any Contract to which the Company or any of its subsidiaries is a party or by which any of them is bound or to -11- which any of their property is subject, other than breaches, violations and defaults which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. To the knowledge of the Company's executive officers, the Company's insurance policies relating to directors' and officers' liability are in full force and effect. Section 4.12. Taxes. (a) The Company and its subsidiaries have (i) duly ----- filed with the appropriate governmental authorities all Tax Returns required to be filed by them, and such Tax Returns are true, correct and complete, and (ii) duly paid in full or reserved in accordance with generally accepted accounting principles on the Company Financial Statements all Taxes required to be paid, except in each such case as would not, individually or in the aggregate, have a Company Material Adverse Effect. Except as would not, individually or in the aggregate, have a Company Material Adverse Effect, there are no liens for Taxes upon any property or asset of the Company or any subsidiary thereof, other than liens for Taxes not yet due or Taxes contested in good faith and reserved against in accordance with generally accepted accounting principles. There are no unresolved issues of law or fact arising out of a notice of deficiency, proposed deficiency or assessment from the Internal Revenue Service (the "IRS") or any other governmental taxing authority with respect to Taxes of the Company or any of its subsidiaries which would individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Except as would not, individually or in the aggregate, have a Company Material Adverse Effect, neither the Company nor any of its subsidiaries has agreed to an extension of time with respect to a Tax deficiency, other than extensions which are no longer in effect. Except as would not, individually or in the aggregate, have a Company Material Adverse Effect, neither the Company nor any of its subsidiaries is a party to any agreement providing for the allocation or sharing of Taxes with any entity that is not, directly or indirectly, a wholly-owned subsidiary of the Company, other than agreements the consequences of which are fully and adequately reserved for in the Company Financial Statements. (b) Except as would not, individually or in the aggregate, have a Company Material Adverse Effect, the Company and each of its subsidiaries has withheld or collected and has paid over to the appropriate governmental entities (or is properly holding for such payment) all material Taxes required to be collected or withheld. (c) For purposes of this Agreement, "Tax" (including, with correlative meaning, the term "Taxes") means all federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, communications services, severance, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions, and includes any liability for Taxes of another person by contract, as a transferee or successor, under Treas. Reg. 1.1502-6 or analogous state, local or foreign law provision or otherwise, and "Tax Return" means any return, report or similar statement (including attached schedules) required to be filed with respect to any Tax, including without limitation, any information return, claim for refund, amended return or declaration of estimated Tax. Section 4.13. Employee Benefit Plans; ERISA. (a) The Company SEC Reports or ----------------------------- the Company Disclosure Letter set forth each employee or director benefit plan, arrangement or agreement, including without limitation any employee welfare benefit plan within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any employee pension benefit plan within the meaning of Section 3(2) of ERISA -12- (whether or not such plan is subject to ERISA) and any bonus, incentive, deferred compensation, vacation, stock purchase, stock option, severance, employment, change of control or fringe benefit plan, program or agreement (excluding any multi-employer plan as defined in Section 3(37) of ERISA (a "Multi-employer Plan") and any multiple employer plan within the meaning of Section 413(c) of the Code) that is sponsored, maintained or contributed to by the Company or any of its subsidiaries or by any trade or business, whether or not incorporated, all of which together with the Company would be deemed a "single employer" within the meaning of Section 4001 of ERISA (the "Company Plans"). (b) Except as disclosed in the Company SEC Reports or in the Company Disclosure Schedule, (i) there have been no prohibited transactions within the meaning of Section 406 or 407 of ERISA or Section 4975 of the Code with respect to any of the Company Plans that could result in penalties, taxes or liabilities which would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (ii) no Company Plan is subject to Title IV of ERISA, (iii) each of the Company Plans has been operated and administered in accordance with all applicable laws during the period of time covered by the applicable statute of limitations, except for failures to comply which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, (iv) each of the Company Plans which is intended to be "qualified" within the meaning of Section 401(a) of the Code has been determined by the IRS to be so qualified and such determination has not been revoked by failure to satisfy any condition thereof or by a subsequent amendment thereto or a failure to amend, except that it may be necessary to make additional amendments retroactively to maintain the "qualified" status of such Company Plans, and the period for making any such necessary retroactive amendments has not expired, (v) to the knowledge of the Company and its subsidiaries, there are no pending, threatened or anticipated claims involving any of the Company Plans other than claims for benefits in the ordinary course or claims which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, (vi) no Company Plan provides post-retirement medical benefits to employees or directors of the Company or any of its subsidiaries beyond their retirement or other termination of service, other than coverage mandated by applicable law, (vii) all material contributions or other amounts payable by the Company or its subsidiaries as of the date hereof with respect to each Company Plan in respect of current or prior plan years have been paid or accrued in accordance with generally accepted accounting principles, (viii) with respect to each Multi-employer Plan contributed to by the Company, to the knowledge of the Company and its subsidiaries, as of the date hereof, none of the Company or any of its subsidiaries has received any notification that any such Multi-employer Plan is in reorganization, has been terminated or is insolvent, (ix) the Company and each of its subsidiaries has complied in all respects with the Worker Adjustment and Retraining Notification Act, except for failures which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, and (x) no act, omission or transaction has occurred with respect to any Company Plan that has resulted or could result in any liability of the Company or any subsidiary under Section 409 or 502(c)(1) or (l) of ERISA or Chapter 43 of Subtitle (A) of the Code, except for liabilities which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. (c) Except as set forth in the Company Disclosure Schedule, and excluding payments in respect of outstanding Options, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including, without limitation, any severance or "excess parachute payment" (within the meaning -13- of Section 280G of the Code)) becoming due to any director or employee of the Company or any of its subsidiaries under any Company Plan, (ii) increase any benefits otherwise payable under any Company Plan, or (iii) result in any acceleration of the time of payment or vesting of any such benefits. Section 4.14. Labor Controversies. Except as disclosed in the Company SEC ------------------- Reports, (a) there are no significant controversies pending or, to the knowledge of the Company, threatened between the Company or any of its subsidiaries and any representatives (including unions) of any of their employees, and (b) to the knowledge of the Company, there are no organizational efforts presently being made involving any of the presently unorganized employees of the Company or any of its subsidiaries. Section 4.15. Environmental Matters. (a) Except as disclosed in the Company --------------------- SEC Reports or the Company Disclosure Schedule and for other matters that would not, singly or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (i) the Company and its subsidiaries have conducted their respective businesses in compliance with all applicable Environmental Laws, including, without limitation, having all permits, licenses and other approvals and authorizations necessary for the operation of their respective businesses as presently conducted, (ii) none of the properties owned by the Company or any of its subsidiaries contain any Hazardous Substance in amounts exceeding the levels permitted by applicable Environmental Laws, (iii) since January 1, 1998, neither the Company nor any of its subsidiaries has received any notices, demand letters or requests for information from any Federal, state, local or foreign governmental entity indicating that the Company or any of its subsidiaries may be in violation of, or liable under, any Environmental Law in connection with the ownership or operation of their businesses, (iv) there are no civil, criminal or administrative actions, suits, demands, claims, hearings, investigations or proceedings pending or threatened, against the Company or any of its subsidiaries relating to any violation, or alleged violation, of any Environmental Law, (v) no Hazardous Substance has been disposed of, released or transported in violation of any applicable Environmental Law from any properties owned by the Company or any of its subsidiaries as a result of any activity of the Company or any of its subsidiaries during the time such properties were owned, leased or operated by the Company or any of its subsidiaries, and (vi) neither the Company, its subsidiaries nor any of their respective properties are subject to any liabilities or expenditures (fixed or contingent) relating to any suit, settlement, court order, administrative order, regulatory requirement, judgment or claim asserted or arising under any Environmental Law. (b) As used herein, "Environmental Law" means any federal, state, local or foreign law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, legal doctrine, order, judgment, decree, injunction, requirement or agreement with any governmental entity relating to (x) the protection, preservation or restoration of the environment (including, without limitation, air, water vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource) or to human health or safety, or (y) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substances, in each case as amended and as in effect at the Effective Time. The term "Environmental Law" includes, without limitation, (i) the Federal Comprehensive Environmental Response Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976 -14- (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Occupational Safety and Health Act of 1970, each as amended and as in effect at the Effective Time, and (ii) any common law or equitable doctrine (including, without limitation, injunctive relief and tort doctrines such as negligence, nuisance, trespass and strict liability) that may impose liability or obligations for injuries or damages arising from or threatened as a result of, the presence of, effects of or exposure to any Hazardous Substance. (c) As used herein, "Hazardous Substance" means any substance presently or hereafter listed, defined, designated or classified as hazardous, toxic, radioactive, or dangerous, or otherwise regulated, under any Environmental Law. Hazardous Substance includes any substance to which exposure is regulated by any government authority or any Environmental Law including, without limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic substance, hazardous waste, special waste, industrial substance or petroleum or any derivative or by-product thereof, radon, radioactive material, asbestos, or asbestos-containing material, urea formaldehyde foam insulation, lead or polychlorinated biphenyls. Section 4.16. Title to Assets. The Company and each of its subsidiaries has --------------- good and valid title in fee simple to all its real property and good title to all its leasehold interests and other properties, as reflected in the most recent balance sheet included in the Company Financial Statements, except for properties and assets that have been disposed of in the ordinary course of business since the date of such balance sheet, free and clear of all mortgages, liens, pledges, charges or encumbrances of any nature whatsoever, except (i) the lien for current taxes, payments of which are not yet delinquent, (ii) such imperfections in title and easements and encumbrances, if any, as are not substantial in character, amount or extent and do not materially detract from the value, or interfere with the present use of the property subject thereto or affected thereby, or otherwise materially impair the Company's business operations (in the manner presently carried on by the Company), or (iii) as disclosed in the Company SEC Reports, and except for such matters which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. All leases under which the Company or any of its subsidiaries leases any real or personal property are in good standing, valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing default or event which with notice or lapse of time or both would become a default other than failures to be in good standing, valid and effective and defaults under such leases which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. Section 4.17. Company Stockholders' Approval. The affirmative vote of ------------------------------ stockholders of the Company required for approval and adoption of this Agreement and the Merger is a majority of the outstanding shares of Company Common Stock entitled to vote thereon. Section 4.18. Brokers and Finders. The Company has not entered into any ------------------- contract, arrangement or understanding with any person or firm which may result in the obligation of the Company to pay any investment banking fees, finder's fees or brokerage fees in connection with the transactions contemplated hereby, other than fees payable to Robertson Stephens, Inc. (the "Special Committee Financial Advisor"), or as disclosed in Section 4.18 of the Company Disclosure Schedule. An accurate copy of any fee agreement with the Company Financial Advisor has been made available to Parent. -15- ARTICLE V COVENANTS Section 5.01. Conduct of Business by the Company Pending the Merger. Except ----------------------------------------------------- as otherwise contemplated by this Agreement or disclosed in Section 5.01 of the Company Disclosure Schedule, after the date hereof and prior to the Effective Time or earlier termination of this Agreement, unless Parent shall otherwise agree in writing, the Company shall, and shall cause its subsidiaries to: (a) conduct their respective businesses in the ordinary and usual course of business and consistent with past practice, including with respect to casino credit policies; (b) not (i) amend or propose to amend their respective articles of incorporation or bylaws or equivalent constitutional documents, (ii) split, combine or reclassify their outstanding capital stock or (iii) declare, set aside or pay any dividend or distribution payable in cash, stock, property or otherwise, except for the payment of dividends or distributions to the Company or a wholly-owned subsidiary of the Company by a direct or indirect wholly-owned subsidiary of the Company; (c) not issue, sell, pledge or dispose of, or agree to issue, sell, pledge or dispose of, any additional shares of, or any options, warrants or rights of any kind to acquire any shares of, their capital stock of any class or any debt or equity securities convertible into or exchangeable for any such capital stock, except that the Company may issue shares upon the exercise of Options outstanding on the date hereof; (d) not (i) incur or become contingently liable with respect to any indebtedness for borrowed money other than (A) borrowings in the ordinary course of business or borrowings under the existing credit facilities of the Company or of any of its subsidiaries up to the existing borrowing limit on the date hereof, and (B) borrowings to refinance existing indebtedness on terms which are reasonably acceptable to Parent; provided that in no event shall aggregate indebtedness of the Company and its subsidiaries, net of all cash and cash equivalents, exceed $75,000,000, (ii) redeem, purchase, acquire or offer to purchase or acquire any shares of its capital stock or any options, warrants or rights to acquire any of its capital stock or any security convertible into or exchangeable for its capital stock other than in connection with the exercise of outstanding Options pursuant to the terms of the Company Option Plans, (iii) except as disclosed in Section 5.01(d)(i) of the Company Disclosure Schedule, make any acquisition of any assets or businesses other than expenditures for current assets in the ordinary course of business and expenditures for fixed or capital assets in the ordinary course of business, (iv) without Parent's consent, acquire any gaming property in the State of Colorado, (v) sell, pledge, dispose of or encumber any assets or businesses other than (A) sales of businesses or assets disclosed in Section 5.01 of the Company Disclosure Schedule, (B) pledges or encumbrances pursuant to Existing Credit Facilities or other permitted borrowings, (C) sales of real estate, assets or facilities for cash consideration (including any debt assumed by the buyer of such real estate, assets or facilities) to non-affiliates of the Company of less than $100,000 in each such case and $500,000 in the aggregate, (D) sales or dispositions of businesses or assets as may be required by applicable law, and (E) sales or dispositions of assets in the ordinary course or (vi) enter into any binding contract, agreement, commitment or arrangement with respect to any of the foregoing; -16- (e) use all reasonable efforts to preserve intact their respective business organizations and goodwill, keep available the services of their respective present officers and key employees, and preserve the goodwill and business relationships with customers and others having business relationships with them other than as expressly permitted by the terms of this Agreement; (f) not enter into, amend, modify or renew any employment, consulting, severance or similar agreement with, or grant any salary, wage or other increase in compensation or increase in any employee benefit to, any director or officer of the Company or of any of its subsidiaries, except (i) for changes that are required by applicable law, (ii) to satisfy obligations existing as of the date hereof, or (iii) in the ordinary course of business consistent with past practice; (g) not enter into, establish, adopt, amend or modify any pension, retirement, stock purchase, savings, profit sharing, deferred compensation, consulting, bonus, group insurance or other employee benefit, incentive or welfare plan, agreement, program or arrangement, in respect of any director, officer or employee of the Company or of any of its subsidiaries, except, in each such case, as may be required by applicable law or by the terms of contractual obligations existing as of the date hereof, including any collective bargaining agreement; (h) not make expenditures, including, but not limited to, capital expenditures, or enter into any binding commitment or contract to make expenditures, except (i) expenditures which the Company or its subsidiaries are currently contractually committed to make, (ii) other expenditures not exceeding $250,000 individually or $500,000 in the aggregate, (iii) for emergency repairs and other expenditures necessary in light of circumstances not anticipated as of the date of this Agreement which are necessary to avoid significant disruption to the Company's business or operations consistent with past practice (and, if reasonably practicable, after consultation with Parent), or (iv) for repairs and maintenance in the ordinary course of business consistent with past practice. With respect to the subject matter of this paragraph (h), if the Company requests approval of Parent to exceed the limits set forth herein, Parent shall respond to such request and grant or withhold approval promptly following receipt of such request; (i) not make, change or revoke any material Tax election unless required by law or make any agreement or settlement with any taxing authority regarding any material amount of Taxes or which would reasonably be expected to materially increase the obligations of the Company or the Surviving Corporation to pay Taxes in the future; and (j) not settle or compromise any litigation to which the Company or any Company subsidiary is a party or with respect to which the Company or any Company subsidiary may have or incur liability, at an aggregate cost to the Company in excess of $250,000 with respect to any action or claim or in excess of $500,000 with respect to all applicable actions and claims in the aggregate. Section 5.02. Control of the Company's Operations. Nothing contained in ----------------------------------- this Agreement shall give to Parent, directly or indirectly, rights to control or direct the Company's operations prior to the Effective Time. Prior to the Effective Time, the Company shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision of its operations. -17- Section 5.03. Acquisition Transactions. (a) After the date hereof and prior ------------------------ to the Effective Time or earlier termination of this Agreement, except in accordance with Section 5.03(b), the Company shall not, and shall not permit any of its subsidiaries to, initiate, solicit, negotiate, encourage or provide confidential information to facilitate, and the Company shall use all reasonable efforts to cause any officer, director or employee of the Company, or any attorney, accountant, investment banker, financial advisor or other agent retained by it or any of its subsidiaries, not to initiate, solicit, negotiate, encourage or provide non-public or confidential information to facilitate, any proposal or offer to acquire all or any substantial part of the business, properties or capital stock of the Company, whether by merger, purchase of assets, tender offer or otherwise, whether for cash, securities or any other consideration or combination thereof (any such transactions being referred to herein as an "Acquisition Transaction"). (b) Notwithstanding the provisions of paragraph (a) above, (i) the Company may, prior to receipt of the Company Stockholders' Approval, in response to an unsolicited bona fide written offer or proposal with respect to a potential or proposed Acquisition Transaction ("Acquisition Proposal") from a corporation, partnership, person or other entity or group (a "Potential Acquirer") which the Company's Board of Directors determines, in good faith and after consultation with its independent financial advisor, would reasonably be expected to result (if consummated pursuant to its terms) in an Acquisition Transaction more favorable to the Company's stockholders than the Merger (a "Qualifying Proposal"), furnish (subject to the execution of a confidentiality agreement substantially similar to the confidentiality provisions of the Confidentiality Agreement (as defined in Section 5.04)) confidential or non-public information to, and negotiate with, such Potential Acquirer, may resolve to accept, or recommend, and, upon termination of this Agreement in accordance with Section 7.01(v) and after payment to Parent of the fee pursuant to Section 5.09(b), enter into agreements relating to, a Qualifying Proposal which the Company's Board of Directors, in good faith, has determined is reasonably likely to be consummated (such Qualifying Proposal being a "Superior Proposal") and (ii) the Company's Board of Directors may take and disclose to the Company's stockholders a position contemplated by Rule 14e-2 under the Exchange Act or otherwise make disclosure required by the federal securities laws. It is understood and agreed that negotiations and other activities conducted in accordance with this paragraph (b) shall not constitute a violation of paragraph (a) of this Section 5.03. (c) The Company shall promptly notify Parent after receipt of any Acquisition Proposal, indication of interest or request for non-public information relating to the Company or its subsidiaries in connection with an Acquisition Proposal or for access to the properties, books or records of the Company or any subsidiary by any person or entity that informs the Board of Directors of the Company or such subsidiary that it is considering making, or has made, an Acquisition Proposal. Such notice to Parent shall be given orally and in writing and shall indicate in reasonable detail the identity of the offeror and the material terms and conditions of such proposal, inquiry or contact. Section 5.04. Access to Information. The Company and its subsidiaries shall --------------------- afford to Parent and Merger Subsidiary and their respective accountants, counsel, financial advisors, sources of financing and other representatives (the "Parent Representatives") reasonable access during normal business hours with reasonable notice throughout the period prior to the Effective Time to all of their respective properties, books, contracts, commitments and records (including, but not limited to, Tax Returns) and, during such period, shall furnish promptly (i) a copy of each report, schedule and other document filed or received by any of them pursuant to the -18- requirements of federal or state securities laws or filed by any of them with the SEC in connection with the transactions contemplated by this Agreement, and (ii) such other information concerning its businesses, properties and personnel as Parent or Merger Subsidiary shall reasonably request and will obtain the reasonable cooperation of the Company's officers, employees, counsel, accountants, consultants and financial advisors in connection with the investigation of the Company by Parent and the Parent Representatives. All nonpublic information provided to, or obtained by, Parent or any Parent Representative in connection with the transactions contemplated hereby shall be "Information" for purposes of the Confidentiality Agreement dated April 23, 2001 between Parent and the Company (the "Confidentiality Agreement"), provided that Parent, Merger Subsidiary and the Company may disclose such information as may be necessary in connection with seeking the Parent Required Statutory Approvals, the Company Required Statutory Approvals and the Company Stockholders' Approval. Notwithstanding the foregoing, the Company shall not be required to provide any information which it reasonably believes it may not provide to Parent by reason of applicable law, rules or regulations, which constitutes information protected by attorney/client privilege, or which the Company or any subsidiary is required to keep confidential by reason of contract, agreement or understanding with third parties entered into prior to the date hereof. Section 5.05. Notices of Certain Events. (a) The Company shall as promptly ------------------------- as reasonably practicable after executive officers of the Company acquire knowledge thereof, notify Parent of: (i) any notice or other communication from any person alleging that the consent of such person (or another person) is or may be required in connection with the transactions contemplated by this Agreement which consent relates to a material Contract to which the Company or any of its subsidiaries is a party or which if not obtained would materially delay consummation of the Merger; (ii) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement; and (iii) any actions, suits, claims, investigations or proceedings commenced or, to the best of its knowledge threatened against, relating to or involving or otherwise affecting the Company or any of its subsidiaries that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 4.08 or 4.10 or which relate to the consummation of the transactions contemplated by this Agreement. (b) Each of Parent and Merger Subsidiary shall as promptly as reasonably practicable after executive officers of the Parent acquire knowledge thereof, notify the Company of: (i) any notice or other communication from any person alleging that the consent of such person (or other person) is or may be required in connection with the transactions contemplated by this Agreement which consent relates to a material Contract to which Parent or any of its subsidiaries is a party or which if not obtained would materially delay the Merger, (ii) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement, and (iii) any actions, suits, claims, investigations or proceedings commenced or, to the best of its knowledge threatened, against Parent or Merger Subsidiary, which relate to consummation of the transactions contemplated by this Agreement. (c) Each of the Company, Parent and Merger Subsidiary agrees to give prompt notice to each other of, and to use commercially reasonable efforts to remedy, (i) the occurrence or failure to occur of any event which occurrence or failure would be likely to cause any of its representations or warranties in this Agreement to be untrue or inaccurate at the Effective Time unless such failure or occurrence would not have a Company Material Adverse Effect or a Parent -19- Material Adverse Effect, as the case may be, and (ii) any failure on its part to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder unless such failure or occurrence would not have a Company Material Adverse Effect or a Parent Material Adverse Effect, as the case may be. The delivery of any notice pursuant to this Section 5.05(c) shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. Section 5.06. Meeting of the Company's Stockholders. The Company shall as ------------------------------------- promptly as practicable after the date of this Agreement take all action necessary in accordance with the CBCA and its Articles of Incorporation and bylaws to convene a meeting of the Company's stockholders (the "Company Stockholders' Meeting") to act on this Agreement. The Board of Directors of the Company shall recommend that the Company's stockholders vote to approve the Merger and adopt this Agreement; provided, however, that the Company may change its recommendation in any manner if its recommendation of the Merger would be inconsistent with the board of directors' fiduciary duties under applicable law, as determined by the board of directors in good faith after consultation with its financial and legal advisors. Section 5.07. Proxy Statement and Other SEC Filings. As promptly as ------------------------------------- practicable after execution of this Agreement, the parties shall cooperate and promptly prepare and the Company shall file the Proxy Statement and the Transaction Statement with the SEC under the Exchange Act, and the parties shall use all reasonable efforts to have the Proxy Statement and the Transaction Statement cleared by the SEC. The Company shall notify Parent of the receipt of any comments of the SEC with respect to the Proxy Statement or Transaction Statement and of any requests by the SEC for any amendment or supplement thereto or for additional information, and shall provide to Parent promptly copies of all correspondence between the Company or any representative of the Company and the SEC. The Company shall give Parent and its counsel the opportunity to review the Proxy Statement and Transaction Statement prior to their being filed with the SEC and shall give Parent and its counsel the opportunity to review all amendments and supplements to the Proxy Statement and Transaction Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of the Company, Parent and Merger Subsidiary agrees to use its reasonable best efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC. As promptly as practicable after the Proxy Statement and Transaction Statement have been cleared by the SEC, the Company shall mail the Proxy Statement to the stockholders of the Company. Prior to the date of approval of the Merger by the Company's stockholders, each of the Company, Parent and Merger Subsidiary shall correct promptly any information provided by it to be used specifically in the Proxy Statement or the Transaction Statement that shall have become false or misleading in any material respect and the Company shall take all steps necessary to file with the SEC and cleared by the SEC any amendment or supplement to the Proxy Statement or the Transaction Statement so as to correct the same and to cause the Proxy Statement as so corrected to be disseminated to the stockholders of the Company, in each case to the extent required by applicable law. Section 5.08. Public Announcements. Parent and the Company will consult -------------------- with each other before issuing any press release or making any public statement with respect to this Agreement and the transactions contemplated hereby and, except as may be required by applicable law or any listing agreement with the NASDAQ - National Market System, will not issue any such press release or make any such public statement prior to such consultation. -20- Section 5.09. Expenses and Fees. (a) All costs and expenses incurred in ----------------- connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, except that those expenses incurred in connection with printing and filing the Proxy Statement and the Transaction Statement or with any filing under the HSR Act shall be shared equally by Parent and the Company. (b) The Company agrees to pay to Parent a fee equal to $1,000,000 if: (i) the Company terminates this Agreement pursuant to clause (v) of Section 7.01; (ii) Parent terminates this Agreement pursuant to clause (vi) of Section 7.01, which fee shall be payable within two business days of such termination; (iii) this Agreement is terminated for any reason at a time at which Parent was not in material breach of its representations, warranties, covenants and agreements contained in this Agreement and was entitled to terminate this Agreement pursuant to clause (vii) of Section 7.01, and (A) prior to the time of the Company Stockholders' Meeting a proposal by a third party relating to an Acquisition Transaction had been publicly proposed or publicly announced, and (B) on or prior to the 12 month anniversary of the termination of this Agreement the Company or any of its subsidiaries or affiliates enters into an agreement or letter of intent (or resolves or announces an intention to do) with respect to an Acquisition Transaction involving a person, entity or group if such person, entity, group (or any member of such group, or any affiliate of any of the foregoing) made a proposal with respect to an Acquisition Transaction on or after the date hereof and prior to the Company Stockholders' Meeting and such Acquisition Transaction is consummated. (c) Parent agrees to pay the Company a fee equal to $2,000,000 if Parent either (i) breaches its representation and covenant under Section 5.12 or (ii) fails to consummate the transactions contemplated by this Agreement on or before 12:00 noon, Mountain Time, on the Outside Date notwithstanding the satisfaction of the conditions to Parent's obligation to consummate the transactions contemplated by this Agreement on or before the Outside Date (not including conditions whose failure to be satisfied is the result of a breach of a representation, warranty or covenant of Parent or Merger Subsidiary hereunder). Section 5.10. Agreement to Cooperate. (a) Subject to the terms and ---------------------- conditions of this Agreement, including Section 5.03, each of the parties hereto shall use all reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations (including the HSR Act and the Gaming Laws) to consummate and make effective the transactions contemplated by this Agreement, including using its reasonable best efforts to obtain all necessary or appropriate waivers, consents or approvals of third parties required in order to preserve material contractual relationships of Parent and the Company and their respective subsidiaries, all necessary or appropriate waivers, consents and approvals to effect all necessary registrations, filings and submissions and to lift any injunction or other legal bar to the Merger (and, in that case, to proceed with the Merger as expeditiously as possible). In addition, subject to the terms and conditions herein provided and subject to the fiduciary duties of the respective boards of directors of the Company and Parent, none of the parties hereto shall knowingly take or cause to be taken any action (including, but not -21- limited to, in the case of Parent, (x) the incurrence of material debt financing, other than the financing in connection with the Merger and related transactions and other than debt financing incurred in the ordinary course of business, and (y) the acquisition of businesses or assets) which would reasonably be expected to delay materially or prevent consummation of the Merger. (b) Without limitation of the foregoing, each of Parent and the Company undertakes and agrees to file as soon as practicable, if required, a Notification and Report Form under the HSR Act with the United States Federal Trade Commission (the "FTC") and the Antitrust Division of the United States Department of Justice (the "Antitrust Division"), and to make such filings and apply for such approvals and consents as are required under the Gaming Laws. Each of Parent and the Company shall (i) respond as promptly as practicable to any inquiries received from the FTC or the Antitrust Division or any authority enforcing applicable Gaming Laws for additional information or documentation and to all inquiries and requests received from any State Attorney General or other governmental authority in connection with antitrust matters or Gaming Laws, and (ii) not extend any waiting period under the HSR Act or enter into any agreement with the FTC or the Antitrust Division not to consummate the transactions contemplated by this Agreement, except with the prior written consent of the other parties hereto. Each party shall (i) promptly notify the other party of any written communication to that party from the FTC, the Antitrust Division, any State Attorney General or any other governmental entity and, subject to applicable law, permit the other party to review in advance any proposed written communication to any of the foregoing; (ii) not agree to participate in any substantive meeting or discussion with any governmental authority in respect of any filings, investigation or inquiry concerning this Agreement or the Merger unless it consults with the other party in advance and, to the extent permitted by such governmental authority, gives the other party the opportunity to attend and participate thereat; and (iii) furnish the other party with copies of all correspondence, filings, and communications (and memoranda setting forth the substance thereof) between them and their affiliates and their respective representatives on the one hand, and any government or regulatory authority or members or their respective staffs on the other hand, with respect to this Agreement and the Merger. Section 5.11. Directors' and Officers' Indemnification. (a) The ---------------------------------------- indemnification provisions of the articles of incorporation and bylaws of the Company as in effect at the Effective Time shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would adversely affect the rights thereunder of individuals who at the Effective Time were directors, officers, employees or agents of the Company. (b) Without limiting Section 5.11(a), after the Effective Time, the Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, to the fullest extent permitted under applicable law, indemnify and hold harmless, each present and former director, officer, employee and agent of the Company or any of its subsidiaries (each, together with such person's heirs, executors or administrators, an "Indemnified Party" and collectively, the "Indemnified Parties") against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any actual or threatened claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative (collectively, "Costs and Expenses"), arising out of, relating to or in connection with (i) any action or omission occurring or alleged to occur prior to the Effective Time (including, without limitation, acts or omissions in connection with such persons serving as an officer, director or other fiduciary in any entity if such service was at the request or for the -22- benefit of the Company) or (ii) the Merger and the other transactions contemplated by this Agreement or arising out of or pertaining to the transactions contemplated by this Agreement or the events and developments between Parent and the Company leading up to this Agreement. Any Indemnified Party hereunder will (1) give prompt notice to the Surviving Corporation of any claim which arises from or after the Effective Time with respect to which it seeks indemnification and (2) permit the Surviving Corporation to assume the defense of such claim with counsel reasonably satisfactory to a majority of the Indemnified Parties. In connection with the selection of counsel to represent the Indemnified Parties in connection with clause (2) above, the Surviving Corporation shall propose counsel to represent the Indemnified Parties. The applicable Indemnified Parties shall have the right to approve such counsel, but such approval shall not be unreasonably withheld. If the proposed counsel is not approved, the Surviving Corporation shall continue to propose counsel until counsel is approved by the applicable Indemnified Parties. Any Indemnified Party shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless: (x) the Surviving Corporation has agreed, in writing, to pay such fees or expenses; (y) the Surviving Corporation shall have failed to assume the defense of such claim after the receipt of notice from the Indemnified Party as required above and failed to employ counsel reasonably satisfactory to a majority of the Indemnified Parties or (z) based upon advice of counsel to such Indemnified Party and concurrence therewith by counsel for the group of Indemnified Parties in such matter, there shall be one or more defenses available to such Indemnified Party that are not available to the Surviving Corporation or there shall exist conflicts of interest between such Indemnified Party and the Surviving Corporation or the other Indemnified Parties (in which case, if the Indemnified Party notifies the Surviving Corporation in writing that such Indemnified Party elects to employ separate counsel at the expense of the Surviving Corporation, the Surviving Corporation shall not have the right to assume the defense of such claim on behalf of such Indemnified Party), in each of which events the reasonable fees and expenses of such counsel (which counsel shall be reasonably acceptable to the Surviving Corporation) shall be at the expense of the Surviving Corporation. (c) If the Surviving Corporation or Parent or any of their successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers all or substantially all of its properties and assets to any person, then and in each such case, proper provision shall be made so that the successors and assigns of the Surviving Corporation or Parent shall assume the obligations of the Surviving Corporation or the Parent, as the case may be, set forth in this Section 5.11. (d) For a period of six years after the Effective Time, Parent shall cause to be maintained or shall cause the Surviving Corporation to maintain in effect the current policies of directors' and officers' liability insurance maintained by the Company and its subsidiaries (provided that Parent may substitute therefor policies of at least the same coverage and amounts containing terms and conditions that are no less advantageous to the Indemnified Parties, and which coverages and amounts shall be no less than the coverages and amounts provided at that time for Parent's directors and officers) with respect to matters arising on or before the Effective Time; provided, however, that Parent and the Surviving Corporation shall not be required to expend in any year an amount in excess of 125% of the annual aggregate premiums currently paid by the Company for such insurance; and provided, further, that if the annual premiums of such insurance coverage exceed such amount, Parent and the Surviving Corporation shall be -23- obligated to obtain a policy with the best coverage available, in the reasonable judgment of the Parent's board of directors, for a cost not exceeding such amount. (e) The indemnification rights of the Indemnified Parties granted under (i) this Agreement, (ii) the Articles and Bylaws of the Surviving Corporation, as amended, and (iii) the CBCA, are the only indemnification rights available to the Indemnified Parties and supersede any other rights to indemnification under any other agreement. The provisions of this Section 5.11 shall survive the consummation of the Merger and expressly are intended to benefit and be binding upon each of the Indemnified Parties. (f) Parent hereby fully and unconditionally guarantees the performance of the Surviving Company's obligations under Sections 5.11(a)-(c). This guaranty is a guaranty of payment and not performance. Section 5.12. Financing. As a condition precedent to the Company's --------- obligation to mail the Proxy Statement to the Company's stockholders in accordance with Section 5.07 of this Agreement, Parent shall deliver to the Company an executed, written "highly confident" letter from U.S. Bancorp Libra or one or more similar lending institutions (each, a "Letter") that it can arrange, in the aggregate, financing sufficient to fund the consummation of the transactions contemplated by this Agreement, including, without limitation, the Merger, and to satisfy all other costs and expenses arising in connection with this Agreement (the "Financing"). Parent shall use its reasonable efforts to consummate the Financing on terms and conditions consistent with the Letters or such other Financing on terms as shall be reasonably satisfactory to Parent, on or before the Closing Date; but reasonable efforts of Parent as used in this Section 5.12 shall in no event require Parent to agree to financing terms materially more adverse to Parent than those provided for in the Letters. Parent shall use its reasonable efforts to satisfy before the Closing Date all requirements that are conditions to the closing of the transactions that constitute the Financing and to obtaining the cash proceeds of the Financing. Parent shall keep the Company informed about the status of the Financing, including, but not limited to, providing copies of financing documents and informing the Company of the termination of any Letter. The Company shall use its reasonable efforts to assist and cooperate with Parent to satisfy on or before the Closing Date all of the conditions to closing the transactions constituting the Financing that are applicable to the Company. Section 5.13. Parent Letter of Credit. Contemporaneously with the execution ----------------------- of this Agreement, Parent shall provide the Company with a letter of credit in favor of the Company in the amount of $2,000,000 and issued by a bank acceptable to the Company, to secure Parent's obligations under Section 5.09(c) of this Agreement. Parent shall maintain that letter of credit until the earlier of the Effective Time and the Outside Date. The Company is entitled to draw against the letter of credit only if (i) its Board of Directors has determined in good faith, after consultation with the Company's counsel, that the Company has become entitled, or is reasonably likely to become entitled by a specified date and time, to the fee payable under Section 5.09(c) of this Agreement (the "Fee"), (ii) the Company has given to Parent written notice, at least one business day in advance, of its intention to draw against the letter of credit at a specified date and time and has endeavored in good faith to consult with Parent concerning whether the Fee is payable, and (iii) Parent has neither consummated the transactions contemplated by this Agreement nor paid the Fee by the later of (x) 24 hours after the notice referred to in clause (ii), above, has been delivered (or deemed delivered in accordance with Section 8.03 of this Agreement) and (y) the date and time specified in that notice. Nothing in this Agreement is intended to preclude Parent from contesting in a court of competent -24- jurisdiction the Company's entitlement to the Fee or the Company's entitlement to draw against the letter of credit if Parent determines in good faith, after consultation with its counsel, that the Company is not entitled to the Fee. ARTICLE VI CONDITIONS TO THE MERGER Section 6.01. Conditions to the Obligations of Each Party. The obligations ------------------------------------------- of the Company, Parent and Merger Subsidiary to consummate the Merger are subject to the satisfaction of the following conditions: (a) this Agreement and the Merger shall have been adopted by the requisite vote of the stockholders of the Company in accordance with CBCA (the "Company Stockholders' Approval"); (b) none of the parties hereto shall be subject to any order or injunction of any governmental authority of competent jurisdiction that prohibits the consummation of the Merger. In the event any such order or injunction shall have been issued, each party agrees to use its reasonable best efforts to have any such order overturned or injunction lifted; and (c) the waiting period with respect to consummation of the Merger under the HSR Act, if applicable, shall have expired or been terminated. Section 6.02. Conditions to Obligation of the Company to Effect the Merger. ------------------------------------------------------------ Unless waived by the Company, the obligation of the Company to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following additional conditions: (a) Parent and Merger Subsidiary shall have performed in all material respects their agreements contained in this Agreement required to be performed on or prior to the Effective Time and the representations and warranties of Parent and Merger Subsidiary contained in this Agreement shall be true and correct on and as of the Effective Time as if made at and as of such date (except to the extent that such representations and warranties speak as of an earlier date), except for such failures to perform or to be true and correct that would not reasonably be expected to have a Parent Material Adverse Effect, and the Company shall have received a certificate of the chief executive officer or the chief financial officer of Parent to that effect; and (b) all Parent Statutory Approvals and Company Statutory Approvals required to be obtained in order to permit consummation of the Merger under applicable law shall have been obtained, except for any such Parent Statutory Approvals or Company Statutory Approvals whose unavailability would not, singly or in the aggregate, reasonably be expected to (i) have a Company Material Adverse Effect after giving effect to the Merger, or (ii) result in the Company or its subsidiaries failing to meet the standards for licensing, suitability or character under any Gaming Laws relating to the conduct of Parent's or the Company's business which (after taking into account the anticipated impact of such failure to so meet such standards on other authorities) -25- would reasonably be expected to have a Company Material Adverse Effect (after giving effect to the Merger). Section 6.03. Conditions to Obligations of Parent and Subsidiary to Effect ------------------------------------------------------------ the Merger. Unless waived by Parent and Merger Subsidiary, the obligations of - ---------- Parent and Merger Subsidiary to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the additional following conditions: (a) the Company shall have performed in all material respects its agreements contained in this Agreement required to be performed on or prior to the Effective Time and the representations and warranties of the Company contained in this Agreement shall be true and correct on and as of the Effective Time as if made at and as of such date (except to the extent that such representations and warranties speak as of an earlier date), except for such failures to perform and to be true and correct that would not reasonably be expected to have a Company Material Adverse Effect or, in the case of Section 4.02(a), shall be true and correct when made except for immaterial exceptions thereto, and Parent shall have received a certificate of the chief executive officer or the chief financial officer of the Company to that effect; and (b) all Parent Statutory Approvals and Company Statutory Approvals required to be obtained in order to permit consummation of the Merger under applicable law shall have been obtained, except for any such Parent Statutory Approvals or Company Statutory Approvals whose unavailability would not reasonably be expected to (i) have a Parent Material Adverse Effect, or (ii) result in Parent or its subsidiaries failing to meet the standards for licensing, suitability or character under any Gaming Laws relating to the conduct of Parent's or the Company's business which (after taking into account the anticipated impact of such failure to so meet such standards on other authorities) would reasonably be expected to have a Parent Material Adverse Effect (after giving effect to the Merger). (c) The number of Dissenting Shares shall constitute not more than 10% of the shares of Company Common Stock outstanding immediately prior to the Effective Time. ARTICLE VII TERMINATION Section 7.01. Termination. This Agreement may be terminated and the Merger ----------- may be abandoned at any time prior to the Effective Time (notwithstanding any approval of this Agreement by the stockholders of the Company): (i) by mutual written consent of the Company, Parent and Merger Subsidiary; (ii) by either the Company or Parent, if the Merger has not been consummated by December 31, 2001, provided that the right to terminate this Agreement under this clause (ii) shall not be available to any party whose failure to fulfill any of its obligations under this Agreement has been the cause of or resulted in the failure to consummate the Merger by such date (the "Outside Date"); -26- (iii) by either the Company or Parent if any judgment, injunction, order or decree of a court or governmental agency or authority of competent jurisdiction shall restrain or prohibit the consummation of the Merger, and such judgment, injunction, order or decree shall become final and nonappealable and was not entered at the request of the terminating party; (iv) by either the Company or Parent, if (x) there has been a breach by the other party of any representation or warranty contained in this Agreement which has not been cured in all material respects within 30 days after written notice of such breach by the terminating party, or (y) there has been a breach of any of the covenants or agreements set forth in this Agreement on the part of the other party, which is not curable or, if curable, is not cured within 30 days after written notice of such breach is given by the terminating party to the other party; (v) by the Company if, prior to receipt of the Company Stockholders' Approval, the Company receives a Superior Proposal, resolves to accept such Superior Proposal, and shall have given Parent two days' prior written notice of its intention to terminate pursuant to this provision; provided, however, that such termination shall not be effective until such time as the payment required by Section 5.09(b) shall have been received by Parent; (vi) by the Parent, if the Board of Directors of the Company shall have failed to recommend, or shall have withdrawn, modified or amended in any material respect its approval or recommendation of the Merger or shall have resolved to do any of the foregoing, or shall have recommended another Acquisition Proposal or if the Board of Directors of the Company shall have resolved to accept a Superior Proposal or shall have recommended to the stockholders of the Company that they tender their shares in a tender or an exchange offer commenced by a third party (excluding any affiliate of Parent or any group of which any affiliate of Parent is a member); or (vii) by Parent or the Company if the stockholders of the Company fail to approve the Merger pursuant to the CBCA at a duly held meeting of stockholders called for such purpose (including any adjournment or postponement thereof). ARTICLE VIII MISCELLANEOUS Section 8.01. Effect of Termination. In the event of termination of this --------------------- Agreement by either Parent or the Company pursuant to Section 7.01, this Agreement shall forthwith become void and there shall be no liability or further obligation on the part of the Company, Parent, Merger Subsidiary or their respective officers or directors (except as set forth in this Section 8.01, in the second sentence of Section 5.04 and in Section 5.09, all of which shall survive the termination). Nothing in this Section 8.01 shall relieve any party from liability for any breach of any representation, warranty, covenant or agreement of such party contained in this Agreement, except that if the fee provided for in Section 5.09(b) or the fee provided for in Section 5.09(c) becomes payable in accordance therewith, that fee will constitute the exclusive remedy of and -27- the sole amount payable to the party entitled thereto with respect to the event or circumstances in connection with which that fee becomes so payable. Section 8.02. Nonsurvival of Representations and Warranties. No --------------------------------------------- representation, warranty or agreement in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Merger, and after effectiveness of the Merger neither the Company, Parent, Merger Subsidiary nor any of their respective officers or directors shall have any further obligation with respect thereto except for the agreements contained in Articles I, II and VIII and Section 5.11. Section 8.03. Notices. All notices and other communications hereunder shall ------- be in writing and shall be considered given if delivered personally, mailed by registered or certified mail (return receipt requested) or sent via facsimile to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): If to the Company: Black Hawk Gaming & Development Company, Inc. P.O. Box 21 240 Main Street Black Hawk, Colorado 80422 Attention: Stephen R. Roark, President Telephone: 303/582-1117 Telecopier: 303/582-0239 with a copy to: Samuel E. Wing, Esq. Jones & Keller, P.C. 1625 Broadway, Suite 1600 Denver, Colorado 80202 Telephone: 303/573-1600 Telecopier: 303/573-0769 J. Patrick McDuff, Chairman Special Committee of the Board of Directors Of Black Hawk Gaming & Development Company, Inc. McDuff Interests, LLC 2909 4/th/ Street Boulder, Colorado 80304 Telephone: 303/443-0018 Telecopier: 419/791-9181 Ronald R. Levine, II Davis Graham & Stubbs LLP Suite 500, 1550 17/th/ Street Denver, Colorado 80202 Telephone: 303/892-7514 Telecopier: 303/893-1379 -28- If to Parent or Merger Subsidiary: GameCo 1001 North U.S. Highway One, No. 710 Jupiter, Florida 33477 Attention: Jeffrey P. Jacobs Telephone: 561/575-4006 Telecopier: 561/575-1526 with a copy to: Baker & Hostetler LLP 3200 National City Center 1900 East Ninth Street Cleveland, Ohio 44114-3485 Telephone: 216/861-7553 Telecopier: 216/696-0740 Attn: Edward G. Ptaszek, Jr. Section 8.04. Interpretation. The headings contained in this Agreement are -------------- for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement, unless a contrary intention appears, (i) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision, (ii) "knowledge" shall mean actual knowledge of the executive officers of the Company or Parent, as applicable, and (iii) reference to any Article or Section means such Article or Section hereof. Section 8.05. Miscellaneous. This Agreement (including the documents and ------------- instruments referred to herein) shall not be assigned by operation of law or otherwise except that Merger Subsidiary may assign its obligations under this Agreement to any other wholly-owned subsidiary of Parent subject to the terms of this Agreement, in which case such assignee shall become the "Merger Subsidiary" for all purposes of this Agreement. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE, WITHOUT REGARD TO THE CONFLICTS OF LAWS OF THAT STATE. Section 8.06. Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be considered to be an original, but all of which shall constitute one and the same agreement. Section 8.07. Amendments; No Waivers. (a) Any provision of this Agreement ---------------------- may be amended or waived prior to the Effective Time if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Company, Parent and Merger Subsidiary or, in the case of a waiver, by the party against whom the waiver is to be effective; however, any waiver or amendment shall be effective against a party only if the board of directors of such party approves such waiver or amendment. -29- (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 8.08. Entire Agreement. This Agreement and the Confidentiality ---------------- Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter of this Agreement. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by either party hereto. Neither this Agreement nor any provision hereof is intended to confer upon any person other than the parties hereto any rights or remedies hereunder except for Section 5.11, which is intended for the benefit of the Company's former and present officers, directors, employees and agents, and Articles I and II, which are intended for the benefit of the Company's stockholders, including holders of Options. Section 8.09. Severability. If any term or other provision of this ------------ Agreement is invalid, illegal or unenforceable, all other provisions of this Agreement shall remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Section 8.10. Specific Performance. The parties hereto agree that -------------------- irreparable damage would occur if any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedies at law or in equity. [Signature page to follow] -30- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. /s/ Stephen R. Roark --------------------------------- Name: Stephen R. Roark --------------------------- Title: President & CEO -------------------------- GAMECO, INC. /s/ Jeffrey P. Jacobs --------------------------------- Name: --------------------------- Title: President -------------------------- Merger Subsidiary: BH ACQUISITION, INC. /s/ Jeffrey P. Jacobs --------------------------------- Name: --------------------------- Title: President -------------------------- -31- EX-2.2 4 dex22.txt AGREEMENT TO AGREEMENT & PLAN OF MERGER 11/12/2001 Exhibit 2.2 AMENDMENT TO AGREEMENT AND PLAN OF MERGER DATED AS OF November 12, 2001 AMONG BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC., GAMECO, INC. AND BH ACQUISITION, INC. AMENDMENT TO AGREEMENT AND PLAN OF MERGER This AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is entered into as of November 12, 2001 by and among Gameco, Inc., a Delaware corporation ("Parent"), BH Acquisition, Inc., a Colorado corporation and wholly owned subsidiary of Parent ("Merger Subsidiary"), and Black Hawk Gaming & Development Company, Inc., a Colorado corporation (the "Company"). Parent, Merger Subsidiary and the Company are referred to collectively herein as the "Parties." WHEREAS, the Parties are parties to an Agreement and Plan of Merger dated as of April 25, 2001 (the "Merger Agreement"), which permits any party thereto to terminate the Merger Agreement under specified circumstances if the transactions provided for therein are not consummated on or before December 31, 2001; WHEREAS, the September 11, 2001 terrorist attacks in New York City and Washington, D.C. and ensuing events have disrupted the financial markets and made it impracticable for Parent and the Company to obtain the contemplated financing to consummate those transactions on or before December 31, 2001; and WHEREAS, in light of the foregoing and the Parties' continuing belief that consummation of the transactions contemplated by the Merger Agreement is in the best interests of the Parties and of the Company's shareholders, the Parties desire to extend the date on which the Merger Agreement may be so terminated; NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: Section 1. Parent and Merger Subsidiary Representations and Warranties. ----------------------------------------------------------- Parent and Merger Subsidiary jointly and severally represent and warrant to the Company that (a) each of Parent and Merger Subsidiary has full corporate power and authority to enter into this Amendment, (b) this Amendment has been approved and adopted by the Boards of Directors of Parent and Merger Subsidiary and Parent as the sole stockholder of Merger Subsidiary, and no other corporate or similar proceeding on the part of Parent or Merger Subsidiary is necessary to authorize the execution and delivery of this Amendment, and (c) this Amendment has been duly executed and delivered by each of Parent and Merger Subsidiary and, assuming the due authorization, execution and delivery hereof by the Company, constitutes a valid and legally binding agreement of each of Parent and Merger Subsidiary enforceable against each of them in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) general equitable principles. Section 2. Company Representations and Warranties. The Company represents -------------------------------------- and warrants to Parent and Merger Subsidiary that (a) the Company has the requisite corporate power and authority to enter into this Amendment, (b) this Amendment has been approved and adopted by the Board of Directors of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Amendment, and (c) this Amendment has been duly executed and delivered by the Company, and, assuming the due authorization, execution and delivery hereof by Parent and Merger Subsidiary, constitutes a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) general equitable principles. Section 3. Amendment. The parties hereby amend the Merger Agreement by --------- deleting the phrase "December 31, 2001" in section 7.01(ii) of the Merger Agreement and inserting in lieu thereof the phrase "April 1, 2002." Section 4. Effect. The Merger Agreement, as amended hereby, remains in full ------ force and effect, and all references therein to the "Agreement" refer to the Merger Agreement as amended by this Amendment, except where the context requires otherwise. [Signature page to follow] -2- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. /s/ Stephen R. Roark -------------------------------------------- Name: Stephen R. Roark Title: President GAMECO, INC. /s/ Jeffrey P. Jacobs -------------------------------------------- Name: Jeffrey P. Jacobs Title: President Merger Subsidiary: BH ACQUISITION, INC. /s/ Jeffrey P. Jacobs -------------------------------------------- Name: Jeffrey P. Jacobs Title: President -3- EX-2.3 5 dex23.txt EXCHANGE AGREEMENT Exhibit 2.3 EXCHANGE AGREEMENT by and among THE RICHARD E. JACOBS REVOCABLE LIVING TRUST, dated April 23, 1987, JEFFREY P. JACOBS and GAMECO, INC. February 22, 2002 Exchange Agreement Page 1 of 19 EXCHANGE AGREEMENT THIS EXCHANGE AGREEMENT ("Agreement") dated as of this 22/nd/ day of February, 2002, is entered into by and among THE RICHARD E. JACOBS REVOCABLE LIVING TRUST, dated April 23, 1987 ("REJ"), JEFFREY P. JACOBS, an individual resident of the State of Florida ("JPJ"), and GAMECO, INC., a Delaware corporation ("Gameco"). RECITALS: A. REJ is the record and beneficial owner of fifty percent (50%) of the membership interests (the "REJ Ownership Interests") of Diversified Opportunities Group Ltd., an Ohio limited liability company ("DOGL"); B. REJ is the record and beneficial owner of fifty percent (50%) of the issued and outstanding shares (the "REJ Shares") of JALOU II INC., a Louisiana corporation ("JALOU II"); C. REJ is the record and beneficial owner of one percent (1%) of the membership interests in CD Entertainment, Ltd., an Ohio limited liability company (the "CD Interests"); D. REJ is the record and beneficial owner of one percent (1%) of the membership interests in BH Entertainment, Ltd., an Ohio limited liability company (the "BH Interests") E. Jacobs Entertainment Ltd., an Ohio limited liability company ("Entertainment"), wholly owned by JPJ or entities wholly controlled by him, is the record and beneficial owner of fifty percent (50%) of the membership interests of DOGL (the "Entertainment Ownership Interests") (the Entertainment Ownership Interests together with the REJ Ownership Interests represent all of the membership interests of DOGL); F. JPJ is the record and beneficial owner of fifty percent (50%) of the issued and outstanding shares (the "JPJ Shares") of JALOU II; G. JPJ is the record and beneficial owner of one hundred percent (100%) of Jacobs Entertainment, Inc., an Ohio corporation; H. REJ desires to transfer to Gameco, and Gameco agrees to accept and acquire from REJ: (i) all of the REJ Ownership Interests; (ii) the REJ Shares; (iii) the CD Interests; and (iv) the BH Interests, all in partial satisfaction of the subscription agreement entered into by REJ under which Gameco issued to REJ seven hundred fifty (750) shares of its common stock (the "REJ Gameco Shares"); I. JPJ desires to transfer to Gameco, and Gameco agrees to accept and acquire from JPJ: (i) all of the membership interests of Entertainment (the "Entertainment Membership Interests"); and (ii) the JPJ Shares, and to cause the merger of Jacobs Entertainment, Inc. with Gameco, all in partial satisfaction of the subscription agreement entered into by JPJ under which Gameco issued to JPJ seven hundred fifty (750) shares of its common stock (the "JPJ Gameco Shares"); Exchange Agreement Page 2 of 19 J. REJ and JPJ desire to amend the DOGL operating agreement as provided in this Agreement; and K. This Agreement is executed by REJ and JPJ, in part, to fulfill their obligations under the subscription agreements entered into by REJ and JPJ as part of the formation of Gameco. NOW, THEREFORE, in consideration of the mutual promises and representations, warranties, covenants and agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, REJ, JPJ and Gameco agree as follows: ARTICLE I EXCHANGE OF OWNERSHIP INTERESTS AND SHARES 1.1 Exchange of REJ Ownership Interests and REJ Shares. At the Closing (as -------------------------------------------------- hereinafter defined), REJ shall assign, transfer, convey and deliver to Gameco, and Gameco shall acquire and accept from REJ: (i) the REJ Ownership Interests; (ii) the REJ Shares; (iii) the CD Interests; and (iv) the BH Interests, each free and clear of all liens, pledges, charges, claims, rights of third parties and other encumbrances of any nature (collectively, the "Liens"). 1.2 Exchange of Entertainment Membership Interests and JPJ Shares. At the ------------------------------------------------------------- Closing, JPJ shall assign, transfer, convey and deliver to Gameco, or caused to be assigned, transferred, conveyed and delivered to Gameco, and Gameco shall acquire and accept from JPJ, or entities controlled by him: (i) the Entertainment Membership Interests; and (ii) the JPJ Shares, each free and clear of all Liens. 1.3 Amount and Form of Consideration. The consideration for the transfer of -------------------------------- the REJ Ownership Interests, the REJ Shares, the CD Interests, the BH Interests, the Entertainment Membership Interests and the JPJ Shares to, and the merger of Jacobs Entertainment, Inc. with, Gameco by REJ and JPJ, respectively, shall consist of the following: 1.3.1 the issuance by Gameco of the REJ Gameco Shares to REJ; and 1.3.2 the issuance by Gameco of the JPJ Gameco Shares to JPJ. The parties acknowledge and agree that one (1) of the JPJ Gameco Shares shall represent the consideration paid by Gameco to JPJ for its merger with Jacobs Entertainment, Inc. 1.4 Closing Delivery of Documents and Other Actions. ----------------------------------------------- 1.4.1 Deliveries by REJ to Gameco. At the Closing, REJ shall deliver or --------------------------- cause to be delivered to Gameco: (i) a validly executed assignment transferring the REJ Ownership Interests, the CD Interests and the BH Interests; and (ii) a validly executed irrevocable stock power transferring the REJ Shares. 1.4.2 Deliveries by JPJ to Gameco. At the Closing, JPJ shall deliver or --------------------------- cause to be delivered to Gameco: (i) a validly executed irrevocable stock power transferring the JPJ Exchange Agreement Page 3 of 19 Shares; (ii) a validly executed assignment transferring the Entertainment Membership Interests; and (iii) the merger agreement between Jacobs Entertainment, Inc. and Gameco, attached hereto as Exhibit A and incorporated by reference herein. 1.5 Closing. The term "Closing" shall mean that date and time Gameco shall ------- receive the proceeds, following their release from any escrow(s), of those certain Senior Secured Notes, due 2009, and more completely described in the Offering Memorandum dated January 15, 2002 (the "Notes"). In the event that the Notes are not issued for any reason, this Agreement shall become null and void and of no further force and effect. ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF GAMECO 2.1 Representations and Warranties of Gameco. As an inducement to each of ---------------------------------------- REJ and JPJ to enter into this Agreement and to consummate the transactions contemplated hereby, Gameco hereby represents and warrants to each of REJ and JPJ as follows: 2.1.1 Organization and Existence. Gameco is a corporation duly -------------------------- organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted and as presently proposed to be conducted. 2.1.2. Authorization and Execution. Gameco has full corporate power and --------------------------- authority to execute and deliver this Agreement and each other agreement, document, instrument or certificate contemplated by this Agreement to which Gameco is a party (all such other agreements, documents, instruments and certificates being hereinafter referred to, collectively, as the "Gameco Documents"), and to perform fully its obligations hereunder and thereunder. The execution, delivery and performance by Gameco of this Agreement and each of the Gameco Documents have been duly authorized by all necessary corporate action on the part of Gameco. This Agreement and each of the Gameco Documents have been duly executed and delivered by Gameco and this Agreement and each of the Gameco Documents constitute legal, valid and binding obligations of Gameco, enforceable against Gameco in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or moratorium laws and other laws of general application affecting the enforcement of creditors' rights. 2.1.3 Common Stock of Gameco. Upon issuance and delivery of ---------------------- certificates representing the REJ Gameco Shares and the JPJ Gameco Shares to REJ and JPJ, respectively, the REJ Gameco Shares and the JPJ Gameco Shares will be duly authorized, validly issued, fully paid and nonassessable by Gameco. The REJ Gameco Shares and the JPJ Gameco shares have been issued in compliance with all applicable federal and state securities laws. Upon consummation of the transactions contemplated by this Agreement and except for the REJ Gameco Shares and the JPJ Gameco Shares, there are no other shares of capital stock of Gameco outstanding (excluding only those shares previously issued to REJ and JPJ in equal proportion, if any) and there are no securities convertible into, or rights to subscribe for or to purchase, or any options or warrants for the purchase of, or any agreement or arrangement providing for the Exchange Agreement Page 4 of 19 issuance, purchase or transfer (contingent or otherwise) of, or any actions relating to, any capital stock of Gameco. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF REJ AND JPJ 3.1 Representations and Warranties of REJ and JPJ. As an inducement to --------------------------------------------- Gameco to enter into this Agreement and to consummate the transactions contemplated hereby, REJ and JPJ, severally and not jointly, hereby represent and warrant as follows: 3.1.1 Authorization and Execution. Each of REJ and JPJ has full --------------------------- power, authority and capacity to execute and deliver this Agreement and each other agreement, document, instrument or certificate, or cause the same to be delivered, each as contemplated by this Agreement to which it is a party (all of such agreements, documents, instruments and certificates being hereinafter referred to, collectively, as the "Investor Documents"), and to perform its obligations hereunder and thereunder. This Agreement and each Investor Document have been duly executed and delivered by each of REJ and JPJ, or their wholly-owned affiliates, and this Agreement and each Investor Document constitutes the legal, valid and binding obligations of each of REJ and JPJ, or their wholly-owned affiliates, enforceable against each in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or moratorium laws and other laws of general application affecting the enforcement of creditors' rights. ARTICLE 4 COVENANTS 4.1 Covenants of All Parties. ------------------------ 4.1.1 Further Assurances. Each party hereto, at the request of any ------------------ other party hereto, at or after the Closing, shall, without further consideration, promptly execute and deliver, or cause to be executed and delivered, to such requesting party such deeds, assignments, bills of sale, consents and other instruments in addition to those required by this Agreement, in form and substance reasonably satisfactory to the requesting party, and take all such other actions, as the requesting party may reasonably deem necessary or desirable to implement any provision of this Agreement. 4.2 Covenants of Gameco. ------------------- 4.2.1 Access, Etc. Gameco, at the request of REJ or JPJ, at or after ----------- the Closing, shall, without further consideration, permit REJ or JPJ and their respective authorized representatives to have reasonable access to the books and records DOGL or any of its subsidiaries or affiliates in connection with any legal proceeding against or governmental investigation of REJ or JPJ or in connection with any tax preparation or examination of REJ or JPJ. Exchange Agreement Page 5 of 19 ARTICLE 5 MISCELLANEOUS 5.1 Notices. All notices and other communications under this Agreement ------- shall be in writing and shall be deemed to have been given (i) three business (3) days after mailing if sent by registered mail, postage prepaid, return receipt requested, (ii) on receipt if delivered personally, (iii) the business day after delivery to an overnight national express courier service, or (iv) immediately if given by confirmed facsimile during normal business hours on a business day. The addresses and fax numbers of the parties for purposes of this Agreement are: If to : with a copy to: Gameco, Inc. Baker & Hostetler LLP 240 Main Street 1900 East Ninth Street 3200 National City Center Black Hawk, Colorado 80422 Cleveland, Ohio 44114 Fax: 303-582-0239 Fax.: 216-696-0740 Attn.: Chief Financial Officer Attn.: Robert Weible If to The Richard E. Jacobs Revocable Trust: with a copy to: The Richard E. Jacobs Group Baker & Hostetler LLP 25425 Center Ridge Road 3200 National City Center Westlake, Ohio 44145 1900 East Ninth Street Fax: 440-808-6908 Cleveland, Ohio 44114 Attn.: ___________________________ Fax.: 216-696-0740 Attn: Gary L. Bryenton, Esq. If to Jeffrey P. Jacobs: with a copy to: Jacobs Investments Management Co., Inc. Hahn Loeser & Parks LLP 1001 N. US Highway One #710 3300 BP Tower Jupiter, Florida 33477 200 Public Square Fax: 561-575-1526 Cleveland, Ohio 44114 Attn: Jeffrey P. Jacobs Fax: 216-274-2414 Attn.: Stephen P. Owendoff, Esq. 5.2. Binding Effect. This Agreement shall be binding upon and inure to -------------- the benefit of the parties and their respective successors, assigns, heirs, trustees, successor trustees and personal representatives. 5.3 Third Party Beneficiaries. Nothing in this Agreement is intended or ------------------------- shall be construed to confer on any person other than the parties any rights or benefits hereunder. 5.4 Survival of Representations and Warranties. The representations and ------------------------------------------ warranties Exchange Agreement Page 6 of 19 of the parties contained in this Agreement shall survive the execution and delivery hereof and the consummation of the transactions contemplated hereby for an indefinite period. 5.5 Headings; Number and Gender. The headings in this Agreement are --------------------------- intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. Where the context requires, the use of the singular form herein shall include the plural, the use of the plural shall include the singular, and the use of any gender shall include any and all genders. 5.6 Counterparts; Effectiveness. This Agreement may be executed in --------------------------- multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. 5.7 Governing Law; Consent to Jurisdiction. This Agreement shall be -------------------------------------- governed by and construed in accordance with the laws of the State of Ohio applicable to agreements made in and to be wholly performed in such state. Any action or proceeding, however characterized, relating to or arising out of this Agreement, or in connection with the subject matter hereof shall be maintained in the state or federal courts located in the County of Cuyahoga and State of Ohio, and the parties hereto, each for itself, its successors, assigns, heirs, trustees, successor trustees and personal representatives hereby irrevocably submits to the jurisdiction of the courts of the State of Ohio and the Courts of the United States of America sitting in the County of Cuyahoga, the State of Ohio for the purposes of any such action or proceeding and irrevocable agrees to be bound by any judgment rendered thereby in connection with this Agreement. 5.8 Waivers. Compliance with the provisions of this Agreement may be ------- waived only by a written instrument specifically referring to this Agreement and signed by the party waiving compliance. No course of dealing, nor any failure or delay in exercising any right, shall be construed as a waiver, and no single or partial exercise of a right shall preclude any other or further exercise of that or any other right. 5.9 Expense. Each party shall bear all of its own fees and expenses ------- (including, without limitation, fees and disbursements of counsel, accountants and other experts) incurred by them in connection with the preparation, negotiation, execution, delivery, performance and enforcement of this Agreement and each of the other documents and instruments executed in connection with or contemplated by this Agreement. 5.10 Severability. The invalidity or unenforceability of any provision ------------ of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, each of which shall remain in full force and effect. 5.11 Amendment. No amendment of this Agreement shall be binding unless --------- made in a written instrument that specifically refers to this Agreement and is signed by all of the parties hereto. Exchange Agreement Page 7 of 19 5.12 Entire Agreement. This Agreement (together with the Exhibits ---------------- hereto) is the exclusive statement of the agreement among the parties hereto concerning the subject matter hereof. All negotiations, disclosures, discussions and investigations relating to the subject matter of this Agreement are merged into the Agreement and there are no representations, warranties, covenants, understandings, or agreements, oral or otherwise, relating to the subject matter of the Agreement, other than those included herein. [signature page to follow] Exchange Agreement Page 8 of 19 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. THE RICHARD E. JACOBS REVOCABLE LIVING TRUST, dated April 23, 1987 /s/ Richard E. Jacobs /s/ Jeffrey P. Jacobs By: ________________________________ _____________________________________ Richard E. Jacobs, Trustee JEFFREY P. JACOBS, an individual GAMECO, INC., a Delaware corporation /s/ Jeffrey P. Jacobs By: _________________________________ Jeffrey P. Jacobs, President Exchange Agreement Page 9 of 19 EXHIBIT A (Merger Agreement) AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and --------- entered into this __ day of February, 2002, by and between GAMECO, INC., a Delaware corporation ("GAMECO"), and JACOBS ENTERTAINMENT, INC., an Ohio. ------ corporation ("JEI"). --- ARTICLE 1 RECITALS A. JEI desires to be merged into GAMECO and upon such merger to be extinguished and to have its existence as a separate entity terminated; and B. GAMECO desires to merge with JEI and to be the surviving entity following such merger. NOW, THEREFORE, in consideration of the mutual covenants, promises and representations contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. RECITALS: The foregoing recitals are incorporated herein as if fully rewritten herein. 2. MERGER: a. On the Effective Date (as hereinafter defined), pursuant to the terms and conditions contained in this Agreement: (i) JEI will be merged into GAMECO; (ii) the separate existence of JEI shall cease; (iii) GAMECO shall continue in existence; and (iv) such merger shall in all respects have the effect provided for in Sections 251, et seq. of the Delaware General Corporation Law, including, but not limited to, Section 252 of the same, as well as Sections 1701.01, et seq. of the Ohio Revised Code, including, but not limited to, Section 1701.79. b. Prior to, from and after the Effective Date, JEI and GAMECO shall take all actions as shall be necessary or appropriate in order to effectuate the merger. If at any time after the Effective Date GAMECO shall determine or be advised that any further assignments, documents, agreements, instruments, conveyances or assurances are necessary or desirable to effect the merger contemplated herein, the duly authorized officers or directors of GAMECO shall be and are hereby authorized on behalf of JEI to execute and deliver any such assignments, documents, agreements, instruments, conveyances or Exchange Agreement Page 10 of 19 assurances in the name, place and stead of JEI to be wholly binding upon JEI and to do all things and take any actions necessary and proper to carry out the terms and conditions hereof. 2. TERMS OF MERGER: On the Effective Date: a. Each share of JEI common stock issued and outstanding immediately prior to the merger shall be converted into and become one (1) share of GAMECO; and each share of JEI common stock unissued or held in the treasury of JEI shall be deemed cancelled, and no shares of GAMECO shall be issued for such unissued or treasury stock. b. JEI represents and warrants that: (i) there shall exist one shareholder of JEI common stock, to-wit; Jeffrey P. Jacobs; (ii) there shall be no other shares of JEI stock issued, authorized or outstanding other than common stock; and (iii) there shall exist no options, warrants or conversion rights attached to or regarding any JEI common stock. c. JEI shall cause Jeffrey P. Jacobs to deliver certificates representing the outstanding common stock of JEI to GAMECO duly marked as "cancelled". Until delivery of the foregoing certificates, each such certificate issued prior to the Effective Date representing common shares of JEI shall be deemed and treated for all purposes, on and after the effective date, as representing one (1) share of GAMECO common stock. d. Immediately upon delivery of the certificates representing JEI common stock, GAMECO shall deliver to Jeffrey P. Jacobs a certificate for 1 share of common stock in GAMECO to be duly issued and delivered to Jeffrey P. Jacobs or his designee. 3. CERTIFICATE OF INCORPORATION AND BY-LAWS: From and after the Effective Date and until thereafter amended or modified by law, the Certificate of Incorporation and By-laws of GAMECO, as in effect immediately preceding the Effective Date, shall be and remain the Certificate of Incorporation and By-Laws of the surviving corporation: GAMECO. 4. DIRECTORS AND OFFICERS: The persons who are the duly elected and appointed directors and officers of GAMECO immediately preceding the merger shall continue as the directors and officers of GAMECO following the merger and shall hold their respective offices as provided in the Certificate of Incorporation and By-laws of GAMECO. 5. STOCKHOLDER APPROVAL, EFFECTIVE DATE: a. By their signatures below, the undersigned, being all of the shareholders and directors of GAMECO and JEI, respectively, do herewith approve and adopt Exchange Agreement Page 11 of 19 this Agreement for and on behalf of themselves, individually, and on behalf of their respective corporations. b. The undersigned shareholders and directors do herewith authorize Jeffrey P. Jacobs, as a director and president of both GAMECO and JEI, to execute this Agreement on behalf of each of GAMECO and JEI, individually, and to further execute the certificates of merger, attached hereto as Exhibits A and B, on behalf of each of GAMECO and JEI (collectively "Certificates"). ------------ c. The undersigned shareholders and directors, by their signatures hereon, do herewith authorize Jeffrey P. Jacobs, as a director and president of both GAMECO and JEI, to execute such additional documents and instruments as may be necessary, in his sole discretion, to implement and carry out the merger contemplated by this Agreement and to do and take all such other actions as may be necessary to carry out the other terms and conditions of this Agreement. d. The undersigned shareholders and directors agree that any third party may rely upon the representations contained in this Section 6 without further action of either GAMECO or JEI and that the power and authority granted herein shall remain in full force and effect notwithstanding the death or incapacitation of any signatory hereto. e. The undersigned do herewith waive any requirements of notice and a meeting prior to the effectiveness of the merger contemplated herein. f. The "Effective Date", as used in this Agreement, shall be the __ day of February, 2002. g. Upon or following the Effective Date, as shall be appropriate in his sole judgment, Jeffrey P. Jacobs shall cause the Certificates to be duly executed and filed with the appropriate state officials. h. The directors of each of GAMECO and JEI may abandon this Agreement prior to the Effective Date, in writing, without the approval of the undersigned shareholders. 6. CONSENT TO SERVICE AND IRREVOCABLE APPOINTMENT OF STATUTORY AGENT: GAMECO herewith consents to be sued and served with process in the State of Ohio. Further, subject to Section 8 below, GAMECO does herewith irrevocably appoint the Secretary of State for the State of Ohio as its agent to accept service of process in any proceeding in the State of Ohio if: (a) the agent appointed pursuant to Section 8 below cannot be found; (b) GAMECO fails to designate another agent when required to do so; or (c) GAMECO's license or registration to do business in Ohio expires or is canceled. Exchange Agreement Page 12 of 19 7. APPLICATION OF GAMECO TO TRANSACT BUSINESS WITHIN THE STATE OF OHIO: On the Effective Date, GAMECO shall, as part of its merger certificate, make application to conduct business as a foreign corporation within the State of Ohio. GAMECO does herewith appoint: HL Statutory Agent, Inc. 3300 BP Tower 200 Public Square Cleveland, Ohio 44114 to serve as its statutory agent for the service of any process, notice or demand within the State of Ohio. 8. ADDRESS OF SURVIVING CORPORATION: The address, in the State of Delaware, of GAMECO following the Effective Date shall be: GAMECO, INC., The Corporation Trust Center 1209 Orange Street Wilmington, Delaware 19801 and GAMECO's statutory agent at such location shall be: The Corporation Trust Company. 9. MISCELLANEOUS: a. Amendments; Waiver: This Agreement may not be modified or amended except by written instrument executed by all parties. No waiver of any provision or condition hereof shall be effective unless evidenced by an instrument, in writing, duly executed by the party granting such waiver. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof. b. Binding Effect: This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, personal representatives, executors, administrators, successors and assigns. Anything herein to the contrary notwithstanding, the parties hereto acknowledge that the foregoing is intended to be for the benefit of the parties and their respective heirs, personal representatives, executors, administrators, successors and assigns, and except for the foregoing, no third party shall be entitled to any rights, benefits or privileges with respect hereto. c. Heading: The headings used herein are for convenience of reference only and do not form a part hereof and do not in any manner modify, interpret or set forth the intentions of the parties. Exchange Agreement Page 13 of 19 d. Exhibits: The exhibits attached to and referenced in this Agreement are a part of this Agreement as if fully rewritten herein. e. Entire Agreement: This Agreement and the Exhibits attached hereto contain the entire agreement between the parties with respect to the transactions and merger contemplated herein and supercede all previous written or oral negotiations, commitments or writings. f. Counterparts: This Agreement may be executed in one or more counterparts, each of which when executed and delivered shall constitute one and the same original. g. Governing Law: This Agreement shall be governed by and construed under the internal laws of the State of Delaware and where applicable the laws of the State of Ohio. In the event of a conflict between the laws of the States of Delaware and Ohio, the laws of the State of Delaware shall be controlling. IN WITNESS WHEREOF, the parties have caused their authorized representatives to execute this Agreement as of the date first written above. Witnesses: "GAMECO" GAMECO, INC., a Delaware corporation ________________________________ By:_______________________________ Printed Name:___________________ Jeffrey P. Jacobs, President ________________________________ Printed Name:___________________ As to Sections 4, 5 and 6: by its directors: ________________________________ __________________________________ Printed Name:___________________ Jeffrey P. Jacobs, Director ________________________________ Printed Name:___________________ Exchange Agreement Page 14 of 19 and: ________________________________ __________________________________ Printed Name:___________________ Richard E. Jacobs, Director ________________________________ Printed Name:___________________ and by its shareholders: ________________________________ __________________________________ Printed Name:___________________ Jeffrey P. Jacobs ________________________________ Printed Name:___________________ The Richard E. Jacobs Revocable Living Trust, dated April 23, 1987 ________________________________ By:_______________________________ Printed Name:___________________ Richard E. Jacobs, Trustee ________________________________ Printed Name:___________________ "JEI" Jacobs Entertainment, Inc., an Ohio corporation ________________________________ By:_______________________________ Printed Name:___________________ Jeffrey P. Jacobs, President ________________________________ Printed Name:___________________ Exchange Agreement Page 15 of 19 As to Sections 4, 5 and 6: by its sole director: ________________________________ __________________________________ Printed Name:___________________ Jeffrey P. Jacobs, Director ________________________________ Printed Name:___________________ and by its shareholder: ________________________________ __________________________________ Printed Name:___________________ Jeffrey P. Jacobs STATE OF ______________ ) ) ss. COUNTY OF____________ ) BEFORE ME a notary public in and for the aforesaid County and State, did personally appear JEFFREY P. JACOBS, who did execute the foregoing Agreement and Plan of Merger for himself individually, and as: (i) the President, Director and a shareholder of Gameco, Inc., a Delaware corporation; and (ii) the President, Director and shareholder of Jacobs Entertainment, Inc., an Ohio corporation, and did acknowledge that such act was his free act and deed, individually, and as such President, Director and shareholder of each of Gameco, Inc. and Jacobs Entertainment, Inc. In witness whereof, I have hereunto subscribed my name this __ day of February, 2002, at the City of _________________, State of ____________________. ____________________________________ Notary Public STATE OF ______________ ) ) ss. COUNTY OF____________ ) Exchange Agreement Page 16 of 19 BEFORE ME a notary public in and for the aforesaid County and State, did personally appear RICHARD E. JACOBS, who did execute the foregoing Agreement and Plan of Merger for himself as Trustee of the Richard E. Jacobs Revocable Living Trust, dated April 23, 1987, and individually, and did acknowledge that such act was his free act and deed, individually, and as such Trustee. In witness whereof, I have hereunto subscribed my name this __ day of February, 2002, at the City of _________________, State of ____________________. ___________________________________ Notary Public Exchange Agreement Page 17 of 19 EXHIBIT A [Certificate of Merger - Delaware] CERTIFICATE OF OWNERSHIP AND MERGER [Pursuant to Section 252 of the Delaware General Corporation Law] GAMECO, INC., a Delaware corporation (the "Corporation"), does hereby certify: FIRST: That the Corporation was incorporated and duly organized pursuant to the General Corporation Law of the State of Delaware. SECOND: That Jacobs Entertainment, Inc. ("JEI") was incorporated and duly organized pursuant to the Revised Code of the State of Ohio. THIRD: That the Corporation shall be the surviving corporation and that its duly registered name is: GAMECO, INC. FOURTH: That an Agreement and Plan of Merger (the "Agreement") has been approved, adopted, certified, executed and acknowledged by each of the Corporation and JEI in accordance with Section 252 of the General Corporation Law of the State of Delaware. FIFTH: That the Agreement is on file at the offices of the Corporation, within the State of Delaware and located at: The Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. SIXTH: That a copy of the Agreement will be furnished by the Corporation upon request by and without cost to any stockholder of JEI. SEVENTH: That prior to the effective date of the merger, as defined in the Agreement, the authorized capital stock of JEI was EIGHT HUNDRED FIFTY (850) shares of common stock each being without par value. IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its duly authorized president, this __ day of February, 2002. GAMECO, INC., a Delaware corporation By:_________________________ Jeffrey P. Jacobs, President Exchange Agreement Page 18 of 19 EXHIBIT B [Certificate of Merger - Ohio Exchange Agreement Page 19 of 19 EX-2.4 6 dex24.txt AGREEMENT AND PLAN OF MERGER DATED 6/11/2001 Exhibit 2.4 AGREEMENT AND PLAN OF MERGER DATED AS OF JUNE 11, 2001 AMONG COLONIAL HOLDINGS, INC. AND GAMECO, INC. AND GAMECO ACQUISITION, INC. AGREEMENT AND PLAN OF MERGER This AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of June 11, 2001 by and among Gameco, Inc., a Delaware corporation ("Parent"), Gameco Acquisition, Inc., a Virginia corporation and wholly owned subsidiary of Parent ("Merger Subsidiary"), Colonial Holdings, Inc., a Virginia corporation (the "Company") and, solely with respect to Section 5.13, Jeffrey P. Jacobs, an individual resident of Florida. Parent, Merger Subsidiary and the Company are referred to collectively herein as the "Parties." WHEREAS, the respective Boards of Directors of Parent, Merger Subsidiary and the Company have each approved the merger of Merger Subsidiary with and into the Company on the terms and subject to the conditions set forth in this Agreement (the "Merger"); NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: ARTICLE I THE MERGER; CLOSING Section 1.01. The Merger. Upon the terms and subject to the conditions of ---------- this Agreement, and in accordance with the Virginia Stock Corporation Act (the "Virginia Act"), Merger Subsidiary shall be merged with and into the Company at the Effective Time (as defined in Section 1.02). Following the Merger, the separate existence of Merger Subsidiary shall cease and the Company shall continue as the surviving corporation (the "Surviving Corporation") and a wholly owned subsidiary of Parent, and shall succeed to and assume all the rights and obligations of Merger Subsidiary in accordance with the Virginia Act. Section 1.02. Effective Time. The Merger shall become effective when -------------- articles of merger (the "Articles of Merger"), executed in accordance with the relevant provisions of the Virginia Act, are filed with the State Corporation Commission of Virginia (the "Commission"); provided, however, that, upon mutual consent of the constituent corporations to the Merger, the Articles of Merger may provide for a later date of effectiveness of the Merger not more than thirty (30) days after the date of filing the Articles of Merger with the Commission. When used in this Agreement, the term "Effective Time" shall mean the date and time at which the Articles of Merger are accepted for record or such later time established by the Articles of Merger. The Articles of Merger shall be filed on the Closing Date (as defined in Section 1.07). Section 1.03. Effects of the Merger. The Merger shall have the effects set --------------------- forth in Section 13.1-721 of the Virginia Act. Section 1.04. Conversion of Shares. At the Effective Time, by virtue of the -------------------- Merger and without any action on the part of Parent, Merger Subsidiary, the Company or the holders of any of the following securities: (a) each issued and outstanding share of the Company's Class A common stock, par value $.01 per share (the "Class A Stock") and Class B Common Stock, par value $.01 (the "Class B Stock," together with the Class A Stock, the "Common Stock") held by the Company as treasury stock and each issued and outstanding share of the Common Stock owned by any subsidiary of the Company, Parent, Merger Subsidiary, any other subsidiary of Parent or by CD Entertainment Ltd. (collectively, the "Controlling Stock"), shall be canceled and retired and shall cease to exist, and no payment or consideration shall be made with respect thereto; (b) each issued and outstanding share of Class A Stock, other than those shares of Class A Stock constituting Controlling Stock (the "Class A Exchange Stock"), shall be converted into the right to receive an amount in cash, without interest, equal to $1.10 (the "Class A Consideration") payable to the record owner thereof upon surrender of the Certificate (as defined herein) with respect to such shares and each issued and outstanding share of Class B Stock, other than those shares of Class B stock constituting Controlling Stock (the "Class B Exchange Stock," and together with the Class A Exchange Stock, the "Exchange Stock"), shall be converted to the right to receive an amount in cash, without interest, equal to $1.10 (the "Class B Consideration," together with the Class A Consideration, the "Merger Consideration") payable to the record owner thereof upon surrender of the Certificate with respect to such shares. At the Effective Time, all such shares of Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate or other reasonable evidence of ownership of non-certificated shares, including, but not limited to, those held electronically or in street name (collectively, a "Certificate") representing any such shares of Common Stock shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration, without interest; and (c) each issued and outstanding share of capital stock or ownership interest of Merger Subsidiary shall be converted into one fully paid and nonassessable share of Class A common stock, par value $0.01, of the Surviving Corporation. Section 1.05. Payment of Shares. (a) Prior to the mailing of the Proxy ----------------- Statement (as herein defined) to the Company's shareholders, Parent shall appoint a bank or trust company reasonably satisfactory to the Company to act as disbursing agent (the "Disbursing Agent") for the payment of the Merger Consideration upon surrender of the Certificates. Parent will enter into a disbursing agent agreement with the Disbursing Agent, in form and substance reasonably acceptable to the Company. Prior to the Effective Time, Parent shall deposit or cause to be deposited with the Disbursing Agent in trust for the benefit of the Company's shareholders cash in an aggregate amount necessary to make the payments pursuant to Section 1.04 to holders of the Exchange Stock (such amounts being hereinafter referred to as the "Exchange Fund"). The Disbursing Agent shall invest the Exchange Fund, as the Surviving Corporation directs, in direct obligations of the United States of America, obligations for which the full faith and credit of the United States of America is pledged to provide for the payment of all principal and interest, or a combination thereof, provided that, in any such case and subject to the obligation to effect payment of the Merger Consideration pursuant to Section 1.05(b), no such instrument shall have a maturity exceeding three months. Any net profit resulting from, or interest or income produced by, such investments shall be payable to the Surviving Corporation. The Exchange Fund shall be used only as provided in this Agreement. (b) Concurrently with the mailing of the Proxy Statement to the Company's shareholders, the Company shall mail or cause to be mailed to each person who is a record holder of the Exchange Stock, a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Disbursing Agent) and any other appropriate materials and instructions for use 2 in effecting the surrender of the Certificates in exchange for payment of the Merger Consideration. Upon surrender to the Disbursing Agent of a Certificate, together with such letter of transmittal duly executed and such other documents as may be reasonably required by the Disbursing Agent, the holder of such Certificate shall be paid promptly after the Effective Time in exchange therefor cash in an amount equal to, in the case of the Class A Stock, the product of the number of shares of Class A Stock represented by such Certificate multiplied by the Class A Consideration, and, in the case of the Class B Stock, the product of the number of shares of Class B Stock represented by such Certificate multiplied by the Class B Consideration, and each such Certificate shall be cancelled. No interest will be paid or accrue on the cash payable upon the surrender of the Certificates. If payment is to be made to a person other than the person in whose name the Certificate surrendered is registered, it shall be a condition of payment that the Certificate so surrendered be properly endorsed or otherwise be in proper form for transfer and that the person requesting such payment pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered in accordance with this Section 1.05, each Certificate (other than Certificates representing Controlling Shares) shall represent for all purposes only the right to receive the Merger Consideration in cash multiplied by the number of shares of Company Common stock evidenced by such Certificate without any interest thereon. (c) From and after the Effective Time, there shall be no registration of transfers of shares of the Common Stock which were outstanding immediately prior to the Effective Time on the stock transfer books of the Surviving Corporation. From and after the Effective Time, the holders of shares of the Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares except as otherwise provided in this Agreement or by applicable law. All cash paid upon the surrender of Certificates in accordance with this Article I shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of the Common Stock previously represented by such Certificates. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, such Certificates shall be canceled and exchanged for cash as provided in this Article I. At the close of business on the day of the Effective Time the stock ledger of the Company shall be closed. (d) At any time more than twelve months after the Effective Time, the Surviving Corporation shall be entitled to require the Disbursing Agent to deliver to it any funds which had been made available to the Disbursing Agent and not disbursed in exchange for Certificates (including, without limitation, all interest and other income received by the Disbursing Agent in respect of all such funds). Thereafter, holders of shares of the Common Stock shall look only to Parent (subject to the terms of this Agreement, abandoned property, escheat and other similar laws) as general creditors thereof with respect to any Merger Consideration that may be payable, without interest, upon due surrender of the Certificates held by them. If any Certificates shall not have been surrendered immediately prior to the time on which any payment in respect hereof would otherwise escheat or become the property of any governmental unit or agency, the payment in respect of such Certificates shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. Notwithstanding the foregoing, none of Parent, the Company, the Surviving Corporation nor the Disbursing Agent shall be liable to any holder of the Common Stock for any Merger Consideration in respect of such Common Stock delivered to a public official pursuant to any abandoned property, escheat or other similar law. 3 Section 1.06. Lost or Stolen Certificates. If any Certificate has been --------------------------- lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen, or destroyed and, if required by the Surviving Corporation, the posting by such person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against the Surviving Corporation with respect to such Certificate, the Disbursing Agent will deliver in exchange for such lost, stolen, or destroyed Certificate, the appropriate Merger Consideration with respect to the shares of Company Common Stock formerly represented by that Certificate. Section 1.07. Stock Options. At the Effective Time, each unexercised ------------- option, whether or not then vested or exercisable in accordance with its terms, to purchase shares of Common Stock (the "Options") previously granted by the Company or any of its subsidiaries shall be canceled automatically and the Parent shall or shall cause the Surviving Corporation to provide the holder thereof with a lump sum cash payment equal to the product of the total number of shares of the Class A Stock subject to such Option immediately prior to the Effective Time and the excess (if any) of the Class A Consideration over the purchase price per share of the Class A Stock subject to such Option. Section 1.08. The Closing. The closing of the transactions contemplated by ----------- this Agreement (the "Closing") shall take place at the executive offices of [_____________ in ________________], commencing at 9:00 a.m. local time not later than December 31, 2001 provided that all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the Parties will take at the Closing) have been satisfied or waived or such other place and date as the Parties may mutually determine (the "Closing Date"). Section 1.09. Dissenters' Rights. Notwithstanding anything in this ------------------ Agreement to the contrary, shares of the Common Stock outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger and who has dissented from the Merger in accordance with Article 15 of the Virginia Act ("Dissenting Shares") shall not be converted into the right to receive the Merger Consideration as provided in Section 1.05, unless and until such holder fails to perfect or withdraws or otherwise loses his right to payment under the Virginia Act. If, after the Effective Time, any such holder fails to perfect or withdraws or loses his right to such payment, such Dissenting Shares shall thereupon be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration, if any, to which such holder is entitled, without interest thereon. The Company shall give Parent and Merger Subsidiary prompt notice of any notice of dissent received by the Company and, prior to the Effective Time, Parent and Merger Subsidiary shall have the right to participate in all negotiations, proceedings and appraisals with respect to any exercise of dissenters' rights. Prior to the Effective Time, the Company shall not, except with the prior written consent of Parent and Merger Subsidiary, make any payment with respect to, or settle or offer to settle, any such dissents. ARTICLE II THE SURVIVING CORPORATION; DIRECTORS AND OFFICERS Section 2.01. Articles of Incorporation. The articles of incorporation of ------------------------- the Company in effect at the Effective Time shall be the articles of incorporation of the Surviving Corporation until amended in accordance with applicable law. 4 Section 2.02. Bylaws. The bylaws of Merger Subsidiary in effect at the ------ Effective Time shall be the bylaws of the Surviving Corporation, until amended in accordance with applicable law and this Agreement. Section 2.03. Directors and Officers. The directors of Merger Subsidiary ---------------------- immediately prior to the Effective Time shall be the directors of the Surviving Corporation as of the Effective Time. The officers of the Company shall be the officers of the Surviving Corporation as of the Effective Time. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY Parent and Merger Subsidiary jointly and severally represent and warrant to the Company that, except as set forth in the Disclosure Schedule dated as of the date hereof and signed by an authorized officer of Parent (the "Parent Disclosure Schedule"), it being agreed that disclosure of any item on the Parent Disclosure Schedule shall be deemed disclosure with respect to all Sections of this Agreement if the relevance of such item is reasonably apparent from the face of the Parent Disclosure Schedule: Section 3.01. Organization and Qualification. Parent is a corporation and ------------------------------ Merger Subsidiary is a corporation and each of Parent's other subsidiaries is a corporation or a limited liability company in each case duly organized, validly existing and in good standing under the laws of the state of its incorporation or formation and has all requisite corporate or company power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. Each of Parent and Merger Subsidiary is qualified to transact business and is in good standing in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified and in good standing would not reasonably be expected to have Parent Material Adverse Effect (as hereinafter defined). The term "Parent Material Adverse Effect" means an effect that is materially adverse to (i) the business, financial condition or ongoing operations or prospects of Parent and its subsidiaries, taken as a whole or (ii) the ability of Parent or any of its subsidiaries to obtain financing for or to consummate any of the transactions contemplated by this Agreement. Section 3.02. Authority; Non-Contravention; Approvals. (a) Each of Parent --------------------------------------- and Merger Subsidiary has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, including, without limitation, the consummation of the financing of the Merger pursuant to the Financing Arrangement (as defined in Section 3.04). This Agreement and the Merger have been approved and adopted by the boards of directors of Parent and Merger Subsidiary and Parent as the sole shareholder of Merger Subsidiary, and no other corporate or similar proceeding on the part of Parent or Merger Subsidiary (or any other party) is necessary to authorize the execution and delivery of this Agreement or the consummation by Parent and Merger Subsidiary of the transactions contemplated hereby, including, without limitation, the Financing Arrangement. This Agreement has been duly executed and delivered by each of Parent and Merger Subsidiary and, assuming the due authorization, execution and delivery hereof by the Company, constitutes a valid and legally binding agreement of each of Parent and Merger Subsidiary enforceable against each of them in accordance with its terms, except that such enforcement may be subject to (i) 5 bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) general equitable principles. (b) The execution, delivery and performance of this Agreement by each of Parent and Merger Subsidiary and the consummation of the Merger and the transactions contemplated hereby, including, without limitation, the Financing Arrangement, do not and will not violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, security interest or encumbrance upon any of the properties or assets of Parent or any of its subsidiaries under any of the terms, conditions or provisions of (i) the respective certificates of incorporation or bylaws of Parent or any of its subsidiaries currently in effect, (ii) any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any court or governmental authority applicable to Parent or any of its subsidiaries or any of their respective properties or assets, subject, in the case of consummation, to obtaining (prior to the Effective Time) the Parent Required Statutory Approvals (as defined in Section 3.02(c)), or (iii) any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument, obligation or agreement of any kind (each a "Contract") to which Parent or any of its subsidiaries is now a party or by which Parent or any of its subsidiaries or any of their respective properties or assets may be bound or affected, except, with respect to any item referred to in clause (ii) or (iii), for any such violation, conflict, breach, default, termination, acceleration or creation of liens, security interests or encumbrances that would not reasonably be expected to have a Parent Material Adverse Effect and would not materially delay the consummation of the Merger. (c) Except for (i) applicable filings, if any, with the Securities and Exchange Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii) filing of the Articles of Merger with the Commission, and (iii) filings with and approvals by any regulatory authority with jurisdiction over the Company's gaming operations required under any Federal, state, local or foreign statute, ordinance, rule, regulation, permit, consent, approval, license, judgment, order, decree, injunction or other authorization governing or relating to the current or contemplated gaming activities and operations of the Company, including, but not limited to, Chapter 29 of the Annotated Code of Virginia and the rules and regulations promulgated thereunder and all other rules and regulations, statutes and ordinances having authority or with which compliance is required for the conduct of gambling, and gaming (collectively, the "Gaming Laws") (the filings and approvals referred to in clauses (i) through (iii) being collectively referred to as the "Parent Required Statutory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of, any governmental or regulatory body or authority is necessary for the execution and delivery of this Agreement by Parent or Merger Subsidiary, or the consummation by Parent or Merger Subsidiary of the transactions contemplated hereby, including, without limitation, the Financing Arrangement, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not made or obtained, as the case may be, would not reasonably be expected to have a Parent Material Adverse Effect and would not materially delay the consummation of the Merger. Section 3.03. Proxy Statement and Other SEC Filings. None of the ------------------------------------- information to be supplied by Parent or its subsidiaries for inclusion in (i) any proxy statement (the "Proxy 6 Statement") to be distributed in connection with the Company's special meeting of shareholders (the "Special Meeting") called for the purpose of voting on this Agreement and the transactions contemplated hereby at the time of the mailing to shareholders of the Proxy Statement or any amendment or supplement thereto, or (ii) the Schedule 13E-3 required under the Exchange Act with respect to the transactions contemplated hereby or any amendments or supplements thereto (the "Transaction Statement") at the time of the final filing thereof with the SEC, and, in each case, at the time of the Special Meeting, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. Section 3.04. Financing. Parent intends to raise $________________ in a --------- debt financing pursuant to Rule 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act") in order to provide financing for the Merger (the "Financing Arrangement") and has engaged U.S. Bancorp Libra to provide financial advisory and debt placement services in connection therewith. Section 3.05. Brokers and Finders. Except as disclosed in the Parent ------------------- Disclosure Schedule, neither Parent nor Merger Sub has entered into any contract, arrangement or understanding with any person or firm which may result in the obligation of the Company to pay any investment banking fees, finder's fees or brokerage fees in connection with the transactions contemplated hereby. Section 3.06. Compliance with Applicable Laws. The businesses of Parent and ------------------------------- Merger Subsidiary are not being conducted in violation of any law, ordinance or regulation of any governmental entity which violation, insofar as reasonably can be foreseen, would prevent or materially impair the consummation by Parent and Merger Subsidiary of the Merger and the transactions contemplated hereby. As of the date of this Agreement, no investigation or review by any governmental entity with respect to Parent and Merger Subsidiary is pending or, to the knowledge of Parent and Merger Subsidiary, threatened, nor has any governmental entity indicated an intention to conduct the same which investigation or review, insofar as reasonably can be foreseen, would prevent or materially impair the consummation by Parent and Merger Subsidiary of the Merger and the transactions contemplated hereby. Section 3.07. Litigation. There is no suit, action or proceeding pending ---------- or, to the knowledge of Parent, threatened against or affecting Parent or any of its subsidiaries, which, if determined adversely to Parent or any of its subsidiaries and insofar as reasonably can be foreseen, would prevent or materially impair the consummation by Parent of the Merger and the transactions contemplated hereby; nor is there any judgment, decree, writ, injunction, rule or order of any governmental entity or arbitrator outstanding against Parent or any of its subsidiaries which judgment, decree, writ, injunction, rule or order, insofar as reasonably can be foreseen, would prevent or materially impair the consummation by Parent of the Merger and the transactions contemplated hereby. Section 3.08. Ownership and Interim Operations. The Merger Subsidiary was -------------------------------- formed solely for the purpose of engaging in the transactions contemplated hereby and has engaged in no other business activities and has conducted its operations only as contemplated by this Agreement. The Merger Subsidiary is, and immediately prior to the Effective Time will be, directly and wholly owned by Parent. Merger Subsidiary does not own, and at all times from and after the date hereof and prior to the Effective Time will continue not to own, any asset other than an amount of cash necessary for its due incorporation and good standing and to pay the fees 7 and expenses of the Merger attributable to it if the Merger is consummated or otherwise required pursuant to the terms of this Agreement and any other assets as are reasonably necessary for the Merger Subsidiary to fulfill its obligations with respect to the transactions contemplated by this Agreement. Section 3.09. Organizational Instruments. Parent heretofore has furnished -------------------------- to the Company complete and correct copies of the respective organizational and constituent instruments and documents of Parent and Merger Subsidiary, in each case as amended or restated to the date hereof. Neither Parent nor Merger Subsidiary is in violation of any provisions of its respective organizational and constituent instruments and documents. Section 3.10. Disclosure. No representation or warranty made by Parent or ---------- Merger Subsidiary in this Agreement and no statement of Parent or Merger Subsidiary contained in any certificate delivered by Parent or Merger Subsidiary pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. For purposes of this Section 3.10, the term "material" shall be measured by reference to Parent and its subsidiaries, considered as an entirety. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent and Merger Subsidiary that, except as set forth in the disclosure schedule dated as of the date hereof and signed by an authorized officer of the Company (the "Company Disclosure Schedule"), it being agreed that disclosure of any item on the Company Disclosure Schedule shall be deemed disclosure with respect to all Sections of this Agreement if the relevance of such item is reasonably apparent from the face of the Company Disclosure Schedule: Section 4.01. Organization and Qualification. The Company is a corporation ------------------------------ duly organized, validly existing and in good standing under the laws of Virginia and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted. The Company is qualified to transact business and is in good standing in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified and in good standing would not reasonably be expected to have a Company Material Adverse Effect (as hereinafter defined). The term "Company Material Adverse Effect" means an effect or effects that are materially adverse to (i) the business, financial condition, or ongoing operations or prospects of the Company and its subsidiaries, taken as a whole, or (ii) has a materially adverse effect on the ability of the Company to consummate the Merger or the ability of the Parties hereto to retain any Material Gaming License (as hereinafter defined). True, accurate and complete copies of the Company's articles of incorporation and bylaws, in each case as in effect on the date hereof, including all amendments thereto, have heretofore been delivered to Parent. The term "Material Gaming License" means a license or similar authorization under any Gaming Law without which Parent or the Company, as the case may be, would be prohibited from operating any of its gaming properties in the state in which such property is located. 8 Section 4.02. Capitalization. (a) The authorized capital stock of the -------------- Company consists of (1) 12,000,000 shares of Class A Stock, and (2) 3,000,000 shares of Class B Stock. As of the close of business on the date hereof: (i) 5,025,239 shares of Class A Stock and 2,242,500 shares of Class B Stock are issued and outstanding all of which shares are validly issued and are fully paid, nonassessable and free of preemptive rights, (ii) 6,974,761 shares of Class A Stock and 757,500 shares of Class B Stock are authorized but unissued, (iii) 395,000 shares of Class A Stock and no shares of Class B Stock are reserved for issuance upon exercise of Options issued and outstanding, (iv) 238,100 Options to purchase Class A Stock and no Options to purchase Class B Stock are issued and outstanding. Assuming the exercise of all outstanding Options, as of the date hereof, there would be 5,263,339 shares of Class A Stock and 2,242,500 shares of Class B Stock issued and outstanding. Since March 31, 2001, except as permitted by this Agreement, (i) no shares of capital stock of the Company have been issued except in connection with the exercise of the instruments referred to in the second sentence of this Section 4.02(a), and (ii) except as set forth in Section 4.02(a) of the Company Disclosure Schedule, no options, warrants, securities convertible into, or commitments with respect to the issuance of shares of capital stock of the Company have been issued, granted or made. (b) Except as set forth in Section 4.02(a) and Section 4.02(a) of the Company Disclosure Schedule, as of the date hereof, there are no outstanding subscriptions, options, calls, contracts, commitments, understandings, restrictions, arrangements, rights or warrants, including any right of conversion or exchange under any outstanding security, instrument or other agreement and including any rights plan or other anti-takeover agreement, obligating the Company or any subsidiary of the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of the capital stock of the Company or obligating the Company or any subsidiary of the Company to grant, extend or enter into any such agreement or commitment. Except as set forth in Section 4.02(a) there are no outstanding stock appreciation rights or similar derivative securities or rights of the Company or any of its subsidiaries. Except as disclosed in the SEC Reports (as defined in Section 4.05) or as otherwise contemplated by this Agreement, there are no voting trusts, irrevocable proxies or other agreements or understandings to which the Company or any subsidiary of the Company is a party or is bound with respect to the voting of any shares of capital stock of the Company. Section 4.03. Subsidiaries. Each direct and indirect subsidiary of the ------------ Company is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has the requisite power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted and each subsidiary of the Company is qualified to transact business, and is in good standing, in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary; except, in all cases, where the failure to be so organized, existing, qualified or in good standing would not reasonably be expected to have a Company Material Adverse Effect. All of the outstanding shares of capital stock of or other equity interests in each subsidiary of the Company are validly issued, fully paid, nonassessable and free of preemptive rights, as applicable. There are no subscriptions, options, warrants, rights, calls, contracts or other commitments, understandings, restrictions or arrangements relating to the issuance or sale with respect to any shares of capital stock of or other equity interests in any subsidiary of the Company, including any right of conversion or exchange under any outstanding security, instrument or agreement. For purposes of this Agreement, the term "subsidiary" means, with respect to any specified person (the "Owner") any other person of which more than 50% of the total voting power of shares of capital stock or other equity interests 9 entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, trustees or other governing body thereof is at the time owned or controlled, directly or indirectly, by such Owner or one or more of the other subsidiaries of such Owner. Section 4.04. Authority; Non-Contravention; Approvals. (a) The Company has --------------------------------------- the requisite corporate power and authority to enter into this Agreement and, subject to the Company Shareholders' Approval (as defined in Section 6.01(a)) with respect solely to the Merger, to consummate the transactions contemplated hereby. This Agreement and the Merger have been approved and adopted by the board of directors of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Agreement or, except for the Company Shareholders' Approval with respect solely to the Merger, the consummation by the Company of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company, and, assuming the due authorization, execution and delivery hereof by Parent and Merger Subsidiary, constitutes a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) general equitable principles. (b) The execution, delivery and performance of this Agreement by the Company and the consummation of the Merger and the transactions contemplated hereby do not and will not violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, contractually require any offer to purchase or any prepayment of any debt, or result in the creation of any lien, security interest or encumbrance upon any of the properties or assets of the Company or any of its subsidiaries under any of the terms, conditions or provisions of (i) the respective certificates of incorporation or bylaws of the Company or any of its subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any court or governmental authority applicable to the Company or any of its subsidiaries or any of their respective properties or assets, subject, in the case of consummation, to obtaining (prior to the Effective Time) the Company Required Statutory Approvals (as defined in Section 4.04(c)) and the Company Shareholders' Approval, or (iii) any Contract to which the Company or any of its subsidiaries is now a party or by which the Company or any of its subsidiaries or any of their respective properties or assets may be bound or affected, subject, in the case of consummation, to obtaining (prior to the Effective Time) consents required from commercial lenders, lessors or other third parties as specified in Section 4.04(b) of the Company Disclosure Schedule, except, with respect to any items referred to in clause (ii) or (iii), for any such violation, conflict, breach, default, termination, acceleration or creation of liens, security interests or encumbrances that would not, individually or in the aggregate, have a Company Material Adverse Effect and would not prevent or materially delay the consummation of the Merger. (c) Except for (i) the filings, if any, by Parent required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) any applicable filings with the SEC pursuant to the Exchange Act, (iii) filing of the Articles of Merger with the Commission, (iv) any filings with or approvals from authorities required solely by virtue of the jurisdictions in which Parent or its subsidiaries conduct any business or own any assets, and (v) filings with and approvals in respect of the Gaming Laws (the filings and approvals referred to in 10 clauses (i) through (v) and those disclosed in Section 4.04(c) of the Company Disclosure Schedule being collectively referred to as the "Company Required Statutory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of, any governmental or regulatory body or authority is necessary for the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not made or obtained, as the case may be, would not individually or in the aggregate have a Company Material Adverse Effect and would not prevent or materially delay the consummation of the Merger. Section 4.05. Reports and Financial Statements. Since January 1, 1998, the -------------------------------- Company has filed with the SEC all forms, statements, reports and documents (including all exhibits, post-effective amendments and supplements thereto) (collectively, the "SEC Reports") required to be filed by it under each of the Securities Act, the Exchange Act and the respective rules and regulations promulgated thereunder, all of which, as amended if applicable, complied when filed in all material respects with all requirements of the applicable act and the rules and regulations promulgated thereunder. As of their respective dates, the SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to make the statements therein, in the light of the circumstances under which they were made, not misleading. The audited consolidated financial statements of the Company (the "Company Financial Statements") included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000 as filed with the SEC have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as may be indicated therein or in the notes thereto) and fairly present in all material respects the financial position of the Company and its subsidiaries as of the dates thereof and the results of their operations and changes in financial position for the periods then ended. Section 4.06. Absence of Undisclosed Liabilities. Except as disclosed in ---------------------------------- the SEC Reports or the Company Disclosure Schedule, neither the Company nor any of its subsidiaries had at December 31, 2000 or March 31, 2001 or has incurred since March 31, 2001 and as of the date hereof, any liabilities or obligations (whether absolute, accrued, contingent or otherwise) of any nature, except (a) liabilities, obligations or contingencies (i) which are accrued or reserved against in the Company Financial Statements or reflected in the notes thereto, or (ii) which were incurred after March 31, 2001 in the ordinary course of business and consistent with past practice, (b) liabilities, obligations or contingencies which (i) would not, individually or in the aggregate, have a Company Material Adverse Effect, or (ii) have been discharged or paid in full prior to the date hereof in the ordinary course of business, and (c) liabilities, obligations and contingencies which are of a nature not required to be reflected in the consolidated financial statements of the Company and its subsidiaries prepared in accordance with generally accepted accounting principles consistently applied. Section 4.07. Absence of Certain Changes or Events. Since the date of the ------------------------------------ most recent SEC Report filed prior to the date of this Agreement that contains consolidated financial statements of the Company, there has not been any Company Material Adverse Effect provided that continuing reasonably foreseeable financial losses or financial losses consistent with historical losses or resulting from the breach by Jeffrey P. Jacobs ("Jacobs"), the sole shareholder of Parent and the Chief Executive Officer and the Chairman of the Board of Directors of the Company of his obligations pursuant to Section 5.13 shall not constitute a Company Material Adverse Effect for purposes of this Section 4.07. 11 Section 4.08. Litigation. Except as referred to in the SEC Reports or ---------- Section 4.08 of the Company Disclosure Schedule, there are no claims, suits, actions or proceedings pending or, to the knowledge of the Company, threatened against, relating to or affecting the Company or any of its subsidiaries, before any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator that would, individually or in the aggregate, have a Company Material Adverse Effect. Except as referred to in the SEC Reports, neither the Company nor any of its subsidiaries is subject to any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator that prohibits the consummation of the transactions contemplated hereby or would reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. Section 4.09. Proxy Statement and Other SEC Filings. None of the ------------------------------------- information to be supplied by the Company or any of its subsidiaries for inclusion in (i) the Proxy Statement at the time of the mailing thereof or any amendment or supplement thereto, or (ii) the Transaction Statement at the time of final filing thereof or any amendment or supplement thereto with the SEC, and, in each case, at the time of the Special Meeting will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Proxy Statement will comply in all material respects with all applicable laws, including, but not limited to, the provisions of the Exchange Act and the rules and regulations promulgated thereunder, except that no representation is made by the Company with respect to information supplied by Parent, Merger Subsidiary or any stockholder of Parent for inclusion therein. Section 4.10. No Violation of Law. Except as disclosed in the SEC Reports ------------------- or Section 4.10 of the Company Disclosure Schedule, neither the Company nor any of its subsidiaries is in violation of or has been given written, or to the knowledge of the Company's executive officers oral, notice of any violation of, any law, statute, order, rule, regulation, ordinance or judgment (including, without limitation, any applicable environmental law, ordinance or regulation) of any governmental or regulatory body or authority, except for violations which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. Except as disclosed in the SEC Reports or Section 4.10 of the Company Disclosure Schedule, to the knowledge of the Company, no investigation or review by any governmental or regulatory body or authority is pending or threatened, nor has any governmental or regulatory body or authority indicated an intention to conduct the same, other than, in each case, those the outcome of which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. To the knowledge of the Company's executive officers, the Company and its subsidiaries are not in material violation of the terms of any material permit, license, franchise, variance, exemption, order or other governmental authorization, consent or approval necessary to conduct their businesses as presently conducted (collectively, the "Company Permits"), except for delays in filing reports or violations which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. Section 4.11. Compliance with Agreements. Except as disclosed in the SEC -------------------------- Reports or Section 4.11 of the Company Disclosure Schedule, neither the Company nor any of its subsidiaries is in breach, violation or default in the performance or observance of any term or provision of, and, to the knowledge of the Company's executive officers, no event has occurred which, with lapse of time or action by a third party, would result in a default under, any Contract 12 to which the Company or any of its subsidiaries is a party or by which any of them is bound or to which any of their property is subject, other than breaches, violations and defaults which would not, individually or in the aggregate, have a Company Material Adverse Effect. The Company's insurance policies relating to directors' and officers' liability are in full force and effect. Section 4.12. Taxes. (a) The Company and its subsidiaries have (i) duly ----- filed with the appropriate governmental authorities all Tax Returns (as defined in Section 4.12(c)) required to be filed by them, and such Tax Returns are true, correct and complete, and (ii) duly paid in full or reserved in accordance with generally accepted accounting principles on the Company Financial Statements all Taxes (as defined in Section 4.12(c)) required to be paid, except in each such case as would not, individually or in the aggregate, have a Company Material Adverse Effect. Except as would not, individually or in the aggregate, have a Company Material Adverse Effect, there are no liens for Taxes upon any property or asset of the Company or any subsidiary thereof, other than liens for Taxes not yet due or Taxes contested in good faith and reserved against in accordance with generally accepted accounting principles. There are no unresolved issues of law or fact arising out of a notice of deficiency, proposed deficiency or assessment from the Internal Revenue Service (the "IRS") or any other governmental taxing authority with respect to Taxes of the Company or any of its subsidiaries which would individually or in the aggregate, have a Company Material Adverse Effect. Except as would not, individually or in the aggregate, have a Company Material Adverse Effect, neither the Company nor any of its subsidiaries has agreed to an extension of time with respect to a Tax deficiency, other than extensions which are no longer in effect. Except as would not, individually or in the aggregate, have a Company Material Adverse Effect, neither the Company nor any of its subsidiaries is a party to any agreement providing for the allocation or sharing of Taxes with any entity that is not, directly or indirectly, a wholly-owned subsidiary of the Company, other than agreements the consequences of which are fully and adequately reserved for in the Company Financial Statements. (b) Except as would not, individually or in the aggregate, have a Company Material Adverse Effect, the Company and each of its subsidiaries has withheld or collected and has paid over to the appropriate governmental entities (or is properly holding for such payment) all material Taxes required to be collected or withheld. (c) For purposes of this Agreement, "Taxes" means all federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, communications services, severance, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions, and includes any liability for Taxes of another person by contract, as a transferee or successor, under Treasury Regulation 1.1502-6 or analogous state, local or foreign law provision or otherwise, and "Tax Return" means any return, report or similar statement (including attached schedules) required to be filed with respect to any Tax, including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax. Section 4.13. Employee Benefit Plans; ERISA. (d) The SEC Reports and the ----------------------------- Company Disclosure Schedule set forth each material employee or director benefit plan, arrangement or agreement, including, without limitation, any employee welfare benefit plan within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any employee pension benefit plan within the meaning of Section 3(2) of ERISA 13 (whether or not such plan is subject to ERISA) and any bonus, incentive, deferred compensation, vacation, stock purchase, stock option, severance, employment, change of control or fringe benefit plan, program or agreement (excluding any multi-employer plan as defined in Section 3(37) of ERISA (a "Multi-employer Plan") and any multiple employer plan within the meaning of Section 413(c) of the Internal Revenue Code of 1986, as amended (the "Code")) that is sponsored, maintained or contributed to by the Company or any of its subsidiaries or by any trade or business, whether or not incorporated, all of which together with the Company would be deemed a "single employer" within the meaning of Section 4001 of ERISA (collectively, the "Company Plans"). (a) Except as disclosed in the SEC Reports or in the Company Disclosure Schedule, (i) there have been no prohibited transactions within the meaning of Section 406 or 407 of ERISA or Section 4975 of the Code with respect to any of the Company Plans that could result in penalties, taxes or liabilities which would individually or in the aggregate, have a Company Material Adverse Effect, (ii) no Company Plan is subject to Title IV of ERISA, (iii) each of the Company Plans has been operated and administered in accordance with all applicable laws during the period of time covered by the applicable statute of limitations, except for failures to comply which would not, individually or in the aggregate, have a Company Material Adverse Effect, (iv) each of the Company Plans which is intended to be "qualified" within the meaning of Section 401(a) of the Code has been determined by the IRS to be so qualified and such determination has not been revoked by failure to satisfy any condition thereof or by a subsequent amendment thereto or a failure to amend, except that it may be necessary to make additional amendments retroactively to maintain the "qualified" status of such Company Plans, and the period for making any such necessary retroactive amendments has not expired, (v) to the knowledge of the Company and its subsidiaries, there are no pending, threatened or anticipated claims involving any of the Company Plans other than claims for benefits in the ordinary course or claims which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, (vi) no Company Plan provides post-retirement medical benefits to employees or directors of the Company or any of its subsidiaries beyond their retirement or other termination of service, other than coverage mandated by applicable law, (vii) all material contributions or other amounts payable by the Company or its subsidiaries as of the date hereof with respect to each Company Plan in respect of current or prior plan years have been paid or accrued in accordance with generally accepted accounting principles, (viii) with respect to each Multi-employer Plan contributed to by the Company, to the knowledge of the Company and its subsidiaries, as of the date hereof, none of the Company or any of its subsidiaries has received any notification that any such Multi-employer Plan is in reorganization, has been terminated or is insolvent, (ix) the Company and each of its subsidiaries has complied in all respects with the Worker Adjustment and Retraining Notification Act, except for failures which would not, individually or in the aggregate, have a Company Material Adverse Effect, and (x) no act, omission or transaction has occurred with respect to any Company Plan that has resulted or could result in any liability of the Company or any subsidiary under Section 409 or 502(c)(1) of ERISA or Chapter 43 of Subtitle (A) of the Code, except for liabilities which would not, individually or in the aggregate, have a Company Material Adverse Effect. (b) Except as set forth in the Company Disclosure Schedule, and excluding payments in respect of outstanding Options or Common Stock, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including, without limitation, any severance or "excess parachute payment" (within the meaning of Section 280G of the Code)) becoming due to any director or 14 employee of the Company or any of its subsidiaries under any Company Plan, (ii) increase any benefits otherwise payable under any Company Plan, or (iii) result in any acceleration of the time of payment or vesting of any such benefits. Section 4.14. Labor Controversies. Except as disclosed in the SEC Reports, ------------------- (a) there are no significant controversies pending or, to the knowledge of the Company, threatened between the Company or any of its subsidiaries and any representatives (including unions) of any of their employees, and (b) to the knowledge of the Company, there are no organizational efforts presently being made involving any of the presently unorganized employees of the Company or any of its subsidiaries. Section 4.15. Environmental Matters. (a) Except as disclosed in the SEC --------------------- Reports or Section 4.15 of the Company Disclosure Schedule, (i) the Company and its subsidiaries have conducted their respective businesses in compliance with all applicable Environmental Laws, including, without limitation, having all permits, licenses and other approvals and authorizations necessary for the operation of their respective businesses as presently conducted, (ii) none of the properties owned by the Company or any of its subsidiaries contain any Hazardous Substance (as defined in Section 4.15(c)) in amounts exceeding the levels permitted by applicable Environmental Laws (as defined in Section 4.15(b)), (iii) since January 1, 1998, neither the Company nor any of its subsidiaries has received any notices, demand letters or requests for information from any Federal, state, local or foreign governmental entity indicating that the Company or any of its subsidiaries may be in violation of, or liable under, any Environmental Law in connection with the ownership or operation of their businesses, (iv) there are no civil, criminal or administrative actions, suits, demands, claims, hearings, investigations or proceedings pending or, to the Company's knowledge, threatened, against the Company or any of its subsidiaries relating to any violation, or alleged violation, of any Environmental Law, (v) no Hazardous Substance has been disposed of, released or transported in violation of any applicable Environmental Law from any properties owned by the Company or any of its subsidiaries as a result of any activity of the Company or any of its subsidiaries during the time such properties were owned, leased or operated by the Company or any of its subsidiaries, and (vi) neither the Company, its subsidiaries nor any of their respective properties are subject to any liabilities or expenditures (fixed or contingent) relating to any suit, settlement, court order, administrative order, regulatory requirement, judgment or claim asserted or arising under any Environmental Law, except for violations of the foregoing clauses (i) through (vi) that would not, individually or in the aggregate, have a Company Material Adverse Effect. (b) As used herein, "Environmental Law" means any federal, state, local or foreign law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, legal doctrine, order, judgment, decree, injunction, requirement or agreement with any governmental entity relating to (x) the protection, preservation or restoration of the environment (including, without limitation, air, water vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource) or to human health or safety, or (y) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substances, in each case as amended and as in effect at the Effective Time. The term "Environmental Law" includes, without limitation, (i) the Federal Comprehensive Environmental Response Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976 15 (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Occupational Safety and Health Act of 1970, each as amended and as in effect at the Effective Time, and (ii) any common law or equitable doctrine (including, without limitation, injunctive relief and tort doctrines such as negligence, nuisance, trespass and strict liability) that may impose liability or obligations for injuries or damages arising from or threatened as a result of, the presence of, effects of or exposure to any Hazardous Substance. (c) As used herein, "Hazardous Substance" means any substance presently or hereafter listed, defined, designated or classified as hazardous, toxic, radioactive, or dangerous, or otherwise regulated, under any Environmental Law. Hazardous Substance includes any substance to which exposure is regulated by any government authority or any Environmental Law including, without limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic substance, hazardous waste, special waste, industrial substance or petroleum or any derivative or by-product thereof, radon, radioactive material, asbestos, or asbestos-containing material, urea formaldehyde foam insulation, lead or polychlorinated biphenyls. Section 4.16. Title to Assets. The Company and each of its subsidiaries has --------------- good and valid title in fee simple to all its real property and good title to all its leasehold interests and other properties, as reflected in the most recent balance sheet included in the Company Financial Statements, except for properties and assets that have been disposed of in the ordinary course of business since the date of such balance sheet, free and clear of all mortgages, liens, pledges, charges or encumbrances of any nature whatsoever, except (i) the lien for current taxes, payments of which are not yet delinquent, (ii) such imperfections in title and easements and encumbrances, if any, as are not substantial in character, amount or extent and do not materially detract from the value, or interfere with the present use of the property subject thereto or affected thereby, or otherwise materially impair the Company's business operations (in the manner presently carried on by the Company), or (iii) as disclosed in the SEC Reports, or Section 4.16 of the Company Disclosure Schedule, and except for such matters which would not, reasonably be expected individually or in the aggregate, have a Company Material Adverse Effect. All leases under which the Company or any of its subsidiaries leases any real or personal property are in good standing, valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing default or event which with notice or lapse of time or both would become a default other than failures to be in good standing and defaults under such leases which would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. Section 4.17. Company Shareholders' Approval. The affirmative vote of ------------------------------ shareholders of the Company required for approval and adoption of this Agreement and the Merger is more than sixty-six and two-thirds percent (66.666%) of the outstanding shares of the Class A Stock and the Class B Stock voting as a separate class. Section 4.18. Brokers and Finders. The Company has not entered into any ------------------- contract, arrangement or understanding with any person or firm which may result in the obligation of the Company to pay any finder's fees or brokerage fees in connection with the transactions contemplated hereby, except as disclosed in Section 4.18 of the Company Disclosure Schedule. Section 4.19. Financial Advisors. The Company has not entered into any ------------------ contract, arrangement or understanding with any person or firm which may result in the obligation of the 16 Company to pay any financial advisory fees in connection with the transactions contemplated hereby, other than fees payable to BB&T Capital Markets (the "Company Financial Advisor"), or as disclosed in Section 4.19 of the Company Disclosure Schedule. An accurate copy of any fee agreement with the Company Financial Advisor has been made available to Parent. ARTICLE V COVENANTS Section 5.01. Conduct of Business by the Company Pending the Merger. Except ----------------------------------------------------- as otherwise contemplated by this Agreement or disclosed in Section 5.01 of the Company Disclosure Schedule, after the date hereof and prior to the Effective Time or earlier termination of this Agreement, unless Parent shall otherwise agree in writing, the Company shall, and shall cause its subsidiaries to: (a) conduct their respective businesses in the ordinary and usual course of business and in a manner substantially consistent with past practice; (b) not (i) amend or propose to amend their respective articles of incorporation or bylaws or equivalent constitutional documents, (ii) split, combine or reclassify their outstanding capital stock, or (iii) declare, set aside or pay any dividend or distribution payable in cash, stock, property or otherwise, except for the payment of dividends or distributions to the Company or a wholly-owned subsidiary of the Company by a direct or indirect wholly-owned subsidiary of the Company; (c) not issue, sell, pledge or dispose of, or agree to issue, sell, pledge or dispose of, any additional shares of, or any options, warrants or rights of any kind to acquire any shares of, their capital stock of any class or any debt or equity securities convertible into or exchangeable for any such capital stock, except that the Company may issue shares upon the exercise of Options outstanding on the date hereof; (d) not (i) incur or become contingently liable with respect to any indebtedness for borrowed money other than (A) borrowings in the ordinary course of business or borrowings under the existing credit facilities of the Company or of any of its subsidiaries up to the existing borrowing limit on the date hereof, and (B) borrowings to refinance existing indebtedness on terms which are reasonably acceptable to Parent; provided that in no event shall aggregate indebtedness of the Company and its subsidiaries, net of all cash and cash equivalents, exceed $______________, (ii) redeem, purchase, acquire or offer to purchase or acquire any shares of its capital stock or any options, warrants or rights to acquire any of its capital stock or any security convertible into or exchangeable for its capital stock other than in connection with the exercise of outstanding Options pursuant to the terms of the Company Plans, (iii) make any acquisition of any assets or businesses other than expenditures for current assets for fixed or capital assets in each case in the ordinary course of business, (iv) without Parent's consent, acquire any gaming property, (v) sell, pledge, dispose of or encumber any assets or businesses other than (A) sales of businesses or assets disclosed in Section 5.01 of the Company Disclosure Schedule, (B) pledges or encumbrances pursuant to existing credit facilities or other permitted borrowings, (C) sales of real estate, assets or facilities for cash consideration (including any debt assumed by the buyer of such real estate, assets or facilities) to non-affiliates of the Company of 17 less than $10,000 in each such case and $100,000 in the aggregate, (D) sales or dispositions of businesses or assets as may be required by applicable law, and (E) sales or dispositions of assets in the ordinary course of business, or (vi) enter into any binding contract, agreement, commitment or arrangement with respect to any of the foregoing; (e) use all reasonable efforts to preserve intact their respective business organizations and goodwill, keep available the services of their respective present officers and key employees, and use all reasonable efforts to preserve the goodwill and business relationships with customers and others having business relationships with them other than as expressly permitted by the terms of this Agreement; (f) not enter into, amend, modify or renew any employment, consulting, severance or similar agreement with, or grant any salary, wage or other increase in compensation or increase in any employee benefit to, any director or officer of the Company or of any of its subsidiaries, except (i) for changes that are required by applicable law, (ii) to satisfy obligations existing as of the date hereof, or (iii) in the ordinary course of business consistent with past practice; (g) not enter into, establish, adopt, amend or modify any pension, retirement, stock purchase, savings, profit sharing, deferred compensation, consulting, bonus, group insurance or other employee benefit, incentive or welfare plan, agreement, program or arrangement, in respect of any director, officer or employee of the Company or of any of its subsidiaries, except, in each such case, as may be required by applicable law or by the terms of contractual obligations existing as of the date hereof, including any collective bargaining agreement; (h) not make expenditures in excess of expenditures permitted by the Company's last budget approved by the Board of Directors, including, but not limited to, capital expenditures, or enter into any binding commitment or contract to make expenditures, except (i) expenditures which the Company or its subsidiaries are currently contractually committed to make, (ii) other expenditures not exceeding $100,000 in each such case and $300,000 in the aggregate, (iii) for emergency repairs and other expenditures necessary in light of circumstances not anticipated as of the date of this Agreement which are necessary to avoid significant disruption to the Company's business or operations consistent with past practice (and, if reasonably practicable, after consultation with Parent), or (iv) for repairs and maintenance in the ordinary course of business consistent with past practice; (i) not make, change or revoke any material Tax election unless required by law or make any agreement or settlement with any taxing authority regarding any material amount of Taxes or which would reasonably be expected to materially increase the obligations of the Company or the Surviving Corporation to pay Taxes in the future. Section 5.02. Control of the Company's Operations. Nothing contained in ----------------------------------- this Agreement shall give to Parent, directly or indirectly, rights to control or direct the Company's operations prior to the Effective Time. Prior to the Effective Time, the Company shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision of its operations. Section 5.03. Acquisition Transactions. (a) After the date hereof and prior ------------------------ to the Effective Time or earlier termination of this Agreement, the Company shall not, and shall not 18 permit any of its subsidiaries to, initiate, solicit, negotiate, encourage or provide confidential information to facilitate, and the Company shall use all reasonable efforts to cause any officer, director or employee of the Company, or any attorney, accountant, investment banker, financial advisor or other agent retained by it or any of its subsidiaries, not to initiate, solicit, negotiate, encourage or provide non-public or confidential information to facilitate, any proposal or offer to acquire all or any substantial part of the business, properties or capital stock of the Company, whether by merger, purchase of assets, tender offer or otherwise, whether for cash, securities or any other consideration or combination thereof (any such transactions being referred to herein as an "Acquisition Transaction"). (b) Notwithstanding the provisions of paragraph (a) above, (i) the Company may, prior to receipt of the Company Shareholders' Approval, in response to an unsolicited bona fide written offer or proposal with respect to a potential or proposed Acquisition Transaction (an "Acquisition Proposal") from a corporation, partnership, person or other entity or group (a "Potential Acquirer") which the Company's Board of Directors determines, in good faith and after consultation with its independent financial advisor, would reasonably be expected to result (if consummated pursuant to its terms) in an Acquisition Transaction more favorable to the Company's shareholders than the Merger (a "Qualifying Proposal"), furnish (subject to the execution of a confidentiality agreement substantially similar to the Confidentiality Agreement (as defined in Section 5.04)) confidential or non-public information to, and negotiate with, such Potential Acquirer, may resolve to accept, or recommend, and, upon termination of this Agreement in accordance with Section 7.01(v) and after payment to Parent of the fee pursuant to Section 5.09(b), enter into agreements relating to, a Qualifying Proposal which the Company's Board of Directors, in good faith, has determined is reasonably likely to be consummated (such Qualifying Proposal being a "Superior Proposal") and (ii) the Company's Board of Directors may take and disclose to the Company's shareholders a position contemplated by Rule 14e-2 under the Exchange Act or otherwise make disclosure required by the federal securities laws. It is understood and agreed that negotiations and other activities conducted in accordance with this paragraph (b) shall not constitute a violation of paragraph (a) of this Section 5.03. (c) The Company shall promptly notify Parent after receipt of any Acquisition Proposal, indication of interest or request for non-public information relating to the Company or its subsidiaries in connection with an Acquisition Proposal or for access to the properties, books or records of the Company or any subsidiary by any person or entity that informs the Board of Directors of the Company or such subsidiary that it is considering making, or has made, an Acquisition Proposal. Such notice to Parent shall be given orally and in writing and shall indicate in reasonable detail the identity of the offeror and the material terms and conditions of such proposal, inquiry or contact. Section 5.04. Access to Information. The Company and its subsidiaries shall --------------------- afford to Parent and Merger Subsidiary and their respective accountants, counsel, financial advisors, sources of financing and other representatives (the "Parent Representatives") reasonable access during normal business hours with reasonable notice throughout the period prior to the Effective Time to all of their respective properties, books, contracts, commitments and records (including, but not limited to, Tax Returns) and, during such period, shall furnish promptly (i) a copy of each report, schedule and other document filed or received by any of them pursuant to the requirements of federal or state securities laws or filed by any of them with the SEC in connection with the transactions contemplated by this Agreement, and (ii) such other information concerning its businesses, properties and personnel as Parent or Merger Subsidiary shall 19 reasonably request and will obtain the reasonable cooperation of the Company's officers, employees, counsel, accountants, consultants and financial advisors in connection with the investigation of the Company by Parent and the Parent Representatives. Notwithstanding the foregoing, the Company shall not be required to provide any information which it reasonably believes it may not provide to Parent by reason of applicable law, rules or regulations, which constitutes information protected by attorney/client privilege, or which the Company or any subsidiary is required to keep confidential by reason of contract, agreement or understanding with third parties entered into prior to the date hereof. Section 5.05. Confidentiality. The Company, Parent and Merger Subsidiary --------------- shall each insure that all non-public information which the Company, Parent and/or Merger Subsidiary, any of their respective officers, directors, employees, attorneys, agents, investment bankers, or accountants may now possess or may hereafter create or obtain relating to the financial condition, results of operations, business, properties, assets, liabilities, or future prospects of the Company, Parent and/or Merger Subsidiary, any affiliate of any of them, or any customer or supplier of any of them or any such affiliate, shall not be published, disclosed, or made accessible by any of them to any other person or entity at any time or used by any of them except pending the Closing in the business and for the benefit of the Surviving Corporation; provided, however, that the restrictions of this sentence shall not apply (a) as may otherwise be required by law, (b) as may be necessary or appropriate in connection with the enforcement of this Agreement, or (c) to the extent such information shall have otherwise become publicly available. The Company, Parent and/or Merger Subsidiary shall, and shall cause all other such persons and entities to, deliver to the Parent all tangible evidence of such non-public information to which the restrictions of the foregoing sentence apply at the Closing or the earlier rightful termination of this Agreement. Section 5.06. Notices of Certain Events. (a) The Company shall promptly as ------------------------- reasonably practicable after executive officers of the Company acquire knowledge thereof, notify Parent of: (i) any notice or other communication from any person alleging that the consent of such person (or another person) is or may be required in connection with the transactions contemplated by this Agreement which consent relates to a material Contract to which the Company or any of its subsidiaries is a party or which, if not obtained, would materially delay consummation of the Merger; (ii) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement; and (iii) any actions, suits, claims, investigations or proceedings commenced or, to the best of its knowledge threatened against, relating to or involving or otherwise affecting the Company or any of its subsidiaries that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 4.08 or 4.10 or which relate to the consummation of the transactions contemplated by this Agreement. (b) Each of Parent and Merger Subsidiary shall as promptly as reasonably practicable after executive officers of Parent acquire knowledge thereof, notify the Company of: (i) any notice or other communication from any person alleging that the consent of such person (or other person) is or may be required in connection with the transactions contemplated by this Agreement which consent relates to a material Contract to which Parent or any of its subsidiaries is a party or which, if not obtained, would materially delay the Merger, (ii) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement, and (iii) any actions, suits, claims, investigations 20 or proceedings commenced or, to the best of its knowledge, threatened against Parent or Merger Subsidiary, which relate to consummation of the transactions contemplated by this Agreement. (c) Each of the Company, Parent and Merger Subsidiary agrees to give prompt notice to each other of, and to use commercially reasonable efforts to remedy, (i) the occurrence or failure to occur of any event which occurrence or failure would be likely to cause any of its representations or warranties in this Agreement to be untrue or inaccurate at the Effective Time unless such failure or occurrence would not have a Company Material Adverse Effect or a Parent Material Adverse Effect, as the case may be, and (ii) any failure on its part to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder unless such failure or occurrence would not have a Company Material Adverse Effect or a Parent Material Adverse Effect, as the case may be. The delivery of any notice pursuant to this Section 5.05(c) shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. Section 5.07. Meeting of the Company's Shareholders. The Company shall as ------------------------------------- promptly as practicable after the date of this Agreement take all action necessary in accordance with the Virginia Act, applicable state and federal securities laws, and the Company's articles of incorporation and bylaws to convene the Special Meeting. The board of directors of the Company shall recommend that the Company's shareholders vote to approve the Merger and adopt this Agreement; provided, however, that the Company may change its recommendation in any manner if its recommendation of the Merger would be inconsistent with the Board of Directors' fiduciary duties under applicable law, as determined by the board of directors in good faith after consultation with its financial and legal advisors. Section 5.08. Proxy Statement and Other SEC Filings. As promptly as ------------------------------------- practicable after execution of this Agreement, the Company shall prepare and file the Proxy Statement and the Transaction Statement, and use all commercially reasonable efforts to have the Proxy Statement and the Transaction Statement cleared by the SEC. Parent, Merger Subsidiary and the Company shall cooperate with each other in the preparation of the Proxy Statement and the Transaction Statement, and the Company shall notify Parent of the receipt of any comments of the SEC with respect to the Proxy Statement and/or the Transaction Statement and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide promptly to Parent copies of all correspondence between the Company or any representative of the Company and the SEC. The Company shall give Parent and its counsel the opportunity to review the Proxy Statement and the Transaction Statement prior to its being filed with the SEC and shall give Parent and its counsel the opportunity to review all amendments and supplements to the Proxy Statement and the Transaction Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. Each of the Company, Parent and Merger Subsidiary agrees to use its reasonable best efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests by the SEC. As promptly as practicable after the Proxy Statement and the Transaction Statement have been cleared by the SEC, the Company shall mail the Proxy Statement to the shareholders of the Company. Prior to the date of approval of the Merger by the Company's shareholders, each of the Company, Parent and Merger Subsidiary shall correct promptly any information provided by it to be used specifically in the Proxy Statement and the Transaction Statement that shall have become false or misleading in any material respect and the Company shall take all steps necessary to file with the SEC any amendment to the Proxy Statement and the Transaction Statement so as to correct the same and to cause the amended Proxy Statement and 21 Transaction Statement to be disseminated to the Shareholders of the Company, in each case to the extent required by applicable law. Section 5.09. Public Announcements. Parent and the Company will consult -------------------- with each other before issuing any press release or making any public statement with respect to this Agreement and the transactions contemplated hereby and, except as may be required by applicable law, will not issue any such press release or make any such public statement prior to such consultation. Section 5.10. Expenses and Fee. (a) All costs and expenses incurred in ---------------- connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, except that those expenses incurred in connection with printing and filing the Proxy Statement and the Transaction Statement shall be shared equally by Parent and the Company. (b) The Company agrees to pay to Parent a fee equal to $250,000 within two (2) business days of the termination of this Agreement if: (i) the Company terminates this Agreement pursuant to clause (v) of Section 7.01; (ii) Parent terminates this Agreement pursuant to clause (vi) of Section 7.01; or (iii) this Agreement is terminated for any reason at a time at which Parent was not in material breach of its representations, warranties, covenants and agreements contained in this Agreement and was entitled to terminate this Agreement pursuant to clause (iv) or (vii) of Section 7.01; and provided that, in the event of the foregoing: (A) prior to the time of the Special Meeting, a proposal by a third party relating to an Acquisition Transaction had been publicly proposed or publicly announced; and (B) on or prior to the 12 month anniversary of the termination of this Agreement, the Company or any of its subsidiaries or affiliates enters into an agreement or letter of intent (or resolves or announces an intention to do) with respect to an Acquisition Transaction involving a person, entity or group if such person, entity, group (or any member of such group, or any affiliate of any of the foregoing) made a proposal with respect to an Acquisition Transaction on or after the date hereof and prior to the Special Meeting and such Acquisition Transaction is consummated. (c) Parent agrees to pay the Company a fee equal to $400,000 if Parent fails to consummate the transactions contemplated by this Agreement on or before 12:00 noon, Eastern Time, on or before December 31, 2001 notwithstanding the satisfaction of the conditions to Parent's obligation to consummate the transactions contemplated by this Agreement on or before December 31, 2001 (not including conditions whose failure to be satisfied is the result of a breach of a representation, warranty or covenant of Parent or Merger Subsidiary hereunder) Section 5.11. Agreement to Cooperate. (iv) Subject to the terms and ---------------------- conditions of this Agreement, including Section 5.03, each of the parties hereto shall use all best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations including, but not limited to, the HSR Act and 22 the Gaming Laws, to consummate and make effective the transactions contemplated by this Agreement, including using its best efforts to obtain all necessary or appropriate waivers, consents or approvals of third parties required in order to preserve material contractual relationships of Parent and the Company and their respective subsidiaries, all necessary or appropriate waivers, consents and approvals to effect all necessary registrations, filings and submissions and to lift any injunction or other legal bar to the Merger (and, in that case, to proceed with the Merger as expeditiously as possible). In addition, subject to the terms and conditions herein provided and subject to the fiduciary duties of the respective boards of directors of the Company and Parent, none of the parties hereto shall knowingly take or cause to be taken any action which would reasonably be expected to delay materially or prevent consummation of the Merger. (b) Without limitation of the foregoing, each of Parent and the Company undertakes and agrees to file as soon as practicable any Notification and Report Form required under the HSR Act with the United States Federal Trade Commission (the "FTC") and the Antitrust Division of the United States Department of Justice (the "Antitrust Division") and to make such filings and apply for such approvals and consents as are required under the Gaming Laws. Each of Parent and the Company shall (i) respond as promptly as practicable to any inquiries received from the FTC or the Antitrust Division or any authority enforcing applicable Gaming Laws for additional information or documentation and to all inquiries and requests received from any State Attorney General or other governmental authority in connection with antitrust matters or Gaming Laws, and (ii) not extend any waiting period under the HSR Act or enter into any agreement with the FTC or the Antitrust Division not to consummate the transactions contemplated by this Agreement, except with the prior written consent of the other Parties hereto. Each party shall (i) promptly notify the other party of any written communication to that party from the FTC, the Antitrust Division, any State Attorney General or any other governmental entity and, subject to applicable law, permit the other party to review in advance any proposed written communication to any of the foregoing; (ii) not agree to participate in any substantive meeting or discussion with any governmental authority in respect of any filings, investigation or inquiry concerning this Agreement or the Merger unless it consults with the other party in advance and, to the extent permitted by such governmental authority, gives the other party the opportunity to attend and participate thereat; and (iii) furnish the other party with copies of all correspondence, filings, and communications (and memoranda setting forth the substance thereof) between them and their affiliates and their respective representatives on the one hand, and any government or regulatory authority or members or their respective staffs on the other hand, with respect to this Agreement and the Merger. Section 5.12. Directors' and Officers' Indemnification. (a) The ---------------------------------------- indemnification provisions of the articles of incorporation and bylaws of the Company as in effect at the Effective Time shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would adversely affect the rights thereunder of individuals who at or immediately prior to, the Effective Time were directors, officers, employees or agents of the Company. (b) Without limiting Section 5.11(a), after the Effective Time, the Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, to the fullest extent permitted under applicable law, indemnify and hold harmless, each present and former director, officer, employee and agent of the Company or any of its subsidiaries (each, together with such person's heirs, executors or administrators, an "Indemnified Party" and collectively, the 23 "Indemnified Parties") against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any actual or threatened claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative (collectively, "Costs and Expenses"), which, in whole or in part, arises out of, relates to or is in connection with (i) any action or omission occurring or alleged to occur prior to the Effective Time (including, without limitation, acts or omissions in connection with such persons serving as an officer, director or other fiduciary of any entity if such service was at the request or for the benefit of the Company), or (ii) the Merger and the other transactions contemplated by this Agreement or arising out of or pertaining to the transactions contemplated by this Agreement or the events and developments between Parent and the Company leading up to this Agreement. Any Indemnified Party hereunder will (1) give prompt notice to the Surviving Corporation of any claim which arises from or after the Effective Time with respect to which it seeks indemnification, and (2) permit the Surviving Corporation to assume the defense of such claim with counsel reasonably satisfactory to a majority of the Indemnified Parties. In connection with the selection of counsel to represent the Indemnified Parties in connection with clause (2) above, the Surviving Corporation shall propose counsel to represent the Indemnified Parties. The applicable Indemnified Parties shall have the right to approve such counsel, but such approval shall not be unreasonably withheld. If the proposed counsel is not approved, the Surviving Corporation shall continue to propose counsel until counsel for the Surviving Corporation is approved by the applicable Indemnified Parties. Any Indemnified Party shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless: (x) the Surviving Corporation has agreed, in writing, to pay such fees or expenses; (y) the Indemnifying Party shall have failed to assume the defense of such claim after the receipt of notice from the Indemnified Party as required above and failed to employ counsel reasonably satisfactory to a majority of the Indemnified Parties, or (z) based upon advice of counsel to such Indemnified Party and concurrence therewith by counsel for the group of Indemnified Parties in such matter, there shall be one or more defenses available to such Indemnified Party that are not available to the Surviving Corporation or there shall exist conflicts of interest between such Indemnified Party and the Surviving Corporation and/or the other Indemnified Parties (in which case, if the Indemnified Party notifies the Surviving Corporation in writing that such Indemnified Party elects to employ separate counsel at the expense of the Surviving Corporation, the Surviving Corporation shall not have the right to assume the defense of such claim on behalf of such Indemnified Party), in each of which events the reasonable fees and expenses of such counsel (which counsel shall be reasonably acceptable to the Surviving Corporation) shall be at the expense of the Surviving Corporation. (c) In the event the Surviving Corporation or Parent or any of their successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers all or substantially all of its properties and assets to any person, then and in each such case, proper provisions shall be made so that the successors and assigns of the Surviving Corporation or Parent shall assume the obligations of the Surviving Corporation or the Parent, as the case may be, set forth in this Section 5.11. (d) For a period of six years after the Effective Time, Parent shall cause to be maintained or shall cause the Surviving Corporation to maintain in effect the current policies of directors' and officers' liability insurance maintained by the Company and its subsidiaries (the "Current Insurance") (provided that Parent may substitute therefor policies of at least the same 24 coverage and amounts containing terms and conditions that are no less advantageous to the Indemnified Parties, and which coverages and amounts shall be no less than the coverages and amounts provided at that time for Parent's directors and officers) with respect to matters arising on or before the Effective Time. Parent and the Surviving Corporation shall not be required to expend in any year an amount in excess of 125% of the annual aggregate premiums currently paid by the Company for such insurance; provided that, if the annual premiums of such insurance coverage exceed such amount, Parent and the Surviving Corporation shall be obligated to obtain a policy with the best coverage available, in the reasonable judgment of the Parent's board of directors, for a cost not exceeding such amount. Parent shall also cause to be maintained or shall cause the Surviving Corporation to maintain in effect such additional directors' and officers' liability insurance with respect to liability arising out of this Agreement and the transactions contemplated hereby in such amount as the Parent and the Company shall agree prior to the Effective Time (the "Additional Insurance"). Parent and the Surviving Corporation shall not be required to expend in any year an amount in excess of $30,000 for the Additional Insurance. (e) The indemnification rights of the Indemnified Parties granted under (i) this Agreement, (ii) the articles of incorporation and bylaws of the Surviving Corporation, as amended, and (iii) the Virginia Act are the only indemnification rights available to the Indemnified Parties and supercede any other rights to indemnification under other agreements if any. The provisions of this Section 5.11 shall survive the consummation of the Merger and expressly are intended to benefit each of the Indemnified Parties. (f) Parent hereby fully and unconditionally guarantees the performance of the Surviving Corporation's obligations under Sections 5.11(a)-(c). This guaranty is a guaranty of payment and not performance. Section 5.13. Financing. As a condition precedent to the Company's --------- obligation to mail the Proxy Statement to the Company's stockholders in accordance with Section 5.07 of this Agreement, Parent shall deliver to the Company an executed, written "highly confident" letter from U.S. Bancorp Libra or one or more similar lending institutions (each, a "Letter") that it can arrange the Financing Arrangement, which shall include, in the aggregate, financing sufficient to fund the consummation of the transactions contemplated by this Agreement, including, without limitation, the Merger, and to satisfy all other costs and expenses arising in connection with this Agreement. Parent shall use its reasonable efforts to consummate the Financing on terms and conditions consistent with the Letters or such other Financing Arrangement on terms as shall be reasonably satisfactory to Parent, on or before the Closing Date; but reasonable efforts of Parent as used in this Section 5.12 shall in no event require Parent to agree to financing terms materially more adverse to Parent than those provided for in the Letters. Parent shall use its reasonable efforts to obtain the cash proceeds of the Financing Arrangement prior to the Closing Date. Parent shall keep the Company informed about the status of the Financing Arrangement, including, but not limited to, providing copies of financing documents and informing the Company of the termination of any Letter. Section 5.14. Funding of Continuing Operations (a) Jacobs shall provide to -------------------------------- the Company up to $1,000,000 in working capital through December 31, 2001, which shall be made available to the Company upon the Company's reasonable request and of which a maximum of $600,000 shall be cash and the balance of which, not to exceed $400,000, shall be in the form of forgiveness of fees and expenses payable to Jacobs and/or his affiliates as Jacobs shall determine in his sole discretion. Such working capital shall be provided to the Company in such combination of equity or debt as determined by Jacobs in his sole discretion and, if provided as 25 debt, shall be on the terms incurred by Jacobs, if applicable, or on terms comparable to those of other loans by Jacobs or his affiliates to the Company. (b) Until the Closing or earlier rightful termination of this Agreement, Jacobs shall not terminate or cause to be terminated the Management Agreement dated as of February 7, 2001 by and among Colonial Holdings Management, Inc., Jalou, LLC and Jalou II, Inc., except upon such grounds as may constitute cause for termination pursuant thereto or under applicable law or upon the expiration of the term of such agreements (and regardless of whether such expiration requires notice to the Company of termination or non-renewal). ARTICLE VI CONDITIONS TO THE MERGER Section 6.01. Conditions to the Obligations of Each Party. The obligations ------------------------------------------- of the Company, Parent and Merger Subsidiary to consummate the Merger are subject to the satisfaction of the following conditions: (a) this Agreement and the Merger shall have been adopted by the requisite vote of the shareholders of the Company in accordance with the Virginia Act (the "Company Shareholders' Approval"); (b) none of the parties hereto shall be subject to any order or injunction of any governmental authority of competent jurisdiction that prohibits the consummation of the Merger. In the event any such order or injunction shall have been issued, each party agrees to use its reasonable best efforts to have any such order overturned or injunction lifted; (c) the waiting period applicable to consummation of the Merger under the HSR Act, if applicable, shall have expired or been terminated; (d) the Company Proxy Statement on Schedule 14A and the Transaction Statement shall be filed in definitive form with the SEC and shall not be the subject of any stop order or similar proceeding; and (e) Update of Fairness Opinion. At the Effective Time, the Company -------------------------- Financial Adviser shall have reaffirmed orally or in writing the fairness opinion previously prepared and delivered by it to the Special Committee of the Board of Directors of the Company. Section 6.02. Conditions to Obligation of the Company to Effect the Merger. ------------------------------------------------------------ Unless waived by the Company, the obligation of the Company to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following additional conditions: (a) Parent and Merger Subsidiary shall have performed in all material respects their agreements contained in this Agreement required to be performed on or prior to the Effective Time and the representations and warranties of Parent and Merger Subsidiary contained in this Agreement shall be true and correct on and as of the Effective Time as if made at and as of such date (except to the extent that such representations and warranties speak as of 26 an earlier date, and which need be true and correct as of such earlier date) except for such failures to perform or to be true and correct that would not have a Parent Material Adverse Effect, and the Company shall have received a certificate of the chief executive officer or the chief financial officer of Parent to that effect; (b) all Parent Statutory Approvals and Company Statutory Approvals required to be obtained in order to permit consummation of the Merger under applicable law shall have been obtained, except for any such Parent Statutory Approvals or Company Statutory Approvals the unavailability of which would not, individually or in the aggregate (i) have a Company Material Adverse Effect after the Effective Time, or (ii) result in the Company or its subsidiaries failing to meet the standards for licensing, suitability or character under any Gaming Laws relating to the conduct of Parent's or the Company's business which (after taking into account the anticipated impact of such failure to so meet such standards on other authorities) would have a Company Material Adverse Effect (after giving effect to the Merger); (c) Consents. The Parent shall have obtained the consent or approval -------- to the transactions contemplated by this Agreement of each person from whom such consent or approval is required under any loan or credit agreement, note, mortgage, indenture, lease or other agreement or instrument to which the Parent is a party or by which it is bound except where the failure to obtain such consents or approvals would not, in the reasonable opinion of the Company, individually or in the aggregate, have a Parent Material Adverse Effect, or materially affect the consummation of the transactions contemplated hereby; and (d) Payment of Exchange Funds. The Parent shall have obtained and ------------------------- segregated for payment to the Company sufficient cash funds as required by the terms hereof, to pay in full at the Effective Time, or promptly thereafter, to the holders of the Common Stock, the Exchange Funds and shall have deposited the Exchange Funds with the Disbursing Agent pursuant to Section 1.05 hereof. Section 6.03. Conditions to Obligations of Parent and Subsidiary to Effect ------------------------------------------------------------ the Merger. Unless waived by Parent and Merger Subsidiary, the obligations of - ---------- Parent and Merger Subsidiary to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the additional following conditions: (a) the Company shall have performed in all material respects its agreements contained in this Agreement required to be performed on or prior to the Effective Time and the representations and warranties of the Company contained in this Agreement shall be true and correct on and as of the Effective Time as if made at and as of such date (except to the extent that such representations and warranties speak as of an earlier date), except for such failures to perform and to be true and correct that would not have a Company Material Adverse Effect, and Parent shall have received a certificate of the chief executive officer or the chief financial officer of the Company to that effect; (b) all Parent Statutory Approvals and Company Statutory Approvals required to be obtained in order to permit consummation of the Merger under applicable law shall have been obtained, except for any such Parent Statutory Approvals or Company Statutory Approvals whose unavailability would not (i) have a Parent Material Adverse Effect, or (ii) result in Parent or its subsidiaries failing to meet the standards for licensing, suitability or character under any Gaming Laws relating to the conduct of Parent's or the Company's business which (after taking into account the anticipated impact of such failure to so meet such standards on other authorities) 27 would reasonably be expected to have a Parent Material Adverse Effect (after giving effect to the Merger); (c) Consents. The Company shall have obtained the consent or approval -------- to the transactions contemplated by this Agreement of each person from whom such consent or approval is required under any loan or credit agreement, note, mortgage, indenture, lease or other agreement or instrument to which the Company is a party or by which it is bound except where the failure to obtain such consents or approvals would not, in the reasonable opinion of the Parent, individually or in the aggregate, have a Company Material Adverse Effect, or materially affect the consummation of the transactions contemplated hereby; and (d) shareholders of the Company owning not more than ten percent (10%) in the aggregate of the Common Stock shall have exercised dissenter's rights pursuant to Article 15 of the Virginia Act. ARTICLE VII TERMINATION This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (notwithstanding any approval of this Agreement by the shareholders of the Company): (i) by mutual written consent of the Company and Parent; (ii) by either the Company or Parent, if the Merger has not been consummated by December 31, 2001 provided that the right to terminate this Agreement under this clause shall not be available to any party whose failure to fulfill any of its obligations under this Agreement has been the cause of or resulted in the failure to consummate the Merger by such date; (iii) by either the Company or Parent if any judgment, injunction, order or decree of a court or governmental agency or authority of competent jurisdiction shall restrain or prohibit the consummation of the Merger, and such judgment, injunction, order or decree shall become final and nonappealable and was not entered at the request of the terminating party; (iv) by either the Company or Parent, if (x) there has been a breach by the other party of any representation or warranty contained in this Agreement which would reasonably be expected to have a Company Material Adverse Effect or a Parent Material Adverse Effect, as applicable, or prevent or delay the consummation of the Merger beyond December 31, 2001, and which has not been cured in all material respects within 30 days after written notice of such breach by the terminating party, or (y) there has been a breach of any of the covenants or agreements set forth in this Agreement on the part of the other party, which would reasonably be expected to have a Parent Material Adverse Effect or a Company Material Adverse Effect, as applicable, or prevent or delay the consummation of the Merger beyond December 31, 2001, and which breach is not curable or, if 28 curable, is not cured within 30 days after written notice of such breach is given by the terminating party to the other party; (v) by the Company if, prior to receipt of the Company Shareholders' Approval, the Company receives a Superior Proposal, resolves to accept such Superior Proposal, and shall have given Parent two days' prior written notice of its intention to terminate pursuant to this provision; provided, however, that such termination shall not be effective until such time as the payment required by Section 5.09(b) shall have been received by Parent; (vi) by the Parent, if the board of directors of the Company shall have failed to recommend, or shall have withdrawn, modified or amended in any material respect its approval or recommendation of the Merger or shall have resolved to do any of the foregoing, or shall have recommended another Acquisition Proposal or if the Board of Directors of the Company shall have resolved to accept a Superior Proposal or shall have recommended to the shareholders of the Company that they tender their shares in a tender or an exchange offer commenced by a third party (excluding any affiliate of Parent or any group of which any affiliate of Parent is a member); or (vii) by Parent or the Company if the shareholders of the Company fail to approve the Merger at a duly held meeting of shareholders called for such purpose (including any adjournment or postponement thereof); ARTICLE VIII MISCELLANEOUS Section 8.01. Effect of Termination. In the event of termination of this --------------------- Agreement by either Parent or the Company pursuant to Article VII, this Agreement shall forthwith become void and there shall be no liability or further obligation on the part of the Company, Parent, Merger Subsidiary or their respective officers or directors (except as set forth in this Section 8.01, in the second sentence of Section 5.04 and in Section 5.09, all of which shall survive the termination). Nothing in this Section 8.01 shall relieve any party from liability for any breach of any representation, warranty, covenant or agreement of such party contained in this Agreement, except that if the fee provided for in Section 5.09(b) or the fee provided for in Section 5.09(c) becomes payable in accordance therewith, that fee will constitute the exclusive remedy of and the sole amount payable to the party entitled thereto with respect to the event or circumstances in connection with which that fee becomes so payable. Section 8.02. Nonsurvival of Representations and Warranties. No --------------------------------------------- representation, warranty or agreement in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Merger, and after effectiveness of the Merger neither the Company, Parent, Merger Subsidiary nor any of their respective officers or directors shall have any further obligation with respect thereto except for the agreements contained in Articles I, II and VIII and Section 5.11. Section 8.03. Notices. All notices and other communications hereunder shall ------- be in writing and shall be considered given upon receipt if delivered personally, mailed by registered or certified mail (return receipt requested) or sent via facsimile to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): If to the Company: Colonial Holdings, Inc. 10515 Colonial Downs Parkway New Kent, Virginia 23124 With a copy to: Ruben & Aronson, LLP 3299 K Street, N.W. Suite 403 Washington, D.C. 20007 Tel: 202-965-3600 Fax: 202-965-3700 Attn: Louis M. Aronson and Hirschler, Fleicher, Weinberg, Cox & Allen 701 E. Byrd Street 15/th/ Floor Richmond, Virginia 23219 Tel: 804-771-9500 Fax: 804-644-0957 Attn: James L. Weinberg If to Parent or Merger Subsidiary: Jeffrey P. Jacobs Jacobs Investments 1001 North U.S. Highway One #710 Jupiter, Florida 33477 Tel: 561-575-4006 Fax: 561-575-1526 with a copy to: Baker & Hostetler LLP 3200 National City Center 1900 East Ninth Street Cleveland, Ohio 44114-3485 Tel: 216/861-7553 Fax: 216/696-0740 Attn: Edward G. Ptaszek, Jr. 30 Section 8.04. Interpretation. The headings contained in this Agreement are -------------- for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement, unless a contrary intention appears, (i) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision, (ii) "knowledge" shall mean actual knowledge of the executive officers of the Company or Parent, as applicable, and (iii) reference to any Article or Section means such Article or Section hereof. Section 8.05. Miscellaneous. This Agreement (including the documents and ------------- instruments referred to herein) shall not be assigned by operation of law or otherwise except that Merger Subsidiary may assign its obligations under this Agreement to any other wholly-owned subsidiary of Parent subject to the terms of this Agreement, in which case such assignee shall become the "Merger Subsidiary" for all purposes of this Agreement. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF VIRGINIA WITHOUT GIVING EFFECT TO APPLICABLE CONFLICT OF LAWS PRINCIPLES. Section 8.06. Counterparts This Agreement may be executed in two or more ------------ counterparts, each of which shall be considered to be an original, but all of which shall constitute one and the same agreement. Section 8.07. Amendments; No Waivers. (a) Any provision of this Agreement ---------------------- may be amended or waived prior to the Effective Time if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Company, Parent and Merger Subsidiary or, in the case of a waiver, by the party against whom the waiver is to be effective; however, any waiver or amendment shall be effective against a party only if the board of directors of such party approves such waiver or amendment. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 8.08. Entire Agreement. This Agreement and the Confidentiality ---------------- Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter of this Agreement. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by either party hereto. Neither this Agreement nor any provision hereof is intended to confer upon any person other than the parties hereto any rights or remedies hereunder except for Section 5.11, which is intended for the benefit of the Company's former and present officers, directors, employees and agents, Articles I and II, which are intended for the benefit of the Company's shareholders, including holders of Options, and Section 5.06, which is intended for the benefit of the parties to the agreements or participants in the plans referred to therein. Section 8.09. Severability. If any term or other provision of this ------------ Agreement is invalid, illegal or unenforceable, all other provisions of this Agreement shall remain in full force and 31 effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Section 8.10. Specific Performance. The parties hereto agree that -------------------- irreparable damage would occur if any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedies at law or in equity. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. COLONIAL HOLDINGS, INC. /s/ Ian M. Stewart _________________________________________ Ian M. Stewart Name:____________________________________ President Title:___________________________________ GAMECO /s/ Jeffrey P. Jacobs _________________________________________ Name: Jeffrey P. Jacobs Title: President MERGER SUBSIDIARY /s/ Jeffrey P. Jacobs _________________________________________ Name: Jeffrey J. Jacobs Title: President /s/ Jeffrey P. Jacobs _________________________________________ Jeffrey P. Jacobs 32 EX-2.5 7 dex25.txt AMENDMENT TO AGREEMENT & PLAN OF MERGER 11/16/2001 Exhibit 2.5 AMENDMENT TO AGREEMENT AND PLAN OF MERGER DATED AS OF November 16, 2001 AMONG COLONIAL HOLDINGS, INC., GAMECO, INC. AND GAMECO ACQUISITION, INC. AMENDMENT TO AGREEMENT AND PLAN OF MERGER This AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is entered into as of November 16, 2001 by and among Gameco, Inc., a Delaware corporation ("Parent"), Gameco Acquisition, Inc., a Virginia corporation and wholly-owned subsidiary of Parent ("Merger Subsidiary"), Colonial Holdings, Inc., a Virginia corporation (the "Company") and, solely with respect to Section 5.13, Jeffrey P. Jacobs, an individual resident of Florida. Parent, Merger Subsidiary and the Company are referred to collectively herein as the "Parties." WHEREAS, the Parties are parties to an Agreement and Plan of Merger dated as of June 11, 2001 (the "Merger Agreement"), which permits any party thereto to terminate the Merger Agreement under specified circumstances if the transactions provided for therein are not consummated on or before December 31, 2001; WHEREAS, Parent and Merger Subsidiary have requested an extension of time until no later than April 1, 2002 within which to consummate the transaction; and WHEREAS, in light of the Parties' continuing belief that consummation of the transactions contemplated by the Merger Agreement is in the best interests of the Parties and the Company's shareholders, the Parties desire to extend the date by which the transaction may be consummated, subject to the terms and conditions of this Amendment; NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: Section 1. Parent and Merger Subsidiary Representations and Warranties. ----------------------------------------------------------- Parent and Merger Subsidiary jointly and severally represent and warrant to the Company that (a) each of Parent and Merger Subsidiary has full corporate power and authority to enter into this Amendment, (b) this Amendment has been approved and adopted by the Boards of Directors of Parent and Merger Subsidiary, and Parent, as the sole stockholder of Merger Subsidiary, and no other corporate or similar proceeding on the part of Parent or Merger Subsidiary is necessary to authorize the execution and delivery of this Amendment, and (c) this Amendment has been duly executed and delivered by each of Parent and Merger Subsidiary and, assuming the due authorization, execution and delivery hereof by the Company, constitutes a valid and legally binding agreement of each of Parent and Merger Subsidiary enforceable against each of them in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally, and (ii) general equitable principles. Section 2. Company Representations and Warranties. The Company -------------------------------------- represents and warrants to Parent and Merger Subsidiary that (a) the Company has the requisite corporate power and authority to enter into this Amendment, (b) this Amendment has been approved and adopted by the Board of Directors of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Amendment, and (c) this Amendment has been duly executed and delivered by the Company, and, assuming the due authorization, execution and delivery hereof by Parent and Merger Subsidiary, constitutes a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally, and (ii) general equitable principles. Section 3. Amendment. --------- (a) The parties hereby amend certain sections of the Merger Agreement as follows: (i) by deleting the phrase "equal to $1.10" in section 1.04(b) of the Merger Agreement and inserting in lieu thereof the phrase "equal to $1.12;" (ii) by deleting the phrase "December 31, 2001" in section 1.08 of the Merger Agreement and inserting in lieu thereof the phrase "April 1, 2002;" (iii) by deleting the phrase "December 31, 2001" in section 5.10(c) of the Merger Agreement and inserting in lieu thereof the phrase "April 1, 2002;" and (iv) by deleting the phrase "December 31, 2001" in Article VII of the Merger Agreement and inserting in lieu thereof the phrase "April 1, 2002." (b) The parties hereby amend and restate section 5.14(a) of the Merger Agreement in its entirety as follows: Section 5.14. FUNDING OF CONTINUING OPERATIONS (a) Jacobs shall provide to the Company up to $1,000,000 in working capital from the date of this Agreement through December 31, 2001, which shall be made available to the Company upon the Company's reasonable request and of which a maximum of $600,000 shall be cash and the balance of which, not to exceed $400,000, shall be in the form of forgiveness of fees and expenses payable to Jacobs and/or his affiliates as Jacobs shall determine in his sole discretion. Jacobs shall provide to the Company up to $300,000 in working capital from January 1, 2002 through April 1, 2002, which shall be made available to the Company upon the Company's reasonable request and of which a maximum of $180,000 shall be cash and the balance of which, not to exceed $120,000, shall be in the form of forgiveness of fees and expenses payable to Jacobs and/or his affiliates as Jacobs shall determine in his sole discretion. Such working capital shall be provided to the Company in such combination of equity or debt as determined by Jacobs in his sole discretion and, if provided as debt, shall be on the terms incurred by Jacobs, if applicable, or on terms comparable to those of other loans by Jacobs or his affiliates to the Company. Section 4. Effect. The Merger Agreement, as amended hereby, remains in ------ full force and effect, and all references therein to the "Agreement" refer to the Merger Agreement as amended by this Amendment, except where the context requires otherwise. [Signature page to follow] -2- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. COLONIAL HOLDINGS, INC. By:________________________________________ Name:______________________________________ Title: _______________________________________ GAMECO, INC. By:____/s/ Jeffrey P. Jacobs ______________ Name: Jeffrey P. Jacobs ____________________ Title: President____________________________ GAMECO ACQUISITION, INC. By:____/s/ Jeffrey P. Jacobs _______________ Name: Jeffrey P. Jacobs ____________________ Title: President____________________________ ______/s/ Jeffrey P. Jacobs ________________ Jeffrey P. Jacobs -3- EX-2.6 8 dex26.txt AGREEMENT AND PLAN OF MERGER DATED 2/22/2002 Exhibit 2.6 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered --------- into this 22nd day of February, 2002, by and between GAMECO, INC., a Delaware corporation ("GAMECO"), and JACOBS ENTERTAINMENT, INC., an Ohio corporation ------ ("JEI"). --- RECITALS A. JEI desires to be merged into GAMECO and upon such merger to be extinguished and to have its existence as a separate entity terminated; and B. GAMECO desires to merge with JEI and to be the surviving entity following such merger. NOW, THEREFORE, in consideration of the mutual covenants, promises and representations contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. RECITALS: The foregoing recitals are incorporated herein as if fully rewritten herein. 2. MERGER: a. On the Effective Date (as hereinafter defined), pursuant to the terms and conditions contained in this Agreement: (i) JEI will be merged into GAMECO; (ii) the separate existence of JEI shall cease; (iii) GAMECO shall continue in existence; and (iv) such merger shall in all respects have the effect provided for in Sections 251, et seq. of the Delaware General Corporation Law, including, but not limited to, Section 252 of the same, as well as Sections 1701.01, et seq. of the Ohio Revised Code, including, but not limited to, Section 1701.79. b. Prior to, from and after the Effective Date, JEI and GAMECO shall take all actions as shall be necessary or appropriate in order to effectuate the merger. If at any time after the Effective Date GAMECO shall determine or be advised that any further assignments, documents, agreements, instruments, conveyances or assurances are necessary or desirable to effect the merger contemplated herein, the duly authorized officers or directors of GAMECO shall be and are hereby authorized on behalf of JEI to execute and deliver any such assignments, documents, agreements, instruments, conveyances or assurances in the name, place and stead of JEI to be wholly binding upon JEI and to do all things and take any actions necessary and proper to carry out the terms and conditions hereof. 3. TERMS OF MERGER: On the Effective Date: a. Each share of JEI common stock issued and outstanding immediately prior to the merger shall be converted into and become one (1) share of GAMECO; and each share of JEI common stock unissued or held in the treasury of JEI shall be deemed cancelled, and no shares of GAMECO shall be issued for such unissued or treasury stock. b. JEI represents and warrants that: (i) there shall exist one shareholder of JEI common stock, to-wit; Jeffrey P. Jacobs; (ii) there shall be no other shares of JEI stock issued, authorized or outstanding other than common stock; and (iii) there shall exist no options, warrants or conversion rights attached to or regarding any JEI common stock. c. JEI shall cause Jeffrey P. Jacobs to deliver certificates representing the outstanding common stock of JEI to GAMECO duly marked as "cancelled". Until delivery of the foregoing certificates, each such certificate issued prior to the Effective Date representing common shares of JEI shall be deemed and treated for all purposes, on and after the effective date, as representing one (1) share of GAMECO common stock. d. Immediately upon delivery of the certificates representing JEI common stock, GAMECO shall deliver to Jeffrey P. Jacobs a certificate for 1 share of common stock in GAMECO to be duly issued and delivered to Jeffrey P. Jacobs or his designee. 4. CERTIFICATE OF INCORPORATION AND BY-LAWS: From and after the Effective Date and until thereafter amended or modified by law, the Certificate of Incorporation and By-laws of GAMECO, as in effect immediately preceding the Effective Date, shall be and remain the Certificate of Incorporation and By-Laws of the surviving corporation: GAMECO. 5. DIRECTORS AND OFFICERS: The persons who are the duly elected and appointed directors and officers of GAMECO immediately preceding the merger shall continue as the directors and officers of GAMECO following the merger and shall hold their respective offices as provided in the Certificate of Incorporation and By-laws of GAMECO. 6. STOCKHOLDER APPROVAL, EFFECTIVE DATE: a. By their signatures below, the undersigned, being all of the shareholders and directors of GAMECO and JEI, respectively, do herewith approve and adopt this Agreement for and on behalf of themselves, individually, and on behalf of their respective corporations. b. The undersigned shareholders and directors do herewith authorize Jeffrey P. Jacobs, as a director and president of both GAMECO and JEI, to execute this Agreement on behalf of each of GAMECO and JEI, individually, and to further execute the certificates of merger, attached hereto as Exhibits A and B, on behalf of each of GAMECO and JEI (collectively "Certificates"). ------------ c. The undersigned shareholders and directors, by their signatures hereon, do herewith authorize Jeffrey P. Jacobs, as a director and president of both GAMECO and JEI, to execute such additional documents and instruments as may be necessary, in his sole discretion, to implement and carry out the merger contemplated by this Agreement and to do and take all such other actions as may be necessary to carry out the other terms and conditions of this Agreement. d. The undersigned shareholders and directors agree that any third party may rely upon the representations contained in this Section 6 without further action of either GAMECO or JEI and that the power and authority granted herein shall remain in full force and effect notwithstanding the death or incapacitation of any signatory hereto. e. The undersigned do herewith waive any requirements of notice and a meeting prior to the effectiveness of the merger contemplated herein. f. The "Effective Date", as used in this Agreement, shall be the 22nd day of February, 2002. g. Upon or following the Effective Date, as shall be appropriate in his sole judgment, Jeffrey P. Jacobs shall cause the Certificates to be duly executed and filed with the appropriate state officials. h. The directors of each of GAMECO and JEI may abandon this Agreement prior to the Effective Date, in writing, without the approval of the undersigned shareholders. 7. CONSENT TO SERVICE AND IRREVOCABLE APPOINTMENT OF STATUTORY AGENT: GAMECO herewith consents to be sued and served with process in the State of Ohio. Further, subject to Section 8 below, GAMECO does herewith irrevocably appoint the Secretary of State for the State of Ohio as its agent to accept service of process in any proceeding in the State of Ohio if: (a) the agent appointed pursuant to Section 8 below cannot be found; (b) GAMECO fails to designate another agent when required to do so; or (c) GAMECO's license or registration to do business in Ohio expires or is canceled. 8. APPLICATION OF GAMECO TO TRANSACT BUSINESS WITHIN THE STATE OF OHIO: On the Effective Date, GAMECO shall, as part of its merger certificate, make application to conduct business as a foreign corporation within the State of Ohio. GAMECO does herewith appoint: HL Statutory Agent, Inc. 3300 BP Tower 200 Public Square Cleveland, Ohio 44114 to serve as its statutory agent for the service of any process, notice or demand within the State of Ohio. 9. ADDRESS OF SURVIVING CORPORATION: The address, in the State of Delaware, of GAMECO following the Effective Date shall be: GAMECO, INC., The Corporation Trust Center 1209 Orange Street Wilmington, Delaware 19801 and GAMECO's statutory agent at such location shall be: The Corporation Trust Company. 10. MISCELLANEOUS: a. Amendments; Waiver: This Agreement may not be modified or amended except by written instrument executed by all parties. No waiver of any provision or condition hereof shall be effective unless evidenced by an instrument, in writing, duly executed by the party granting such waiver. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof. b. Binding Effect: This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, personal representatives, executors, administrators, successors and assigns. Anything herein to the contrary notwithstanding, the parties hereto acknowledge that the foregoing is intended to be for the benefit of the parties and their respective heirs, personal representatives, executors, administrators, successors and assigns, and except for the foregoing, no third party shall be entitled to any rights, benefits or privileges with respect hereto. c. Heading: The headings used herein are for convenience of reference only and do not form a part hereof and do not in any manner modify, interpret or set forth the intentions of the parties. d. Exhibits: The exhibits attached to and referenced in this Agreement are a part of this Agreement as if fully rewritten herein. e. Entire Agreement: This Agreement and the Exhibits attached hereto contain the entire agreement between the parties with respect to the transactions and merger contemplated herein and supercede all previous written or oral negotiations, commitments or writings. f. Counterparts: This Agreement may be executed in one or more counterparts, each of which when executed and delivered shall constitute one and the same original. g. Governing Law: This Agreement shall be governed by and construed under the internal laws of the State of Delaware and where applicable the laws of the State of Ohio. In the event of a conflict between the laws of the States of Delaware and Ohio, the laws of the State of Delaware shall be controlling. IN WITNESS WHEREOF, the parties have caused their authorized representatives to execute this Agreement as of the date first written above. Witnesses: "GAMECO" GAMECO, INC., a Delaware corporation ___/s/ Linda B. Boschen_____________ By:___/s/ Jeffrey P. Jacobs____________ Printed Name:__Linda B. Boschen_____ Jeffrey P. Jacobs, President ___/s/ Janet Bonneau________________ Printed Name:__ Janet Bonneau ______ As to Sections 4, 5 and 6: by its directors: ___/s/ Linda B. Boschen_____________ By:___/s/ Jeffrey P. Jacobs____________ Printed Name:__Linda B. Boschen_____ Jeffrey P. Jacobs, Director ___/s/ Janet Bonneau________________ Printed Name:__ Janet Bonneau ______ and: __/s/ Charla J. Clinage_____________ __/s/ Richard E. Jacobs _____ Printed Name:__ Charla J. Clinage __ Richard E. Jacobs, Director ____________________________________ Printed Name:_______________________ and by its shareholders: ___/s/ Linda B. Boschen_____________ By:___/s/ Jeffrey P. Jacobs____________ Printed Name:__Linda B. Boschen_____ Jeffrey P. Jacobs ___/s/ Janet Bonneau________________ Printed Name:_ Janet Bonneau _______ The Richard E. Jacobs Revocable Living Trust, dated April 23, 1987 __/s/ Charla J. Clinage_____________ By:__/s/ Richard E. Jacobs_____________ Printed Name:_ Charla J. Clinage ___ Richard E. Jacobs, Trustee ____________________________________ Printed Name:_______________________ "JEI" Jacobs Entertainment, Inc., an Ohio corporation ___/s/ Linda B. Boschen_____________ By:___/s/ Jeffrey P. Jacobs____________ Printed Name:__Linda B. Boschen_____ Jeffrey P. Jacobs, President ___/s/ Janet Bonneau________________ Printed Name:_ Janet Bonneau _______ As to Sections 4, 5 and 6: by its sole director: ___/s/ Linda B. Boschen_____________ By:___/s/ Jeffrey P. Jacobs____________ Printed Name:__Linda B. Boschen_____ Jeffrey P. Jacobs, Director ___/s/ Janet Bonneau________________ Printed Name:_ Janet Bonneau _______ and by its shareholder: ___/s/ Linda B. Boschen_____________ By:___/s/ Jeffrey P. Jacobs____________ Printed Name:__Linda B. Boschen_____ Jeffrey P. Jacobs STATE OF _Florida_______) ) ss. COUNTY OF_Palm Beach____) BEFORE ME a notary public in and for the aforesaid County and State, did personally appear JEFFREY P. JACOBS, who did execute the foregoing Agreement and Plan of Merger for himself individually, and as: (i) the President, Director and a shareholder of Gameco, Inc., a Delaware corporation; and (ii) the President, Director and shareholder of Jacobs Entertainment, Inc., an Ohio corporation, and did acknowledge that such act was his free act and deed, individually, and as such President, Director and shareholder of each of Gameco, Inc. and Jacobs Entertainment, Inc. In witness whereof, I have hereunto subscribed my name this 18th day of February, 2002, at the City of Jupiter, State of Florida. __ Linda B. Boschen_______________ Notary Public STATE OF _Ohio__________) ) ss. COUNTY OF_Cuyahoga______) BEFORE ME a notary public in and for the aforesaid County and State, did personally appear RICHARD E. JACOBS, who did execute the foregoing Agreement and Plan of Merger for himself as Trustee of the Richard E. Jacobs Revocable Living Trust, dated April 23, 1987, and individually, and did acknowledge that such act was his free act and deed, individually, and as such Trustee. In witness whereof, I have hereunto subscribed my name this 20th day of February, 2002, at the City of Cleveland, State of Ohio. __Linda K. Moran____________ Notary Public EXHIBIT A [Certificate of Merger - Delaware] CERTIFICATE OF OWNERSHIP AND MERGER [Pursuant to Section 252 of the Delaware General Corporation Law] GAMECO, INC., a Delaware corporation (the "Corporation"), does hereby certify: FIRST: That the Corporation was incorporated and duly organized pursuant to the General Corporation Law of the State of Delaware. SECOND: That Jacobs Entertainment, Inc. ("JEI") was incorporated and duly organized pursuant to the Revised Code of the State of Ohio. THIRD: That the Corporation shall be the surviving corporation and that its duly registered name is: GAMECO, INC. FOURTH: That an Agreement and Plan of Merger (the "Agreement") has been approved, adopted, certified, executed and acknowledged by each of the Corporation and JEI in accordance with Section 252 of the General Corporation Law of the State of Delaware. FIFTH: That the Agreement is on file at the offices of the Corporation, within the State of Delaware and located at: The Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. SIXTH: That a copy of the Agreement will be furnished by the Corporation upon request by and without cost to any stockholder of JEI. SEVENTH: That prior to the effective date of the merger, as defined in the Agreement, the authorized capital stock of JEI was EIGHT HUNDRED FIFTY (850) shares of common stock each being without par value. IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its duly authorized president, this __ day of February, 2002. GAMECO, INC., a Delaware corporation By:_/s/ Jeffrey P. Jacobs _______ Jeffrey P. Jacobs, President EXHIBIT B [Certificate of Merger - Ohio] EX-3.1 9 dex31.txt CERTIFICATE OF INCORPORATION OF GAMECO, INC. Exhibit 3.1 CERTIFICATE OF INCORPORATION OF GAMECO, INC. FIRST: The name of the Corporation is Gameco, Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 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. THIRD: The nature of the business or purposes to be conducted or promoted are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of stock that the Corporation shall have authority to issue is One Thousand Five Hundred (1,500) shares, all of which shall be Common Stock of the par value of $.01 per share. FIFTH: The name and mailing address of the sole incorporator is as follows: Name Mailing Address ---- --------------- Emanuel J. Cotronakis c/o Baker & Hostetler LLP 3200 National City Center 1900 East 9/th/ Street Cleveland, OH 44114 SIXTH: The Board of Directors is authorized to make, alter or repeal the By-Laws of the Corporation. SEVENTH: Any one or more directors may be removed, with or without cause, by the vote or written consent of the holders of a majority of the issued and outstanding shares of stock of the Corporation entitled to be voted at an election of directors. EIGHTH: Meetings of stockholders shall be held at such place, within or without the State of Delaware, as may be designated by or in the manner provided in the By-Laws, or, if not so designated, at the registered office of the Corporation in the State of Delaware. Elections of directors need not be by written ballot unless and to the extent that the By-Laws so provide. NINTH: The Corporation reserves the right to amend, alter or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by statute, and all rights of stockholders herein are subject to this reservation. TENTH: To the fullest extent permitted by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended, a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. THE UNDERSIGNED, being the incorporator above named for the purposes of forming a corporation pursuant to the General Corporation Law of the State of Delaware, has signed this instrument the 17th day of April, 2001 and does thereby acknowledge that it is his act and deed and that the facts stated therein are true. /s/ Emanuel J. Cotronakis ______________________________ Emanuel J. Cotronakis Sole Incorporator Page 2 EX-3.2 10 dex32.txt BY-LAWS OF GAMECO, INC. Exhibit 3.2 BY-LAWS OF GAMECO, INC. ARTICLE I OFFICES Section 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of directors shall be held in the State of Florida at such place as may be fixed from time to time by the board of directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. The board of directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of Delaware. If so authorized, and subject to such guidelines and procedures as the board of directors may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication, participate in a meeting of stockholders and be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation. Section 2. Annual meetings of stockholders, commencing with the year 2002 shall be held in the month of April, or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting stating the place if any, date and hour of the meeting, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, shall be given to each stockholder entitled to vote at such meeting not less than five (5) nor more than ten (10) days before the date of the meeting. Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall 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. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 6. Written notice of a special meeting stating the place if any, date and hour of the meeting, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, and the purpose or purposes for which the meeting is called, shall be given not less than five (5) nor more than ten (10) days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. The holders of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 10. Unless otherwise provided in the certificate of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 11. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent 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. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Stockholders may, unless the certificate of incorporation otherwise provides, act by written consent to elect directors; provided, however, that if such consent is less than unanimous, such action by written consent may be in lieu of holding an annual meeting only if all of the directorships to which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action. A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or by a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes herein, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the corporation can determine (A) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder or proxyholder and (B) the date on which such stockholder or proxyholder or authorized persons or persons transmitted such telegram, cablegram or other electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall be delivered in accordance with Section 228 of the General Corporation Law of Delaware, to the corporation by delivery to its registered office in Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all such purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing. ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole board shall be a minimum of one and a maximum of five. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. Section 3. The business of the corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. MEETINGS OF THE BOARD OF DIRECTORS Section 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. Section 7. Special meetings of the board may be called by the president on five (5) days notice to each director, either personally or by mail or by facsimile communication; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors unless the board consists of only one director; in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director. Section 8. At all meetings of the board, two-thirds (2/3) of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing or electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Section 10. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. REMOVAL OF DIRECTORS Section 14. Unless otherwise restricted by the certificate of incorporation or by law, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors. ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by facsimile telecommunication. Notice may also be given to stockholders by a form of electronic transmission in accordance with and subject to the provisions of Section 232 of the General Corporation Law of Delaware. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to notice or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a president, a vice-president, a secretary and a treasurer. The board of directors may also choose additional vice-presidents, and one or more assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these by-laws otherwise provide. Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, one or more vice-presidents, a secretary and a treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these by-laws otherwise provide. Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. THE PRESIDENT Section 6. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the stockholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. THE VICE-PRESIDENTS Section 8. 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-presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARY Section 9. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 10. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 11. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. Section 12. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. Section 13. If required by the board of directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 14. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. ARTICLE VI CERTIFICATES FOR SHARES Section 1. The shares of the corporation shall be represented by a certificate or shall be uncertificated. Certificates shall be signed by, or in the name of the corporation by, the chairman or vice-chairman of the board of directors, or the president or a vice-president, and by the treasurer- or an assistant treasurer, or the secretary or an assistant secretary of the corporation. Section 2. Any of or all the signatures on a certificate may be 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, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. LOST CERTIFICATES Section 3. The board of directors may direct a new certificate or certificates or uncertificated shares to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates or uncertificated shares, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. TRANSFER OF STOCK Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Upon receipt of proper transfer instructions from the registered owner of uncertificated shares, such uncertificated shares shall be cancelled and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the corporation. FIXING RECORD DATE Section 5. 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 to express consent to corporate action in writing without a meeting, 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 stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. 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. REGISTERED STOCKHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. ANNUAL STATEMENT Section 3. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. CHECKS Section 4. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. FISCAL YEAR Section 5. The fiscal year of the corporation shall be fixed by resolution of the board of directors. SEAL Section 6. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. INDEMNIFICATION Section 7. The corporation shall indemnify its officers, directors, employees and agents to the extent permitted by the General Corporation Law of Delaware. ARTICLE VIII AMENDMENTS Section 1. These by-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the board of directors, when such power is conferred upon the board of directors by the certificate of incorporation, at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such special meeting. If the power to adopt, amend or repeal by-laws is conferred upon the board of directors by the certificate of incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal by-laws. EX-3.3 11 dex33.txt ARTICLES OF INCORPORATION OF BLACK HAWK Exhibit 3.3 FILED DONETTA DAVIDSON COLORADO SECRETARY OF STATE 20011079684 C $ 100.00 SECRETARY OF STATE 04-18-2001 11:21:57 ARTICLES OF INCORPORATION form 7.102.102.1 revised 11/13/2000 Filing fee: $50.00 This document must be typed or machine printed. If more space is required, continue on attached 8 1/2" x 11" sheet(s). Deliver 2 copies to: Colorado Secretary of State, Business Division. 1560 Broadway, Suite 200, Denver, CO 80202-5169 Please include a typed or machine printed, self-addressed, envelope. For filing requirements, see Sections 7-90-301 and 7-102-102, Colorado Revised Statutes For more information, see the Citizen's Guide to the Business Division on our Web site, http://www.sos.state.co.us Questions? Contact the Business Division: voice 303 894 2251, fax 303 894 2242 or e-mail sos.business@state.co.us The undersigned, acting as the incorporator of a corporation for profit pursuant to Section 7-102-102, Colorado Revised Statutes (C.R.S.), delivers these Articles of Incorporation to the Colorado Secretary of State for filing, and states as follows: 1. The entity name of the corporation is: BH Acquisition Corp. The entity name of a corporation must contain the term "corporation", "incorporated", "company", or "limited", or an abbreviation of any of these terms Section 7-90-601(3)(a), C.R.S. 2. The total number of shares that the corporation is authorized to issue is 1,000 shares of common stock. 3. The street address of the corporation's initial registered office and the name of its initial registered agent at that office are: Street Address (must be a street or other physical address in Colorado) 1675 Broadway, Denver, Colorado 80202 If mail is undeliverable to this address, ALSO include a post office box address: ; Name The Corporation Company ------------------------------------ 4. The address of the corporation's initial principal office is: 240 Main Street, Black Hawk, Colorado 80422 5. The name and address of the incorporator is: Name: Emanuel J. Cotronakis Address: 1900 East 9th Street, 3200 National City Center, Cleveland, Ohio 44114 6. The undersigned consents to appointment as the corporation's initial registered agent: Registered agent The Corporation Company By: /s/ Christen Noakes Signer's Name-printed: Christen Noakes ------------------------ (individual's signature) 7. The address to which the Secretary of State may send a copy of this document upon completion of filing (or to which the Secretary of State may return this document if filing is refused) is: The Corporation Company, 1675 Broadway, Denver, Colorado 80202 Incorporator: BH Acquisition Corp. /s/ Emanuel J. Cotronakis Signer's Name-printed: Emanuel J. Cotronakis ------------------------- (individual's signature) OPTIONAL. The electronic mail and/or Internet address for this entity is/are: e-mail Web site -------------------------- ------------------------------------- The Colorado Secretary of State may contact the following authorized person regarding this document: name --------------------------------------------------- address ------------------------------------------------------------------------ voice fax e-mail ------------------------- ---------------- ----------------------- [ILLEGIBLE] COMPUTER UPDATE COMPLETE MW For The Office use Only FILED DONETTA DAVIDSON COLORADO SECRETARY OF STATE 20011081600 C $ 75.00 SECRETARY OF STATE 04-20-2001 11:32:43 Mail to: Secretary of State Corporations Section 1560 Broadway, Suite 200 Denver, CO 80202 (303) 894-2251 MUST BE TYPED Fax (303) 894-2242 FILING FEE: $25.00 MUST SUBMIT TWO COPIES CHANGE OF NAME ARTICLES OF AMENDMENT Please include a typed TO THE self-addressed envelope ARTICLES OF INCORPORATION Pursuant to the provisions of the Colorado Business Corporation Act, the undersigned adopts the following Articles of Incorporation: FIRST: The name of the corporation is BH Acquisition Corp. SECOND: The following amendment to the Articles of Incorporation was adopted on April 19, 2001, as prescribed by the Colorado Business Corporation Act, in the manner marked with an X below: xx No shares have been issued or Directors Elected - Action by Incorporators No shares have been issued but Directors Elected - Action by Directors - --- Such amendment was adopted by the board of directors where shares have been - --- issued and shareholder action was not required. Such amendment was adopted by a vote of the shareholders. The number of - --- shares voted for the amendment was sufficient for approval. THIRD: If changing corporate name, the new name of the corporation is BH Acquisition, Inc. FOURTH: The manner, if not set forth in such amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the amendment shall be effected, is as follows: N/A If these amendments are to have a delayed effective date, please list that date: N/A (Not to exceed ninety (90) days from the date of filing) BH Acquisition Corp. Signature /s/ Emanuel J. Cotronakis ----------------------------------- Title Emanuel J. Cotronakis, Incorporator Revised 7/95 COMPUTER UPDATE COMPLETE ST FILED DONETTA DAVIDSON COLORADO SECRETARY OF STATE 20021043920 C $ 110.00 SECRETARY OF STATE 02-22-2002 11:12:18 ARTICLES OF MERGER THESE ARTICLES OF MERGER, dated as of the 22nd day of February, 2002, pursuant to Section 7-111-105 of the Colorado Business Corporation Act (the "Act"), are entered into by and among the parties named in Article FIRST below ("Parties"). FIRST: The Parties to these Articles of Merger are Gameco, Inc., a Delaware corporation ("Gameco"), BH Acquisition, Inc., a Colorado corporation ("BHA"), and Black Hawk Gaming & Development Company, Inc., a Colorado corporation (the "Company"). The Company and BHA are referred to herein collectively as the "Constituent Corporations." SECOND: The Parties have agreed to effect a merger, and the terms and conditions of the merger, the mode of carrying the same into effect, and the manner and basis of converting or exchanging the shares of issued stock of each of the Constituent Corporations into different stock or other consideration, and the manner of dealing with any issued stock of the Constituent Corporations not to be so converted or exchanged, are and shall be as set forth herein. THIRD: The Company shall be the surviving corporation under the name of Black Hawk Gaming & Development Company, Inc. (the "Surviving Corporation"). FOURTH: Following the merger, the separate existence of BHA shall cease and the Company shall continue as the Surviving Corporation and a wholly-owned subsidiary of Gameco. FIFTH: The Articles of Incorporation of the Company now in effect shall continue as the Articles of Incorporation of the Surviving Corporation with the same force and effect as if herein set forth in full; and, from and after the Effective Time (as defined in Article TWELFTH herein), and until amended as provided by law, they shall be, and may be separately certified as, the Articles of Incorporation of the Surviving Corporation. SIXTH: Immediately prior to the Effective Time the Company has an authorized capitalization of (a) 40,000,000 shares of common stock of which 4,154,400 shares are issued and outstanding; and (b) 10,000,000 shares of preferred stock of which no shares are issued and outstanding. BHA has an authorized capitalization of 1,000 shares of common stock of which 1,000 shares are issued and outstanding. SEVENTH: The manner and basis of converting or exchanging the issued stock of each of the Constituent Corporations into different stock or other consideration, and the manner of dealing with any issued stock of the Constituent Corporations not to be so converted or exchanged at the Effective Time, shall be as follows: (a) Each issued and outstanding share of the Company's common stock, par value $.001 per share ("Company Common Stock"), held by the Company as treasury stock and each issued and outstanding share of Company Common Stock owned by any subsidiary of the Company, Gameco, BHA or any other subsidiary of Gameco shall be canceled and retired and shall cease to exist, and no payment or consideration shall be made with respect thereto. (b) Each issued and outstanding share of Company Common Stock, other than shares of Company Common Stock referred to in paragraph (a) above, shall be converted into the right to receive an amount in cash, without interest, equal to $12.00 (the "Merger Consideration"). At the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration, without interest. (c) Each issued and outstanding share of capital stock or ownership interest of BHA shall be converted into one fully paid and nonassessable share of common stock, par value $.001 per share, of the Surviving Corporation. (d) Prior to the Effective Time, Gameco shall appoint a bank or trust company reasonably satisfactory to the Company to act as disbursing agent (the "Disbursing Agent") for the payment of Merger Consideration upon surrender of certificates representing the shares of Company Common Stock. Gameco will enter into a disbursing agent agreement with the Disbursing Agent, in form and substance reasonably acceptable to the Company. At or prior to the Effective Time, Gameco shall deposit or cause to be deposited with the Disbursing Agent in trust for the benefit of the Company's stockholders cash in an aggregate amount necessary to make the payments pursuant to paragraph (b) above to holders of shares of Company Common Stock (such amounts being hereinafter referred to as the "Exchange Fund"). The Disbursing Agent shall invest the Exchange Fund, as the Surviving Corporation directs, in direct obligations of the United States of America, obligations for which the full faith and credit of the United States . of America is pledged to provide for the payment of all principal and interest or commercial paper obligations receiving the highest rating from either Moody's Investors Service, Inc. or Standard & Poor's, a division of The McGraw Hill Companies, or a combination thereof, provided that, in any such case, no such instrument shall have a maturity exceeding three months. Any net profit resulting from, or interest or income produced by, such investments shall be payable to the Surviving Corporation. The Exchange Fund shall be used only as provided in the Agreement and Plan of Merger. (e) Promptly (but no later than five days) after the Effective Time, the Surviving Corporation shall cause the Disbursing Agent to mail to each person who was a record holder as of the Effective Time of an outstanding certificate or certificates which immediately prior to the Effective Time represented shares of Company Common Stock (the "Certificates"), and whose shares were converted into the right to receive Merger Consideration pursuant to paragraph (b) above, a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Disbursing Agent) and instructions for use in effecting the surrender of the Certificates in exchange for payment of the Merger Consideration. Upon surrender to the 2 Disbursing Agent of a Certificate, together with such letter of transmittal duly executed and such other documents as may be reasonably required by the Disbursing Agent, the holder of such Certificate shall be paid promptly in exchange therefor cash in an amount equal to the product of the number of shares of Company Common Stock represented by such Certificate multiplied by the Merger Consideration, and such Certificate shall forthwith be canceled. No interest will be paid or accrue on the cash payable upon the surrender of the Certificates. If payment is to be made to a person other than the person in whose name the Certificate surrendered is registered, it shall be a condition of payment that the Certificate so surrendered be properly endorsed or otherwise be in proper form for transfer and that the person requesting such payment pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered in accordance with this paragraph (e), each Certificate (other than shares of Company Common Stock referred to in paragraph (a) above) shall represent for all purposes only the right to receive the Merger Consideration in cash multiplied by the number of shares of Company Common Stock evidenced by such Certificate, without any interest thereon. (f) From and after the Effective Time, there shall be no registration of transfers of shares of Company Common Stock which were outstanding immediately prior to the Effective Time on the stock transfer books of the Surviving Corporation. From and after the Effective Time, the holders of shares of Company Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares of Company Common Stock except as otherwise provided in the Agreement and Plan of Merger or by applicable law. All cash paid upon the surrender of Certificates in accordance with the Agreement and Plan of Merger shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock previously represented by such Certificates. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, such Certificates shall be canceled and exchanged for cash as provided in the Agreement and Plan of Merger. At the close of business on the day of the Effective Time the stock ledger of the Company shall be closed. (g) At any time more than 365 days after the Effective Time, the Surviving Corporation shall be entitled to require the Disbursing Agent to deliver to it any funds which had been made available to the Disbursing Agent and not disbursed in exchange for Certificates (including, without limitation, all interest and other income received by the Disbursing Agent in respect of all such funds). Thereafter, holders of shares of Company Common Stock shall look only to the Surviving Corporation (subject to the terms of the Agreement and Plan of Merger, abandoned property, escheat and other similar laws) as general creditors thereof with respect to any Merger Consideration that may be payable, without interest, upon due surrender of the Certificates held by them. If any' Certificates shall not have been surrendered prior to five years after the Effective Time (or immediately prior to such time on which any payment in respect hereof would otherwise escheat or become the property of any governmental unit or agency), the payment in respect of such Certificates shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. Notwithstanding the foregoing, none of Gameco, the Company, the Surviving Corporation nor the Disbursing Agent shall be liable to any holder of a share of 3 Company Common Stock for any Merger Consideration in respect of such share of Company Common Stock delivered to a public official pursuant to any abandoned property, escheat, or other similar law. (h) If any Certificate has been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen, or destroyed and, if required by the Surviving Corporation, the posting by such person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against the Surviving Corporation with respect to such Certificate, the Disbursing Agent will deliver in exchange for such lost, stolen, or destroyed Certificate, the appropriate Merger Consideration with respect to the shares of Company Common Stock formerly represented by that Certificate. (i) The Surviving Corporation or the Disbursing Agent, as the case may be, may deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock such amounts as the Surviving Corporation or the Disbursing Agent, as the case may be, may be required to deduct and withhold with respect to the making of any such payment under the Internal Revenue Code of 1986, as amended, or any provision of state, local, or foreign tax law, including without limitation withholdings required in connection with payments under paragraph (j) below. To the extent withheld by the Surviving Corporation or the Disbursing Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holders of the shares of Company Common Stock in respect of which such deduction and withholding was made. (j) At the Effective Time, each unexercised option, whether or not then vested or exercisable in accordance with its terms, to purchase- shares of Company Common Stock (the "Options") previously granted by the Company or, any of its subsidiaries shall be canceled automatically and Gameco shall or shall cause the Surviving Corporation to provide the holder thereof with a lump sum cash payment equal to the product of (i) the total number of shares of Company Common Stock subject to such Option immediately prior to the Effective Time and (ii) the excess (if any) of the Merger Consideration over the exercise price per share of Company Common Stock subject to such Option. (k) Notwithstanding anything in the Agreement and Plan of Merger to the contrary, shares of Company Common Stock outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the plan of merger and who has dissented from the plan of merger in accordance with Article 113 of the Act ("Dissenting Shares") shall not be converted into the right to receive the Merger Consideration as provided in paragraph (b) above, unless and until such holder fails to perfect or withdraws or otherwise loses his right to payment under the Act. If, after the Effective Time, any such holder fails to perfect or withdraws or loses his right to such payment, such Dissenting Shares shall thereupon be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration, if any, to which such holder is entitled, without interest thereon. The Company shall give Gameco and BHA prompt notice of any notice of dissent received by Company and, prior to the Effective Time, Gameco and BHA shall have the right to participate in all negotiations and proceedings with respect to such dissents. Prior to the Effective Time, 4 Company shall not, except with the prior written consent of Gameco and BHA, make any payment with respect to, or settle or offer to settle, any such dissents. EIGHTH: The principal office of the Company and the Surviving Corporation in the State of Colorado is 240 Main Street, Black Hawk, Colorado 80422 1ocated in the County of Gilpin. NINTH: The principal office of BHA in the State of Colorado is 240 Main Street, Black Hawk, Colorado 80422 located in the County of Gilpin. TENTH: These Articles of Merger were duly advised, authorized, and approved in the manner and by the vote of the Company's shareholders required by its Articles of Incorporation and by the laws of the State of Colorado. The number of votes cast for the plan of merger by each voting group entitled to vote separately on the plan of merger was sufficient for approval by that voting group. ELEVENTH: These Articles of Merger were duly advised, authorized, and approved in the manner and by the vote of the shareholders of BHA required by its Articles of Incorporation and by the laws of the State of Colorado. The number of votes cast for the plan of merger by each voting group entitled to vote separately on the plan of merger was sufficient for approval by that voting group. TWELFTH: The merger provided for by these Articles of Merger shall become effective when these Articles of Merger are filed with the Colorado Secretary of State and the separate existence of BHA, except insofar as continued by statute, shall cease. on the date that these Articles of Merger, duly advised, approved, signed, acknowledged, sealed, and verified by BHA and Surviving Corporation as required by the laws of the State of Colorado, are filed for record with the Secretary of State of Colorado, as required by the laws of the State of Colorado (the "Effective Time"). IN WITNESS WHEREOF, Black Hawk Gaming & Development Company, Inc., BH Acquisition, Inc., and Gameco, Inc. have caused these Articles of Merger to be signed in their respective corporate names and on their behalf by their respective Presidents and witnessed or attested by their respective Secretaries as of the 22nd day of Febru1ary, 2002. ATTEST: BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. /s/ Illegible By:/s/ Stephen R. Roark - ----------------------------------- ------------------------------- Secretary Stephen R. Roark, President 5 ATTEST: BH ACQUISITION, INC. By:/s/ Jeffrey P. Jacobs - ----------------------------------- ------------------------------- Secretary Jeffrey P. Jacobs, President ATTEST: GAMECO, INC. By:/s/ Jeffrey P. Jacobs - ----------------------------------- ------------------------------- Secretary Jeffrey P. Jacobs, President 6 EX-3.4 12 dex34.txt BY-LAWS OF BH ACQUISITION CORP. Exhibit 3.4 B Y - L A W S OF BH ACQUISITION CORP. ARTICLE I OFFICES Section 1. The registered office shall be located in Denver, Colorado. Section 2. The corporation may also have offices at such other places both within and without the State of Colorado as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II ANNUAL MEETINGS OF SHAREHOLDERS Section 1. All meetings of shareholders for the election of directors shall be held in the State of Florida at such place as may be fixed from time to time by the board of directors, or such other place either within or without the State of Colorado as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Section 2. Annual meetings of shareholders, commencing with the year 2002, shall be held in the month of April, or such other date as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. ARTICLE III SPECIAL MEETINGS OF SHAREHOLDERS Section 1. Special meetings of shareholders for any purpose other than the election of directors may be held at such time and place within or without the State of Colorado as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the articles of incorporation, may be called by the president, the board of directors, or the holders of not less than one-tenth of all the shares entitled to vote at the meeting. Section 3. Written or printed notice of a special meeting stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than fifty days before the date of the meeting, either personally or by mail, by or at the direction of the president, the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. Section 4. The business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice. ARTICLE IV QUORUM AND VOTING OF STOCK Section 1. The holders of the shares of stock issued and outstanding and entitled To vote, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by statute or by the articles of incorporation. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders present in person or represented by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. Section 2. If a quorum is present, the affirmative vote of a majority of the shares of stock represented at the meeting shall be the act of the shareholders unless the vote of a greater number of shares of stock is required by law or the articles of incorporation. Section 3. Each outstanding share of stock, having voting power, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Section 4. Any action required to be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. ARTICLE V DIRECTORS Section 1. The number of directors shall be a minimum of one and a maximum of five. Directors need not be residents of the State of Colorado nor shareholders of the corporation. The directors, other than the first board of directors, shall be elected at the annual meeting of the shareholders, and each director elected shall serve until the next succeeding annual meeting and until his successor shall have been elected and qualified. The first board of directors shall hold office until the first annual meeting of shareholders. Section 2. Vacancies and newly created directorships resulting from any increase in the number of directors may be filled by a majority of the directors then in office, though less than a quorum, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify. Also, newly created directorships resulting from any increase in the number of directors may be filled by election at an annual or at a special meeting of shareholders called for that purpose. Section 3. The business affairs of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the articles of incorporation or by these by-laws directed or required to be exercised or done by the shareholders. Section 4. The directors may keep the books of the corporation, except such as are required by law to be kept within the state, outside of the State of Colorado, at such place or places as they may from time to time determine. Section 5. The board of directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise. ARTICLE VI MEETINGS OF THE BOARD OF DIRECTORS Section 1. Meetings of the board of directors, regular or special, may be held either within or without the State of Colorado. Section 2. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the shareholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or it may convene at such place and time as shall be fixed by the consent in writing of all the directors. Section 3. Regular meetings of the board of directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the board. Section 4. Special meetings of the board of directors may be called on at least two days' notice to each director, either personally or by mail or by telegram. Section 5. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. Section 6. A majority of the directors shall constitute a quorum for the transaction of business unless a greater number is required by law or by the articles of incorporation. 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 of directors, unless the act of a greater number is required by statute or by the articles of incorporation. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 7. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof. ARTICLE VII EXECUTIVE COMMITTEE Section 1. The board of directors, by resolution adopted by a majority of the number of directors fixed by the by-laws or otherwise, may designate two or more directors to constitute an executive committee, which committee, to the extent provided in such resolution, shall have and exercise all of the authority of the board of directors in the management of the corporation, except s otherwise required by law. Vacancies in the membership of the committee shall be filled by the board of directors at a regular or special meeting of the board of directors. The executive committee shall keep regular minutes of its proceedings and report the same to the board when required. ARTICLE VIII NOTICES Section 1. Whenever, under the provisions of the statutes or of the articles of incorporation or of these by-laws, notice is required to be given to any director or shareholder, it shall not be construed to mean personal notice, but such notice may be given in written , by mail, addressed to such director or share- holder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposed in the United States mail. Notice to directors may also be given by telegram. Section 2. Whenever any notice whatever is required to be given under the provisions of the statutes or under the provisions of the articles of incorporation or these by-laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whet her before or after the time stated therein, shall be deemed equivalent to the giving of such notice. - -thirds (2/3rds) of the total voting power. ARTICLE - XVII The President shall be a director of this corporation. ARTICLE - XVIII The business and affairs of this corporation shall be managed and all corporate powers thereof shall be vested in and exercised by a Board of Directors which shall be composed of not less than three (3) nor more than six (6) persons. ARTICLE - XIX The shareholder may sell any stock of this corporation without first offering it to this corporation at the book value thereof as shown by the last preceding statement of this corporation with the understanding that a current appraised value of the immovable assets of the corporation shall be used in lieu of any purchase value or depreciated value of those assets. Said offer must be made by delivery to the Secretary of this corporation against written receipt, the certificates representing said stock endorsed in blank, and written offer to sell said stock to this corporation, for cash, at the value hereinabove mentioned. This corporation shall have the right, for a period of thirty (30) days from the delivery of such offer and said certificates endorsed in blank, to the Secretary of this corporation to purchase the stock of said shareholders, for cash, at the book value thereof, as shown by the last preceding statement of this corporation, after which thirty (30) days the said shares may be sold without restriction. No sale of any stock of this corporations shall be valid and binding until and unless opportunity to purchase such shares has been given to this corporation in the manner in this Article provided; and, this right so vested in this corporation shall follow any of the stock of this corporation so sold without such opportunity being given into any hands into which it may pass. Such rights may be exercised against the holder of such stock up to thirty (30) days after such shares are tendered for transfer on the books of this corporation, and no transfer of any such shares shall be made on the books of this corporation without the written consent of all of the other record holders of stock of this corporation, during the pendency of said thirty (30) days. The right vested in this corporation to purchase the stock of any stockholder of this corporation to purchase the stock of any shareholder of this corporation desiring to sell the stock of this corporation may be waived in writing by all of the other record stockholders of this corporation at any time. No stockholder of this corporation shall ever be held responsible or liable for the contracts or faults of this corporation, nor shall any mere informality in organization have the effect of rendering this charter null and exposing stockholders to any liability. THUS DONE AND SIGNED, in multiple originals, in the Parish of Lafourche, State of Louisiana, on the day, month and year first above written, in the presence of Joynel G. Picou and Ramona R. Naquin, competent witnesses and me, --------------- ---------------- Notary, after due reading of the whole. WITNESS: INCORPORATORS: /s/ Joynel G. Picou /s/ Albert J. Waguespack, Jr. - ------------------------- ---------------------------------- ALBERT J. WAGUESPACK, JR. /s/ Cindy I. Waguespack ---------------------------------- CINDY I. WAGUESPACK /s/ John Corbin ---------------------------------- JOHN CORBIN /s/ Angela Corbin ---------------------------------- ANGELA CORBIN /s/ Carl A. Sandlin ---------------------------------- CARL A. SANDLIN /s/ Ramona R. Naquin /s/ Mary Ellen Sandlin - ------------------------- ---------------------------------- MARY ELLEN SANDLIN /s/ Daniel A. Cavell -------------------- NOTARY PUBLIC LOST CERTIFICATES Section 3. The board of directors may direct a new certificate to be issued in place of any certificate there to fore issued by the corporation alleged to have been lost or destroyed. When authorizing such issue of a new certificate, the board of directors, in its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate, to protect the corporation from any claim that may be made against it with respect to any such certificate alleged to have been lost or destroyed. TRANSFERS OF SHARES Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto, and the old certificate canceled and the transaction recorded upon the books of the corporation. FIXING THE RECORD DATE Section 5. For the purpose of determining shareholders entitled to notice of a shareholder's meeting, to demand a special meeting, to vote or in order to make a determination of shareholders form any other proper purpose, the board of directors may provide that the record date be fixed not more than seventy days before the meeting or action requiring a determination of shareholders. LIST OF SHAREHOLDERS Section 6. The officer or agent having charge of the transfer books for shares shall make, at least ten days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of each and the number of shares held by each, which list, for a period of ten days prior to such meeting, shall be kept on file at the principal office of the corporation and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of the shareholders. ARTICLE XI GENERAL PROVISIONS DIVIDENDS Section 1. Subject to the provisions of the articles of incorporation relating thereto, if any, dividends may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to any provisions of the articles of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. CHECKS Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. FISCAL YEAR Section 4. The fiscal year of the corporation shall be fixed by resolution of the board of directors. SEAL Section 5. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Colorado". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. ARTICLE XII AMENDMENTS Section 1. These by-laws may be altered, amended, or repealed or new by-laws may be adopted by the affirmative vote of a majority of the board of directors at any regular or special meeting of the board. EX-3.5 13 dex35.txt ARTICLES OF INCORPORATION OF GOLD DUST WEST CASINO Exhibit 3.5 FILED # C3024-00 -------- FEB 04 2000 ON THE OFFICE OF /s/ Dean Keller - --------------- DEAN KELLER SECRETARY OF STATE ARTICLES OF INCORPORATION OF GOLD DUST WEST CASINO, INC. The undersigned individual acting as the incorporation of a corporation (the "Corporation") under the provisions of Chapter 78 of the Nevada Revised Statutes hereby adopts the following Articles of Incorporation. 1. NAME. The name of the Corporation is Gold Dust West Casino, Inc. ---- 2. REGISTERED OFFICE AND INITIAL RESIDENT AGENT. -------------------------------------------- 2.1 Registered office. The street address of the registered office of ----------------- the Corporation is 3500 Lakeside Court, Reno, Washoe Country, Nevada 89509. The mailing address of the registered office is P.O. Box 30000, Reno, Nevada 89520. The Corporation may conduct all or part of its business in any other part of the State of Nevada. 2.2 Resident Agent. The resident agent of the Corporation is the law -------------- firm of Walther, Key, Maupin, Oats, Cox & LeGoy, located at 3500 Lakeside Court, P.O. Box 30000, Reno, Nevada 89520. 3. STOCK. The Corporation shall be authorized to issue two thousand, five ----- hundred (2,500) shares of stock without par value. All of the shares of stock shall be of the same class, without preference or distinction. 5. GOVERNING BOARD. ---------------- 5.1 Name. The members of the governing board of the Corporation shall ---- be designated as Directors. 5.2. Initial Board of Directors. The initial Board of Directors shall -------------------------- consist of two (2) members, the names and post office boxes or street addresses, either residence or business, of whom are as follows. These individuals shall serve as Directors until the first annual meeting of the shareholders, or until their successors shall have been elected and qualified. NAME ADDRESS ---- ------- Jeffrey P. Jacobs 240 Main Street Black Hawk, CO 80432 Stephen R. Roark 240 Main Street Black Hawk, CO 80422 1 5.3. Increase or Decrease of Directors. The number of Directors of the --------------------------------- Corporation may be increased or decreased from time to time by amendment to the Bylaws of the Corporation in effect from time to time; provided, however, that there must at all time be at least one (1) Director. 6. NAME AND ADDRESS OF INCORPORATOR. The name and post office box or -------------------------------- street address, either residence or business, of the incorporator signing these Articles of Incorporation are as follows. NAME ADDRESS ---- ------- Debra A. Kelly 3500 Lakeside Court, Suite 200 Reno, Nevada 89509 7. LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS. No director or ------------------------------------------------- officer of the Corporation shall be personally liable to the Corporation or any of its stockholders for damages for breach of fiduciary duty as a director or officer involving any act or omission of any such director or officer. However, the foregoing provision shall not eliminate or limit the liability of a director or officer for (i) acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (ii) the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any repeal or modification of this Article by the shareholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director or officer of the Corporation for acts or omissions prior to such repeal or modification. 8. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND CERTAIN AGENTS. -------------------------------------------------------------------- 8.1 Third Party Actions. The Corporations shall indemnify any person ------------------- who was or is a party or is threatened to be made a party to or is in any way involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, expect an action by or in the right of the Corporation, (1) by reason of the fact that he is or was a director or officer of the Corporation as a director or officer of another entity or enterprise, (2) by reason of anything done or not, done in such capacity referred to in clause (1) above, or (3) by reason of the fact that he is or was an employee or authorized agent of the Corporation and such threatened, pending or completed action, suit, or proceeding relates to actions or omissions within the course and scope of such employee's or authorized agent's duties, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or it in connection with the action, suit or proceeding, to the fullest extent authorized by the Nevada Revised Statutes. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo 2 contenders or its equivalent, does not, of itself, create a presumption that the person or entity did not act in good faith and in a manner which he or it reasonably believed to be in or not opposed to the best interest of the Corporation, and that, with respect to any criminal action or proceeding, he or it had reasonable cause to believe that his or its conduct was unlawful. 8.2. Corporate Actions. The Corporation shall indemnify any person who ----------------- or was or is a party or is threatened to be made a party to or is in any way involved in any threatened, pending or completed action, suit, or proceeding by or in the right of the Corporation to procure a judgment in its favor (1) by reason of the fact that he is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another entity or enterprise, (2) by reason of anything done or not done in such capacity referred to in clause (1) above, or (3) by reason of the fact that he is or was an employee or authorized agent of the Corporation and such threatened, pending or completed action, suit, or proceeding relates to actions or omissions within the course and scope of such employee's or authorized agent's duties, against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the actions or suit, to the fullest extent authorized by the Nevada Revised Statutes. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Corporation or for amounts paid in settlement to the Corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. 8.3. Advancement of Expenses. The expenses of directors, officers, ----------------------- employees, and authorized agents incurred in connection a with civil or criminal action, suit or proceeding referred to in Sections 8.1 and 8.3 must be paid by the Corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director, officer, employee, or authorized agent to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the Corporation. 8.4. Reliance. The rights to indemnification and advancement of -------- expenses conferred by this Article 8. shall be presumed to have been relied upon by directors, officers, employees and authorized agents of the Corporation in serving or continuing to serve the Corporation and shall be enforceable as contract rights. In any proceeding against the Corporation to enforce these rights, such person shall be presumed to be entitled to indemnification and the Corporation shall have burden of proof to overcome that presumption. 3 8.5. Nature of Rights. The indemnification and advancement of expenses ---------------- authorized in or ordered by a court pursuant to this Article 8.: 8.5.1. Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office or position, except that indemnification, unless ordered by a court or for the advancement of expenses made pursuant to the provisions above, may not be made to or on behalf of any director, officer, employee, or authorized agent if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. 8.5.2 Continues for a person who has ceased to be a director, officer, employee, or authorized agent and inures to the benefit of the heirs, executors, administrators, and personal representatives of such a person. 8.6. Amendments to Statute. It the Nevada Revised Statutes are --------------------- hereafter amended to permit the Corporation to provide broader indemnification rights than said Statutes permitted the Corporation to provide prior such amendment, the indemnification rights conferred by this Article 8. shall be broadened to the fullest extent permitted by the Nevada Revised Statues, as so amended. 8.7 Amendments to Indemnification provisions. The provisions of this ---------------------------------------- Article 8. shall not be repealed of modified to adversely affect any current or former director, officer, employee, or authorized agent's rights indemnity rights there under. Subject to the foregoing limitation, any repeal or modification of the foregoing provisions of this Article 8., including, without limitation, any contractual rights arising under or authorized by it, by the stockholders of the Corporation shall not adversely affect any right or protection of a director, officer, employee, or authorized agent of the corporation existing at the time of such repeal or modification. The Indemnification and advancement of expenses provided in this Article shall continue for a person who has ceased to be a director, officer, employee, or authorized agent and inures to the benefit of the heirs, executors and administrators of such a person. 8.8 Insurance. The Corporation may, but shall not be required to, --------- purchase and maintain insurance on behalf of any director, officer, employee or authorized agent against any liability asserted against the person as a result of any alleged acts or omissions of the person within the course and scope of the person's duties as a director, officer, employee or authorized agent of the Corporation, including attorneys' fees and cost. The 4 determination of whether or not the Corporation should maintain any such insurance shall be made by the Board of Directors. Dated: February 3, 2000. /s/ Debra A. Kelly ----------------------------------------- Debra A. Kelly STATE OF NEVADA ) : ss. COUNTY OF WASHOE ) These Articles of Incorporation were acknowledged before me on Feb 3, 2000, by Debra A. Kelly. /s/ Doris A. Dotbon ----------------------------------------- Notary Public ----------------------------------------- DORIS A. DOTBON Notary Public - State of Nevada Appointment Recorded in Washoe County No: Illegible Expires: July 20,2001 ----------------------------------------- 5 ANNUAL LIST OF OFFICERS, DIRECTORS AND AGENTS OF: FILE NUMBER GOLD DUST WEST CASINO, INC. 3024-2000 FOR THE PERIOD FEB 2001 TO 2002. DUE BY FEB 28, 2001. The Corporation's duly appointed resident agent in the State of Nevada upon whom process can be served is: FOR OFFICE USE ONLY RA# 77068 FILED (DATE) FILED WALTER KEY MAUPIN OATS COX FEB 12 2001 Dean Haller PO BOX 30000 Secretary of State RENO NV 89520 [ ] IF THE ABOVE INFORMATION IS INCORRECT, PLEASE CHECK THIS BOX AND A CHANGE OF RESIDENT AGENT/ADDRESS FORM WILL BE SENT. PLEASE READ INSTRUCTION BEFORE COMPLETING AND RETURNING THIS FORM. 1. Include the names and addresses, either residence or business, for all officers and directors. A President, Secretary, Treasurer and all Directors must be named. There must be at least one director. Last year's information may have been preprinted. If you need to make changes, cross out the incorrect information and insert the new information above it. An officer must sign the form. FORM WILL BE RETURNED IF UNSIGNED. 2. If there are additional directors, attach a list of them to this form. 3. Return the completed form with the $85.00 filing fees. A $15 penalty must be added for failure to file this form by the deadline. An annual list received more than 60 days before its due date shall be deemed an amended list for the previous year. 4. Make your check payable to the Secretary of State. Your canceled check will constitute a certificate to transact business per NRS-78.155. If you need the below attachment file stamped, enclose a self-addressed stamped envelop. To receive a certified copy, enclose a copy of this completed form, an additional $10.00 and appropriate instructions. 5. Return the completed form to: Secretary of State, 101 North Carson Street, Suite #3, Carson City, NV 89701-4786 (775) 684-5708 FILING FEE: $85.00 PENALTY:$15.00 - -------------------------------------------------------------------------------- NAME /s/ JEFFREY P JACOBS TITLE(S) ------------------------------------ PRESIDENT JEFFREY P JACOBS P. O. BOX STREET ADDRESS CITY ST. ZIP 240 MAIN STREET BLACK HAWK CO 80422 - --------------- NAME /s/ STEPHEN R ROARK TITLE(S) ------------------------------------ SECRETARY STEPHEN R ROARK P. O. BOX STREET ADDRESS CITY ST. ZIP 240 MAIN STREET BLACK HAWK CO 80422 - --------------- NAME /s/ STEPHEN R ROARK TITLE(S) ------------------------------------ TREASURER STEPHEN R ROARK P. O. BOX STREET ADDRESS CITY ST. ZIP 240 MAIN STREET BLACK HAWK CO 80422 - --------------- NAME TITLE(S) ------------------------------------ DIRECTOR P. O. BOX STREET ADDRESS CITY ST. ZIP - --------------- -------------- --------------- -- --------- NAME TITLE(S) ------------------------------------ DIRECTOR P. O. BOX STREET ADDRESS CITY ST. ZIP - --------------- -------------- --------------- -- --------- - -------------------------------------------------------------------------------- I hereby certify this annual list. /s/ STEPHEN R ROARK - -------------------------------- Signature of Officer Date 1/22/01 EX-3.6 14 dex36.txt CODE OF BY-LAWS OF GOLD DUST WEST CASINO, INC. Exhibit 3.6 CODE OF BYLAWS OF GOLD DUST WEST CASINO, INC. I IDENTIFICATION A. Name. The name of the corporation is Gold Dust West Casino, Inc., ---- hereafter referred to as the "Corporation." B. Registered Office and Resident Agent. The address of the Registered ------------------------------------ Office of the Corporation is 3500 Lakeside Court, Suite 200, Reno, Nevada 89509; and the Resident Agent at this address is the law firm of Walther, Key, Maupin, Oats, Cox & LeGoy. C. Principal and other Offices. The principal executive office of the --------------------------- Corporation shall be located at such place within or outside the State of Nevada as may from time to time be designated by the Board of Directors of the Corporation. If the principal executive office is located outside of the State of Nevada and the Corporation has one or more business offices within Nevada, the Board of Directors shall fix and designate a principal business office in the State of Nevada. Branch or subordinate offices may at any time be established by the Board of Directors at any place or places within or outside the State of Nevada. D. Seal. The seal of the Corporation shall be circular in form and mounted ---- upon a metal die, suitable for impression upon paper. About the upper periphery of the seal shall appear the words "Gold Dust West Casino, Inc." and about the lower periphery of it the word "Nevada." In the center of the seal shall appear the words "Corporate Seal" and "2000." E. Fiscal Year. The fiscal year of the Corporation shall be the calendar ----------- year. II CAPITAL STOCK A. Consideration for Shares. The stock of the Corporation may be issued for ------------------------ consideration consisting of any tangible or intangible property or benefit to the Corporation, including, but not limited to, real and personal property, tangible and intangible property, cash, promissory notes, services performed, contracts for services to be performed, or other securities of the Corporation. Before the Corporation issues shares, the Board of Directors must determine that the consideration received or to be received for the shares to be issued is adequate. The judgment of the Board of Directors as to the adequacy of the consideration received for the 1. shares issued is conclusive in the absence of actual fraud in the transaction. When the Corporation receives the consideration for which the Board of Directors authorized the issuance of shares, the shares issued therefore are fully paid and non-assessable. B. Certificates Representing Shares. Certificates of stock shall be in a -------------------------------- form adopted by the Board of Directors and shall be signed by the President and Secretary or by a Vice-President and Secretary of the Corporation, and each stock certificate shall have impressed upon it the corporate seal. All certificates shall be consecutively numbered. When issued, there shall be entered on the Corporation's books the name and address of the person owning the shares of stock represented by the certificate together with the number of shares owned by such person and the date of issue. To the extent applicable, each certificate shall comply with the requirements of all Nevada gaming statutes and regulations, including, without limitation, NRS 463.510.4 and Gaming Regulations 15.510.4-1 and any substitute or successor statute and/or regulation as in effect from time to time. D. Transfer of Stock. The Corporation shall register the transfer of any ----------------- stock certificate presented to it for transfer if the following conditions have been satisfied: 1. Endorsement. The certificate is properly endorsed by the registered ----------- holder or by his duly authorized attorney-in-fact; 2. Witnessing. The endorsement or endorsements are witnessed by one ---------- witness unless this requirement is waived by the Secretary of the Corporation; 3. Adverse Claims. The Corporation has no notice of any adverse claims -------------- or has discharged any duty to inquire into any such claims; 4. Collection of Taxes. There has been compliance with any applicable ------------------- law relating to the collection of taxes; and 5. Contractual Requirements. There has been compliance with all ------------------------ applicable contractual provisions by or among the Corporation and any one or more of its shareholders, if any, as amended from time to time, and all other contractual requirements of the Corporation and its shareholders affecting or otherwise pertaining to the transfer of stock. III SHAREHOLDERS A. Place of meetings; Telephonic Meetings. Meetings of the shareholders of -------------------------------------- the Corporation shall be held at the registered office of the Corporation, 3500 Lakeside Court, Reno, Nevada, or at such other place as may be designated by the Chairman of the Board of Directors (if any) or the President of the Corporation. 2. Shareholders may participate in a meeting of the shareholders by means of a telephone conference or similar method of communication by which all persons participating in the meeting can hear each other. B. Annual Meeting. The annual meeting of the shareholders shall be held in -------------- the registered office of the Corporation on the date and time specified by the Chairman of the Board of Directors, or in the absence of the Chairman of the Board of Directors, by the President of the Corporation. Failure to hold the annual meeting at the designated time shall not cause a forfeiture or dissolution of the Corporation. C. Special Meetings. Special meetings of the shareholders may be called by ---------------- a majority of the Board of Directors, the Chairman of the Board of Directors, the President, or any shareholder owning ten percent (10%) or more of the outstanding shares of voting stock of the Corporation. D. Notice of Meetings -- Waiver. Written notice stating the place, day, ---------------------------- hour, and purpose of the meeting shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman of the Board of Directors, the President, the Secretary, or the Officer or persons calling the meeting, to each registered shareholder entitled to vote at such meeting. If mailed, the notice shall be considered to be delivered when deposited in the United States mail addressed to the registered shareholder of voting stock at the shareholder's address as it appears on the stock transfer books of the Corporation, with postage prepaid. Waiver by a shareholder in writing of notice of a shareholders' meeting shall be equivalent to notice. Attendance by a shareholder, without objection to the notice, whether in person or by proxy, at a shareholders meeting shall constitute a waiver of notice of the meeting. E. Quorum. A majority of the shares entitled to vote on a particular ------ matter, represented in person or by proxy, shall constitute a quorum at a meeting of the shareholders. The shareholders present at a duly organized meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. The acts of the shareholders shall be governed by the vote of more than fifty percent (50%) of the issued and outstanding shares required to constitute a quorum of voting stock of the Corporation unless a greater number is required by law, the Articles of Incorporation, or the Code of Bylaws. F. Proxies. A shareholder may vote either in person or by proxy executed in ------- writing by the shareholder or by his duly authorized attorney-in-fact. No proxy shall be valid after six (6) months from the date of its execution, unless otherwise provided in the proxy, and in no event shall a proxy be valid more than seven (7) years after its execution unless it is coupled with an interest. 3. G. Action or Ratification of Action Without a Meeting. Any action that may -------------------------------------------------- be taken or ratified at a meeting of the shareholders may be taken or ratified without a meeting if a consent in writing setting forth the action to be taken or to be ratified is signed by shareholders owning a majority of the issued and outstanding shares of stock entitled to vote on the particular matter, or by shareholders owning such greater proportion of the stock entitled to vote on the particular matter as may be required for the approval or ratification of the action by any other provision of these Bylaws, the Articles of Incorporation, or applicable law. In no instance where action is authorized by written consent need a meeting of the shareholders be called or notice given. The written consent must be filed with the minutes of the proceedings of the shareholders. IV BOARD OF DIRECTORS A. Number of Directors. The Board of Directors of the Corporation shall ------------------- consist of two (2) members. The members of the Board of Directors need not be shareholders. The number of members of the Board of Directors may be increased or decreased from time to time as provided in paragraph B. below. B. Increase or Decrease of Directors. The number of Directors of the --------------------------------- Corporation may be increased or decreased from time to time by the affirmative vote of a majority of the issued and outstanding shares of voting stock of the Corporation; provided, however, that there must at all times be at least one (1) Director. This paragraph may be amended only by the affirmative vote of a majority of the issued and outstanding shares of voting stock of the Corporation. C. Election. Members of the initial Board of Directors shall hold office -------- until the first annual meeting of shareholders and until their successors shall have been elected and qualified. At the first annual meeting of shareholders and at each annual meeting thereafter, the shareholders shall elect Directors to hold office until the next succeeding annual meeting. Directors shall be elected by a majority of the votes cast at the election. Each Director shall hold office for the term for which he is elected and until his successor is elected and qualified. D. Removal of Directors. Any Director may be removed from office by the -------------------- vote or written consent of not less than Sixty-six and 2/3rds percent (66 2/3%) of the issued and outstanding shares of voting stock of the Corporation. Upon the removal of any member of the Board of Directors, the vacancy shall be filled pursuant to paragraph E. below. E. Vacancies. Any vacancy occurring in the Board of Directors may be filled --------- by the affirmative vote of a majority of the remaining Directors though less than a quorum of the Board of Directors, and if there are no other Directors, by a majority vote 4. of the voting shareholders at a special meeting of the shareholders. A Director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. F. Place of Meetings; Telephonic Meetings. Meetings of the Board of -------------------------------------- Directors, annual, regular, or special, may be held within or without the State of Nevada at any place which has been designated from time to time by a resolution of the Board of Directors or by written consent of all of the members of the Board of Directors. In the absence of such a designation, the meetings of the Board of Directors shall be held at the registered office of the Corporation. In addition, meetings of the Board of Directors may be conducted by means of a telephone conference or similar method of communication by which all persons participating in the meeting can hear each other. Participation in a telephonic or similar meeting constitutes presence in person at the meeting. G. Officers of the Board. The Board of Directors of the Corporation may --------------------- (but shall not be required to), by resolution adopted by not less than a majority of the Board, designate one of its members to serve as Chairman of the Board. The Chairman of the Board shall preside over all meetings of the Board of Directors, shall execute the actions of the Board of Directors, and shall perform such other duties as are prescribed from time to time by resolution of the Board or in this Code of Bylaws. In addition, the Board of Directors may, by resolution adopted by not less than a majority of the Board, designate a Secretary who shall be elected or appointed by the Board from time to time and who may or may not serve as a member of the Board of Directors. The Secretary of the Board shall maintain formal minutes of all meetings and actions of the Board and shall submit such record to the whole Board at each regular meeting. The Secretary of the Board shall, in addition, perform such other duties as are prescribed from time to time by resolution of the Board. In the absence of any such designation, the functions of Secretary of the Board shall be performed by the Secretary of the Corporation. H. Annual Meetings. Immediately after the annual meeting of the --------------- shareholders, at the same place as the meeting of the shareholders, the Board of Directors shall meet each year for the purpose of organization, election of officers, and consideration of any other business that may properly be brought before the meeting. No notice of any kind to either old or new members of the Board of Directors for this annual meeting shall be necessary unless the meeting is to be held at a place other than the registered office of the Corporation, in which case notice of the place of the meeting shall be given as provided in paragraph F. above. I. Other Meetings; Notice; Waiver. Other meetings of the Board of Directors ------------------------------ may be held by notice by letter, telegram, cable, or telefax, delivered for transmission not less than seventy-two (72) hours prior to the meeting, or by word of mouth, telephone, or telefax received not less than forty-eight (48) hours prior to the meeting, upon call of the Chairman of the Board, President, or Secretary of the Corporation at any place within or 5. without the State of Nevada. If mailed, the notice shall be considered to be delivered forty-eight (48) hours after being deposited in the United States Mail addressed to the Director at his address as it appears on the records of the Corporation, with postage prepaid. Waiver by Director and writing of notice of a Directors meeting shall be the equivalent of notice. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Directors need be specified in the notice or waiver of notice of the meeting. Attendance by a Director without objection to the notice shall constitute a waiver of notice of the meeting. J. Quorum. A majority of the number of Directors fixed by the Code of ------ Bylaws shall constitute a quorum for the transaction of business. The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless the action of a greater number is required by law, the Articles of Incorporation or the Code of Bylaws. K. Action or Ratification of Action Without a Meeting. Any action that may -------------------------------------------------- be taken or ratified at a meeting of the Directors or of a committee may be taken or ratified without a meeting if a consent in writing, setting forth the action to be taken or to be ratified, is signed by all of the Directors or all of the members of the committee, as the case may be. L. Fees and Compensation. Directors and members of committees may receive --------------------- such compensation, if any, for their services and such reimbursement of expenses, as may be fixed or determined by resolution of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefor. M. Committees. The Board of Directors, at its discretion, may constitute ---------- and appoint special committees to assist in the supervision, management, and control of the affairs of the Corporation, with responsibilities and powers appropriate to the nature of the several committees and as provided by the Board of Directors in the resolution of appointment or in subsequent resolutions and directives. Such committees may include, but are not limited to, the following: executive committee, compensation committee, audit committee, finance committee, advisory committee, membership or stockholders' committee, complaint committee, public relations committee, public and/or governmental affairs committee, and employee relations committee. Each committee so constituted and appointed by the Board shall serve at the pleasure of the Board and the members thereof shall include at least one (1) member of the Board of Directors and such other persons as the Board may designate. In addition to such obligations and functions as may be expressly provided for by the Board of Directors, each committee so constituted and appointed by the Board shall from time to time report to and advise the Board on corporate affairs within its particular area of responsibility and interest. The Board of Directors may provide by general resolution applicable to all such 6. special committees for the organization and conduct of the business of the committees. V OFFICERS A. Officers. The officers of the Corporation shall consist of a President, -------- one or more Vice-Presidents, Secretary, Treasurer, and a Chairman of the Board and such other officers and assistant officers and agents as may be considered necessary by the Board of Directors, each of whom shall be elected by the Board of Directors at its annual meeting. Any two (2) or more offices may be held by the same person. Except for the Chairman of the Board of Directors, officers need not be Directors of the Corporation. B. Removal and Resignation. Any officer may be removed, with or without ----------------------- cause, by the Board of Directors, at any regular or special meeting of the Board, or, except in the case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors. Any such removal shall be without prejudice to the rights, if any, of the officer under any contract of employment. Any officer may resign at any time by giving written notice to the Corporation, without prejudice to the rights, if any, of the Corporation under any contract with the officer. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. C. Vacancies. Whenever any vacancy shall occur in any office by death, --------- resignation, removal, increase in the number of offices of the Corporation, or otherwise, the vacancy shall be filled by the Board of Directors, and the officer so elected shall hold office until his successor is duly elected and qualified. D. Chairman of the Board. To the extent designated by the Board of --------------------- Directors, the Chairman of the Board shall have general supervisory duties of the Corporation, including the Board of Directors and the officers of the Corporation. The Chairman of the Board shall supervise and direct generally all the business and affairs of the Corporation. The Chairman of the Board shall preside at all meetings of shareholders and Directors of the Corporation at which he is present, and discharge all the duties as this Code of Bylaws provides or as may be prescribed by the Board of Directors. E. President. The President of the Corporation shall be the Chief Executive --------- Officer of the Corporation. The President shall have active executive management duties of the operations of the Corporation, subject, however, to the control of the Board of Directors, and the Chairman of the Board, if any. In the absence of the Chairman of the Board, the President shall preside at all meetings of shareholders and Directors. Subject to the supervisory 7. duties of the Chairman of Board, if any, the President shall be the principal executive officer of the Corporation, and shall supervise and direct the day-to-day business and affairs of the Corporation. The President shall also make reports to the Chairman of the Board, the Board of Directors, and the shareholders, and generally perform all duties incident to the President and such other duties as may prescribed by the Board of Directors. F. Vice-Presidents. Vice-Presidents shall perform all duties incumbent upon --------------- the President during the absence or disability of the President and shall perform such other duties as this Code of Bylaws may provide or the Board of Directors may prescribe. If there is more than one Vice-President, then the Board of Directors shall designate their order of authority, e.g., Senior Vice President, 1st Vice-President and/or 2nd Vice-President, and their respective duties if appropriate. G. Secretary. The Secretary shall attend all meetings of the shareholders --------- and of the Board of Directors and shall maintain a true and complete record of the proceedings of the meetings. The Secretary shall be the custodian of the records and of the seal of the Corporation and shall see that the seal is affixed to all documents, the execution of which is duly authorized. The Secretary shall issue or make adequate arrangements for another responsible employee to issue all notices and shall perform such other duties as this Code of Bylaws may provide or the Board of Directors may prescribe. H. Treasurer. The Treasurer shall keep a correct and complete record of --------- account, showing accurately at all times the financial condition of the Corporation. Unless otherwise designated by the Board of Directors, the Treasurer shall be the Chief Financial Officer of the Corporation, who shall be responsible for the active management of the Corporation's daily operations. The Treasurer shall be the legal custodian of all moneys, notes, securities, and other valuables that may from time to time come into the possession of the Corporation. He shall furnish at meetings of the Board of Directors, or whenever requested, a statement of the financial condition of the Corporation, and shall perform such other duties as this Code of Bylaws may provide or the Board of Directors may prescribe. The Treasurer may be required to furnish a bond in such amount and form as shall be determined by the Board of Directors. I. Corporate Bank Accounts. Bank accounts in the name of the Corporation ----------------------- may be opened without the approval of the Board of Directors if opened with the consent of both the Chairman of the Board or President and Treasurer of the Corporation. The Treasurer shall inform the Board of Directors of any bank account opened by the Chairman of the Board or President and Treasurer of the Corporation pursuant to the authority granted in this paragraph at the next meeting of the Board of Directors. J. Transfers of Authority. In the absence of any officer of the ---------------------- Corporation, or for any other reason that the Board of 8. Directors may consider sufficient, the Board of Directors may transfer the power or duties of that officer to any other officer or to any Director or employee of the Corporation, provided a majority of the full Board of Directors concurs. VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND CERTAIN AGENTS A. Third Party Actions. The Corporation shall indemnify any person who was ------------------- or is a party or is threatened to be made a party to or is in any way involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the Corporation, (1) by reason of the fact that he is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another entity or enterprise, (2) by reason of anything done or not done in such capacity referred to in clause (1) above, or (3) by reason of the fact that he is or was an employee or authorized agent of the Corporation and such threatened, pending or completed action, suit, or proceeding relates to actions or omissions within the course and scope of such employee's or authorized agent's duties, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or it in connection with the action, suit or proceeding, to the fullest extent authorized by the Nevada Revised Statutes. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person or entity did not act in good faith and in a manner which he or it reasonably believed to be in or not opposed to the best interest of the Corporation, and that, with respect to any criminal action or proceeding, he or it had reasonable cause to believe that his or its conduct was unlawful. B. Corporate Actions. The Corporation shall indemnify any person who or was ----------------- or is a party or is threatened to be made a party to or is in any way involved in any threatened, pending or completed action, suit, or proceeding by or in the right of the Corporation to procure a judgment in its favor (1) by reason of the fact that he is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another entity or enterprise, (2) by reason of anything done or not done in such capacity referred to in clause (1) above, or (3) by reason of the fact that he is or was an employee or authorized agent of the Corporation and such threatened, pending or completed action, suit, or proceeding relates to actions or omissions within the course and scope of such employee's or authorized agent's duties, against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the actions or suit, to the fullest extent authorized by the Nevada Revised Statutes. Indemnification may not be made 9. for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Corporation or for amounts paid in settlement to the Corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. C. Advancement of Expenses. The expenses of directors, officers, employees, ----------------------- and authorized agents incurred in connection with a civil or criminal action, suit or proceeding referred to in Paragraphs A. and B. must be paid by the Corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director, officer, employee, or authorized agent to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the Corporation. D. Reliance. The rights to indemnification and advancement of expenses -------- conferred by this Article VI shall be presumed to have been relied upon by directors, officers, employees and authorized agents of the Corporation in serving or continuing to serve the Corporation and shall be enforceable as contract rights. In any proceeding against the Corporation to enforce these rights, such person shall be presumed to be entitled to indemnification and the Corporation shall have the burden of proof to overcome that presumption. E. Nature of Rights. The indemnification and advancement of expenses ---------------- authorized in or ordered by a court pursuant to this Article VI: 1. Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the Articles of Incorporation, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office or position, except that indemnification, unless ordered by a court or for the advancement of expenses made pursuant to the provisions above, may not be made to or on behalf of any director, officer, employee, or authorized agent if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. 2. Continues for a person who has ceased to be a director, officer, employee, or authorized agent and inures to the benefit of the heirs, executors, administrators, and personal representatives of such a person. F. Amendments to Statute. If the Nevada Revised Statutes are hereafter --------------------- amended to permit the Corporation to provide broader 10. indemnification rights than said Statutes permitted the Corporation to provide prior to such amendment, the indemnification rights conferred by this Article VI shall be broadened to the fullest extent permitted by the Nevada Revised Statutes, as so amended. G. Amendments to Indemnification Provisions. The provisions of this ---------------------------------------- Article VI shall not be repealed or modified to adversely affect any current or former director, officer, employee, or authorized agent's indemnity rights thereunder. Subject to the foregoing limitation, any repeal or modification of the foregoing provisions of this Article VI, including, without limitation, any contractual rights arising under or authorized by it, by the stockholders of the Corporation shall not adversely affect any right or protection of a director, officer, employee, or authorized agent of the Corporation existing at the time of such repeal or modification. The indemnification and advancement of expenses provided in this Article VI shall continue for a person who has ceased to be a director, officer, employee, or authorized agent and inures to the benefit of the heirs, executors and administrators of such a person. H. Insurance. The Corporation may, but shall not be required to, purchase --------- and maintain insurance on behalf of any director, officer, employee or authorized agent against any liability asserted against the person as a result of any alleged acts or omissions of the person within the course and scope of the person's duties as an director, officer, employee or authorized agent of the Corporation, including attorneys' fees; and costs. The determination of whether or not the Corporation should maintain any such insurance shall be made by the Board of Directors. VII MISCELLANEOUS A. Execution of Documents. All checks, drafts, notes, bonds, bills of ---------------------- exchange, and orders for the payment of money of the Corporation, all deeds, mortgages, and other written contracts and agreements to which the Corporation shall be a party, and all assignments or endorsements of stock certificates, registered bonds, or other securities owned by the Corporation shall, unless otherwise required by law, be signed by the Chairman of the Board, the President or by any two (2) of a Vice-President, Secretary, or Treasurer who are different persons. The Board of Directors may, however, authorize any one (1) of such officers to sign any of the instruments without the necessity of countersignature, may designate officers or employees of the Corporation, other than those named above, who may, in the name of the Corporation, sign the instruments, and may authorize the use of facsimile signatures of any such persons. B. Record Date and Closing Stock Books. The Board of Directors may fix a ----------------------------------- time in the future, not exceeding sixty (60) days nor less than ten (10) days before the date of any meeting of stockholders, and not exceeding thirty (30) days before the date 11. fixed for the payment of any dividend or distribution or for the allotment of rights, or when any change or conversion or exchange of shares shall go into effect, as a record date for the determination of the stockholders entitled to notice of and to vote at any such meeting, or entitled to receive any such dividend or distribution, or any such allotment or rights, or to exchange the rights in respect to any such change, conversion or exchange of shares. Only stockholders of record on the date so fixed shall be entitled to notice of and to vote at such meetings, or to receive such rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after any record date. The Board of Directors may close the books of the Corporation against transfers of shares during the whole or any part of any such period. C. Inspection of Corporate Records. Stockholders shall have the right to ------------------------------- inspect such corporate records at such times and based upon such limitations of such rights as may be set forth in the Nevada Revised Statutes Chapter 78 from time to time. D. Representation of Shares of Other Corporations. The Chairman of the ---------------------------------------------- Board, the President or any Vice President and the Secretary or Assistant Secretary of the Corporation are authorized to vote, represent and exercise on behalf of the Corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of the Corporation. The authority herein granted to said officers to vote or represent on behalf of the Corporation any and all shares held by the Corporation in any other corporation or corporations may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney duly executed by said officers. E. Inspection of Bylaws. The Corporation shall keep in its registered -------------------- office the original or a copy of the Bylaws as amended or otherwise altered to date, certified by the Secretary, which shall be open to inspection by the stockholders at all reasonable times during office hours. ARTICLE VIII AMENDMENTS A. Power of Shareholders. New bylaws may be adopted or this code of Bylaws --------------------- may be amended or repealed by the vote or written consent of holders of a majority of the issued and outstanding shares entitled to vote of the Corporation, except as otherwise provided by the Articles of Incorporation, these Bylaws, or by law. B. Power of Directors. Subject to the rights of shareholders and ------------------ restrictions as provided in paragraph A. above to adopt, amend, or repeal the Code of Bylaws, the Code of Bylaws may be adopted, amended, or repealed by the Board of Directors. 12. IX CERTIFICATE OF SECRETARY The undersigned, the duly elected and acting Secretary of Gold Dust West Casino, Inc., a Nevada corporation, hereby certifies that the foregoing Code of Bylaws, comprised of thirteen (13) pages, constitutes the Code of Bylaws of said Corporation as duly adopted by the full Board of Directors effective February 4, 2000. /s/ Stephen R. Roark -------------------- Stephen R. Roark Secretary/Treasurer 13. EX-3.7 15 dex37.txt ARTICLES OF ORGANIZATION OF BLACK HAWK / JACOBS Exhibit 3.7 961146696 C $50.00 SECRETARY OF STATE 11-12-96 10:03 ARTICLES OF ORGANIZATION OF BLACK HAWK/JACOBS ENTERTAINMENT, LLC The undersigned, a natural person of at least 18 years of age, acting as organizer, hereby forms a limited liability company by virtue of the Colorado Limited Liability Company Act, and adopts the following Articles of Organization for such limited liability company. ARTICLE I Name The name of the limited liability company is Black Hawk/Jacobs Entertainment, LLC. ARTICLE II Principal Place of Business The principal place of business of the limited liability company is 2060 Broadway, Suite 400, Boulder, Colorado 80302. ARTICLE III Registered Agent The registered agent of this limited liability company in this state is Black Hawk Gaming & Development Company, Inc. The business address of the registered agent is 2060 Broadway, Suite 400, Boulder, Colorado 80302. ARTICLE IV Initial Manager Management of this limited liability company shall be vested in managers rather than members. The name and business addresses of the initial manager who is to serve as manager until the first annual meeting of the members or until its successor is elected and qualified is as follows: COMPUTER UPDATE COMPLETE PN Name Address ---- ------- BH Entertainment Ltd. c/o Jacobs Entertainment Ltd. 425 Lakeside Avenue Cleveland, Ohio 44114 ARTICLE V Limitations on Voting Securities or Interests The limited liability company shall not issue any voting securities or other voting interests except in accordance with the provisions of the Colorado Limited Gaming Act and the 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 limited liability company shall cease to be subject to the jurisdiction of the Colorado Limited Gaming Control Commission, or (b) the Colorado Limited Gaming Control Commission shall, by affirmative action, validate said issuance or waive any defect in issuance. No voting securities or other voting interests issued by the limited liability company 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 the regulations promulgated thereunder. Any transfer in violation thereof shall be void until (a) the limited liability company shall cease to be subject to the jurisdiction of the Colorado Limited Gaming Control Commission, or (b) the Colorado Limited Gaming Control Commission shall, by affirmative action, validate said transfer or waive any defect in said transfer. If the Colorado Limited Gaming Control Commission at any time determines that a holder of voting securities or other voting interests of this limited liability company is unsuitable to hold such securities or other voting interests, then the issuer of such voting securities or other voting interests 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 limited liability company, 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 Commission) within sixty (60) days after the finding of unsuitability. Until such voting securities or other voting interests are owned by persons found by the Commission to be suitable to own them, (a) the limited liability company 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 limited liability company entitled to vote, and (c) the limited liability company 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 paragraph. ARTICLE VI Organizer The name and address of the organizer of this limited liability company is Samuel E. Wing, c/o Jones & Keller, P.C., 1625 Broadway, Suite 1600, Denver, CO 80202. IN WITNESS WHEREOF, I have signed these Articles of Organization this 12th day of November, 1996, and I acknowledge the same to be my true act and deed. /s/ Samuel E. Wing ------------------------- Organizer: Samuel E. Wing For office use only 19971098316 C $10.00 SECRETARY OF STATE 06-19-97 15:11:36 Mail to: Secretary of State Corporations Section 1560 Broadway, Suite 200 Denver, CO 80202 (303)894-2251 MUST BE TYPED Fax (303) 894-2242 FILING FEE:$10.00 MUST SUBMIT TWO COPIES --- Please include a typed self-addressed envelope CERTIFICATE OF ASSUMED OR TRADE NAME Black Hawk/Jacobs Entertainment, LLC, a limited liability company under the laws of Colorado, being desirous of transacting a portion of its business under an assumed or trade name as permitted by 7-71-101, Colorado Revised Statutes, hereby certifies: 1. The location of its principal office is: 2060 Broadway, Suite 400, Boulder, Colorado 80302. 2. The name, other than its own, under which the business is carried on is: The Lodge Casino at Black Hawk. 3. A brief description of the kind of business transacted under such assumed or trade name is: The operation of a gaming casino/lodge. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Limited Partnership or Limited Liability Companies complete this section. Corporations complete this section - -------------------------------------------------------------------------------- Black Hawk/Jacobs Entertainment, LLC By: /s/ Stephen R. Roark By: ------------------------------------ ---------------------------------- Stephen R. Roark, Manager Its ____________Title _______________ - -------------------------------------------------------------------------------- For office use only 19971161824 C $ 10.00 SECRETARY OF STATE 10-08-97 15:55:21 Mail to: Secretary of State Corporations Section 1560 Broadway, Suite 200 Denver, CO 80202 (303) 894-2251 MUST BE TYPED Fax (303) 894-2242 FILING FEE: $10.00 MUST SUBMIT TWO COPIES --- Please include a typed self-addressed envelope CERTIFICATE OF ASSUMED OR TRADE NAME Black Hawk/Jacobs Entertainment, LLC, a corporation, limited liability company under the laws of Colorado, being desirous of transacting a portion of its business under an assumed or trade name as permitted by 7-71-101, Colorado Revised Statutes, hereby certifies: 1. The location of its principal office is: 2060 Broadway, Suite 400, Boulder, CO 80302 2. The name, other than its own, under which the business is carried on is: The Seasons Buffet 3. A brief description of the kind of business transacted under such assumed or trade name is: Buffet Restaurant - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Limited Partnership or Limited Liability Companies complete this section. Corporations complete this section - -------------------------------------------------------------------------------- Black Hawk/Jacobs Entertainment, LLC - ------------------------------------ ------------------------------------- By /s/ Stephen R. Roark By ------------------------------------- ---------------------------------- Stephen R. Roark, Manager Its _____________Title _____________ - -------------------------------------------------------------------------------- For office use only 19971161025 C $ 10.00 SECRETARY OF STATE 10-06-97 15:55:21 Mail to: Secretary of State Corporations Section 1560 Broadway, Suite 200 Denver, CO 80202 (303)894-2251 MUST BE TYPED Fax (303)894-2242 FILING FEE:$10.00 MUST SUBMIT TWO COPIES --- Please include a typed self-addresssed envelope CERTIFICATE OF ASSUMED OR TRADE NAME Black Hawk/Jacobs Entertainment, LLC, a corporation, limited liability company under the laws of Colorado, being desirous of transacting a portion of its business under an assumed or trade name as permitted by 7-71-101, Colorado Revised Statutes, hereby certifies: 1. The location of its principal office is: 2060 Broadway, Suite 400, Boulder, CO 80302. 2. The name, other than its own, under which the business is carried on is: Jake's 3. A brief description of the kind of business transacted under such assumed or trade name is: Pub Restaurants - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Limited Partnership or Limited Liability Companies complete this section. Corporations complete this section - -------------------------------------------------------------------------------- Black Hawk/Jacobs Entertainment, LLC - ------------------------------------ ------------------------------------- By: /s/ Stephen R. Roark By: ------------------------------------ ---------------------------------- Stephen R. Roark, Manager Its ____________ Title _____________ - -------------------------------------------------------------------------------- COMPUTER UPDATE COMPLETE CAW For office use only 19971161826 C $ 10.00 SECRETARY OF STATE 10-08-97 15:55:21 Mail to: Secretary of State Corporations Section 1560 Broadway, Suite 200 Denver, CO 80202 (303) 894-2251 MUST BE TYPED Fax (303) 894-2242 FILING FEE: $10.00 MUST SUBMIT TWO COPIES --- Please include a typed self-addressed envelope CERTIFICATE OF ASSUMED OR TRADE NAME Black Hawk/Jacobs Entertainment, LLC, a corporation, limited liability company under the laws of Colorado, being desirous of transacting a portion of its business under an assumed or trade name as permitted by 7-71-101, Colorado Revised Statutes, hereby certifies: 1. The location of its principal office is: 2060 Broadway, Suite 400, Boulder, CO 80302 2. The name, other than its own, under which the business is carried on is: The White Buffalo Grill 3. A brief description of the kind of business transacted under such assumed or trade name is: Upscale Restaurant - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Limited Partnership or Limited Liability Companies complete this section. Corporations complete this section - -------------------------------------------------------------------------------- Black Hawk/Jacobs Entertainment, LLC - ------------------------------------ ------------------------------------- By /s/ Stephen R. Roark By ------------------------------------- ---------------------------------- Stephen R. Roark, Manager Its _____________ Title _____________ - -------------------------------------------------------------------------------- For office Use only 19971198349 M $ 5.00 SECRETARY OF STATE 12-10-97 14:16:52 Mail to: Secretary of State Corporations Section 1560 Broadway, Suite 200 Denver, CO 80202 (303) 894-2251 MUST BE TYPED Fax (303) 894-2242 FILING FEE: $5.00 MUST SUBMIT TWO COPIES --- STATEMENT OF CHANGE OF Please include a typed REGISTERED OFFICE OR self addressed envelope REGISTERED AGENT, OR BOTH Pursuant to the provisions of the Colorado Business Corporation Act, the Colorado Nonprofit Corporation Act, the Colorado Uniform Limited Partnership Act of 1981 and the Colorado Limited Liability Company Act, the undersigned, organized under the laws of: ___________________________________________________ submits the following statement for the purpose of changing its registered office or its registered agent, or both, in the state of Colorado: FIRST: The name of the corporation, limited partnership or limited liability company is: Black Hawk / Jacobs Entertainment, LLC SECOND: Street Address of current REGISTERED OFFICE is: 2060 Broadway, Suite 400, Boulder, CO 80302 (Include City, State, Zip) and if changed, the new street address is:______________________________ (Include City, State, Zip) THIRD: The name of its current REGISTERED AGENT is:____________________________ and if changed, the new registered agent is:____________________________ Signature of New Registered Agent_______________________________________ Principal place of business_____________________________________________ (City, State, Zip) The address of its registered office and the address of the business office of its registered agent, as changed, will be identical. FOURTH: If changing the principal place of business address ONLY, the new address is 17301 West Colfax, Suite 170, Golden, CO 80401 Signature /s/ illegible --------------------------- Title: V.P. ------------------------------ COMPUTER UPDATE COMPLETE CAW Revised 7/97 STATE OF COLORADO BIENNIAL REPORT OF A CORPORATION OR LIMITED LIABILITY COMPANY FEE $ 45.00 ON OR BEFORE DATE DUE 4:30:99 REPORT YEAR 1999 READ INSTRUCTION ON REVERSE SIDE BEFORE COMPLETING SUBMIT SIGNED FORM WITH FILING FEE THIS FORM MUST BE TYPED MAILING DATE --------------- INFORMATION BELOW IS ON FILE IN THIS OFFICE. DO NOT CHANGE PRE-PRINTED INFORMATION - -------------------------------------------------------------------------------- CORPORATE NAME REGISTERED AGENT, FOR OFFICE USE ONLY REGISTERED OFFICE CITY, STATE & ZIP 19991057965 C 19961146696 DLLC $ 60.00 STATE/COUNTRY OF INC CO SECRETARY OF STATE BLACK HAWK GAMING & 03-29-1999 11:29:27 BLACK HAWK/JACOBS ENTERTAINMENT, LLC DEVELOPMENT COMPANY INC 2060 BROADWAY STE 400 FIRST REPORT OR CORRECTIONS BOULDER CO 80302 IN THIS COLUMN - -------------------------------------------------------------------------------- Return completed reports to: TYPE NEW AGENT NAME Stephen R. Roark Departmental of State ------------------------------------------ Corporate Report Section SIGNATURE OF NEW REGISTERED AGENT 1560 Broadway, Suite 200 Denver, CO 8020 /s/ Stephen R. Roark ------------------------------------------ MUST HAVE A STREET ADDRESS 240 Main Street ------------------------------------------ CITY Black Hawk STATE CO ZIP 80422 - ----------------------------------- ------------------------------------------ OFFICERS NAME AND ADDRESS TITLE ------------------------------------------ ------------------------------------------ ------------------------------------------ - -------------------------------------------------------------------------------- ------------------------------------------ ------------------------------------------ ------------------------------------------ - -------------------------------------------------------------------------------- ------------------------------------------ ------------------------------------------ ------------------------------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DIRECTORS CP LIMITED LIABILITY (If you have less than 3 shareholders, you COMPANY MANAGERS may list less than 3 directors) ------------------------------------------ BH ENTERTAINMENT LTD C/O JACOBS ENTERTAINMENT LTD ------------------------------------------ 425 LAKESIDE AVE CLEVELAND OH 44114 ------------------------------------------ - -------------------------------------------------------------------------------- Black Hawk Gaming & Development Co, Inc. ------------------------------------------ 240 Main Street Black Hawk, CO 80422 ------------------------------------------ ------------------------------------------ - -------------------------------------------------------------------------------- ------------------------------------------ ------------------------------------------ ------------------------------------------ - -------------------------------------------------------------------------------- Address of Principal Place of Business Street: 240 Main Street ------------------------------------------------------------------------ City: Black Hawk Sate CO Zip 80422 -------------------- ------------ ----------------------------- SIGNATURE Under penalties of perjury and as an authorized officer, I declare that this biennial report and, if applicable, the statement of change of registered office and/or agent, has been examined by me and is, to the best of my knowledge and belief, true, correct, and complete. BY: /s/ Stephen R. Roark ---------------------------- Authorized Agent TITLE: President, Black Hawk, Gaming & Development Company, Inc. --------------------------------------------------------- Date March 29 19__ NOTE: DO NOT USE THIS BOX IF THIS IS YOUR FIRST REPORT!!! SEE INSTRUCTIONS ON REVERSE. IF THERE ARE NO CHANGES SINCE YOUR LAST REPORT. MARK THIS BOX. SIGN ABOVE AND RETURN WITH THE FEE AND BY THE DATE DUE INDICATED ABOVE(UPPER LEFT HAND CORNER). IF YOU ARE FILING AFTER THE DATE DUE ABOVE. CONTACT THIS OFFICE FOR THE PROPER FEE (303) 894-2251 SEE INSTRUCTIONS ON BACK EX-3.8 16 dex38.txt OPERATING AGREEMENT OF BLACK HAWK / JACOBS Exhibit 3.8 OPERATING AGREEMENT OF BLACK HAWK/JACOBS ENTERTAINMENT, LLC A COLORADO LIMITED LIABILITY COMPANY EFFECTIVE AS OF NOVEMBER 12, 1996 THIS OPERATING AGREEMENT made as of the 12th day of November, 1996 for Black Hawk/Jacobs Entertainment, LLC (the "Company") by and among Black Hawk Gaming & Development Company, Inc., a Colorado corporation ("Black Hawk"), and BH Entertainment Ltd., an Ohio limited liability company ("Entertainment"), and Diversified Opportunities Group Ltd., an Ohio limited liability company ("Diversified"). RECITALS -------- WHEREAS, concurrently herewith, Black Hawk and Diversified are entering into an Amended and Restated Purchase Agreement (the "Purchase Agreement"); WHEREAS, it is a condition to the closing of the transactions contemplated by the Purchase Agreement that the parties hereto form the Company on the terms and subject to the conditions hereinafter set forth; WHEREAS, the parties desire to form the Company as a limited liability company under the laws of the State of Colorado to develop and manage a casino project (the "Project") in the City of Black Hawk, County of Gilpin, State of Colorado; and WHEREAS, the parties desire to enter into this Operating Agreement to reflect certain agreements among them and to replace and supersede that certain Joint Venture Agreement dated December 15, 1994, by and between Black Hawk and Jacobs Investments, Inc.; Entertainment and Diversified being the assignees of Jacobs Investments, Inc. NOW, THEREFORE, in consideration of the foregoing, of mutual promises of the parties hereto, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby mutually agree as follows: ARTICLE I DEFINITIONS ----------- The following terms used in this operating Agreement shall have the following meanings (unless otherwise expressly provided herein): "Act" shall mean the Colorado Limited Liability Company Act. --- "Affiliate" means, with respect to any Person, (i) any Person directly or --------- indirectly controlling, controlled by, or under common control with such Person, (ii) any Person owning or controlling ten percent (10%) or more of the outstanding voting interests of such Person, (iii) any officer, director, or general partner of such Person, or (iv) any Person who is an officer, director, general partner, trustee, or holder of ten percent (10%) or more of the voting interests of any Person described in clauses (i) through (iii) of this sentence. For purposes of this definition, the term "controls," "is controlled by," or "is under common control with" shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person or Entity, whether through the ownership of voting securities, by contract or otherwise. "Annual Operating Plan" shall have the meaning ascribed in Section 5.11 of --------------------- this Operating Agreement. "Appraisal" shall mean the following process for determining the fair --------- market value of an interest in the Company: The fair market value of an interest in the Company shall be the value agreed upon by the Members, or if an agreement cannot be reached within thirty (30) days after such value is requested by any Member (the "Determination Date"), then within twenty (20) business days thereafter each Member shall select a reputable qualified appraiser, each such appraiser having no less than ten (10) years experience in the gaming industry and each being familiar with the prices then being paid for comparable businesses. If either Member shall fail to designate its appraiser within said twenty (20) business day period and thereafter shall fail to do so within three (3) days after written notice by the other party requesting such designation, then such appraiser shall be appointed by the office of the American Arbitration Association. The two appraisers shall separately complete their appraisals within thirty (30) days after the date that the later of them is designated. The two appraisers shall then meet together with the Members or their representatives, and at such meeting each appraiser shall present to the other a sealed letter setting forth the appraiser's judgment as to the fair market value of the interest in the Company and attempt to persuade all Members to reach agreement as to the value. If all of the Members (or their representatives) do not reach agreement, and if the higher amount set forth in either such letter shall not exceed one hundred ten percent (110%) of the lower amount, then the value shall be the average of the amounts set forth in the two letters. If, however, the higher amount set forth in either of the two letters shall exceed one hundred ten percent (110%) of the lower amount, then within ten (10) business days after the initial delivery of the sealed letters the two appraisers shall designate a third appraiser having the same minimum qualifications as the first two. If the first two appraisers shall fail to agree upon the designation of a third appraiser, then the third appraiser shall be appointed by the American Arbitration Association. The third appraiser shall conduct such investigations and hearing as he shall deem appropriate and within thirty (30) days after his date of designation shall choose a value in the range of the values determined by the appraisers selected by the Members as the fair market value as of the Determination Date. The decision of the third appraiser shall be in writing and shall be binding upon each Member. The costs of the Appraisal shall be shared by all Members in accordance with their Membership Interests. "Articles of Organization" shall mean the Articles of Organization of the ------------------------ Company as filed with the Office of the Secretary of State of the State of Colorado in the form attached as Exhibit A hereto, as the same may be amended from time to time. "Bankruptcy" means, with respect to any Person, (i) the making of an ---------- assignment for the benefit of creditors, (ii) the filing of a voluntary petition in bankruptcy, (iii) the adjudication of such Person as bankrupt or insolvent; (iv) the filing by such Person of a -2- petition or answer seeking for himself or itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under a statute, law or regulation; (v) the filing by such Person of an answer or other pleading admitting or failing to contest the material allegation of a petition filed against him or it in any proceeding of this nature; (vi) seeking, consenting to, or acquiescence by such Person in the appointment of a trustee, receiver, or liquidator of him or it or of all or any substantial part of his or its property; (vii) the commencement of any proceeding against such Person seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation, if such proceeding has not been dismissed within 120 days after such commencement; or (viii) the appointment without the consent of such Person or acquiescence of a trustee, receiver, or liquidator of such Person or of all or any substantial part of his or its properties, if the appointment is not vacated or stayed within 90 days, or if within 90 days after the expiration of any such stay, the appointment is not vacated. "Book Basis" means the adjusted basis of an item of property as reflected ---------- in the books of the Company, determined and maintained in accordance with this Operating Agreement and with the capital accounting rules contained in Treasury Regulation Section 1.704-1(b)(2)(iv). "Budget" means the Budget proposed and adopted with respect to a Fiscal ------ Year of the Company pursuant to Section 5.11 of this Operating Agreement. "Capital Account" means the account maintained by the Company for each --------------- Member in accordance with the provisions of Treasury Regulation Section 1.704-1(b) and Section 7.4 of this Operating Agreement. "Capital Interest" shall mean the proportion that a Member's Capital ---------------- Account bears to the aggregate Capital Accounts of all Members whose Capital Accounts have positive balances as adjusted from time to time. "Capital Proceeds" means the net cash proceeds realized by the Company ---------------- resulting from (1) a Capital Transaction, (2) any refinancing of indebtedness of the Company, or (3) the elimination of the necessity for any funded reserve in connection with any mortgage or other indebtedness of the Company. "Capital Transaction" means the sale, exchange, liquidation or other ------------------- disposition of, or any condemnation award or casualty loss recovery with respect to, all or substantially all of the property of the Company. "Code" shall mean the Internal Revenue Code of 1986, as amended. ---- "Company" shall refer to Black Hawk/Jacobs Entertainment, LLC. ------- -3- "Consent" means the written consent of a Person to do the act or thing for ------- which the Consent may be required. "Deficit Capital Account" shall mean with respect to any Member, the ----------------------- deficit balance, if any, in such Member's Capital Account as of the end of the taxable year, after giving effect to the following adjustments: (i) credit to such Capital Account any amount which such Member is obligated to restore under Section 1.704-1(b)(2)(ii)(c) of the Treasury Regulations, as well as any additions thereto pursuant to the next to last sentence of Sections 1.704-2(g)(1) and (i)(5) of the Treasury Regulations, after taking into account thereunder any changes during such year in partnership minimum gain (as determined in accordance with Section 1.704-2(d) of the Treasury Regulations) and in the minimum gain attributable to any partner nonrecourse debt (as determined under Section 1.704-2(i)(3) of the Treasury Regulations); and (ii) debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury Regulations. This definition of Deficit Capital Account is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and 1.704-2, and will be interpreted consistently with those provisions. "Depreciation" means, for each Fiscal Year, an amount equal to the ------------ depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such Fiscal Year, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes of an-asset at the beginning of such Fiscal Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Manager. "Entity" shall mean any general partnership, limited partnership, limited ------ liability company, corporation, joint venture, trust, business trust, cooperative or association or any foreign trust or foreign business organization. "Fiscal Year" shall mean the Company's fiscal year, which shall be the ----------- calendar year. "Gifting Member" shall mean any Member who gifts, bequeaths or otherwise -------------- transfers for no consideration (by operation of law or otherwise) all or any part of its Membership Interest in accordance with the provisions of Article IX of this Operating Agreement. -4- "Gross Asset Value" means, with respect to any asset, the asset's adjusted ----------------- basis for federal income tax purposes, except as follows: (i) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the mutual agreement of the Members, provided that the initial Gross Asset Values of the assets contributed to the Company pursuant to Section 7.1 hereof shall be the agreed values of such assets as set forth in Section 7.1; (ii) The Gross Asset Values of all Company assets may be adjusted to equal their respective gross fair market values, as determined by the mutual agreement of the Members as of the following times: (a) the acquisition of an additional interest by any new or existing Member in exchange for more than a de minimis contribution of property (including money); (b) the distribution by the Company to a Member of more than a de minimis amount of property as consideration for a Membership Interest; and (c) the liquidation of the Company within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses (a) and (b) above shall be made only if the Manager reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company; (iii) The Gross Asset Value of any Company asset distributed to any Member shall be adjusted to equal the gross fair market value of such asset on the date of distribution as determined by the mutual agreement of the Members; and (iv) The Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m) and Section 7.4 and subparagraph (iv) under the definition of Net Profits and Net Losses; provided, however, that Gross Asset Values shall not be adjusted pursuant to subparagraph (iv) to the extent the Manager determines that an adjustment pursuant to subparagraph (ii) of this definition is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (iv). If the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraph (i), (ii) or (iv) of this definition, then such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Net Profits and Net Losses. "Liquidator" means the Manager or, if there is no Manager at the time in ---------- question, such other Person as may be appointed in accordance with applicable law who shall be -5- responsible to take all actions related to the winding up and distribution of assets of the Company. "Manager" shall mean Entertainment or any other Person that accompanies or ------- succeeds it in that capacity in accordance with this Operating Agreement. "Member" shall initially mean each of Black Hawk, Entertainment and ------ Diversified, in their capacities as Members, and thereafter shall mean each of the foregoing so long as it remains a Member of the Company in accordance with the terms of this Operating Agreement, and each person who may hereafter become a Member in accordance with the terms of this Operating Agreement. "Member Capital" means an amount equal to the sum of all the Members' -------------- Capital Account balances determined immediately prior to an allocation to the Members pursuant to Section 8.1(b) of any Disposition Gain or Disposition Loss, increased by the aggregate amount of Disposition Gain to be allocated to the Members pursuant to Section 8.1(b)(i) or decreased by the aggregate amount of Disposition Loss to be allocated to the Members pursuant to Section 8.1(b)(ii). "Membership Interest" shall mean the entire interest of a Member in the ------------------- Company, including without limitation, the right to receive distributions (liquidation or otherwise) and allocations of profits and losses. Initial Membership Interests of the Members are as follows, although actual voting, governance and other rights deriving from membership, and the allocation of them, are subject to the specific provisions of this Operating Agreement: Black Hawk - 75% Entertainment - 24% Diversified - 1% "Net Cash Flow" means the Net Profits or Net Losses of the Company as shown ------------- on the books of the Company adjusted for any accrual items and further adjusted by the addition of all items set forth in subsection (i) below and by the deduction of all items set forth in subsection (ii) below: (i) (A) the amount of Depreciation taken in computing such taxable income; (B) all other receipts of the Company not included in taxable income (exclusive of Capital Contributions), the proceeds of loans and similar capital receipts provided for elsewhere; (C) the net proceeds of sale, exchange, condemnation, destruction or other event resulting from the disposition of any part (but not all or substantially all) of the property owned by the Company, to the extent not included in such taxable income; (D) amounts released from Reserves; and (E) any other funds deemed available for distribution and designated as Net Cash Flow by the Manager. -6- (ii) (A) all principal payments for the current Fiscal Year on all loans and on similar obligations of the Company, if any; (B) expenditures of the acquisition of property of the Company and similar capital outlay items not deducted for federal income tax purposes; and (C) amounts added to Reserves. Net Cash Flow shall be determined separately for each Fiscal Year and shall not be cumulative. "Net Profits" and "Net Losses" shall mean for each taxable year of the ----------- ---------- Company an amount equal to the Company's net taxable income or loss for such year as determined for federal income tax purposes (including separately stated items) in accordance with Section 703 of the Code with the following adjustments: (i) Any items of income, gain, loss and deduction allocated to Members pursuant to Section 8.2 shall not be taken into account in computing Net Profits or Net Losses for purposes of this Operating Agreement; (ii) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Profits and Net Losses (pursuant to this definition) shall be added to such taxable income or loss; (iii) Any expenditure of the Company described in Section 705(a)(2)(B) of the Code and not otherwise taken into account in computing Net Profits and Net Losses (pursuant to this definition) shall be subtracted from such taxable income or loss; (iv) In the event the Gross Asset Value of any Company asset is adjusted pursuant to clause (ii) or (iii) of the definition of Gross Asset Value, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Profits and Net Losses; (v) Gain or loss resulting from any disposition of any Company asset with respect to which gain or loss is recognized for federal income tax purposes shall be computed with reference to the Gross Asset Value of the asset disposed of; notwithstanding that the adjusted tax basis of such asset differs from its Gross Asset Value; and (vi) In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year. "Notice" means a writing containing the information required by this ------ Agreement to be communicated to a Person and sent by registered or certified United States mail, postage prepaid and registered or certified with returns receipt requested, or sent by some form of -7- overnight express delivery to such Person at the last known address of such Person or sent by facsimile (receipt confirmed). All Notices shall be effective upon being deposited in the United States mail or with such overnight express delivery service. However, the time period in which a response to any such Notice must be given shall commence to run from the date of delivery or attempted delivery as noted on the return receipt of the Notice by the addressee thereof or the records of the Entity effecting the overnight express delivery. Notwithstanding the foregoing, any written communication containing such information sent to such Person actually received by such Person shall constitute Notice for all purposes of this Agreement. "Operating Agreement" shall mean this Operating Agreement as originally ------------------- executed and as amended from time to time. "Person" shall mean any individual or Entity, and the heirs, executors, ------ administrators, legal representatives, successors and assigns of such "Person" where the context so permits. "Policy Board" shall mean the board established by the Members as ------------ contemplated by Section 5.3, which Policy Board shall have full responsibility and authority for the operation and management of the Company's business affairs. Initially, the Policy Board shall have five members (three appointed by Entertainment and two appointed by Black Hawk). "Project" shall have the meaning ascribed to it in the recital paragraphs. ------- "Reserves" shall mean, with respect to any fiscal period, funds set aside -------- or amounts allocated to such period to reserves which shall be maintained in amounts deemed sufficient by the Members for working capital or other reasonable business needs. "Required Interest" shall mean Members owning 100% of the Membership ----------------- Interests of the Company. "Selling Member" shall mean any Member which sells, assigns, or otherwise -------------- transfers for consideration all or any portion of its Membership Interest in accordance with the provisions of Article IX of this Operating Agreement. "Service" means the Internal Revenue Service. ------- "State" means the State of Colorado. ----- "Tax Matters Partner" means Entertainment. ------------------- "Transferring Member" shall, depending on the context, refer to a Selling ------------------- Member, a Gifting Member or both. -8- "Treasury Regulations", shall include temporary and final regulations -------------------- promulgated under the Code in effect as of the date of filing the Articles of organization and the corresponding sections of any regulations subsequently issued that amend or supersede such regulations. "Withdrawal Event" shall have the meaning ascribed in Section 12.1(a)(iii) ---------------- of this Operating Agreement. ARTICLE II FORMATION OF COMPANY -------------------- SECTION 2.1 Members. The names and business addresses of the initial ------- Members are as follows: Black Hawk Gaming & Development Company, Inc. 2060 Broadway, Suite 400 Boulder, Colorado 80302 BH Entertainment Ltd. c/o Jacobs Entertainment Ltd. 425 Lakeside Avenue Cleveland, Ohio 44114 Diversified Opportunities Group Ltd. c/o Jacobs Entertainment Ltd. 425 Lakeside Avenue Cleveland, Ohio 44114 2.2 Formation and Name. The Company was formed as a Colorado limited ------------------ liability company as of November 12, 1996, upon the filing of Articles of Organization with the Colorado Secretary of State. This Operating Agreement constitutes the sole agreement, and supersedes any prior oral or written agreements, of the Members relating to the Company. 2.3 Name. The name of the Company is Black Hawk/Jacobs Entertainment, LLC. ---- 2.4 Principal Place of Business. The principal place of business of the --------------------------- Company shall be 2060 Broadway, Suite 400, Boulder, Colorado 80302. The Company may locate its places of business and registered office at any other place or places as the Manager may from time to time determine. -9- 2.5 Registered Office and Registered Agent. The Company's initial -------------------------------------- registered office shall be at the office of its registered agent at 2060 Broadway, Suite 400, Boulder, Colorado 80302, and the name of its initial registered agent at such address shall be Black Hawk Gaming & Development Company, Inc. The registered office and registered agent may be changed from time to time by filing the address of the new registered office and/or the name of the new registered agent with the Secretary of State pursuant to the Act. 2.6 Term. The term of the Company shall commence upon the filing of the ---- Articles of Organization with the Colorado Secretary of State and shall expire on December 31, 2036, or such later date as may be fixed by amendment of this Operating Agreement, unless the Company is earlier dissolved in accordance with either the provisions of this Operating Agreement or the Act. ARTICLE III BUSINESS OF COMPANY ------------------- 3.1 Permitted Businesses. The business of the Company shall be the -------------------- development, ownership and management of the Project and in connection therewith: (a) to accomplish any lawful business whatsoever, or which shall at any time appear conducive to or expedient for the protection or benefit of the Company and its assets; (b) to exercise all other powers necessary to or reasonably connected with the Company's business which may be legally exercised by limited liability companies under the Act; and (c) to engage in all activities necessary, customary, convenient, or incident to any of the foregoing. ARTICLE IV GENERAL ECONOMIC TERMS AND SECURITY ----------------------------------- 4.1 Purchase Agreement Terms. Subject to the terms of the Purchase ------------------------ Agreement, Diversified is acquiring 190,476 Shares (as defined in the Purchase Agreement) and is loaning to Black Hawk an amount that ultimately will equal $6,000,000. The loan is evidenced by a Convertible Note of even date herewith (the "Note"). The Note provides, among other things, that prior to payment in full of the principal balance of the Note, all or any portion of the unpaid principal balance shall be convertible into Shares of Black Hawk at any time upon the election of Diversified and, if not yet fully converted, shall, unless the provisions of Article XI of this Operating Agreement apply, be automatically converted into Shares at such time as (i) Diversified has acquired or received all necessary -10- and appropriate regulatory, licensing and other approvals from the Colorado Division of Gaming (the "Division"), the Colorado Limited Gaming Control Commission (the "Commission") and the State and local liquor licensing authorities and (ii) the Commission approves the issuance to the Company of a retail gaming license (such date of conversion being hereafter referred to as the "Conversion Date"). The proceeds of the loan received by Black Hawk pursuant to the Note shall be contributed to the capital of the Company by Black Hawk 4.2 NASD Approval. Notwithstanding anything to the contrary contained in ------------- Section 4.1, in the event Black Hawk does not obtain NASD Approval (as defined in the Purchase Agreement), Diversified shall have no further obligation to make any investment in or loan to Black Hawk beyond the acquisition of the 190,476 Shares and the initial $1,500,000 loan for the First Note (as defined in the Purchase Agreement). At such time, the First Note shall be deemed to have been cancelled, the 190,476 Shares acquired by Diversified shall be deemed to have been redeemed by Black Hawk, and Diversified shall be deemed to have made a $2,500,000 capital contribution to the Company and the parties' Membership Interests and other interests in the Company shall be adjusted so that Black Hawk shall have a 50% Membership Interest and Diversified and Entertainment shall have an aggregate 50% Membership Interest and, thereafter, the parties shall make such capital contributions as are necessary to equalize their Capital Accounts in accordance with the foregoing. 4.3 Security. As security for Black Hawk's obligations to Diversified under -------- the Note, pursuant to the terms of an Assignment, Pledge and Security Agreement (the "Security Agreement") of even date herewith, Black Hawk is granting Diversified a first priority lien in 100% of Black Hawk's Membership Interest and the products and proceeds thereof, including but not limited to its Capital Interest, interest in Net Profits and Net Losses and Net Cash Flow of the Company, and all other rights and privileges associated with Black Hawk's membership in the Company; provided, however, that Diversified's remedies upon an event of default under the Note shall be limited (i) to obtaining accrued but unpaid interest thereon and (ii) in the same manner as if it exercised its Purchase Right described in Sections 11.2(a) and (b), below, (provided that all of the events described in Section 11.2(b) occur). ARTICLE V MANAGEMENT ---------- 5.1 Manager. -------- (a) Subject to the other provisions of this Operating Agreement, the business and affairs of the Company shall be managed by the Manager. The Manager shall direct, manage and control the business of the Company to the best of its ability. Except for decisions, actions or situations in which the approval of the Policy Board or the -11- Members is expressly required by this Operating Agreement or by non-waivable provisions of applicable law, the Manager shall have full and complete authority, power and discretion to manage and control the business, affairs and properties of the Company, to make all decisions regarding those matters and to perform any and all other acts or activities customary or incident to the management of the Company's business. (b) No Person may serve as Manager unless it is a Member and holds at least a twenty percent (20%) Membership Interest in the Company. (c) The Members hereby designate Entertainment as the initial Manager; provided, however, that from and after the Conversion Date, Black Hawk also shall be designated as a Manager and, thereafter, Entertainment and Black Hawk shall have equal rights as Manager. Notwithstanding the foregoing, following the Conversion Date, Entertainment shall continue to serve as the Tax Matters Partner. 5.2 Powers and Duties of Manager. ---------------------------- (a) Without limiting the generality of Section 5.1, but subject to the limitations set forth in Section 5.4, the Manager shall have the power and authority, on behalf of the Company to: (i) Cause the Company to pay all required taxes, rents, assessments and other obligations of the Company; (ii) On behalf of the Company, execute and supervise contracts to be entered into by the Company and execute all other instruments and documents, including, without limitation, checks, drafts, notes and other negotiable instruments, mortgages or deeds of trust, security agreements, financing statements, documents providing for the acquisition, mortgage or disposition of the Company's property, assignments, bills of sale, leases and any other instruments or documents necessary, in the opinion of the Manager, to the business of the Company; (iii) Borrow money for the Company from banks, other lending institutions, Members, or Affiliates of Members in accordance with this Agreement or on such terms as may be approved by the Members, and in connection therewith, to hypothecate, encumber and grant security interests in the assets of the Company to secure repayment of the borrowed sums. No debt shall be contracted or liability incurred by or on behalf of the Company except to the extent expressly provided in this Operating Agreement or as approved by the Policy Board; (iv) Purchase liability and other insurance to protect the Company's property and business; -12- (v) Invest any Company funds temporarily (by way of example but not limitation) in time deposits, short-term governmental obligations, commercial paper or other investments; and (vi) Take any action and do and perform all other acts which (A) are necessary or appropriate to the conduct of the Company's business, including all actions necessary to fulfill the Company's obligations to maintain the development of the Project, but (B) do not require approval of the Policy Board under this Operating Agreement, unless such action or acts are specifically authorized by the Budget or the Annual Operating Plan. (b) The Manager shall be responsible for and hereby covenants that: (i) as Tax Matters Partner, it will provide: (A) notice of each Member's name, address and profits interest to be furnished to the Service in accordance with Section 6223(c) of the Code, provided the Tax Matters Partner has knowledge of such Member's name, address and profits interest, (B) notice of all administrative and judicial proceedings for the adjustment at the partnership (Company) level of partnership (Company) items shall be sent to each known Member, and (C) if the Service notifies the Company of any administrative proceeding, notice will be sent to the Service in accordance with Section 6230(e) of the Code; (ii) it will exercise good faith in all activities relating to the conduct of the business of the Company and will take no action with respect to the business and property of the Company which is not reasonably related to the achievement of the purpose of the Company; (iii) extended risk insurance in favor of the Company acceptable to the Policy Board and workmen's compensation and public liability insurance in favor of the Company in amounts satisfactory to the Policy Board will be kept in force during the term of the Company as to property of the Company; (iv) all funds of the Company will be deposited in a separate bank account or accounts as shall be determined by the Manager; (v) at the Company's cost and expense, it will provide or cause to be provided each Member (A) within thirty (30) days after the end of each fiscal quarter, a report of operations for such quarter, including a balance sheet, a statement of income and expenses and a cash flow statement for the quarter then ended, (B) within ninety (90) days after the end of each Fiscal Year of the Company, reviewed and compiled and, if necessary, audited financial statements prepared by Deloitte & Touche (or such other independent accountants as may be selected by the Members) in accordance with generally accepted accounting principles and such -13- financial information with respect to such Fiscal Year of the Company as shall be reportable for federal and state income tax purposes, (C) tax returns for the Company as set forth in Section 8.10; and (D) regular and periodic (but not less than quarterly) reports and updates regarding the Project; (vi) comply with all contracts, agreements and obligations and all governmental rules, regulations, laws, ordinances and requirements, applicable to the Project and management of the Company; and (vii) in hiring professionals on behalf of the Company, it will consider, on a reasonable basis, any business issues or concerns raised by any Member with respect to any one or more candidates for such engagement. 5.3 Policy Board. ------------ (a) Subject to the authority granted to the Manager, the Policy Board shall have full authority for operating and managing the Company and the Project. Actions and decisions of the Policy Board shall require the vote or Consent of a majority of the members of the Policy Board. The Policy Board shall make all decisions on behalf of the Company not specifically reserved herein to the Manger. (b) There shall be five Members of the Policy Board. The Policy Board members and the Member of the Company appointing such individuals are as follows: Entertainment Black Hawk ------------- ---------- 1) Jeffrey P. Jacobs 1) Robert D. Greenlee 2) David C. Grunenwald 2) Stephen R. Roark 3) Robert H. Hughes All members of the Policy Board shall serve in such capacity without compensation from the Company. Each Member of the Company may at any time and from time to time upon Notice to the other Members replace any of its designees to the Policy Board should such designee die, become disabled, resign or for any reason cease to serve on the Policy Board. (c) From and after the date on which Diversifed controls Black Hawk's Board of Directors, one of the Members of the Policy Board designated by Entertainment shall resign and Black Hawk shall have the right to nominate the fifth member of the Policy Board. If, however, Jeffrey P. Jacobs ("Jacobs") ceases to be Chief Executive Officer or Chairman of the Board of Black Hawk, the Policy Board shall consist of six members, with three members being designated by each of Entertainment and Black Hawk and thereafter decisions of the Policy Board shall require the vote or consent of four of the members of the Policy Board. -14- 5.4 Restrictions on Authority of the Manager. ---------------------------------------- The Manager shall not have the authority to, and covenants and agrees that it shall not, do any of the following acts without the majority Consent of the members of the Policy Board: (a) Cause or permit the Company to engage in any activity that is not consistent with the purposes of the Company as set forth in Section 3.1 hereof; (b) Do any act in contravention of this Operating Agreement; (c) Do any act which would make it impossible to carry on the ordinary business of the Company, except as otherwise provided in this Operating Agreement; (d) Confess a judgment against the Company or execute an assignment for the benefit of creditors; (e) Utilize Company property, or assign rights in specific property of the Company, for other than a Company purpose; (f) Perform any act that would cause the Company to conduct business in a state which has neither enacted legislation which permits limited liability' companies to organize in such state nor permits the Company to register to do business in such state as a foreign limited liability company; (g) Cause the Company to voluntarily take any action that would cause Bankruptcy of the Company; (h) Cause the Company to acquire any equity or debt securities of any Member or any of its Affiliates, or otherwise make loans to any Member or any of its Affiliates; (i) Direct the business and affairs of the Company and exercise the rights and powers granted by Section 5.2 in a manner that would cause or effect a significant change in the nature of the Company's business; (j) Cause the Company to admit any additional Members; (k) Sell, lease, encumber or otherwise dispose of all or any part of the Project or Company assets, except for a liquidating sale in connection with the dissolution of the Company or the casual sale or other disposition of Company assets with a fair market value of less than $10,000 in a single transaction or $100,000 in the aggregate; -15- (1) Except as otherwise contemplated by this Agreement, cause the Company to enter into any contract or obligation in excess of $50,000; (m) Borrow money on behalf of the Company; (n) Except as otherwise contemplated by this Agreement, cause the Company to enter into any contract or agreement with any Affiliate of any Member, unless the compensation provided thereunder is in accordance with Section 6.7 and the services to be provided are approved by the Manager and are reasonably necessary for the Company's business; (o) Cause dissolution of the Company; (p) Establish, add to and release funds from Reserves; (q) Cause the Company to enter into any joint venture, partnership or other Entity; or (r) Agree or consent to any material amendment of, or the execution of, any Agreement, contract or other document relating to the Project. 5.5 Duties of Manager and Policy Board. Each of the Manager and Policy ---------------------------------- Board shall perform their respective duties in good faith, in a manner each reasonably believes to be in the best interests of the Company, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. 5.6 Managers and Members of the Policy Board Have No Exclusive Duty to ------------------------------------------------------------------ Company. Neither the Manager nor the members of the Policy Board shall be - ------- required to manage the Company as its sole and exclusive function and each (and/or any Member) (i) may have other business interests and may engage in other activities in addition to those relating to the Company, including, without limitation, subject to this Agreement, and the Master Joint Venture Agreement (as defined in the Purchase Agreement), participation in ventures which compete, or may compete, with the business of the Company and (ii) shall incur no liability to the Company or to any of the Members as a result of engaging in any such other business or venture. 5.7 Bank Accounts. The Manager may from time to time open bank accounts in ------------- the name of the Company, and the Policy Board shall designate the sole signatories on such accounts. 5.8 Resignation. The Manager of the Company may resign at any time by ----------- giving Notice to the Members. Any such resignation of a Manager shall take effect upon receipt of Notice thereof or at such later time as shall be specified in such Notice; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to -16- make it effective. The failure of a Manager to satisfy or to continue to satisfy the requirements of Section 5.1(b) shall be deemed to constitute the resignation of such Manager, effective immediately and without Notice or any further action upon such failure. Upon resignation of a Manager, until a new Manager is appointed pursuant to Section 5.8, the management of the Company shall revert to and be vested in the Policy Board. The resignation of a Manager shall not affect the former Manager's rights as a Member and shall not constitute a withdrawal of a Member. 5.9 Vacancies. Any vacancy occurring for any reason in the position of --------- Manager of the Company shall be filled by Entertainment until the Conversion Date and, thereafter, by the Members holding the Required Interest. 5.10 Right to Rely on the Manager. Any Person dealing with the Company may ---------------------------- rely (without duty of further inquiry) upon a certificate signed by the Manager as to: (a) The identity of the Manager or any Member; (b) The existence of nonexistence of any fact or facts which contribute a condition precedent to acts by the Manager or which are in any other manner germane to the affairs of the Company; (c) The Persons who are authorized to execute and deliver any instrument or document of the Company; or (d) Any act or failure to act by the Company or any other matter whatsoever involving the Company or any Member with respect to the business of the Company. 5.11 Annual Operating Plan and Budget. -------------------------------- (a) The Manager shall prepare for the approval of the Policy Board, which approval shall not be unreasonably withheld, each Fiscal Year (no later than thirty (30) days prior to the end of the then current Fiscal Year) a business plan ("Annual Operating Plan") for the next Fiscal Year. Each Annual Operating Plan shall consist of a strategic plan setting forth the Company's goals and objectives regarding the Project during the next Fiscal Year. Any such Annual Operating Plan shall also include such other information or other matters necessary in order to inform the Policy Board of the Company's business and prospects and to enable the Policy Board to make an informed decision with respect to their approval of such Annual Operating Plan. (b) The Manager shall prepare for the approval of the Policy Board, which approval shall not be unreasonably withheld, each Fiscal Year (no later than thirty (30) days prior to the end of the then current Fiscal Year) a budget ("Budget") for the next Fiscal Year. If the proposed Budget for any given year is not approved by the Policy Board by the -17- first day of such year, then, until such time as the Members approve a Budget for that year, the Manager shall be authorized to expend only such funds as are required to preserve and protect the value of the Project and satisfy the Company's obligations under existing contracts with Persons. ARTICLE VI RIGHTS AND OBLIGATIONS OF MEMBERS --------------------------------- 6.1 Limitation of Liability. Each Member's liability shall be limited as ----------------------- set forth in this Operating Agreement, the Act and other applicable law. A Member will not be personally liable for any debts, obligations, liabilities or losses of the Company beyond its respective Capital Contributions and any obligation of a Member under Section 7.1, 7.2 or 7.4 to make Capital Contributions, as specifically agreed in accordance with Section 7.5 or as otherwise required by law. 6.2 List of Members. Upon written request of any Member, the Manager shall --------------- provide a list showing the names, addresses and Membership Interests of all Members. 6.3 Company Books. In accordance with the Act, at the expense of the ------------- Company, the Manager shall maintain and preserve, during the term of the Company, and for five (5) years thereafter, all books, records and accounts of all operations and expenditures of the Company and other relevant Company documents. Upon reasonable request, each Member (or its representative) shall have the right, during ordinary business hours, to inspect and copy such Company documents at the requesting Member's expense. In addition to complete accounting records, at a minimum, the Company shall keep at its principal place of business the following records: (a) A current list of the full name and last known business, residence, or mailing address of each Member, assignee, member of the Policy Board and Manager, both past and present; (b) A copy of the Articles of Organization of the Company and all amendments thereto, together with executed copies of any powers of attorney pursuant to which any amendment has been executed; (c) Copies of the Company's federal, state, and local income tax returns and reports, if any, for the four most recent years; (d) Copies of the Company's currently effective written Operating Agreement, copies of any writings permitted or required with respect to a Member's obligation to contribute cash, property or services, and copies of any financial statements of the Company for the three most recent years; -18- (e) Minutes of every annual, special meeting and court-ordered meeting of the Manager or the Members; and (f) Any written consents obtained from Members for actions taken by Members without a meeting and from members of the Manager for actions taken by the Manager without a meeting. 6.4 Liability of a Member to the Company. A Member who receives a ------------------------------------ distribution in violation of this Agreement or the Act is liable to the Company to the extent now or hereafter provided by the Act. 6.5 No Commitments on Behalf of the Company. Except as provided in this --------------------------------------- Operating Agreement, each Member agrees that it will not take any action which will commit or bind, or purport to commit or bind, the Company or any other Member to any act, agreement, contract or undertaking of any kind or nature whatsoever, or incur debt in the name of or on behalf of the Company or create any lien upon any of the properties or the other assets of the Company or hold itself out as authorized to act on behalf of the Company or any Member, unless permitted by this Operating Agreement or expressly authorized in advance to do so by approval of the other Member. Each Member agrees that it will indemnify the Company and the other Member(s) against any and all claims, damages, losses and liabilities to which the Company or any other Member may be or become subject arising or resulting from the breach by such Member of this Section 6.5. 6.6 Payment of Costs and Expenses. All reasonable costs and expenses of the ----------------------------- Company and (to the extent fairly allocable to the Company) of the Manager and/or the Policy Board will be borne by and charged to the Company, including, without limitation: (i) out-of pocket expenses incurred by the Company, the Manager or the Policy Board in connection with the organization of the Company; (ii) fees and expenses of consultants, appraisers, custodians, counsel, independent public accountants, actuaries and other agents; (iii) finders, placement, brokerage and other similar fees; (iv) out-of-pocket costs of meetings with (including travel), and reports to, the Members or the Policy Board; (v) costs and expenses incurred for the preparation and distribution of financial reports, tax reports, and other information for the benefit of the Members or as specifically requested by a Member; (vi) any taxes, fees or other governmental charges levied against the Manager or its income or assets or in connection with its business or operations; and (vii) costs of any agency or administrative actions or hearings, any governmental action or third-party litigation or other matters that are the subject of indemnification pursuant to Article X hereof; (viii) costs of winding-up and liquidating the Company, and (ix) all other reasonable costs and expenses of the Company, the Manager or the Policy Board in connection with this Agreement. 6.7 Member or Affiliates Dealing With Company. ----------------------------------------- -19- (a) A Member or any Affiliate of a Member shall have the right to contract or otherwise deal with the Company for the sale of goods or services only if (i) the terms and conditions of such contract are fully disclosed in writing to all Members not less than thirty (30) business days prior to the effective date of such contract, (ii) compensation paid or promised for such goods or services is reasonable and competitive (i.e., at fair market value) and is paid only for goods or services actually furnished to the Company, (iii) the goods or services to be furnished are reasonable for and necessary to the Company, and (iv) the terms for the furnishing of such goods and services are at least as favorable to the Company as would be obtainable in an arm's length transaction. Any contract covering such transactions shall be in writing. Any payment made to a Member or any Affiliate of a Member for such goods or services shall be fully disclosed to all Members, and no Affiliate shall, by the making of lump-sum payments to any other Person for disbursement by such other Person, circumvent the provisions of this Section 6.7. (b) Notwithstanding the provisions of Section 6.7(a), no Member or Affiliate of a Member shall: (i) participate in any arrangement which would circumvent the provisions of Section 6.7(a), including but not limited to receipt of a rebate or give-up; or (ii) receive any insurance brokerage fee or write any insurance policy covering the Company. 6.8 Member Loans. Nothing in this Operating Agreement shall prevent any ------------ Member from making secured or unsecured loans to the Company by agreement with the Company and approval of all of the Members; provided, however, each Member shall be entitled to proportionately participate in making such loan(s) on the same terms as made by any Member. ARTICLE VII CAPITAL CONTRIBUTIONS MEMBER LOANS, ---------------------------------- FINANCIAL OBLIGATIONS AND CAPITAL ACCOUNTS -------------------------------------------- 7.1 Members' Capital Contributions. ------------------------------ (a) As its Capital Contribution to the Company, Entertainment and Diversified have or will assign, or cause to be assigned, and contribute those items set forth on Exhibit B. For Capital Account purposes, the Members acknowledge that the Agreed Value of such Capital Contribution is $5,000,000. (b) As its Capital Contribution to the Company, Black Hawk has or will assign, or cause to be assigned, and contribute those items set forth on Exhibit B. For -20- Capital Account purposes, the Members acknowledge that the Agreed Value of such Capital Contribution is $15,000,000. 7.2 Additional Capital. Except as may be required or desired by the Policy ------------------ Board, no Member shall be required to contribute capital to the Company beyond its initial Capital Contribution. Additional Capital Contributions shall be made by each of the Members in proportion to their Membership Interests. 7.3 Provisions Not for Benefit of Creditors. None of the terms, covenants, --------------------------------------- obligations or rights contained in this Article VII is or shall be deemed to be for the benefit of any person or Entity other than the Members and the Company, and no such third person shall under any circumstances have any right to compel any actions or payments by the Manager and/or the Members. 7.4 Capital Accounts. ---------------- (a) A separate Capital Account will be maintained for each Member. Each Member's Capital Account will be increased by (1) the amount of money contributed by such Member to the Company; (2) the fair market value of property contributed by such Member to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Section 752 of the Code); (3) allocations to such Member of Net Profits; (4) any items in the nature of income and gain which are specially allocated to the Member pursuant to paragraphs (a), (b), (c), (d), (e), (i) and/or (j) of Section 8.2; and (5) allocations to such Member of income described in Section 705(a)(1)(B) of the Code. Each Member's Capital Account will be decreased by (1) the amount of money distributed to such Member by the Company; (2) the fair market value of property distributed to such Member by the Company (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under Section 752 of the Code); (3) allocations to such Member of expenditures described in Section 705(a)(2)(B) of the Code; (4) any items in the nature of deduction and loss that are specially allocated to the Member pursuant to paragraphs (a), (b), (c), (d), (e), (f), (i) and/or (j) of Section 8.2; and (5) allocations to the account of such Member of Net Losses. (b) In the event of a permitted sale or exchange of a Membership Interest in the Company, the Capital Account of the transferor shall become the Capital Account of the transferee to the extent it relates to the transferred Membership Interest in accordance with Section 1.704-1(b)(2)(iv) of the Treasury Regulations. (c) The manner in which Capital Accounts are to be maintained pursuant to this Section 7.4 is intended to comply with the requirements of Section 704(b) of the Code and the Treasury Regulations promulgated thereunder. If, in the opinion of the Company's accountants, the manner in which Capital Accounts are to be maintained pursuant to the preceding provisions of this Section 7.4 should be modified in order to comply with Section 704(b) of the Code and the Treasury Regulations thereunder, then -21- notwithstanding anything to the contrary contained in the preceding provisions of this Section 7.4, the method in which Capital Accounts are maintained shall be so modified; provided, however, that any change in the manner of maintaining Capital Accounts shall not materially alter the economic agreement between or among the Members. (d) Upon liquidation of the Company (or any Member's Membership Interest or an assignee's Membership Interest, except as otherwise provided in this Operating Agreement), liquidating distributions will be made in accordance with the positive Capital Account balances of the Members and assignees, as determined after taking into account all Capital Account adjustments for the Company's taxable year during which the liquidation occurs. Liquidation proceeds will be paid in accordance with Section 12.3(b). The Company may offset damages for breach of this Operating Agreement by a Member or assignee whose interest is liquidated (either upon the withdrawal of the Member or the liquidation of the Company) against the amount otherwise distributable to such Member. (e) Except as otherwise required in the Act (and subject to Sections 6.1 and 6.4), no Member or assignee shall have any liability to restore all or any portion of a deficit balance in such Member's or assignee's Capital Account. 7.5 Withdrawal or Reduction of Members' Contributions ------------------------------------------------- (a) A Member shall not receive out of the Company's property any part of its Capital Contribution until all liabilities of the Company, except liabilities to Members on account of their Capital Contributions, have been paid or there remains property of the Company sufficient to pay them. (b) A Member, irrespective of the nature of its Capital Contribution, has only the right to demand and receive cash in return for its Capital Contribution. ARTICLE VIII ALLOCATIONS, DISTRIBUTIONS, ELECTIONS AND REPORTS ------------------------------------------------- 8.1 (a) Allocations of Profits and Losses from Operations. Subject to ------------------------------------------------- Section 8.1(b) and 8.2 the Net Profits and Net Losses of the Company for each Fiscal Year shall be allocated to the Members in proportion to their respective Membership Interests. (b) Allocations of Gain or Loss Upon Sale or Other Disposition of the ----------------------------------------------------------------- Property Upon Liquidation of the Company. The Net Profits or Net Losses from the - ---------------------------------------- sale or other disposition of the property or any portion thereof (such Net Profits or Net Losses determined by reference to the Book Basis of such property to the Company, and without including any income from interest on any deferred portion of the sale price) ("Disposition Gain" and Disposition Loss," respectively) for each fiscal year of the Company shall be allocated to the Members as follows: -22- (i) Disposition Gain. Subject to the allocations set forth in Sections ---------------- 8.2, Disposition Gain shall be allocated to the Members as follows: (A) First, to any Members with deficit balances in their respective Capital Accounts, until such balances are restored to zero; (B) Second, among the Members in such proportions and in such amounts as would result in the Capital Account balance of each Member equaling, as nearly as possible, the amount of the distribution that such Member would receive if an amount equal to the Member Capital were distributed to the Members pursuant to Section 8.4; and (C) Any remaining Disposition Gain shall be allocated to the Members in accordance with their respective Percentage Interests. (ii) Disposition Loss. Subject to the allocations set forth in Sections ---------------- 8.2, Disposition Loss shall be allocated to the Members as follows: (A) First, to those Members with positive balances in their respective Capital Accounts in amounts equal to their respective Capital Account balances; provided, however, that if the amount of Disposition Loss to be allocated is less than the sum of the Capital Account balances of all Members having positive Capital Account balances, then the Disposition Loss shall be allocated to such Members in such proportions and in such amounts as would result in the Capital Account balance of each such Member equaling, as nearly as possible, the amount of the distribution that such Member would receive if an amount equal to the Member Capital were distributed to such Members pursuant to Section 8.4; and (B) Any remaining Disposition Loss shall be allocated to the Members in accordance with their respective Membership Interests. (iii) Interest Income on Sale. Income from interest on any deferred portion ----------------------- of the Net Capital Proceeds with respect to a sale or other disposition of Property shall not be deemed to be gain on such sale, and such income shall be considered an item of gross income and allocated to the Member receiving the interest to which such income is attributable. 8.2 Special Allocations to Capital Accounts and Certain Other Income Tax -------------------------------------------------------------------- Allocations. Notwithstanding Section 8.1 hereof: - ----------- (a) In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the -23- Treasury Regulations, which create or increase a Deficit Capital Account of such Member, then items of Company income and gain (consisting of a pro rata portion of each item of Company income, including gross income, and gain for such year and, if necessary, for subsequent years) shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Deficit Capital Account so created as quickly as possible. It is the intent that this Section 8.2(a) be interpreted to comply with the alternate test for economic effect set forth in Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations. (b) In the event any Member would have a Deficit Capital Account at the end of any Company taxable year which is in excess of the sum of any amount that such Member is obligated to restore to the Company under Section 1.704-1(b)(2)(ii)(c) of the Treasury Regulations and such Member's share of minimum gain as defined in Section 1.704-2(g)(1) of the Treasury Regulations (which is also treated as an obligation to restore in accordance with Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations), the Capital Account of such Member shall be specially credited with items of Membership income (including gross income) and gain in the amount of such excess as quickly as possible. (c) Notwithstanding any other provision of this Section 8.2, if there is a net decrease in the Company's minimum gain as defined in Treasury Regulation Section 1.704-2(d) during a taxable year of the Company, then, the Capital Account of each Member shall be allocated items of income (including gross income) and gain for such year (and if necessary for subsequent years) equal to that Member's share of the net decrease in Company minimum gain. This Section 8.2(c) is intended to comply with the minimum gain chargeback requirement of Section 1.704-2 of the Treasury Regulations and shall be interpreted consistently therewith. If (i) in any taxable year that the Company has a net decrease in the Company's minimum gain, (ii) the minimum gain chargeback requirement would cause a distortion in the economic arrangement among the Members, and (iii) it is not expected that the Company will have sufficient other income to correct that distortion, then the Manager may in its discretion (and shall, if requested to do so by a Member) seek to have the Internal Revenue Service waive the minimum gain chargeback requirement in accordance with Treasury Regulation Section 1.704-2(f)(4). (d) Items of Company loss, deduction and expenditures described in Section 705(a)(2)(B) which are attributable to any nonrecourse debt of the Company and are characterized as partner (Member) nonrecourse deductions under Section 1.704-2(i) of the Treasury Regulations shall be allocated to the Members' Capital Accounts in accordance with said Section 1.704-2(i) of the Treasury Regulations. (e) Beginning in the first taxable year in which there are allocations of "nonrecourse deductions" (as described in Section 1.704-2(b) of the Treasury Regulations) such deductions shall be allocated to the Members in the same manner as Net Profit or Net Loss is allocated for such period. -24- (f) In accordance with Section 704(c)(1)(A) of the Code and Section 1.704-1(b)(2)(i)(iv) of the Treasury Regulations, if a Member contributes property with a fair market value that differs from its adjusted basis at the time of contribution, income, gain, loss and deductions with respect to the property shall, solely for federal income tax purposes (and not for Capital -------------------------------------- Account purposes), be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company and its fair market value at the time of contribution. (g) Pursuant to Section 704(c)(1)(B) of the Code, if any contributed property is distributed by the Company other than to the contributing Member within five years of being contributed, then, except as provided in Section 704(c)(2) of the Code, the contributing Member shall, solely for federal income ------------------------- tax purposes (and not for Capital Account purposes), be treated as recognizing - ------------ gain or loss from the sale of such property in an amount equal to the gain or loss that would have been allocated to such Member under Section 704(c)(1)(A) of the Code if the property had been sold at its fair market value at the time of the distribution. (h) In the case of any distribution by the Company to a Member or assignee, such Member or assignee shall, solely for federal income tax purposes -------------------------------------- (and not for Capital Account purposes), be treated as recognizing gain in an amount equal to the lesser of (i) the excess (if any) of (A) the fair market value of the property (other than money) received in the distribution over (B) the adjusted basis of such Member's Membership Interest or assignee's Membership Interest in the Company immediately before the distribution reduced (but not below zero) by the amount of money received in the distribution, or (ii) the Net Precontribution Gain (as defined in Section 737(b) of the Code) of the Member or assignee. The Net Precontribution Gain means the net gain (if any) which would have been recognized by the distributes Member or assignee under Section 704(c)(1)(B) of the Code of all property which (1) had been contributed to the Company within five years of the distribution, and (2) is held by the Company immediately before the distribution, had been distributed by the Company to another Member or assignee. If any portion of the property distributed consists of property which had been contributed by the distributes Member or assignee to the Company, then such property shall not be taken into account under this Section 8.2(h) and shall not be taken into account in determining the amount of the Net Precontribution Gain. If the property distributed consists of an interest in an Entity, the preceding sentence shall not apply to the extent that the value of such interest is attributable to the property contributed to such Entity after such interest had been contributed to the Company. -25- (i) All recapture of income tax deductions resulting from sale or disposition of company property shall be allocated to the Member or Members to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Member is allocated any gain from the sale or other disposition of such property. (j) Any credit or charge to the Capital Accounts of the Members pursuant to Sections 8.2(a), (b), (c), (d), and/or (e) hereof shall be taken into account in computing subsequent allocations of profits and losses pursuant to Section 8.1, so that the net amount of any items charged or credited to Capital Accounts pursuant to Sections 8.1 and 8.2(a), (b), (c), (d), and/or (e) shall, to the extent possible, be equal to the net amount that would have been allocated to the Capital Account of each Member pursuant to the provisions of this Article VIII if the special allocations required by Sections 8.2(a), (b), (c), (d), and/or (e) hereof had not occurred. 8.3 Intentionally Omitted. 8.4 Distributions. Except as provided in Section 12.3, all Company Net Cash ------------- Flow, Capital Proceeds, or other cash or property shall be distributed at least quarterly, after payment of debts of the Company to the extent required (including the payment of debts to Members) and the setting aside of any Reserves which the Members deem reasonably necessary for contingent, unforeseen or unmatured Company obligations, to the Members in the same manner as Net Profits and Net Losses are allocated as set forth in Section 8.1. 8.5 Limitation Upon Distributions. No distribution shall be declared and ----------------------------- paid unless, after the distribution is made, the then fair market value of the assets of the Company are in excess of all liabilities of the Company, except liabilities to Members on account of their contributions. 8.6 Priority and Return of Capital. Except as may be expressly provided in ------------------------------ this Article VIII, no Member or assignee shall have priority over any other Member or assignee, either as to the return of Capital Contributions or as to Net Profits, Net Losses or distributions; provided that this Section shall not apply to loans (as distinguished from Capital Contributions) which a Member has made to the Company. 8.7 Accounting Principles. The profits and losses of the Company shall be --------------------- determined in accordance with generally accepted accounting principles applied on a consistent basis. 8.8 Interest on and Return of Capital Contributions. No Member shall be ----------------------------------------------- entitled to interest on its Capital Contribution or to return of its Capital Contribution, except as otherwise specifically provided for herein. -26- 8.9 Accounting Period. The Company's accounting period shall be the ----------------- calendar year. 8.10 Returns and Elections. The Manager shall cause the preparation and --------------------- timely filing of all tax returns required to be filed by the Company pursuant to the Code and all other tax returns deemed necessary and required in each jurisdiction in which the Company does business. Copies of such returns, or pertinent information therefrom, shall be furnished to the Members within a reasonable time after the end of the Company's Fiscal Year. All elections permitted to be made by the Company under federal or state tax laws shall be made by the Manager with the prior approval and direction of the Members. 8.11 Distributions In Kind. No Member shall be entitled to demand and --------------------- receive property other than cash in return for his Capital Contributions to the Company. No Company assets shall be distributed in kind except as and in such manner as may be specifically agreed and approved by the Members. The amount by which the fair market value of any property to be distributed in kind to the Members exceeds or is less than the tax basis of such property shall, to the extent not otherwise recognized by the Company, be taken into account in computing Net Profits and Net Losses of the Company for purposes of allocations and distributions to the Members under this Article VIII. ARTICLE IX ASSIGNMENTS AND TRANSFERS ------------------------- 9.1 General. Except for the pledge and assignment by Black Hawk to ------- Diversified of its Membership Interest and as otherwise specifically provided herein, neither a Member nor an assignee shall have the right to: (a) sell, assign, transfer, exchange, pledge or otherwise transfer for consideration, (collectively, "sell" or "sale"), or (b) gift, bequeath or otherwise transfer for no consideration whether or not by operation of law, including without limitation, in the case of Bankruptcy (collectively "gift") all or any part of its Membership Interest. Each Member hereby acknowledges the reasonableness of the restrictions on sale and gift of Membership Interests imposed by this Operating Agreement in view of the unique terms, the Company purposes and the relationship of the Members. Accordingly, the restrictions on sale and gift contained herein shall be specifically enforceable. Any attempt to effect a sale or gift of a Membership Interest in contravention of this Section 9.1 shall he deemed null and void. -27- 9.2 No Assignment or Transfer in Absence of Unanimous Consent. --------------------------------------------------------- (a) Notwithstanding anything contained herein to the contrary, except Sections 12.1(c) and (d) below, no sale or gift of a Membership Interest to a proposed assignee which is not a Member immediately prior to the sale or gift shall be permitted or shall be effective without the prior Consent of all of the remaining Members, which Consent may be given or withheld in the sole and absolute discretion of such Members; provided, however, (x) each of Entertainment or Diversified may assign its rights hereunder, in whole or in part, to one or more corporations, limited liability companies, partnerships, trusts or other entities which are under common control with or control through equity ownership and/or voting control by, Entertainment, Diversified or Jacobs; it being acknowledged that (i) any entity managed by Jacobs Entertainment Ltd. ("JEL") or Jacobs, (ii) any entity in which either of JEL or Jacobs is one of the trustees and/or one of the beneficiaries or (iii) any entity in which either JEL or Jacobs beneficially owns 15% or more of the outstanding equity securities constitutes common control and (y) Black Hawk may assign its rights hereunder, in whole or in part, to one or more corporations, limited liability companies, partnerships, trusts or other entities which are wholly-owned by Black Hawk. (b) Further notwithstanding anything contained herein to the contrary, notwithstanding the Consent of the remaining Members to the sale or gift of a Membership Interest to an assignee in accordance with Section 9.2(a) above no assignee (other than a permitted assignee of Entertainment or Diversified as described in 9.2(a)) which is not a Member immediately prior to the sale or gift shall have any right to exercise any rights as a Member, to participate in the management of the business and affairs of the Company or to become a Member without the further Consent of all of the remaining Members. Such assignee shall have only the rights of an assignee under Section 7-80-702 of the Act. (c) No assignment or transfer of a Member's interest in the Company shall be effective unless and until Notice (including the name and address of the proposed assignee and the date of such transfer) has been provided to the Company and the non-transferring Member(s). (d) Upon and contemporaneously with any sale or gift of a Transferring Member's Membership Interest in the Company which does not at the same time transfer the balance of the rights associated with the Membership interest transferred by the Transferring Member (including, without limitation, the rights of the Transferring Member to participate in the management of the business and affairs of the Company), all remaining rights and interests otherwise retained by the Transferring Member which immediately prior to such sale or gift were associated with the transferred Membership Interest shall lapse. (e) The remaining Members may require the Selling Member or Gifting Member and the proposed assignee to execute, acknowledge and deliver to the remaining Members such instruments of transfer, assignment and assumption and such other -28- certificates, representations and documents, and to perform all such other acts which the remaining Members may deem necessary or desirable to: (i) constitute the assignee as a Member, donee or successor-in-interest as such; (ii) confirm that the Person desiring to acquire an interest or interests in the Company, or to be admitted as a Member, has accepted, assumed and agreed to be subject and bound by all of the terms, obligations and conditions of this Operating Agreement, as the same may have been further amended (whether such Person is to be admitted as a new Member or will merely be an assignee); (iii) preserve the Company after the completion of such sale, transfer, assignment, or substitution under the laws of each jurisdiction in which the Company is qualified, organized or does business; (iv) maintain the status of the Company as a partnership for federal tax purposes; and (v) assure compliance with any applicable state and federal laws including securities laws and regulations. 9.3 Effective Date. Any sale or gift of a Membership Interest or admission -------------- of a Member in compliance with this Article IX shall be deemed effective as of the later of the last day of the calendar month in which the remaining Members' Consent thereto was given (if such Consent is required) or such date that the assignee complies with Section 9.2. The Transferring Member agrees, upon request of the remaining Members, to execute such certificates or other documents and perform such other acts as may be reasonably requested by the remaining Members from time to time in connection with such sale, transfer, assignment, or substitution. 9.4 Indemnity. The Transferring Member hereby indemnifies the Company and --------- the remaining Members against any and all loss, damage or expense (including, without limitation, reasonable attorney's fees and tax liabilities or loss of tax benefits) arising directly or indirectly as a result of any transfer or purported transfer in violation of this Article IX. ARTICLE X INDEMNIFICATION AND DAMAGES --------------------------- 10.1 Indemnity of the Manager, Members of the Policy Board, Employees and ------------------------------------------------------------------- Other Agents. To the maximum extent permitted under the Act, the Company shall - ------------ indemnify the Manager, members of the Policy Board and the Members and make advances -29- for expenses to the maximum extent permitted under the Act. The Company shall indemnify its employees and other agents who are not managers to the fullest extent permitted by law, provided that such indemnification in any given situation is approved by the Members. The Manager, the members of the Policy Board and the Members (and their respective officers, directors, employees and agents) shall be indemnified by the Company from any liability resulting from any act omitted or performed by them in good faith on behalf of the Company and in a manner reasonably believed by them to be within the scope of the authority conferred upon them by this operating Agreement and in the best interest of the Company; provided, however, that any indemnity under this Article X shall be provided out of and be limited to the extent of the Company assets only and shall not include any liabilities arising under the Securities Act of 1933, and no Member shall have any personal liability therefor. 10.2 Liability for Acts and Omissions. No Manager or Member (and no -------------------------------- officer, director, employee or agent of a Manager or a Member) shall be liable, responsible or accountable, in damages or otherwise, to the Company or the Members for or as a result of any act, omission or error in judgment which was taken, omitted or made by them in good faith on behalf of the Company and in a manner reasonably believed by them to be within the scope of the authority granted to them by this Operating Agreement and in the best interest of the Company, except for fraud, deceit, willful misconduct, gross negligence or a knowing violation of the law. The Manager or Member may consult with such legal or other professional counsel as it may select. Any action taken or omitted by it in good faith reliance on, and in accordance with, the opinion or advice of such counsel shall be full protection and justification to it with respect to the action taken or omitted. 10.3 Reimbursement. If (i) a Member ("Paying Member") shall pay any amount ------------- on behalf of or for the account of the Company with respect to any liability, obligation, undertaking, damage or claim for which the Company shall or may (pursuant to contract or applicable law) be liable or responsible, or with respect to making good any loss or damage sustained by, or paying any duty, costs, claim or damage incurred by, the Company, and (ii) such payment was made by the Paying Member because the Members authorized such payment by the Paying Member, then (except as otherwise expressly provided in this Operating Agreement) the Paying Member shall have a right of contribution from the Members and the other Members shall reimburse the Paying Member for such amount as shall have been so paid thereby in accordance with such other Members' proportionate Membership Interests in the Company. 10.4 Damages. In the event that a Member violates or breaches any of its ------- representations, warranties or agreements under this Operating Agreement, becomes a Resigning Member, or is terminated as a result of its Bankruptcy, resignation, expulsion or dissolution, then, in any such event, such Member shall be liable to the Company and to the other Members for damages incurred by the Company and such other Members and arising from such violation, breach, resignation, Bankruptcy, expulsion or dissolution. Except as otherwise provided in this Operating Agreement, the foregoing remedy is in addition to and -30- not in limitation of the right of the Company and the other Members to recover damages resulting from any default or breach by a Member hereunder and any other right or remedy of the Company and the other Members at law or in equity. Each Member acknowledges that the damages suffered by the Company may include expenses relating to the Company's efforts to exercise its rights and remedies upon such breach or default. To the extent required to recover the damages suffered by the Company, the Company and the other Members shall have the right to set-off any cash or property otherwise payable on account of the defaulting Member's Membership Interest and to retain such cash or property. Except as otherwise provided in this Operating Agreement, the selection of which remedy or remedies to pursue will be made is the sole and absolute discretion of the other Members, and the pursuit of any remedy shall not operate as a waiver of the rights of such Members or the Company to pursue any other remedy against the defaulting Member. ARTICLE XI REGULATORY CONCERNS AND MANDATORY REDEMPTION EVENTS --------------------------------------------------- 11.1 Government Regulations. ---------------------- (a) The parties hereto acknowledge that the proposed business of the Project is subject to stringent government regulation including supervision by the Division and the Commission. (b) The parties also acknowledge that Entertainment and certain of its Affiliates are presently seeking appropriate gaming licenses from the Division (Jacobs has already obtained a key employee license), and that no assurance can be given that such licenses will be issued or when such licenses may be issued. (c) It any license, registration, application or other form of required governmental filing for the Project or otherwise, is denied, reserved, revoked or suspended for any reason, including but not limited to the participation of a person unacceptable or unsuitable to the Division and the Commission or other Governmental Authority (as defined in the Purchase Agreement), the affected party hereto (each of Black Hawk, Entertainment, Diversified or the affected Affiliate) shall take all measures necessary to remedy or correct the deficiency. In the case where the Division, the Commission or other Governmental Authority denies or reserves approval for gaming operations or other business operations of a party hereto because of the participation of an unacceptable or unsuitable person, that party shall forthwith expel such person(s) and substitute a person(s) acceptable to the Division, the Commission or other Governmental Authority, or otherwise take measures to remedy or correct the deficiency. 11.2 Casino Investigation. -------------------- -31- (a) In the event that, on or before January l, 1998, the Commission has not approved a retail gaming license for the Project casino ("Licensing Approval") and, on or before such date, Entertainment, in its sole but reasonable discretion, has reason to believe that the Project casino will not receive such Licensing Approval and such failure to obtain Licensing Approval is attributable to the Division's and the Jefferson County, Colorado District Attorney's office's investigation into check cashing and bad check collection practices of the Gilpin Hotel Casino of which Black Hawk is the general manager and a joint venture participant and/or certain of the Gilpin Hotel Casino's personnel and agents (the "Casino Investigation"), Entertainment shall have the right and option to acquire (the "Purchase Right") all of Black Hawk's interest in the Company, except that portion that is actually transferred to the Holder (as defined below) in full satisfaction of the Note as described in Section 11.2(b). (b) Entertainment may elect such Purchase Right by delivering Notice of such election to Black Hawk on or before March 31, 1998. The purchase price for the Purchase Right shall be an amount equal to 90% of the fair market value of such interest determined as of the date Entertainment delivered its Notice. The fair market value of such interest shall be determined by an Appraisal. The purchase price for the Purchase Right shall be payable by Entertainment to Black Hawk pursuant to a promissory note which shall be payable over a ten year period and which shall bear interest at a rate equal to 2% in excess of the prime rate of interest as announced from time to time by the Wall Street Journal or shall be discounted (using the same rate) to present value if an earlier payoff is required under the Colorado Gaming Laws. The closing of the Purchase Right shall occur on a date mutually agreed to by Entertainment and Black Hawk, which date shall be within 15 days following the completion of the Appraisal. At such time as Entertainment provides Notice of the election of its Purchase Right, Black Hawk shall be deemed to be in default of the Note. For four months thereafter or such longer period as the parties shall agree, so long as the Appraisal and purchase process is ongoing and not stayed, Diversified or any other related entity that is a Member and is holding the Note by permitted assignment from Diversified (collectively, the "Holder") shall take no enforcement action on the Note (other than the collection of accrued but unpaid interest thereon and sending any notices or filing any claims it deems appropriate.) Concurrently with the closing of the Purchase Right, Black Hawk shall transfer to the Holder in exchange for the cancellation of the Note, and the Holder shall accept in full satisfaction of its rights under the Note, the following property (collectively, the "Note Satisfaction Property"): 40% of each of Black Hawk's (a) Capital Interest, (b) Membership Interest, and (c) interest in Net Profits, Net Losses, and Net Cash Flow of the Company; together with all membership rights associated with any of the foregoing, and all proceeds and products of any of the foregoing. On the Closing Date, Black Hawk shall cease to be a Member, shall cease to have any management function in the Company, and the members of the Policy Board appointed by it shall be terminated and replaced by designees of the Holder and Entertainment. (c) In the event Entertainment has exercised the Purchase Right, within two years of the opening of the Project casino, Black Hawk shall have the right to reacquire -32- its 75% Membership Interest in the Company on the term and subject to the conditions hereinafter set forth. Provided Black Hawk can prove to Entertainment, in Entertainment's sole but reasonable discretion, that the involvement of Black Hawk in the Project will not detrimentally affect the Project casino and provided Black Hawk obtains Licensing Approval, Black Hawk shall have the right and option to reacquire its 75% Membership Interest in the Company (the "Repurchase Right"). Black Hawk may elect such Repurchase Right by delivering Notice to Entertainment of the exercise of such Repurchase Right. The purchase price for the Repurchase Right representing 60% of its Membership Interest shall be an amount equal to the purchase price for the Purchase Right, plus an amount equal to Black Hawk's proportionate share of any additional capital contributions made to the Company from and after the closing of the Purchase Right. In addition, the purchase price for the Repurchase Right representing 40% of its Membership Interest shall be 1,142,857 Shares (as adjusted in accordance with Section 2(e) of the Purchase Agreement) to be issued by Black Hawk to the Holder. The closing of the Repurchase Right shall occur on a date mutually agreed to by Black Hawk and Entertainment, which date shall be within 30 days after the date which Black Hawk gave Notice to Entertainment and Holder of the Repurchase Right and at such time, the economic and control position of Black Hawk, Entertainment and Holder, as to both the Company and Black Hawk, shall be made to be equivalent to what would have been the positions of such parties immediately following the Conversion Date. (d) The parties acknowledge that the redemption provisions contained in this Article XI and the terms hereof (including price and payment terms) are subject to the Colorado Gaming Laws (as defined below) and the discretion of the Commission and the Division. 11.3 Automatic Divestiture. --------------------- (a) If, prior to the issuance by the Commission of appropriate gaming licenses to the Company for the Project casino, any of the following occur to a Member, all interests of that Member (the "Affected Member") will automatically and immediately terminate, and the Affected Member will cease to be a Member, all subject only to any contrary requirements of the Colorado Gaming Laws (as defined below.) The divestiture events are as follows: (i) The Affected Member is charged with or convicted of any criminal offense, if a conviction of the offense in question would, pursuant to the Colorado gaming laws (C.R.S. Section 12-47.1-101 et seq., as the same may be amended or supplemented from time to time, together with the regulations promulgated thereunder -- collectively, the "Colorado Gaming Laws") disqualify the Affected Member from obtaining a gaming license. However, where a Member is only charged with a criminal offense and not convicted, and where the Commission and the Division upon request have agreed to defer pursuing any action based upon such charges against the Company's application for a gaming license, or where any such actions of the Division or Commission are subject to a -33- stay order, then the Affected Member's Membership Interest shall not be subject to divestiture under this subdivision (i). (ii) The Affected Member, or any Entity that it owns or controls, incurs a revocation of any Colorado gaming or alcohol beverage license, and it is determined through arbitration pursuant to Section 15.2 below, that such revocation has a material adverse affect upon the issuance to the Company of a gaming or alcohol beverage license. (iii) The Division issues a formal recommendation against the issuance to the Company of an operator or retail gaming license, which recommendation cites the participation of the Affected Member as a material factor in the decision. (iv) The Commission denies the issuance to the Company of an operator or retail gaming license, citing the participation of the Affected Member as a factor in the decision, or the Commission conditions the issuance of a retail gaming license on the Company removing the Affected Member in the Company or its casino operations. (v) The Company's alcoholic beverage license applications are denied by either the state or local licensing authority, citing the participation of the Affected Member as a material factor in the decision. (vi) The Affected Member is found to be an "unsuitable person" within the meaning of the Colorado Gaming Laws. (vii) The Commission or the Division advise the Company in writing, or it is otherwise determined through arbitration pursuant to Section 15.2 below, that a decision on the Company's gaming license application is being delayed beyond the later of (x) one year following the filing of the Company's application for a retail gaming license or (y) January 1, 1998, and the Company is advised before or after said date that the sole reason for such delay is the participation of or concerns about the Affected Member. (b) The Company shall continue in existence notwithstanding the automatic termination of any Member pursuant to Section 11.3(a) above, notwithstanding any provision of this Operating Agreement to the contrary. The occurrence of any of the events enumerated in Section 11.3(a) above, if the Affected Member is Black Hawk, shall constitute an Event of Default under the Note, and the Note shall automatically be accelerated, all without notice or other action of any kind by the Holder. The automatic termination of the Membership Interest shall cause the percentage Membership Interest of the Holder to increase by an amount equal to 40% of the percentage Membership Interest of Black Hawk as it existed immediately prior to its automatic termination. For example, if Diversified is the Holder, Diversified's percentage Membership Interest would increase to 31% (1% + the product of (75% x 40%)). The percentage Membership Interest of Entertainment shall increase by an amount equal to 60% of the percentage Membership -34- Interest of Black Hawk as it existed immediately prior to its; automatic termination. For example, Entertainment's Membership Interest would increase to 69% (24% + the product of (75% x 60%)). The Company shall be liable to Black Hawk for the value of its terminated Membership Interest as follows. The Company shall pay in full for 40% of the terminated Membership interest by canceling the Note, which the Holder shall immediately contribute to the Company to enable the Company to make payment. The Company shall pay in full for the remaining 60% of the terminated Membership Interest as follows: the Company and Black Hawk shall determine the fair market value of that portion of the Membership Interest by an Appraisal. Upon determination, the Company shall deliver a note (the "Payoff Note") to Black Hawk for 90% of the value found by the Appraisal. The Payoff Note shall be payable over a ten year period and shall bear interest at a rate equal to 2% in excess of the prime rate of interest as announced from time to time by the Wall Street Journal or shall be discounted (using the same rate) to present value if an earlier payoff is required under the Colorado Gaming Laws. Entertainment agrees to contribute to the Company, in time for payments to be made under the Payoff Note, additional capital in an amount equal to the payments to be made, which additional capital shall be used solely for that purpose. On request of Black Hawk, Entertainment will also execute a guaranty of the Payoff Note, and any payments made pursuant to the guaranty will be deducted from the additional capital requirements that it would otherwise have. In the event the Affected Member is either Entertainment or Diversified, both will be treated as being the Affected Member. The percentage Membership Interest of Black Hawk shall increase by an amount equal to the percentage Membership Interest of both Entertainment and Diversified as such Membership Interests existed immediately prior to their automatic termination. The Company shall be liable to the Affected Member (both Entertainment and Diversified) for the value of their terminated Membership Interest by the Appraisal method and issuance of the Payoff Note in the same manner as described above. Black Hawk agrees to contribute to the Company, in time for payments to be made under the Payoff Note, additional capital in an amount equal to the payments to be made, which additional capital shall be used solely for that purpose. On request of the Affected Member, Black Hawk will also execute a guaranty of the Payoff Note, and any payments made pursuant to the guaranty will be deducted from the additional capital requirements that it would otherwise have. On the date of automatic termination pursuant to this Section 11.3(b), the Affected Member shall cease to be a Member, shall cease to have any management function in the Company and the members of the Policy Board appointed by it shall be terminated and replaced by designees of the other Member(s) of the Company. (c) Subject only to the contrary requirements of the Colorado Gaming Laws, the Affected Member pursuant to this Section 11.3 shall have, for a period of two years from and after the event causing the involuntary termination, the right to reacquire its Membership Interest on the same terms described above in Section 11.2(c); provided, however, that if Entertainment or Diversified is the Affected Member, no Shares shall be issued as part of the purchase price for the repurchase right described in this Section 11.3(c) (the "11.3(c) Repurchase Right") and Diversified and Entertainment shall have the right to reacquire 100% of their respective Membership Interests that was divested by paying to -35- Black Hawk an amount equal to what Black Hawk paid for such Membership Interests, plus an amount equal to their proportionate share of any additional capital contributions made to the Company from and after the date of the event causing the involuntary termination. The closing of the 11.3(c) Repurchase Right shall occur on a date mutually agreed to by Black Hawk, Diversified and Entertainment, which date shall be within 30 days after the date which Diversified and Entertainment gave Notice to Black Hawk of the 11.3(c) Repurchase Right and at such time, the economic and control position of Black Hawk, Entertainment and Diversified, as to both the Company and Black Hawk, shall be made to be equivalent to what would have been the positions of such parties immediately following the Conversion Date. 11.4 Right of First Participation. In the event that the right of first ---------------------------- participation asserted by Black Hawk's partners at the Gilpin Hotel Casino is determined in a final adjudication (whether by arbitration or declaratory judgment action or otherwise), and the outcome of such determination provides Black Hawk's partners at the Gilpin Hotel Casino with a 50% Membership Interest in the Company, thereafter, Entertainment shall have the right to acquire 50% of Black Hawk's then Membership Interest. If such determination provides Black Hawk's partners with a 25% interest in the Company, thereafter Entertainment shall have the right to acquire 25% of Black Hawk's then Membership Interest. The price and payment terms for such Membership Interest shall be as agreed to by the parties. 11.5 Addition of Member. Notwithstanding anything to the contrary contained ------------------ in this Article XI, if, upon the occurrence of any event described in this Article XI, there is only one remaining Member, then such Member shall be entitled to cause one or more additional persons to become members in order to enable the existence of the Company to continue. ARTICLE XII DISSOLUTION AND TERMINATION --------------------------- 12.1 Dissolution (a) The Company shall be dissolved upon the occurrence of any of the following events: (i) expiration of the period fixed for the duration of the Company pursuant to Section 2.6 hereof; (ii) the unanimous written agreement of all Members; or (iii) upon the death, retirement, resignation, removal, expulsion, Bankruptcy or dissolution of a Member or occurrence of any other event which -36- terminates the continued Membership of a Member in the Company (a "Withdrawal Event"), unless the business of the Company is continued by the consent of all the remaining Members within 90 days after the Withdrawal Event. (b) As soon as possible following the occurrence of any of the events specified in this Section 12.1 effecting the dissolution of the Company, the Liquidator shall execute a certificate of dissolution in such form as shall be prescribed by the Act and the Colorado Secretary of State and file the same with the Colorado Secretary of State's office. (c) If a Member who is an individual dies or a court of competent jurisdiction adjudges him to be incompetent to manage his person or his property, the Member's executor, administrator, guardian, conservator, or other legal representative ("Successor") may exercise all of the Member's rights for the purpose of settling his estate or administering his property, provided, however, that for purposes of Section 9.2 and Section 12.1(a)(iii), the Successor shall not be considered a Member and shall have no right to vote, approve or consent to any matter pursuant to such provisions. (d) Except as expressly permitted in this Operating Agreement, a Member shall not voluntarily withdraw or resign or take any other voluntary action which directly causes a Withdrawal Event. Unless otherwise approved by all of the other Members, a Member who attempts to withdraw or resign (a "Resigning Member") or whose Membership Interest is otherwise terminated by virtue of a Withdrawal Event, regardless of whether such Withdrawal Event was the result of a voluntary act by such Resigning Member, shall become an assignee and be entitled to receive only those distributions to which such Resigning Member would have been entitled had such Resigning Member remained a Member (and only at such times as such distribution would have been made had such Resigning Member remained a Member). Damages for breach of this Section 12.1(d) may be offset against distributions by the Company to which the Resigning Member would otherwise be entitled. (e) Notwithstanding anything to the contrary contained in this Article 12, if, upon the occurrence of any event described in this Section 12.1, there is only one remaining Member, then such Member shall be entitled to cause one or more additional persons to become Members in order to enable the existence of the Company to continue. 12.2 Effect of Filing of Certificate of Dissolution. Upon the filing with ---------------------------------------------- the Colorado Secretary of State of a certificate of dissolution, the Company shall cease to carry on its business, except insofar as may be necessary for the winding up of its business or as may be otherwise permitted under the Act, but its separate existence shall continue until the winding up of its affairs is completed. 12.3 Winding Up, Liquidation and Distribution of Assets. -------------------------------------------------- -37- (a) Upon dissolution, an accounting shall be made by the Company's independent accountants of the accounts of the Company and of the Company's assets, liabilities and operations, from the date of the last previous accounting until the date of dissolution. The Liquidator shall immediately proceed to wind up the affairs of the Company. (b) If the Company is dissolved and its affairs are to be wound up, the Liquidator shall: (i) Sell or otherwise liquidate all of the Company's assets as promptly as practicable (except to the extent the Members may determine to distribute any assets to the Members in kind); (ii) Allocate any Net Profit or Net Loss resulting from such sales to the Members' and assignees' in accordance with Section 8.1 hereof; (iii) Discharge all liabilities of the Company, including liabilities to Members and assignees who are also creditors, to the extent otherwise permitted by law, other than liabilities to Members and assignees for distributions and the return of capital, and establish such Reserves as may be reasonably necessary to provide for contingent liabilities of the Company (for purposes of determining the Capital Accounts of the Members and assignees, the amounts of such Reserves shall be deemed to be an expense of the Company); and (iv) Distribute the remaining assets in the following order: (1) If any assets of the Company are to be distributed in kind, the net fair market value of such assets as of the date of dissolution shall be determined by Appraisal or by agreement of the Members. Such assets shall be deemed to have been sold as of the date of dissolution for their fair market value, and the Capital Accounts of the Members and assignees shall be adjusted pursuant to the provisions of Article VIII and Section 7.4 of this Operating Agreement to reflect such deemed sale. (2) The positive balance (if any) of each Member's and assignees Capital Account (as determined after taking into account all Capital Account adjustments for the Company's taxable year during which the liquidation occurs) shall be distributed to the Members, either in cash or in kind, with any assets distributed in kind being valued for this purpose at their fair market value. Any such distributions to the Members in respect of their Capital Accounts shall be made in accordance with the time requirements set forth in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations. -38- (c) Notwithstanding anything to the contrary in this operating Agreement, upon a liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations, if any Member has a Deficit Capital Account (after giving effect to all contributions, distributions, allocations and other Capital Account adjustments for all taxable years, including the year during which such liquidation occurs), such Member shall have no obligation to make any Capital Contribution, and the negative balance of such Member's Capital Account shall not be considered a debt owed by such Member to the Company or to any other Person for any purpose whatsoever. (d) Upon completion of the winding up, liquidation and distribution of the assets, the Company shall be deemed terminated. (e) The Liquidator shall comply with any applicable requirements of applicable law pertaining to the winding up of the affairs of the Company and the final distribution of its assets. 12.4 Return of Contribution Nonrecourse to Other Members. Except as --------------------------------------------------- provided by law or as expressly provided in this operating Agreement, upon dissolution, each Member shall look solely to the assets of the Company for the return of its Capital Contribution. If the Company property remaining after the payment or discharge of the debts and liabilities of the Company is insufficient to return the cash contribution of one or more Members, such Member or Members shall have no recourse against any other Member. ARTICLE XIII MEETINGS OF MEMBERS ------------------- 13.1 Meetings of Members. ------------------- (a) Annual Meetings. An annual meeting of Members may be held if so --------------- desired, and if held shall be at such time and on such date in the first three months of each year (commencing in 1997) as may be fixed by the Manager and stated in the notice of the meeting. (b) Special Meetings. Special meetings of the Members shall be called ---------------- upon the written request of the Manager, acting either with or without a meeting, or by any Member. Calls for such meetings shall specify the purposes thereof. No business other than that specified in the call shall be considered at any special meeting. (c) Notices of Meetings. Unless waived, written notice of each annual ------------------- or special meeting stating the time, place, and the purposes thereof shall be given by personal delivery or by mail to each Member of record entitled to vote at or entitled to notice of the meeting, not more than sixty (60) days nor less than seven (7) days before any such meeting. If mailed, such notice shall be directed to the Member at its address as the same appears -39- upon the records of the Company. Any Member, either before or after any meeting, may waive any notice required to be given by law or under this Agreement. The giving of notice shall be deemed to have been waived by any Member who shall participate in any annual or special meeting. (d) Place of Meetings. Meetings of Members shall be held at the ----------------- principal office of the Company unless the Manager determines that a meeting shall be held at some other place within or without the State of Colorado and causes the notice thereof to so state. (e) Quorum. Members holding a Required Interest present in person or ------ by proxy, shall constitute a quorum for the transaction of business to be considered at such meeting; provided, however, that no action required by law or by the Articles or this Operating Agreement to be authorized or taken by the holders of a designated proportion of the Membership Interests may be authorized or taken by the holders of a designated proportion of the Membership Interests may be authorized or taken by a lesser proportion. The holders of a majority of the voting Membership Interests represented at a meeting, whether or not a quorum is present, may adjourn such meeting from time to time, until a quorum shall be present. (f) Record Date. The Manager may fix a record date for any lawful ----------- purpose, including without limiting the generality of the foregoing, the determination of Members entitled to (i) receive notice of or to vote at any meeting, (ii) receive payment of any distribution, (iii) receive or exercise rights of purchase of or subscription for, or exchange or conversion of, certificates or other securities, subject to any contract right with respect thereto, or (iv) participate in the execution of written consents, waivers or releases. Said record date shall not be more than sixty (60) days preceding the date of such meeting, the date fixed for the payment of any distribution or the date fixed for the receipt or the exercise of rights, as the case may be. If a record date shall not be fixed, the record date for the determination of Members who are entitled to notice of, or who are entitled to vote at, a meeting of Members, shall be the close of business on the date next preceding the day on which notice is given, or the close of business on the date next preceding the day on which the meeting is held, as the case may be. (g) Proxies. A person who is entitled to attend a Members' meeting, to ------- vote thereat, or to execute consents, waivers or releases, may be represented at such meeting or vote thereat, and execute consents, waivers and releases, and exercise any of its other rights, by proxy or proxies appointed by a writing signed by such person. (h) Written Action. Any action may be decided or approved, without -------------- notice, by written action signed by all of the Members. ARTICLE XIV -40- DEBT FINANCING -------------- 14.1 It is contemplated by the parties that certain Affiliates of Entertainment will be providing guarantees for the Company's debt financing with Wells Fargo Bank, N.A. or such other lenders as may be selected by the Company. In the event that Entertainment's Affiliates provide such guarantees, the Company shall pay Entertainment an annual fee in an amount equal to 2% of the amount so guaranteed. The fee required to be paid pursuant to this Section 14.1 shall be paid on an annual basis in arrears on or before March 31. Notwithstanding the foregoing, one-half of the fee payable for 1997 pursuant to this Article XIV shall be deferred and paid in two (2) equal installments on or before March 31, 1999 and March 31, 2000, respectively. ARTICLE XV MISCELLANEOUS PROVISIONS ------------------------ 15.1 Notices. All Notices and communications required or permitted under ------- this Operating Agreement to be sent to the Members shall be expressed in writing and delivered in person and sent and confirmed by certified or registered mail, return receipt requested, or sent by overnight courier service such as Federal Express, or sent by facsimile (receipt confirmed) to the Members at the following addresses, or at such other addresses as the parties shall designate by Notice to the other: If to Black Hawk: Black Hawk Gaming & Development Company, Inc. 2060 Broadway, Suite 400 Boulder Colorado 80302 Attention: Stephen R. Roark, President Fax No. (303) 444-7968 with a copy to: Jones & Keller, P.C. 1625 Broadway, Suite 1600 Denver, Colorado 80202 Attention: Samuel E. Wing, Esq. Fax No. (303) 825-8537 If to Entertainment or Diversified: c/o Jacobs Entertainment Ltd. 425 Lakeside Avenue Cleveland, Ohio 44114 Attention: Jeffrey P. Jacobs Fax No. (216) 861-6315 -41- with a copy to: Hahn Loeser & Parks 3300 BP America Building 200 Public Square Cleveland, Ohio 44114 Attention: Stephen P. Owendoff, Esq. Fax No. (216) 241-2824 15.2 Arbitration. If any dispute shall arise between the parties pursuant ----------- to this Operating Agreement, such dispute shall be settled by arbitration pursuant to this Section 15.2. In such event, either party hereto may serve upon the other party a written notice demanding that the dispute be resolved pursuant to this Section 15.2. To the extent that any provision herein is inconsistent with any rule of the American Arbitration Association (the "AAA"), this Agreement shall prevail. The dispute or claim shall be heard in Chicago, Illinois by one (1) neutral arbitrator, if the parties can agree on the selection of said arbitrator, or if unable to agree, each party shall select (1) arbitrator and the two arbitrators chosen shall select the third arbitrator. If the dispute shall be heard by three (3) arbitrators, one (1) arbitrator will be selected by the party initiating the arbitration at the time of the submission to arbitration. Within seven (7) days after submission, the other party will select an arbitrator. Within seven (7) days after the first two (2) arbitrators are chosen, the third arbitrator will be selected. The third arbitrator selected shall not have any relationship to either of the parties. The arbitrators shall apply the internal law of the State of Colorado. Said arbitrator(s) shall be sworn faithfully and fairly to determine the question at issue. The arbitrator(s) shall afford to the parties a hearing and the right to submit evidence, with the privilege of cross examination and the right to compel testimony by applying for subpoena powers to appropriate judicial authority, on the question at issue, and shall, with all possible speed, make his/their determination in writing and shall give notice to the parties hereto of such determination. The concurring determination of the arbitrator, if heard by one, or of any two of said three arbitrator(s) shall be binding upon the parties hereto, or, in case no two of the arbitrators shall render a concurring determination, then the determination of the third arbitrator appointed shall be binding upon the parties hereto. The decision of the arbitrators shall be final and binding upon the parties hereto and shall be enforceable in any court having jurisdiction. Any arbitration shall be conducted in accordance with the then prevailing Commercial Rules of the AAA, or the successor party thereto from time to time in existence. The fees and expenses of the arbitrator(s) shall be divided equally between the parties so involved. The parties shall each bear their own expenses (including, but not limited to, attorneys' and witnesses' fees and expenses) in any arbitration proceedings. 15.3 Development Fee. The Company shall pay Entertainment or its nominee --------------- the remaining portion of the development fee, which is estimated at $370,000. -42- 15.4 Abrahamson and Rich. Any amounts paid or to be paid to Robert S. Rich ------------------- or Ron Abrahamson pursuant to certain Settlement Agreements shall be treated as expenses of the Company. 15.5 Books of Account and Records. Proper and complete records and books of ---------------------------- account shall be kept or shall be caused to be kept by the Manager in which shall be entered fully and accurately all transactions and other matters relating to the Company's business in such detail and completeness as is customary and usual for businesses of the type engaged in by the Company. Such books and records shall be maintained as provided in Section 5.3. The books and records shall at all times be maintained at the principal executive office of the Company and shall be open to the reasonable inspection and examination of the Members, assignees or their duly authorized representatives during reasonable business hours. 15.6 Application of Colorado Law. This Operating Agreement, and the --------------------------- application and interpretation hereof, shall be governed exclusively by its terms and by the laws of the State, and specifically the Act. 15.7 Waiver of Action for Partition. Each Member and assignee irrevocably ------------------------------ waives during the term of the Company any right that it may have to maintain any action for partition with respect to the property of the Company. 15.8 Amendments. This Operating Agreement may not be amended except by the ---------- written agreement of all of the Members. Further, without the Consent of the Member or former Member, no amendment shall be adopted which prejudices the rights of a Member or former Member from exercising any repurchase or similar right described in this Operating Agreement. 15.9 Execution of Additional Instruments. Each Member hereby agrees to ----------------------------------- execute such other and further statements of interest and holdings, designations, powers of attorney and other instruments and documents, and to provide such information, necessary to comply with any laws, rules or regulations, and to effectuate the provisions of this Operating Agreement. 15.10 Construction. Whenever the singular number is used in this Operating ------------ Agreement and when required by the context, the same shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa. 15.11 Headings and Pronouns. The headings in this operating Agreement are --------------------- inserted for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Operating Agreement or any provision hereof. All pronouns and only variations thereof shall be deemed to refer to masculine, feminine, or neuter, singular or plural as the identity of the Person or Persons may require. -43- 15.12 Waivers. The failure of any party to seek redress for violation of or ------- to insist upon the strict performance of any covenant or condition of this Operating Agreement shall not constitute a waiver or prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation. 15.13 Rights and Remedies Cumulative. The rights and remedies provided by ------------------------------ this Operating Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive the right to use any or all other remedies. Said rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise. 15.14 Severability. If any provision of this Operating Agreement or the ------------ application thereof to any Person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Operating Agreement and the application thereof shall not be affected and shall be enforceable to the fullest extent permitted by law. 15.15 Heirs, Successors and Assigns. Each and all of the covenants, terms, ----------------------------- provisions and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Operating Agreement, their respective heirs, legal representatives, and permitted successors and assigns. 15.16 Creditors. None of the provisions of this Operating Agreement shall --------- be for the benefit of or enforceable by any creditor of the Company. 15.17 Counterparts. This Operating Agreement may be executed in ------------ counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. 15.18 Investment Representations. The undersigned Members and assignees, if ------------------------- any, understand (i) that the Membership Interests evidenced by this Operating Agreement have not been registered under the Securities Act of 1933, the Colorado or the Ohio Securities Act or any other state securities laws (the "Securities Acts") because the Company is issuing these Membership Interests in reliance upon the exemptions from the registrations requirements of the Securities Acts providing for issuance of securities not involving a public offering, (ii) that the Company has relied upon the fact that the Membership Interests are to be held by each Member for investment, and (iii) that exemption from registrations under the Securities Acts would not be available if the Membership Interests were acquired by a Member with a view to distribution. Accordingly, each Member and assignee hereby confirms to the Company that such Member or assignee is acquiring the Membership Interests for such own Member's or assignee's account, for investment and not with a view to the resale or distribution thereof. Each Member and assignee agrees not to transfer, sell or offer for sale any portion of the Membership Interests unless (i) there is an effective registration or other qualification -44- relating thereto under the Securities Acts, or (ii) the holder of Membership Interests delivers to the Company an opinion of counsel, satisfactory to the Company, that such registration or other qualification under such Act and applicable state securities laws is not required in connection with such transfer, offer or sale. Each Member and assignee understands that the Company is under no obligation to register the Membership Interests or to assist such Member or assignee in complying with any exemption from registration under the Securities Acts if such Member or assignee should at a later date, wish to dispose of the Membership Interest. Furthermore, each Member realizes that the Membership Interests are unlikely to qualify for disposition under Rule 144 of the Securities and Exchange commission unless such Member is not an "affiliate" of the Company and the Membership Interest has been beneficially owned and fully paid for by such Member for at least three years. Prior to acquiring the Membership Interests, each Member and assignee has made an investigation of the Company and its business and has had made available to each other Member and assignee all information with respect thereto which such other Member or assignee needed to make an informed decision to acquire the Membership Interest. Each Member and assignee considers himself or itself to possess experience and sophistication as an investor which are adequate for the evaluation of the merits and risks of such Member's or assignee's investment in the Membership Interest. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.] -45- CERTIFICATE ----------- The undersigned hereby agree, acknowledge and certify that the foregoing Operating Agreement, consisting of pages, excluding the Table of Contents ----- and attached Exhibits, constitutes the Operating Agreement of Black Hawk/Jacobs Entertainment, LLC adopted by the Members of the Company as of November 12, 1996. MEMBERS: BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. By: /s/ Robert D. Greenlee -------------------------------------- Robert D. Greenlee, Chairman BH ENTERTAINMENT LTD. By: Jacobs Entertainment Ltd., its manager By: --------------------------------------- Title: ------------------------------------ DIVERSIFIED OPPORTUNITIES GROUP LTD. By: Jacobs Entertainment Ltd., its manager By: --------------------------------------- Title: ------------------------------------ -45- CERTIFICATE ----------- The undersigned hereby agree, acknowledge and certify that the foregoing Operating Agreement, consisting of pages, excluding the Table of Contents ----- and attached Exhibits, constitutes the Operating Agreement of Black Hawk/Jacobs Entertainment, LLC adopted by the Members of the Company as of November 12, 1996. MEMBERS: BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. By: -------------------------------------- Robert D. Greenlee, Chairman BH ENTERTAINMENT LTD. By: Jacobs Entertainment Ltd., its manager By: /s/ Illegible --------------------------------------- Title: Vice President ------------------------------------ DIVERSIFIED OPPORTUNITIES GROUP LTD. By: Jacobs Entertainment Ltd., its manager By: /s/ Illegible --------------------------------------- Title: Vice President ----------------------------------- -45- EXHIBIT A RECEIVED 1996 NOV 12 AM 10:00 SECRETARY OF STATE STATE OF COLORADO ARTICLES OF ORGANIZATION OF BLACK HAWK/JACOBS ENTERTAINMENT, LLC The undersigned, a natural person of at least 18 years of age, acting as organizer, hereby farms a limited liability company by virtue of the Colorado Limited Liability Company Act, and adopts the following Articles of Organization for such limited liability company. ARTICLE I Name The name of the limited liability company is Black Hawk/Jacobs Entertainment, LLC. ARTICLE II Principal Place of Business The principal place of business of the limited liability company is 2060 Broadway, Suite 400, Boulder, Colorado 80302. ARTICLE III Registered Agent The registered agent of this limited liability company in this state is Black Hawk Gaming & Development Company, Inc. The business address of the registered agent is 2060 Broadway, Suite 400, Boulder, Colorado 80302. ARTICLE IV Initial Manager Management of this limited liability company shall be vested in managers rather than members. The name and business addresses of the initial manager who is to serve as manager until the first annual meeting of the members or until its successor is elected and qualified is as follows: Name Address ---- ------- BH Entertainment Ltd. c/o Jacobs Entertainment Ltd. 425 Lakeside Avenue Cleveland, Ohio 44114 ARTICLE V Limitations on Voting Securities or Interests The limited liability company shall not issue any voting securities or other voting interests except in accordance with the provisions of the Colorado Limited Gaming Act and the 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 limited liability company shall cease to be subject to the jurisdiction of the Colorado Limited Gaming Control Commission, or (b) the Colorado Limited Gaming Control Commission shall, by affirmative action, validate said issuance or waive any defect in issuance. No voting securities or other voting interests issued by the limited liability company 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 the regulations promulgated thereunder. Any transfer in violation thereof shall be void until (a) the limited liability company shall cease to be subject to the jurisdiction of the Colorado Limited Gaming Control Commission, or (b) the Colorado Limited Gaming Control Commission shall, by affirmative action, validate said transfer or waive any defect in said transfer. If the Colorado Limited Gaming Control Commission at any time determines that a holder of voting securities or other voting interests of this limited liability company is unsuitable to hold such securities or other voting interests, then the issuer of such voting securities or other voting interests 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 limited liability company, 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 Commission) within sixty (60) days after the finding of unsuitability. Until such voting securities or other voting interests are owned by persons found by the Commission to be suitable to own them, (a) the limited liability company 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 limited liability company entitled to vote, and (c) the limited liability company 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 paragraph. ARTICLE VI Organizer The name and address of the organizer of this limited liability company is Samuel E. Wing, c/o Jones & Keller, P.C., 1625 Broadway, Suite 1600, Denver, CO 80202. IN WITNESS WHEREOF, I have signed these Articles of Organization this 12th day of November, 1996, and I acknowledge the same to be my true act and deed. /s/ Samuel E. Wing ------------------------- Organizer, Samuel E. Wing EXHIBIT B BLACK HAWK/JACOBS ENTERTAINMENT, L.L.C. PROJECTED CAPITAL ACCOUNT BALANCES 25% 75% Diversified BWHK or BH Total ----------- ----------- ----------- Cash Contributed Through $ 1,647,500 $1,647,500 $ 3,295,000 10/25/96 Contribution of Land: Millsite 30 Millsite 31 Millsite 32 3,568,234 3,568,234 Millsite 34 1,080,000 1,080,000 Additional Cash Contributions 9,784,266/1/ 2,272,500 12,056,766 ----------- ----------- ----------- Total LLC Capital Contributions $15,000,000 $5,000,000 $20,000,000 =========== =========== =========== /1/ Black Hawk's additional cash contribution will be funded as follows: $7,000,000 from Diversified pursuant to the Amended and Restated Purchase Agreement; $750,000 from Messrs. Greenlee, Day & Roark; and $2,034,266 of its own funds. AMENDMENT TO OPERATING AGREEMENT OF BLACK HAWK/JACOBS ENTERTAINMENT, LLC THIS AMENDMENT TO OPERATING AGREEMENT (this "Amendment") is made and entered into as of the 22nd day of January, 1997, by and among Black Hawk Gaming & Development Company, Inc., a Colorado corporation ("Black Hawk"), BH Entertainment Ltd., an Ohio limited liability company ("Entertainment"), and Diversified Opportunities Group Ltd., an Ohio limited liability company ("Diversified"). R E C I T A L S: A. Black Hawk, Entertainment and Diversified are parties to that certain Operating Agreement dated November 12, 1996 (the "Operating Agreement"), with respect to the formation of Black Hawk/Jacobs Entertainment, LLC (the "Company"), Articles of Organization for the Company were filed with the Colorado Secretary of State on November 12, 1996. B. Black Hawk, Entertainment and Diversified desire to amend the Operating Agreement in the manner hereinafter set forth. AGREEMENTS: ---------- In consideration of the foregoing recitals and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Black Hawk, Entertainment and Diversified hereby agree as follows: 1. Amendment. The Operating Agreement is hereby amended by the inclusion of --------- the following as new Section 15.19: 15.19 Management Fee. The Company shall pay to Entertainment -------------- and Black Hawk a management fee (the "Management Fee") in an amount equal to the sum of (x) five percent (5%) of the Adjusted Gross Proceeds (as hereinafter defined) of the Casino (the "Base") plus (y) ten percent (10%) of the Casino's "Net Profits" defined as EBITDA (determined in accordance with generally accepted accounting principles) less interest and agreed upon reserves. The Management Fee based on the Base shall be paid on a monthly basis and the Management Fee based on the Net Profits shall be paid on an annual basis, each at such times as is determined by the Manager. The Management Fee shall be split equally between Entertainment and Black Hawk, except that during the first twelve (12) months of operations after opening the Casino, Black Hawk shall be entitled to 3% of the Base and Entertainment shall be entitled to 2% of the Base. For purposes hereof, Adjusted Gross Proceeds means the Casino's total gambling receipts less jackpots/winnings, less restocking monies for slot machines, plus monies collected from table games and deposited with the cashier. 2. No Other Modifications. Except as modified herein, all other terms and ---------------------- conditions of the Operating Agreement shall remain unaffected and in full force and effect. 3. Binding Effect: Governing Law. This Amendment shall bind and inure to ----------------------------- the benefit of the parties hereto and their respective successors and assigns, and shall be governed by and construed in accordance with the laws of the State of Colorado. 4. Counterparts. This Amendment may be executed in counterparts, each of ------------ which shall be deemed an original, but all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date first above written. BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. BY: /s/ Illegible ---------------------------- TITLE: Chairman BH ENTERTAINMENT LTD. BY: JACOBS ENTERTAINMENT LTD. Its Manager By: /s/ Illegible ------------------------ TITLE: Manager/President DIVERSIFIED OPPORTUNITIES GROUP LTD. BY: JACOBS ENTERTAINMENT LTD. Its Manager By: /s/ Illegible ------------------------ TITLE: Manager/President EX-3.9 17 dex39.txt JOINT VENTURE AGREEMENT OF GILPIN HOTEL VENTURE Exhibit 3.9 GILPIN HOTEL JOINT VENTURE AGREEMENT This Joint Venture Agreement (the "Agreement") is made February 28, 1992 by and between the parties to be named as Joint Venturers herein. The parties desire to enter into this Agreement for the purpose of defining their respective rights and obligations with regard to the Joint Venture and the Property. Now, therefore, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I FORMATION --------- 1. Joint Venture. The subscriber parties (hereinafter defined as the "Original ------------- Venturers") hereby create a joint venture under the terms and conditions hereinafter set forth. 2. Name. The name of the joint venture shall be the Gilpin Hotel Venture (the ---- "Joint Venture"). 3. Original Venturers. The Original Joint Venturers to this Agreement on the ----------------- date of its execution are Mountain Casino Properties, Inc. ("MCP") and Gilpin Ventures, Inc. ("GVI") which shall be termed the "Original Ventures" or the "Venturers". 4. Venture Funding. MCP will provide funds for the project. --------------- 5. Purpose. ------- A. The purposes of the Joint Venture shall be to lease and engage in the joint development of the Gilpin Hotel and related properties (hereinafter referred to as the "property") as set forth in Exhibit "A", attached hereto, in the city of BlackHawk, County of Gilpin, State of Colorado, and to develop, refurbish, and operate the Gilpin Hotel and related properties, including, but not limited to hotel, restaurant, bar and to establish a gaming operation on the property. MCP has conducted its own inspection and investigation of the existing condition of the building and improvements on the property and of the legal title and ownership of the property, including existing encumbrances and claims to title. MCP accepts the property as is and acknowledges that it is relying solely upon its own inspection and investigation and that no representation, -1- statement or warranty, express or implied, other than as may be set forth in the real estate purchase contract, has been made to it by GVI nor anyone acting on behalf of GVI or its predecessors. B. If any license, registration, application or other form of required governmental filing is denied, reserved, revoked, or suspended for any reason, including, but not limited to the participation of a person unacceptable to a governmental authority, the affected Joint Venturer shall take all measures necessary to remedy or correct the deficiency. In the case where a governmental authority denies or reserves approval for gaming operations or other business operations of the Joint Venture because of the participation of an unacceptable person, GVI and MCP shall forthwith expel such person(s) and substitute a person(s) acceptable to the governmental authority, or otherwise take measures to remedy or correct the deficiency. All agreements by MCP, GVI or on behalf of the Joint Venture shall contain such an expulsion provision. 6. Principal Office. The principal office of the Joint Venture shall be at the ---------------- office of Mountain Casino Properties, Inc., 2060 Broadway, Suite 300, Boulder, Colorado 80302, or such other places as the Joint Venture may from time to time designate. The Joint Venture may transfer or establish additional offices in B1ackHawk at the site of the property. 7. Term. The Joint Venture shall commence upon execution of this Agreement and ---- the Exhibits attached hereto. The Joint Venture shall continue from the date of execution of this Agreement until the Property has been sold by the Venturers; or upon dissolution; or upon the expiration of 35 years, whichever occurs first. The Joint Venture shall not otherwise be terminated except pursuant to the terms of this Agreement. ARTICLE II CAPITAL CONTRIBUTIONS --------------------- 8. Initial Capital Contribution. The initial capital contributions to the Joint ---------------------------- Venture shall be as follows: MCP - $1,000.00 GVI - $1,000.00 9. Development Funding. ------------------- A. MCP shall provide development funds of a minimum of $2,000,000 or more as may be determined by the Policy Board, for development, refurbishing and operation of the Joint Venture ("development funds") and thereafter, MCP shall be -2- solely responsible for the contribution of all funds necessary to operate the Joint Venture ("Further Advances"), subject to reimbursal as specified in this Agreement. B. MCP shall pay the development funds to the Joint Venture as follows: (i) $1,000,000 cash or certified funds or a negotiable, irrevocable letter of credit (the terms of which, including the issuing institution, are subject to the prior written approval of GVI which shall not be unreasonably withheld), or any combination thereof upon the execution of this Agreement; (ii) $1,000,000 cash or certified funds or a negotiable, irrevocable letter of credit (the terms of which, including the issuing institution, are subject to the prior written approval of GVI which shall not be unreasonably withheld), within 30 days from the execution date hereof; (iii) additional funding as approved by the Policy Board in the form of Further Advances as described in subparagraph 10(B). C. In the event MCP fails to make the payments, in whole or in part, required under subparagraph B(ii)-(iii) above, the obligation of GVI under Article IV shall be reduced by the same dollar amount as MCP's failure of payment. In the event the dollar amount of MCP's failure under subparagraph B(ii) above exceeds the obligation of GVI under Article IV, all such excess amounts shall be a credit in favor of GVI against any subsequent obligation of GVI to MCP or the Joint Venture. 10. Further Advances. ---------------- A. No Further Advances shall be required for the needs of the Joint Venture unless and until the development funds are exhausted. B. In the event that Further Advances are required for the needs of the Joint Venture after the development funds are exhausted, MCP shall provide all necessary Further Advances. One-half of MCP's Further Advances shall be repaid by GVI solely in accordance with those procedures of Article IV. This subparagraph 10 shall constitute the sole and exclusive means for a capital call to, or a capital contribution by GVI; provided, however, in the sole and exclusive discretion of GVI, the provisions of this subparagraph 10 may be waived by GVI, which in no event shall constitute a subsequent waiver of GVI's rights hereunder or of any other right of GVI under this Agreement. -3- 11. Capital Accounts. ---------------- A. The initial Capital Account/ownership for each Venturer shall be: MCP - 50% Joint Venture ownership GVI - 50% Joint Venture ownership B. Development Fund and Further Advances. ------------------------------------- 1. The Development Funds and Further Advances to be made by MCP pursuant to Article II, paragraphs 9 and 10 shall be advances by MCP to the Joint Venture and shall not constitute Venturers' capital for capital account purposes (the "Advance Account"). The Advance Account shall not bear an interest obligation upon repayment. 2. Notwithstanding the provisions of paragraph 11(B)(1) above, the Advance Account of MCP shall be converted from the MCP Advance Account to the MCP Capital Account and to the GVI Capital Account by the same amount as the sum of each capital contribution made by GVI to the Joint Venture pursuant to Article IV, paragraph 14. The Advance Account shall then be reduced by the total of the sum of the MCP and GVI capital contribution so credited. 3. No credit shall be made to the MCP Advance Account, MCP Capital Account or any other form of MCP's Venture Interest for the expenditure of Development Funds or Further Advances unless the written consent and approval for any such expenditures is first obtained from GVI. 12. Withdrawal of Capital. A Venturer shall not have the right to withdraw from --------------------- the Joint Venture all or any part of its capital Contribution except as specifically agreed to in writing by the Venturers, or as otherwise provided in this Agreement. ARTICLE III ALLOCATION OF PROFITS AND LOSSES -------------------------------- 13. Profits and Losses. Subject to the provisions of Article IV, all profits, ------------------ gain, losses, deductions, credits and other items of the Joint Venture shall be allocated between the Venturers in accordance with their respective ownership interests. ARTICLE IV DISTRIBUTIONS ------------- 14. Distributions. ------------- -4- A. On no less frequently than a monthly basis, MCP and GVI shall be entitled to a distribution of net profits, after appropriate reserves, to be determined in accordance with Article VII, paragraph 24(f), in proportion to their ownership interests. From the distribution of net profits to GVI, GVI shall estimate its local, state and federal tax obligations and shall retain such estimated amounts. One - half of the remaining sum shall be paid by GVI to the Joint Venture, which shall make distribution of those same funds to MCP, until such time as one-half of the MCP Advance Account has been repaid by GVI. All Advance Account payments by GVI shall be capital contributions to the Joint Venture. Concurrent with the distribution of funds hereunder to MCP by the Joint Venture, MCP shall transfer a like amount from the Advance Account to the Joint Venture capital accounts according to the provisions of paragraph 11(B)(2). No payment by GVI shall be required at any time there are net losses. GVI's obligation and payments hereunder shall not bear interest. B. The underlying amount on which payments by GVI under subparagraph (A) above are made shall not be a debt obligation from GVI to MCP, the Joint Venture or to any third person capable of satisfaction, levy, attachment or other such collection means except by the monthly distribution of net profits generated subsequent to the action for levy; attachment or other collection means. ARTICLE V MANAGEMENT AND OPERATION ------------------------ 15. Management of the Joint Venture. ------------------------------- A. The Joint Venture shall be managed by a Policy Board. The Policy Board shall be responsible for the restoration, development and operation of the hotel and the establishment of gaming facilities. The Policy Board shall have full responsibility and authority for operating and managing the Joint Venture including, but not limited to appointing a Manager to conduct the day-to-day operations of the business. Actions and decisions of the Policy Board shall be by majority vote. The Policy Board shall make all Joint Venture decisions not specifically reserved herein to be made by the Venturers. B. There shall be five members of the Policy Board. All members, except the Impartial Board member as hereinafter defined, shall serve in such capacities without compensation from the Joint Venture. Each Venturer shall designate two representatives to serve on the Policy Board. The fifth member of the Policy Board shall be an independent and impartial person, unrelated to the Venturers and their -5- affiliates (the "Impartial Board Member"). The Impartial Board Member shall be selected and appointed by the joint written consent of the Venturers. The Impartial Board Member shall vote on Policy Board matters only in the event of a deadlock. If the Venturers cannot agree upon the selection and appointment of the Impartial Board Member, the Venturers shall promptly apply to the American Arbitration Association for the appointment of one. Each Venturer shall also designate alternate representatives to the Policy Board who shall serve only when the designated representatives are absent or incapacitated or otherwise unable to serve. The Impartial Board Member may be removed as a member of the Policy Board by a majority vote of the other members of the Policy Board or by decree of the American Arbitration Association upon application for and proof of entitlement to such relief by a Venturer. Should any of the foregoing representatives die, become disabled, resign or for any reason cease to be connected with the Venturer which nominated them, such Venturer shall promptly, by written notice served upon the other Venturer, name a successor. Should the Impartial Board Member die, become disabled, resign or for any reason cease to be connected with the Joint venture, the remaining members of the Policy Board shall mutually agree upon a successor. Meetings of the Policy Board for the transaction of the business of the Joint Venture may be called, subject to reasonable written, advance notice, by any Venturer as it may consider necessary or desirable. 16. Management Agreement. The day-to-day affairs of the Joint Venture business -------------------- shall be conducted by MCP ("Manager") pursuant to the Management Agreement (attached hereto as Exhibit "B") until such time as a successor is named. 17. Indemnity. --------- A. To the fullest extent permitted by law, MCP shall indemnify, defend, and hold harmless GVI, and each of its agents, employees, officers and directors from and against any and all claims, actions, suits, costs, expenses, fees (including reasonable attorney fees), liabilities, and losses and damages of any nature whatsoever that may be asserted by or on behalf of MGPLP, its limited partners, or any other members of MGPLP. B. In all other cases other than subparagraph A above, to the fullest extent permitted by law, MCP agrees to indemnify and save GVI harmless from any loss, costs or expense claimed by third parties for property damage and bodily injury, including death, caused by the negligence or willful misconduct of MCP, its agents, employees, or MCP's affiliates in connection with the Joint Venture. To the -6- fullest extent permitted by law, GVI agrees to indemnify and save MCP harmless from any loss, cost, or expense claimed by third parties for property damage and bodily injury, including death, caused by the negligence or willful misconduct of GVI, its agents, or employees, or GVI's affiliates in connection with the Joint Venture. If the negligence or willful misconduct of both MCP and GVI (or a person identified above for whom each is liable) is the cause of such damage or injury, the loss, cost, or expense shall be shared between MCP and GVI in proportion to their relative degrees of negligence or willful misconduct and the right of indemnity shall apply for such proportion. 18. Liability. The aggregate liability of GVI and its agents, employees, --------- officers and directors to MCP or the Joint Venture, regardless of the legal theory asserted, shall not exceed the greater of GVI's insurer acknowledged coverage or the actual value of GVI's capital account. ARTICLE VI ADMINISTRATIVE PROVISIONS ------------------------- 19. Books and Records. The Manager shall maintain proper books of account ----------------- wherein shall be entered all monies, goods, or effects belonging to or owing to or by the Joint Venture, or paid, received, sold or purchased by the Joint Venture in the course of the Joint Venture's business, and of all such other transactions, matters and things relating to the business as are usually entered in books of account kept by persons engaged in any such business. The books shall be kept at the Joint Venture's principal place of business, and each Venturer shall at all times have access thereto. 20. Annual Accounts and Reports. The annual accounts and reports shall be --------------------------- prepared in accordance with Generally Accepted Accounting Principles by an independent certified public accountant selected by the Venturers. 21. Fiscal Year. The fiscal year for the Joint Venture shall be the calendar ----------- year, unless otherwise mutually agreed to by the Venturers. 22. Bank Accounts. The Policy Board shall establish one or more bank accounts in ------------- FDIC fully insured accounts in the name of the Joint Venture into which all Joint Venture funds shall be deposited. No other funds shall be deposited into these accounts. Funds deposited in the Joint Venture's bank accounts may be withdrawn only to pay Joint Venture debts or to be distributed to the Venturers pursuant to this Agreement. However, pending their withdrawal for such purposes, Joint Venture funds may be invested in such United States issued or guaranteed securities, bank accounts, and -7- money market funds, as the Policy Board may reasonably select. The Joint Venturers' banking institution shall be instructed to provide each Venturer with all notices and communications given by the banking institution in connection with the Joint Venture account. 23. Tax Returns and Information. The Venturers intend for the Joint Venture to --------------------------- be treated as a Joint Venture for tax purposes. The Manager shall cause to be prepared all federal, state and local income and other tax returns which the Joint Venture is required to file and shall furnish same to the Venturers, together with a copy of each Venturer's K-1 and any other information which any Venturer may reasonably request relating thereto, no later than sixty (60) days after the end of each Joint Venture fiscal year. ARTICLE VII AUTHORITY --------- 24. Consent to Actions. The following actions shall require the joint written ------------------ consent of the Venturers: A. Any bonafide loan taken out by the Joint Venture which exceeds $5,000, or any series of loans totalling more than $25,000 the purpose of which, in the opinion of either Venturer, is to avoid the consent required hereunder; B. Any loan in excess of $100,000 taken out by any Venturer for the business needs of the Joint Venture except for any loan or any series of loans for the Development Fund aggregating up to $500,000; C. Any mortgage, lien or other encumbrance on the property of the Joint Venture; D. Sale of any assets of the Joint Venture except as may be required in the normal course of business; E. Unless previously approved in writing by the Venturers in the "Annual Plan" or otherwise previously approved by the Venturers in writing, the execution of contracts whose annual value exceeds or may exceed $25,000, contracts with related entities or affiliates of a Venturer; execution or renewal of management contracts and consulting agreements; employment of counsel, accountants and other similar professionals; and any other obligation or action that could materially affect the business operations of the Venture, or materially affect a Venturer; F. Development, implementation and modification of the phrase "appropriate reserves" as referenced in Article IV, paragraph l4(A); -8- G. Development, implementation and modification of the phrase "net profits", as that phrase is referred to throughout this Agreement (see Exhibit --- "C", a memorandum of understanding, explaining the Parties' pre-operation intentions, incorporated herein by reference); approval of the "Annual Plan" referenced in the Management Agreement. Notwithstanding the provisions of Article IX(31), if the joint written consent and approval for an annual plan cannot be obtained, the Joint Venture shall continue to operate its business: (i) in accordance with the portions of the Annual Plan upon which joint approval exists; (ii) in accordance with the previous year's Annual Plan, to the extent possible, for the portions of the Annual Plan upon which joint approval does not exist; (iii) the portions of the Annual Plan upon which joint approval does not exist shall immediately and forthwith be submitted to arbitration in accordance with the rules of the American Arbitration Association, with the stipulation that a decision by the arbitrator be rendered within thirty (30) days after commencement of arbitration, each party to the arbitration to pay and bear its own attorneys' fees and costs; H. Sale or transfer of all or a portion of MCP's or GVI's interest within one year after the effective date hereof; and I. Adoption of (and amendment to) rules and procedures governing the affairs of the Policy Board. Appointment and service of the Impartial Board Member. 25. Competing or Conflicting Business Interests. ------------------------------------------- A. GVI acknowledges that it has been informed that MCP may own and operate other gaming and gaming related properties in BlackHawk and Central City, Colorado, as reflected by and disclosed in the May 8, 1991 letter of MCP, attached hereto as Exhibit "D" and made an integral and material part of this Agreement. MCP agrees that any adjacent properties controlled by it shall, in good faith, enter into joint marketing arrangements for the mutual benefit of such properties and the properties owned, leased or operated by the Joint Venture. GVI shall be entitled to participate on a first right of participation basis in the development of adjacent properties on terms no less favorable than those offered to third party investors. MCP shall cause such first right of participation to be incorporated into the -9- controlling development, operation, management and other such agreements that MCP may, from time to time, execute in connection with such other related properties. B. To the extent applicable, the right of first participation in subparagraph (A) shall be mutual and shall be construed as a covenant from GVI to benefit MCP. ARTICLE VIII RESTRICTIONS ON TRANSFER OF JOINT VENTURE INTERESTS --------------------------------------------------- 26. Restriction Against Transfer. No Venturer, except as otherwise specifically ---------------------------- authorized by this Agreement shall sell, convey, transfer, assign, pledge, or in any way alienate any of his interest in the Joint Venture or the property, or any right or interest therein, whether voluntarily or by operation of law, or by gift or otherwise, without the prior written consent of the other Venturer, except a transfer that meets the requirements of this Agreement. Any purported transfer or pledge in violation of this Agreement shall be void and ineffective and shall not operate to transfer any interest or title in the purported transferee. 27. The First Right of Refusal. -------------------------- A. If a Venturer desires to sell or transfer all or a portion of his interest ("Selling Venturer"), the sale or transfer shall be made only pursuant to a bona fide written offer to purchase ("Offer") received by the Selling Venturer. Any sale of a Venture interest or Offer to purchase a Venture interest shall be subject to the express terms of this Agreement, and any purchaser shall be bound by the terms hereof. The Selling Venturer shall give written notice of the Offer to the Non-Selling Venturer, which notice shall include a copy of the actual written Offer. For a period of sixty days after receipt of the Offer, the Non - Selling Venturer shall have the right of first refusal to purchase the Selling Venturer's interest upon the same terms and conditions contained in the Offer. If the Non - Selling Venturer fails to exercise the right of first refusal, the Selling Venturer may sell his interest upon the terms and conditions of the Offer. If, after the Non - Selling Venturer fails to exercise the right of first refusal, the terms and conditions of the Offer change, the Non Selling Venturer shall have the right of first refusal under the same procedures described above, to purchase the Selling venturer's interest upon the terms and conditions contained in the changed Offer. B. If an Offer contains property as consideration, in whole or in part, the Non - Selling Venturer shall have the -10- option of exercising the right of first refusal by substituting a cash equivalent for such property. 28. Option to Purchase Venturer's Interest on Other Events. ----------------------------------------------------- In the event a Venturer: (a) is adjudicated bankrupt (voluntary or involuntary); or (b) Makes an assignment for the benefit of his creditors; or (c) Files a petition for involuntary dissolution of the Joint Venture, the remaining Venturer (or if the remaining Venturer elects not to exercise, MCP) shall have the option for a period of 90 days following notice of any such event(s) to give notice of its or their election to acquire all, but not less than all, of the interest owned by the Venturer. The closing and transfer of such interest shall be by mutual agreement of the parties within 180 days of the notice of any of the events in (a), (b), or (c) above and the purchase price for the Venture Interest shall be determined in accordance with paragraph 29, hereinbelow. 29. Appraisal. The purchase price to be paid for the Venture Interest shall be --------- determined by appraisal. Within 30 days after the occurrence of the event requiring the determination of the purchase price under this Agreement, the parties exercising the option shall select one independent appraiser to appraise the Venture Interest and its subsidiaries and determine their values. The Venturer whose interest is acquired or its successor in interest shall select an independent appraiser to appraise the Venture Interest. If the two appraisers cannot agree on a value, they shall appoint a third appraiser and the decisions of the majority of the appraisers shall be binding upon all parties. The appraisal fees for each selected appraiser shall be paid by the party selecting said appraiser and the fee of the appointed appraiser shall be divided equally between the person exercising the option and the Venturer whose interest is being acquired or its successor in interest. In making the appraisals, the appraisers shall value real estate and improvements at fair market value in accordance with the standards of the American Institute for Real Estate Appraisers; machinery and equipment shall be valued at replacement cost or fair market value, whichever is lower; finished inventory shall be valued at cost or market, whichever is lower; goods in process shall be valued at cost, using the cost accounting procedures customarily employed by the company in preparing its financial statements; -11- receivables shall be valued at their face amount, less an allowance for uncollectible items that is reasonable in view of the past experience of the Company and a recent review of their collectibility; all liabilities shall be deducted at their face value, and a reserve for contingent liabilities shall be established, if appropriate. The value of other comparable businesses, if known, shall also be considered. ARTICLE IX BREACH OF DUTIES TO JOINT VENTURE --------------------------------- 30. Definition. A Joint Venturer who fails to perform an enforceable promise to ---------- provide Development Funds or Further Advances or otherwise violates its duty under this Agreement shall be liable to the other Venturer and the Joint Venture. 31. Procedure Regarding Alleged Breach. A Venturer may give notice if a Co- ---------------------------------- Venturer is believed to have committed a material breach of this Agreement. The Venturer shall serve written notice upon the Joint Venture, the Policy Board and the Venturer alleged to be in breach setting forth the details of such alleged breach. If the Co-Venturer shall not, within 30 days after the mailing of such notice, have cured such breach, or if such breach is of a nature that it cannot be cured within such 30-day period, or if the Co-Venturer shall not within such 30-day period have commenced and at all times thereafter have diligently proceeded with all acts required to cure such breach, the Venturer may elect to serve on the Co-Venturer a written notice to terminate the business and affairs of the Joint Venture. Any such termination shall be without prejudice, however, to any and all rights and remedies of the Venturer. If the Co-Venturer shall, within 15 days after receipt of the written notice of such breach, serve upon the Venturer written notice disputing the Venturer's claim of material breach and demanding arbitration thereof, then the dispute shall be submitted promptly to arbitration for determination in accordance with the rules of the American Arbitration Association, and such determination shall be binding upon both parties. If the Co-Venturer shall not serve timely demand for arbitration, or if such arbitration, having been timely demanded, shall result in a determination that the Co-Venturer has committed a material breach of this Agreement, all costs and expenses incurred in connection with such arbitration shall be borne solely by the Co-Venturer. If such arbitration, having been timely demanded, shall result in a determination that the Co-Venturer has not committed a material breach of this Agreement, then the Venturer shall bear all costs and expenses incurred in connection with such arbitration. -12- ARTICLE X TERMINATION, DISSOLUTION AND LIQUIDATION ---------------------------------------- 32. Dissolution. The Joint Venture shall be dissolved on the first of the ----------- following to occur: A. The joint consent of the Venturers to the dissolution of the Joint Venture; B. The Joint Venture makes a general assignment of Joint Venture assets for the benefit of creditors; C. The Joint Venture files a voluntary petititon in bankruptcy or becomes the subject of an order for relief or is declared insolvent in any state or federal bankruptcy or insolvency proceeding; D. The Joint Venture files a petition or answer seeking a reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for the Joint Venture under any law; E. The Joint Venture seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of the Joint Venture or of all or any substantial part of Joint Venture's properties; or F. The expiration of 35 years from the date of this Agreement, or termination of the Joint Venture's Lease of the Property. 33. Distribution upon Dissolution. Subject to the provisions of Article IV, in ----------------------------- the course of winding up and terminating the business and affairs of the Joint Venture, the assets of the Joint Venture, after full payment of all liabilities, shall be distributed to the parties in proportion to the respective ownership interest as defined in Article II, paragraph 11. In the event the assets of the Joint Venture are insufficient to return to the Venturers all or any part of their respective capital contributions, neither party shall have any claim or recourse against the other therefor. 34. Final Accounting. Subject to the provisions of Article IV, within a ---------------- reasonable time following the completion of the liquidation, the Policy Board shall cause an accounting of the Joint Venture to be made and distributed to each Venturer, former Venturer or assignee which shall set forth assets and the liabilities of the Joint Venture as of the date of complete liquidation, each Venturer's pro rata portion of distributions, and the amount retained as reserves by the Liquidator. A supplemental final accounting shall -13- accompany the distribution of the retained reserves. ARTICLE XI MISCELLANEOUS ------------- 35. Governing Law. This Joint Venture, the Joint Venture Agreement and related ------------- agreements created hereunder shall be construed in accordance with and governed by the laws of the State of Colorado. 36. Schedule of Exhibits. The following Exhibits are attached to and -------------------- incorporated into the Agreement herein: Exhibit "A" -- Legal Description of Real Estate ---------- Exhibit "B" -- Development and Management Agreement ---------- Exhibit "C" -- Memorandum of Understanding ---------- Exhibit "D" -- MCP Disclosures ---------- 37. Notices. All notices required or permitted under the terms of this Agreement ------- shall be in writing and shall be deemed to have been properly given if served personally, or if sent by United States registered or certified mail, postage prepaid, return receipt requested, properly addressed. All notices to MCP shall be addressed to Mountain Casino Properties, Inc., 2060 Broadway, Suite 300, Boulder, Colorado 80302, or at any other address as MCP may from time to time designate by written notice to GVI. All notices to GVI shall be addressed to GVI at 27657 Timber Drive, Conifer, Colorado 80433, or at any other address as GVI may from time to time designate by written notice to MCP. 38. Binding Effect. This Agreement shall inure to the benefit of and be binding -------------- upon the parties and their respective executors, administrators, successors, and permitted assigns. Except as provided in this Agreement, neither Venturer shall sell, transfer, assign, or otherwise dispose of its or his interest in the Joint Venture or any part of it. 39. Entire Agreement. This Agreement and agreements incorporated and referenced ---------------- herein constitute the entire agreement between the parties and any prior agreements not contained herein are terminated. 40. Severability. This Agreement is intended to be performed in accordance with, ------------ and only to the extent permitted by all applicable laws, ordinances, rules and regulations. If any provision of this Agreement or the application thereof to any person or circumstance shall, for -14- any reason and to any extent, be invalid or unenforceable, but the extent of such invalidity or unenforceability does not destroy the basis of the bargain among the Venturers expressed herein, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby, but rather shall be enforced to the greatest extent permitted by law. If the adoption of applicable laws, ordinances, rules and regulations destroy the basis of the bargain among the Venturers expressed herein, the Venturers agree to negotiate in good faith to amend and modify this Agreement to conform to the applicable laws, ordinances, rules and regulations and to arrive at a new agreement consistent with the basic intentions expressed by this Agreement. 41. Waiver of Partition. Notwithstanding any statute or principal of law to the ------------------- contrary, each Venturer agrees that during the term of the Joint Venture, it shall have no right and hereby waives any such right to cause any Joint venture property to be partitioned. 42. Amendments. This Agreement may be modified or amended upon the written ---------- agreement of both Venturers, but not otherwise. 43. Attorneys' Fees. If any litigation or arbitration is initiated by any --------------- Venturer against another Venturer relating to this Agreement or the subject matter hereof, the Venturer who prevails in such proceedings shall be entitled to recover, in addition to all damages allowed by law and other relief, all court costs and reasonable attorneys' fees incurred in connection therewith. 44. Headings. Headings in this Agreement are for convenience only and shall not -------- be used to interpret or construe its provisions. SWORN TO AND SUBSCRIBED as of the dates set forth below. GILPIN VENTURES, INC. 3-3-92 /s/ Robert W. Dunlap Date --------------------------------- By: Robert W. Dunlap, President MOUNTAIN CASINO PROPERTIES, INC. 3-3-92 /s/ Robert D. Greenlee Date --------------------------------- By: Robert D. Greenlee, President -15- STATE OF COLORADO ) ) ss: COUNTY OF DENVER ) SUBSCRIBED AND SWORN TO before me by the said Robert W. Dunlap, President of Gilpin Ventures, Inc. on the 3rd day of March, 1992. Witness my hand and official seal. My Commission expires: 11-22-92 /s/ Illegible ------------- Notary Public STATE OF COLORADO ) ) ss: COUNTY OF DENVER ) SUBSCRIBED AND SWORN TO before me by the said Robert D. Greenlee, President of Mountain Casino Properties, Inc. on the 3rd day of March 1992. Witness my hand and official seal. My Commission expires: 11-22-92 /s/ Illegible ------------- Notary Public -16- EXHIBIT "C" Letter of Understanding Regarding the Calculations of Rent of Real Property, Management Fees, and Venturer Distributions 1. Rent of Real Property. Rent shall be paid monthly based upon "7% of Gross Sales". Gross Sales shall be defined as all sales without regard to any allowance for uncollectible accounts and after deducting all related sales, gambling, lodging, and other related taxes. 2. Management Fee - Gross Sales Portion. A portion of the management fee shall be paid monthly based upon "3% of Gross Sales from Hotel, Restaurant, and Bar activities" (but not including gaming activities). Gross Sales shall be defined as in (1) above. 3. Management Fee - "Net Profits" Portion. A portion of the management fee shall be paid monthly based upon "10% of the 'Net Profits' from Hotel, Restaurant, and Bar operations and 12%, of the 'Net Profits' from gaming operations". "Net Profits" for this calculation only shall be defined as actual Net Profits from operations less provisions for depreciation, amortization and prepayments and after inclusion of Rents and Fees described in (1) and (2) above and before inclusion of any %-of-net-profit management fee and without regard for non-operating income or expense such as interest and gain or loss on the disposition of assets. Dated this 26th day of February, 1992. Mountain casino Properties, Inc. By: /s/ Robert D. Greenlee ----------------------------- Title: President Gilpin Ventures, Inc. By: /s/ Robert W. Dunlap ----------------------------- Title: President Example of Calculation of "Net Profits" Management fee Gaming Hotel, Bar and Activities Restaurant Activities Total Gross Sales (Net of Applicable Sales, Lodging, and Gaming Taxes) $400,000 $75,000 $475,000 Less Cost of Goods Sold 50,000 35,000 85,000 -------------------------------------------- Gross Margin $350,000 $40,000 $390,000 Less: Cost of Operations (Not incl. "Net Profit" Mgt. Fee and incl. Rent and "Gross Sales" Mgt. Fee $150,000 $15,000 $390,000 -------------------------------------------- "Net Profits" Before Reserves $200,000 $25,000 $225,000 Less: Reserve for Depreciation, Amortization and Prepayments $ 35,000 $10,000 $ 45,000 -------------------------------------------- "Net Profits" Subject to Mgt. Fee $165,000 $15,000 $109,000 Management Fee Percentage .12 .10 N/A -------------------------------------------- Management Fee $ 19,800 $ 1,500 -------------------------- Total Fee from "Net $21,300 Profits" Add. Fee from "Gross Sales" $ 2,250 ------- Total Management Fee $23,250 4. Venturer Distributions. Distributions to Venturers shall be based upon a portion of positive cash flow generated from Net Profits as follows. All items of actual income and expense including management fees and lease payments shall be included in the calculation. Further, amounts actually deposited in sinking funds for the purpose of providing funding for future capital acquisitions and amounts paid against any note payable obligations shall reduce the amount to be distributed. In no event shall the amount actually distributed be less than the expected local, state, and federal income tax liability generated by the Joint Venture and payable by the Venturers. Example of Calculation of Venturers Distributions Gross Sales (Net of Applicable Taxes) $475,000 Less: Cost of Goods Sold 85,000 -------- Gross Margin $390,000 Less: Cost of Operations 180,000 -------- "Net Profit" from Operation $210,000 Add *Deduct** Miscellaneous Income and Expense 10,000 -------- "Net Profit" $200,000 Less: Sinking Funds (at Present Value) for Future Acquisitions *25,000**/1/ Note Obligation Repayments (if any) -0- Working Capital Fund *80,000**/2/ -------- Cash Flow Subject to Distribution $ 95,000/3/ -------- /1/ It is anticipated that a provision for sinking funds will be recurring. /2/ Balance will be sustained, but is not recurring in nature. --------- --- /3/ Estimated Income Taxes in this example: $62,500. EXHIBIT A Covering the Land in the State of Colorado, County of Gilpin Descried as : PARCEL NO. 1: A parcel of ground in the CITY OF BLACK HAWK, described as follows: Beginning at a point which lies N. 48 DEG. 06' W., 10 feet from the Southeast Corner of Lot 6, Block 40, City of Black Hawk; thence N. 43 DEG. 33' E., 100.05 feet: thence S. 48 DEG. 06' E., 10 feet; thence N. 43 DEG. 33' E., 48.12 feet; thence S. 51 DEG. 34' E., 93.30 feet; thence S.38 DEG. 20' W., 152.36 feet; thence N. 57 DEG. 59' W., 10 feet ; thence N. 48 DEG. 06' W., 106.66 feet to the place of beginning, Sometimes described as the East 10 feet of Lot 6, Block 40, part of Mill Site no. 29 and the West 10 feet of Mill Site No. 30 and tract. PARCEL NO. 2: The East 15 feet of Lot 11, all of Lot 12, Block 35; and Lot 1, Block 37, CITY OF BLACK HAWK PARCEL NO. 3: Und. 1/3 Interest in "99" Lode (City Title) All in the CITY OF BLACK HAWK AMENDMENT TO JOINT VENTURE AGREEMENT THIS AMENDMENT TO JOINT VENTURE AGREEMENT is entered into by and between BLACK HAWK GAMING AND DEVELOPMENT COMPANY, INC., a Colorado corporation ("BHG") as owner of the "Property" defined below, and GILPIN VENTURES, INC., a Colorado corporation ("GVI"), effective as of September 1, 1992, under the following facts: R E C I T A L S A. After passage of the Constitutional Amendment permitting limited gaming activities, the owners of the real property described on Exhibits A and B examined the business opportunities for limited gaming on the properties. It was determined that development of the Gilpin Hotel site, which is positioned on a parcel of land described on Exhibit B, presented an opportunity for a competitive advantage over other limited gaming facilities so long as the Gilpin Hotel utilized the land on the properties described herein for customer parking. B. In 1991, the owners of the two properties and others entered into a business agreement for development and operation of the Gilpin Hotel as a limited gaming casino. The competitive advantage of the parking facilities was repeatedly identified as one of the cornerstones for success in developing and operating the Gilpin Hotel as a limited gaming casino. Use of the parking facilities by the customers of the business was confirmed and approved by the City of Black Hawk, Colorado. C. Thereafter, BHG as Venturer & GVI entered into a joint venture under the name of Gilpin Hotel Venture doing business as Gilpin Hotel Casino (the "Venture") pursuant to a Joint Venture Agreement dated February 28, 1992 (the "Joint Venture Agreement"). D. BHG owns real estate situated in the County of Gilpin, State of Colorado commonly known as Mill Site 30, more particularly described on Exhibit A, annexed hereto (the "Property"). Unless otherwise indicated, reference to BHG herein shall be as owner of the Property. E. BHG, as Venturer & GVI desire to amend the Joint Venture Agreement to memorialize the agreements which have been reached regarding the use of the Property by the Venture as customer parking for the Gilpin Hotel Casino. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties amend the Joint Venture Agreement by the addition of paragraphs 18.1-18.6 to Article V ("Management and Operation"): -1- 18.1. BHG contributes the use of the Property to the Venture for parking for the Gilpin Hotel Casino pursuant to the terms and provisions hereof. The Venture accepts the use of the Property for parking for the Gilpin Hotel Casino in its present "as is" condition. As consideration for the use of the Property for parking, the Venture shall pay BHG a monthly fee. Commencing September 30, 1992, and running through December 31, 1992, the parking fee shall be $20,000 per month, due and payable monthly. Commencing January 1, 1993, and running through December 31, 1993, the parking fee shall be $35,000 per month, due and payable monthly. Thereafter, the amount of the parking fee shall be adjusted annually effective January 1 to reflect the market rate for the use of comparable property for parking for gaming establishments in Black Hawk, Colorado, as determined by an independent party experienced in the valuation of parking rights, selected with the prior mutual agreement of BHG and the Venture. In addition, the monthly parking fee shall also be adjusted in the manner described in the preceding sentence in the event of any changes to fees imposed by the City of Black Hawk for use of property for parking. 18.2. The right of the Venture to use the Property for parking shall continue from year to year until terminated by either BHG or the Venture upon 90 days prior written notice to the other party. In the event the City of Black Hawk ever prohibits parking as a permitted use of the Property and this prohibition is upheld if challenged by the Venture, the Venture's right to use the Property shall also terminate. 18.3. BHG as manager shall manage the Property for the Venture. During the term of the use of the Property for parking the Venture shall be responsible for all costs and expenses associated with the Property, it being the understanding of the parties that the parking fee shall represent a net payment to BHG. These costs and expenses include, without limitation, all costs of operation, including costs of staff, construction, and maintenance of parking-related structures, and any related litigation fees, expenses, and disbursements; all taxes, assessments, and fees, general or special, ordinary or extraordinary, and installments thereof which may be taxed, charged, levied, or assessed on the Property (which shall be prorated for partial years); the cost of all utilities arranged for by the Venture; and the cost of maintaining the insurance coverage listed below. 18.4. The use of the Property by the Venture shall be at the sole risk of the Venture. All property kept, stored, or maintained on the Property by the Venture and third parties, including owners of motor vehicles shall, as between BHG and the Venture, be at the Venture's sole risk. The Venture hereby agrees to indemnify, defend, and hold harmless BHG from all loss, damage, cost, or expense, including reasonable attorneys' fees, arising from or related to the Venture's use of the Property. In addition, the Venture agrees to indemnify, defend, and hold harmless BHG from and against any and all loss, damage, cost, or expense, including reasonable attorneys' fees, resulting from any and all mechanics', materialmen's, or other similar liens filed against the Property by any supplier, contractor, subcontractor, or materialman for any work performed or materials supplied at the request of the Venture during the term of its possession of the Property. -2- 18.5. The Venture shall, throughout the term of its possession of the Property, at the Venture's sole cost and expense, maintain comprehensive public liability and property damage insurance with a single limit of not less than $1,000,000 insuring against all claims for bodily injury, death, or property damage occurring on or about the Property or sidewalks or other areas adjacent to the Property. The insurance policy shall be issued by an insurance company of recognized standing authorized to do business in the state of Colorado and shall be reasonably satisfactory to BHG. All such policies shall name BHG as an additional insured. Certificates of insurance shall be delivered to BHG evidencing such insurance upon commencement of the term hereof and as to any renewal thereof at least 30 days prior to the expiration of any policy initially provided. All such policies shall further provide that any cancellation, termination, or material modification thereof shall be effective only upon 10 days prior written notice by the insurance carrier to BHG. 18.6. The Venture shall not improve, modify, or alter the Property without the prior written permission of BHG, which permission shall not be unreasonably withheld. Such permission may be conditioned upon receipt and approval of all plans and specifications for the work and the qualifications of the contractors and subcontractors. Upon the expiration of the right of the Venture to use the Property, all improvements made to the Property by and on behalf of the Venture shall belong to BHG; provided, however, that the Venture shall receive a reimbursement for the useful life of any assets purchased by the Venture and remaining on the Property and shall have the right to remove any distinctive signs bearing names and logos, and any attendant shelter provided that the Venture shall repair any damage resulting from such removal. The Venture shall not have the right to assign the right to use the Property for parking. IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Joint Venture Agreement to be effective as of September 1, 1992. BLACK HAWK GAMING AND DEVELOPMENT COMPANY, INC., a Colorado corporation By: /s/ Robert D. Greenlee ---------------------------------- Title: President -3- GILPIN HOTEL VENTURE, a Colorado joint venture doing business as GILPIN HOTEL CASINO By: GILPIN VENTURES, INC., a Colorado corporation, Joint Venturer By: /s/ Robert W. Dunlap ----------------------------------------------- Title: President By: BLACK HAWK GAMING AND DEVELOPMENT COMPANY, INC., a Colorado corporation, Joint Venturer & Manager By: /s/ Robert D. Greenlee ----------------------------------------------- Title: President -4- ADDENDUM TO GILPIN HOTEL JOINT VENTURE AGREEMENT This Addendum to the Gilpin Hotel Joint Venture Agreement ("Agreement") is made and entered into this 24 day of April, 1998 by and between Black Hawk Gaming & Development Company, Inc. "Black Hawk" formerly called Mountain Casino Properties, Inc.) and Gilpin Ventures, Inc. ("GVI"). For and in consideration of the mutual promises set forth herein, the parties agree as follows: 1. The following shall be added to the Agreement as paragraph 45 thereof: "45. It is intended by the parties that the Gilpin Hotel Venture be deemed to be a general partnership and shall be subject to, and governed by, the provisions of the Colorado Uniform Partnership Law (C.R.S. 7-60-100 et. seq.)." BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. By: /s/ Illegible --------------------------- President GILPIN VENTURES, INC. By: /s/ Illegible --------------------------- President EX-3.10 18 dex310.txt ARTICLES OF INCORPORATION OF GILPIN VENTURES, INC. Exhibit 3.10 ARTICLES OF INCORPORATION OF GILPIN VENTURES, INC. [Illegible], The undersigned natural persons of the age of twenty-one years or more, acting as incorporators of a corporation under the Colorado Corporation Act, adopt the following Articles of Incorporation for such corporation: FIRST: The name of the corporation is Gilpin Ventures, Inc. SECOND: The period of its duration is perpetual. THIRD: The purposes for which the corporation is organized are to operate a hotel, restaurant & bar & Lawful gaming facility and all other types of lawful business. FOURTH: The aggregate number of shares which the corporation shall have authority to issue is 50,000 shares of common stock with no par value. FIFTH: Cumulative voting of shares of stock is not authorized. SIXTH: Provisions limiting or denying to shareholders the preemptive right to acquire additional or treasury shares of the corporation, if any, are: none. SEVENTH: The address of the registered office of the corporation is 27657 Timber Drive, Conifer, Colorado 80433. Agent name: Robert W. Dunlap EIGHTH: Address of the place of business is the Gilpin Hotel 111 Main Street, BlackHawk, Colorado 80422. NINTH: The number of directors constituting the initial Board of directors of the corporation is three (3), and the names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders or until their successors are elected and shall qualify are: Robert W. Dunlap 27657 Timber Drive, Conifer, Colorado 80433 Douglas K. Lee 74A Ponca Point Loda, Illinois 60948 Kathy L. Dunlap 27657 Timber Drive, Conifer, Colorado 80433 The number of directors of this corporation shall be fixed in accordance with the By-laws. So long as the number of directors shall be less than three, no shares of this corporation may be issued and held of record by more shareholders than there are directors and any shares issued in violation of this paragraph shall be null and void. COMPUTER UPDATE COMPLETE MRA TENTH: The name and address of each incorporator is: Douglas K. Lee 74A Ponca Point Loda, Illinois 60948 Dated: 5/28/91. /s/ Illegible ---------------------------- STATE OF ILLINOIS ) )ss: COUNTY OF [Illegible] ) I, Pat Landis, a notary public, hereby certify that on the 28th day of May,1991 personally appeared before me Douglas K. Lee, who being by me first duly sworn, severally declared that he is the person who signed the foregoing document as incorporator, and that the statements therein contained are true. I witness whereof, I have hereunto set my hand and seal this 28th day of May, 1991. /s/ Pat Landis ---------------------------- Notary Public My Commission Expires: June 1, 1992 for office use only 03-17-92 10:37 921027480 $10.00 SS: AN-TN 1 Mail to: Secretary of State (Rev. 7/91) Corporations Section SUBMIT ONE 1560 Broadway, Suite 200 Filing fee: $10.00 Denver, Colorado 80202 (303) 894-2200 This document must be typewritten. CERTIFICATE OF ASSUMED OR TRADE NAME Gilpin Ventures, Inc. and Mountain Casino Properties, inc. (a joint venture), a corporation, limited partnership or limited liability company under the laws of Colorado being desirous of transacting a portion of its business under an assumed or trade name as permitted by 7-71-101, Colorado Revised Statutes hereby certifies: 1. The location of its principal office is: 27657 Timber Drive, Conifer, CO 80433 2. The name, other than its own, under which business is carried on is (Note 1): Gilpin Hotel Casino, Ltd. 3. A brief description of the kind of business transacted under such assumed or trade name is: a Colorado gaming development and management venture - -------------------------------------------------------------------------------- Limited Partnerships or Limited Liabilities Companies complete this Corporations complete this section section - -------------------------------------------------------------------------------- In IN WITNESS WHEREOF, the undersigned IN WITNESS WHEREOF, the undersigned general partner or manager of said officers of said corporation have this limited partnership or limited day executed this certificate March 13 liability company has this day executed 1992 this certificate 19 --------- ---- GILPIN VENTURES, INC. (Note 2) (Note 2) By /s/ Robert W. Dunlap (Note 3) - ------------------------------ -------------------------- By (Note 3) Its President ------------------------------------ --------------------- Title, General Partner or Manager Robert W. Dunlap - --------------------------------------- Attest: /s/ Kathy L. Dunlap Title, General Partner or Manager ------------------------------ Its Secretary --------------------- Kathy L. Dunlap - -------------------------------------------------------------------------------- STATE OF COLORADO COMPUTER UPDATE COMPLETE ss. JM COUNTY OF DENVER Acknowledged before me this 13TH day of March 1992 By Robert W. Dunlap, President of Gilpin Ventures, Inc. and Kathy L. Dunlap, its ----------------------------------------------------------------------------- Secretary (Insert name(s) as signed above, title(s) In witness whereof I have hereunto set my hand and seal My Commission Expires Nov. [Illegible] /s/ Illegible [SEAL] -------------------------------------- Notary Public Note 1: Any assumed name used by any corporation shall contain one of the words "Corporation", "Incorporated", "Limited", or one of the abbreviations "Corp.", "Inc.", or "Ltd." Any assumed name used by any limited partnership shall contain one of the words "Limited Partnership", "Limited", or "Company" or one of the abbreviations "L.P.", "Ltd.", or "Co." Any assumed name used by a Limited Liability Company must contain the words Limited Liability Company. The words Limited and Company may be abbreviated as Ltd. and Co., but the word Liability cannot be abbreviated. Note 2: Exact name of corporation, limited partnership or limited liability company making the statement. Note 3: Signature and title of officers signing (for the corporation, must be president or vice president; and secretary or assistant secretary, for a limited partnership must be general partner for a limited liability company must be a manager.) For office use only 961148885 C $10.00 SECRETARY OF STATE 11-14-96 16:08 Mail to: Secretary of State Corporation Section 1560 Broadway, Suite 200 Denver, CO 80202 (303) 894-2251 MUST BE TYPED Fax (303) 894-2242 FILING FEE: $10.00 MUST SUBMIT TWO COPIES --- STATEMENT OF CHANGE OF Please include a typed REGISTERED OFFICE OR self addressed envelope REGISTERED AGENT, OR BOTH Pursuant to the provisions of the Colorado Business Corporation Act, the Colorado Nonprofit Corporation Act, the Colorado Uniform Limited Partnership Act of 1981 and the Colorado Limited Liability Company Act, the undersigned, organized under the laws of: the State of Colorado, submits the following statement for the purpose of changing its registered office or its registered agent, or both, in the state of Colorado: FIRST: The name of the corporation, limited partnership or limited liability company is: Gilpin Ventures, Inc. SECOND: Street address of current REGISTERED OFFICE is: 27657 Timber Drive Conifer, Colorado 80433 (Include City, State, Zip) and if changed, the new street address is: 1600 Broadway, Ste.1800, Denver, CO 80202-4918 (Include City, State, Zip) THIRD: The name of its current REGISTERED AGENT is: Robert W. Dunlap and if changed, the new registered agent is: Philip A. Rouse. Jr. Signature of New Registered Agent /s/ Philip A. Rouse. Jr. ------------------------- Principal place of business 32391 Horseshoe Drive, Evergreen, Colorado 80439 (City, State, Zip) The address of its registered office and the address of the business office of its registered agent, as changed, will be identical. FOURTH: If changing the principal place of business address ONLY, the new address is ------------------------------------------------------------- ---------------------------------------------------------------------- Signature /s/ Robert W. Dunlap ------------------------------ Title President - -------------------------------------------------------------------------------- STATE OF COLORADO BIENNIAL REPORT OF FEE $45.00 A CORPORATION OR LIMITED LIABILITY COMPANY ON OR BEFORE DATE DUE 11/30/1997 READ INSTRUCTIONS ON REVERSE SIDE BEFORE COMPLETING REPORT YEAR 1997 SUBMIT SIGNED FORM WITH FILING FEE THIS FORM MUST BE TYPED MAILING DATE 09/30/1997
INFORMATION BELOW IS ON FILE IN THIS OFFICE. DO NOT CHANGE PRE-PRINTED INFORMATION - -------------------------------------------------------------------------------------------------------------------- CORPORATE NAME REGISTERED AGENT, REGISTERED OFFICE,CITY, STATE & ZIP FOR OFFICE USE ONLY 19971169395 M 19911046810 DPC STATE/COUNTRY OF INC CO $45.00 SECRETARY OF STATE GILPIN VENTURES, INC. 10-22-97 12:13:08 GILPIN VENTURES, INC. 32391 HORSESHOE DR EVERGREEN CO 80439 FIRST REPORT OR CORRECTIONS IN THIS COLUMN - -------------------------------------------------------------------------------------------------------------------- Return completed reports to: TYPE NEW AGENT NAME Department of State Philip A. Rouse, Jr. Corporate Report Section ------------------------------------------- 1560 Broadway, Suite 200 SIGNATURE OF NEW REGISTERED AGENT Denver, CO 80202 /s/ Illegible ------------------------------------------- MUST HAVE A STREET ADDRESS 303 East Seventeenth Ave., Suite 800 ------------------------------------------- CITY STATE ZIP Denver CO 80203 - -------------------------------------------------------------------------------------------------------------------- OFFICERS NAME AND ADDRESS TITLE DUNLAP ROBERT WILLIAM PR 27657 TIMBER DR ------------------------------------------- 32391 Horseshoe Drive CONIFER CO 80433 Evergreen, Colorado 80439 - -------------------------------------------------------------------------------------------------------------------- LEE DOUGLAS KERWIN VP 33 SPARROW CT ------------------------------------------- BAILEY CO 80421 ------------------------------------------- ------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- DUNLAP KATHY LYNN ST 27657 TIMBER DR ------------------------------------------- 32391 Horseshoe Drive CONIFER CO 80433 Evergreen, Colorado 80439 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- DIRECTORS OR LIMITED LIABILITY COMPANY MANAGERS (If you have less than 3 shareholders, you may list less than 3 directors) DUNLAP ROBERT WILLIAM 27657 TIMBER DR ------------------------------------------- 32391 Horseshoe Drive CONIFER CO 80433 Evergreen, Colorado 80439 - -------------------------------------------------------------------------------------------------------------------- LEE DOUGLAS KERWIN 33 SPARROW CT ------------------------------------------- ------------------------------------------- ------------------------------------------- BAILEY CO 80421 - -------------------------------------------------------------------------------------------------------------------- DUNLAP KATHY LYNN 27657 TIMBER DR ------------------------------------------- 32391 Horseshoe Drive ------------------------------------------- CONIFER CO 80433 Evergreen, Colorado 80439 - --------------------------------------------------------------------------------------------------------------------
Address of Principal Place of Business Street 32391 Horseshoe Drive City Evergreen, State CO Zip 80439 SIGNATURE Under penalties of perjury and as an authorized officer, I declare that this biennial report and, if applicable, the statement of change of registered office and/or agent, has been examined by me and is to the best of my knowledge and belief, true, correct, and complete. BY /s/ Robert W. Dunlap ---------------------------- Authorized Agent TITLE President DATE 10/2/1997 [ ] NOTE: DO NOT USE THIS BOX IF THIS IS YOUR FIRST REPORT !!! SEE INSTRUCTIONS ON REVERSE, IF THERE ARE NO CHANGES SINCE YOUR LAST REPORT, MARK THIS BOX SIGN ABOVE AND RETURN WITH THE FEE AND BY THE DATE DUE INDICATED ABOVE (UPPER LEFT HAND CORNER). IF YOU ARE FILING AFTER THE DATE DUE ABOVE, CONTACT THIS OFFICE FOR THE PROPER FEE. (303) 894-2251 SEE INSTRUCTIONS ON BACK For office use only 19981126426 M $5.00 SECRETARY OF STATE 07-10-1998 12:17:13 FILED [ILLEGIBLE] COLORADO SECRETARY OF STATE Mail to: Secretary of State Corporations Section 1560 Broadway, Suite 200 Denver, CO 80202 (303) 894-2251 MUST BE TYPED Fax (303) 894-2242 FILING FEE: $5.00 MUST SUBMIT TWO COPIES --- STATEMENT OF CHANGE OF Please Include a typed REGISTERED OFFICE OR Self addressed envelope REGISTERED AGENT, OR BOTH Pursuant to the provisions of the Colorado Business Corporation Act, the Colorado Nonprofit Corporation Act, the Colorado Uniform Limited Partnership Act of 1981 and the Colorado Limited Liability Company Act, the undersigned, organized under the laws of: COLORADO submits the following statement for the purpose of changing its registered office or its registered agent, or both, in the state of Colorado: FIRST: The name of the corporation, limited partnership or limited liability company is: GILPIN VENTURES, INC. SECOND: Street address of current REGISTERED OFFICE is: 32391 HORSESHOE DRIVE EVERGREEN, CO 80439 (Include City, State, Zip) and if changed, the new street address is: 240 MAIN STREET, BLACK HAWK, CO 80422 (Include City, State, Zip) THIRD: The name of its current REGISTERED AGENT is: PHILIP A. ROUSE and if changed, the new registered agent is: STANLEY POLITANO Signature of New Registered Agent /s/ STANLEY POLITANO -------------------- Principal place of business 240 MAINSTREET, BLACK HAWK, CO 80422 (City, State, Zip) The address of its registered office and the address of the business office of its registered agent, as changed, will be identical. FOURTH: If changing the principal place of business address ONLY, the new address is ----------------------------------------------------------- - -------------------------------------------------------------------------------- COMPUTER UPDATE COMPLETE Signature /s/ Illegible [ILLEGIBLE] --------------- Title Controller Revised 7/97 EX-3.11 19 dex311.txt BY-LAWS OF GILPIN VENTURES, INC. Exhibit 3.11 BY-LAWS OF GILPIN VENTURES, INC. A shareholder may apply to any court of competent jurisdiction in Colorado to seek an order that a shareholder meeting be held: (i) if an annual meeting was not held within six months after the end of the corporation's fiscal year or fifteen months after its last annual meeting, whichever is earlier, or (ii) if the shareholder participated in a proper call for a special meeting and notice of the special meeting was not given within thirty days after the date the demand was delivered to the corporation's secretary or the special meeting was not held in accordance with the notice. Article I. Offices The principal office of the corporation shall be located at 27657 Timber Drive, Conifer, Colorado 80433. The corporation may have such other offices, either within or outside Colorado, as the board of directors may designate or as the business of the corporation may require from time to time. The registered office of the corporation required by the Colorado Corporation Code to be maintained in Colorado may be, but need not be, identical with the principal office if in Colorado, and the address of the registered office may be changed from time to time by the board of directors. Article II. Shareholders Section 1. Annual Meeting. The annual meeting of Shareholders shall be held [Illegible], for the purpose of electing Directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in Colorado, such meeting shall be held on the next succeeding business day. If the election of directors is not held on the day designated herein for any annual meeting of the shareholders, or at any adjournment thereof, the board of directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as it may conveniently be -1- held. Section 2. Special Meetings. Special Meetings of the shareholders for any purpose, unless otherwise prescribed by statute, may be called by the president of by the board of directors, and shall be called by the president at the request of the holders of not less than one-tenth of all the outstanding shares of the corporation entitled to vote at the meeting. Section 3. Place of Meeting. The board of directors may designate any place, either within or outside Colorado, as the place for any annual meeting or for any special meeting called by the board of directors. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or outside Colorado, as the place for such meeting. If no designation is made, or if a special meeting shall be called otherwise than by the board, the place of meeting shall be the registered office of the corporation in Colorado. Section 4. Notice of Meeting. Written or printed notice stating the place, day and hour of the meeting, and in the case of a special meeting or as otherwise required by the Colorado Corporation Code, the purposes for which the meeting is called, shall be delivered not less than ten nor more than fifty days before the date of the meeting, except to the extent that a longer notice period is required by the Colorado Corporation Code. Notice shall be delivered either personally or by mail, by or at the direction of the president, or the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid. If required by the persons or persons lawfully calling such meeting, the secretary shall give notice thereof at corporate expense. No notice need be sent to any shareholder of record if three successive letters mailed to the last known address of such shareholder have been returned as undeliverable until such time as another address for such shareholder is provided to the corporation by such shareholder. In order to be entitled to receive notice of any meeting, a shareholder shall advise the corporation in writing of any change in such shareholder's mailing address as shown on the corporation's books and records. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time -2- and place of such meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. By attending a meeting, either in person or by proxy, a shareholder waives objection to lack of notice or defective notice of the meeting unless the shareholder, at the beginning of the meeting, objects to the holding of the meeting or the transacting of business at the meeting. By attending the meeting, the shareholder also waives any objection to consideration at the meeting of a matter not within the purpose or purposes described in the meeting notice unless the shareholder objects to considering the matter when it is presented. Section 5. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors may provide that the stock transfer books shall be closed for any stated period not exceeding fifty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the stock transfer books, the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than fifty days, and, in the case of a meeting of shareholder, not less than ten days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the board directors declaring such dividend is adopted, as the case be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof except where the determination has been made through the closing of the stock transfer books and the stated period -3- of the closing has expired. Section 6. Voting Lists. The officer or agent having charge of the stock transfer books for shares of the corporation shall make, at least ten days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each. For a period of ten days prior to such meeting, this list shall be kept on file at the principal office of the corporation, whether within or outside Colorado, and shall be subject to inspection for any purpose germane to the meeting by any person who is a holder of record of shares or of voting trust certificates therefor at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder for any purpose germane to the meeting during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders Section 7. Certification Procedure for Beneficial Owners. The board of directors may adopt by resolution a procedure whereby a shareholder of the corporation may certify in writing to the corporation all or a portion of the shares registered in the name of such shareholder are held for the account of a specified person or persons. The resolution shall set forth: (i) the classification of shareholder who may certify; (ii) the purpose or purposes for which the certification may be made; (iii) the form of certification and the information to be contained therein; (iv) if the certification is with respect to a record date or closing of the stock transfer books, the time within which the certification must be received by the corporation; and (v) such other provisions with respect to the procedure that the board deems necessary or desirable. Upon receipt by the corporation of a certificate complying with this procedure, the persons specified in the certification shall be deemed for the purpose or purposes set forth in the certification, to be the holders of record of the number of share specified in place of the shareholder making the certification. Section 8. Quorum and Manner of Acting. A majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice, for a period not to exceed 60 days at any one adjournment. At such adjourned -4- meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than quorum. If a quorum is present, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number of voting by classes is required by law or the Articles of Incorporation. Section 9. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or his duty authorized attorney in fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. Section 10. Voting of Shares. Each outstanding share, regardless of class, shall be entitled to one vote; except in the election of directors, and each fractional share shall be entitled to a corresponding fractional vote; on each matter submitted to a vote at a meeting of shareholders, except to the extent that the voting rights of the shares of any class or classes are limited or denied by the Articles of Incorporation as permitted by the Colorado Corporation Code. Cumulative voting shall not be required in the election of directors. Each record holder of stock shall be entitled to vote at such election having as many votes for each of the shares owned by him as there are directors to be elected and for whose election he has the right to vote. Section 11. Voting of Shares by Certain Holders. Neither treasury shares, nor shares of its own stock held by the corporation in a fiduciary capacity, nor shares held by another corporation if a majority of the shares entitled to vote for the election of directors of such other corporation is held by this corporation shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time. Redeemable shares which have been called for redemption shall not be entitled to vote on and after the date on which written notice of redemption has been mailed to shareholders and a sum sufficient to redeem such shares has been deposited with a bank or trust company with irrevocable instruction and authority to pay the redemption price to the holders of the shares upon surrender of certificates therefor. -5- Shares standing in the name of another corporation 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. Shares entitled to vote and held by a personal representative, custodian, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if he is authorized to vote the shares in an appropriate order of the court by which the receiver was appointed. Unless the secretary of the corporation is given written notice of alternate voting provisions and is furnished with a copy of the instrument or order wherein the alternate voting provisions are stated, if shares of other securities having voting power are held of record in the name of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, voting with respect to the shares shall have the following effect: (1) if only one person votes, his vote binds all; (2) if two or more persons vote, the act of the majority in interest so voting binds all; or (3) if two or more persons vote, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionately, or any person voting the shares of a beneficiary, if any, may apply to any court of competent jurisdiction in the State of Colorado to appoint an additional person to act with the persons so voting the shares. The shares shall then be voted as determined by a majority of such persons and the person appointed by the court. If a tenancy is held in unequal interests, a majority of even split for the purpose of this item (3) of this subparagraph shall be a majority or even split in interest. All other shares may be voted only by the record holder thereof, except as may be otherwise required by the laws of Colorado. Section 12. Informal Action by Shareholders. Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if a consent (or counterparts thereof) in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof and delivered to the secretary of the corporation for inclusion in the minutes or for filing with the corporate records. Such sent shall have the same force and effect as a unanimous vote of -6- the shareholders, and may be stated as such in any document. Action taken under this Section is effective when all shareholders entitled to vote have signed the consent, unless the consent specifies a different effective date. The record date for determining shareholders entitled to take action without a meeting is the date the first shareholder signs the consent. Article III Board of Directors Section 1. General Powers. The business and affairs of the corporation shall be managed by its board of directors, except as otherwise provided in the Colorado Corporation Code or the Articles of Incorporation. Section 2. Number, Tenure and Qualifications. The number of directors of the corporation shall be three. Directors shall be elected at each annual meeting of shareholders. Each director shall hold office until the next annual meeting of shareholders and thereafter until his successor shall have been elected and qualified. Directors need not be residents of Colorado or shareholders of the corporation. Directors shall be removed in the manner provided by the Colorado Corporation Code. Section 3. Vacancies. Any director may resign at any time by given written notice to the president or to the secretary of the corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any vacancy occurring in the board of directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. Any directorship to be filled by reason of an increase in the number of directors shall be filled by the affirmative vote of a majority of the directors then in office or by an election at an annual meeting or at a special meeting of the shareholders called for that purpose, and a director so chosen shall hold office for the term specified in Section 2 above. Section 4. Regular Meetings. A regular meeting of the board of directors shall be held without other notice than this bylaw immediately after and at the same place as the annual meeting of shareholders. The board of directors may provide by resolution the time and place, either within or outside Colorado, for the holding of additional regular -7- meetings without other notice than such resolution. Section 5. Special Meetings. Special Meetings of the board of directors may be called by or at the request of the president or any two directors. The person or persons authorized to call special meetings of the board of directors may fix any place, either within or outside Colorado, as the place for holding any special meeting of the board of directors called by them. Section 6. Notice. Notice of any special meeting shall be given at least seven days prior to the meeting by written notice delivered personally or mailed to each director at his business address, or by notice given at least two days prior to the meeting by telegraph, telex, telecopier, or other similar device. If mailed, such notice shall be deemed to be delivered three days after such notice is deposited in the United States mail so addressed, with postage thereon prepaid. If notice is given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. A director waives notice of a regular or special meeting by attending or participating in the meeting unless, at the beginning of the meeting, he objects to the holding of the meeting or the transaction of business at the meeting. Neither the business to be transacted at, nor the purpose of any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. Section 7. Quorum. A majority of the number of directors fixed by Section 2 shall constitute a quorum for the transaction of business at any meeting of the board of directors, but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, for a period not to exceed 60 days at any one adjournment. Section 8. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors. Section 9. Compensation. By resolution of the board of directors, any director may be paid any one or more of the following: his expenses, if any, of attendance at meetings, a fixed sum for attendance at each meeting; a stated salary as director; or such other compensation as the corporation and the director may reasonably agree upon. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Section 10. Presumption of Assent. A director of the corporation who is present at a meeting of the board of -8- directors or committee of the board at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless (i) he objects at the beginning of the meeting to the holding of the meeting or the transaction of business at the meeting; (ii) he contemporaneously requests that his dissent be entered in the minutes of the meeting; or (iii) he gives written notice of his dissent to the presiding officer of the meeting before its adjournment or delivers such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. A director may dissent to a specific action at a meeting, while assenting to others. The right to dissent to a specific action taken at a meeting of the board of directors or a committee of the board shall not be available to a director who voted in favor of such action. Section 11. Committees. The board of directors, by resolution adopted by a majority of the full board of directors, may designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in the resolution, shall have all the authority of the board of directors, except that no such committee shall have the authority to: (i) declare dividends or distributions; (ii) approve or recommend to shareholders actions or proposals required by the Colorado Corporation Code to be approved by shareholders; (iii) fill vacancies on the board of directors or any committee thereof; (iv) amend the bylaws; (v) approve a plan of merger not requiring shareholder approval; (vi) reduce earned or capital surplus; (vii) authorize or approve the issuance or sale of, or any contract to issue or sell, shares or designate the terms of a series of a class of shares provided that the board of directors, having acted regarding general authorization for the issuance or sale of shares or any contract therefore and, in the case of a series, the designation thereof, may, pursuant to a general formula or method specified by the board by resolution or by adoption of a stock option or other plan, authorize a committee to fix the terms of any contract for the sale of the shares and to fix the terms upon which such shares may be issued or sold, including, without limitation, the price, the dividend rate, provisions for redemption, sinking fund, conversion, or voting or preferential rights, and provisions for other features of a class of shares or a series of a class of shares, with full power in such committee to adopt any final resolution setting forth all terms thereof and to authorize the statement of the terms of a series for filing with the Secretary of State under the Colorado Corporation Code. Neither the designation of any committee, the delegation of authority to such committee, nor any action by such committee pursuant to its authority shall alone constitute -9- compliance by any member of the board of directors, nor a member of the committee in question, with his responsibility to conform to the standard of care set forth in Article III, Section 14 of these bylaws. Section 12. Informal Action by Directors. Any action required or permitted to be taken at a meeting of the directors or any committee designated by the board of directors may be taken without a meeting if a consent (or counterparts thereof) in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof and delivered to the secretary of the corporation for inclusion in the minutes or for filing with the corporate records. Such consent shall have the same force and effect as a unanimous vote of the directors or committee members, and may be stated as such in any document. Action taken under this Section is effective when all directors or committee members have signed the consent, unless the consent specifies a different effective date. Section 13. Telephonic meetings. One or more members of the board of directors or any committee designated by the board may participate in a meeting of the board of directors or a committee thereof by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear one another at the same time. Such participation shall constitute presence in person at the meeting. Section 14. Standard of Care. A director shall perform his duties as a director, including his duties as a member of any committee of the board upon which he may serve, in good faith, in a manner he reasonably believes to be in the best interests of the corporation, and with such care as an ordinarily prudent person in a like position, should use under similar circumstances. In performing his duties, a director shall be entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by the persons herein designated; but he shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that would cause such reliance to be unwarranted. A person who so performs his duties shall not have any liability by reason of being or having been a director of the corporation. The designated person or whom a director is entitled to rely are: (1) one or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented; (2) counsel, public accountants, or other persons as to matters which the -10- director reasonably believes to be within such persons' professional or expert competence; or (3) a committee of the board upon which the director does not serve, duly designated in accordance with Article III, section 11 of these bylaws, as to matters within its designated authority, which committee the director reasonably believes to merit confidence. Article IV Officers and Agents Section l. General. The officers of the corporation shall be a president, one or more vice presidents, a secretary and a treasurer. The board of directors may appoint such other officers, assistant officers, committees and agents, including a chairman of the board, assistant secretaries and assistant treasurers, as they may consider necessary, who shall be chosen in such manner and hold their offices for such terms and have such authority and duties as from time to time may be determined by the board of directors. The salaries of all the officers of the corporation shall be fixed by the board of directors. One person may hold more than one office, except that no person may simultaneously hold the offices of president and secretary. In all cases where the duties of any officer, agent or employee are not prescribed by the bylaws or by the board of directors, such officer, agent or employee shall follow the orders and instructions of the president. Section 2. Election and Term of Office. The officers of the corporation shall be elected by the board of directors annually at the first meeting of the board held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Each officer shall hold office until the first of the following occurs: until his successor shall have been duly elected and qualified; or until his death; or until he shall resign; or until he shall have been removed in the manner hereinafter provided. Section 3. Removal. Any officer or agent may be removed by the board of directors or by the executive committee whenever in its judgment the best interests of the corporation, will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not in itself create contract rights. Section 4. Vacancies. A vacancy in any office, however, occurring, may be filled by the board of directors -11- for the unexpired portion of the term. Section 5. President. Subject to the direction and supervision of the board of directors, the president shall be the chief executive officer of the corporation and shall have general and active control of its affairs and business and general supervision of its officers, agents and employees. Unless otherwise directed by the board of directors, the president shall attend in person or by substitute appointed by him, or shall execute on behalf of the corporation written instruments appointing a proxy or proxies to represent the corporation, at all meetings of the stockholders of any other corporation in which the corporation holds any stock. He may, on behalf of the corporation, in person or by substitute or by proxy, execute written waivers of notice and consents with respect to any such meetings. At all such meetings and otherwise, the president, in person or by substitute or proxy as aforesaid, may vote the stock so held by the corporation and may execute written consents and other instruments with respect to such stock and may exercise any and all rights and powers incident to the ownership of said stock, subject however to the instructions, if any, of the board of directors. The president shall have custody of the treasurer's bond, if any. Section 6. Vice Presidents. The vice presidents shall assist the president and shall perform such duties as may be assigned to them by the president or by the board of directors. In the absence of the president, the vice president, if any (or, if there be more than one, the vice presidents in the order designated by the board of directors, or if the board makes no such designation, then the vice president designated by the president, or if neither the board nor the president makes any such designation, the senior vice president (as determined by first-election to that office) shall have the powers and perform the duties of the president. Section 7. Secretary. The Secretary shall (a) keep the minutes of the proceedings of the shareholders, executive committee and the board of directors; (b) see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation and affix the seal to all documents when authorized by the board of directors; (d) keep at its registered office or principal place of business within or outside Colorado a record containing the names and addresses of all shareholders and the number and class of shares held by each, unless such a record shall be kept at the office of the corporation's transfer agent or registrar; (e) sign with the president, or a vice president, certificates for shares of the corporation, -12- the issuance of which shall have been authorized by resolution of the board of directors; (f) have general charge of the stock transfer books of the corporation, unless the corporation has a transfer agent; and (g) in general, perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the president or by the board of directors. Assistant secretaries, if any, shall have the same duties and powers, subject to supervision by the secretary. The directors and/or shareholders may however respectively designate a person other than the secretary or assistant secretary to keep the minutes of their respective meetings. Any books, records, or minutes of the corporation may be in written form or in any form capable of being converted into written form within a reasonable time. Section 8. Treasurer. The treasurer shall be the principal financial officer of the corporation, shall have the care and custody of all funds, securities, evidences of indebtedness and other personal property of the corporation and shall deposit the same in accordance with the instructions of the board of directors. He shall receive and give receipts and acquittances for money paid in on account of the corporation, and shall pay out of the funds on hand all bills, payrolls and other just debts of the corporation of whatever nature upon maturity. He shall perform all other duties incident to the office of the treasurer and, upon request of the board, shall make such reports to it as may be required at any time. He shall, if required by the board, give the corporation a bond in such sums and with such sureties as shall be satisfactory to the board, conditioned upon the faithful performance of his duties and for the restoration to the corporation of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. He shall have such other powers and perform such other duties as may from time to time be prescribed by the board of directors or the president. The assistant treasurers, if any, shall have the same powers and duties, subject to the supervision of the treasurer. The treasurer shall also be the principal accounting officer of the corporation. He shall prescribe and maintain the methods and systems of accounting to be followed, keep complete books and records of account, prepare and file all local, state and federal tax returns, prescribe and maintain an adequate system of internal audit, and prepare and furnish to the president and the board of directors statements of account showing the financial position of the corporation and the results of its operations. -13- Article V Stock Section 1. Certificates. The board of directors shall be authorized to issue any of its classes of shares with or without certificates. The fact that the shares are not represented by certificates shall have no effect on the rights and obligations of shareholders. If the shares are represented by certificates, such shares shall be represented by consecutively number certificates signed in the name of the corporation by the chairman or vice- chairman of the board of directors or by the president or a vice president and by the treasurer or an assistant treasurer or by the secretary or an assistant secretary and shall be sealed with the seal of the corporation, or with a facsimile thereof. Any or all of the signatures on such certificates may also be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, both of which may be the corporation or an employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed upon such certificates shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issue. Certificates of stock shall be in such form and shall contain such information consistent with law as shall be prescribed by the board of directors. No certificate shall be issued until the shares represented thereby are fully paid. If shares are not represented by certificates, within a reasonable time following the issue or transfer of such shares, the corporation shall send the shareholder a complete written statement of all of the information required to be placed on certificates by the Colorado Corporation Code. Section 2. Consideration for Shares. Shares shall be issued for such consideration, expressed in dollars (but not less than the par value thereof) as shall be fixed from time to time by the board of directors. Such consideration may consist in whole or in part of money, other property, tangible or intangible, or in labor or services actually performed for the corporation. Neither the promissory note of a subscriber or direct purchaser of shares from the corporation nor the unsecured or nonnegotiable promissory note of any other person shall constitute payment or part payment for shares of the corporation. Treasury shares shall be disposed of for such consideration expressed in dollars as may be fixed from time to time by the board. -14- Section 3. Lost Certificates. In case of the alleged loss, destruction or mutilation of a certificate of stock, the board of directors may direct the issuance of a new certificate in lieu thereof upon such terms and conditions in conformity with law as it may prescribe. The board of directors may in its discretion require a bond in such form and amount and with such surety as it may determine before issuing a new certificate. Section 4. Transfer of Shares. Upon surrender to the corporation or to a transfer agent of the corporation of a certificate of stock duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer and receipt of (i) such documentary stamps as may be required by law, and (ii) evidence of compliance with all applicable securities laws and other restrictions, it shall be the duty of the corporation issue a new certificate to the person entitled thereto, and cancel the old certificate. Every such transfer of stock shall be entered on the stock books of the corporation which shall be kept at its principal office, or by its registrar duly appointed. Except as provided in Article II, Sections 7 and 11 of these bylaws, the corporation shall be entitled to treat the registered holder of any shares of the corporation as the owner thereof for all purposes, and the corporation shall not be bound to recognize any equitable or other claim to, or interest in, such shares or rights deriving, from such shares on the part of any person other than the registered holder, including without limitation any purchaser, assignee or transferee of such shares or rights deriving from such shares, unless and until such other person becomes the registered holder of such shares, whether or not the corporation shall have either actual or constructive notice of the claimed interest of such other person. Section 5. Transfer Agent, Registrars, and Paying Agents. The board may at its discretion appoint one or more transfer agents, registrars and agents for making payment upon any class of stock, bond, debenture, or other security of the corporation. Such agents and registrars may be located either within or outside Colorado. They shall have such rights and duties and shall be entitled to such compensation as may be agreed. Article VI Indemnification of Certain Persons Section 1. Authority for Indemnification. Any person who was or is a part or is threatened to be made a party to -15- any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative, and whether formal or informal, by reason of the fact that he is or was a director, officer, employee, fiduciary or agent of the corporation or is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, or agent of any foreign or domestic corporation or of any partnership joint venture, trust, other enterprises or employee benefit plan ("Any Proper Person"), shall be indemnified by the corporation against expenses (including attorneys' fees), judgments, penalties, fines, (including an excise tax assessed with respect to any employee benefit plan) and, amounts paid in settlement reasonably incurred by him in connection with such action, suit or proceeding if it is determined by the groups set forth in Section 4 of this Article that he conducted himself in good faith and that he (1) reasonably believed, in the case of conduct in his official capacity with the corporation, that his conduct was in the corporation's best interests, or (2) in all other cases (except criminal cases) believed that his conduct was at least not opposed to the corporation's best interests, or (3) with respect to criminal proceedings had no reasonable cause to believe his conduct was unlawful. A person will be deemed to be acting in his official capacity while acting as a director, officer, employee or agent of this corporation and, not when he is acting on this corporation's behalf for some other entity. No indemnification shall be made under this Section to a director with respect to any claim, issue or matter in connection with a proceeding by or in the) right of a corporation in which the director was adjudged 1iable to the corporation or in connection with any proceeding charging improper personal benefit to the director, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefits was improperly received by him. Further, indemnification under this Section in connection with a proceeding, brought by or in the right of the corporation shall be limited to reasonable expenses, including attorneys' fees, incurred in connection with the proceeding. These limitations shall apply to directors only and not to officers, employees, fiduciaries or agents of the corporation. Section 2. Right to Indemnification. The corporation shall indemnify any Proper Person who has been wholly successful on the merits or otherwise, in defense of any action, suit, or proceeding referred to in Section 1 of this Article against expenses (including attorneys' fees) reasonably incurred by him in connection with the proceeding without the necessity of any action by the corporation other than the determination in good faith that the defense has been wholly successful. -16- Section 3. Effect of Termination of Action. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the person seeking indemnification did not meet the standards of conduct described in Section 1 of this Article. Entry of a judgment by consent as part of a settlement shall not be deemed an adjudication of liability. Section 4. Groups Authorized to Make Indemnification Determination. In all cases except where there is a right to indemnification as set forth in Section 2 of this Article or where indemnification is ordered by a court, any indemnification shall be made by the corporation only as authorized in the specific case upon a determination by a proper group that indemnification of the Proper Person is permissible under the circumstances because he has met the applicable standards of conduct set forth in Section 1 of this Article. This determination shall be made by the board of directors by a majority vote of a quorum, which quorum shall consist of directors not parties to the proceeding ("Quorum"). If a Quorum cannot be obtained, the determination shall be made by a majority vote of a committee of the board of directors designated by the board, which committee shall consist of two or more directors not parties to the proceeding except that directors who are parties to the proceeding may participate in the designation of directors for the committee. If a Quorum of the board of directors cannot be obtained or the committee cannot be established, or even if a Quorum can be obtained or the committee can be established but such Quorum or committee so directs, the determination shall be made by independent legal counsel selected by a vote of a Quorum of the board of directors or a committee in the manner specified in this Section or, if a Quorum of the full board of directors cannot be obtained and a committee cannot be established, by independent legal counsel selected by a majority vote of the full board (including directors who are parties to the action) or by a vote of the shareholders. Section 5. Court Ordered Indemnification. Any Proper Person may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction for mandatory indemnification under Section 2 of this Article, including indemnification for reasonable expenses incurred to obtain court-ordered indemnification. If the court determines that the director is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not he met the standards of conduct set forth in Section 1 of this Article or was adjudged liable in the proceeding, the court may order such indemnification -17- as the court deems proper except that if the individual has been adjudged liable, indemnification shall be limited to reasonable expenses incurred. Section 6. Advance of Expenses. Expenses (including attorneys' fees) incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation to any Proper Person in advance of the final disposition of such action, suit or proceeding upon receipt of (1) a written affirmation of such Proper Person's good faith belief that he has met the standards of conduct prescribed by Section 1 of this Article; (2) a written undertaking, executed personally or on his behalf, to repay such advances if it is ultimately determined that he did not meet the prescribed standards of conduct (the undertaking shall be an unlimited general obligation of the Proper Person but need not be secured and may be accepted without reference to financial ability to make repayment); and (3) a determination is made by the proper group (as described in Section 4 of this Article), that the facts as then known to the group would not preclude indemnification. Section 7. Report to Shareholders. Any indemnification of or advance of expenses to a director in accordance with this Article, it arising out of a proceeding by or on behalf of the corporation, shall be reported in, writing to the shareholders with or before the notice of the next shareholders' meeting. Article VII Provision of Insurance By action of the board of directors, notwithstanding any interest of the directors in the action, the corporation may purchase and maintain insurance, in such scope and amounts as the board of directors deems appropriate, on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the corporation, or who, while a director, officer, employee, fiduciary or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, fiduciary or agent of any other foreign or domestic corporation or of any partnership, joint venture, trust, other enterprise or employee benefit plan, against any liability asserted against, or incurred by, him in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of Article VI or applicable law. -18- Article VIII Miscellaneous Section 1. Waiver of Notice. Whenever notice is required by law, by the Articles of Incorporation or by these bylaws, a waiver thereof in writing signed by the director, shareholder or other person entitled to said notice, whether before, at or after the time stated therein, shall be equivalent to such notice. Section 2. Seal. The corporate seal of the corporation shall be circular in form and shall contain the name of the corporation and the words, "Seal, Colorado". Section 3. Fiscal Year. The fiscal year of the corporation shall be as established by the board of directors. Section 4. Amendments. The board of directors shall have the power to make, amend and repeal the bylaws of the corporation at any regular or special meeting of the board unless the shareholders, in making, in amending or repealing a particular bylaw, provide expressly that the directors may not amend or repeal such bylaw. The shareholders also shall have the power to make, amend or repeal the bylaws of the corporation at any annual meeting or at any special meeting called for that purpose. Section 5. Gender. The masculine gender is used in these bylaws as a matter of convenience only and shall be interpreted to include the female and neuter genders as the circumstances indicate. Section 6. Conflicts. In the event of any irreconcilable conflict between these bylaws and either the corporation's Articles of Incorporation or applicable law, the latter shall control. Section 7. Definitions. Except as otherwise specifically provided in these bylaws, all terms used in these bylaws shall have the same definition as in the Colorado Corporation Code. -19- EX-3.12 20 dex312.txt ARTICLE OF INCORPORATION OF JALOU II INC. Exhibit 3.12 - --------------------------------------------------------------------------------------------- W. Fox McKeithen Secretary of State ARTICLE OF INCORPORATION [GRAPHIC] (R. S. 12:24) ------------------------------------------------------------------------ Domestic Business Corporation Return to: Commercial Division Enclose $60.00 filing fee P.O. Box 94125 Make remittance payable to Baton Rouge, LA 70804-9125 Secretary of State Phone (225) 925-4704 Do not send cash Web Site: www.sec.state.la.us - ---------------------------------------------------------------------------------------------
STATE OF OHIO PARISH/COUNTY OF CUYAHOGA 1. The name of this corporation is JALOU II INC. 2. This corporation is formed for the purpose of: (check one) (X) Engaging in any lawful activity for which corporations may be formed. ( ) ----------------------------------------------------------------- (use for limiting corporate activity) 3. The duration of this corporation is: (may be perpetual) Perpetual 4. The aggregate number of shares which the corporation shall have authority to issue is: 500 5. The shares shall consist of one class only and the par value of each share is 0 (shares may be without par value) per share. 6. The full name and post office address of each incorporator is: Stephen P. Owendoff, Hahn Loeser & Parks LLP, 3300 BP Tower, 200 Public Square, Cleveland, Ohio 44114-2301 7. Other provisions: ---------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- 8. The corporation's federal tax identification number is: being applied for Incorporator(s) Signature: /s/ Stephen P. Owendoff ---------------------------------------- Stephen P. Owendoff ---------------------------------------- ---------------------------------------- Sworn to and subscribed before me the undersigned Notary Public, on this date: May 30, 2000 [GRAPHIC] /s/ Illegible My commission ---------------------------------------- expires 5/22/01 Notary Recorded in Lake County - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- W. Fox McKeithen Secretary of State DOMESTIC BUSINESS CORPORATION INITIAL REPORT [GRAPHIC] (R.S. 12:25 and 12:101) - -------------------------------------------------------------------------------- 1. The name of this corporation is: JALOU II INC. 2. The location and municipal address (not a P.O. Box only) of this corporation's registered office: 8550 United Plaza Boulevard Baton Rouge, LA 70809 3. The full name and municipal address (not a P.O. Box only) of each of this corporation's registered agent(s) is/are: CT Corporation System, 8550 United Plaza Boulevard, Baton Rouge, LA 70809 4. The names and municipal addresses (not a P.O. Box only) of the first directors are: UNDETERMINED AT THIS TIME Incorporator(s) signature(s) /s/ Stephen P. Owendoff ---------------------------- Stephen P. Owendoff ---------------------------- ---------------------------- ---------------------------- AGENT'S AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE I hereby acknowledge and accept the appointment of registered agent for and on behalf of the above named corporation. Registered agent(s) signature(s): CT Corporation System See attached Sworn to and subscribe before me, the undersigned Notary Public, on this date: - -------------------------------------------------------------------------------- ---------------------------------------------------- Notary - -------------------------------------------------------------------------------- AFFIDAVIT OF ACCEPTANCE OF APPOINTMENT -------------------------------------- BY DESIGNATED REGISTERED AGENT ------------------------------ ACT 769 OF 1987 --------------- To the State Corporation Department State of Louisiana STATE OF MISSOURI COUNTY OF ST. LOUIS On this 31 day of May, 2000, before me, a Notary Public in and for the State aforesaid, personally came and appeared, M. A. Belton, who is to me known to be the Assistant Secretary of C T Corporation System, and who, being duly sworn, acknowledged to me that it does hereby accept appointment as the Registered Agent of JALOU II INC., which is a corporation authorized to transact business in the State of Louisiana pursuant to the provisions of the Title 12, Chapter 1, 2 and 3. C T CORPORATION SYSTEM REGISTERED AGENT By /s/ M. A. Belton --------------------------------- M. A. Belton, Assistant Secretary Subscribed and sworn to before me on the day, month and year first above set forth. CATHI J. WALL Notary Public Notary Seal State of Missouri St. Louis County My Commission Expires December 5, 2003 /s/ Cathi J. Wall - ---------------------------- Cathi J. Wall, Notary Public My commission expires: December 5, 2003 - ------------------------------------------------------------------------------------------ W. Fox McKeithen Secretary of State CORPORATION/LIMITED LIABILITY COMPANY SUPPLEMENTAL INITIAL REPORT [GRAPHIC] (R.S. 12:25 & R.S. 12:1305) - ------------------------------------------------------------------------------------------ Enclose $20.00 filing fee Return to: Commercial Division Make remittance payable to P O Box 94125 Secretary of State Baton Rouge, LA 70804-9125 Do not send cash Phone (225) 925 - 4704 Web Site: www.sec.state.la.us - ------------------------------------------------------------------------------------------
1. The name of the corporation is: JALOU II INC. 2. The name and municipal address (not a P.O. Box only) of first directors (corporation) or managers or members (limited liability company) are: JEFFREY P. JACOBS, 1231 MAIN AVENUE, CLEVELAND, OHIO 44113 --------------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- Corporations: To be signed by incorporator(s) or shareholder(s): LLC: To be signed by each person who signed the Articles of Organization: /s/ Stephen P.Owendoff --------------------------------------- STEPHEN P.OWENDOFF, INCORPORATOR --------------------------------------- --------------------------------------- --------------------------------------- AUGUST 8, 2000 --------------------------------------- Date - -------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- W.Fox McKeithen DOMESTIC CORPORATION Secretary of State ANNUAL REPORT [GRAPHIC] For Period Ending May 31,2001 - ---------------------------------------------------------------------------------------------------- Mailing Address Only (INDICATE ANY CHANGES BELOW) (INDICATE ANY CHANGES BELOW) 34947855 D Registered Office Address in Louisiana JALOU II INC. (Do Not Use P.O.Box) C/O C T CORPORATION SYSTEM C/O C T CORPORATION SYSTEM 8550 UNITED PLAZA BLVD. 8550 UNITED PLAZA BLVD BATON ROUGE, LA 70809 BATON RODGE, LA 70809 ---------------------------------------- Federal Tax ID Number Issued Shares 34-1926209 100 - ---------------------------------------------------------------------------------------------------- Our records indicate the following registered agents for the corporation. Indicate any changes or deletions below. All agents must have a Louisiana address. Do not use a P.O.Box. New registered agents require a notarized signature. C T CORPORATION SYSTEM 8550 UNITED PLAZA BLVD./BATON ROUGE, LA 70809 - ---------------------------------------------------------------------------------------------------- I hereby accept the appointment of registered Sworn to and subscribed before me on agent(s). - ---------------------------------------- ---------------------------------------- - ---------------------------------------- ---------------------------------------- - ---------------------------------------------------------------------------------------------------- Our records indicate the following officers or directors for the corporation. Indicate any change or deletions below. If space is needed for additional officers/directors, attach an addendum. Include addresses. Do not use a P. O. Box. Indicate all offices held by each individual listed. JEFEREY P. JACOBS DIR 1231 MAIN AVENUE/CLEVELAND, OE 44113 See Addendum attached hereto for list of current director/officers. - ---------------------------------------------------------------------------------------------------- 01 OCT 17 PH 4:20 SECRETARY OF STATE - ---------------------------------------------------------------------------------------------------- To be signed by an officer or director. Title Phone Date SIGN-- /s/ Stephen P. Owendoff Assistant Secretary 216.274.2292 10/17/01 -------------------------------------- Stephen P. Owendoff - ---------------------------------------------------------------------------------------------------- Return By: May 31, 2001 CHECK Enclose filing fee of $25.00 IF NO Make remittance payable to Secretary of State to: Commercial Division CHANGE P.O. Box 94125 Do Not Send Cash DO NOT STAPLE Baton Rough, LA[Illegible] ( ) Web site: www.sec.state.la.us ------------- Phone (225) 920-4784 - ----------------------------------------------------------------------------------------------------
UNSIGNED REPORTS WILL BE RETURNED ADDENDUM TO DOMESTIC CORPORATION ANNUAL REPORT FOR JALOU II INC. - -------------------------------------------------------------------------------- NAME TITLE/OFFICE ADDRESS - -------------------------------------------------------------------------------- Jeffery P. Jacobs Director; President, Treasurer and 1231 Main Avenue Secretary Cleveland, Ohio 44113 - -------------------------------------------------------------------------------- Stephen P. Owendoff Assistant Secretary 3300 BP Tower 200 Public Square Cleveland, OH 44114 - -------------------------------------------------------------------------------- EX-3.13 21 dex313.txt BY-LAWS OF JALOU II INC. Exhibit 3.13 JALOU II INC. ***** BY-LAWS ***** ARTICLE I OFFICES Section 1. The registered office shall be located in Baton Rouge, Louisiana. Section 2. The corporation may also have offices at such other places both within and without the State of Louisiana as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II ANNUAL MEETINGS OF SHAREHOLDERS Section 1. All meetings of shareholders for the election of directors shall be held at such place as may be fixed from time to time by the shareholders. Section 2. Annual meetings of shareholders, commencing with the year 2001 shall be held on the first Monday in April, if not a legal holiday, and if a legal holiday, then on the next secular day following, at such place as may be fixed from time to time by the shareholders, at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Written or printed notice of the annual meeting stating the place, day and hour of the meeting shall be delivered not less than one day nor more than three days before the date of the meeting, either personally or by mail, by or at the direction of the president, or the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. ARTICLE III SPECIAL MEETINGS OF SHAREHOLDERS Section 1. Special meetings of shareholders for any purpose other than the election of directors may be held at such time and place within or without the State of Louisiana as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the articles of incorporation, may be called by the president, the board of directors, or the holders of not less than a majority of all the shares entitled to vote at the meeting. Section 3. Written or printed notice of a special meeting stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called, shall be delivered not less than one day nor more than three days before the date of the meeting, either personally or by mail, by or at the direction of the president, or the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. Section 4. The business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice. ARTICLE IV QUORUM AND VOTING OF STOCK Section 1. The holders of a majority of the shares of stock issued and outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by statute or by the articles of incorporation. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders present in person or represented by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. In the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum as fixed herein, shall nevertheless constitute a quorum for the purpose of electing directors. Section 2. If a quorum is present, the affirmative vote of a majority of the shares of stock represented at the meeting shall be the act of the shareholders unless the vote of a greater number of shares of stock is required by law or the articles of incorporation. Section 3. Each outstanding share of stock, having voting power, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. In all elections for directors every shareholder entitled to vote shall have the right to vote, in person or by proxy, the number of shares of stock owned by him, for as many persons as there are directors to be elected, or to cumulate the vote of said shares, and give one candidate as many votes as the number of directors multiplied by the number of his shares of stock shall equal, or to distribute the votes on the same principle among as many candidates as he may see fit. Section 4. Any action required to be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. If the articles of incorporation provide that a consent may be signed by fewer than all of the shareholders having voting power on any question, then the consent need be signed only by shareholders holding that proportion of the total voting power on the question which is required by the articles of incorporation or by law, whichever requirement is higher. The consent, together with a certificate by the secretary of the corporation to the effect that the subscribers to the consent constitute all or the required proportion of the shareholders entitled to vote on the particular question, shall be filed with the records of proceedings of the shareholders. If the consent is signed by fewer than all of the shareholders having voting power on the question, prompt notice shall be given to all of the shareholders of the action taken pursuant to the consent. ARTICLE V DIRECTORS Section 1. The number of directors shall be one or as may be fixed from time to time by resolution of the shareholders; provided, however, that no reduction in the number of directors shall have the effect of removing any director prior to the expiration of his term of office. Directors need not be residents of the State of Louisiana nor shareholders of the corporation. The directors, other than the first board of directors, shall be elected at the annual meeting of the shareholders, and each director elected shall serve until the next succeeding annual meeting and until his successor shall have been elected and qualified. The first board of directors shall hold office until the first annual meeting of shareholders. Section 2. Vacancies and newly created directorships resulting from any increase in the number of directors may be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose. A director elected to fill a vacancy, or a newly created directorship, shall hold office until the next succeeding annual meeting of shareholders and until his successor shall have been elected and qualified. In addition vacancies and newly created directorships resulting from any increase in the number of directors may be filled by a majority of the directors then in office, though less than a quorum, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify. Section 3. The business affairs of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the articles of incorporation or by these by-laws directed or required to be exercised or done by the shareholders. Section 4. The directors may keep the books of the corporation, except such as are required by law to be kept within the state, outside of the State of Louisiana, at such place or places as they may from time to time determine. Section 5. The board of directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise. ARTICLE VI MEETINGS OF THE BOARD OF DIRECTORS Section 1. Meetings of the board of directors, regular or special, may be held either within or without the State of Louisiana. Section 2. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the shareholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or it may convene at such place and time as shall be fixed by the consent in writing of all the directors. Section 3. Regular meetings of the board of directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the board. Section 4. Special meetings of the board of directors may be called by the president on one days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the director. Section 5. Attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. Section 6. A majority of the directors shall constitute a quorum for the transaction of business unless a greater number is required by law or by the articles of incorporation. 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 of directors, unless the act of a greater number is required by statute or by the articles of incorporation. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 7. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof. Section 8. Unless otherwise restricted by the articles of incorporation or these by-laws, members of the board of directors may participate in a meeting of the board of directors, by means of conference telephone or similar communications equipment provided all persons participating in the meeting can hear and communicate with each other, and such participation in a meeting shall constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called or convened. PROXY VOTE BY DIRECTORS Section 9. Any director absent from a meeting may be represented by any other director or shareholder, who may cast the vote of the absent director according to the written instructions, general or special, or said absent director, filed with the secretary. ARTICLE VII EXECUTIVE COMMITTEE Section 1. The board of directors, by resolution adopted by a majority of the number of directors fixed by the by-laws or otherwise, may designate two or more directors to constitute an executive committee, which committee, to the extent provided in such resolution, shall have and exercise all of the authority of the board of directors in the management of the corporation, except as otherwise required by law. Vacancies in the membership of the committee shall be filled by the board of directors at a regular or special meeting of the board of directors. The executive committee shall keep regular minutes of its proceedings and report the same to the board when required. ARTICLE VIII NOTICES Section 1. Whenever, under the provisions of the statutes or of the articles of incorporation or of these by-laws, notice is required to be given to any director or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or shareholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 2. Whenever any notice whatever is required to be given under the provisions of the statutes or under the provisions of the articles of incorporation or these by-laws, 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 IX OFFICERS Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a president, a vice-president, a secretary and a treasurer. The board of directors may also choose additional vice-presidents, and one or more assistant secretaries and assistant treasurers. Section 2. The board of directors at its first meeting after each annual meeting of share holders shall choose a president, one or more vice-presidents, a secretary and a treasurer, none of whom need be a member of the board. Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board of directors. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. THE PRESIDENT Section 6. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the shareholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. THE VICE-PRESIDENTS Section 8. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the board of directors, shall, in the absence or disability of the president, perform the duties and exercise the powers of the president and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARIES Section 9. The secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 10. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 11. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. Section 12. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. Section 13. If required by the board of directors, he shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 14. The assistant treasurer, or, if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. ARTICLE X CERTIFICATES FOR SHARES Section 1. The shares of the corporation shall be resented by certificates signed by the president or a vice-president and the secretary or an assistant secretary of the corporation, and may be sealed with the seal of the corporation or a facsimile thereof. When the corporation is authorized to issue shares of more than one class there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any shareholder upon request and without charge, a full or summary statement of the designations, preferences, limitations, and relative rights of the shares of each class authorized to be issued and, if the corporation is authorized to issue any preferred or special class in series, the variations in the relative rights and preferences between the shares of each such series so far as the same have been fixed and determined and the authority of the board of directors to fix and determine the relative rights and preferences of subsequent series. Section 2. The signatures of the officers of the corporation upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the corporation itself or an employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issue. LOST CERTIFICATES Section 3. The board of directors may direct a new certificate to be issued in place of any certificate theretofore issued by the corporation alleged to have been lost or destroyed. When authorizing such issue of a new certificate, the board of directors, in its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate, to protect the corporation from any claim that may be made against it with respect to any such certificate alleged to have been lost or destroyed. TRANSFERS OF SHARES Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto, and the old certificate canceled and the transaction recorded upon the books of the corporation. FIXING RECORD DATE Section 5. For the purpose of determining shareholders entitled to notice of and to vote at a meeting, or to receive a dividend, or to receive or exercise subscription or other rights, or to participate in a reclassification of stock, or in order to make a determination of shareholders for any other proper purpose, the board of directors may fix in advance a record date for determination of shareholders for such purpose, such date to be not more than sixty days and, if fixed for the purpose of determining shareholders entitled to notice of and to vote at a meeting, not less than ten days, prior to the date on which the action requiring the determination of shareholders is to be taken. REGISTERED SHAREHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Louisiana. ARTICLE XI GENERAL PROVISIONS DIVIDENDS Section 1. Subject to the provisions of the articles of incorporation relating thereto, if any, dividends may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to any provisions of the articles of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. CHECKS Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. FISCAL YEAR Section 4. The fiscal year of the corporation shall be fixed by resolution of the board of directors. SEAL Section 5. The corporation shall not have a corporate seal. ARTICLE XII AMENDMENTS Section 1. These by-laws may be altered, amended, or repealed or new by-laws may be adopted by the affirmative vote of a majority of the board of directors at any regular or special meeting of the board. The shareholders shall have the right to change or repeal any by-laws adopted by the directors. ARTICLE XII AMENDMENTS Section 1. These by-laws may be altered, amended or repealed or new by-laws may be adopted at any regular or special meeting of shareholders at which a quorum is present or represented, by the affirmative vote of a majority of the stock entitled to vote, provided notice of the proposed alteration, amendment or repeal be contained in the notice of such meeting. EX-3.14 22 dex314.txt ARTICLES OF INCORPORATION-WINNER'S CHOICE CASINO Exhibit 3.14 ARTICLES OF INCORPORATION UNITED STATES OF AMERICA OF STATE OF LOUISIANA WINNER'S CHOICE TRUCK STOP, INC. PARISH OF CALCASIEU BE IT KNOWN, that on this 10th day of May, 1993, before me, the undersigned authority, a Notary Public, duly commissioned and qualified, in and for the State and Parish aforesaid, therein residing, and in the presence of the witnesses hereinafter named and undersigned, personally came and appeared the persons whose names are hereunto subscribed, who declared that, availing themselves of the benefits and provisions of the Constitution and Laws of Louisiana, and particularly R. S. 12:1 to 178, they do, by these presents, contract, agree, bind and obligate themselves to form, organize and constitute themselves, as well as their successors, into a business corporation, for the objects and purposes and under the conditions, covenants, stipulations and agreements of the articles following, to-wit: ARTICLE I. The name and title of this corporation shall be WINNER'S CHOICE TRUCK STOP, INC., and under and by said name, unless sooner dissolved in accordance with law, it shall exist and continue, and shall have and enjoy corporate existence and succession in perpetuity, or such maximum period as may be authorized by the Laws of Louisiana, during which time it shall have and possess all the powers, rights, and privileges which corporations are and may hereafter be authorized to have and possess under the Constitution and Laws of Louisiana. ARTICLE II. The objects and purposes for which this corporation is formed and the nature of the business to be carried on by it are hereby declared to be as follows: To operate a TRUCK STOP business, including, but not limited to, the sale of fuel and other oil by-products for motor vehicles, including tractor-trailer rigs, operation of a convenience store, restaurant, cafe, and/or amusement rooms, the sale of alcoholic beverages, and to enter into any lawful business activity for which corporations may be formed under the Business Corporation Laws of the State of Louisiana. The foregoing shall be construed both as objects and powers but the enumeration thereof shall not be held to limit or restrict in any manner the powers and privileges conferred on this corporation by the Constitution and Laws of Louisiana. ARTICLE III. The total authorized capital stock of this corporation shall be ONE THOUSAND (1,000) Shares of common stock having no par value. Shareholders shall have preemptive rights. The transfer of stock of this corporation shall be made only in the book of the corporation by the stockholders, in person or by proxy, and under such rules and regulations as the Board of Directors may in accordance with law prescribe from time to time. ARTICLE IV. The amount of paid in capital with which this corporation may begin business in hereby fixed at ONE THOUSAND ($1,000.00) DOLLARS which has been duly paid. ARTICLE V. The business and affairs of this corporation shall be managed, and all the corporate powers thereof shall be vested in and exercised by a board of not less than one (1) nor more than five (5) directors. The number of directors may be increased or decreased within the said limits by a majority vote of the directors. The Board of Directors shall have authority to make and alter bylaws, fix their own qualifications, classifications or terms of office and fix or increase their compensation, subject to the power of the shareholders to change or repeal the bylaws so made. The Board of Directors shall have power and authority with respect to capital, surplus and dividends, including allocation, increases, reduction, utilization, distribution, and payment, as is permitted and provided by R. S. 12:61, 61 and 63 or other applicable law. The Board of Directors shall have full authority to exercise other powers and to perform such other lawful activities in which the corporation and/or its shareholders may engage, unless prohibited from doing so by law or this corporation's charter or bylaws. Until otherwise provided in the bylaws any director absent from a meeting may be represented by any other director or shareholder, who may cast the vote of the absent director according to his or her written instructions, general or special. The general annual meeting of the shareholders for the election of directors shall be held at the registered office of the Corporation, and shall take place on the first Monday of May of each year, beginning with year 1993. Upon the written request of shareholders holding sixty (60%) percent of this corporation's issued and outstanding voting stock, any director may be replaced, even though his term of office may not have expired. ARTICLE VI. The names and addresses of the incorporators are as follows: ANTHONY J. PALERMO, SR. JOSEPH PALERMO, JR. 2701 Maplewood Dr. 2701 Maplewood Dr. Sulphur, LA 70663 Sulphur, LA 70663 JAMES P. KOEHLER P. O. Box 15 Aberdeen, SD 57402-0015 The name and address of the registered agent for service of process are as follows: DENNIS R. SUMPTER 1003 S. Huntington Sulphur, LA 70663 ARTICLE VII. The incorporators, officers and directors of this corporation claim the benefits of limitation of liability of the provisions of LSA-R.S. 12:24C (1968, as amended 1987) to the fullest extent allowed by law as fully and completely as though said provisions were recited herein in full. ARTICLE VIII. Section 1. No stock in this corporation shall be transferred to any person not already a shareholder of this corporation unless the stock shall have been first offered for sale to the corporation, and, if the corporation shall fail or refuse to accept this offer, to each of the other stockholders of this corporation. The offeree shall have an option to purchase the stock to be transferred at the following price: At the same price and on the same terms and conditions as the offeror shall have been offered by a third person at arm's length, acting in good faith. The offer shall be in writing and shall set forth the price and terms on which the stock is offered. It shall be sent by registered mail to the President and Secretary of the Corporation and to each stockholder at the address listed on the corporation books. The right to transfer stock shall not exist until the corporation and all existing stockholders either refuse in writing the offer so made, or waive the requirement of an offer in writing, or until they fail for a period of thirty (30) days after receipt of the written offer to accept it by compliance with the terms therein set forth. Regulations as to the formalities and procedures to be followed in effecting the transfer may be prescribed in the bylaws of the corporation. Section 2. Should the corporation be unable or unwilling for any reason to exercise its option as granted above, the option may be exercised by such stockholders as desire to exercise it, in the proportions in which these stockholders hold stock in the corporation. Section 3. After the expiration of the option period, no transfer at a price less than has been offered to the corporation and the other stockholders, or on terms or conditions varying from those stated in the letter notifying the corporation and the stockholders of a proposal to transfer, shall be valid until the right shall have been offered to the corporation and the stockholders to purchase the stock proposed to be transferred at the precise price and on the precise terms and conditions which were offered to or by the stockholder who proposes to transfer his stock. Section 4. The stockholders in this corporation may make arrangements, either in bylaws or by a shareholder agreement, among themselves relative to the purchase, among themselves, of the stock of this corporation in the event of the death, divorce, judicial separation, insanity, retirement, or disability of any stockholder, or in the event of a transfer of his stock by donation to the stockholder's spouse and linear descendants. A copy of any such agreement shall be filed with the Secretary or Secretary-Treasurer of this corporation, and the provisions of any such agreement shall be binding upon the persons who are parties to it and their respective heirs, administrators, legatees, executors, and assigns. Section 5. Except as to a transfer on death or a gift of the stock of a stockholder to his spouse or linear descendants (which shall be controlled, if at all, by the bylaws of a shareholder agreement), no sale, mortgage, pledge, conveyance, transfer, seizure, donation, sale under legal process or attachment or by virtue of any pledge or hypothecation, and no other disposal of stock of any nature whatsoever shall have any effect as related to the corporation or its stockholders, nor shall it be valid in any fashion until the option period above shall have expired. Section 6. The corporation may waive its option to purchase by majority --------- vote of the Board of Directors. Any shareholder may waive the option to purchase prior to or at the time of any specific offer of stock, or for any and all offers, by executing a written waiver in form specified by and acceptable to the Corporation. THUS DONE AND PASSED in my office in Sulphur, Calcasieu Parish, Louisiana, on the 10th day of May, 1993, in the presence of [Illegible] and [Illegible] competent witnesses, who hereunto sign their names with the said Appearers and me, Notary, after due reading of the whole. WITNESSES: /s/ Illegible /s/ Anthony J. Palermo, Sr. - ---------------------- --------------------------- ANTHONY J. PALERMO, SR. /s/ Illegible - ---------------------- /s/ Illegible --------------------------- NOTARY PUBLIC THUS DONE AND PASSED in my office in Sulphur, Calcasieu Parish, Louisiana, on the 10th day of May, 1993, in the presence of [Illegible] and [Illegible], competent witnesses, who hereunto sign their names with the said Appearers and me, Notary, after due reading of the whole. WITNESSES: /s/ Illegible /s/ Joseph R. Palermo, Jr. - ---------------------- --------------------------- JOSEPH R. PALERMO, JR. /s/ Illegible - ---------------------- /s/ Illegible --------------------------- NOTARY PUBLIC THUS DONE AND PASSED in my office in Sulphur, Calcasieu Parish, Louisiana, on the 10th day of May, 1993, in the presence of [Illegible] and [Illegible], competent witnesses, who hereunto sign their names with the said Appearers and me, Notary, after due reading of the whole. WITNESSES: /s/ Illegible /s/ James P. Koehler - ---------------------- --------------------------- JAMES P. KOEHLER /s/ Illegible - ---------------------- /s/ Illegible --------------------------- NOTARY PUBLIC Prepared and Furnished by [Illegible] Secretary of State INITIAL REPORT BY DOMESTIC CORPORATIONS (To be filed when the Articles of Incorporation are filed) [GRAPHIC] (R.S. 1950, 12:101) ================================================================================ State of Louisiana Parish of CALCASIEU To: The Secretary of State Baton Rouge, Louisiana Complying with R.S. 1950, 12:101, WINNER'S CHOICE TRUCK STOP, INC. -------------------------------- (Name of Corporation) hereby makes its initial report as follows: - -------------------------------------------------------------------------------- Municipal Address or Location of its Registered Office 2701 Maplewood Drive, Sulphur, LA 70663 - -------------------------------------------------------------------------------- Name and Municipal Address or Location of Each Registered Agent Dennis R. Sumpter, 1003 S. Huntington, Sulphur, LA 70663 - -------------------------------------------------------------------------------- Names & Addresses of the First Directors (if selected when articles are filed) Anthony J. Palermo, Sr., 2701 Maplewood Drive, Sulphur, LA 70663 Joseph R. Palermo. Jr., 2701 Maplewood Drive, Sulphur, LA 70663 James P. Koehler, P.O. Box 15, Aberdeen, South Dakota 57402-0015 Dated at Sulphur, LA, on the 11th, day of May, 1993 /s/ Antony J. Palermo Sr. ---------------------------------------- ANTONY J. PALERMO, SR. /s/ Joseph R. Palermo Jr. ---------------------------------------- JOSEPH R. PALERMO, JR. /s/ James P. Koehler ---------------------------------------- JAMES P. KOEHLER (To be signed by Each Incorporator) ================================================================================ (DOMESTIC/FOREIGN) AFFIDAVIT OF ACCEPTANCE OF APPOINTMENT -------------------------------------- BY DESIGNATED REGISTERED AGENT ------------------------------ ACT 769 OF 1987 --------------- To the State Corporation Department State of Louisiana STATE OF LOUISIANA PARISH/COUNTY OF CALCASIEU On this 11th day of May, 1993, before me, a Notary Public in and for the State and Parish aforesaid, personally came and appeared DENNIS R. SUMPTER, who is to me known to be the person, and who, being duly sworn, acknowledged to me that he does hereby accept appointment as the Registered Agent of WINNER'S CHOICE TRUCK STOP, INC., which is a Corporation authorized to transact business in the State of Louisiana pursuant to the provisions of the Title 12, Chapter 1, 2, and 3. /s/ Illegible ------------------------------ REGISTERED AGENT Subscribed and sworn to before me on the day, month and year first above set forth /s/ Illegible - ------------------------------------ NOTARY PUBLIC NOTE: If the Agent is a Corporation authorized to act as an agent, then the affidavit must be executed by an officer of the corporation. Issued by W. Fox McKeithen Secretary of State SS 388 (9/87) - ------------------------------------------------------------------------------------------ W. Fox McKeithen NOTICE OF CHANGE OF REGISTERED OFFICE Secretary of State AND/OR CHANGE OF REGISTERED AGENT [GRAPHIC] (R.S. 12:104 & 12:236) --------------------------------------------------------------------- Domestic Corporation (Business or Non-Profit) Return to: Corporation Division Enclose $20.00 filing fee P.O. Box 94125 Make remittance payable to Baton Rouge, LA 70804 - 9125 Secretary of State Phone (504)925 - 4704 Do not send Cash - ------------------------------------------------------------------------------------------
Corporation Name: Winner's Choice Truck Stop, Inc. CHANGE OF LOCATION OF REGISTERED OFFICE Notice is hereby given that the Board of Directors of the above named corporation has authorized a change in the location of the corporation's registered office. The new registered office is located at: 12121 S. Choctaw Drive, Baton Rouge, LA 70815 /s/ GEORGE D. LOCKHART --------------------------------- Authorized Representative GEORGE D. LOCKHART President Title I certify that I am the duly elected and qualified Secretary of the above named corporation, and that George D. Lockhart, the authorized representative whose name is subscribed herein was duly authorized to complete this Notice of Change of Location pursuant to a resolution adopted at a meeting of the Board of Directors of the above named corporation, duly convened. /s/ CLAUDE M. PENN, JR. --------------------------------- Secretary CLAUDE M. PENN, JR. CHANGE OF REGISTERED AGENT(S) Notice is hereby given that the Board of Directors of the above named corporation has authorized the change of the corporation's registered agent(s). The name(s) and address(es) of the new registered agent(s) is/are as follows: Jay J. Harris, HARRIS & PUGH, L.L.C., 1406 S. Range Avenue, Suite 2, Denham Springs, LA 70726 /s/ GEORGE D. LOCKHART -------------------------------------- President, Vice President or Secretary GEORGE D. LOCKHART, President AGENT AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE I hereby acknowledge and accept the appointment of registered agent(s) for and on behalf of the above named corporation. /s/ JAY J. HARRIS -------------------------------------- JAY J. HARRIS -------------------------------------- Registered Agent(s) Sworn to and subscribed before me this 26th day of April, 1999. /s/ CHARLOTTE A. PUGH -------------------------------------- Notary CHARLOTTE A. PUGH - -------------------------------------------------------------------------------- WINNER'S CHOICE TRUCK STOP, INC. 12121 S. Choctaw Drive Baton Rouge, Louisiana 70815 May 13, 1999 Ms. Helen J. Cumbo State of Louisiana Secretary of State P.O. Box 94125 Baton Rouge, LA 70804-9125 Re: Winner's Choice Truck Stop, Inc. Dear Ms. Cumbo: Pursuant to your correspondence dated May 7, 1999, a copy of which is attached, please be advised that the new officers of Winner's Choice Truck Stop, Inc. are as follows: President: George D. Lockhart 12121 S. Choctaw Drive Baton Rouge, LA 70815 Secretary: Claude M. Penn, Jr. 12121 S. Choctaw Drive Baton Rouge, LA 70815 Please note these new officers in the records of the Secretary of State and delete Ms. Jacqueline Palermo as a current officer of this corporation. We have enclosed the required filing fee of $20.00 payable to the Secretary of State for the revision of these records. Thanking you for your assistance in this matter, I am Sincerely, /s/ Claude M. Penn ------------------------ Claude M. Penn, Jr. Enclosure AMENDMENT TO ARTICLES OF INCORPORATION -------------------------------------- OF -- WINNER'S CHOICE TRUCK STOP, INC. -------------------------------- STATE OF LOUISIANA PARISH OF LIVINGSTON BEFORE ME, the undersigned notary public, and in the presence of the two undersigned competent witnesses, personally came and appeared: George D. Lockhart and Claude M. Penn, Jr., the President and Secretary of Winner's Choice Truck Stop, Inc., respectively, duly authorized by a corporate resolution, herein appearing and acting for and on behalf of Winner's Choice Truck Stop, Inc., a corporation organized under the laws of the State of Louisiana, by act before Dennis R. Sumpter, Notary Public for the Parish of Calcasieu, State of Louisiana, who declared that, pursuant to the resolution of the shareholders of Winner's Choice Truck Stop, Inc., adopted at a meeting of the shareholders on the 23rd day of June, 1999, at the registered office of Winner's Choice Truck Stop, Inc., 12121 S. Choctaw Drive, Baton Rouge, Louisiana 70815, a certified copy of the minutes of which meeting are attached hereto, they now appear for the purpose of executing this act of amendment, as passed by the unanimous vote of all shareholders of Winner's Choice Truck Stop, Inc. And, appearers do further declare that it was resolved that Article I. of the Articles of Incorporation be amended to read as follows: ARTICLE I. The name and title of this corporation shall be Winner's Choice Casino, Inc., and under and by said name, unless sooner dissolved in accordance with law, it shall exist and continue, and shall have and enjoy corporate existence and succession in perpetuity, or such maximum period as may be authorized by the laws of Louisiana, during which time it shall have and possess all the powers, rights, and privileges which corporations are and may hereafter be authorized to have and possess under the constitution and laws of Louisiana." And, appearers, having requested me, notary, to duly make note of the aforesaid amendment in the form of this authentic act in order that the amendment may be promulgated and recorded, and become part of the Articles of Incorporation of Winner's Choice Casino, Inc., I, notary, do hereby so note said amendment and cause the same to be executed in authentic form as hereinabove set forth. THUS DONE AND PASSED at my office in the City of Denham Springs, Parish of Livingston, State of Louisiana, on the 23rd day of June, 1999 in the presence of the two undersigned competent witnesses, who signed with appearer, and me, notary, after reading of the whole. WITNESSES: WINNER'S CHOICE TRUCK STOP, INC. /s/ Deborah M. Bond By: /s/ George D. Lockhart - --------------------- ----------------------------- Deborah M. Bond GEORGE D. LOCKHART, President /s/ Cathy M. Ellis By: /s/ Claude M. Penn - --------------------- ----------------------------- Cathy M. Ellis CLAUDE M.PENN, JR., Secretary /s/ Jay J. Harris ---------------------------- JAY J. HARRIS, Notary Public EXCERPT FROM THE MINUTES OF A MEETING ------------------------------------- OF -- WINNER'S CHOICE TRUCK STOP, INC. -------------------------------- STATE OF LOUISIANA PARISH OF EAST BATON ROUGE WHEREAS, it is necessary for the business of the corporation that George D. Lockhart, as President, and Claude M. Penn, Jr., as Secretary, of the corporation be authorized to execute an authentic notarial document amending the name of the corporation to that of Winner's Choice Casino, Inc. Upon motion duly made, seconded and unanimously carried by all shareholders of the corporation, it was: RESOLVED, that George D. Lockhart, as President, and Claude M. Penn, Jr., as Secretary, be and they are hereby authorized to execute an authentic notarial document amending the name of the corporation to that of Winner's Choice Casino, Inc. /s/ George D. Lockhart ------------------------------ GEORGE. D. LOCKHART, President Attest: /s/ Claude M. Penn - ----------------------------- CLAUDE M.PENN, JR., Secretary CERTIFICATE ----------- I, Claude M. Penn, Jr., Secretary, certify that the above and foregoing are true minutes of a meeting of the shareholders of Winner's Choice Truck Stop, Inc., held on the 23rd day of June, 1999. /s/ Claude M. Penn ----------------------------- CLAUDE M.PENN, JR., Secretary - --------------------------------------------------------------------------------------- W. Fox McKeithen NOTICE OF CHANGE OF REGISTERED OFFICE Secretary of State AND/OR CHANGE OF REGISTERED AGENT [GRAPHIC] (R.S. 12:104 & 12:236) ------------------------------------------------------------------ Domestic Corporation Return to: Corporation Division (Business or Non-Profit) P.O. Box 94125 Enclose $20.00 filing fee Baton Rouge, LA 70804-9125 Make remittance payable to Phone (504)925-4704 Secretary of State Do not send cash - --------------------------------------------------------------------------------------- Corporation Name: Winner's Choice Casino, Inc. CHANGE OF LOCATION OF REGISTERED OFFICE Notice is hereby given that the Board of Directors of the above named corporation has authorized a change in the location of the corporation's registered office. The new registered office is located at: --------------------- - -------------------------------------------------------------------------------- ---------------------------------------------------- To be signed by one (1) officer or two (2) directors ---------------------------------------------------- CHANGE OF REGISTRED AGENT(S) Notice is hereby given that the Board of Directors of the above named corporation has authorized the change of the corporation's registered agent(s). The name(s) and address(es) of the new registered agent(s) is/are as follows: Ian M. Stewart 1003 S. Hugh Wallis, Suite D LaFayette, LA 70508 /s/ Ian M. Stewart -------------------------------------- President, Vice President or Secretary Ian M. Stewart, President AGENT AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE I hereby acknowledge and accept the appointment of registered agent(s) for and on behalf of the above named corporation. /s/ Ian M. Stewart -------------------------------------- Registered Agent(s) Ian M. Stewart State of Virginia County of NewKent Sworn to and subscribed before me this 14th day of February, 2001 /s/ Illegible -------------------------------------- Notary My Commission Expires, August, 31 2004 - --------------------------------------------------------------------------------------- (See instructions on back)
- ------------------------------------------------------------------------------------------ W. Fox McKeithen NOTICE OF CHANGE OF REGISTERED OFFICE Secretary of State AND/OR CHANGE OF REGISTERED AGENT [GRAPHIC] (R.S. 12:104 & 12:236) --------------------------------------------------------------------- Domestic Corporation (Business or Non-Profit) Return to: Commercial Division Enclose $20.00 filing fee P.O.Box 94125 Make remittance payable to Baton Rouge, LA 70804-9125 Secretary of State Phone (225)925-4704 Do Not Send Cash Web Site: www.sec.state.la.us - ------------------------------------------------------------------------------------------ Corporation Name: Winner's Choice Casino, Inc. CHANGE OF LOCATION OF REGISTERED OFFICE Notice is hereby given that the Board of Directors of the above named corporation has authorized a change in the location of the corporation's registered office. The new registered office is located at: 1003 S. Hugh Wallis, Suite D, Lafayette, LA 70508 /s/ Illegible 03/08/01 -------------------------------------------------------------- To be signed by one (1) officer or two (2) directors Date -------------------------------------------------------------- Date CHANGE OF REGISTRED AGENT(S) Notice is hereby given that the Board of Directors of the above named corporation has authorized the change of the corporation's registered agent(s). The name(s) and address(es) of the new registered agent(s) is/are as follows: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ------------------------------------------------- President, Vice President or Secretary Date AGENT'S AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE I hereby acknowledge and accept the appointment of registered agent(s) for and on behalf of the above named corporation. -------------------------------- -------------------------------- Sworn to and subscribed before me the undersigned Notary Public, on this date: - ------------------ --------------------------- Notary - ------------------------------------------------------------------------------------------ (see instruction on back)
Winner's Choice Casino, Inc. 1003 S. Hugh Wallis Suite D Lafayette, Louisiana 70508 March 7, 2001 Secretary of State CORPORATIONS DIVISION Post Office Box 94125 Baton Rouge, Louisiana 70804-9125 RE: Winner's Choice Casino, Inc. Change in Officers and Directors Charter No.: 34434718D To Whom It May Concern: Please allow this letter to serve as notification of a change in the Officers and Directors of the Louisiana Business Corporation set forth above. The following officers and/or directors have resigned and/or have been removed from the corporation. As such, please amend your files to reflect their removal and resignation. George D. Lockhart Claude M. Penn, Jr. Additionally, the following individuals have been elected to the Board of Directors of the corporation. As such, please amend your files to reflect their election: Jeffrey P. Jacobs Ian M. Stewart Finally, the following individuals have been elected to the respective offices set forth next to their names. As such, please amend your files to reflect their election: Ian M. Stewart President Reid M. Smith Executive Vice President, Secretary & Treasurer Thank you very much for your assistance with this matter. Very truly yours, /s/ Reid M. Smith ------------------------------------- Reid M. Smith Executive Vice President CHRISTOPHER G. YOUNG A Professional Law Corporation Suite 2A-210 701 Metairie Road Metairie, Louisiana 70005 Telephone (504) 828-6900 Facsimile (504) 831-9930 March 13, 2001 VIA FACSIMILE TRANSMISSION - -------------------------- (225) 922-0435 ATTN: Ms. Yvonne CORPORATIONS DIVISION Secretary of State Baton Rouge, Louisiana RE: Houma Truck Plaza & Casino, L.L.C. Charter No.:34802608K Winner's Choice Casino, Inc. Charter No.: 34434718D Dear Ms. Yvonne. In accordance with our telephone discussion earlier today, following you will find the addresses of the new members and managing agents of the limited liability company set forth above: Name Address Position - ---- ------- -------- Jeffrey P. Jacobs 1001 N U.S. Highway One #170 Member Jupiter, Florida 33477 Richard E. Jacobs 12700 Lake Road Member Lakewood, Ohio 44107 Ian M. Stewart 9258 Hunt Club Lane Managing Agent Mechanicsville, Virginia 23111 Reid M. Smith 5313 Golf Villa Managing Agent Glenn Allen Virginia 23059 Page Two ATTN: Ms. Yvonne March 13, 2001 Also enclosed find a copy of corporate of documents of Winner's Choice Casino, Inc., a Louisiana Business Corporation, which were filed with your office at the same time the Houma Truck Plaza & Casino, LLC documents were submitted. Would you kindly provide the same addresses to the appropriate person in your office? Should you need any additional information, please do not hesitate to contact me. Thank you very much for your assistance Very truly yours, /s/ Christopher G. Young ------------------------ Christopher G. Young CGY/ted Documents Included - ----------------------------------------------------------------------------------------------------- W.Fox McKeithen DOMESTIC CORPORATION Secretary of State ANNUAL REPORT [GRAPHIC] For Period Ending May 17, 2001 - ----------------------------------------------------------------------------------------------------- Mailing Address Only (INDICATE ANY CHANGES BELOW) (INDICATE ANY CHANGES BELOW) 34434718 D 163 Registered Office Address in Louisiana WINNER'S CHOICE CASINO, INC. (Do Not Use P.O. Box) C/O IAN M. STEWART 1003 S. HUGH WALLIS, STE. D 1003 S. HUGH WALLIS, STE. D LAFAYETTE, LA 70508 LAFAYETTE, LA 70508 ----------------------------------------- Federal Tax ID Number Issued Shares 72-1227314 - ----------------------------------------------------------------------------------------------------- Our records indicate the following registered agents for the corporation. Indicate any changes or deletions below. All agents must have a Louisiana address. Do not use a P.O. Box. New registered agents require a notarized signature. IAN M. STEWART 1003 S. HUGH WALLIS, STE. D/LAFAYETTE, LA 70508 - ----------------------------------------------------------------------------------------------------- I hereby accept the appointment of registered Sworn to and subscribed before me on May 3, 2001 agent(s). /s/ Ian M. Stewart /s/ Illegible - --------------------------------- ----------------------------------- My Commission expires: 8/31/04 - --------------------------------- - ----------------------------------------------------------------------------------------------------- Our records indicate the following officers or directors for the corporation. Indicate any changes or deletions below. If additional space is needed, attach an addendum. Include addresses. Do not use a P.O. Box. Indicate all offices held by each individual listed. IAN M. STEWART PRES/DIR 9258 HUNT CLUB LANE/MECHANICSVILLE, VA 23111 REID M. SMITH VICE PRES/SECT/TREAS 5313 GOLF VILLA/GLENN ALLEN, VA 23059 JEFFREY P. JACOBS DIR 1001 N. U.S. HIGHWAY ONE #170/JUPITER , FL 33477 - ----------------------------------------------------------------------------------------------------- 2001 MAY 14 AM 9:20 SECRETARY OF STATE - ----------------------------------------------------------------------------------------------------- To be signed by one officer or two directors. Title Phone Date SIGN-- /s/ Ian M. Stewart PRESIDENT (804)966-7223 5/3/01 -------------------- - ----------------------------------------------------------------------------------------------------- Return by: May 17, 2001 CHECK Enclose filling fee of $25.00 IF NO Make remittance payable to Secretary of State to: Commercial Division CHANGE P.O. Box 94125 Do Not Send Cash Baton Rouge, LA 70894-9125 ( ) web site: www.sec.state.la.us Phone (225) 925-4704 - -----------------------------------------------------------------------------------------------------
UNSIGNED REPORTS WILL BE RETURNED EX-3.15 23 dex315.txt BY-LAWS OF WINNER'S CHOICE CASINO, INC. Exhibit 3.15 BY-LAWS OF WINNER'S CHOICE TRUCK STOP, INC. ARTICLE I. OFFICERS -------- Section l. The officers of WINNER'S CHOICE TRUCK STOP, INC., shall be a --------- President and a Secretary-Treasurer. The officers shall be elected annually by the Board of Directors at its first meeting following the annual meeting. Officers may be members of the Board of Directors and vice-versa. The duties of the several officers shall be as follows: PRESIDENT: The President shall be the chief executive officer of the corporation; he/she shall preside at all meetings of the stockholders and directors; he/she shall have general and active management of the business of the corporation, and shall see that all orders and resolutions of the Board are carried into effect. He/she shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation. He/she shall have the general powers and duties of supervision and management usually vested in the office of president of a corporation. SECRETARY-TREASURER: He shall attend all meetings of the Corporation and of the Board of Directors, and keep minutes of the proceedings thereof. He/she shall give notice of all meetings of the corporation of the Board of Directors and of Committees. He/she shall further be charged with the performance of such services on behalf of the Corporation as may, from time to time, be determined by the Board of Directors. He shall attend all meetings of the board and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for the standing committees when required. He/she shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors under whose supervision he shall be. He/she shall keep in safe custody the seal of the corporation, and when authorized by the Board, affix the same to any instrument requiring it, and when so affixed, it shall be attested by his signature. He/she shall be sworn to the faithful discharge of his/her duty. He shall have charge of all funds of the Corporation and of its disbursements under the direction of the Board of Directors. He/she shall keep a record of all monies received and paid out, making a report of same to the Board of Directors at each regular meeting thereof and whenever requested so to do. Section 2. The compensation of all officers shall be fixed by the Board of ---------- Directors. Section 3. The Board may appoint such other officers and agents as it shall ---------- deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. Section 4. The officers of the Corporation shall hold office until their ---------- successors are chosen and qualify in their stead. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the whole Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy shall be filled by the affirmative vote of a majority of the whole Board of Directors. Section 5. In the case of the absence of any officer of the corporation, or ---------- for any other reason that the Board may deem sufficient, the Board may delegate, for the time being, the powers or duties, or any of them, of such officer to any other officer, or to any director, provided a majority of the entire Board concurs therein. ARTICLE II. BOARD OF DIRECTORS Section 1. The Board of Directors shall be composed of shareholders and/or ---------- officers of the corporation who shall be elected annually as provided in the Charter. Section 2. The Board of Directors shall be charged with the management of ---------- all of the affairs of the corporation, subject to the provisions of its charter and by-laws. Section 3. For the purposes of transacting the business of this corporation ---------- during the intervals between the meetings of the Board of Directors, the President and Secretary-Treasurer shall constitute the Executive Committee with full authority to act. Section 4. Regular meetings of the Board of Directors shall be held at such ---------- time and place as the directors may determine. Special meetings of the Board may be called by the President on seven (7) days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the President or Secretary-Treasurer in like manner and on like notice on the written request of one director. Section 5. Two (2) directors shall constitute a quorum of the Board. ---------- Section 6. In addition to the powers and authorities by these by-laws ---------- expressly conferred upon it, the Board of Directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the articles of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. Section 7. Indemnity. The corporation shall indemnify and hold harmless ---------- each director and officer now or hereafter serving the corporation from and against any and all claims and liabilities to which he may be or become subject by reason of his now or hereafter being or having heretofore been a director or officer of the corporation and/or by reason of his alleged acts or omissions as such director or officer, whether or not he continues to be such officer or director at the time when any such claim or liability is asserted, and shall reimburse each such director and officer for all legal and other expenses reasonably incurred by him in connection with defending any or all such claims or liabilities, including amounts paid or agreed to be paid in connection with reasonable settlements made before final adjudication with the approval of the Board of Directors, whether or not he continues to be such director or officer at the time such expenses are incurred; provided, however, that no director or officer shall be indemnified against any claim or liability arising out of his own negligence or willful misconduct or shall be indemnified against or reimbursed for any expenses incurred in defending any or all such claims or liability or in settling the same unless in the judgment of the directors of the corporation the director or officer against whom such claim or liability is asserted has not been guilty of negligence or willful misconduct. The foregoing right of indemnification shall be exclusive of other rights to which any director or officer may be entitled as a matter of law. ARTICLE III. COMMITTEES Section 1. The President may appoint such committees as he deems necessary, ---------- subject to the approval of the Board of Directors. Whenever the Board of Directors is not in session, the committees appointed by the President may act subject to ratification at the next meeting of the Board of Directors, at which the appointments made by the President may be either approved or disapproved. Section 2. The chairman of each committee shall make a written report to ---------- the Board of Directors whenever requested by the Board. ARTICLE IV. STOCKHOLDERS' MEETINGS Section 1. The annual meeting of the corporation shall be held as provided ---------- in the charter. Section 2. Special meetings of the corporation may be called at any time by ---------- the President, or on the request, in writing to the President, of a majority of the Board of Directors. Section 3. Immediately following the adjournment of the annual meeting of ---------- the corporation, the newly-elected directors shall hold a meeting for the purpose of organization, and the transaction of any other business. Section 4. Not less than seven (7) days prior to any meeting of the ---------- corporation, a notice of such meeting shall be mailed to each shareholder at his last known post office address. The notice for any special meeting shall state the purpose of the meeting. All meetings of the corporation, may, however, be called without notice, by written waiver of the right to such notice, by each person entitled thereto. Section 5. At any meeting of the stockholders every stockholder having the ---------- right to vote shall be entitled to vote in person, or by proxy appointed by any instrument in writing subscribed by such stockholder and witnessed by one witness. Each stockholder shall have one (1) vote for each share of stock having voting power, registered in his name on the books of the corporation, except where the transfer books of the corporation shall have been closed or a date shall have been fixed as a date of record for the determination of its stockholders entitled to vote. Section 6. Written notice of the annual meeting shall be mailed to each ---------- stockholder entitled to vote thereat at such address as appears on the stock book of the corporation, at least seven (7) days prior to the meeting. Section 7. A complete list of the stockholders entitled to vote at the ---------- ensuing election, arranged in alphabetical order, with the address of each, and the number of voting shares held by shall be prepared by the Secretary and filed in the office where the election is to be held, at least ten (10) days before every election, and shall at all times, during the usual hours of business, and during the whole time of said election, be open to the examination of any stockholder. Section 8. Special meetings of the stockholders, for any purpose or ---------- purposes, unless otherwise prescribed by statute, may be called by the President and shall be called by the President or Vice-President/Secretary-Treasurer at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the Corporation issued and outstanding, and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 9. Business transaction at all special meetings shall be confined ---------- to the objects stated in the call. Section 10. Written notice of a special meeting of stockholders, stating ----------- the time and place and object thereof shall be mailed, postage prepaid, at least seven (7) days before such meeting, to each stockholder entitled to vote thereat at such address as appears on the books of the corporation. ARTICLE V. CERTIFICATES OF STOCK The certificates of stock of the corporation shall be numbered and shall be entered in the books of the corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be signed by the President and the Secretary-Treasurer. ARTICLE VI. REGISTERED STOCKHOLDERS The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the Laws of Louisiana. ARTICLE VII. LOSS OF CERTIFICATE Any person claiming a certificate of stock to be lost or destroyed, shall make an affidavit or affirmation of that fact, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate or his legal representative, to give the corporation a bond, in such sum as the Board of Directors of the corporation may require to indemnify the corporation against any claim that may be made against it on account of the alleged loss of any such certificate. A new certificate of the same tenor and for the same number of shares as the one alleged to be lost or destroyed, may be issued without requiring any bond when, in the judgment of the directors, it is proper to do so. ARTICLE VIII. CHECKS All checks, drafts and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. ARTICLE IX. SALES AND OTHER TRANSFERS OF STOCK Section 1. No stock in this corporation shall be transferred to any person --------- not already a shareholder of this corporation unless the stock shall have been first offered for Sale to the corporation, and, if the corporation shall fail or refuse to accept the offer, each of the other stockholders of this corporation. The offeree shall have an option to purchasethe stock to be transferred at the following price: At the same price and on the same terms and conditions as the offeror shall have been offered by a third person at arm's length, acting in good faith. The offer shall be in writing and shall set forth the price and terms on which the stock is offered. It shall be sent by registered mail to the President and Secretary of the corporation and to each stockholder at the address listed on the corporation and to each stockholder at the address listed on the corporation books. The right to transfer stock shall not exist until the corporation and all existing stockholders either refuse in writing the offer so made, or waive the requirement of an offer in writing, or until they fail for a period of thirty (30) days after receipt of the written offer to accept it by compliance with the terms therein set forth. Regulations as to the formalities and procedures to be followed in effecting the transfer may be prescribed in the by-laws of the corporation. Section 2. Should the corporation be unable or unwilling for any reason to --------- exercise its option as granted above, the option may be exercised by such stockholders as desire to exercise it, in the proportions in which these stockholders hold stock in the corporation. Section 3. After the expiration of the option period, no transfer at a --------- price less than has been offered to the corporation and the other stockholders, or on terms or conditions varying from those stated in the letter notifying the corporation and the stockholders of a proposal to transfer, shall be valid until the right shall have been offered to the corporation and the stockholders to purchase the stock proposed to be transferred at the precise price and on the precise terms and conditions which were offered to or by the stockholder who proposes to transfer his stock. Section 4. The stockholders in this corporation may make arrangements, ---------- either in by-laws or by a shareholder agreement, among themselves relative to the purchase, among themselves, of the stock of this corporation in the event of the death, insanity, retirement, or disability of any stockholder, or in the event of a transfer of his stock by donation to the stockholder's spouse and linear descendants. A copy of any such agreement shall be filed with the Secretary or Secretary-Treasurer of this corporation, and the provisions of any such agreement shall be binding upon the persons who are parties to it and their respective heirs, administrators, legatees, executors, and assigns. Section 5. Except as to a transfer on death or a gift of the stock of a ---------- stockholder to his spouse or linear descendants (which shall be controlled, if at all, by the by-laws or by a shareholder stock agreement), no sale, mortgage, pledge, conveyance, transfer, seizure, donation, sale under legal process or attachment or by virtue of any pledge of hypothecation, and no other disposal of stock of any nature whatsoever shall have any effect as related to the corporation or its stockholders, nor shall it be valid in any fashion until the option period above shall have expired. Section 6. The corporation may waive its option to purchase by majority ---------- vote of the Board of Directors. Any shareholder may waive the option to purchase prior to or at the time of any specific offer of stock, or for any and all offers, by executing a written waiver in form specified by and acceptable to the corporation. ARTICLE XI. AMENDMENTS These by-laws may be altered or amended or repealed by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote thereat, at any regular or special meeting of the stockholders called for that purpose, or by the affirmative vote of a majority of the Board of Directors at any regular or special meeting of the Board called for that purpose; provided however, that no change of the time or place for the election of directors shall be made within sixty days preceding the day on which such election is to be held, and that in case of any change of such time or place, notice thereof shall be given to each stockholder in person or by letter mailed to his last known post office address, at least 20 days before the election is held. Dated: May 10, 1993. /s/ ANTHONY J. PALERMO ------------------------------- ANTHONY J. PALERMO, SR. /s/ JOSEPH R. PALERMO ------------------------------- JOSEPH R. PALERMO, JR. /s/ JAMES P. KOEHLER ------------------------------- JAMES P. KOEHLER EX-3.16 24 dex316.txt ARTICLES OF ORGANIZATION OF DIVERSIFIED Exhibit 3.16 054455-0664 [GRAPHIC] Prescribed by Approved 20 Bob Taft, Secretary of State Date 2-29-96 30 East Broad Street, 14th Floor Fee $85.00* Columbus, Ohio 43266-0418 96030103201 Form LCA (July 1994) ARTICLES OF ORGANIZATION (Under Section 1705.04 of the Ohio Revised Code) Limited Liability Company The undersigned, desiring to form a limited liability company, under Chapter 1705 of the Ohio Revised Code, do hereby state the following: FIRST: The name of said limited liability company shall be Diversified Opportunities Group Ltd. - -------------------------------------------------------------------------------- (the name must include the words "limited liability company", "limited", "Ltd" or "Ltd.") SECOND: This limited liability company shall exist for a period of Until December 31, 2036 - -------------------------------------------------------------------------------- THIRD: The address to which interested persons may direct requests for copies of any operating agreement and any bylaws of this limited liability company is: 1231 Main Avenue ------------------------------------------------------------- (street or post office box) Cleveland, Ohio 44113 ------------------------------------------------------------- (city, village or township) (state) (zip code) [ ] Please check this box if additional provision are attached hereto Provisions attached hereto are incorporated herein and made a part of these articles of organization. 05445-00665 FOURTH: Purpose (optional) IN WITNESS WHEREOF, we have hereunto subscribed our names, this 20th day of February, 1996. SEE ATTACHED SIGNATURE PAGE Signed: Signed: ------------------------------ -------------------------------- Signed: Signed: ------------------------------ -------------------------------- Signed: Signed: ------------------------------ -------------------------------- (If insufficient space for all signatures, please attach a separate sheet containing additional signatures) INSTRUCTIONS 1. The fee for filing Articles of Organization for a limited liability company is $85.00. 2. Articles will be returned unless accompanied by a written appointment of agent signed by all or a majority of the members of the limited liability company which must include a written acceptance of the appointment by the named agent. 3. A limited liability company must be formed by a minimum of two persons. 4. Any other provisions that are from the operating agreement or that are not inconsistent with applicable Ohio law and that the members elect to set out in the articles for the regulation of the affairs of the limited liability company may be attached. [Ohio Revised Code Section 1705.04] 054475-0666 Diversified Opportunities Group Ltd. Signature Page for Articles of Organization The undersigned have hereunto subscribed their names as Members of Diversified Opportunities Group Ltd. THE OPPORTUNITIES TRUST, JACOBS ENTERTAINMENT U/A/D 2-1-96 LTD., an Ohio limited liability company By: /s/Gary L. Bryenton By: /s/ Jeffrey P. Jacobs ---------------------------- --------------------------------- Gary L. Bryenton Jeffrey P. Jacobs, Co-Trustee Managing Member And:/s/ Jeffrey P. Jacobs, ---------------------------- Jeffrey P. Jacobs, Co-Trustee 05445-0667 [GRAPHIC] Prescribed by Bob Taft, Secretary of State 30 East Broad Street, 14th Floor Columbus, Ohio 43266-0418 Form LCO (July 1994) ORIGINAL APPOINTMENT OF AGENT (for limited liability company) The undersigned, being at least a majority of the members of Diversified Opportunities Group Ltd. hereby appoints - ----------------------------------------------------------- (name of limited liability company) Jacobs Entertainment, Inc., an Ohio corporation to be the agent - ----------------------------------------------------------- (name of agent) upon whom any process, notice or demand required or permitted by statute to be served upon the limited liability company may be served. The complete address of the agent is: 1231 Main Avenue - -------------------------------------------------------------------------------- (street address) Cleveland , - --------------------------------------------------------------------------- (city, village or township) Note: P.O. Box addresses are not acceptable Ohio 44113 ----------- (zip code) SEE ATTACHED SIGNATURE PAGE - ------------------------------------- --------------------------------------- (member) (member) - ------------------------------------- --------------------------------------- (member) (member) (If insufficient space for all signatures, please attach a separate sheet containing additional signatures) ACCEPTANCE OF APPOINTMENT The undersigned, named herein as the statutory agent for Diversified ----------- Opportunities Group Ltd., hereby acknowledges and accepts the - ------------------------ (name of limited liability company) JACOBS ENTERTAINMENT, INC. appointment of agent for said limited liability company. ----------------------------- Agent's Signature By: /s/ Illegible -------------------------- INSTRUCTIONS 1. Articles of organization must be accompanied by an original appointment of agent R.C. 1705.06(B). 2. The agent for a limited liability company must be an individual who is a resident of Ohio, an Ohio corporation, or a foreign corporation holding an Ohio license as a foreign corporation. R.C. 1705.06(A) 3. An original appointment of agent form must be signed by at least a majority of the members of the limited liability company. R.C. 1705.06(B) 05445-0668 Diversified Opportunities Group Ltd. Signature Page for Original Appointment of Agent The undersigned have hereunto subscribed their names as Members of Diversified Opportunities Group Ltd. THE OPPORTUNITIES TRUST, JACOBS ENTERTAINMENT U/A/D 2-1-96 LTD., an Ohio limited liability company By: /s/ Gary L. Bryenton By: /s/ Jeffrey P. Jacobs --------------------------- ---------------------------- Gary L. Bryenton Jeffrey P. Jacobs, Co-Trustee Managing Member And: /s/ Jeffrey P. Jacobs --------------------------- Jeffrey P. Jacobs, Co-Trustee EX-3.17 25 dex317.txt ARTICLES OF ORGANIZATION OF JALOU L.L.C. Exhibit 3.17 - -------------------------------------------------------------------------------------------------- W. Fox McKeithen Secretary of State ARTICLES OF ORGANIZATION [GRAPHIC] (R.S. 12:1301) ----------------------------------------------------------------------------- Domestic Limited Liability Company Return to: Commercial Division Enclose $60.00 filing fee P.O. Box 94215 Make remittance payable to Baton Rouge, LA 70804-9125 Secretary of State Phone (225) 925-4704 Web Site: www.sec.state.la.us - --------------------------------------------------------------------------------------------------
STATE OF OHIO Check one: (X) Business ( ) Non Profit PARISH/COUNTY OF CUYAHOGA 1. The name of this limited liability company is: JALOU L.L.C. 2. This company is formed for the purpose of: (check one) (X) Engaging in any lawful activity for which limited liability companies may be formed. ( ) --------------------------------------------------------------------------- (use for limiting activity) 3. The duration of this limited liability company is: (may be perpetual) PERPETUAL 4. Other provisions: --------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- Signatures: /s/ STANLEY R. GOROM III --------------------------------------------------- STANLEY R. GOROM III. AUTHORIZED REPRESENTATIVE --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- Sworn to and subscribed before me, the undersigned Notary Public, on this date: March 13, 2000 [GRAPHIC] /s/ Illegible My commission --------------------------------------------------- expires 5/22/01 Notary Recorded in Ohio County - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- W.Fox McKeithen Secretary of State LIMITED LIABILITY COMPANY INITIAL REPORT [GRAPHIC] (R.S. 12:1305 (E)) - -------------------------------------------------------------------------------- 1. The name of this limited liability company is: JALOU L.L.C. 2. The location and municipal address, not a post office box only, of this limited liability company's registered office: 8550 United Plaza Boulevard, Baton Rouge, LA 70809 3. The full name and municipal address, not a post office box only, of each of this limited liability company's registered agent(s) is/are: CT CORPORATION SYSTEM, 8550 United Plaza Boulevard, Baton Rouge, LA 70809 4. The names and municipal addresses, not post office box only, of the first managers, or the members: NOT YET DETERMINED To be signed by each person who signed the articles of organization; /s/ STANLEY R. GOROM III ----------------------------------------------- STANLEY R. GOROM III, AUTHORIZED REPRESENTATIVE ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- AGENT'S AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE I hereby acknowledge and accept the appointment of registered agent for and on behalf of the above named limited liability company. Registered agent(s) signature(s): C T CORPORATION SYSTEM /s/ Illegible ----------------------------------------------- ----------------------------------------------- Sworn to and subscribed before me, the undersigned Notary Public, on this date: 3-14-00 /s/ Illegible ----------------------------------------------- Notary - -------------------------------------------------------------------------------- EX-3.18 26 dex318.txt ARTICLES OF ORGANIZATION OF HOUMA TRUCK PLAZA Exhibit 3.18 STATE OF LOUISIANA PARISH OF LIVINGSTON ARTICLES OF ORGANIZATION OF HOUMA TRUCK PLAZA & CASINO, L.L.C. BE IT KNOWN, that on the 10th day of June, 1999, before me, Jay J. Harris, notary public, duly commissioned and qualified in and for the aforesaid parish and state, and in the presence of the undersigned competent witnesses, personally came and appeared Cathy M. Ellis and Deborah M. Bond, who, acting under the authority of Louisiana's Limited Liability Company Law, R.S. 12:1301 et seq., do hereby organize and constitute themselves into a Limited Liability Company, for the objects and purposes and under the conditions and agreements of the following Articles of Organization: I. NAME The name of this limited liability company is Houma Truck Plaza & Casino, L.L.C., referred to hereinafter as "the company." II. PURPOSE The company's purpose is to engage in any lawful business activities for which limited liability companies organized under Chapter 22 of Title 12 of the Louisiana Revised Statutes (R.S. 12:1301 et seq.) may engage. III. MANAGEMENT The company shall be managed by its sole member, Claude M. Penn, Jr. IV. RESTRICTIONS Other than those restrictions imposed by law, there shall be no restrictions on the authority of the company's manager to bind the company. V. LIABILITY WAIVER AND INDEMNIFICATION No member shall have any personal liability for monetary damages for breach of any duty as set forth in R.S. 12:1314, or any activities performed in connection with the management of the company. Further, each member shall be fully indemnified by the company for any judgments, settlements, penalties, fines or expenses incurred because of membership in the company. It is the intention of this provision to afford members of the company the most complete relief from liability and the most indemnification permitted by law, and particularly afforded by R.S. 12:1315. VI. OPERATING AGREEMENT The company's operating agreement, if any, shall provide for the company's status and operations, including questions of management, management rights, finances, distributions, assignments of membership interests, dissolution and other operational matters. VII. NO OPERATING AGREEMENT; STATUTORY APPLICATION In the absence of a written operating agreement, all questions concerning the company's status and operations, including questions of management and management rights, finance, distributions, assignment of membership interests and dissolution shall, unless otherwise provided, be governed by the laws of the State of Louisiana and particularly Title 12, Section 1301 et seq. of the Revised Statutes of Louisiana. VIII. MISCELLANEOUS Unless and until amendment of these Articles by proper juridical act properly filed in the office of the Louisiana Secretary of State, any person dealing with the company may rely upon a certificate of Claude M. Penn, Jr., acting alone, to: (1) establish the membership of any member of the company, (2) establish the authenticity of any records of the company, or (3) establish the authority of any person to act on behalf of the company, including but not limited to the authority to take actions referred to in Louisiana Revised Statutes Title 12, Section 1318(B), which actions include: a. The dissolution and winding up of the company; b. The sale, exchange, lease, mortgage, pledge, or other transfers of all or substantially all of the assets of the company; c. The merger or consolidation of the company; d. The incurrence of indebtedness by the company other than in the ordinary course of its business; e. The alienation, lease or encumbrance of any immovable of the company; and f. An amendment to the articles of organization. THUS DONE AND SIGNED on the day and date set forth above at the City of Denham Springs, Parish of Livingston, State of Louisiana, the parties hereto having affixed their signatures, together with me, Notary, and the undersigned competent witnesses, after due reading of the whole. WITNESSES: APPEARERS: /s/ Illegible /s/ Cathy M. Ellis - ------------------------------------ ----------------------------------- CATHY M. ELLIS /s/ Illegible /s/ Deborah M. Bond - ------------------------------------ ----------------------------------- DEBORAH M. BOND /s/ Jay J. Harris --------------------------------------- JAY J. HARRIS, Notary Public LIMITED LIABILITY COMPANY INITIAL REPORT (R.S.12:1305 (e)) 1. The name of this limited liability company is: Houma Truck Plaza & Casino, L.L.C. 2. The location and municipal address, not a post office box only, of this limited liability company's registered office: 1406 S. Range Avenue Suite 2 Denham Springs, LA 70726 3. The full name and municipal address, not a post office box only, of each of this limited liability company's registered agent(s) is/are: Jay J. Harris 1406 S. Range Ave., Ste 2, Denham Springs, LA 70726 4. The names and municipal addresses, not a post office box only, of the first managers: Claude M. Penn, Jr. 35059 Bend Road Denham Springs, LA 70706 To be signed by each person who signed the articles of organization: /s/ Cathy M. Ellis --------------------------------- CATHY M. ELLIS /s/ Deborah M. Bond --------------------------------- DEBORAH M. BOND AGENT'S AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE I hereby acknowledge and accept the appointment of registered agent for and on behalf of Houma Truck Plaza & Casino, L.L.C. Registered agent(s) signature(s): /s/ Jay J. Harris --------------------------------- JAY J. HARRIS Sworn to and subscribed before me this 10th day of July, 1999 /s/ Charlotte A. Pugh --------------------------------- CHARLOTTE A. PUGH, Notary Public - --------------------------------------------------------------------------------------- W. Fox McKeithen NOTICE OF CHANGE OF REGISTERED OFFICE Secretary of State AND/OR CHANGE OF REGISTERED AGENT [GRAPHIC] (R.S. 12:1308) ------------------------------------------------------------------ Domestic Limited Return to: Corporations Division Liability Company P.O. Box 94125 Enclose $20.00 filing fee Baton Rouge, LA 70804-9125 Make remittance payable to Phone (504)925-4704 Secretary of State Do not send cash - ---------------------------------------------------------------------------------------
Limited Liability Company Name: Houma Truck Plaza & Casino, L.L.C. CHANGE OF LOCATION OF REGISTERED OFFICE Notice is hereby given that the above named limited liability company has authorized a change in the location of its registered office, in accordance with the articles of organization or operating agreement. The new registered office is located at: ----------------------------------------------------------------- - -------------------------------------------------------------------------------- ----------------------------------------- To be signed by a manager or member CHANGE OF REGISTERED AGENT(S) Notice is hereby given that the above named limited liability company has authorized the change of its registered agent(s), in accordance with the articles of organization or operating agreement. The name(s) and address(es) of the new registered agent(s) is/are as follows: Ian M. Stewart 1003 S. Hugh Wallis, Suite D LaFayette, LA 70508 /s/ Ian M. Stewart -------------------------------------- To be signed by a manager or member Ian M. Stewart, President/Manager AGENT AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE I hereby acknowledge and accept the appointment of registered agent(s) for and on behalf of the above named limited liability company. -------------------------------------- /s/ Ian M. Stewart -------------------------------------- Registered Agent(s) State of Virginia County of New Kent: Ian M. Stewart Sworn to and subscribed before me this 14th day of February, 2001 /s/ Illegible -------------------------------------- Notary My Commission Expires: August 31, 2004 - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- W. Fox McKeithen NOTICE OF CHANGE OF REGISTERED OFFICE Secretary of State AND/OR CHANGE OF REGISTERED AGENT [GRAPHIC] (R.S. 12:1308) ---------------------------------------------------------------------- Domestic Limited Return to: Commercial Division Liability Company P.O. Box 94125 Enclose $20.00 filing fee Baton Rouge, LA 70804-9125 Make remittance payable to Phone (225) 925-4704 Secretary of State Web Site: www.sec.state.la.us Do Not Send Cash - -------------------------------------------------------------------------------------------
Limited Liability Company Name: Houma Truck Plaza & Casino, LLC CHANGE OF LOCATION OF REGISTERED OFFICE Notice is hereby given that the above named limited liability company has authorized a change in the location of its registered office, in accordance with the articles of organization or operating agreement. The new registered office is located at: 1003 S. Hugh Wallis, Suite D, Lafayette, LA 70508 /s/ Reid M. Smith 03/08/01 ---------------------------------------------------- To be signed by a manager or member Date CHANGE OF REGISTERED AGENT(S) Notice is hereby given that the above named limited liability company has authorized the change of its registerd agents(s), in accordance with the articles of organization or operating agreement. The name(s) and address(es) of the new registered agent(s) is/are as follows: ------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ---------------------------------------------------- To be signed by a manager or member Date AGENT AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE I hereby acknowledge and accept the appointment of registered agent(s) for and on behalf of the above named limited liability company. ---------------------------------------------------- ---------------------------------------------------- Registered Agents(s) Sworn to and subscribed before me, the undersigned Notary Public, on this date: - ---------------- ----------------------------- Notary - -------------------------------------------------------------------------------- Houma Truck Plaza & Casino, L.L.C. 1003 S. Hugh Wallis Suite D Lafayette, Louisiana 70508 March 7, 2001 Secretary of State CORPORATIONS DIVISION Post Office Box 94125 Baton Rouge, Louisiana 70804-9125 RE: Houma Truck Plaza & Casino, L.L.C. Change in Members Change in Managing Agents Charter No.: 34802608K To Whom It May Concern: Please allow this letter to serve as notification of a change in the members and managing agents of the Louisiana Limited Liability Company set forth above. The following member and manager has resigned from the limited liability -------- company. As such, please amend your files to reflect his resignation. Claude M. Penn, Jr. Additionally, the following individuals have become members of the limited liability company. As such, please amend your files to reflect these new members. Jeffrey P. Jacobs Richard E. Jacobs Finally, the following individuals have been designated as managing agents of the limited liability company. As such, please amend your files to reflect their designation. Ian M. Stewart Reid M. Smith Thank you very much for your assistance with this matter. Very truly yours, /s/ Reid M. Smith ----------------------------------------------- Reid M. Smith Managing Agent CHRISTOPHER G. YOUNG A Professional Law Corporation Suite 2A-210 701 Metairie Road Metairie, Louisiana 70005 Telephone (504) 828-6900 Facsimile (504) 831-9930 March 13, 2001 VIA FACSIMILE TRANSMISSION - -------------------------- (225) 922-0435 ATTN: Ms. Yvonne CORPORATIONS DIVISION Secretary of State Baton Rouge, Louisiana RE: Houma Truck Plaza & Casino, L.L.C. Charter No.: 34802608K Winner's Choice Casino, Inc. Charter No.: 34434718D Dear Ms. Yvonne In accordance with our telephone discussion earlier today, following you will find the addresses of the new members and managing agents of the limited liability company set forth above: Name Address Position - ---- ------- -------- Jeffrey P. Jacobs 1001 N. U.S. Highway One #170 Member Jupiter, Florida 33477 Richard E. Jacobs 12700 Lake Road Member Lakewood, Ohio 44107 Ian M. Stewart 9258 Hunt Club Lane Managing Agent Mechanicsville, Virginia 23111 Reid M. Smith 5313 Golf Villa Managing Agent Glenn Allen Virginia 23059 Page Two ATTN: Ms. Yvonne March 13, 2001 Also enclosed find a copy of corporate of documents of Winner's Choice Casino, Inc., a Louisiana Business Corporation, which were filed with your office at the same time the Houma Truck Plaza & Casino, LLC documents were submitted. Would you kindly provide the same addresses to the appropriate person in your office? Should you need any additional information, please do not hesitate to contact me. Thank you very much for your assistant Very truly yours, /s/ Christopher G. Young -------------------------- Christopher G. Young CGY/ted Documents Included EX-3.19 27 dex319.txt ARTICLES OF ORGANIZATION OF JALOU-CASH'S L.L.C. Exhibit 3.19 - -------------------------------------------------------------------------------------------------- W. Fox McKeithen ARTICLES OF ORGANIZATION Secretary of State (R.S. 12:1301) ----------------------------------------------------------------------------- [GRAPHIC] Domestic Limited Liability Company Return to: Commercial Division Enclose $60.00 filing fee P.O. Box 94215 Make remittance payable to Baton Rouge, LA 70804-9125 Secretary of State Phone (225) 925-4704 Web Site: www.sec.state.la.us - --------------------------------------------------------------------------------------------------
STATE OF Ohio Check one: (X) Business ( ) Non Profit PARISH/COUNTY OF Cuyahoga 1. The name of this limited liability company is: Jalou - Cash's L.L.C. 2. This company is formed for the purpose of: (check one) (X) Engaging in any lawful activity for which limited liability companies may be formed. ( ) --------------------------------------------------------------------------- (use for limiting activity) 3. The duration of this limited liability company is: (may be perpetual) Perpetual 4. Other provisions: ---------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- Signatures: /s/ Stanley R. Gorom III ----------------------------------------------- Stanley R. Gorom III, Authorized Representative ----------------------------------------------- ----------------------------------------------- Sworn to and subscribed before me, the undersigned Notary Public, on this date: 1/25/01 [GRAPHIC] /s/ Illegible My commission ----------------------------------------------- expires 3/22/01 Notary Recorded in Lake County - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- W. Fox McKeithen Secretary of State LIMITED LIABILITY COMPANY INITIAL REPORT [GRAPHIC] (R.S. 12:1305 (E)) - -------------------------------------------------------------------------------- 1. The name of this limited liability company is: Jalou - Cash's L.L.C. 2. The location and municipal address, not a post office box only, of this limited liability company's registered office: 8550 United Plaza Boulevard, Baton Rouge, LA 70809 3. The full name and municipal address, not a post office box only, of each of this limited liability company's registered agent(s) is/are: CT CORPORATION SYSTEM, 8550 United Plaza Boulevard, Baton Rouge, LA 70809 4. The names and municipal addresses, not a post office box only, of the first managers, or the members: Ian Stewart, Manager 10515 Colonial Downs Pkwy., New Kent, VA 23124 To be signed by each person who signed the articles of organization; /s/ Stanley R. Gorom ------------------------------------------------ Stanley R. Gorom III, Authorized Representative: ------------------------------------------------ ------------------------------------------------ ------------------------------------------------ AGENT'S AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE I hereby acknowledge and accept the appointment of registered agent for and on behalf of the above named limited liability company. Registered agent(s) signature(s): C T CORPORATION SYSTEM /s/ Illegible ------------------------------------------------ ------------------------------------------------ Sworn to and subscribed before me, the undersigned Notary Public, on this date: January 26, 2001 /s/ Illegible ------------------------------------------------ Notary - -------------------------------------------------------------------------------- EX-3.20 28 dex320.txt ARTICLES OF INCORPORATION OF JACE, INC. Exhibit 3.20 ARTICLES OF INCORPORATION STATE OF LOUISIANA OF JACE, INC. PARISH OF LAFOURCHE BE IT KNOWN, that on this 8th day of September, in the year of our Lord Nineteen Hundred and Ninety-Two (1992). BEFORE ME, Daniel A. Cavell, a Notary Public duly commissioned and qualified in and for the Parish of Lafourche, State of Louisiana, personally came and appeared the persons whose names are hereunto subscribed, who declared that, availing themselves of the benefits and provisions of the Constitution and the laws of the State of Louisiana, and particularly R.S. 12:201, et seq, inclusive, as amended, they do by these presents contract, agree, bind and obligate themselves to form, organize and constitute himself, as well as all such other persons who may hereafter join or become associated with them or their successors, into a business corporation for the objects and purposes and under the conditions, covenants, stipulations and agreements of the articles following: ARTICLE - I. The name of the corporation is and shall be: JACE, INC. ARTICLE - II. The objectives and purposes of this corporation is to engage in any lawful activities for which this corporation may be formed under the Business Corporation Laws of Louisiana. ARTICLE - III. The name and address of the incorporators are: Albert J. Waguespack, Jr. Cindy I. Waguespack Post Office Box 326 P.O. Box 326 Thibodaux, La. 70301 Thibodaux, La. 70301 John Corbin Angela Corbin 400 St. George Road 400 St. George Road Schriever, La. 70395 Schriever, La. 70395 Carl A. Sandlin Mary Ellen Sandlin 1133 Abadie Street 1133 Abadie Street Vacherie, La. 70090 Vacherie, La. 70090 ARTICLE - IV. The corporation has authority to issue 10,000 shares of common stock with a no par value. The capital stock of this corporation shall consist of only one class, that being common stock, and such common stock may be issued pursuant to and in accordance with Internal Revenue Code, Section 1244, as amended, and the regulations pertaining thereto. ARTICLE - V. Shareholders shall have pre-emptive rights. ARTICLE - VI. Any corporate action of shareholders, including specifically, but not by way of limitation, adoption of amendments to the Articles, and approval thereof by class vote, approval of merger and consolidation agreements and authorization of voluntary disposition of all or substantially all of the corporate assets, may be taken on affirmative vote of a majority of the voting power present. ARTICLE - VII. Cash, property or share dividends, shares issuable to shareholders in connection with the reclassification of stock and the redemption price of redeemed shares, which are not claimed by the shareholders entitled thereto within one year after the dividend or redemption price became payable, or the shares became issuable, despite reasonable efforts by the corporation to pay the dividend or redemption price or to deliver the certificates for the shares to such shareholder within such time, shall, at the expiration of such time revert in full ownership to the corporation, and the corporation's obligation to pay such dividend or redemption price or issue such shares, as the case may be, shall thereupon cease; provided, that the Board of Directors may, at any time, for any reason satisfactory to it, but need not, authorize (a) payment of the amount of cash or property dividend or redemption price or (b) issuance of any share, ownership of which has reverted to the corporation, to the entity who or which would be. ARTICLE - VIII. Any director absent from a meeting of the Board or any committee thereof may be represented by any other director or shareholder who may cast the absent director's both according to his written instructions, general or special. ARTICLE - IX. The Board of Directors has authority to make or alter by-laws. ARTICLE - X. All officers shall be elected by the directors. ARTICLE - XI. Authority to create and issue rights to convert shares of obligations into shares of any class may be exercised only by shareholders. ARTICLE - XII. Proper allowance for depletion of wasting assets and for amortization of the cost of property having a limited life, shall be made in computing surplus. ARTICLE - XIII. Special meeting of shareholders may be called by the President or by the Secretary or by a majority of the Board of Directors or upon the written request of a shareholder or shareholders holding in the aggregate twenty (20%) per cent of the total voting power of this corporation. ARTICLE - XIV. The corporation shall not confer voting power upon holders of obligations issued by it. ARTICLE - XV. Consents in writing to corporate action may be signed by the shareholders having that proportion of the total voting power which would be required to authorize or constitute such action at a meeting of shareholders. ARTICLE - XVI. Any director may be removed from office only by vote of two - -thirds (2/3rds) of the total voting power. ARTICLE - XVII The President shall be a director of this corporation. ARTICLE - XVIII The business and affairs of this corporation shall be managed and all corporate powers thereof shall be vested in and exercised by a Board of Directors which shall be composed of not less than three (3) nor more than six (6) persons. ARTICLE - XIX No shareholder may sell any stock of this corporation without first offering it to this corporation at the book value thereof as shown by the last preceding statement of this corporation with the understanding that a current appraised value of the immovable assets of the corporation shall be used in lieu of any purchase value or depreciated value of those assets. Said offer must be made by delivery to the Secretary of this corporation against written receipt, the certificates representing said stock endorsed in blank, and written offer to sell said stock to this corporation, for cash, at the value hereinabove mentioned. This corporation shall have the right, for a period of thirty (30) days from the delivery of such offer and said certificates endorsed in blank, to the Secretary of this corporation to purchase the stock of said shareholders, for cash, at the book value thereof, as shown by the last preceding statement of this corporation, after which thirty (30) days the said shares may be sold without restriction. No sale of any stock of this corporations shall be valid and binding until and unless opportunity to purchase such shares has been given to this corporation in the manner in this Article provided; and, this right so vested in this corporation shall follow any of the stock of this corporation so sold without such opportunity being given into any hands into which it may pass. Such rights may be exercised against the holder of such stock up to thirty (30) days after such shares are tendered for transfer on the books of this corporation, and no transfer of any such shares shall be made on the books of this corporation without the written consent of all of the other record holders of stock of this corporation, during the pendency of said thirty (30) days. The right vested in this corporation to purchase the stock of any shareholder of this corporation to purchase the stock of any shareholder of this corporation desiring to sell the stock of this corporation may be waived in writing by all of the other record stockholders of this corporation at any time. No stockholder of this corporation shall ever be held responsible or liable for the contracts or faults of this corporation, nor shall any mere informality in organization have the effect of rendering this charter null and exposing stockholders to any liability. THUS DONE AND SIGNED, in multiple originals, in the Parish of Lafourche, State of Louisiana, on the day, month and year first above written, in the presence of Joynel G. Picou and Ramona R. Naquin, competent witnesses and me, Notary, after due reading of the whole. WITNESSES: INCORPORATORS: /s/ Illegible /s/ Albert J. Waguespack. Jr - ------------- ---------------------------- ALBERT J. WAGUESPACK, JR. /s/ Cindy I. Waguespack ---------------------------- CINDY I. WAGUESPACK /s/ John Corbin ---------------------------- JOHN CORBIN /s/ Angela Corbin ---------------------------- ANGELA CORBIN /s/ Carl A. Sandlin ---------------------------- CARL A. SANDLIN /s/ Illegible /s/ Mary Ellen Sandlin - ------------- ---------------------------- MARY ELLEN SANDLIN /s/ Illegible ------------- NOTARY PUBLIC INITIAL REPORT OF JACE, INC. We, the undersigned, being the sole incorporators of JACE, INC. pursuant to the provisions of LSA-R.S. 12:1, et seq, inclusive, as amended, do hereby file the following initial report: I. The corporation's registered office is located at 400 St. George Road, Schriever, Louisiana 70395, and its mailing address is 400 St. George Road, Schriever, Louisiana 70395. II. Its registered agents for service of process or otherwise are: Albert J. Waguespack, Jr. John Corbin Post Office Box 326 400 St.George Road 997 W. Thibodaux By Pass Schriever, La. 70395 Thibodaux, La. 70302 III. The first officers of the corporation are as follows: John Corbin Mary Ellen Sandlin 400 St. George Road 1133 Abadie Street Schriever, La. 70395 Vacherie, La. 70090 President Vice-President Albert J. Waguespack, Jr. P.O. Box 326 - 997 W. Thibodaux By Pass Thibodaux, La. 70302 Secretary/Treasurer IV. The first directors of the corporation are as follows: Albert J. Waguespack, Jr. Cindy I. Waguespack Post Office Box 326 Post Office Box 326 Thibodaux, La. 70302 Thibodaux, La. 70302 (997 W. Thibodaux By Pass) John Corbin Angela Corbin 400 St. George Road 400 St. George Road Schriever, La. 70395 Schriever, La. 70395 Carl A. Sandlin Mary Ellen Sandlin 1133 Abadie Street 1133 Abadie Street Vacherie, La. 70090 Vacherie, La. 70090 /s/ Albert J. Waguespack, Jr. /s/ Cindy I. Waguespack - ----------------------------- ------------------------------ Albert J. Waguespack, Jr. Cindy I. Waguespack /s/ John Corbin /s/ Angela Corbin - ----------------------------- ------------------------------ John Corbin Angela Corbin /s/ Carl A. Sandlin /s/ Mary Ellen Sandlin - ----------------------------- ------------------------------ Carl A. Sandlin Mary Ellen Sandlin THUS DONE AND SIGNED in the Parish of Lafourche, State of Louisiana, on this 8th day of September 1992. /s/ Daniel A. Cavell -------------------- NOTARY PUBLIC AFFIDAVIT OF ACCEPTANCE OF APPOINTMENT BY DESIGNATED REGISTERED AGENT STATE OF LOUISIANA PARISH OF LAFOURCHE BE IT KNOWN on this 8th day of September 1992, before me, Notary Public in and for the State and Parish aforesaid, personally came and appeared Albert J. Waguespack, Jr. and John Corbin who are to me known to be the persons, and after being duly sworn, acknowledged to me that they do hereby accept the appointment as the Registered Agents for JACE, INC., a domestic corporation authorized to do and in doing business in the State of Louisiana pursuant to the provisions of LSA R.S. 12:101 et. seq. /s/ Albert J. Waguespack, Jr. - ----------------------------- Albert J. Waguespack, Jr. /s/ John Corbin - ----------------------------- John Corbin SUBSCRIBED AND SWORN before me on this 9th day of September, 1992. /s/ Illegible ------------- NOTARY PUBLIC LETTER OF RESIGNATION I, John Corbin do hereby resign my position as a Member of the Board of Directors, President, and Agent for Service of Process of the corporation known as Jace, Inc. This done on the 1st day of March, 2000. /s/ John Corbin --------------- JOHN CORBIN I, John Corbin do hereby affirm that I am resigning my position as a Member of the Board of Directors, President, and Agent for Service of Process of the corporation known as Jace, Inc. of my won free and voluntary act for the objects purposes therein set forth. /s/ John Corbin --------------- JOHN CORBIN SWORN TO AND SUBSCRIBED, before me on this 1st day of March, 2000. /s/ Illegible ------------- NOTARY PUBLIC LETTER OF RESIGNATION I, Angela Corbin do hereby resign my position as a Member of the Board of Directors and Vice-President of the corporation known as Jace, Inc. This done on the 1st day of march, 2000. /s/ Angela Corbin ----------------- ANGELA CORBIN I, Angela Corbin do hereby affirm that I am resigning my position as a Member of the Board of Directors and Vice-President of the corporation known as Jace, Inc. of my own free and voluntary act for the objects purposes therein set forth. /s/ Angela Corbin ----------------- ANGELA CORBIN SWORN TO AND SUBSCRIBED, before me on this 1st day of March, 2000. /s/ Illegible ------------- NOTARY PUBLIC LETTER OF RESIGNATION I, Albert J. Waguespack, Jr. do hereby resign my position as a Member of the Board of Directors, Secretary, and Agent for Service of Process of the corporation known as Jace, Inc. This done on the 1st day of March, 2000. /s/ Albert J. Waguespack, Jr. ------------------------------ ALBERT J. WAGUESPACK, JR. I, Albert J. Waguespack, Jr. do hereby affirm that I am resigning my position as a Member of the Board of Directors, Secretary, and Agent for Service of Process of the corporation known as Jace, Inc. of my own free and voluntary act for the objects purposes therein set forth. /s/ Albert J. Waguespack, Jr. ------------------------------ ALBERT J. WAGUESPACK, JR. SWORN TO AND SUBSCRIBED, before me on this 1st day of March, 2000. /s/ Illegible ------------- NOTARY PUBLIC LETTER OF RESIGNATION I, Cindy I. Waguespack do hereby resign my position as a Member of the Board of Directors and Treasurer of the corporation known as Jace, Inc. This done on the 1st day of March, 2000. /s/ Cindy I. Waguespack ------------------------------ CINDY I. WAGUESPACK I, Cindy I. Waguespack do hereby affirm that I am resigning my position as a Member of the Board of Directors and Treasurer of the corporation known as Jace, Inc. of my own free and voluntary act for the objects purposes therein set forth. /s/ Cindy I. Waguespack ------------------------------ CINDY I. WAGUESPACK SWORN TO AND SUBSCRIBED, before me on this 1st day of March, 2000. /s/ Illegible ------------- NOTARY PUBLIC - ------------------------------------------------------------------------------------------ W. Fox McKeithen NOTICE OF CHANGE OF REGISTERED OFFICE Secretary of State AND/OR CHANGE OF REGISTERED AGENT [GRAPHIC] (R.S. 12:1308) --------------------------------------------------------------------- Domestic Limited Return to: Corporations Division Liability Company P.O. Box 94125 Enclose $20.00 filing fee Baton Rouge, LA 70804-9125 Make remittance payable to Phone (504)925-4704 Secretary of State Do not send Cash - ------------------------------------------------------------------------------------------
Limited Liability Company Name: JACE, Inc. CHANGE OF LOCATION OF REGISTERED OFFICE Notice is hereby given that the above named limited liability company has authorized a change in the location of its registered office, in accordance with the articles of organization or operating agreement. The new registered office is located at: 230 West Park Avenue, Thibodaux, LA 70301 /s/ Claude M. Penn, Jr. -------------------------------------------------- To be signed by a manager or member CLAUDE M. PENN, JR., President CHANGE OF REGISTERED AGENT(S) Notice is hereby given that the above named limited liability company has authorized the change of its registered agents(s), in accordance with the articles of organization or operating agreement. The new name(s) and address(es) of new registered agent(s) is/are as follows: Jay J. Harris, 1406 S. Range Avenue, Suite 2, Denham Springs, LA 70726 /s/ Claude M. Penn, Jr. -------------------------------------------------- To be signed by a manager or member CLAUDE M. PENN, JR., President AGENT AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE I hereby acknowledge and accept the appointment of registered agent(s) for and on behalf of the above named limited liability company. /s/ Jay J. Harris ------------------------------ JAY J. HARRIS ------------------------------ Registered Agents(s) Sworn to and subscribed before me, this 23rd day of March, 2000 /s/ Charlotte A. Pugh ---------------------------- Notary CHARLOTTE A. PUGH - -------------------------------------------------------------------------------- EX-3.21 29 dex321.txt ARTICLES OF ORGANIZATION OF LUCKY MAGNOLIA TRUCK Exhibit 3.21 ARTICLES OF ORGANIZATION ------------------------ OF -- PENN VENTURES, L.L.C. --------------------- The undersigned, acting pursuant to the Louisiana Limited Liability Company Law, R.S. 12:1301 et seq., adopts the following Articles of Organization: ------ ARTICLE I NAME The name of the Limited Liability Company is PENN VENTURES, L.L.C. ARTICLE II PURPOSE The purpose of the Company is to engage in any lawful activity for which limited liability companies may be formed under the Louisiana Limited Liability Company Law. ARTICLE III AUTHORITY TO BIND COMPANY Any limitation on members to bind the Company are contained in a written operating agreement. ARTICLE IV RELIANCE ON CERTIFICATE Persons dealing with the Company may rely upon the certificate of Claude M. Penn, Jr., acting alone, to establish the membership of any member, the authenticity of any records of the Company, or the authority of any person to act on behalf of the Company, including but not limited to the authority to take the actions referred to in R.S. 12:1318(B). WITNESSES: /s/ Deborah M. Bond /s/ Claude M. Penn, Jr. - --------------------- ---------------------------- CLAUDE M. PENN, JR. Organizer /s/ Illegible /s/ Janice Morris Penn - --------------------- ---------------------------- JANICE MORRIS PENN Organizer ACKNOWLEDGMENT -------------- STATE OF LOUISIANA PARISH OF LIVINGSTON BEFORE ME, the undersigned authority, personally came and appeared: CLAUDE M. PENN, JR. and JANICE MORRIS PENN to me known to be the persons who signed the foregoing instrument as organizers, and who, having been duly sworn, acknowledged and declared, in the presence of the undersigned witnesses, that they signed such instrument as their free act and deed for the purposes mentioned therein. IN WITNESS WHEREOF, the appeares, witnesses and I have hereunto fixed our hands on this 20th day of December, 1993, at Denham Springs, Louisiana. WITNESSES: /s/ Deborah M. Bond /s/ Claude M. Penn, Jr. - ------------------------------ --------------------------------- CLAUDE M. PENN, JR. Organizer /s/ Illegible /s/ Janice Morris Penn - ------------------------------ --------------------------------- JANICE MORRIS PENN Organizer /s/ Illegible ------------------------------ NOTARY PUBLIC LIMITED LIABILITY COMPANY INITIAL REPORT (R.S. 12:1305 (e)) 1. The name of this limited liability company is: Penn Ventures, L.L.C. 2. The location and municipal address, not a post office box only, of this limited liability company's registered office: 519 Florida Avenue SW Denham Springs, LA 70726 3. The full name and municipal address, not a post office box only, of each of this limited liability company's registered agent(s) is/are: Jay J. Harris 519 Florida Avenue SW Denham Springs, LA 70726 4. The names and municipal addresses, not a post office box only, of the first managers, or the members: Claude M. Penn, Jr. 35059 Bend Road Denham Springs, LA 70726 Janice Morris Penn 35059 Bend Road Denham Springs, LA 70726 To be signed by each person who signed the articles of organization: /s/ Claude M. Penn, Jr. -------------------------------------- Claude M. Penn, Jr. /s/ Janice Morris Penn -------------------------------------- Janice Morris Penn AGENT'S AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE I hereby acknowledge and accept the appointment of registered agent for and on behalf of the above named limited liability company. Registered agent(s) signature(s): /s/ Jay J. Harris -------------------------------------- Jay J. Harris Sworn to and subscribed before me this 20th day of December, 1993. /s/ Illegible ----------------------------- Notary AMENDED ARTICLES OF ORGANIZATION -------------------------------- OF -- PENN VENTURES, L.L.C. --------------------- STATE OF LOUISIANA PARISH OF LIVINGSTON BEFORE ME, the undersigned notary public, and in the presence of the two undersigned competent witnesses, personally came and appeared: Claude M. Penn, Jr. duly authorized by virtue of Article IV of the Articles of Organization of PENN VENTURES, L.L.C., herein appearing and acting for and on behalf of PENN VENTURES, L.L.C., a limited liability company organized under the laws of the State of Louisiana, by act before Jay J. Harris, Notary Public, who declared that, pursuant to the unanimous written consent of the members of PENN VENTURES, L.L.C., adopted at a meeting of said members held on the 26th day of October, 1999, he now appears for the purpose of executing this act of amendment, as passed by the unanimous vote of all members of PENN VENTURES, L.L.C. And, the appearer did further declare that it was resolved that Article I of the Articles of Organization be amended to read, as follows: "ARTICLE I NAME The name of the limited liability company is Lucky Magnolia Truck Stop and Casino, L.L.C." And, the appearer, having requested me, notary, to duly make note of the aforesaid amendment in the form of this authentic act in order that the amendment may be promulgated and recorded, and become part of the Articles of Organization of Penn Ventures, L.L.C., I, notary, do hereby so note said amendment and cause the same to be executed in authentic form as hereinabove set forth. Thus done and passed at Denham Springs, Parish of Livingston, State of Louisiana, on this 26th day of October, 1999 in the presence of the two undersigned competent witnesses, who signed with appearer, and me, notary, after due reading of the whole. WITNESSES: /s/ Illegible /s/ Claude M. Penn - ------------------ --------------------------- CLAUDE M. PENN, JR., Member /s/ Illegible - ------------------ /s/ Jay J. Harris --------------------------------- JAY J. HARRIS, Notary Public ACKNOWLEDGMENT -------------- STATE OF LOUISIANA PARISH OF LIVINGSTON BEFORE ME, the undersigned authority, personally came and appeared: CLAUDE M. PENN, JR. to me known to be the person who signed the foregoing Amended Articles of Organization of PENN VENTURES, L.L.C. and who, having been duly sworn, acknowledged and declared, in the presence of the undersigned witnesses, that he signed such instrument as his free act and deed for the purposes mentioned therein. IN WITNESS WHEREOF, the appearer, witnesses and I have hereunto fixed our hands on this 26th day of October, 1999, at Denham Springs, Louisiana. WITNESSES: /s/ Deborah M. Bond - --------------------------------- /s/ Cathy M. Ellis /s/ Claude M. Penn, Jr. - --------------------------------- --------------------------------- CLAUDE M. PENN, JR., Member /s/ Jay J. Harris --------------------------------- JAY J. HARRIS, Notary Public - ------------------------------------------------------------------------------------------ W. Fox McKeithen NOTICE OF CHANGE OF REGISTERED OFFICE Secretary of State AND/OR CHANGE OF REGISTERED AGENT [GRAPHIC] (R.S. 12:1308) --------------------------------------------------------------------- Domestic Limited Return to: Commercial Division Liability Company P.O. Box 94125 Enclose $20.00 filing fee Baton Rouge, LA 70804-9125 Make remittance payable to Phone (225) 925-4704 Secretary of State Web Site: www.sec.state.la.us Do not send cash - ------------------------------------------------------------------------------------------
Limited Liability Company Name: Lucky Magnolia Truck Stop and Casino, L.L.C. CHANGE OF LOCATION OF REGISTERED OFFICE Notice is hereby given that the above named limited liability company has authorized a change in the location of its registered office, in accordance with the articles of organization or operating agreement. The new registered office is located at: 6865 Magnolia Beach Rd Suite G' Denham Springs, LA 70706 /s/ Claude M. Penn, Jr. 7/6/01 -------------------------------------------------- To be signed by a manager or member Date CLAUDE M. PENN, JR., Manager CHANGE OF REGISTERED AGENT(S) Notice is hereby given that the above named limited liability company has authorized the change of its registered agent(s), in accordance with the articles of organization or operating agreement. The name(s) and address(es) of the new registered agent(s) is/are as follows: Jay J. Harris 1532 S. Range Avenue Denham Springs, LA 70726 /s/ Claude M. Penn, Jr. 7/6/01 -------------------------------------------------- To be signed by a manager or member Date CLAUDE M. PENN, JR., Manager AGENT AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCCEPTANCE I hereby acknowledge and accept the appointment of registered agent(s) for and on behalf of the above named limited liability company. /s/ Illegible ------------------------------ ------------------------------ Registered Agent(s) Sworn to and subscribed before me, the undersigned Notary Public, on this date: July 6th, 2001 /s/ Illegible ------------------------ Notary - -------------------------------------------------------------------------------- EX-3.22 30 dex322.txt ARTICLES OF ORGANIZATION OF BAYOU VISTA TRUCK Exhibit 3.22 STATE OF LOUISIANA PARISH OF LIVINGSTON ARTICLES OF ORGANIZATION OF BAYOU VISTA TRUCK PLAZA AND CASINO, L.L.C. BE IT KNOWN, that on the 19th day of November, 1999, before me, Jay J. Harris, notary public, duly commissioned and qualified in and for the aforesaid parish and state, and in the presence of the undersigned competent witnesses, personally came and appeared Cathy M. Ellis and Elaine E. McLean, who, acting under the authority of Louisiana's Limited Liability Company Law, R.S. 12:1301 et seq., do hereby organize and constitute themselves into a Limited Liability Company, for the objects and purposes and under the conditions and agreements of the following Articles of Organization: I. NAME The name of this limited liability company is Bayou Vista Truck Plaza and Casino, L.L.C., referred to hereinafter as "tile company." II. PURPOSE The company's purpose is to engage in any lawful business activities for which limited liability companies organized under Chapter 22 of Title 12 of the Louisiana Revised Statutes (R.S. 12:1301 et seq.) may engage. III. MANAGEMENT The company shall be managed by Claude M. Penn, Jr. IV. RESTRICTIONS Other than those restrictions imposed by law, there shall be no restrictions on the authority of the company's manager to bind the company. V. LIABILITY WAIVER AND INDEMNIFICATION No member shall have any personal liability for monetary damages for breach of any duty as set forth in R.S. 12:1314, or any activities performed in connection with the management of the company. Further, each member shall be fully indemnified by the company for any judgments, settlements, penalties, fines or expenses incurred because of membership in the company. It is the intention of this provision to afford members of the company the most complete relief from liability and the most indemnification permitted by law, and particularly afforded by R.S. 12:1315. VI. OPERATING AGREEMENT The company's operating agreement, if any, shall provide for the company's status and operations, including questions of management, management rights, finances, distributions, assignments of membership interests, dissolution and other operational matters. VII. NO OPERATING AGREEMENT; STATUTORY APPLICATION In the absence of a written operating agreement, all questions concerning the company's status and operations, including questions of management and management rights, finance, distributions, assignment of membership interests and dissolution shall, unless otherwise provided, be governed by the laws of the State of Louisiana and particularly Title 12, Section 1301 et seq. of the Revised Statutes of Louisiana. VIII. MISCELLANEOUS Unless and until amendment of these Articles by proper juridical act properly filed in the office of the Louisiana Secretary of State, any person dealing with the company may rely upon a certificate of Claude M. Penn, Jr., acting alone, to: (1) establish the membership of any member of the company, (2) establish the authenticity of any records of the company, or (3) establish the authority of any person to act on behalf of the company, including but not limited to the authority to take actions referred to in Louisiana Revised Statutes Title 12, Section 1318(B), which actions include: a. The dissolution and winding up of the company; b. The sale, exchange, lease, mortgage, pledge, or other transfers of all or substantially all of the assets of the company; c. The merger or consolidation of the company; d. The incurrence of indebtedness by the company other than in the ordinary course of its business; e. The alienation, lease or encumbrance of any immovable of the company; and f. An amendment to the articles of organization. THUS DONE AND SIGNED on the day and date set forth above at the City of Denham Springs, Parish of Livingston, State of Louisiana, the parties hereto having affixed their signatures, together with me, Notary, and the undersigned competent witnesses, after due reading of the whole. WITNESSES: APPEARERS: /s/ Illegible /s/ Cathy M. Ellis - ------------------------- --------------------------------- CATHY M. ELLIS /s/ Illegible /s/ Elaine E. Mclean - ------------------------- --------------------------------- ELAINE E. MCLEAN /s/ Jay J. Harris -------------------------------- JAY J. HARRIS, Notary Public LIMITED LIABILITY COMPANY INITIAL REPORT ---------------------------------------- (R.S.12:1305(e)) ---------------- 1. The name of this limited liability company is: Bayou Vista Truck Plaza and Casino, L.L.C 2. The location and municipal address, not a post office box only, of this limited liability company's registered office: Municipal Address: Mailing Address: 1829 Hwy 90 West P.O. Box 339 Bayou Vist, LA 75703 Amite, LA 70422 3. The full name and municipal address, not a post office box only, of each of this limited liability company's registered agent(s) is/are: Jay J. Harris 1406 S. Range Avenue Suit 2 Denham Springs, LA 70726 4. The names and municipal addresses, not a post office box only, of the first managers, or the members: Claude M. Penn, Jr. 35059 Bend Road Denham Springs, LA 70706 To be signed by each person who signed the articles of organization: /s/ Cathy M. Ellis --------------------------------- CATHY M. ELLIS /s/ Elaine E. Mclean --------------------------------- ELAINE E. MCLEAN AGENT'S AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE --------------------------------------------------- I hereby acknowledge and accept the appointment of registered agent for and on behalf of Bayou Vista Truck Plaza and Casino, L.L.C. Registered agent(s) signature(s): /s/ Jay J. Harris --------------------------------- JAY J. HARRIS Sworn to and subscribed before me this 19th day of November, 1999. /s/ Illegible --------------------- Notary Public EX-3.23 31 dex323.txt ARTICLES OF ORGANIZATION OF RACELAND TRUCK PLAZA Exhibit 3.23 STATE OF LOUISIANA PARISH OF LIVINGSTON ARTICLES OF ORGANIZATION OF BAYOU LAND TRUCK PLAZA AND CASINO, L.L.C. BE IT KNOWN, that on the 13th day of June, 2000, before me, Jay J. Harris, notary public, duly commissioned and qualified in and for the aforesaid parish and state, and in the presence of the undersigned competent witnesses, personally came and appeared Becky F. Rougon and Elaine E. McLean, who, acting under the authority of Louisiana's Limited Liability Company Law, R.S. 12:1301 et seq., do hereby organize and constitute themselves into a Limited Liability Company, for the objects and purposes and under the conditions and agreements of the following Articles of Organization: I. NAME The name of this limited liability company is Bayou Land Truck Plaza and Casino, L.L.C., referred to hereinafter as "the company." II. PURPOSE The company's purpose is to engage in any lawful business activities for which limited liability companies organized under Chapter 22 of Title 12 of the Louisiana Revised Statutes (R.S. 12:1301 et seq.) may engage. III. MANAGEMENT The company shall be managed by Claude M. Penn, Jr. IV. RESTRICTIONS Other than those restrictions imposed by law, there shall be no restrictions on the authority of the company's manager to bind the company. V. LIABILITY WAIVER AND INDEMNIFICATION No member shall have any personal liability for monetary damages for breach of any duty as set forth in R.S. 12:1314, or any activities performed in connection with the management of the company. Further, each member shall be fully indemnified by the company for any judgments, settlements, penalties, fines or expenses incurred because of membership in the company. It is the intention of this provision to afford members of the company the most complete relief from liability and the most indemnification permitted by LIMITED LIABILITY COMPANY INITIAL REPORT ---------------------------------------- (R.S. 12:1305 (e)) ------------------ 1. The name of this limited liability company is: Bayou Land Truck Plaza & Casino L.L.C. 2. The location and municipal address, not a post office box only, of this limited liability company's registered office: Municipal Address: Mailing Address: 109 S. Service Road 109 S. Service Road Raceland, LA 70394 Raceland, LA 70394 3. The full name and municipal address, not a post office box only, of each of this limited liability company's registered agent(s) is/are: Jay J. Harris 1532 S. Range Avenue Denham Springs, LA 70726 4. The names and municipal addresses, not a post office box only, of the first managers, or the members: Claude M. Penn, Jr. 35059 Bend Road Denham Springs, LA 70726 To be signed by each person who signed the articles of organization: /s/ Becky F. Rougon ------------------------ BECKY F. ROUGON /s/ Elaine E. Mclean ------------------------ ELAINE E. MCLEAN AGENT'S AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE --------------------------------------------------- I hereby acknowledge and accept the appointment of registered agent for and on behalf of Bayou Land Truck Plaza & Casino L.L.C. Registered agent(s) signature(s): /s/ Jay J. Harris --------------------------------- JAY J. HARRIS Sworn to and subscribed before me this 13th day of June, 2000. /s/ Illegible ----------------------- Notary Public AMENDED ARTICLES OF ORGANIZATION -------------------------------- OF -- BAYOU LAND TRUCK PLAZA AND CASINO, L.L.C. ----------------------------------------- STATE OF LOUISIANA PARISH OF LIVINGSTON BEFORE ME, the undersigned notary public, and in the presence of the two undersigned competent witnesses, personally came and appeared: Claude M. Penn, Jr. duly authorized by virtue of Article VIII of the Articles of Organization of Bayou Land Truck Plaza and Casino, L.L.C., herein appearing and acting for and on behalf of Bayou Land Truck Plaza and Casino, L.L.C., a limited liability company organized under the laws of the State of Louisiana, by act before Jay J. Harris, Notary Public, who declared that, pursuant to the written consent of the sole member of Bayou Land Truck Plaza and Casino, L.L.C., adopted at a meeting of said member held on the 27th day of June, 2000, he now appears for the purpose of executing this act of amendment, as passed by the vote of the sole member of Bayou Land Truck Plaza and Casino, L.L.C. And, the appearer did further declare that it was resolved that Article I of the Articles of Organization be amended to read, as follows: "I. NAME The name of this limited liability company is Raceland Truck Plaza and Casino, L.L.C., referred to hereinafter as "the company." And, the appearer, having requested me, notary, to duly make note of the aforesaid amendment in the form of this authentic act in order that the amendment may be promulgated and recorded, and become part of the Articles of Organization of Bayou Land Truck Plaza and Casino, L.L.C., I, notary, do hereby so note said amendment and cause the same to be executed in authentic form as hereinabove set forth. Thus done and passed at Denham Springs, Parish of Livingston, State of Louisiana, on this 27th day of June, 2000, in the presence of the two undersigned competent witnesses, who signed with appearer, and me, notary, after due reading of the whole. WITNESSES: BAYOU LAND TRUCK PLAZA AND CASINO, L.L.C. /s/ Deborah M. Bond - ------------------------- /s/ Illegible By: /s/ Claude M. Penn - ------------------------- -------------------------------- CLAUDE M. PENN, JR.,Manager /s/ Jay J. Harris ---------------------------- JAY J. HARRIS, Notary Public ACKNOWLEDGMENT -------------- STATE OF LOUISIANA PARISH OF LIVINGSTON BEFORE ME, the undersigned authority, personally came and appeared: CLAUDE M. PENN, JR. to me known to be the person who signed the foregoing Amended Articles of Organization of Bayou Land Truck Plaza and Casino, L.L.C. and who, having been duly sworn, acknowledged and declared, in the presence of the undersigned witnesses, that he signed such instrument as his free act and deed for the purposes mentioned therein. IN WITNESS WHEREOF, the appearer, witnesses and I have hereunto fixed our hands on this 27th day of June, 2000, at Denham Springs, Louisiana. WITNESSES: /s/ Deborah M. Bond - ------------------------- /s/ Illegible /s/ Claude M. Penn - ------------------------- -------------------------------- CLAUDE M. PENN, JR. /s/ Illegible ---------------------------- JAY J. HARRIS, Notary Public EX-3.24 32 dex324.txt ARTICLES OF INCORPORATION OF JACE, INC. Exhibit 3.24 ARTICLES OF INCORPORATION STATE OF LOUISIANA OF JACE, INC. PARISH OF LAFOURCHE BE IT KNOWN, that on the 8th day of September, in the year of our Lord Nineteen Hundred and Ninety-Two (1992). BEFORE ME, Daniel A. Cavell, a Notary Public duly commissioned and qualified in and for the Parish of Lafourche, State of Louisiana, personally came and appeared the persons whose names are hereunto subscribed, who declared that, availing themselves of the benefits and provisions of the Constitution and the laws of the State of Louisiana, and particularly R.S. 12:201, et seq, inclusive, as amended, they do by these presents contract, agree, bind and obligate themselves to form, organize and constitute himself, as well as all such other persons who may hereafter join or become associated with them or their successors, into a business corporation for the objects and purposes and under the conditions, convenants, stipulations and agreements of the articles following: ARTICLE - I. The name of corporation is and shall be: JACE, INC. ARTICLE - II. The objectives and purposes of this corporation is to engage in any lawful activities for which this corporation may be formed under the Business Corporation Laws of Louisiana. ARTICLE - III. The name and address of the incorporators are: Albert J. Waquespack, Jr. Cindy I. Waquespack Post Office Box 326 P.O. Box 326 Thibodaux, La. 70301 Thibodaux, LA. 70301 John Corbin Angela Corbin 400 St. George Road 400 St. George Road Schriever, La. 70395 Schriever, La. 70395 Carl A. Sandlin Mary Ellen Sandlin 1133 Abadie Street 1133 Abadie Street Vacherie, La. 70090 Vacherie, La. 70090 ARTICLE - IV. The corporation has authority to issue 10,000 shares of common stock with a no par value. The capital stock of this corporation shall consist of only one class, that being common stock may be issued pursuant to and in accordance with Internal Revenue Code, Section 1244, as amended, and the regulations pertaining thereto. ARTICLE - V. Shareholders shall have pre-emptive rights. ARTICLE - VI. Any corporate action of shareholders, including specifically, but not by way of limitation, adoption of amendments to the Articles, and approval thereof by class vote, approval of merger and consolidation agreements and authorization of voluntary disposition of all of substantially all of the corporate assets, may be taken on affirmative vote of a majority of the voting power present. ARTICLE - VII. Cash, property or share dividends, share issuable to shareholders in connection with the reclassification of stock and the redemption price of redeemed shares, which are not claimed by the shareholders entitled thereto within one year after the dividend or redemption price became payable, or the shares became issuable, despite reasonable efforts by the corporation to pay the dividend or redemption price or to deliver the certificates for the shares to such shareholder within such time, shall, at the expiration of such time revert in full ownership to the corporation, and the corporation's obligation to pay such dividend or redemption price or issue such shares, as the case may be, shall thereupon cease; provided, that the Board of Directors may, at any time, for any reason satisfactory to it, but need to, authorize (a) payment of the amount of cash or property dividend or redemption price or (b) issuance of any share, ownership of which has reverted to the corporation, to the entity who or which would be. ARTICLE - VIII. Any director absent from a meeting of the Board or any committee thereof may be represented by any other director or shareholder who may cast the absent director's both according to his written instructions, general or special. ARTICLE - IX. The Board of Directors has authority to make or alter by-laws. ARTICLE - X. All officers shall be elected by the directors. ARTICLE - XI. Authority to create and issue rights to convert shares of obligations into shares of any class may be exercised only by shareholders. ARTICLE - XII. Proper allowance for depletion of wasting assets and for amortization of the cost of property having a limited life, shall be made in computing surplus. ARTICLE - XIII. Special meeting of shareholders may be called by the President or by the Secretary or by a majority of the Board of Directors or upon the written request of a shareholder or shareholders holding in the aggregate twenty (20%) per cent of the total voting power of this corporation. ARTICLE - XIV. The corporation shall not confer voting power upon holders of obligations issued by it. ARTICLE - XV. Consents in writing to corporate action may be signed by the shareholders having that proportion of the total voting power which would be required to authorize or constitute such action at a meeting of shareholders. ARTICLE - XVI. Any director may be removed from office only by vote of two LIMITED LIABILITY COMPANY INITIAL REPORT ---------------------------------------- (R.S. 12:1305 (e)) ------------------ 1. The name of this limited liability company is: Colonial Truck Plaza and Casino, L.L.C. 2. The location and municipal address, not a post office box only, of this limited liability company's registered office: Municipal Address: Mailing Address: 233 West Park Avenue 233 West Park Avenue Thibodaux, LA 70301 Thibodaux, LA 70341 3. The full name and municipal address, not a post office box only, of each of this limited liability company's registered agent(s) is/are: Jay J Harris 1406 S. Range Avenue Suite 2 Denham Springs, LA 70726 4. The names and municipal addresses, not a post office box only, of the first managers, or the members: Claude M. Penn, Jr. 35059 Bend Road Denham Springs, LA 70726 To be signed by each person who signed the articles of organization: /s/ Cathy M. Ellis ------------------------ CATHY M. ELLIS /s/ Deborah M. Bond ------------------------ DEBORAH M. BOND AGENT'S AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE --------------------------------------------------- I hereby acknowledge and accept the appointment of registered agent for and on behalf of Colonial Truck Plaza and Casino, L.L.C. Registered agent(s) signature(s): /s/ Jay J. Harris --------------------------------- JAY J. HARRIS Sworn to and subscribed before me this 26th day of January, 2000. /s/ Charlotte A. Pugh ------------------------- CHARLOTTE A. PUGH Notary Public INITIAL REPORT OF JACE, INC. We, the undersigned, being the sole incorporators of JACE, INC. pursuant to the provisions of LSA-R.S. 12:1, et seq, inclusive, as amended, do hereby file the following initial report: I. The corporation's registered office is located at 400 St. George Road, Schriever, Louisiana 70395, and its mailing address is 400 St. George Road, Schriever, Louisiana 70395. II. Its registered agents for service of process or otherwise are: Albert J. Waguespack, Jr. John Corbin Post Office Box 326 400 St. George Road 997 W. Thibodaux By Pass Schriever, La. 70395 Thibodaux, La. 70302 III. The first officers of the corporation are as follows: John Corbin Mary Ellen Sandlin 400 St. George Road 1133 Abadie Street Schriever, La. 70395 Vacherie, La. 70090 President Vice-President Albert J. Waguespack, Jr. Post Office Box 326 - 997 W, Thibodaux By Pass Thibodaux, La. 70302 Secretary/Treasurer IV. The first directors of the corporation are as follows: Albert J. Waguespack, Jr. Cindy I. Waguespack Post Office Box 326 Post Office Box 326 Thibodaux, La. 70302 Thibodaux, La. 70302 (997 W. Thibodaux By Pass) John Corbin Angela Corbin 400 St. George Road 400 St. George Road Schriever, La. 70395 Schriever, La. 70395 Carl Sandlin Mary Ellen Sandlin 1133 Abadie Street 1133 Abadie Street Vacherie, La 70090 Vacherie, La 70090 /s/ Albert J. Waguespack, Jr. /s/ Cindy I. Waguespack - ----------------------------- ------------------------- Albert J. Waguespack, Jr. Cindy I. Waguespack /s/ John Corbin /s/ Angela Corbin - ----------------------------- ------------------------- John Corbin Angela Corbin /s/ Carl A. Sandlin /s/ Mary Ellen Sandlin - ----------------------------- ------------------------- Carl A. Sandlin Mary Ellen Sandlin 6 THUS DONE AND SIGNED in the Parish of Lafourche, State of Louisiana, on this 8th day of September , 1992. --- ------------ /s/ Illegible ---------------------------- NOTARY PUBLIC AFFIDAVIT OF ACCEPTANCE OF APPOINTMENT BY DESIGNATED REGISTERED AGENT STATE OF LOUISIANA PARISH OF LAFOURCHE BE IT KNOWN on this 8th day of September 1992, before me, Notary Public in --- --------- and for the State and Parish aforesaid, personally came and appeared Albert J. Waguespack, Jr. and John Corbin who are to me known to be the persons, and after being duly sworn, acknowledged to me that they do hereby accept the appointment as the Registered Agents for JACE, INC., a domestic corporation authorized to do and in doing business in the State of Louisiana pursuant to the provisions of LSA R.S.12:101 et. seq. /s/ Albert J. Waguespack, Jr. - ----------------------------- Albert J. Waguespack, Jr. /s/ John Corbin - ----------------------------- John Corbin SUBSCRIBED AND SWORN before me on this 9th day of September, 1992. --- --------- /s/ Illegible ------------------------------- NOTARY PUBLIC EX-4.1 33 dex41.txt INDENTURE DATED 2/8/2002 Exhibit 4.1 ================================================================================ Gameco, Inc. as Issuer and The Subsidiary Guarantors Named Herein 11 7/8% Senior Secured Notes due 2009 ------------- INDENTURE Dated as of February 8, 2002 ------------- Wells Fargo Bank Minnesota, National Association as Trustee ================================================================================ CROSS-REFERENCE TABLE* Trust Indenture Indenture Act Section Section 310(a)(1) ...................................................... 7.10 (a)(2) ...................................................... 7.10 (a)(3) ...................................................... N.A. (a)(4) ...................................................... N.A. (a)(5) ...................................................... 7.10 (b) ......................................................... 7.10 (c) ......................................................... N.A. 311(a) ......................................................... 7.11 (b) ......................................................... 7.11 (c) ......................................................... N.A. 312(a) ......................................................... 2.05 (b) ......................................................... 13.03 (c) ......................................................... 13.03 313(a) ......................................................... 7.06 (b)(1) ...................................................... 10.03 (b)(2) ...................................................... 7.07 (c) ......................................................... 7.06; 13.02 (d) ......................................................... 7.06 314(a) ......................................................... 4.03 (b) ......................................................... 10.02 (c)(1) ...................................................... 13.04 (c)(2) ...................................................... 13.04 (c)(3) ...................................................... N.A. (d) ......................................................... 10.03, 10.09 (e) ......................................................... 13.05 (f) ......................................................... N.A. 315(a) ......................................................... 7.01 (b) ......................................................... 7.05, 13.02 (c) ......................................................... 7.01 (d) ......................................................... 7.01 (e) ......................................................... 6.11 316(a) (last sentence) ......................................... 2.09 (a)(1)(A) ................................................... 6.05 (a)(1)(B) ................................................... 6.04 (a)(2) ...................................................... N.A. (b) ......................................................... 6.07 (c) ......................................................... 2.12 317(a)(1) ...................................................... 6.08 (a)(2) ...................................................... 6.09 (b) ......................................................... 2.04 318(a) ......................................................... 13.01 (b) ......................................................... N.A. (c) ......................................................... 13.01 N.A. means not applicable. * This Cross Reference Table is not part of the Indenture. TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions ................................................ 1 SECTION 1.02. Other Definitions. ......................................... 31 SECTION 1.03. Incorporation by Reference of Trust Indenture Act .......... 32 SECTION 1.04. Rules of Construction ...................................... 33 ARTICLE 2 THE NOTES SECTION 2.01. Form and Dating ............................................ 33 SECTION 2.02. Execution and Authentication. .............................. 34 SECTION 2.03. Registrar and Paying Agent ................................. 34 SECTION 2.04. Paying Agent to Hold Money in Trust. ....................... 35 SECTION 2.05. Holder Lists. .............................................. 35 SECTION 2.06. Transfer and Exchange ...................................... 35 SECTION 2.07. Replacement Notes. ......................................... 36 SECTION 2.08. Outstanding Notes. ......................................... 36 SECTION 2.09. Treasury Notes. ............................................ 37 SECTION 2.10. Temporary Notes. ........................................... 37 SECTION 2.11. Cancellation. .............................................. 37 SECTION 2.12. Defaulted Interest ......................................... 37 SECTION 2.13. Deposit of Monies. ......................................... 38 SECTION 2.14. CUSIP Number ............................................... 38 SECTION 2.15. Book-Entry Provisions for Global Notes. .................... 38 SECTION 2.16. Registration of Transfers and Exchanges. ................... 39 SECTION 2.17. Restrictive Legends. ....................................... 44 ARTICLE 3 REDEMPTION SECTION 3.01. Notices to Trustee. ........................................ 45 SECTION 3.02. Selection of Notes to Be Redeemed .......................... 45 SECTION 3.03. Notice of Redemption. ...................................... 46 SECTION 3.04. Effect of Notice of Redemption. ............................ 47
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Page ---- SECTION 3.05. Deposit of Redemption Price ................................. 47 SECTION 3.06. Notes Redeemed in Part. ..................................... 47 SECTION 3.07. Optional Redemption ......................................... 48 SECTION 3.08. No Mandatory Redemption. .................................... 48 SECTION 3.09. Special Mandatory Redemption. ............................... 48 SECTION 3.10. Mandatory Disposition in Accordance with Gaming Laws. ....... 49 ARTICLE 4 COVENANTS SECTION 4.01. Payment of Notes ............................................ 49 SECTION 4.02. Maintenance of Office or Agency. ............................ 50 SECTION 4.03. Reports ..................................................... 50 SECTION 4.04. Compliance Certificate ...................................... 51 SECTION 4.05. Taxes. ...................................................... 52 SECTION 4.06. Stay, Extension and Usury Laws. ............................. 52 SECTION 4.07. Restricted Payments ......................................... 53 SECTION 4.08. Incurrence of Indebtedness and Issuance of Preferred Stock. . 55 SECTION 4.09. Liens. ...................................................... 58 SECTION 4.10. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries ................................................ 58 SECTION 4.11. Asset Sales. ................................................ 59 SECTION 4.12. Business Activities ......................................... 63 SECTION 4.13. Corporate Existence. ........................................ 63 SECTION 4.14. Offer to Repurchase upon Change of Control. ................. 63 SECTION 4.15. Limitation on Issuances and Sales of Capital Stock in Wholly Owned Restricted Subsidiaries ............................. 65 SECTION 4.16. Events of Loss. ............................................. 65 SECTION 4.17. Payments for Consent ........................................ 68 SECTION 4.18. Additional Subsidiary Guarantees ............................ 68 SECTION 4.19. Maintenance of Properties; Insurance, Books and Records. .... 69 SECTION 4.20. Further Assurances. ......................................... 71 SECTION 4.21. Impairment of Security Interests ............................ 72 SECTION 4.22. Sale and Leaseback Transactions. ............................ 72 SECTION 4.23. Escrow of Proceeds of Notes on Issue Date. .................. 72 SECTION 4.24. Transactions with Affiliates ................................ 73 SECTION 4.25. Designation of Restricted and Unrestricted Subsidiaries. .... 74
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Page ---- ARTICLE 5 SUCCESSORS SECTION 5.01. Merger, Consolidation or Sale of Assets .............. 75 SECTION 5.02. Successor Corporation Substituted for the Company. ... 76 ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. Events of Default. ................................... 77 SECTION 6.02. Acceleration ......................................... 79 SECTION 6.03. Other Remedies. ...................................... 80 SECTION 6.04. Waiver of Past Defaults .............................. 80 SECTION 6.05. Control by Majority. ................................. 80 SECTION 6.06. Limitation on Suits. ................................. 81 SECTION 6.07. Rights of Holders to Receive Payment ................. 81 SECTION 6.08. Collection Suit by Trustee ........................... 81 SECTION 6.09. Trustee May File Proofs of Claim. .................... 82 SECTION 6.10. Priorities. .......................................... 82 SECTION 6.11. Undertaking for Costs ................................ 83 ARTICLE 7 TRUSTEE SECTION 7.01. Duties of Trustee .................................... 83 SECTION 7.02. Rights of Trustee .................................... 84 SECTION 7.03. Individual Rights of Trustee ......................... 85 SECTION 7.04. Trustee's Disclaimer ................................. 85 SECTION 7.05. Notice of Defaults. .................................. 86 SECTION 7.06. Reports by Trustee to Holders ........................ 86 SECTION 7.07. Compensation and Indemnity. .......................... 86 SECTION 7.08. Replacement of Trustee ............................... 87 SECTION 7.09. Successor Trustee by Merger, etc. .................... 88 SECTION 7.10. Eligibility; Disqualification ........................ 88 SECTION 7.11. Preferential Collection of Claims Against Company. ... 88 ARTICLE 8 DISCHARGE OF INDENTURE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. Satisfaction and Discharge. .......................... 89
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Page ---- SECTION 8.02 Option to Effect Legal Defeasance or Covenant Defeasance ......... 90 SECTION 8.03. Legal Defeasance and Discharge. .................................. 90 SECTION 8.04. Covenant Defeasance .............................................. 90 SECTION 8.05. Conditions to Legal or Covenant Defeasance. ...................... 91 SECTION 8.06. Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions ................................. 92 SECTION 8.07. Repayment to Company. ............................................ 93 SECTION 8.08. Reinstatement. ................................................... 93 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. Without Consent of Holders. ...................................... 94 SECTION 9.02. With Consent of Holders .......................................... 94 SECTION 9.03. Compliance with Trust Indenture Act .............................. 96 SECTION 9.04. Revocation and Effect of Consents ................................ 96 SECTION 9.05. Notation on or Exchange of Notes. ................................ 96 SECTION 9.06. Trustee to Sign Amendments, etc. ................................. 96 ARTICLE 10 COLLATERAL SECTION 10.01. Collateral Documents; Additional Collateral; Substitute Collateral .......................................... 96 SECTION 10.02. Recording, Registration and Opinions. ............................ 99 SECTION 10.03. Release of Collateral ............................................ 100 SECTION 10.04. Possession and Use of Collateral. ................................ 101 SECTION 10.05. Specified Releases of Collateral ................................. 101 SECTION 10.06. Disposition of Collateral Without Release. ....................... 104 SECTION 10.07. Form and Sufficiency of Release. ................................. 106 SECTION 10.08. Purchaser Protected. ............................................. 107 SECTION 10.09. Authorization of Actions to Be Taken by the Trustee Under the Collateral Documents. .......................................... 107 SECTION 10.10. Authorization of Receipt of Funds by the Trustee Under the Collateral Documents. .......................................... 107 SECTION 10.11. Powers Exercisable by Receiver or Trustee. ....................... 107 ARTICLE 11 APPLICATION OF TRUST MONIES SECTION 11.01. Collateral Account ............................................... 108 SECTION 11.02. Withdrawal of Loss Proceeds ...................................... 108
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Page ---- SECTION 11.03. Withdrawal of Net Proceeds to Fund an Asset Sale Offer ......................... 111 SECTION 11.04. Withdrawal of Trust Monies for Investment in Replacement Assets ................ 111 SECTION 11.05. Investment of Trust Monies ..................................................... 113 SECTION 11.06. Use of Trust Monies; Retirement of Notes ....................................... 114 SECTION 11.07. Disposition of Notes Retired. .................................................. 115 ARTICLE 12 SUBSIDIARY GUARANTEES SECTION 12.01. Guarantees ..................................................................... 115 SECTION 12.02. Execution and Delivery of Subsidiary Guarantees. ............................... 116 SECTION 12.03. Subsidiary Guarantors May Consolidate, etc., on Certain Terms .................. 117 SECTION 12.04. Limitation of Subsidiary Guarantor's Liability. ................................ 119 SECTION 12.05. Application of Certain Terms and Provisions to the Subsidiary Guarantors ....... 119 ARTICLE 13 MISCELLANEOUS SECTION 13.01. Trust Indenture Act Controls ................................................... 120 SECTION 13.02. Notices. ....................................................................... 120 SECTION 13.03. Communication by Holders with Other Holders. ................................... 121 SECTION 13.04. Certificate and Opinion as to Conditions Precedent. ............................ 121 SECTION 13.05. Statements Required in Certificate or Opinion .................................. 122 SECTION 13.06. Rules by Trustee and Agents .................................................... 122 SECTION 13.07. No Personal Liability of Directors, Officers, Employees and Stockholders. ...... 122 SECTION 13.08. Governing Law .................................................................. 123 SECTION 13.09. No Adverse Interpretation of Other Agreements. ................................. 123 SECTION 13.10. Successors ..................................................................... 123 SECTION 13.11. Severability. .................................................................. 123 SECTION 13.12. Counterpart Originals .......................................................... 123 SECTION 13.13. Table of Contents, Headings, etc. .............................................. 123
-v- EXHIBITS EXHIBIT A FORM OF NOTE AND SUBSIDIARY GUARANTEE EXHIBIT B FORM OF CERTIFICATE OF TRANSFER EXHIBIT C FORM OF TRANSFEREE LETTER OF REPRESENTATION EXHIBIT D FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH REGULATION S TRANSFERS EXHIBIT E FORM OF SECURITY AGREEMENT EXHIBIT F-1 FORM OF MORTGAGE EXHIBIT F-2 FORM OF LEASEHOLD MORTGAGE EXHIBIT F-3 FORM OF DEED OF TRUST EXHIBIT F-4 FORM OF LEASEHOLD DEED OF TRUST EXHIBIT G FORM OF JACOBS SUBORDINATION AND INTERCREDITOR AGREEMENT EXHIBIT H FORM OF SELLER INTERCREDITOR AGREEMENT EXHIBIT I FORM OF SENIOR INTERCREDITOR AGREEMENT -vi- INDENTURE, dated as of February 8, 2002, among Gameco, Inc., a Delaware corporation (the "Company"), the Subsidiary Guarantors (as defined) and Wells Fargo Bank Minnesota, National Association, a national banking association, as trustee (the "Trustee"). Each party agrees as follows for the benefit of each other and for the equal and ratable benefit of the Holders: ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. ----------- "Accrued Bankruptcy Interest" means, with respect to any Indebtedness, all interest accruing thereon after the filing of a petition by or against the Company or any of the Subsidiary Guarantors under any Bankruptcy Law, in accordance with and at the rate (including any rate applicable upon any default or event of default, to the extent lawful) specified in the documents evidencing or governing such Indebtedness, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such Bankruptcy Law. "Acquired Black Hawk Indebtedness" means Indebtedness represented by, colle c-tively, (1) $1,500,000 in aggregate principal amount at maturity of 6.25% Series 1999A Black Hawk Business Improvement District, Gilpin, Colorado, Special Improvement District No. 1997-2 Special Assessment Bonds due December 1, 2004 and (2) $4,000,000 in aggregate principal amount at maturity of 6.50% Series 1999B Black Hawk Business Improvement District, Gilpin, Colorado, Special Improvement District No. 1997-2 Special Assessment Bonds due December 1, 2011, which bonds are secured by a first priority lien on certain real property comprising the Black Hawk Business Improvement District relating to The Lodge Casino at Black Hawk in favor of the Black Hawk Business Improvement District Special Assessment Bonds. "Acquired Colonial Holdings Indebtedness" means: (1) $15,700,000 in principal amount of Indebtedness incurred pursuant to a certain Amended and Restated Loan Agreement, dated August 30, 2000, as amended to the Issue Date, by and among Colonial Downs, Colonial and CD Entertainment Ltd. which is secured by a Lien on substantially all of the assets of Colonial and its Subsidiaries (other than its off-track wagering facilities); (2) a note payable to Citizen and Farmers Bank in the principal amount of $165,000 as of September 30, 2001, less any repayments thereof, bearing interest at the rate of 8.5%, maturing in August 2002, and secured by a first priority Lien on the racetrack lighting equipment purchased with the proceeds of the note; (3) a note payable to the Maryland Jockey Club in the principal amount of $1,232,500 as of September 30, 2001, less any repayments thereof, bearing interest at the rate of 7.75% and maturing in December 2005; and (4) a note payable to the Maryland Jockey Club in the principal amount of $300,308 as of September 30, 2001, less any repayments thereof, bearing interest at the prime rate and maturing in January 2002. "Acquired Debt" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Acquired Louisiana Properties Indebtedness" means, collectively, (1) a certain promissory note maturing at March 31, 2009, in the principal amount of $1,208,571.40, dated February 7, 2001, as amended on September 26, 2001, between Winner's Choice Casino, Inc., as borrower, and Claude M. Penn, Jr. and George D. Lockhart, as creditors, accruing interest in the amount of 8.0% until October 1, 2001 and 8.5% thereafter, secured by a second mortgage on the property comprising Winner's Choice in the parish of Calcasieu, city of Sulphur, Louisiana in favor of Claude M. Penn, Jr. and George D. Lockhart; (2) a certain promissory note maturing at March 31, 2009, in the principal amount of $1,809,160, dated February 7, 2001, as amended on September 26, 2001, between Houma Truck Plaza & Casino, L.L.C., as borrower, and Claude M. Penn, Jr., as creditor, accruing interest in the amount of 8.0% until October 1, 2001 and 8.5% thereafter; (3) a certain promissory note maturing at March 31, 2009, in the principal amount of $1,718,857.10, dated February 7, 2001, as amended on September 26, 2001, between Jalou-Cash's L.L.C., as borrower and Seabuckle Gaming, Inc., as creditor, accruing interest in the amount of 8.0% until October 1, 2001 and 8.5% thereafter, secured by a second security interest in the revenue accruing under a certain Video Draw Poker Device Agreement dated April 24, 1998 by and between Cash's Casino, Inc. and Southern Trading Corporation, as successor to Seabuckle Gaming Inc.; (4) a certain promissory note maturing at April 30, 2009, in the principal amount of $788,000, dated January 11, 2002, between Lucky Magnolia Truck Stop and Casino L.L.C., as borrower and Claude M. Penn, Jr., as creditor, accruing interest in the amount of 8.5%, secured by a second mortgage on the property comprising the Lucky Magnolia Truck Stop and Casino, which is located in the parish of St. Helena, city of Denham Springs, Louisiana in favor of Claude M. Penn, Jr.; -2- (5) a certain promissory note maturing at April 30, 2009, in the principal amount of $1,679,142.86, dated January 11, 2002, between Bayou Vista Truck Plaza and Casino, L.L.C., as borrower and Claude M. Penn, Jr., as creditor, accruing interest in the amount of 8.5%, secured by a second mortgage on the property comprising the Bayou Vista Truck Plaza and Casino, which is located in the parish of St. Mary, city of Bayou Vista, Louisiana in favor of Claude M. Penn, Jr.; (6) a certain promissory note maturing at April 30, 2009, in the principal amount of $2,171,428.57, dated January 11, 2002, between JACE, Inc., as borrower, and Claude M. Penn, Jr., as creditor, accruing interest in the amount of 8.5%, secured by a second mortgage on the property comprising the Colonel's Truck Plaza and Casino, which is located in the parish of Terrebonne, city of Thibodaux, Louisiana in favor of Claude M. Penn, Jr.; (7) a certain promissory note maturing 7.25 years from the date of issuance in the principal amount not to exceed $1,200,000, to be dated the date of the acquisition of the property, between Raceland Truck Plaza and Casino, as borrower and Claude M. Penn, Jr., as creditor, accruing interest in the amount of 8.5%, secured by a second mortgage on the property comprising the Raceland Truck Plaza and Casino L.L.C., which is located in the parish of Lafourche, city of Raceland, Louisiana in favor of Claude M. Penn, Jr.; (8) a certain unsecured subordinated promissory note maturing January 31, 2010, in the principal amount of $1,000,000 to be dated on or after the Issue Date, between the Company as borrower and Jeffrey P. Jacobs as creditor, accruing interest in the amount of 12% until maturity; and (9) a certain unsecured subordinated promissory note, maturing January 31, 2010, in the principal amount of $8,000,000 to be dated on or after the Issue Date, between the Company as borrower and the Richard E. Jacobs Revocable Trust as creditor, accruing interest in the amount of 12% until maturity. Upon consummation of the Pending Acquisitions, each of the promissory notes described in clauses (1) through (7) above shall be assumed by and become an Obligation of the Company and will be subject to the Seller Intercreditor Agreement. Upon consummation of the Pending Acquisitions, each of the promissory notes described in clauses (8) and (9) above shall be subject to the Jacobs Subordination and Intercreditor Agreement. "Acquired Pending Acquisitions Indebtedness" means, collectively, the Acquired Black Hawk Indebtedness, the Acquired Colonial Holdings Indebtedness and the Acquired Louisiana Properties Indebtedness. "Additional Interest" means, at any time, all liquidated damages then owing pursuant to the Registration Rights Agreement. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, shall mean the possession, -3- directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For the purposes of this definition, the terms "controlling," "controlled by" and "under common control with" shall have the correlative meanings. "After-Acquired Property" means any and all assets or property acquired after the Issue Date including any assets or property acquired by the Company or any Subsidiary Guarantor from a transfer from the Company or a Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor. "Agent" means any Registrar, Paying Agent or co-registrar. "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets or rights; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole shall be governed by the provisions of Section 4.14 and/or Section 5.01 and not by the provisions of Section 4.11; and (2) the issuance of Capital Stock in any of the Company's Restricted Subsidiaries or the sale of Capital Stock in any of its Subsidiaries. Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales: (1) any single transaction or series of related transactions that involves assets having a Fair Market Value of less than $500,000; (2) a transfer of assets solely between or among the Company and its Wholly Owned Restricted Subsidiaries that are Subsidiary Guarantors; provided that such assets (to the extent constituting Collateral) shall remain subject to the Lien of the Collateral Documents; (3) an issuance of Capital Stock by a Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor to the Company or to another Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor; provided that such Capital Stock shall constitute After-Acquired Property and shall be made subject to the Lien of the Collateral Documents in accordance with the provisions of this Indenture; (4) the sale or lease of equipment, accounts receivable or other assets in the ordinary course of business; (5) the sale or other disposition of cash or Cash Equivalents in the ordinary course of business; and -4- (6) a Restricted Payment or Permitted Investment that is permitted by Sec- tion 4.07. "Attributable Debt" in respect of a Sale and Leaseback Transaction means, at the time of determination, the present value of the Obligation of the lessee for net rental payments during the remaining term of the lease included in such Sale and Leaseback Transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP. "Bankruptcy Code" means Title 11, U.S. Code or any similar federal or state law for relief of debtors. "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning. "Black Hawk Gaming" means Black Hawk Gaming & Development Company, Inc., a Colorado corporation. "Black Hawk Permitted Liens" means the Liens securing the Acquired Black Hawk Indebtedness to the extent and in the manner such Liens exist on the Issue Date. "Board of Directors" means: (1) with respect to a corporation, the board of directors of the corporation; (2) with respect to a partnership, the Board of Directors of the general partner of the partnership; and (3) with respect to any other Person, the board or committee of such Person serving a similar function. "Board Resolution" means a resolution duly adopted by the Board of Directors and certified by an Officers' Certificate. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. -5- "Capital Stock" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person; and, in the case of each of the foregoing, all warrants, options or rights to acquire the foregoing. "Cash Equivalents" means: (1) United States dollars; (2) securities issued or directly and fully Guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition; (3) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500,000,000; (4) repurchase Obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; (5) commercial paper maturing within six months after the date of acquisition and having a rating of at least A-1 from Moody's or P-1 from S&P; and (6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition. "Certificated Notes" means one or more certificated Notes in registered form. "Change of Control" means the occurrence of any of the following: (1) any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), other than the Principals and Related Parties, becomes the Benefi- -6- cial Owner of more than 33 1/3% of the total voting power of the Company's Voting Stock, and the Principals and Related Parties Beneficially Own, in the aggregate, a lesser percentage of the total voting power of the Voting Stock of the Company than such other Person or Group and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Company; (2) there is consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any Person or Group, together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of this Indenture), other than to the Principals and Related Parties; (3) the adoption of a plan relating to the liquidation or dissolution of the Company; (4) there is consummated any consolidation or merger of the Company in which the Company is not the continuing or surviving Person or pursuant to which the Common Stock of the Company would be converted into cash, securities or other property, other than a merger or consolidation of the Company in which the holders of the Capital Stock of the Company outstanding immediately prior to the consolidation or merger hold, directly or indirectly, at least a majority of the voting power of the surviving corporation immediately after such consolidation or merger; or (5) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Clearstream" means Clearstream Banking, anonyme. "Code" means the Internal Revenue Code, as amended. "Collateral" means, collectively, all of the property and assets that are from time to time subject to the Lien of the Collateral Documents including the Liens, if any, required to be granted pursuant to Section 10.01 and otherwise required pursuant to the other provisions of this Indenture. "Collateral Account" means the collateral account established pursuant to Section 11.01 of this Indenture. "Collateral Documents" means, collectively, the Mortgages, the Escrow Agreement, the Security Agreement, the Intercreditor Agreements and all other mortgages, deeds of trust, pledge agreements, collateral assignments, security agreements, fiduciary transfers, debentures, fiduciary assignments or other instruments evidencing or creating any security interests or Liens in favor of the Trustee on behalf of itself and the Holders (whether directly or by assignment) in all or any portion of the Collateral, in each case, as amended, amended and restated, extended, renewed, supplemented or otherwise modified from time to time, in accordance with the terms thereof. "Colonial" means Colonial Holdings, Inc., a Virginia corporation. -7- "Colonial Downs" means Colonial Downs L.P., a Virginia limited partnership. "Colonial Holdings Permitted Liens" means the Liens securing the Indebtedness described in clause (2) of the definition of "Acquired Colonial Holdings Indebtedness," to the extent and in the manner such Liens exist on the Issue Date. "Commission" means the Securities and Exchange Commission. "Consolidated EBITDA" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus: (1) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; plus (2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period (including, without limitation, any Tax Distributions taken into account in calculating Consolidated Net Income), to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (3) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus (4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; plus (5) without duplication of any items described above, to the extent such amounts were deducted in computing Consolidated Net Income, the costs and expenses of the Company incurred in connection with (i) the consummation of the issuance and sale of the Notes to the Initial Purchasers and (ii) the consummation of the Pending Acquisitions; minus (6) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with GAAP. -8- Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash expenses of, a Subsidiary of the Company shall be added to Consolidated Net Income to compute Consolidated EBITDA of the Company only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Wholly Owned Restricted Subsidiary thereof; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; (4) the cumulative effect of a change in accounting principles shall be excluded; (5) any net gain (but not loss) resulting from an Asset Sale by the Person in question or any of its Restricted Subsidiaries other than in the ordinary course of business shall be excluded; (6) extraordinary gains and losses shall be excluded; and (7) in the case of any Person that is a Flow Through Entity during such period, an amount equal to the maximum amount of Tax Distributions made or which may be made to the holders of Capital Stock of such Person in respect of the net taxable income allocated by such Person to such holders for such period shall be included as though such amounts had been paid as income taxes directly by the Company. "Consolidated Net Worth" means, with respect to any specified Person as of any date, the sum of: -9- (1) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date; plus (2) the respective amounts reported on such Person's balance sheet as of such date 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 such Person upon issuance of such Preferred Stock. "Contested Collateral Lien Conditions" shall mean, with respect to any Permitted Lien of the type described in clauses (1), (2) and (6) of the definition of "Permitted Liens", the following conditions: (1) any proceeding instituted contesting such Lien shall conclusively operate to stay the sale or forfeiture of any portion of the Collateral on account of such Lien; (2) at the option and upon request of the Trustee, the Company or any Subsidiary Guarantor, as applicable, shall maintain cash reserves in an amount sufficient to pay and discharge such Lien and the Trustee's reasonable estimate of all interest and penalties related thereto; and (3) such Lien shall in all respects be subject and subordinate in priority to the Lien and security interest created and evidenced by the Collateral Documents, except if and to the extent that the law or regulation creating, permitting or authorizing such Lien provides that such Lien is or must be superior to the Lien and security interest created and evidenced by the Collateral Documents. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who: (1) was a member of such Board of Directors on the Issue Date; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Corporate Trust Office" shall be at the address of the Trustee specified in Section 13.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Agreement" means (a) any credit agreement, dated on or after the Issue Date, by and among the Company, one or more of its Subsidiaries and the financial institutions acting as lenders and/or agents thereunder (including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith) and (b) any amendment, modification, supplement, refunding, refinancing or replacement thereof) that has terms and conditions (including with respect to applicable interest rates and fees) customary for similar facilities extended to borrowers -10- comparable to the Company, in each case, that does not permit the Company and such Subsidiaries to incur Indebtedness in an aggregate principal amount at any time outstanding in excess of $10,000,000. "Credit Agreement Collateral" means all of the real property owned or leased by the Company or a Subsidiary on which The Lodge Casino at Black Hawk and the Gilpin Hotel Casino in Black Hawk, Colorado is located, together with all easements, right, title and interest (including, without limitation, fee and leasehold estates) of the Company and the Subsidiaries in and to any and all parcels of real property, together with all easements, hereditaments and appurtenances relating thereto, and all other improvements, accessions, alterations, replacements and repairs thereto and all leases and rents and other income, issues or profits derived from the foregoing interests and all right, title and interest of the Company and the Subsidiaries in and to any and all equipment, machinery, furniture, furnishings and fixtures, together with all additions, accessions, improvements, alterations, replacements and repairs thereto. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Depository" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in this Indenture as the Depository with respect to the Notes, until a successor shall have been appointed and become such Depository pursuant to the applicable provision of this Indenture, and, thereafter, "Depository" shall mean or include such successor. "Disqualified Stock" means 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, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07. "Equipment" shall have the meaning given to such term in the Security Agreement. "Equity Offering" means any public offering or private sale of Capital Stock (other than Disqualified Stock) of the Company pursuant to which the Company receives net proceeds of at least $10,000,000. "Escrow Account" means the escrow account created pursuant to the Escrow Agreement. "Escrow Agreement" means the Escrow and Pledge Agreement dated as of the Issue Date among the Company, Wells Fargo Bank Minnesota, National Association, as Securities Intermediary, and the Trustee, as the same may be amended from time to time. -11- "Escrow Collateral" means the Collateral as such term is defined in the Escrow Agreement. "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "Event of Loss" means, with respect to any property or asset (tangible or intangible, real or personal) constituting Collateral, any of the following: (1) any loss, destruction or damage of such property or asset; (2) 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; (3) 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; or (4) any settlement in lieu of clauses (2) or (3) above. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the Notes issued in the Exchange Offer. "Exchange Offer" means the offer that may be made by the Company pursuant to the Registration Rights Agreement to exchange the Notes for the Exchange Notes. "Existing Indebtedness" means the Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the Issue Date, until such amounts are repaid. "Fair Market 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. Fair Market Value shall be determined by the Board of Directors acting in good faith and shall be evidenced by a Board Resolution of the Board of Directors delivered to the Trustee except (a) any determination of Fair Market Value made with respect to any parcel of real property and related fixtures shall be made by an Independent Appraiser and (b) as otherwise indicated in this Indenture, the Collateral Documents or the Intercreditor Agreements. "Fixed Charge Coverage Ratio" means with respect to any specified Person for any period, the ratio of the Consolidated EBITDA of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems Preferred Stock subsequent to the commencement of the period for -12- which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of Preferred Stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of calculating the Fixed Charge Coverage Ratio: (1) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated EBITDA for such reference period shall be calculated on a pro forma basis in accordance with Regulation S-X under the Securities Act, but without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income; (2) the Consolidated EBITDA attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded; and (3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposedof prior to the Calculation Date, shall be excluded, but only to the extent that the Obligations giving rise to such Fixed Charges shall not be Obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date. "Fixed Charges" means, with respect to any specified Person for any period, the sum, without duplication, of: (1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment Obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations; plus (2) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; plus (3) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Per- -13- son or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus (4) the amount of all dividends, whether paid or accrued and whether or not in cash, on any series of Preferred Stock of such Person or any of its Restricted Subsidiaries, other than dividends on Capital Stock payable solely in Capital Stock of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company. "Flow Through Entity" means an entity that: (1) for Federal income tax purposes constitutes (a) an "S corporation", as defined in Section 1361(a) of the Code, (b) a "qualified subchapter S subsidiary", as defined in Section 1361(b)(3)(B) of the Code, (c) a "partnership", within the meaning of Section 7701(a)(2) of the Code, other than a "publicly traded partnership", as defined in Section 7704 of the Code, or (d) an entity that is disregarded as an entity separate from its owner under the Code, the Treasury regulations or any published administrative guidance of the Internal Revenue Service; and (2) for state and local jurisdictions in respect of which Tax Distributions are being made, is subject to treatment on a basis under applicable state or local income tax law substantially similar to a Federal Flow Through Entity. "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 or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Gameco Acquisition" means Gameco Acquisition, Inc., a Virginia corporation. "Gaming Authorities" means any agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of the United States or foreign government, any state, province or city or other political subdivision, whether now or hereafter existing, or any officer or official thereof, including, without limitation, the gaming commission and any other agency with authority to regulate any gaming operation or proposed gaming operation owned, managed or operated by the Company or any of its Restricted Subsidiaries. "Gaming Law" means any gaming laws or regulations of any jurisdictions to which the Company or any of its Subsidiaries is or may at any time after the Issue Date be subject. -14- "Gaming Licenses" means every material license, material franchise, material registration, material qualification, findings of suitability or other material approval or authorization required to own, lease, operate or otherwise conduct or manage riverboat, dockside or land-based gaming activities in any state or jurisdiction in which the Company or any of its Restricted Subsidiaries conducts business, and all applicable liquor licenses. "Government Securities" means direct Obligations of, or obligations Guaranteed by, the United States of America for the payment of which Guarantee or obligations the full faith and credit of the United States is pledged and which are not callable or redeemable at the option of the issuer thereof. "Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "Guarantors" or " Subsidiary Guarantor" means each Restricted Subsidiary that executes a Subsidiary Guarantee in accordance with this Indenture and their respective successors and assigns. "Hedging Obligations" means, with respect to any specified Person, the Obligations of such Person under: (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (2) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Holder" means a Person in whose name a Note is registered on the Registrar's books. "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) in respect of banker's acceptances; (4) representing Capital Lease Obligations; (5) in respect of the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or -15- (6) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes (i) all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person), (ii) to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of any other Person, and (iii) all Disqualified Stock issued by such Person with the amount of such Disqualified Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. The amount of any Indebtedness outstanding as of any date shall be: (1) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and (2) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Disqualified Stock, such Fair Market Value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Stock. "Indenture" means this Indenture, as amended, supplemented or otherwise modified in accordance with the terms hereof from time to time. "Independent Appraiser" means a person who in the course of its business appraises property and (1) where real property is involved, who is a member in good standing of the American Institute of Real Estate Appraisers, recognized and licensed to do business in the jurisdiction where the applicable real property is situated, (2) who does not have a direct or indirect financial interest in the Company and (3) who, in the judgment of the Board of Directors, is otherwise independent and qualified to perform the tasks for which it is engaged. "Initial Purchasers" means CIBC World Markets Corp. and Libra Securities, LLC, as initial purchasers of the Notes. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is not also a QIB. "Insurance Certificate" shall mean a certificate evidencing the insurance requirements (i) in substantially the form commonly known as "ACORD 27" that (A) provides that the insurance has been issued, is in full force and effect, and conveys all the rights and privileges afforded under the insurance policies, (B) provides an unequivocal obligation to give notice in advance to additional -16- interest parties of termination and notification in advance of changes and (C) purports to convey all the privileges of the insurance policies to the certificate holders and (ii) that otherwise complies with the requirements with respect thereto set forth in Section 4.19. "Intellectual Property" means "Intellectual Property Collateral" as defined in the Security Agreement. "Intercreditor Agreements" means, collectively, the Jacobs Subordination and Intercreditor Agreement, the Seller Intercreditor Agreement and the Senior Intercreditor Agreement. "Interest Payment Date" means each February 1 and August 1, commencing August 1, 2002. "Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other Obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Capital Stock or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Capital Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Wholly Owned Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Capital Stock of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07. The acquisition by the Company or any Subsidiary of the Company of a Person that holds an Investment in a third Person shall be deemed to be an Investment by the Company or such Subsidiary in such third Person in an amount equal to the Fair Market Value of the Investment held by the acquired Person in such third Person in an amount determined as provided in the final paragraph of Section 4.07. "Issue Date" means February 8, 2002. "Jacobs Subordinated Louisiana Properties Notes" means the notes referred to in clauses (8) and (9) of the definition of "Acquired Louisiana Properties Indebtedness", as the same may be amended or otherwise modified from time to time in accordance with the terms hereof and the Jacobs Subordination and Intercreditor Agreement. "Jacobs Subordination and Intercreditor Agreement" means the intercreditor agreement substantially in the form of Exhibit G hereto among --------- Jeffrey P. Jacobs and the Richard E. Jacobs Revocable Trust in their capacities as holders of the Jacobs Subordinated Louisiana Property Notes and the Trustee, in its capacity as such and on behalf of the Holders, and acknowledged by the Company and the Subsidiaries that are parties to the Jacobs Subordinated Louisiana Properties Notes, as such is amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof and thereof. -17- "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. "Letter of Credit" means an irrevocable letter of credit issued on behalf of the Company to and for the benefit of the Trustee. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and, any filing of or agreement to give any financing statement under the UCC (or equivalent statutes) of any jurisdiction. "Louisiana Properties Notes" means, collectively, the Jacobs Subordinated Louisiana Properties Notes and the Louisiana Properties Seller Notes. "Louisiana Properties Permitted Junior Liens" means the Liens securing the Indebtedness described in clauses (1) through (7) inclusive of the definition of "Acquired Louisiana Properties Indebtedness", to the extent and in the manner such Liens exist on the Issue Date (except in the case of clause (7) which shall be to the extent and in the manner such Liens exist on the date such Indebtedness is incurred), which Liens are junior in right of and subject to the prior rights of the Lien securing the Notes in the manner provided for in the Seller Intercreditor Agreement. "Louisiana Properties Seller Notes" means the notes referred to in clauses (1) through (7) inclusive of the definition of "Acquired Louisiana Properties Indebtedness", as the same may be amended or otherwise modified from time to time in accordance with the terms hereof and the Seller Intercreditor Agreement. "Maturity Date" means February 1, 2009. "Moody's" means Moody's Investors Service, Inc., or any successor thereto. "Mortgage" means each mortgage, leasehold mortgage, deed of trust or leasehold deed of trust, as applicable, substantially in the form of Exhibit F-1, F-2, F-3 or F-4, attached hereto (including such changes to such form as may be necessary or desirable to conform to applicable local laws or customs regarding property in the jurisdiction where such instrument is to be recorded) as the same may be amended, amended and restated, extended, renewed, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "Mortgaged Louisiana Property" means the property and assets secured by the Louisiana Properties Permitted Junior Liens. "Mortgaged Property" means each Real Property encumbered by a Mortgage. -18- "Net Income" means, with respect to any specified Person for any period, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends to the extent such Preferred Stock dividends do not reduce net income as determined in accordance with GAAP. "Net Loss Proceeds" means the aggregate cash proceeds received by the Company or any Subsidiary Guarantor in respect of any Event of Loss, including, without limitation, insurance proceeds, condemnation awards or damages awarded by any judgment, net of the direct costs in recovery of such Net Loss Proceeds (including, without limitation, legal, accounting, appraisal and insurance adjuster fees and any relocation expenses incurred as a result thereof), amounts required to be applied to the repayment of Indebtedness secured by a Prior Lien (including, without limitation, any Permitted Lien which is a Prior Lien) on the asset or assets that were the subject of such Event of Loss, and any taxes paid or payable as a result thereof. "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, sales commissions, and any relocation expenses incurred as a result thereof, and taxes paid or payable as a result thereof, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, amounts required to be applied to the repayment of Indebtedness secured by a Prior Lien (including, without limitation, any Permitted Lien that is a Prior Lien) on the asset or assets that were the subject of such Asset Sale, and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "Non-Guarantor Restricted Subsidiary" means each of Colonial Holdings, Inc., Stansley Racing Corp., Colonial Downs and Colonial Management, Inc., and each of their respective Subsidiaries to the extent not otherwise required to be a Subsidiary Guarantor under this Indenture. "Non-Recourse Indebtedness" means Indebtedness: (1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender; (2) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (3) as to which the lenders have been notified in writing that they shall not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. -19- "Note Custodian" means the Trustee, as custodian with respect to the Global Notes, or any successor entity thereto. "Note Registrar" means the Trustee, as security registrar, together with any successor of the Trustee, in such capacity. "Notes" means the 117/8% Senior Secured Notes due 2009 to be issued by the Company, and any Additional Notes and, following the Exchange Offer, any Exchange Notes or Private Exchange Notes issued in accordance with the terms of the Registration Rights Agreement. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Offering" means the offering of the Notes by the Company on the Issue Date. "Offering Memorandum" means the Company's offering memorandum dated Febru-ary 1, 2002, as supplemented, relating to the Offering of the Notes. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company or any Subsidiary by two Officers of the Company or such Subsidiary, as applicable, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company or such Subsidiary, as applicable, that meets the requirements of Section 13.05 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee that meets the requirements of Section 13.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Participant" means, with respect to the Depository, Euroclear or Clearstream, a Person who has an account with the Depository, Euroclear or Clearstream, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and Clearstream). "Pending Acquisitions" means: (1) the acquisition of Black Hawk Gaming pursuant to the Agreement and Plan of Merger, dated as of April 25, 2001, as amended on November 12, 2001, among Black Hawk Gaming, the Company and BH Acquisition Inc., a Colorado corporation; (2) the acquisition of Diversified Opportunities Group Ltd. and its Subsidiaries which Subsidiaries collectively own and operate the Louisiana truck plaza video gaming properties (including, without limitation, Raceland Truck Plaza and Casino, L.L.C.) described in the -20- Offering Memorandum pursuant to an Exchange Agreement to be dated on or after the Issue Date, among the Company, Jeffrey P. Jacobs and the Richard E. Jacobs Revocable Trust; and (3) the acquisition of Colonial pursuant to the Agreement and Plan of Merger, dated as of June 11, 2001 as amended on November 16, 2001, among Colonial, the Company and Gameco Acquisition, Inc., a Virginia corporation. "Permitted Business" means the ownership and operation of one or more gaming or pari-mutuel businesses, including without limitation, casinos, hotels, racetracks and video poker truck stops, in the United States of America. "Permitted Investments" means: (1) any Investment in the Company or in a Wholly Owned Restricted Subsidiary of the Company that is a Subsidiary Guarantor; (2) any Investment in Cash Equivalents; (3) any Investment by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment: (a) such Person becomes a Wholly Owned Restricted Subsidiary of the Company and a Subsidiary Guarantor; or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the Company that is a Subsidiary Guarantor; (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.11; (5) any acquisition of assets solely in exchange for the issuance of Capital Stock (other than Disqualified Stock) of the Company; and (6) Hedging Obligations. "Permitted Liens" means: (1) inchoate Liens for taxes, assessments or governmental charges or levies not yet due and payable or delinquent and Liens for taxes, assessments or governmental charges or levies, which (i) are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien, or (ii) in the case of any such charge or -21- claim which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; (2) Liens in respect of property of the Company or any Restricted Subsidiary imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers', warehousemen's, materialmen's, landlord's and mechanics' liens and other similar Liens arising in the ordinary course of business, and (i) which do not in the aggregate materially detract from the value of the property or assets of the Company and its Restricted Subsidiaries, taken as a whole, and do not materially impair the use thereof in the operation of the business of the Company and its Restricted Subsidiaries, taken as a whole, (ii) which are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien, and (iii) in the case of any such Lien which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; (3) (a) Liens on property and assets of the Company existing on the Issue Date other than Liens of third parties on the Collateral and (b) upon consummation of the Pending Acquisitions, the Louisiana Properties Permitted Junior Liens, the Black Hawk Permitted Liens and the Colonial Holdings Permitted Liens; (4) easements, rights-of-way, restrictions (including zoning restrictions), cove- nants, encroachments, protrusions and other similar charges or encumbrances, and minor title deficiencies on or with respect to any real property, in each case whether now or hereafter in existence, not (i) securing Indebtedness, (ii) individually or in the aggregate materially impairing the value or marketability of such real property and (iii) individually or in the aggregate materially interfering with the conduct of the business of the Company or any Restricted Subsidiary at such real property; (5) Liens arising out of judgments or awards not resulting in a Default and in respect of which the Company or any Restricted Subsidiary shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall be secured a subsisting stay of execution pending such appeal or proceedings; provided that the aggregate amount of all such judgments or awards (and any cash and the Fair Market Value of any property subject to such Liens) does not exceed $5,000,000 at any time outstanding; (6) Liens (other than any Lien imposed by the United States Employee Retirement Income Security Act of 1974, as amended) (i) imposed by law or deposits made in connection therewith in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security or public utility obligations, (ii) incurred in the ordinary course of business to secure the performance of tenders, statutory obligations (other than excise taxes), surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of Obligations for the payment of borrowed money) or (iii) arising -22- by virtue of deposits made in the ordinary course of business to secure liability for premiums to insurance carriers; provided that (x) with respect to clauses (i), (ii) and (iii) hereof such Liens are set amounts not yet due and payable or delinquent or, to the extent such amounts are so due and payable, such amounts are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien, (y) to the extent such Liens are not imposed by law, such Liens shall in no event encumber any property other than cash and Cash Equivalents and (z) in the case of any such Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; provided, further that the aggregate amount of deposits at any time pursuant to clause (ii) and clause (iii) shall not exceed $1,000,000 in the aggregate; (7) leases with respect to the assets or properties of the Company or any Restricted Subsidiary or its respective Subsidiaries, in each case entered into in the ordinary course of the Company or any Restricted Subsidiary business so long as such leases are subordinate in all respects to the Liens granted and evidenced by the Collateral Documents and do not, individually or in the aggregate, (i) interfere in any material respect with the ordinary conduct of the business of the Company or any Restricted Subsidiary and (ii) materially impair the use (for its intended purposes) or the value of the property subject thereto; (8) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any Restricted Subsidiary in the ordinary course of business in accordance with the past practices of the Company or any Restricted Subsidiary; (9) Liens arising pursuant to Purchase Money Obligations or Capital Lease Obligations incurred pursuant to Section 4.08; provided that (i) the Indebtedness secured by any such Lien (including refinancings thereof) does not exceed 100% of the cost of the property being acquired or leased at the time of the incurrence of such Indebtedness and (ii) any such Liens attach only to the property being financed pursuant to such Purchase Money Obligations or Capital Lease Obligations and do not encumber any other property of the Company or any Subsidiary (it being understood that all Indebtedness to a single lender shall be considered to be a single Purchase Money Obligation, whether drawn at one time or from time to time); (10) bankers' Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by the Company or any Restricted Subsidiary, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided that in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness; (11) other than in connection with the Pending Acquisitions, Liens on assets of a Person existing at the time such Person is acquired or merged with or into or consolidated with -23- the Company or any Restricted Subsidiary (and not created in anticipation or contemplation thereof) in accordance with the provisions of this Indenture; provided that such Liens were in existence prior to the contemplation of the merger or consolidation and do not extend to assets not subject to such Liens at the time of acquisition (other than improvements thereon) and are no more favorable to the lienholders than the existing Lien; (12) Liens (other than with respect to the property or assets constituting Collateral) incurred in the ordinary course of business of the Company or any Restricted Subsidiary with respect to obligations (other than Indebtedness) that do not in the aggregate exceed $2,000,000 at any time outstanding; (13) Liens securing Obligations under this Indenture, the Notes, the Subsidiary Guarantees and the Collateral Documents; (14) Liens securing Acquired Debt (and any Permitted Refinancing Indebtedness which refinances such Acquired Debt) incurred in accordance with Section 4.08; provided that (a) such Liens secured the Acquired Debt at the time of and prior to the incurrence of such Acquired Debt by the Company or a Restricted Subsidiary and were not granted in connection with, or in anticipation of the incurrence of such Acquired Debt by the Company or a Restricted Subsidiary and (b) such Liens do not extend to or cover any property or assets of the Company or of any of the Restricted Subsidiaries other than the property or assets that secured the Acquired Debt prior to the time such Indebtedness became Acquired Debt of the Company or a Restricted Subsidiary; (15) licenses of the patents, patent applications, trademarks, trademark applications, service marks, service mark applications, trade names, copyrights, trade secrets, know-how and processes, granted by the Company or any Restricted Subsidiary in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of the Company or any Restricted Subsidiary; (16) Liens arising under applicable Gaming Laws, provided that no such Lien constitutes a Lien securing repayment of Indebtedness; (17) Liens in favor of the Company of any Subsidiary Guarantor provided that such Liens shall be subject to the Lien of the Collateral Documents; and (18) Liens on the Credit Agreement Collateral securing the Company's or any Restricted Subsidiary's Obligations under the Credit Agreement; provided, that the Company and its Subsidiaries shall have granted a Lien in favor of the Trustee on all assets securing such Credit Agreement as provided for in this Indenture and the Senior Intercreditor Agreement; provided, however, that no Liens shall be permitted to exist, directly or indirectly, on any Capital Stock, intercompany notes or other securities constituting Collateral. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to ex- -24- tend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refi-nancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest thereon and the amount of all expenses and premiums incurred in connection therewith); (2) such Permitted Refinancing Indebtedness has a final maturity date the same as or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "Pledgor" means each of the Company and the Restricted Subsidiaries party to any of the Collateral Documents executed on the date hereof and each other party that becomes a pledgor, mortgagor, transferor or assignor under any Collateral Document. "Preferred Stock" means any Capital Stock of a Person, however designated, which entitles the holder thereof to a preference with respect to dividends, distributions or liquidation proceeds of such Person over the holders of other Capital Stock issued by such Person. "Premier One Development" means Premier One Development Company, an Ohio corporation, and its successors and assigns. "Presumed Tax Rate", for any holder of Capital Stock of the Company or any Subsidiary Guarantor with respect to any period, means (i) with respect to the excess, if any, of ordinary income over ordinary loss (as determined for U.S. federal income tax purposes and, for this purpose, including items taxable at the same rate as ordinary income, such as net short-term capital gain) allocated to such holder for such period, the sum of the maximum marginal individual (or corporate, if such holder is taxed as a corporation) U.S. federal, state and local income tax rates applicable to such in- -25- come taking into account the deductibility of state and local income taxes for U.S. federal income tax purposes, and (ii) with respect to the net capital gain (as determined for U.S. federal income tax purposes) allocated to such holder for such period, the sum of the maximum marginal individual (or corporate, if such holder is a corporation) U.S. federal, state and local income tax rates applicable to such income taking into account the deductibility of state and local income taxes for U.S. federal income tax purposes. For purposes of this definition of "Presumed Tax Rate", the maximum marginal individual (or corporate, if applicable) U.S. federal, state or local income tax rate for each holder of Capital Stock shall be the highest such marginal individual (or corporate, if applicable) U.S. federal, state or local income tax rate applicable to any holder of Capital Stock. "Principals" means Jeffrey P. Jacobs and Richard E. Jacobs. "Prior Lien" shall have the meaning assigned to such term in the applicable Collateral Documents. "Private Exchange" means the offer that may be made by the Company pursuant to the Registration Rights Agreement to exchange the Notes for Private Exchange Notes. "Private Exchange Notes" means the Notes issued in the Private Exchange. "Prudent Operator" has the meaning set forth in the applicable Collateral Document. "Purchase Money Obligations" of any Person means any Obligations of such Person to any seller or any other Person incurred or assumed to finance the purchase, or the cost of construction or improvement, of real or personal property to be used in the business of such Person or any of its Subsidiaries in an amount that is not more than 100% of the cost, or Fair Market Value, as appropriate, of such property, and incurred within 90 days after the date of such acquisition (excluding accounts payable to trade creditors incurred in the ordinary course of business). "QIB" means a Qualified Institutional Buyer. "QIB" or "Qualified Institutional Buyer" shall have the meaning ascribed to "qualified institutional buyer" in Rule 144A promulgated under the Securities Act. "Real Property" means any interest in any real property or any portion thereof whether owned in fee or leased or otherwise owned. "Record Date" for interest payable on any Interest Payment Date (except a date for payment of default interest) means the January 15 and July 15 (whether or not a Business Day) as the case may be, immediately preceding such Interest Payment Date. "Redemption Date" when used with respect to any Note to be redeemed means the date fixed for such redemption pursuant to this Indenture. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the Issue Date, by and among the Company, the Subsidiary Guarantor and the Initial Purchasers, as -26- such agreement may be amended, modified or supplemented from time to time relating to, among other things, a registered exchange offer relating to the Notes. "Regulation S" means Regulation S promulgated under the Securities Act. "Related Party" means: (1) any parent, spouse, sibling or lineal descendant of any Principal; or (2) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Principals and/or such other Persons referred to in the immediately preceding clause (1). "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) 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 Investment" means an Investment other than a Permitted Investment. "Restricted Security" has the meaning set forth in Rule 144(a)(3) promulgated under the Securities Act; provided that the Trustee shall be entitled to request and conclusively rely upon an Opinion of Counsel with respect to whether any Note is a Restricted Security. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Sale and Leaseback Transaction" means any arrangement with any Person providing for the leasing by the Company or any Restricted Subsidiary of the Company of any real or tangible personal property, which property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person in contemplation of such leasing. "S&P" means Standard & Poor's Ratings Services, or any successor thereto. "Securities Act" means the Securities Act of 1933, as amended. "Security Agreement" means each security agreement substantially in the form of Exhibit E attached hereto, as the same may be amended, amended and restated, extended, renewed, -27- supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. "Seller Intercreditor Agreement" means the intercreditor agreement between the holders of the Louisiana Properties Seller Notes and the Trustee, in its capacity as such and on behalf of the Holders, and acknowledged by the Company and the Subsidiaries that are parties to the Louisi-ana Properties Notes, as such is amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof and thereof. "Senior Intercreditor Agreement" means the intercreditor agreement between the Trustee, on behalf of the Holders and one or more lenders, substantially in the form attached hereto as Exhibit I, which may be entered into after the Issue Date in accordance with Section 7.01(f) hereof, including any amended or supplemented agreement or any replacement or substitute agreement, in each case, substantially in the form of Exhibit I attached hereto. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof). "Survey" means a survey of any parcel of Real Property (and all improvements thereon): (1) prepared by a surveyor or engineer licensed to perform surveys in the state or province in which such Real Property is located; (2) dated (or redated) not earlier than six months prior to the date of delivery thereof (unless there shall have occurred within six months prior to such date of delivery any exterior construction on the site of such Real Property, in which event such survey shall be -28- dated (or redated) after the completion of such construction or if such construction shall not have been completed as of such date of delivery, not earlier than 20 days prior to such date of delivery); (3) certified by the surveyor in a manner reasonably acceptable to the title company providing title insurance in respect of the Liens granted under the Mortgages; and (4) complying in all respects with the minimum detail requirements of the Ameri-can Land Title Association, or local or foreign equivalent, as such requirements are in effect on the date of preparation of such survey, or that is otherwise reasonably acceptable to the Trustee (giving consideration to the applicable transaction). "Tax" or "Taxes" means (i) all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including, without limitation, all net income, alternative minimum, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and charges of any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or other additional amounts imposed by any taxing authority in connection with any item described in clause (i) and (iii) all transferee, successor, joint and several or contractual liability (including, without limitation, liability pursuant to Treas. Reg. (S) 1.1502-6 (or any similar state, local or foreign provision)) in respect of any items described in clause (i) or (ii). "Tax Return" means all returns, declarations, reports, estimates, information returns and statements required to be filed in respect of any Taxes. "TIA" means Trust Indenture Act 1939 U.S.C. (S)(S) 77aaa-77bbbb) as amended and as in effect on the date on which this Indenture is qualified under the TIA. "Trust Monies" means all cash and Cash Equivalents received by the Trustee: (1) upon the release of Collateral from the Lien of this Indenture or the Collateral Documents, including all Net Proceeds and Net Loss Proceeds and all monies received in respect of the principal of all purchase money, governmental and other Obligations; (2) pursuant to the Collateral Documents; (3) as proceeds of any sale or other disposition of all or any part of the Collateral by or on behalf of the Trustee or any collection, recovery, receipt, appropriation or other realization of or from all or any part of the Collateral pursuant to this Indenture or any of the Collateral Documents or otherwise; or (4) for application as provided in the relevant provisions of this Indenture or any Collateral Document or which disposition is not otherwise specifically provided for in this Indenture or in any Collateral Document; -29- provided, however, that Trust Monies shall in no event include any property deposited with the Trustee for any redemption, legal defeasance or covenant defeasance of Notes, for the satisfaction and discharge of this Indenture or to pay the purchase price of Notes pursuant to a Change of Control Offer or Asset Sale Offer. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "UCC" means the Uniform Commercial Code as in effect on the date hereof and as it may hereafter be in effect from time to time in the relevant states. "Unrestricted Subsidiary" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution of the Board of Directors, but only to the extent that such Subsidiary: (1) has no Indebtedness other than Non-Recourse Indebtedness; (2) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect Obligation (a) to subscribe for additional Capital Stock or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (5) has at least one director on its Board of Directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to -30- the nearest one-twelfth) that shall elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness. "Wholly Owned Restricted Subsidiary" of any specified Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) will at the time be owned by such Person and/or by one or more Wholly Owned Restricted Subsidiaries of such Person. SECTION 1.02. Other Definitions. ----------------- Defined in Term Section ---- ---------- "Additional Notes" .......................... 2.02 "Affiliate Transaction" ..................... 4.24 "Agent Member" .............................. 2.15 "Asset Sale Offer" .......................... 4.11 "Asset Sale Offer Payment Date" ............. 4.11 "Asset Sale Offer Trigger Date" ............. 4.11 "Authentication Order" ...................... 2.02 "Bankruptcy Law" ............................ 6.01 "Benefited Party" ........................... 12.01 "Change of Control Offer" ................... 4.14 "Change of Control Purchase Price" .......... 4.14 "Change of Control Payment Date" ............ 4.14 "Company Notice" ............................ 10.05 "Company Obligations" ....................... 4.01 "Covenant Defeasance" ....................... 8.04 "Custodian" ................................. 6.01 "Event of Default" .......................... 6.01 "Event of Loss Offer" ....................... 4.16 "Event of Loss Offer Trigger Date" .......... 4.16 "Excess Loss Proceeds" ...................... 4.16 "Excess Loss Proceeds Payment Date" ......... 4.16 "Excess Proceeds" ........................... 4.11 "Gaming Redemption" ......................... 3.10 "Global Note" ............................... 2.01 "Global Note Legend" ........................ 2.17 "Guarantee Obligations" ..................... 12.01 "incur" ..................................... 4.08 "Legal Defeasance" .......................... 8.03 "Net Offering Proceeds" ..................... 4.23 "Paying Agent" .............................. 2.03 "Payment Default" ........................... 6.01 -31- Defined in Term Section ---- ---------- "Permitted Indebtedness" ...................... 4.08 "Private Placement Legend" .................... 2.17 "Registrar" ................................... 2.03 "Regulation S Global Notes" ................... 2.01 "Released Collateral" ......................... 10.05 "Released Trust Monies" ....................... 11.04 "Replacement Assets" .......................... 4.11 "Resale Restriction Termination Date" ......... 2.16 "Restricted Payments" ......................... 4.07 "Rule 144A Global Notes" ...................... 2.01 "Special Redemption" .......................... 3.09 "Subject Property" ............................ 4.16 "Surviving Entity" ............................ 5.01 "Surviving Guarantor Entity" .................. 12.03 "Tax Distribution" ............................ 4.07 "Valuation Date" .............................. 10.05 SECTION 1.03. Incorporation by Reference of Trust Indenture Act. ------------------------------------------------- Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security holder" means a Holder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes means the Company and any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA have the meanings so assigned to them. -32- SECTION 1.04. Rules of Construction. --------------------- Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the Commission from time to time; and (7) reference to "subject to the terms of the Senior Intercreditor Agreement" or words of similar meaning shall have effect if the Senior Intercreditor Agreement is then in effect. ARTICLE 2 THE NOTES SECTION 2.01. Form and Dating. --------------- (a) General. The Notes and the Trustee's certificate of ------- authentication shall be substantially in the form of Exhibit A hereto. The Notes --------- may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Subsidiary Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. The Notes shall be issued initially in the form ------------ of two or more permanent global Notes (the "Global Notes"). Notes offered and ------------ sold (i) in reliance on Rule 144A shall be issued initially in the form of one or more permanent Global Notes in registered form, substantially in the form set forth in Exhibit A (the "Rule 144A Global Note") and (ii) in offshore --------- --------------------- transactions -33- in reliance on Regulation S shall be issued initially in the form of one or more permanent global Notes in registered form, substantially in the form set forth in Exhibit A (the "Regulation S Global Note"). Global Notes shall be --------- ------------------------ substantially in the form of Exhibit A attached hereto (including the Global --------- Note Legend). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend). Each Global --------- Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) Euroclear and Clearstream Procedures Applicable. provisions of ----------------------------------------------- the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euro-clear" and the "General Terms and Conditions of Clearstream" and "Customer Handbook" of Clear-stream shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Clearstream. SECTION 2.02. Execution and Authentication. ---------------------------- One Officer shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual or facsimile signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by an Officer (an "Authentication Order"), authenticate Notes for original issue up to the aggregate principal amount of $125,000,000. Subject to compliance with Section 4.08, the Trustee may authenticate Notes thereafter for issuance upon an Authentication Order in an aggregate principal amount as specified by such Authentication Order (the "Additional Notes"). The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. In addition, upon receipt of an Authentication Order, the Trustee shall authenticate an additional series of Notes in an aggregate principal amount not to exceed the principal amount of the then outstanding Notes for issuance in exchange for all Notes previously issued pursuant to an Exchange Offer registered under the Securities Act or pursuant to a Private Exchange. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentic a-tion by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. SECTION 2.03. Registrar and Paying Agent. -------------------------- The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their -34- transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company to act as Depository with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent. SECTION 2.04. Paying Agent to Hold Money in Trust. ----------------------------------- The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Additional Interest, if any, or interest on the Notes, and shall notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05. Holder Lists. ------------ The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders and the Company shall otherwise comply with TIA (S) 312(a). SECTION 2.06. Transfer and Exchange. --------------------- Subject to the provisions of Sections 2.15 and 2.16, when Notes are presented to the Registrar or a co-Registrar with a request to register the transfer of such Notes or to exchange such Notes for an equal principal amount of Notes of other authorized denominations of the same series, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that the Notes presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registrations of transfer and exchanges, the Company shall execute and the Trustee shall authenticate Notes at the Registrar's or co-Registrar's request. No service charge shall be made for any registration of transfer or exchange, but -35- the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge in connection therewith payable by the transferor of such Notes (other than any such transfer taxes or similar governmental charge payable upon exchanges or transfers pursuant to Sections 2.10, 3.06, 4.11, 4.14 or 8.07, in which event the Company shall be responsible for the payment of such taxes). The Company shall not be required to register the transfer of or exchange of any Note (i) during a period beginning at the opening of 15 Business Days before the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing and (ii) selected for redemption in whole or in part pursuant to Article 3, except the unredeemed portion of any Note being redeemed in part. Any Holder of a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Notes may be effected only through a book entry system maintained by the Holder of such Global Note (or its agent), and that ownership of a beneficial interest in the Note shall be required to be reflected in a book entry. SECTION 2.07. Replacement Notes. ----------------- If a mutilated Note is surrendered to the Trustee or if the Holder presents evidence to the satisfaction of the Company and the Trustee that the Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Note. An indemnity bond may be required by the Company or the Trustee that is sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Note is replaced. In every case of destruction, loss or theft, the applicant shall also furnish to the Company and to the Trustee evidence to their satisfaction of the destruction, loss or the theft of such Note and the ownership thereof. Each of the Company and the Trustee may charge for its expenses in replacing a Note. In the event any such mutilated, lost, destroyed or wrongfully taken Note has become due and payable, the Company in its discretion may pay such Note instead of issuing a new Note in replacement thereof. The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to replacement or payment of mutilated, lost, destroyed or wrongfully taken Notes. Every replacement Note is an additional Obligation of the Company. SECTION 2.08. Outstanding Notes. ----------------- Notes outstanding at any time are all Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, and those described in this Section 2.08 as not outstanding. If a Note is replaced pursuant to Section 2.07 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding until the Company and the Trustee receive proof satisfactory to each of them that the replaced Note is held by a protected purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.07. -36- If on a Redemption Date or the Maturity Date, the Paying Agent holds U.S. legal tender sufficient to pay all of the principal and interest due on the Notes payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Notes cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Treasury Notes. -------------- In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver, consent or notice, Notes owned by the Company or any of its Affiliates shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which a Responsible Officer actually knows are so owned shall be so considered. The Company shall notify the Trustee, in writing, when it or any of its Affiliates repurchases or otherwise acquires Notes, of the aggregate principal amount of such Notes so repurchased or otherwise acquired. SECTION 2.10. Temporary Notes. --------------- Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes upon receipt of a written order of the Company in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of temporary Notes to be authenticated and the date on which the temporary Notes are to be authenticated. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate upon receipt of an Authentication Order pursuant to Section 2.02 definitive Notes in exchange for temporary Notes. SECTION 2.11. Cancellation. ------------ The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent, and no one else, shall cancel and, at the written direction of the Company, dispose of and deliver evidence of such disposal of all Notes surrendered for registration of transfer, exchange, payment or cancellation. Subject to Section 2.07, the Company may not issue new Notes to replace Notes that it has paid or delivered to the Trustee for cancellation. If the Company shall acquire any of the Notes, 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 pursuant to this Section 2.11. SECTION 2.12. Defaulted Interest. ------------------ The Company shall pay interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 2% per annum in excess of the then applicable interest rate on the Notes to the extent lawful. The Company shall pay interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest (without regard to any applicable grace period) at the -37- rate equal to 2% per annum in excess of the then applicable interest rate on the Notes to the extent lawful. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest to the Persons who are Holders on a subsequent special Record Date, which date shall be the fifteenth day next preceding the date fixed by the Company for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day. At least 15 days before the subsequent special Record Date, the Company shall mail to each Holder, as of a recent date selected by the Company, with a copy to the Trustee, a notice that states the subsequent special Record Date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. Notwithstanding the foregoing, any interest which is paid prior to the expiration of the 30-day period set forth in Section 6.01(1) shall be paid to Holders as of the Record Date for the Interest Payment Date for which interest has not been paid. SECTION 2.13. Deposit of Monies. ----------------- Prior to 10:00 a.m., New York City time, on each Interest Payment Date, Redemption Date, Change of Control Payment Date and Maturity Date, the Company shall have deposited with the Paying Agent in immediately available funds U.S. legal tender sufficient to make payments, if any, due on such Interest Payment Date, Redemption Date, Change of Control Payment Date or Maturity Date, as the case may be, in a timely manner which permits the Trustee to remit payment to the Holders on such Interest Payment Date, Redemption Date, Change of Control Payment Date or Maturity Date, as the case may be. The principal and interest on Global Notes shall be payable to the Depository or its nominee, as the case may be, as the sole registered owner and the sole Holder of the Global Notes represented thereby. The principal and interest on Notes in certificated form shall be payable at the office of the Paying Agent. SECTION 2.14. CUSIP Number. ------------ The Company in issuing the Notes may use one or more "CUSIP" numbers, and if so, the Trustee shall use such CUSIP numbers in notices of redemption or exchange as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP numbers printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. The Company shall promptly notify the Trustee of any change in the CUSIP number. SECTION 2.15. Book-Entry Provisions for Global Notes. -------------------------------------- (a) The Global Notes initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in Section 2.17. Members of, or Participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository or -38- under the Global Note, and the Depository may be treated by the Company, the Trustee and any Agent of the Company or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any Agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder. (b) Interests of beneficial owners in the Global Notes may be transferred or exchanged for Certificated Notes in accordance with the rules and procedures of the Depository and the provisions of Section 2.16. In addition, Certificated Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in Global Notes if (i) the Depository (x) notifies the Company that it is unwilling or unable to continue as Depository for any Global Note or (y) has ceased to be a clearing company registered under the Exchange Act and, in each case, a successor depositary is not appointed by the Company within 90 days of such notice or (ii) a Default or an Event of Default has occurred and is continuing and the Registrar has received a written request from the Depository to issue Certificated Notes. (c) In connection with the transfer of Global Notes as an entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall, upon receipt of an Authentication Order, authenticate and deliver, to each beneficial owner identified by the Depository in writing in exchange for its beneficial interest in the Global Notes, an equal aggregate principal amount of Certificated Notes of authorized denominations. (d) Any Certificated Note constituting a Restricted Security delivered in exchange for an interest in a Global Note pursuant to paragraph (b) or (c) shall, except as otherwise provided by Section 2.16, bear the Private Placement Legend. (e) The Holder of any Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. SECTION 2.16. Registration of Transfers and Exchanges. --------------------------------------- (a) Transfer and Exchange of Certificated Notes. When ------------------------------------------- Certificated Notes are presented to the Registrar or co-Registrar with a request: (i) to register the transfer of the Certificated Notes; or (ii) to exchange such Certificated Notes for an equal principal amount of Certificated Notes of other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if the requirements under this Indenture as set forth in this Section 2.16 for such transactions are met; provided, however, that the Certificated Notes presented or surrendered for registration of transfer or exchange: -39- (I) shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Registrar or co- Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (II) in the case of Certificated Notes the offer and sale of which have not been registered under the Securities Act and are presented for transfer or exchange prior to (x) the date which is two years after the later of the date of original issue and the last date on which the Company or any Affiliate of the Company was the owner of such Note or any predecessor thereto and (y) such later date, if any, as may be required by any subsequent change in applicable law (the "Resale Restriction Termination Date"), such Certificated Notes shall be accompanied, in the sole discretion of the Company, by the following additional information and documents, as applicable: (A) if such Certificated Note is being delivered to the Registrar or co-Registrar by a Holder for registration in the name of such Holder, without transfer, a certification to that effect (substantially in the form of Exhibit B hereto); or --------- (B) if such Certificated Note is being transferred to a Qualified Institutional Buyer in accordance with Rule 144A, a certification to that effect (substantially in the form of Exhibit ------- B hereto); or - (C) if such Certificated Note is being transferred in reliance on Regulation S, delivery of a certification to that effect (substantially in the form of Exhibit B hereto) and a --------- transferor certificate for Regulation S transfers substantially in the form of Exhibit D hereto; or --------- (D) if such Certificated Note is being transferred to an Institutional Accredited Investor, delivery of certification to that effect (substantially in the form of Exhibit B hereto), --------- certificates of the transferee in substantially the form of Exhibit ------- C and, at the option of the Company, an Opinion of Counsel - reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or (E) if such Certificated Note is being transferred in reliance on Rule 144 under the Securities Act, delivery of a certification to that effect substantially in the form of Exhibit B --------- hereto and, at the option of the Company, an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or (F) if such Certificated Note is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect (substantially in the form of Exhibit B hereto) and, at the option of the Company, --------- an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act. -40- (b) Restrictions on Transfer of a Certificated Note for a ----------------------------------------------------- Beneficial Interest in a Global Note. A Certificated Note may not be exchanged - ------------------------------------ for a beneficial interest in a Global Note except upon satisfaction of the requirements set forth below. Upon receipt by the Registrar or co-Registrar of a Certificated Note, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Registrar or co-Registrar, together with: (A) in the case of Certificated Notes the offer and sale of which have not been registered under the Securities Act and which are presented for transfer prior to the Resale Restriction Termination Date, certification, substantially in the form of Exhibit B hereto, that such --------- Certificated Note is being transferred (I) to a Qualified Institutional Buyer or (II) in an offshore transaction in reliance on Regulation S (and, in the case of this clause II, the Company shall have received a transferor certificate for Regulation S transfers substantially in the form of Exhibit D hereto and, at the option of the Company, an Opinion --------- of Counsel reasonably satisfactory to the Company to the effect that such transaction is in compliance with the Securities Act); and (B) written instructions from the Holder thereof directing the Registrar or Registrar to make, or to direct the Depository to make, an endorsement on the applicable Global Note to reflect an increase in the aggregate amount of the Notes represented by the Global Note, then the Registrar or co-Registrar shall cancel such Certificated Note and cause, or direct the Depository to cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar or co-Registrar, the principal amount of Notes represented by the applicable Global Note to be increased accordingly. If no Global Note representing Notes held by Qualified Institutional Buyers or Persons acquiring Notes in offshore transactions in reliance on Regulation S, as the case may be, is then outstanding, the Company shall issue and the Trustee shall, upon receipt of an Authentication Order in accordance with Section 2.02, authenticate such a Global Note in the appropriate principal amount. (c) Transfer and Exchange of Global Notes. The transfer and ------------------------------------- exchange of Global Notes or beneficial interests therein shall be effected through the Depository in accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of the Depository therefor. Upon receipt by the Registrar or co-Registrar of written instructions, or such other instruction as is customary for the Depository, from the Depository or its nominee, requesting the registration of transfer of an interest in a Rule 144A Global Note or Regulation S Global Note, as the case may be, to another type of Global Note, together with the applicable Global Notes (or, if the applicable type of Global Note required to represent the interest as requested to be transferred is not then outstanding, only the Global Note representing the interest being transferred), the Registrar or Co-Registrar shall cancel such Global Notes (or Global Note) and the Company shall issue and the Trustee shall, upon receipt of an Authentication Order in accordance with Section 2.02, authenticate new Global Notes of the types so cancelled (or the type so cancelled and applicable type required to represent the interest as requested to be transferred) reflecting the applicable increase and decrease of the principal amount of Notes represented by such types of Global Notes, giving effect to such transfer. If the applicable type of Global Note required to represent the interest as requested to be transferred is not outstanding at the -41- time of such request, the Company shall issue and the Trustee shall, upon written instructions from the Company in accordance with Section 2.02, authenticate a new Global Note of such type in principal amount equal to the principal amount of the interest requested to be transferred. (d) Transfer of a Beneficial Interest in a Global Note for a -------------------------------------------------------- Certificated Note. (i) Any Person having a beneficial interest in a Global Note - ----------------- may upon request exchange such beneficial interest for a Certificated Note. Upon receipt by the Registrar or co-Registrar of written instructions, or such other form of instructions as is customary for the Depository, from the Depository or its nominee on behalf of any Person having a beneficial interest in a Global Note and upon receipt by the Trustee of a written order or such other form of instructions as is customary for the Depository or the Person designated by the Depository as having such a beneficial interest containing registration instructions and, in the case of any such transfer or exchange of a beneficial interest in Notes the offer and sale of which have not been registered under the Securities Act and which Notes are presented for transfer or exchange prior to the Resale Restriction Termination Date, the following additional information and documents: (A) if such beneficial interest is being transferred to the Person designated by the Depository as being the beneficial owner, a certification from such Person to that effect (substantially in the form of Exhibit B hereto); or --------- (B) if such beneficial interest is being transferred to a Qualified Institutional Buyer in accordance with Rule l44A, a certification to that effect (substantially in the form of Exhibit B --------- hereto); or (C) if such beneficial interest is being transferred in reliance on Regulation S, delivery of a certification to that effect (substantially in the form of Exhibit B hereto) and a transferor --------- certificate for Regulation S transfers substantially in the form of Exhibit D hereto; or --------- (D) if such beneficial interest is being transferred to an Institutional Accredited Investor, delivery of certification (substantially in the form of Exhibit B hereto), a certificate of the --------- transferee in substantially the form of Exhibit C and, at the option of --------- the Company, an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or (E) if such beneficial interest is being transferred in reliance on Rule 144 under the Securities Act, delivery of a certification to that effect (substantially in the form of Exhibit B hereto) and, at the --------- option of the Company, an Opinion of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or (F) if such beneficial interest is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect (substantially in the form of Exhibit B hereto) and, at the option of the Company, an Opinion --------- of Counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act, -42- then the Registrar or co-Registrar shall cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar or co-Registrar, the aggregate principal amount of the applicable Global Note to be reduced and, following such reduction, the Company shall execute and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate and deliver to the transferee a Certificated Note in the appropriate principal amount. (ii) Certificated Notes issued in exchange for a beneficial interest in a Global Note pursuant to this Section 2.16(d) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect Participants or otherwise, shall instruct the Registrar or co-Registrar in writing. The Registrar or co-Registrar shall deliver such Certificated Notes to the Persons in whose names such Certificated Notes are so registered. (e) Restrictions on Transfer and Exchange of Global Notes. ----------------------------------------------------- Notwithstanding any other provisions of this Indenture, a Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (f) Private Placement Legend. Upon the transfer, exchange or ------------------------ replacement of Notes not bearing the Private Placement Legend, the Registrar or co-Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar or co-Registrar shall deliver only Notes that bear the Private Placement Legend unless, and the Trustee is hereby authorized to deliver Notes without the Private Placement Legend if (i) the Resale Restriction Termination Date shall have occurred, (ii) there is delivered to the Trustee an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (iii) such Note has been sold pursuant to an effective registration statement under the Securities Act. (g) General. By its acceptance of any Note bearing the Private ------- Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it shall transfer such Note only as provided in this Indenture. The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Agent Members or beneficial owners of interest in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.15 or this Section 2.16. The Company shall have the right to in- -43- spect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. SECTION 2.17. Restrictive Legends. ------------------- Each Global Note and Certificated Note that constitutes a Restricted Security shall bear the following legend (the "Private Placement Legend") on the face thereof until the Resale Restriction Termination Date, unless otherwise agreed to by the Company and the Holder thereof: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) AGREES THAT IT WILL NOT, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS NOTE AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE), RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF SUB-PARAGRAPH 501(a)(1), (2), (3), or (7) UNDER THE SECURITIES ACT THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS NOTE), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (2) WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE PRIOR TO THE RESALE RESTRICTION TERMINATION DATE, IF THE PROPOSED TRANSFER IS BEING MADE PURSUANT TO CLAUSE (C) OR (E) ABOVE, PRIOR TO SUCH TRANSFER, THE HOLDER WILL BE REQUIRED TO FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE -44- TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. Each Global Note shall also bear the following legend (the "Global Note Legend"): THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, AND TRANSFERS OF INTERESTS IN THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.16 OF THE INDENTURE. ARTICLE 3 REDEMPTION SECTION 3.01. Notices to Trustee. ------------------ If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days (unless a shorter period is acceptable to the Trustee) but not more than 60 days before a Redemption Date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the Redemption Date, (iii) the principal amount of Notes to be redeemed, (iv) the amount of any interest (including any Additional Interest) and (v) the redemption price. In the event of a Special Redemption or Gaming Redemption, the Company shall notify the Trustee as soon as practicable but in any event before notice of the Special Redemption or Gaming Redemption, as the case may be, is to be mailed to any Holder (unless a shorter notice shall be satisfactory to the Trustee). SECTION 3.02. Selection of Notes to Be Redeemed. --------------------------------- If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed among the Holders in compliance with the requirements of the principal na- -45- tional securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate; provided that if a partial redemption is made with the proceeds of any Equity Offering, selection of the Notes or portions thereof for redemption shall be made by the Trustee on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to the procedures of the Depository), unless such method is otherwise prohibited. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the Redemption Date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or integral multiples of $1,000, except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not an integral multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.03. Notice of Redemption. -------------------- At least 30 days but not more than 60 days before a Redemption Date (other than in connection with a Special Redemption or Gaming Redemption), the Company shall mail or cause to be mailed, by first class mail, an unconditional notice of redemption to each Holder (or the affected Holder in the case of a Gaming Redemption) whose Notes are to be redeemed at its registered address. In the event of a Special Redemption, notice of redemption shall be given at least 5 days before a Special Redemption by first class mail to each Holder as such Holder's address appears in the Note Register. In the event of a Gaming Redemption, notice of redemption shall be given in accordance with Section 3.10. The notice shall identify the Notes to be redeemed and shall state: (a) the Redemption Date; (b) the redemption price and the amount of interest (including Additional Interest), if any; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the Redemption Date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; -46- (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the Redemption Date (or 5 days prior to (y) the Special Redemption Date, in the case of a Special Redemption, and (z) the date of any Gaming Redemption, in the case of a Gaming Redemption), an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. SECTION 3.04. Effect of Notice of Redemption. ------------------------------ Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the Redemption Date at the redemption price. A notice of redemption may not be conditional. SECTION 3.05. Deposit of Redemption Price. --------------------------- At least one Business Day prior to the Redemption Date, the Company shall deposit with the Trustee or with the Paying Agent immediately available funds sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the Redemption Date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest Record Date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such Record Date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the Redemption Date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 2.12 hereof. SECTION 3.06. Notes Redeemed in Part. ---------------------- Upon surrender of a Note that is redeemed in part (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writ- -47- ing), the Company shall issue and, upon receipt of an Authentication Order, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.07. Optional Redemption. ------------------- (a) At any time prior to February 1, 2005, the Company may on one occasion redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price of 111.875% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the Redemption Date, with the net cash proceeds of any Equity Offering; provided that: (1) at least 65% of the aggregate principal amount of Notes issued under this Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and (2) the redemption must occur within 45 days after the date of the closing of such Equity Offering. (b) After February 1, 2006, the Company may redeem all or a part of the Notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, thereon to the applicable Redemption Date, if redeemed during the 12-month period beginning on February 1 of the years indicated below: Year Percentage 2006 ......................... 105.938% 2007 ......................... 102.969% 2008 ......................... 100.000% SECTION 3.08. No Mandatory Redemption. ----------------------- Other than as set forth in Sections 3.09 and 3.10 below, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. SECTION 3.09. Special Mandatory Redemption. ---------------------------- On the earliest to occur of (a) March 20, 2002, if the Pending Acquisitions shall not have been consummated on or prior to such date, (b) the date of termination of any of the agreements relating to the Pending Acquisitions or (c) the determination by the Company that any of the Pending Acquisitions are likely not to be able to be consummated in a manner consistent in all material respects with the description of such transactions contained in the Offering Memorandum, the Company shall redeem all of the Outstanding Notes; provided that (1) in the case of clause (a) above, such redemption shall occur no later than April 1, 2002, (2) in the case of clause (b) above, such redemption shall occur within 10 days after the termination of any such agreement and (3) in the case of clause (c) above, such redemption shall occur within 10 days after the date of the Company's determination. The -48- redemption price, in each case, shall be at a price equal to 97.12% of the principal amount thereof together with accrued and unpaid interest and Additional Interest, if any, to the date of redemption. A redemption of the Notes pursuant to this Section 3.09 is herein referred to as a "Special Redemption." SECTION 3.10. Mandatory Disposition in Accordance with Gaming Laws. ---------------------------------------------------- If any Gaming Authority requires that a Holder or beneficial owner of Notes be i- l censed, qualified or found suitable under any applicable Gaming Law and such Holder or beneficial owner (i) fails to apply for a license, qualification or a finding of suitability within 30 days (or such shorter period as may be required by the applicable Gaming Authority) after being requested to do so by the Gaming Authority or (ii) is denied such license or qualification or not found suitable, the Company shall have the right, at its option, (1) to require any such Holder or beneficial owner to dispose of its Notes within 30 days (or such earlier date as may be required by the applicable Gaming Authority) of the occurrence of the event described in clause (i) or (ii) above or (2) to redeem the Notes of such Holder or beneficial owner at a redemption price equal to the lesser of (x) the principal amount thereof, together with accrued and unpaid interest and Additional Interest, if any, to the earlier of the date of redemption or the date of the denial of license or qualification or of the finding of unsuitability by such Gaming Authority, and (y) the price at which such Holder or beneficial owner acquired the Notes, together with accrued and unpaid interest and Additional Interest, if any, to the earlier of the date of redemption or the date of the denial of license or qualification or of the finding of unsuitability by such Gaming Authority. The Company shall notify the Trustee in writing of any redemption pursuant to this Section 3.10 as soon as practicable. A redemption of the Notes pursuant to this Section 3.10 is herein referred to as a "Gaming Redemption." Immediately upon a determination by a Gaming Authority that a Holder or beneficial owner of the Notes shall not be licensed, qualified or found suitable, the Holder or beneficial owner will, to the extent required by applicable law, have no further right (i) to exercise, directly or indirectly, through any trustee or nominee or any other person or entity, any right conferred by the Notes; or (ii) to receive any interest, dividend, economic interests or any other distributions or payments with respect to the Notes or any remuneration in any form with respect to the Notes from the Company, the Subsidiary Guarantors or the Trustee. The Holder or beneficial owner that is required to apply for a license, qualification or a finding of suitability shall pay all fees and costs of applying for and obtaining the license, qualification or finding of suitability and of any investigation by the applicable Gaming Authorities. ARTICLE 4 COVENANTS SECTION 4.01. Payment of Notes. ---------------- The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes and this Indenture. Principal, -49- premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. New York City time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Additional Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company's Obligations under the Notes, this Indenture, the Registration Rights Agreement and the Collateral Documents are referred to herein as the "Company Obligations." SECTION 4.02. Maintenance of Office or Agency. ------------------------------- The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-Registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof. SECTION 4.03. Reports. ------- (a) Whether or not required by the Commission, so long as any Notes are outstanding, the Company shall furnish to the Holders, within the time periods specified in the Commission's rules and regulations, (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants, (ii) If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the consolidated quarterly and annual financial information required by subsection (i) shall include a reasonably detailed presentation, either on the face of the financial statements or -50- in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Company's Unrestricted Subsidiaries as required by the rules and regulations of the Commission, and (iii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. (b) In addition, following consummation of the Exchange Offer, whether or not required by the rules and regulations of the Commission, the Company shall file a copy of all information and reports referred to in clause (a) with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission shall not accept such a filing) and make such information available to securities analysts and prospective investors upon request. The Company shall at all times comply with TIA (S)314(a). (c) For so long as any Notes remain outstanding, the Company and the Subsidiary Guarantors shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. (d) Delivery of the reports, information and other documents set forth in this Section 4.03 to the Trustee is for informational purposes only and the Trustee's receipt of such reports, information and other documents shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants under this Indenture. SECTION 4.04. Compliance Certificate. ---------------------- (a) The Company and each Subsidiary Guarantor (to the extent that such Subsidiary Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its Obligations under this Indenture and the Collateral Documents, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge, the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and the Collateral Documents and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture or the Collateral Documents (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. -51- (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.05. Taxes. ----- The Company shall pay or discharge or shall cause each of its Subsidiaries to pay or discharge, before the same shall become delinquent, (1) all material Taxes levied or imposed upon the Company or any of its Subsidiaries or upon its or any of its Subsidiaries' income, profits or property and (2) all lawful material claims for labor, materials and supplies which, in each case, if unpaid, might by law become a Lien upon the property of the Company or any of its Subsidiaries; provided, however, that, subject to the terms of the applicable Collateral Documents, neither the Company nor any of its Subsidiaries shall be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which disputed amounts adequate reserves have been made in accordance with GAAP. The Company and each of its Subsidiaries shall prepare and timely file with the appropriate governmental agencies all Tax Returns required to be filed for any period (or portion thereof), taking into account any extension of time to file granted to or obtained on behalf of the Company and/or such Subsidiary, and each such Tax Return shall be complete and accurate in all material respects. SECTION 4.06. Stay, Extension and Usury Laws. ------------------------------ The Company and each of the Subsidiary Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Subsidiary Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. -52- SECTION 4.07. Restricted Payments. ------------------- (a) The Company shall not, and shall not permit any of its Restricted Subsidia ries to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Capital Stock (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Capital Stock in their capacity as such (other than (x) dividends or distributions payable in Capital Stock (other than Disqualified Stock) of the Company or (y) dividends or distributions payable to the Company or a Wholly Owned Restricted Subsidiary of the Company that is a Subsidiary Guarantor); (2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Capital Stock of the Company; (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any unsecured Indebtedness that is pari passu in right of payment with the Notes or the Subsidiary Guarantees or any Indebtedness that is subordinated to the Notes or the Subsidiary Guarantees, except a payment of interest or principal at the Stated Maturity thereof; or (4) make any Restricted Investment, (all such payments and other actions set forth in clauses (1) through (4) above being collectively referred to as "Restricted Payments") unless, at the time of and after giving effect to such Restricted Payment: (1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (2) the Company would, 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 four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.08(a); and (3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the Issue Date (excluding Restricted Payments permitted by clauses (2), (3) and (5) of clause (b) below), is less than the sum, without duplication, of: (a) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the Issue Date to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available -53- at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (b) 100% of the aggregate net cash proceeds received by the Company since the Issue Date as a contribution to its common equity capital or from the issue or sale of Capital Stock of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Capital Stock (other than Capital Stock (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company), plus (c) to the extent that any Restricted Investment that was made after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (x) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (y) the initial amount of such Restricted Investment, plus (d) $2,000,000. (b) So long as no Default or Event of Default has occurred and is continuing or would be caused thereby, the preceding provisions shall not prohibit: (1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or any unsecured pari passu Indebtedness of the Company or Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor or of any Capital Stock of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, Capital Stock of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3)(b) of subsection (a) above; (3) the defeasance, redemption, repurchase or other acquisition of unsecured pari passu Indebtedness or subordinated Indebtedness of the Company or any Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (4) the repurchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company or any Restricted Subsidiary of the Company held by any member of the Company's (or any of its Restricted Subsidiaries') management (excluding the Principals and Related Parties) pursuant to any management equity subscription agreement or stock option agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Capital Stock shall not exceed $500,000 in any 12-month period; and -54- (5) with respect to each tax year that the Company qualifies as a Flow Through Entity, the distribution by the Company to the holders of Capital Stock of the Company of an amount equal to the product of (i) the amount of aggregate net taxable income allocated by the Company to the holders of Capital Stock of the Company for such period (computed by netting net losses allocated to the Company for such period against net income allocated to the Company for such period and by reducing such net income by any net losses allocated to the Company in any prior period to the extent such losses (x) have not previously been deducted in determining such holder's tax liability for any prior year and (y) may be used by such holder against such net income) and (ii) the Presumed Tax Rate for such period. The amount distributable under this paragraph (5) shall be adjusted to take into account the effect of alternative minimum tax, if applicable. The distributions described in this paragraph (5) are referred to as "Tax Distributions." The payment of the Tax Distributions is subject to (A) the Company providing an Officers' Certificate and Opinion of Counsel to the effect that the Company and each Subsidiary in respect of which the Tax Distributions are being made qualify as Flow Through Entities for Federal income tax purposes and for the states and localities in respect of which the Tax Distributions are being made, prior to the first payment of Tax Distributions in a calendar year, and (B) at the time of the Tax Distribution, the most recent audited financial statements of the Company provided to the Trustee pursuant to Section 4.03 provide that the Company and each such Subsidiary were treated as Flow Through Entities for the period of the financial statements. (c) The amount of all Restricted Payments (other than cash) shall be the Fair Market Value on the date of the Restricted Payment of the assets or securities proposed to be transferred or issued to or by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The Fair Market Value of any assets or securities that are required to be valued by this Section 4.07 shall be determined by the Board of Directors, whose Board Resolution with respect thereto shall be delivered to the Trustee. The Board of Directors' determination must be based upon an opinion or appraisal issued by an independent accounting, appraisal or investment banking firm if the Fair Market Value exceeds $2,000,000. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. SECTION 4.08. Incurrence of Indebtedness and Issuance of Preferred Stock. ---------------------------------------------------------- (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, Guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company shall not permit any of its Restricted Subsidiaries to issue any shares of Preferred Stock; provided, however, that if no Default or Event of Default has occurred and is continuing at the time of or as a consequence of the incurrence of such Indebtedness, the Company and any Subsidiary Guarantor may incur Indebtedness (including Acquired Debt) if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional In- -55- debtedness is incurred is at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred at the beginning of such four-quarter period. (b) Section 4.08(a) shall not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Indebtedness"): (1) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness under the Credit Agreement in an aggregate principal amount not to exceed $10,000,000 at any time outstanding, less the amount of any such Indebtedness retired with the Net Proceeds from any Asset Sale applied to permanently reduce the outstanding amounts or commitments referred to in clause (4) of Section 4.11(b); (2) the incurrence by the Company and any Wholly Owned Restricted Subsidiary of Indebtedness represented by Purchase Money Obligations and Capital Lease Obligations in an aggregate principal amount or accreted value, as applicable, not to exceed the greater of (x) $5,000,000 and (y) 15% of Consolidated EBITDA of the Company and its Restricted Subsidiaries for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such Indebtedness is incurred; (3) the incurrence by the Company and its Restricted Subsidiaries of the (a) Existing Indebtedness and (b) Acquired Pending Acquisitions Indebtedness; (4) the incurrence by the Company and the Subsidiary Guarantors of Indebtedness represented by $125,000,000 aggregate principal amount of the Notes and the related Subsidiary Guarantees issued on the Issue Date and the Exchange Notes and the related Subsidiary Guarantees to be issued pursuant to the Registration Rights Agreement; (5) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace, Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under Section 4.08(a) or clauses (2), (3), (4), (5) or (10) of this subsection (b); (6) the incurrence by the Company or any of its Wholly Owned Restricted Subsidiaries of intercompany Indebtedness solely between or among the Company and any Wholly Owned Restricted Subsidiary; provided, however, that: (a) such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Subsidiary Guarantee, in the case of a Subsidiary Guarantor; and (b) any subsequent issuance or transfer of Capital Stock that results in any such Indebtedness being held by a Person other than the Company or a Wholly Owned Restricted Subsidiary thereof and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a -56- Wholly Owned Restricted Subsidiary thereof, shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Wholly Owned Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); (7) the incurrence by the Company or any Restricted Subsidiary of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding; provided that the notional principal amount of each such Hedging Obligation does not exceed the principal amount of the Indebtedness to which such Hedging Obligation relates; (8) the Guarantee by the Company or any of the Restricted Subsidiaries of Indebtedness (other than Non-Recourse Indebtedness of an Unrestricted Subsidiary) of the Company or a Subsidiary Guarantor that was permitted to be incurred by another provision of this Section; (9) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock; provided, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued; (10) the incurrence by the Company or any of its Wholly Owned Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (10), not to exceed $5,000,000 at any one time outstanding, provided that the amount of Indebtedness incurred pursuant to this clause (10) by Non-Guarantor Restricted Subsidiaries shall not exceed $1,000,000 in the aggregate for all such Non-Guarantor Restricted Subsidiaries at any one time outstanding; and (11) the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Indebtedness; provided, however, that if any such Indebtedness ceases to be Non-Recourse Indebtedness of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (11). (c) The Company shall not incur any Indebtedness (including Permitted Indebtedness) that is contractually subordinated in right of payment to any other Indebtedness of the Company unless such Indebtedness is also contractually subordinated in right of payment to the Notes on substantially identical terms; provided, however, that no Indebtedness of the Company shall be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company solely by virtue of being unsecured. -57- (d) For purposes of determining compliance with this Section 4.08, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (11) above in section (b), or is entitled to be incurred pursuant to subsection (a) of this Section 4.08, the Company shall be permitted to classify such item of Indebtedness on the date of its incurrence, in any manner that complies with this Section. (e) Notwithstanding anything in this Indenture to the contrary, neither the Company nor any of its Restricted Subsidiaries shall enter into, incur any Indebtedness under or otherwise become obligated under any Credit Agreement unless prior to or concurrently therewith the Trustee and the agents and lenders under such Credit Agreement shall have entered into the Senior Intercredi-tor Agreement and the Company shall have delivered to the Trustee such Officers' Certificates and Opinions of Counsel in connection therewith as the Trustee shall reasonably require. SECTION 4.09. Liens. ----- The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind on any property or asset now owned or hereafter acquired or on any income or profits therefrom or assign any right to receive income therefrom, except Permitted Liens. SECTION 4.10. Dividend and Other Payment Restrictions Affecting Restricted ------------------------------------------------------------ Subsidiaries. ------------ (a) The Company shall not, and shall not permit any of its Restricted Subsidia ries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries; (2) make loans or advances to the Company or any of its Restricted Subsidiaries; or (3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. (b) The preceding restrictions shall not apply to encumbrances or restrictions existing under or by reason of: (1) Existing Indebtedness as in effect on the Issue Date and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or re-financings thereof; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in such Existing Indebtedness, as in effect on the Issue Date; -58- (2) this Indenture, the Notes and the Subsidiary Guarantees; (3) applicable law; (4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred; (5) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (6) Purchase Money Obligations or Capital Lease Obligations for property acquired or leased in the ordinary course of business that impose restrictions of the nature described in clause (3) of subsection (a) above of this Section 4.10 on the property so acquired; (7) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition; (8) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being re-financed; (9) Liens securing Indebtedness that limit the right of the debtor to dispose of the assets subject to such Lien; and (10) restrictions imposed by Gaming Authorities on the payment of dividends by entities holding Gaming Licenses. SECTION 4.11. Asset Sales. ----------- (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets or Capital Stock issued or sold or otherwise disposed of; (2) such Fair Market Value is determined by the Company's Board of Directors and evidenced by a Board Resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee; -59- (3) at least 85% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes of this provision, each of the following shall be deemed to be cash: (a) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet), of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability; and (b) any securities, notes or other Obligations received by the Company or any such Restricted Subsidiary from such transferee that are contemporaneously (subject to ordinary settlement periods) converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received in that conversion); (4) if such Asset Sale involves the disposition of Collateral, subject to the terms of the Senior Intercreditor Agreement with respect to the Credit Agreement Collateral, the Company or such Subsidiary has complied with the provisions of Article 10; and (5) if such Asset Sale involves the disposition of Collateral, subject to the terms of the Senior Intercreditor Agreement with respect to the Credit Agreement Collateral, the Net Proceeds thereof shall be paid directly by the purchaser of the Collateral to the Trustee for deposit into the Collateral Account, and, if any property other than cash or Cash Equivalents is included in such Net Proceeds, such property shall be made subject to the Lien of this Indenture and the applicable Collateral Documents. (b) Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company (or the Restricted Subsidiary, as the case may be) may apply such Net Proceeds to (1) make capital expenditures, (2) the acquisition of all or substantially all of the assets or, or a majority of the Voting Stock of another Permitted Business, (3) the acquisition of other long-term assets in another Permitted Business (each of clauses (1), (2) and (3) above, either individually or in the aggregate, "Replacement Assets"), (4) to the extent that such Asset Sale relates to Credit Agreement Collateral, retire and permanently reduce Indebtedness incurred under the Credit Agreement; provided, that in the case of a revolver or similar arrangement that makes credit available, such commitment is permanently reduced by such amount, and/or (5) to the extent such Asset Sale relates to assets which constitute collateral securing pari passu Indebtedness incurred in compliance with the terms of this Indenture, to repay such pari passu Indebtedness in accordance with the terms thereof; provided that any Replacement Assets acquired with any Net Proceeds shall be owned by the Company or by the Restricted Subsidiary that made the Asset Sale and shall not be subject to any Liens (and the Company or such Restricted Subsidiary, as the case may be, shall execute and deliver to the Trustee such Collateral Documents or other instruments as shall be reasonably necessary to cause such Replacement Assets to become subject to a Lien in favor of the Trustee, for its benefit and for the benefit of the Holders, securing its Obligations under the Notes or its Subsidiary Guarantee, as the case may be, and oth- -60- erwise shall comply with the provisions of this Indenture applicable to After-Acquired Property) other than Permitted Liens. (c) Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph shall constitute "Excess Proceeds." On the first date on which the aggregate amount of Excess Proceeds exceeds $5,000,000 (such date the "Asset Sale Offer Trigger Date"), the Company ----------------------------- shall make an offer (an "Asset Sale Offer") to all Holders to purchase the ---------------- maximum principal amount of Notes that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer shall be equal to 100% of principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, and shall be payable in cash. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, remaining Excess Proceeds solely to the extent such Excess Proceeds do not arise out of any Asset Sale involving Collateral shall be released to the Company and may be used free and clear of the Lien of the Collateral Documents for general corporate purposes. If the aggregate principal amount of Notes tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis based on the principal amount of Notes tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. (d) All Net Proceeds of any Collateral shall, pending their application in accordance with this Section 4.11 or the release thereof in accordance with Articles 10 and 11, be deposited in the Collateral Account under this Indenture. (e) If the Company is required to make an Asset Sale Offer, the Company shall mail, within 30 days following the Asset Sale Offer Trigger Date, an unconditional notice to the Holders. Such notice shall be sent by first-class mail, postage prepaid, to the Trustee and to each Holder, at the address appearing in the register maintained by the Registrar of the Notes, and shall state: (1) that the Asset Sale Offer is being made pursuant to this Section 4.11; (2) that such Holders have the right to require the Company to apply the Excess Proceeds to repurchase such Notes at a purchase price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest, and Additional Interest if any, to the date which shall be not later than 60 days from the date such notice is mailed (the "Asset Sale Offer Payment Date"); (3) that any Note not tendered or accepted for payment shall continue to accrue interest; (4) that any Notes accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Asset Sale Offer Payment Date; (5) that Holders accepting the offer to have their Notes purchased pursuant to an Asset Sale Offer shall be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the -61- address specified in the notice prior to the close of business on the Business Day preceding the Asset Sale Offer Payment Date; (6) that Holders shall be entitled to withdraw their acceptance of the Asset Sale Offer if the Paying Agent receives, not later than the close of business on the third Business Day preceding the Asset Sale Offer Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased; (7) that if the aggregate principal amount of Notes surrendered by Holders exceeds the amount of Excess Proceeds, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000 or integral multiples thereof shall be purchased); (8) that Holders whose Notes are being purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each such new Note issued shall be in an original principal amount in denominations of $1,000 and integral multiples thereof; (9) the calculations used in determining the amount of Excess Proceeds to be applied to the purchase of such Notes; (10) any other procedures that a Holder must follow to accept an Asset Sale Offer or effect withdrawal of such acceptance; and (11) the name and address of the Paying Agent. On the Asset Sale Offer Payment Date, the Company shall, to the extent lawful, (1) accept for payment, on a pro rata basis to the extent necessary, Notes or portions thereof tendered pursuant to the Asset Sale Offer, (2) deposit with the Paying Agent U.S. legal tender sufficient to pay the purchase price plus accrued and unpaid interest, and Additional Interest, if any, on the Notes to be purchased or portions thereof, (3) deliver or cause to be delivered to the Trustee Notes so accepted together with an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 4.11. The Paying Agent shall promptly mail to each Holder so accepted payment in an amount equal to the purchase price for such Notes, and the Company shall execute and issue, and the Trustee shall promptly authenticate and make available for delivery to such Holder, a new Note equal in principal amount to any unpurchased portion of the Notes surrendered; provided that each such new Note shall be issued in an original principal amount in denominations of $1,000 and integral multiples thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Asset Sale Offer Payment Date. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sales provisions -62- of this Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its Obligations under the Asset Sale provisions of this Indenture by virtue of such compliance. SECTION 4.12. Business Activities. ------------------- The Company shall not, and shall not permit any Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Subsidiaries taken as a whole. SECTION 4.13. Corporate Existence. ------------------- Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Restricted Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Restricted Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders. SECTION 4.14. Offer to Repurchase upon Change of Control. ------------------------------------------ (a) If a Change of Control occurs, the Company shall be obligated to make an offer to purchase (the "Change of Control Offer") each Holder's outstanding Notes at a purchase price (the "Change of Control Purchase Price") equal to 101% of the principal amount thereof plus accrued and unpaid interest, and Additional Interest thereon, if any, to the Change of Control Payment Date in accordance with the procedures set forth below. (b) Within 10 days of the occurrence of a Change of Control, the Company shall send by first-class mail, postage prepaid, to the Trustee and to each Holder, at the address appearing in the register maintained by the Registrar of the Notes, a notice stating: (1) a Change of Control has occurred, describing the Change of Control transaction and that the Change of Control Offer is being made pursuant to this Section 4.14 and that all Notes tendered shall be accepted for payment; (2) the Change of Control Purchase Price and the purchase date (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed (the "Change of Control Payment Date")); (3) that any Note not tendered shall continue to accrue interest; -63- (4) that, unless the Company defaults in the payment of the Change of Control Purchase Price, any Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders accepting the offer to have their Notes purchased pursuant to a Change of Control Offer shall be required to surrender the Notes, with the form entitled "Option of the Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day preceding the Change of Control Payment Date; (6) that Holders shall be entitled to withdraw their acceptance if the Paying Agent receives, not later than the close of business on the third Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased; (7) that Holders whose Notes are being purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; (8) any other procedures that a Holder must follow to accept a Change of Control Offer or effect withdrawal of such acceptance; and (9) the name and address of the Paying Agent. (c) On the Change of Control Payment Date, the Company shall, to the extent lawful: (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer; (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. (d) The Paying Agent shall promptly mail to each Holder of Notes so tendered the Change of Control Purchase Price for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. (e) The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. -64- (f) The Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. (g) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes in connection with a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of this Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Change of Control provisions of this Indenture by virtue of such compliance. SECTION 4.15. Limitation on Issuances and Sales of Capital Stock in Wholly Owned Restricted Subsidiaries. ----------------------------------------------------------------- (a) The Company shall not, and shall not permit any of its Restricted Subsidia ries to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock in any Wholly Owned Restricted Subsidiary of the Company to any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company), unless: (1) such transfer, conveyance, sale, lease or other disposition is of all the Capital Stock in such Wholly Owned Restricted Subsidiary; and (2) the cash Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with Section 4.11. (b) The Company shall not permit any Wholly Owned Restricted Subsidiary of the Company to issue any of its Capital Stock (other than, if necessary, shares of its Capital Stock constituting directors' qualifying shares) to any Person other than to the Company or a Wholly Owned Restricted Subsidiary of the Company. SECTION 4.16. Events of Loss. -------------- (a) In the event of an Event of Loss, the Company or the affected Restricted Subsidiary of the Company, as the case may be, may apply the Net Loss Proceeds from such Event of Loss to the rebuilding, repair, replacement or construction of improvements to the property affected by such Event of Loss (the "Subject Property"), with no concurrent obligation to offer to purchase any of the Notes; provided, however, that: (1) the Company delivers to the Trustee within 90 days of such Event of Loss a written opinion from a reputable contractor that the Subject Property can be rebuilt, repaired, replaced or constructed in, and operated in, substantially the same condition as it existed prior to the Event of Loss within 360 days of the Event of Loss; and -65- (2) an Officers' Certificate certifying that the Company has available from Net Loss Proceeds or other sources sufficient funds to complete the rebuilding, repair, replacement of construction described in clause (1) above. (b) Any Net Loss Proceeds that are not reinvested or not permitted to be reinvested as provided in subsection (a) of this Section 4.16 shall be deemed "Excess Loss Proceeds." On the first date on which the aggregate amount of Excess Loss Proceeds exceeds $5,000,000 (the "Event of Loss Offer Trigger Date"), the Company shall make an offer (an "Event of Loss Offer") to all Holders to purchase or redeem with the proceeds of Events of Loss the maximum principal amount of Notes that may be purchased out of the Excess Loss Proceeds. The offer price in any Event of Loss Offer shall be equal to 100% of the principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, and shall be payable in cash. If any Excess Loss Proceeds remain after consummation of an Event of Loss Offer, the Company may use such Excess Loss Proceeds for any purpose not otherwise prohibited by this Indenture and the Collateral Documents; provided that any remaining Net Loss Proceeds shall remain subject to the Lien of the Collateral Documents. If the aggregate principal amount of Notes tendered pursuant to an Event of Loss Offer exceeds the Excess Loss Proceeds, the trustee shall select the Notes to be purchased on a pro rata basis based on the principal amount of Notes tendered. (c) If the Company is required to make an Event of Loss Offer, the Company shall mail, within 30 days following the Event of Loss Offer Trigger Date, an unconditional notice to the Holders. Such notice shall be sent by first-class mail, postage prepaid, to the Trustee and to each Holder, at the address appearing in the register maintained by the Registrar of the Notes, and shall state: (1) that the Event of Loss Offer is being made pursuant to this Section 4.16; (2) that such Holders have the right to require the Company to apply the Excess Loss Proceeds to repurchase such Notes at a purchase price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the purchase date which shall be no earlier than 30 days and not later than 60 days from the date such notice is mailed (the "Excess Loss Proceeds Payment Date"); (3) that any Note not tendered or accepted for payment shall continue to accrue interest; (4) that any Notes accepted for payment pursuant to the Event of Loss Offer shall cease to accrue interest after the Excess Loss Proceeds Payment Date; (5) that Holders accepting the offer to have their Notes purchased pursuant to an Event of Loss Offer shall be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day preceding the Excess Loss Proceeds Payment Date; -66- (6) that Holders shall be entitled to withdraw their acceptance of the Event of Loss Offer if the Paying Agent receives, not later than the close of business on the third Business Day preceding the Excess Loss Proceeds Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased; (7) that if the aggregate principal amount of Notes surrendered by Holders exceeds the amount of Excess Loss Proceeds, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000 or integral multiples thereof, shall be purchased); (8) that Holders whose Notes are being purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each such new Note issued shall be in an original principal amount in denominations of $1,000 and integral multiples thereof; (9) the calculations used in determining the amount of Excess Loss Proceeds to be applied to the purchase of such Notes; (10) any other procedures that a Holder must follow to accept an Event of Loss Offer or effect withdrawal of such acceptance; and (11) the name and address of the Paying Agent. On the Excess Loss Proceeds Payment Date, the Company shall, to the extent lawful, (1) accept for payment, on a pro rata basis to the extent necessary, Notes or portions thereof tendered pursuant to the Event of Loss Offer, (2) deposit with the Paying Agent U.S. legal tender sufficient to pay the purchase price plus accrued and unpaid interest, if any, on the Notes to be purchased or portions thereof, (3) deliver or cause to be delivered to the Trustee Notes so accepted together with an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 4.16. The Paying Agent shall promptly mail to each Holder so accepted payment in an amount equal to the purchase price for such Notes, and the Company shall execute and issue, and the Trustee shall promptly authenticate and make available for delivery to such Holder, a new Note equal in principal amount to any unpurchased portion of the Notes surrendered; provided that each such new Note shall be issued in an original principal amount in denominations of $1,000 and integral multiples thereof. The Company shall publicly announce the results of the Event of Loss Offer on the Excess Loss Proceeds Payment Date. (d) Subject to the terms of the Senior Intercreditor Agreement with respect to the Credit Agreement Collateral, all Net Loss Proceeds shall, pending their application in accordance with this Section 4.16 or the release thereof in accordance with Articles 10 and 11, be deposited in the Collateral Account under this Indenture. -67- (e) With respect to any Event of Loss pursuant to clause (4) of the definition of "Event of Loss" that has a Fair Market Value (or replacement cost, if greater) in excess of $5,000,000, the Company (or the affected Subsidiary Guarantor, as the case may be), shall be required to receive consideration (i) at least equal to the Fair Market Value (evidenced by a Board Resolution set forth in an Officers' Certificate delivered to the Trustee) of the assets subject to the Event of Loss and (ii) at least 85% of which is in the form of cash or Cash Equivalents. (f) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Event of Loss Offer. To the extent that the provisions of any applicable securities laws or regulations conflict with the Event of Loss provisions of this Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its Obligations under the Event of Loss provisions of this Indenture by virtue of such compliance. SECTION 4.17. Payments for Consent. -------------------- The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is 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 4.18. Additional Subsidiary Guarantees. -------------------------------- (a) If the Company or any of its Restricted Subsidiaries (other than a Non- Guarantor Restricted Subsidiary) acquires or creates another Subsidiary after the Issue Date, then that newly acquired or created Subsidiary must become a Guarantor and, within ten Business Days of the date on which it was acquired or created (except all Subsidiaries that have been properly designated as Unrestricted Subsidiaries in accordance with this Indenture for so long as they continue to constitute Unrestricted Subsidiaries), execute and deliver to the Trustee (i) a supplemental Indenture, (ii) a joinder to the Security Agreement in the form of Exhibit 3 to the Security Agreement, (iii) an Opinion of Counsel and (iv) all the Collateral Documents and other items required pursuant to Section 10.01 relating to such Subsidiary's assets and property. (b) Notwithstanding subsection (a) above, if any Non-Guarantor Restricted Subsidiary, directly or indirectly, provides any Guarantee of or other credit support for any Indebtedness of the Company or any Restricted Subsidiary (other than any other Non-Guarantor Restricted Subsidiary), the Company shall cause such Non-Guarantor Restricted Subsidiary to execute and deliver to the Trustee a supplemental Indenture and, if required by the other provisions of this Indenture, the applic able Collateral Documents and other items required pursuant to Section 10.01 relating to such Non-Guarantor Restricted Subsidiary's assets and property, each in form and substance reasonably satisfactory to the Trustee pursuant to which such Non-Guarantor Restricted Subsidiary shall unconditionally Guarantee all of the Company's Obligations under the Notes on the terms set forth in such supple- -68- mental Indenture and shall grant a security interest in the Collateral on the terms set forth in the Indenture and such Collateral Documents. Notwithstanding that the Company may not be required to do so by the terms of this Section 4.18, the Company may at any time, at its option, designate any Non-Guarantor Restricted Subsidiary as a Subsidiary Guarantor. SECTION 4.19. Maintenance of Properties; Insurance, Books and Records. ------------------------------------------------------- (a) Subject to, and in compliance with, the provisions of Article 10 and the provisions of the applicable Collateral Documents, the Company shall cause all material properties used or useful in the conduct of its business or the business of any of the Subsidiary Guarantors to be maintained and kept in operating condition, repair and working order (ordinary wear and tear and casualty loss excepted) and supplied with all necessary Equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereto; provided, that the Company shall not be obligated to make -------- such repairs, renewals, replacements, betterments and improvements that would not result in a material adverse effect on the ability of the Company and the Subsidiary Guarantors to satisfy their obligations under the Notes, the Guarantees, this Indenture and the Collateral Documents. (b) The Company shall maintain, and shall cause the Subsidiary Guarantors to maintain, insurance with responsible carriers against such risks and in such amounts, and with such deductibles, retentions, self-insured amounts and co-insurance provisions, as are customarily carried by similar businesses of similar size in the locations which such business is conducted, including property and casualty loss, workers' compensation and interruption of business insurance; provided that, with respect to the Collateral, the Company will, and - --------- will cause the Restricted Subsidiaries to, maintain the following insurance policies and coverages with policy limits and deductibles in such amounts as would be maintained by a Prudent Operator or as the Trustee may otherwise reasonably request: (i) physical hazard insurance on an "all risk" basis covering, without limitation, hazards commonly covered by such policies, in an amount equal to the full replacement cost of the Mortgaged Property and Equipment, (ii) commercial general liability insurance against claims for bodily injury, death or property damage occurring on, in or about the Mortgaged Property (and any other adjoining streets, sidewalks and passageways) and other Collateral covering such matters as are customarily covered by such policies, arising out of or connected with the possession, use, leasing, operation or condition of the Collateral; (iii) explosion insurance in respect of any boilers, machinery and similar apparatus located on or comprising the Mortgaged Property and Equipment; (iv) if the Mortgaged Property is located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards pursuant to the National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of 1973, each as amended, or any successor laws, flood insurance; -69- (v) worker's compensation insurance as required by the laws of the state where the Collateral is located to protect the Pledgors against claims for injuries sustained in the course of employment at the premises of the Pledgors; and (vi) such other types of insurance, against such risks as the Trustee may from time to time reasonably require to the extent such insurance is commercially available at commercially reasonable prices, to the extent secured lenders are requiring borrowers to obtain such insurance in connection with financings of the type contemplated by this Indenture. (c) Each insurance policy described in Section 4.19(b) shall provide that: (i) it may not be materially modified, reduced, cancelled or otherwise terminated without at least thirty (30) days' prior written notice to the Trustee; (ii) the Trustee is permitted to pay any premium therefor within thirty (30) days after receipt of any notice stating that such premium has not been paid when due; (iii) all losses thereunder shall be payable notwithstanding any act or negligence of the applicable Pledgor or its agents or employees which otherwise might have resulted in a forfeiture of all or a part of such insurance payments; (iv) with respect to the insurance policies described in clauses (i), (iii), (iv) and, to the extent applicable, (vi) of Section 4.19(b), all losses payable thereunder shall be payable to the Trustee, as loss payee, pursuant to a standard non-contributory New York mortgagee endorsement and shall be in an amount, at least sufficient to prevent coinsurance liability; and (v) with respect to the insurance policies described in clauses (ii) and, to the extent applicable, (vi) of Section 4.19(b), the Trustee shall be named as an additional insured. (d) On an annual basis and prior to the expiration of any insurance policy described in Section 4.19(b), the Pledgors shall deliver to the Trustee an insurance policy or policies renewing or extending such expiring insurance policy or policies or renewal or extension Insurance Certificates or other reasonable evidence of renewal or extension providing that the insurance policies are in full force and effect. (e) The Pledgors shall not purchase separate insurance policies concurrent in form or contributing in the event of loss with the insurance policies required to be maintained under this Section 4.19 unless the Trustee is included thereon as an additional insured and, if applicable, with loss payable to the Trustee under an endorsement containing the provisions described in Section 4.19(b). The Pledgors shall immediately notify the Trustee whenever any such separate insurance policy is obtained and shall promptly deliver to the Mortgagee the insurance policy or Insurance Certificate evidencing such insurance. (f) The Pledgors may maintain the coverages required by Section 4.19 under blanket policies covering the Collateral and other locations owned or operated by the Pledgors or an Affiliate of the Pledgors if the terms of such blanket policies otherwise comply with the provisions of -70- Section 4.19(b) and contain specific coverage allocations in respect of the Premises complying with the provisions of Section 4.19(b). (g) If there shall occur any Event of Loss that has a Fair Market Value (or replacement cost, if greater) in excess of $5,000,000, the applicable Pledgor shall promptly send to the Trustee a written notice setting forth the nature and extent of such Event of Loss in accordance with the provisions of Section 11.02. (h) All insurance under this Section will be issued by carriers having an A.M. Best & Company, Inc. rating of A or such other rating as shall be reasonably acceptable to the Trustee, or if such carrier is not rated by A.M. Best & Company, Inc., having the financial stability and size deemed appropriate by the Company after consultation with a reputable insurance broker. (i) The Company shall, and shall cause each of its Subsidiary Guarantors to, keep proper books of record and account, in which full and correct entries shall be made of all financial transactions of the Company and each of its Subsidiary Guarantors, in accordance with GAAP. SECTION 4.20. Further Assurances. ------------------ (a) The Company shall, and shall cause each of its Restricted Subsidiaries to, execute and deliver such additional instruments, certificates or documents, and take all such actions as may be reasonably required from time to time in order to: (1) carry out more effectively the purposes of the Collateral Documents; (2) create, grant, perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and the Liens created, or intended to be created, by the Collateral Documents; and (3) ensure the protection and enforcement of any of the rights granted or intended to be granted to the Trustee under any other instrument executed in connection therewith. (b) Upon the exercise by the Trustee or any Holder of any power, right, privilege or remedy under this Indenture or any of the Collateral Documents which requires any consent, approval, recording, qualification or authorization of any governmental authority (including any Gaming Authority), the Company shall, and shall cause each of its Restricted Subsidiaries to, execute and deliver all applications, certifications, instruments and other documents and papers that may be required from the Company or any of its Restricted Subsidiaries for such governmental consent, approval, recording, qualification or authorization. (c) At or prior to the release of the Escrow Proceeds in connection with the Pending Acquisitions, the Company shall have caused each of the Jacobs Subordination and Inter-creditor Agreement and the Seller Intercreditor Agreement to have been duly executed and delivered by each of the parties indicated therein and shall have delivered to the Trustee such Officers' Certificates and Opinions of Counsel as the Trustee shall require in connection therewith. -71- SECTION 4.21. Impairment of Security Interests. -------------------------------- The Company shall not, and shall not permit any of its Restricted Subsidiaries to, (i) take or omit to take any action with respect to the Collateral that might or would have the result of affecting or impairing the security interest in the Collateral in favor of the Trustee for its benefit and for the benefit of the Holders or (ii) grant to any Person (other than the Trustee for its benefit and for the benefit of the Holders) any interest whatsoever in the Collateral, in each case except as expressly provided for in this Indenture or the Collateral Documents. SECTION 4.22. Sale and Leaseback Transactions. ------------------------------- The Company shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any Sale and Leaseback Transaction; provided that the Company or any Subsidiary Guarantor may enter into a Sale and Leaseback Transaction if: (1) the Company or such Subsidiary Guarantor could have incurred Indebtedness in an amount equal to the Attributable Debt relating to such Sale and Leaseback Transaction under the Fixed Charge Coverage Ratio test in Section 4.08(a); (2) the gross cash proceeds of that Sale and Leaseback Transaction are at least equal to the Fair Market Value, as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee, of the property that is the subject of that Sale and Leaseback Transaction; and (3) the transfer of assets in that Sale and Leaseback Transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, Section 4.11. SECTION 4.23. Escrow of Proceeds of Notes on Issue Date. ----------------------------------------- (a) On the Issue Date, the Company shall enter into the Escrow Agreement and deposit (or cause to be deposited) into the Escrow Account the net proceeds from the issuance of the Notes (the "Net Offering Proceeds") and shall provide to the Trustee a Letter of Credit which, when added to the Net Offering Proceeds, equals $123,210,429, which amount represents the maximum amount which may be payable to Holders in connection with the Special Redemption of the Notes pursuant to Section 3.09. (b) The Company shall, pursuant to the Escrow Agreement, grant a first priority perfected security interest in the Escrow Collateral to the Trustee for its benefit and the benefit of the Holders, in order to secure all monetary Obligations of the Company under the Notes and any other monetary Obligation, now or hereafter arising, of every kind and nature, owed by the Company under this Indenture to the Holders or to the Trustee for the benefit of the Holders. The Company shall comply with its Obligations under the Escrow Agreement. (c) Each Holder, by its acceptance of a Note, consents and agrees to the terms of the Escrow Agreement (including, without limitation, the provisions providing for foreclosure and release of the Escrow Collateral) as the same may be in effect or may be amended from time to time in -72- accordance with its terms, and authorizes and directs the Trustee to enter into the Escrow Agreement and to perform its obligations and exercise its rights thereunder in accordance therewith. (d) The release of any Escrow Collateral pursuant to the Escrow Agreement shall not be deemed to impair the security under this Indenture in contravention of the provisions hereof. (e) The Trustee, in its sole discretion and without the consent of the Holders, may take all actions it deems necessary or appropriate in order to (i) enforce any of the terms of the Escrow Agreement and (ii) collect and receive any and all amounts payable in respect of the monetary Obligations of the Company thereunder. The Trustee shall have power to institute and to maintain such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Holders in the Escrow Collateral (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 under the Escrow Agreement or be prejudicial to the interest of the Holders or of the Trustee). SECTION 4.24. Transactions with Affiliates. ---------------------------- (a) The Company shall not, and shall not permit any of its Restricted Subsidia ries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless: (1) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and (2) the Company delivers to the Trustee: (i) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $500,000, a Board Resolution set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this Section 4.24 and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and (ii) with respect to any Affiliate Transaction or series of rela ted Affiliate Transactions (x) involving aggregate consideration in excess of $2,000,000 or (y) to which clause (i) above applies and in respect of which there are no disinterested directors, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an independent accounting, appraisal or investment banking firm. -73- (b) The following items shall not be deemed to be Affiliate Transactions and, therefore, shall not be subject to the provisions of the immediately preceding paragraph: (1) subject to clause (2) of this subsection (b), any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary; (2) any employment, consulting or other similar compensation agreements with the Principals, so long as the annual compensation paid under all such agreements with the Principals by the Company and its Restricted Subsidiaries does not exceed $1,000,000 in the aggregate in any 12-month period; (3) transactions solely between or among the Company and/or its Wholly Owned Restricted Subsidiaries that are Subsidiary Guarantors; (4) payment of reasonable directors fees to Persons who are not otherwise Affiliates of the Company; (5) sales of Capital Stock of the Company (other than Disqualified Stock) to Affiliates of the Company; (6) fees paid to Premier One Development for the provision of casino property development advisory services rendered to the Company not to exceed $450,000 in any 12-month period plus an amount equal to the documented out-of-pocket expenses of Premier One Development incurred in connection with rendering such services; and (7) Restricted Payments that are permitted by Section 4.07. SECTION 4.25. Designation of Restricted and Unrestricted Subsidiaries. ------------------------------------------------------- The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would be in compliance with the conditions set forth in the definition of "Unrestricted Subsidiary"; provided that in no event shall any business regulated by any Gaming Authority be transferred to or held by an Unrestricted Subsidiary. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary so designated shall be deemed to be an Investment made as of the time of such designation and shall either reduce the amount available for Restricted Payments under Section 4.07(a) or reduce the amount available for future Investments under one or more clauses of the definition of Permitted Investments, as the Company shall determine in a manner which complies with the requirements of such covenant or definition, as applicable. That designation shall only be permitted if such Restricted Payment or Investment would be permitted at that time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving ef- -74- fect to such designation and an Officers' Certificate certifying that such designation complied with the conditions set forth in the definition of "Unrestricted Subsidiary" and was permitted by Section 4.07. If, at any time, any Unrestricted Subsidiary would fail to meet the conditions for continued designation as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date pursuant to Section 4.08, the Company shall be in Default of such Section 4.08. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default. Upon the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, such Restricted Subsidiary (unless such Restricted Subsidiary is a Non-Guarantor Restricted Subsidiary) shall execute a supplemental Indenture to become a Subsidiary Guarantor and shall become a party to all applicable Collateral Documents. ARTICLE 5 SUCCESSORS SECTION 5.01. Merger, Consolidation or Sale of Assets. --------------------------------------- The Company shall not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole (without giving effect to any property or assets of any Unrestricted Subsidiary), in one or more related transactions, to another Person; unless: (1) either: (a) the Company is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia (the "Surviving Entity"); (2) the Surviving Entity (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition shall have been made assumes all the Obligations of the Company under the Notes, this Indenture, the Registration Rights Agreement and the Collateral Documents pursuant to agreements reasonably satisfactory to the Trustee; (3) immediately after such transaction no Default or Event of Default exists; (4) the transaction would not result in the loss, suspension or material impairment of any Gaming License unless a comparable replacement Gaming License is effective prior to or simultaneously with the loss, suspension or material impairment; -75- (5) the Surviving Entity: (a) shall have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction; and (b) shall, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.08(a); (6) the Surviving Entity causes such amendments, supplements or other instruments to be filed and recorded in such jurisdictions as may be required by applicable law to preserve and protect the Lien of the Collateral Documents on the Collateral owned by or transferred to the Surviving Entity, together with such financing statements as may be required to perfect any security interests in such Collateral which maybe perfected by the filing of a financing statement under the UCC of the relevant states; (7) the Collateral owned by or transferred to the Surviving Entity shall: (a) continue to constitute Collateral under this Indenture and the Collateral Documents; (b) be subject to the Lien in favor of the Trustee for its benefit and for the benefit of the Holders, and (c) not be subject to any Lien other than Permitted Liens; (8) the property and assets of the Person which is merged or consolidated with or into the Surviving Entity, to the extent that they are property or assets of the types which would constitute Collateral under the Collateral Documents, shall be treated as After- Acquired Property and the Surviving Entity shall take such action as may be reasonably necessary to cause such property and assets to be made subject to the Lien of the Collateral Documents in the manner and to the extent required in this Indenture; and (9) such transaction would not require any Holder or beneficial owner of Notes to obtain a Gaming License or be qualified or found suitable under the law of any applicable gaming jurisdiction; provided that such Holder or beneficial owner would not have been required to obtain a Gaming License or be qualified or found suitable under the laws of any applicable gaming jurisdiction in the absence of such transaction. SECTION 5.02. Successor Corporation Substituted for the Company. ------------------------------------------------- Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company or any of its the Restricted -76- Subsidiaries in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company or the Restricted Subsidiary is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" or the "Restricted Subsidiary" shall refer instead to the successor corporation and not to the Company or the Restricted Subsidiary), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company or the Restricted Subsidiary herein; provided, however, that the predecessor of the Company shall not be relieved from the Obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's or the Restricted Subsidiary assets that meets the requirements of Section 5.01 hereof. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. Events of Default. ----------------- An "Event of Default" wherever used herein means any one of the following events: (1) default for 30 days in the payment when due of interest on, or Additional Interest, if any, with respect to, the Notes; (2) default in payment when due of the principal of or premium, if any, on the Notes; (3) failure by the Company or any of its Subsidiaries to comply with the provisions described in Section 4.07, 4.08, 4.11, 4.14 or 4.16 or in Article 5; (4) failure by the Company or any of its Subsidiaries for a period of 30 days after notice from the Trustee or Holders of not less than 25% in aggregate principal amount of the Notes then outstanding to comply with any of the other covenants or agreements contained in this Indenture; (5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Company or any of its Subsidiaries (or the payment of which is Guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the Issue Date, if that default: (a) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or -77- (b) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5,000,000 or more; (6) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $5,000,000, which judgments are not paid, discharged or stayed for a period of 60 days; (7) breach by the Company or any Subsidiary Guarantor of any representation or warranty or agreement in the Collateral Documents, the repudiation by the Company or any Subsidiary Guarantor of any of its obligations under the Collateral Documents or the unenforceability or invalidity of the Collateral Documents against the Company or any Subsidiary Guarantor for any reason; (8) any revocation, suspension, expiration without any previous or concurrent renewal, or loss of any Gaming License of the Company or any of its Restricted Subsidiaries for more than 60 days (other than any voluntary relinquishment of a Gaming License if such relinquishment, in the reasonable good faith judgment of the Board of Directors of the Company, evidenced by a Board Resolution, is both desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and would not in any material respect impair the Company's ability to pay principal and interest on the Notes or materially impair the value of the Collateral); (9) the cessation or suspension of any gaming operations of the Company or any of its Restricted Subsidiaries for more than 30 days that, individually or in the aggregate, represent in excess of 5% of the Company's consolidated net revenues for its most recently completed four fiscal quarters for which financial statements are available (other than any voluntary cessation of gaming operations if such cessation, in the reasonable good faith judgment of the Board of Directors of the Company, evidenced by a Board Resolution, is both desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and would not in any material respect impair the Company's ability to pay principal and interest on the Notes or materially impair the value of the Collateral); (10) except as permitted by this Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; (11) any failure to perform or comply with the provisions of Section 3.09 or 4.23 of this Indenture or the Escrow Agreement; (12) the Company or any of its Restricted Subsidiaries pursuant to or within the meaning of any Bankruptcy Law: -78- (a) commences a voluntary case, (b) consents to the entry of an order for relief against it in an involuntary case, (c) consents to the appointment of a Custodian of it or for all or substan- tially all of its property, (d) makes a general assignment for the benefit of its creditors, or (e) generally is not paying its debts as they become due; or (13) a court of competent jurisdiction enters an order or decree under any Bank- ruptcy Law that: (a) is for relief against the Company or any Restricted Subsidiary in an in- voluntary case, (b) appoints a Custodian of the Company or any Restricted Subsidiary or for all or substantially all of the property of the Company or any Restricted Subsidiary, or (c) orders the liquidation of the Company or any Restricted Subsidiary, and the order or decree remains unstayed and in effect for 60 consecutive days. The term "Bankruptcy Law" means the Bankruptcy Code or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. SECTION 6.02. Acceleration. ------------ If an Event of Default (other than an Event of Default specified in clauses (12) and (13) of Section 6.01 relating to the Company or any Significant Subsidiary or group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the then outstanding Notes by written notice to the Company and the Trustee may declare the unpaid principal of and any accrued interest on all the Notes to be due and payable. Upon such declaration the principal, premium, if any, and interest shall be due and payable immediately (together with the premium referred to in Section 6.02, if applicable). If an Event of Default specified in clause (12) or (13) of Section 6.01 relating to the Company or any Significant Subsidiary or group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary occurs, such unpaid principal of, premium, if any, and any accrued interest (together with the premium referred to in Section 6.02, if applicable) on the Notes shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of a majority in principal amount of the then outstanding Notes by written notice to the Trustee may rescind an acceleration and its consequences if the rescission -79- would not conflict with any judgment or decree, the Company has paid or deposited with the Trustee a sum sufficient to pay all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and if all existing Events of Default (except nonpayment of principal or interest that has become due solely because of the acceleration) have been cured or waived. If an Event of Default occurs by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in this Indenture or in the Notes to the contrary notwithstanding; provided that, -------- if such Event of Default occurs prior to February 1, 2006, such premium (expressed as a percentage of principal amount of the Notes) shall equal the interest rate then borne by the Notes. SECTION 6.03. Other Remedies. -------------- If an Event of Default occurs and is continuing, subject to the terms of the Senior In-tercreditor Agreement, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest and Additional Interest, if any, on the Notes or to enforce the performance of any provision of the Notes, this Indenture or the Collateral Documents. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04. Waiver of Past Defaults. ----------------------- Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium or interest, and Additional Interest, if any, on the Notes (including in connection with an offer to purchase) or in respect of a covenant or provision hereof which under Article 9 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 impair any right consequent thereon. SECTION 6.05. Control by Majority. ------------------- Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to -80- follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders or that may involve the Trustee in personal liability. SECTION 6.06. Limitation on Suits. ------------------- A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any cost, loss, liability or expense; (d) the Trustee does not comply with such request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with such request. A Holder of a Note may not use this Indenture or the Collateral Documents to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. SECTION 6.07. Rights of Holders to Receive Payment. ------------------------------------ Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and interest on the Note, and Additional Interest, if any, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder; provided that a Holder shall not have the right to institute any such suit for the enforcement of payment if and to the extent that the institution or prosecution thereof or the entry of judgment therein would, under applicable law, result in the surrender, impairment, waiver or loss of the Lien of this Indenture and the Collateral Documents upon any of the Collateral. SECTION 6.08. Collection Suit by Trustee. -------------------------- If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of and premium and interest and Additional Interest, if any, remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the -81- reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. -------------------------------- The Trustee is authorized to file such proofs of claim and 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 the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to 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 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. 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, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. Priorities. ---------- Subject to the terms of the Senior Intercreditor Agreement, if the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for all amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders for amounts due and unpaid on the Notes for principal and interest, and Additional Interest, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and interest and Additional Interest, if any, respectively; and Third: subject to the Intercreditor Agreements, to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a Record Date and payment date for any payment to Holders pursuant to this Section 6.10. -82- SECTION 6.11. Undertaking for Costs. --------------------- In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Note on or after the respective maturity or payment dates expressed in such Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7 TRUSTEE SECTION 7.01. Duties of Trustee. ----------------- (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its 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: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Collateral Documents and the Trustee need perform only those duties that are specifically set forth in this Indenture and the Collateral Documents and no others, and no implied covenants or Obligations shall be read into this Indenture or the Collateral Documents against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture or the Collateral Documents. However, the Trustee shall examine such certificates and opinions to determine whether or not they conform to the requirements of this Indenture or the Collateral Documents. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; -83- (ii) the Trustee shall not be liable for any error of judgment made in Trustee good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof or in exercising any trust or power conferred upon the Trustee under this Indenture. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to this Section 7.01 and Section 7.02. (e) No provision of this Indenture or the Collateral Documents shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture or the Collateral Documents at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) Upon request from the Company, the Trustee is hereby authorized to and shall enter into the Senior Intercreditor Agreement in connection with the Credit Agreement or any amendment, restatement, supplement, renewal, replacement or other modification thereof, entered into in accordance with the terms of this Indenture, including Section 4.08 hereof. (g) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02. Rights of Trustee. ----------------- (a) In connection with the Trustee's rights and duties under this Indenture or the Collateral Documents, the Trustee may conclusively rely upon and shall be protected from acting or refraining from acting upon any document or instrument believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting under this Indenture or the Collateral Documents, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. 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 from liability in respect of any action taken, suffered or omitted by it hereunder or pursuant to the Collateral Documents in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. -84- (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture or the Collateral Documents. (e) Unless otherwise specifically provided in this Indenture or the Collateral Documents, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture or the Collateral Documents at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) Except with respect to Section 4.01 hereof, the Trustee shall have no duty to inquire as to the performance of the Company's covenants in Article 4 hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except (i) any Event of Default occurring pursuant to Sections 6.01(1), 6.01(2) and 4.01 or (ii) any Default or Event of Default of which the Trustee shall have received written notification or obtained actual knowledge. (h) The Trustee shall not be bound to make any investigation into the facts or matters stated in any Board 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 may, in its discretion, 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. (i) To the extent any provisions of the Collateral Documents conflict with or are silent with respect to the matters set forth in this Article 7, this Article 7 shall be controlling. SECTION 7.03. Individual Rights of Trustee. ---------------------------- The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest (as defined in the TIA) it must eliminate such conflict within 90 days, apply to the Commission for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. Trustee's Disclaimer. -------------------- The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money re- -85- ceived by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. Notice of Defaults. ------------------ If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders. SECTION 7.06. Reports by Trustee to Holders. ----------------------------- Within 60 days after each May 15 beginning with the May 15 following the Issue Date, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders a brief report dated as of such reporting date that complies with TIA (S) 313(a) (but if no event described in TIA (S) 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA (S) 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA (S) 313(c). A copy of each report at the time of its mailing to the Holders shall be mailed to the Company and filed with the Commission and each stock exchange on which the Notes are listed in accordance with TIA (S) 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. SECTION 7.07. Compensation and Indemnity. -------------------------- The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and the Collateral Documents and services rendered by it hereunder and thereunder. The Trustee's compensation shall not be limited by any law in regard to the law of compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee and its officers, directors, employees, agents and affiliates against any and all losses, liabilities or expenses (including reasonable attorneys' fees) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, the Collateral Documents and any landlord waiver or consent, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by -86- the Trustee to so notify the Company shall not relieve the Company of its Obligations hereunder, under the Collateral Documents or under any landlord waiver or consent. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its prior written consent, which consent shall not be unreasonably withheld. The Obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture and the termination of any Collateral Document. To secure the Company's payment Obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money and property held or collected by the Trustee, except money held in trust to pay principal, premium, if any, and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture and the termination of any Collateral Documents. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(1) or 6.01(2) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA 313(b)(2) to the extent applicable. SECTION 7.08. Replacement of Trustee. ---------------------- A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the suc- -87- cessor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers, trusts and duties of the retiring Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger, etc. -------------------------------- If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10. Eligibility; Disqualification. ----------------------------- There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trust power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA (S)310(a)(1), (2) and (5). The Trustee is subject to TIA 310(b). SECTION 7.11. Preferential Collection of Claims Against Company. ------------------------------------------------- The Trustee is subject to TIA 311(a), excluding any creditor relationship listed in TIA 311(b). A Trustee who has resigned or been removed shall be subject to TIA 311(a) to the extent indicated therein. -88- ARTICLE 8 DISCHARGE OF INDENTURE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. Satisfaction and Discharge. -------------------------- This Indenture shall be discharged and shall cease to be of further effect (except as to surviving rights or registration of transfer or exchange of Notes) as to all outstanding Notes when: (1) either (a) all Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation; or (b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or shall become due and payable within one year and the Company or any Subsidiary Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as shall be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and accrued interest and Additional Interest, if any, to the date of maturity or redemption; (2) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit shall not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Subsidiary Guarantor is a party or by which the Company or any Subsidiary Guarantor is bound; (3) the Company or any Subsidiary Guarantor has paid or caused to be paid all sums payable by it under this Indenture; and (4) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or the Redemption Date, as the case may be. In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel stating that all conditions precedent to satisfaction and discharge have been complied with. -89- Notwithstanding the foregoing paragraphs, the Company's Obligations in Article 2 and in Sections 4.01, 4.02, 7.07, 7.08, 8.07 and 8.08 shall survive until the Notes are no longer outstanding. After the Notes are no longer outstanding, the Company's Obligations in Sections 7.07, 8.07 and 8.08 shall survive. After such delivery or irrevocable deposit the Trustee upon request shall acknowledge in writing the discharge of the Company's Obligations under the Notes, the Guarantees and this Indenture except for those surviving Obligations specified above. SECTION 8.02 Option to Effect Legal Defeasance or Covenant Defeasance. -------------------------------------------------------- The Company may, at the option of its Board of Directors evidenced by a Board Resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.03 or 8.04 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. SECTION 8.03. Legal Defeasance and Discharge. ------------------------------ Upon the Company's exercise under Section 8.02 hereof of the option applicable to this Section 8.03, the Company and the Subsidiary Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.05 hereof, be deemed to have been discharged from their Obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company and the Subsidiary Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.06 hereof and the other Sections of this Indenture referred to in (1) and (2) below, and to have satisfied all their other Obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (1) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.05 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, and interest, if any, and Additional Interest, if any, on such Notes when such payments are due, (2) the Company's Obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's Obligations in connection therewith and (4) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.03 notwithstanding the prior exercise of its option under Section 8.04 hereof. SECTION 8.04. Covenant Defeasance. ------------------- Upon the Company's exercise under Section 8.02 hereof of the option applicable to this Section 8.04, the Company and the Subsidiary Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.05 hereof, be released from their Obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.14, 4.15, 4.16, 4.17, 4.18, 4.22, 4.24 and 4.25 hereof with respect to the outstanding Notes on and after the date the conditions set forth below are -90- satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "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 (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to 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 and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.02 hereof of the option applicable to this Section 8.04 hereof, subject to the satisfaction of the conditions set forth in Section 8.05 hereof, the events set forth in Sections 6.01(3) through 6.01(10) hereof shall not constitute Events of Default. SECTION 8.05. Conditions to Legal or Covenant Defeasance. ------------------------------------------ The following shall be the conditions to the application of either Section 8.03 or 8.04 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as shall be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay (without reinvestment) the principal of, premium and interest and Additional Interest, if any, on the outstanding Notes on the stated date for payment thereof or on the applicable Redemption Date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular Redemption Date; (2) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the Issue Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes shall not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and shall 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; (3) in the case of an election under Section 8.04 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes shall not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and shall -91- 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; (4) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which shall be used to defease the Notes pursuant to this Article 8 concurrently with such incurrence) or insofar as Sections 6.01(12) or 6.01(13) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (5) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture, the Notes, the Subsidiary Guarantees and the Registration Rights Agreement) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (6) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that, assuming no intervening bankruptcy of the Company between the date of deposit and the 91st day following the deposit and assuming that no Holder is an "insider" of the Company under applicable bankruptcy law, after 91 days following the deposit, the trust funds shall not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (7) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (8) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. SECTION 8.06. Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions. -------------------------------------------------------------- Subject to Section 8.07 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.06, the "Trustee") pursuant to Section 8.05 hereof in respect of the outstanding Notes shall be held in trust 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 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, premium, if any, and interest, but such money need not be segregated from other funds, except to the extent required by law. -92- The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.05 hereof or the principal and interest received in respect thereof. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.05 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.05(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.07. Repayment to 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 or premium or interest or Additional Interest, if any, on any Note and remaining unclaimed for two years after such principal, and premium, if any, Additional Interest, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a 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 (but shall not be obligated to) 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 shall be repaid to the Company. SECTION 8.08. Reinstatement. ------------- If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.03 or 8.04 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's Obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.03 or 8.04 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.03 or 8.04 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, 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. -93- ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. Without Consent of Holders. -------------------------- Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder to: (a) cure any ambiguity, defect or inconsistency; (b) provide for uncertificated Notes in addition to or in place of certificated Notes; (c) provide for the assumption of the Company's or any Subsidiary Guarantor's Obligations to the Holders in the case of a merger or consolidation pursuant to Articles 5 or 12 hereof or a sale of all or substantially all of the Company's or any Subsidiary Guarantor's assets; (d) provide for additional Subsidiary Guarantors as set forth in Section 4.18 or to provide for the release of a Subsidiary Guarantor pursuant to Section 12.04; (e) make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the rights hereunder of any Holder; or (f) comply with requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA. Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02. With Consent of Holders. ----------------------- Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture and the Collateral Documents and the Notes may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default or compliance with any provision of this Indenture, the Collateral Documents or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). -94- However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (1) reduce the principal amount of Notes whose Holders must consent to amendment, supplement or waiver of this Indenture, the Notes, the Subsidiary Guarantees, the Registration Rights Agreement or the Collateral Documents; (2) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to Sections 4.11, 4.14 and 4.16); (3) reduce the rate of or change the time for payment of interest on any Note; (4) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Additional Interest, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment Default that resulted from such acceleration in accordance with the provisions of Article 6); (5) make any Note payable in money other than that stated in the Notes; (6) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of, or interest or premium or Additional Interest, if any, on the Notes; (7) waive a redemption payment with respect to any Note (other than a payment required by Sections 4.11, 4.14 and 4.16); (8) release any Subsidiary Guarantor from any of its Obligations under its Subsidiary Guarantee or this Indenture, except in accordance with the terms of this Indenture; (9) make any change to the provisions of this Indenture relating to the Special Redemption provided for in Section 3.09 in a way that would adversely affect the rights of any of the Holders; (10) adversely affect the ranking of the Notes; or (11) make any change in the preceding amendment and waiver provisions. Notwithstanding the foregoing, Collateral may be released with the consent of the Holders of at least 75% in aggregate principal amount of the then outstanding Notes in addition to releases of Collateral expressly permitted by this Indenture and the Collateral Documents. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. -95- SECTION 9.03. Compliance with Trust Indenture Act. ----------------------------------- Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents. --------------------------------- Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05. Notation on or Exchange of Notes. -------------------------------- The Trustee may (but shall not be obligated to) place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee upon receipt of an Authentication Order, shall authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. Trustee to Sign Amendments, etc. ------------------------------- The Trustee shall sign any amended or supplemental Indenture or Collateral Document authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture or Collateral Document until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental Indenture or Collateral Document is authorized or permitted by this Indenture. ARTICLE 10 COLLATERAL SECTION 10.01. Collateral Documents; Additional Collateral; Substitute ------------------------------------------------------- Collateral. ---------- (a) Collateral Documents. In order to secure the due and punctual -------------------- payment of the principal or premium, if any, and interest and Additional Interest, if any, on the Notes when and as the -96- same shall be due and payable, whether on an Interest Payment Date, at maturity, on any Asset Sale Offer Payment Date, Excess Loss Proceeds Payment Date or Change of Control Payment Date, or by acceleration, redemption or otherwise, and interest on the overdue principal of and (to the extent permitted by law) interest and Additional Interest, if any, on the Notes and the performance of all other Obligations of the Company and the Subsidiary Guarantors to the Holders or the Trustee under this Indenture, the Notes, the Subsidiary Guarantees, and any other documents contemplated hereby, as the case may be, the Company, the Subsidiary Guarantors and the Trustee, as applicable, have simultaneously with the execution of this Indenture entered into the Collateral Documents to create the security interests and for related matters. The Trustee, the Company and the Subsidiary Guarantors each hereby agree that the Trustee holds its interest in the Collateral in trust for its benefit and for the benefit of the Holders pursuant to the terms of the Collateral Documents. Each of the Company and the Subsidiary Guarantors covenants and agrees that it shall execute, acknowledge and deliver to the Trustee such further assignments, transfers, assurances or other instruments and shall do or cause to be done all such acts and things as may be necessary or proper to assure and confirm to the Trustee its interest in the Collateral, or any part thereof, as from time to time constituted, and the right, title and interest in and to the Collateral Documents so as to render the same available for the security and benefit of this Indenture and of the Notes. (b) Additional Collateral. Concurrently with (i) the designation of a --------------------- Non- Guarantor Restricted Subsidiary as a Subsidiary Guarantor or (ii) the acquisition by the Company or any Restricted Subsidiary of (x) any asset or property in connection with the Pending Acquisitions or (y) any other assets or property of the type which constitutes Collateral with a Fair Market Value (as determined by the Board of Directors of the Company) in excess of $100,000 individually or $250,000 in the aggregate, to the extent, in the case of this clause (y), not prohibited by Gaming Authorities or applicable Gaming Laws: (i) the Company or the applicable Subsidiary Guarantor, as the case may be, and the Trustee shall enter into such amendments or supplements to the Collateral Documents or such additional Mortgages (in each case in registrable or recordable form) and other Collateral Documents, and the Company shall cause such amendments, supplements, mortgages and other Collateral Documents to be filed and recorded in all such governmental offices as shall be necessary in order to grant and create a valid first priority Lien on and security interest in such After-Acquired Property in favor of the Trustee (subject to no Liens except Permitted Liens and, in the case of the Credit Agreement Collateral, subject to the terms of the Senior Intercreditor Agreement), the Company shall cause appropriate financing statements to be filed in such governmental offices as shall be reasonably necessary in order to perfect any security interest in such After-Acquired Property as to which a security interest may, under the UCC of the applicable jurisdiction, be perfected by the filing of a financing statement and, if any such After-Acquired Property consists of stock certificates, promissory notes or other property as to which, under the relevant UCC, a security interest may be perfected by possession or control, deliver such certificates, promissory notes and other property (together with stock powers or assignments duly endorsed in blank), or deliver issuer acknowledgments and control agreements relating to such property in accordance with the provisions of the applicable Collateral Documents to the Trustee; -97- (ii) in the case of additional Collateral which constitutes personal property the Company or the applicable Subsidiary Guarantor, as the case may be, shall also deliver to the Trustee the following: (A) an Opinion of Counsel required pursuant to Section 10.02(b) below; (B) an Officers' Certificate of the Company stating that any specific Liens on such personal property are Permitted Liens; (C) evidence of payment or a closing statement indicating payments to be made of all filing fees, recording charges, transfer taxes and other costs and expenses, including reasonable legal fees and disbursements of counsel for the Trustee (and any local counsel) that may be incurred to validly and effectively subject such personal property to the Lien of any applicable Collateral Document to perfect such Liens; and (D) UCC, judgment, tax lien and intellectual property searches confirming that such personal property is subject to no Liens other than (1) Permitted Liens, (2) in the case of the Credit Agreement Collateral, subject to the terms of the Senior Inter-creditor Agreement and (3) in the case of assets to be acquired in connection with the Pending Acquisitions, Liens that shall be satisfied and released contemporaneously with the release of the funds from the Escrow Account pursuant to the terms of the Escrow Agreement; (iii) in the case of additional Collateral which constitutes Real Property the Company or the applicable Subsidiary Guarantor, as the case may be, shall also deliver to the Trustee the following: (A) a title insurance policy or an endorsement to an existing title insurance policy, in the American Land Title Insurance Loan Policy Extended Coverage form, or its equivalent, and in an amount at least equal to the purchase price thereof (or, if such property was not purchased or such purchase price cannot be determined by the Company, the Fair Market Value thereof as reasonably determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the Trustee), in favor of the Trustee insuring that the Lien of the Collateral Documents or any additional Collateral Documents constitutes a valid and perfected Lien, subject to no Liens except Permitted Liens and, in the case of the Credit Agreement Collateral, subject to the terms of the Senior Intercreditor Agreement, on such Real Property in an aggregate amount equal to the purchase price or the Fair Market Value, as applicable, of the Real Property and containing such endorsements and other assurances of the type reasonably acceptable to the Trustee, together with an Officers' Certificate stating that any Liens on such Real Property are Liens expressly permitted by this Indenture and the applicable Colla teral Documents; (B) any Opinion of Counsel required pursuant to Section 10.02(b) below; (C) a Survey with respect to such Real Property; -98- (D) a policy or certificate of insurance as required by any Mortgage relating to such Real Property, which policy or certificate shall bear mortgagee endorsements of the character required by Section 10.02 of this Indenture; (E) evidence of payment or a closing statement indicating payments to be made by the applicable Subsidiary Guarantor of all title premiums, recording charges, transfer taxes and other costs and expenses including reasonable legal fees and disbursements of counsel for the Trustee (and any local counsel) that may be incurred to validly and effectively subject such Real Property to the Lien of any applicable Colla t-eral Document to perfect such Lien; (F) copies of all Leases, all of which Leases shall be in conformance with any applicable provisions of the Collateral Documents; (G) an Officers' Certificate of the Company stating that there has been issued and is in effect a valid and proper certificate of occupancy or local or foreign equivalent, if required by the local or foreign codes or ordinances for the use then being made of such Real Property and that there is not outstanding any citation, violation or similar notice indicating that such Real Property contains conditions which are not in compliance with local or foreign codes or ordinances relating to building or fire safety or structural soundness; and (H) such consents, approvals, amendments, supplements, estoppels, tenant subordination agreements or other instruments as shall be necessary in order for the owner or holder of the fee interest or leasehold interest to grant the Lien contemplated by the Mortgage with respect to such Real Property; and (iv) The Company shall deliver to the Trustee an Opinion of Counsel and an Officers' Certificate to the effect that the documents that have been or are therewith delivered to the Trustee pursuant to this Section 10.01(b) (including any amendments, supplements, mortgages or other Collateral Documents referred to in paragraph (i) above) conform to the requirements of this Indenture. SECTION 10.02. Recording, Registration and Opinions. ------------------------------------ (a) The Company and the Subsidiary Guarantors shall take or cause to be taken all action required to perfect, maintain, preserve and protect the Lien on and security interest in the Collateral granted by the Collateral Documents (subject only to Permitted Liens), including without limitation, the filing of financing statements, continuation statements, Mortgages and any instruments of further assurance, in such manner and in such places as may be required by law fully to preserve and protect the rights of the Holders and the Trustee under this Indenture and the Collateral Documents to all property comprising the Collateral. The Company and the Subsidiary Guarantors shall from time to time promptly pay all financing, continuation statement and mortgage recording, registration and/or filing fees, charges and taxes relating to this Indenture and the Collateral Documents, any amendments thereto and any other instruments of further assurance required hereunder or pursuant to the Collateral -99- Documents. The Trustee shall have no obligation to, nor shall it be responsible for any failure to, so register, file or record. (b) The Company shall furnish to the Trustee, promptly but in no event later than 30 days after the execution and delivery of this Indenture, Opinion(s) of Counsel required by TIA (S) 314(b)(1). (c) The Company shall furnish to the Trustee on the anniversary of the Issue Date in each year, beginning with 2003, an Opinion of Counsel, dated as of such date, which complies with TIA (S) 314(b)(2), either (i)(x) stating that, in the opinion of such counsel, such action has been taken with respect to the recordings, registrations, filings, re-recordings, re-registrations and refilings of this Indenture and all supplemental indentures, financing statements, continuation statements and other instruments of further assurance as are necessary to maintain the perfected Liens of the Collateral Documents under the UCC or the applicable law in those items of Collateral that can be perfected by the filing, recordings or registrations and reciting with respect to such Liens on and security interests in the Collateral the details of such action or referring to prior Opinions of Counsel in which such details are given, and (y) stating that, based on relevant laws as in effect on the date of such Opinion of Counsel, all financing statements, continuation statements, Mortgage and other documents have been executed and filed that are necessary, as of such date and during the succeeding 12 months, fully to maintain the perfection of the security interests of the Holders and the Trustee hereunder and under the Collateral Documents with respect to the Collateral; provided that if there is a required filing of a continuation statement or other instrument within such 12 month period and such continuation statement or other instrument is not effective if filed at the time of the opinion, such opinion may so state and in that case the Company shall cause a continuation statement or other instrument to be timely filed so as to maintain such Liens and security interests and shall provide a further Opinion of Counsel to the effect of this clause (i) upon the filing of the relevant continuation statement or other instrument; or (ii) stating that, in the opinion of such counsel, no such action is necessary to maintain such Liens or security interests. SECTION 10.03. Release of Collateral. --------------------- (a) The Trustee shall not at any time release Collateral from the Liens created by this Indenture and the Collateral Documents unless such release is in accordance with the provisions of this Indenture and the Collateral Documents. (b) Anything herein to the contrary notwithstanding, at any time when an Event of Default shall have occurred and be continuing, no release of Collateral pursuant to the provisions of this Indenture or the Collateral Documents shall be effective as against the Holders. (c) The release of any Collateral from the Lien of the Collateral Documents shall not be deemed to impair the security under this Indenture in contravention of the provisions hereof if and to the extent the Collateral is released pursuant to this Indenture and the Collateral Documents. To the extent applicable, the Company shall comply with (S) 313(b)(1) and TIA (S) 314(d) relating to the release of property from the Lien of the Collateral Documents and relating to the substitution therefor of any property to be subjected to the Lien of the Collateral Documents. Any certificate or opinion re- -100- quired by TIA (S) 314(d) may be made by an Officer of the Company, except in cases where TIA (S) 314(d) requires that such certificate or opinion be made by an independent person, which person shall be an independent engineer, appraiser or other expert selected by the Company. SECTION 10.04. Possession and Use of Collateral. -------------------------------- Subject to and in accordance with the provisions of this Indenture and the Collateral Documents, so long as the Trustee has not exercised rights or remedies with respect to the Collateral in connection with an Event of Default that has occurred and is continuing, the Company and the Subsidiary Guarantors shall have the right to remain in possession and retain exclusive control of and to exercise all rights with respect to the Collateral (other than Trust Monies held by the Trustee, other monies or Government Securities deposited pursuant to Article 8, and other than as set forth in the Collateral Documents and this Indenture), to operate, manage, develop, lease, use, consume and enjoy the Colla t-eral (other than Trust Monies held by the Trustee, other monies and Government Securities deposited pursuant to Article 8 and other than as set forth in the Collateral Documents and this Indenture), to alter or repair any Collateral so long as such alterations and repairs do not impair the Lien of the Colla t-eral Documents thereon and to collect, receive, use, invest and dispose of the reversions, remainders, interest, rents, lease payments, issues, profits, revenues, proceeds and other income thereof. SECTION 10.05. Specified Releases of Collateral. -------------------------------- (a) Satisfaction and Discharge; Defeasance. The Company and the -------------------------------------- Subsidiary Guarantors shall be entitled to obtain a full release of all of the Collateral from the Liens of this Indenture and of the Collateral Documents upon payment in full of all principal, premium, if any, interest and Additional Interest, if any, on the Notes and of all Obligations for the payment of money due and owing to the Trustee or the Holders, or upon compliance with the conditions precedent set forth in Article 8 for Legal Defeasance or Covenant Defeasance. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel, each to the effect that such conditions precedent have been complied with (and which may be the same Officers' Certificate and Opinion of Counsel required by Article 8), together with such documentation, if any, as may be required by the Trustee or the TIA (including, without limitation, TIA (S) 314(d)) prior to the release of such Colla teral, the Trustee shall forthwith take all necessary action (at the request of and the expense of the Company) to release and reconvey to the Company and the applicable Subsidiary Guarantors without recourse all of the Colla t-eral, and shall deliver such Collateral in its possession to the Company and the applicable Subsidiary Guarantors including, without limitation, the execution and delivery of releases and satisfactions wherever required. (b) Dispositions of Collateral in Connection with Asset Sales. The --------------------------------------------------------- Company and each of the Subsidiary Guarantors, as the case may be, shall be entitled to obtain a release of, and the Trustee shall release, items of Collateral (other than Trust Monies, excluding Trust Monies constituting Net Proceeds from an Asset Sale, which Trust Monies are subject to release from the Lien of the Collateral Documents as provided under Article 11) (the "Released Collateral") subject to an Asset Sale upon compliance with the conditions precedent that the Company shall have delivered to the Trustee the following: -101- (i) A notice from the Company requesting release of Released Collateral (a "Company Notice"), such Company Notice (A) specifically describing the proposed Released Collateral, (B) specifying the Fair Market Value of such Released Collateral on a date within 60 days of the Company Notice (the "Valuation Date"), (C) stating that the consideration to be received is at least equal to the Fair Market Value of the Released Collateral, (D) stating that the release of such Released Collateral shall not materially and adversely impair the value of the remaining Collateral, taken as a whole, or interfere with or impede the Trustee's ability to realize the value of the remaining Collateral and shall not impair the maintenance and operation of the remaining Collateral, (E) confirming the sale of, or an agreement to sell, such Released Collateral in a bona fide sale to a Person that is not an Affiliate of the Company or, in the event that such sale is to a Person that is an Affiliate of the Company, confirming that such sale is being made in accordance with Section 4.24, (F) certifying that such Asset Sale complies with the terms and conditions of this Indenture, including, without limitation, Section 4.11 hereof, (G) in the event that there is to be a substitution of property for the Collateral subject to the Asset Sale, specifying the property intended to be substituted for the Collateral to be disposed of and (H) accompanied by a counterpart of the instruments proposed to give effect to the release fully executed and acknowledged (if applicable) by all parties thereto other than the Trustee; (ii) An Officers' Certificate certifying that (A) such sale covers only the Released Collateral and complies with the terms and conditions of this Indenture, including, without limitation, Section 4.11 hereof, (B) all Net Proceeds from the sale of any of the Released Colla t-eral shall be deposited in the Collateral Account, and all Net Proceeds from the sale of any of the Released Collateral have been or will be applied pursuant to Section 4.11, (C) there is not, and shall not be, a Default or Event of Default in effect or continuing on the date thereof, the Valuation Date or the date of such Asset Sale, (D) the release of the Released Collateral shall not result in a Default or Event of Default hereunder and (E) all conditions precedent in this Indenture and the Collateral Documents to such release have been complied with; (iii) The Net Proceeds and other property received as consideration from the Asset Sale shall be delivered to the Trustee, together with such instruments of conveyance, assignment and transfer, if any, as may be necessary, in the Opinion of Counsel, to subject to the Lien of this Indenture and the Collateral Documents all the right, title and interest of the Company and the Subsidiary Guarantors in and to such property; (iv) All documentation required by the TIA (including, without limitation, TIA 314(d)), if any, prior to the release of Collateral by the Trustee, and, in the event there is to be a substitution of property for the Collateral subject to the Asset Sale, all documentation required by the TIA to effect the substitution of such new Collateral and to subject such new Collateral to the Lien of the relevant Collateral Documents, and all documents required by Section 10.01 hereof; (v) An Opinion of Counsel stating that the documents that have been or are therewith delivered to the Trustee in connection with such release conform to the requirements of this Indenture and (i) that any obligation included in the consideration for any Released Collateral and to be received by the Trustee pursuant to Section 11.04(d) is a valid and binding ob- -102- ligation enforceable in accordance with its terms subject to such customary exceptions regarding equitable principles, creditors' rights generally and bankruptcy as shall be reasonably acceptable to the Trustee in its sole judgment, and is effectively pledged under the Collateral Documents, (ii) that any Lien granted by a purchaser to secure a purchase money Obligation is a fully perfected Lien and such instrument granting such Lien is enforceable in accordance with its terms, (iii) either (x) that such instruments of conveyance, assignment and transfer as have been or are then delivered to the Trustee are sufficient to subject to the Lien of the Collateral Documents all the right, title and interest of the Company in and to any property that is included in the consideration for the Released Collateral and is to be received by the Trustee pursuant to Section 11.04(d), or (y) that no instruments of conveyance, assignment or transfer are necessary for such purpose, (iv) that the Company has corporate power to own all property included in the consideration for such release, and (v) that all conditions precedent herein and under any of the Collateral Documents relating to the release of such Collateral have been complied with; and (vi) If the Collateral to be released is (i) only a portion of a discrete parcel of Real Property, an Opinion of Counsel confirming that after such release, the Lien of the applicable Mortgage continues unimpaired as a first priority perfected Lien upon the remaining Mortgaged Property subject only to those Liens permitted by the applicable Mortgage; and (ii) Mortgaged Property having a fair value in excess of $100,000, the Company shall have delivered to the Trustee a Survey depicting the Real Property to be released. Upon compliance by the Company with the conditions precedent set forth above, the Trustee shall cause to be released and reconveyed to the Company or the applicable Subsidiary Guarantor the Released Collateral without recourse by executing a release in the form provided by the Company or the applicable Subsidiary Guarantor and reasonably acceptable to the Trustee. (c) Release of Collateral in Connection with Events of Loss. ------------------------------------------------------- The Company and the Subsidiary Guarantors, as the case may be, shall be entitled to obtain a release of, and the Trustee shall release, items of Collateral (other than Trust Monies, excluding Trust Monies constituting Net Loss Proceeds from an Event of Loss, which Trust Monies are subject to release from the Lien of the Collateral Documents as provided under Article 11) subject to an Event of Loss, upon compliance with the conditions precedent that the Company shall have delivered to the Trustee the following: (i) an Officers' Certificate of the Company certifying that (A) such Collateral is the subject of an Event of Loss and the amount of the Net Loss Proceeds, and (B) all conditions precedent to such release have been complied with; (ii) the Net Loss Proceeds to be held as Trust Monies subject to the disposition thereof pursuant to Article 11; (iii) all documentation required by the TIA (including, without limitation, TIA 314(d)), if any, prior to the release of Collateral by the Trustee; and -103- (iv) an Opinion of Counsel substantially to the effect: (1) if applicable, that such property has been taken by eminent domain, or has been sold pursuant to the exercise of a right vested in a governmental authority to purchase, or to designate a purchaser or order a sale of, such property; (2) in the case of a taking by eminent domain, that the award for the property so taken has become final and that an appeal from such award is not advisable in the interests of the Company or the Holders; (3) in the case of any such sale pursuant to the exercise of a right vested in a governmental authority referred to in subclause (1) above, that the payment with respect to the property so sold is not less than the amount to which the Company is legally entitled under the terms of such right to purchase or designate a purchaser, or under the order or orders directing such sale, as the case may be; and (4) that the instrument or instruments and the award or payment of such Taking which have been or are therewith delivered to and deposited with the Trustee conform to the requirements of this Indenture and the applicable Collateral Documents and that, upon the basis of such application, the Trustee is permitted by the terms hereof and of the Collateral Documents to execute and deliver the release requested, and that all conditions precedent herein and in the Collateral Documents provided for relating to such release have been complied with. In any proceedings for the taking of any part of the Collateral, the Trustee may be represented by counsel who may be counsel for the Company or the applicable Subsidiary Guarantor. Upon compliance by the Company with the conditions precedent set forth above, the Trustee shall cause to be released and reconveyed to the Company or the applicable Subsidiary Guarantor without recourse the aforementioned items of Collateral which are the subject of such Event of Loss by executing a release in the form provided by the Company or the applicable Subsidiary Guarantor. SECTION 10.06. Disposition of Collateral Without Release. ----------------------------------------- Notwithstanding the provisions of Section 10.05 and subject to Sections 10.07 and 13.01 below, so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom, the Company or any Subsidiary Guarantors may, without any prior release or consent by the Trustee: (i) sell or otherwise dispose in any transaction or series of related transactions of any property that may be defective or may have become worn out, defective or obsolete or is not used or useful in the operation of the Company or any Subsidiary Guarantor and which has an aggregate Fair Market Value of such property of $50,000 or less which is replaced by property of substantially equivalent or greater value which shall become subject to the Lien of the Collateral Documents pursuant to Section 10.01 hereof; -104- (ii) alter, repair, replace, change the location or position of and add to its plants, structures, machinery, systems, Equipment, fixtures and appurtenances; provided, however, that no change in the location of any such Collateral subject to the Lien of any of the Collateral Documents shall be made which (1) removes such property into a jurisdiction in which any instrument required by law to perfect the Lien of any of the relevant Collateral Document on such property, including all necessary instruments of further assurance, has not been recorded, registered or filed in the manner required by law to continue the perfection of the Lien of any of the Collateral Documents on such property, (2) does not comply with the terms of this Indenture and the Collateral Documents or (3) otherwise impairs the Lien of the Collateral Documents; (iii) subject to the provisions of the Collateral Documents, abandon, terminate, cancel, release or make alterations in or substitutions of any leases, contracts or rights-of-way subject to the Lien of the Collateral Documents; provided, however, that (a) any altered or substituted leases, contracts or rights-of-way shall forthwith, without further action, be subject to the Lien of the Collateral Documents to the same extent as those previously existing and (b) if the Company or the relevant Subsidiary Guarantor shall receive any money or property in excess of the Company's or the relevant Subsidiary Guarantor's expenses in connection with such termination, cancellation, release, alteration or substitution as consideration or compensation for such termination, cancellation, release, alteration or substitution, such money or property, to the extent it exceeds $100,000 (in which case all of the money and property so received and not just the portion in excess of $100,000 shall be subject to this clause), forthwith upon its receipt by such entity, shall be deposited with the Trustee (unless otherwise required by a Permitted Lien permitted under the applicable Collateral Documents) as Trust Monies subject to disposition as provided in Article 11 hereof or otherwise subjected to the Lien of the Collateral Documents; (iv) grant a non-exclusive license of any Intelle ctual Property; (v) abandon any Intellectual Property that the Company or the relevant Subsidiary Guarantor, in its reasonable business judgment, concludes is no longer used or useful in any material respect in the conduct of the business of Company or the relevant Subsidiary Guarantor; (vi) surrender or modify any franchise, license or permit subject to the Lien of any of the Collateral Documents which it may own or under which it may be operating if the Company or the relevant Subsidiary Guarantor in its reasonable business judgment concludes that such franchise, license or permit is no longer used or useful in the conduct of the business of the Company or the relevant Subsidiary Guarantor and provided, further, that if such entity shall be entitled to receive any money or property in excess of such entity's expenses in connection with such surrender or modification as consideration or compensation for such surrender or modification, such money or property, to the extent that it exceeds $100,000 (in which case all of the money and property so received and not just the portion in excess of $100,000 shall be subject to this clause), forthwith upon its receipt by such entity, shall be deposited with the Trustee (unless otherwise required by a Permitted Lien) as Trust Monies subject to dispo- -105- sition as provided in Article 11 hereof, or otherwise subjected to the Lien of the Collateral Documents; (vii) subject to the provisions of the Collateral Documents, grant leases or subleases in respect of any Real Property in the event that the Company or the relevant Subsidiary Guarantor determines, in its reasonable business judgment, that such Real Property is no longer useful in the conduct of such entity's business and such leases or subleases do not materially interfere with the ordinary course of business of the Company and its Subsidiaries and do not materially affect the value of the property subject thereto; provided, however, that any such lease or sublease shall by its terms be subject and subordinate to the Lien, and otherwise comply with the provisions, of the Mortgage affecting such Real Property; and (viii) subject to the Collateral Documents, sell or otherwise dispose of inventory and modify, extend or renew, or compromise or settle any dispute or claim relating to, or sell any account, in each case in the ordinary course of business consistent with prudent business practice. SECTION 10.07. Form and Sufficiency of Release. ------------------------------- In the event that the Company or any Subsidiary Guarantor has sold, exchanged, or otherwise disposed of or proposes to sell, exchange or otherwise dispose of any portion of the Colla t-eral that under the provisions of Section 10.05 or 10.06 may be sold, exchanged or otherwise disposed of by the Company or any Subsidiary Guarantor, and the Company or such Subsidiary Guarantor requests the Trustee to furnish a written disclaimer, release or quitclaim of any interest in such property under this Indenture, the applicable Subsidiary Guarantee and the Collateral Documents, upon being satisfied that the Company or such Subsidiary Guarantor is selling, exchanging or otherwise disposing of the Collateral in accordance with the provisions of Section 10.05 or 10.06 (which, in the case of Section 10.06, shall include receipt of (i) an Officers' Certificate by the Company or such Subsidiary Guarantor reciting the sale, exchange or other disposition made or proposed to be made and describing in reasonable detail the property affected thereby, and stating that such property is property which by the provisions of Section 10.06 may be sold, exchanged or otherwise disposed of or dealt with by the Company or such Subsidiary Guarantor without any release or consent of the Trustee and (ii) an Opinion of Counsel stating that the sale, exchange or other disposition made or proposed to be made was duly taken by the Company or such Subsidiary Guarantor in conformity with a designated subsection of Section 10.06 and that the execution and form of such written disclaimer, release or quit-claim is appropriate under this Section 10.07), the Trustee shall execute, acknowledge and deliver to the Company or such Subsidiary Guarantor such an instrument in the form provided by the Company, and providing for release without recourse, promptly after satisfaction of the conditions set forth herein for delivery of any such release and shall take such other action as the Company or such Subsidiary Guarantor may reasonably request and as necessary to effect such release. Notwithstanding the preceding sentence, all purchasers and grantees of any property or rights purporting to be released shall be entitled to rely upon any release executed by the Trustee hereunder as sufficient for the purpose of this Indenture and as constituting a good and valid release of the property therein described from the Lien of this Indenture and of the Collateral Documents. -106- SECTION 10.08. Purchaser Protected. ------------------- No purchaser or grantee of any property or rights purporting to be released shall be bound to ascertain the authority of the Trustee to execute the release or to inquire as to the existence of any conditions herein prescribed for the exercise of such authority. SECTION 10.09. Authorization of Actions to Be Taken by the Trustee Under the Collateral Documents. ----------------------------------------------------------------- Subject to the provisions of the Collateral Documents: (a) the Trustee may, in its sole discretion and without the consent of the Holders, take all actions it deems necessary or appropriate in order to (i) enforce any of the terms of the Collateral Documents and (ii) collect and receive any and all amounts payable in respect of the obligations of the Company and the Subsidiary Guarantors hereunder and under the Collateral Documents; and (b) the Trustee shall have power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any act that may be unlawful or in violation of the Collateral Documents or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Holders in the Collateral (including the power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest thereunder or be prejudicial to the interests of the Holders or of the Trustee). SECTION 10.10. Authorization of Receipt of Funds by the Trustee Under the Collateral Documents. ----------------------------------------------------------------- The Trustee is authorized to receive any funds for the benefit of Holders distributed under the Collateral Documents, to apply such funds as provided in this Indenture and the Collateral Documents, and to make further distributions of such funds to the Holders in accordance with the provisions of Article 11 and the other provisions of this Indenture. SECTION 10.11. Powers Exercisable by Receiver or Trustee. ----------------------------------------- In case the Collateral shall be in the possession of a receiver or trustee, lawfully appointed, the powers conferred in this Article 10 upon the Company or any Subsidiary Guarantor, as applicable, with respect to the release, sale or other disposition of such property may be exercised by such receiver or trustee, and an instrument signed by such receiver or trustee shall be deemed the equivalent of any similar instrument of the Company or any Subsidiary Guarantor, as applicable, or of any officer or officers thereof required by the provisions of this Article 10. -107- ARTICLE 11 APPLICATION OF TRUST MONIES SECTION 11.01. Collateral Account. ------------------ On the Issue Date there shall be established and, at all times hereafter until this Indenture shall have terminated, there shall be maintained with the Trustee the Collateral Account. The Collateral Account shall be established and maintained by the Trustee at its Corporate Trust Office. All Trust Monies which are received by the Trustee shall, subject to the terms of the Senior Inter-creditor Agreement with respect to the Credit Agreement Collateral, be deposited in the Collateral Account and thereafter shall be held by and under the sole dominion and control of the Trustee for its benefit and for the benefit of the Holders as a part of the Collateral and, upon any entry upon or sale or other disposition of the Collateral or any part thereof pursuant to any of the Collateral Documents, said Trust Monies shall be applied in accordance with Section 6.10; but prior to any such entry, sale or other disposition, all or any part of the Trust Monies held by the Trustee may be withdrawn, and shall be released, paid or applied by the Trustee in accordance with the terms of this Article. SECTION 11.02. Withdrawal of Loss Proceeds. --------------------------- To the extent that any Trust Monies consist of Net Loss Proceeds, such Trust Monies may be withdrawn by the Company and shall be paid by the Trustee upon a Company Request delivered to the Trustee to reimburse the Company or the applicable Subsidiary Guarantor for expenditures made, or to pay costs incurred, by the Company or such Subsidiary Guarantor in connection with the repair, rebuilding or replacement of the Collateral destroyed, damaged or taken, upon receipt by the Trustee of the following: (a) An Officers' Certificate, dated not more then 30 days prior to the date of the application for the withdrawal and payment of such Trust Monies setting forth: (i) that expenditures have been made, or costs incurred by the Company or such Subsidiary Guarantor, as the case may be, in a specified amount in connection with certain repairs, rebuildings and replacements of the Collateral, which shall be briefly described, and stating the Fair Market Value thereof to the Company or such Subsidiary Guarantor at the date of the acquisition thereof by the Company or such Subsidiary Guarantor; (ii) that no part of such expenditures or costs has been or is being made the basis for the withdrawal of any Trust Monies in any previous or then pending application pursuant to this Section 11.02; (iii) that no part of such expenditures or costs has been paid out of the proceeds of insurance upon any part of the Collateral not required to be paid to the Trustee under the Collateral Documents; -108- (iv) that there is no outstanding Indebtedness, other than costs for which payment is being requested, known to the Company, after due inquiry, for the purchase price or construction of such repairs, rebuildings or replacements, or for labor, wages, materials or supplies in connection with the making thereof, which, if unpaid, might become the subject of a vendor's, mechanic's, laborer's, materialman's, statutory or other similar Lien upon any such repairs, rebuildings or replacement, which Lien might, in the opinion of the signers of such Officers' Certificate, materially impair the security afforded by such repairs, rebuildings or replacements; (v) that the property to be repaired, rebuilt or replaced is necessary or desirable in the conduct of the Company's or such Subsidiary Guarantor's business; (vi) that the Company or such Subsidiary Guarantor has title to such repairs, rebuildings and replacements that is substantially similar to its title to the property destroyed, damaged or taken and that any Liens upon such repairs, rebuildings and replacements are expressly permitted by this Indenture and the applicable Collateral Documents; (vii) that no Default or Event of Default shall have occurred and be continuing; and (viii) that all conditions precedent herein provided for relating to such withdrawal and payment have been complied with; (b) All documentation required under the TIA (including, without limitation, TIA (S) 314(d)); (c) (i) In case any part of such repairs, rebuildings or replacements constitutes Real Property: (A) with respect to any such repairs, rebuildings or replacements that are not encompassed within or are not erected upon Mortgaged Property, an instrument or instruments in recordable form sufficient for the Lien of any applicable Mortgage to cover such repairs, rebuildings or replacements which, if such repairs, rebuildings or replacements include leasehold or easement interests, shall include normal and customary provisions with respect thereto and evidence of the filing of all such documents as may be necessary to perfect such Liens; (B) in the event such repairs, rebuildings or replacements have a Fair Market Value in excess of $100,000, a policy of title insurance (or a commitment to issue title insurance) insuring that the Lien of any applicable Mortgage constitutes a valid and perfected mortgage Lien on such repairs, rebuildings or replacements to the extent that such repairs, rebuildings or replacements extend beyond the exterior configuration of any improvement (subject to no Liens other than Permitted Liens) in an aggregate amount equal to the Fair Market Value of such repairs, rebuildings or replacements or other investments, together with such endorsements and other opinions as are contem- -109- plated by Section 10.01(b), or with respect to any such repairs, rebuildings or replacements that are encompassed within or are erected upon Real Property subject to the Lien of a Mortgage, an endorsement to the title insurance policy issued pursuant to Section 10.01(b) regarding the affected Real Property confirming that such repairs, rebuildings or replacements are encumbered by the Lien of the applicable Mortgage (subject to no Liens other than Permitted Liens); (C) in the event such repairs, rebuildings or replacements have a Fair Market Value in excess of $100,000 and affect the exterior configuration of an improvement, a Survey with respect thereto; and (D) evidence of payment or a closing statement indicating payments to be made by the Company or the applicable Subsidiary Guarantor of all title insurance premiums, recording charges, and/or transfer taxes, if any, and other costs and expenses, including reasonable legal fees and disbursements of counsel for the Trustee (and any local counsel), that may be incurred to validly and effectively subject such repairs, rebuildings or replacements to the Lien of any applicable Collateral Document to perfect such Lien; and (ii) in case any part of such repairs, rebuildings or replacements constitutes personal property interests: (A) an instrument in recordable form sufficient for the Lien of any applicable Collateral Document to cover such repairs, rebuildings or replacements; and (B) evidence of payment or a closing statement indicating payments to be made by the Company or the applicable Subsidiary Guarantor of all filing fees, recording charges and/or transfer taxes, if any, and other costs and expenses, including reasonable legal fees and disbursements of counsel for the Trustee (and any local counsel), that may be incurred to validly and effectively subject such repairs, rebuildings or replacements to the Lien of any Collateral Document; and (d) An Opinion of Counsel substantially stating: (i) that the instruments that have been or are therewith delivered to the Trustee conform to the requirements of this Indenture and the other Collateral Documents, and that, upon the basis thereof and the accompanying documents specified in this Section 11.02, all conditions precedent herein provided for relating to such withdrawal and payment have been complied with, and the Trust Monies whose withdrawal is then requested may be paid over under this Section 11.02; (ii) that the relevant Collateral Documents create a valid, binding and enforceable Lien on and security interest in such repairs, rebuildings and replacements in favor of the Trustee in favor of the Holders and, to the extent that a security interest in any such property may be perfected under the relevant UCC, a perfected security interest in such property; and -110- (iii) that all the Company's or such Subsidiary Guarantor's right, title and interest in and to said repairs, rebuilding or replacements, or combination thereof are then subject to the Lien of this Indenture and the relevant Collateral Documents. Upon compliance with the foregoing provisions of this Section 11.02 and Section 11.01, the Trustee shall, upon receipt of a Company request, pay an amount of Net Loss Proceeds constituting Trust Monies equal to the amount of the expenditures or costs stated in the Officers' Certificate required by clause (i) of paragraph (a) of this Section 11.02, or the Fair Market Value to the Company or the applicable Subsidiary Guarantor of such repairs, rebuildings and replacements stated in such Officers' Certificate (or in an independent appraiser's or independent financial advisor's certificate, if required by the TIA), whichever is less. SECTION 11.03. Withdrawal of Net Proceeds to Fund an Asset Sale Offer. ------------------------------------------------------ To the extent that any Trust Monies consist of Net Proceeds received by the Trustee pursuant to the provisions of Section 4.11 hereof and an Asset Sale Offer has been made in accordance therewith, such Trust Monies may be withdrawn by the Company and shall be paid by the Trustee to the Paying Agent for application in accordance with Section 4.11 upon a Company Notice to the Trustee and upon receipt by the Trustee of the following: (a) An Officers' Certificate, dated not more than three days prior to the Asset Sale Offer Payment Date stating: (i) that no Default or Event of Default shall have occurred and be continuing; (ii) (x) that such Trust Monies constitute Net Proceeds, (y) that pursuant to and in accordance with Section 4.11, the Company has made an Asset Sale Offer and (z) the amount of Excess Proceeds to be applied to the repurchase of the Notes pursuant to the Asset Sale Offer; (iii) the Asset Sale Offer Payment Date; and (iv) that all conditions precedent and covenants herein provided for relating to such application of Trust Monies have been complied with; and (b) All documentation, if any, required under TIA (S) 314(d). Upon compliance with the foregoing provisions of this Section 11.03, the Trustee shall apply the Trust Monies as directed and specified by such Company Notice, subject to Section 4.11. SECTION 11.04. Withdrawal of Trust Monies for Investment in Replacement Assets. --------------------------------------------------------------- In the event the Company intends to reinvest Net Proceeds of an Asset Sale in Replacement Assets (the "Released Trust Monies"), such Net Proceeds constituting Trust Monies may -111- be withdrawn by the Company and shall be paid by the Trustee to the Company upon a Company Notice to the Trustee and upon receipt by the Trustee of the following: (a) a Notice signed by the Company which shall (i) refer to this Section 11.04, (ii) contain all documents referred to below, (iii) describe with particularity the Released Trust Monies, (iv) describe with particularity the Replacement Assets to be invested in with respect to the Released Trust Monies and (v) be accompanied by a counterpart of the instruments proposed to give effect to the release fully executed and acknowledged (if applicable) by all parties thereto other than the Trustee; (b) An Officers' Certificate certifying that (i) such Trust Monies constitute Net Proceeds, (ii) the release of the Released Trust Monies complies with the terms and conditions of this Indenture, (iii) there is no Default or Event of Default (both before and after investing in the Replacement Asset) in effect or continuing on the date thereof, (iv) the release of the Released Trust Monies shall not result in a Default or Event of Default hereunder and (v) all conditions precedent herein to such release have been complied with; (c) All documentation required under the TIA (including, without limitation, TIA (S) 314(d)); (d) If the Replacement Asset proposed for investment is Real Property, the Company or the appropriate Subsidiary Guarantor shall also deliver to the Trustee: (i) an instrument or instruments in recordable form sufficient for the Lien of any applicable Mortgage to cover such Real Property which, if the Real Property is a leasehold or easement interest, shall include normal and customary provisions with respect thereto and evidence of the filing of all such financing statements and other instruments as may be necessary to perfect such Liens; (ii) a policy of title insurance (or a commitment to issue title insurance) insuring that the Lien of any applicable Mortgage constitutes a valid and perfected mortgage Lien on such Real Property (subject to no Liens other than Permitted Liens) in an aggregate amount equal to the Fair Market Value of the Real Property, together with an Officers' Certificate stating that any specific exceptions to such title insurance are Permitted Liens, together with such endorsements and other opinions as are contemplated by Section 10.02(b); (iii) in the event the Fair Market Value of the Real Property is in excess of $100,000, a Survey with respect thereto; and (iv) evidence of payment or a closing statement indicating payments to be made by the Company or the appropriate Subsidiary Guarantor of all title premiums, recording charges, and/or transfer taxes, if any, and other costs and expenses, including reasonable legal fees and disbursements of one counsel for the Trustee (and any local counsel), that may be incurred to validly and effectively subject the Real Property to the Lien of any applicable Collateral Document to perfect such Lien; -112- (e) If the Replacement Asset is a personal property interest, the Company or the appropriate Subsidiary Guarantor shall deliver to the Trustee: (i) financing statements and other instruments in form sufficient to perfect the Lien of any applicable Collateral Document on such personal property interest; and (ii) evidence of payment or a closing statement indicating payments to be made by the Company or the appropriate Subsidiary Guarantor of all filing fees, recording charges and/or transfer taxes, if any, and other costs and expenses, including reasonable legal fees and disbursements of one counsel for the Trustee (and any local counsel), that may be incurred to validly and effectively subject the Replacement Asset to the Lien of any Collateral Document; and (f) An Opinion of Counsel stating: (i) that the documents that have been or are therewith delivered to the Trustee in connection with an investment in Replacement Assets conform to the requirements of this Indenture and that all conditions precedent herein provided for relating to such application of Trust Monies have been complied with; and (ii) to the extent that such Replacement Assets were acquired with Net Proceeds, the relevant Collateral Documents create a valid, binding and enforceable Lien, subject only to Permitted Liens, on and security interest in such Replacement Assets in favor of the Trustee for the benefit of the Holders and, to the extent that a security interest in any such Replacement Assets may be perfected under the relevant UCC, a perfected security interest in such property. Upon compliance with the foregoing provisions, the Trustee shall apply the Released Trust Monies as directed and specified by the Company. SECTION 11.05. Investment of Trust Monies. -------------------------- So long as no Default or Event of Default shall have occurred and be continuing, all or any part of any Trust Monies held by the Trustee shall from time to time be invested or reinvested by the Trustee in any Cash Equivalents pursuant to a Company request in the form of an Officers' Certificate, which shall specify the Cash Equivalents in which such Trust Monies shall be invested and shall certify that such investments constitute Cash Equivalents and the Trustee shall sell any such Cash Equivalent only upon receipt of such a Company request specifying the particular Cash Equivalent to be sold. So long as no Default or Event of Default occurs and is continuing, any interest or dividends accrued, earned or paid on such Cash Equivalents (in excess of any accrued interest or dividends paid at the time of purchase) that may be received by the Trustee shall be forthwith paid to the Company. Such Cash Equivalents shall be held by the Trustee as a part of the Collateral, subject to the same provisions hereof as the cash used by it to purchase such Cash Equivalents. -113- The Trustee shall not be liable or responsible for any loss resulting from such investments or sales except only for its own negligent action, its own negligent failure to act or its own willful misconduct in complying with this Section 11.05. SECTION 11.06. Use of Trust Monies; Retirement of Notes. ---------------------------------------- The Trustee shall apply Trust Monies not required to be applied to fund an Asset Sale Offer or Event of Loss Offer or required to be held pending application to the acquisition of Replacement Assets from time to time to the payment of the principal of, premium, and interest on, any Notes, on any Redemption Date or the Maturity Date or to the redemption thereof or the purchase thereof upon tender or in the open market or at private sale or upon any exchange or in any one or more of such ways, including, without limitation, pursuant to a Change of Control Offer, as the Company shall request in writing, upon receipt by the Trustee of the following: (a) Board Resolutions of the Company directing the application pursuant to this Section 11.06 of a specified amount of Trust Monies and, in case any such monies are to be applied to payment, designating the Notes so to be paid and, in case any such monies are to be applied to the purchase of Notes, prescribing the method of purchase, the price or prices to be paid and the maximum aggregate principal amount of Notes to be purchased and any other provisions of this Indenture governing such purchase; (b) an Officers' Certificate, dated not more than three days prior to the date of the relevant application stating (i) that no Default or Event of Default exists unless such Default or Event of Default would be cured thereby; and (ii) that all conditions precedent and covenants herein provided for relating to such application of Trust Monies have been complied with; and (c) an Opinion of Counsel stating that the documents and the cash or Cash Equivalents, if any, which have been or are therewith delivered to and deposited with the Trustee conform to the requirements of this Indenture and all conditions precedent herein provided for relating to such application of Trust Monies have been complied with. Upon compliance with the foregoing provisions of this Section, the Trustee shall apply Trust Monies as directed and specified by such Board Resolution. A Board Resolution expressed to be irrevocable directing the application of Trust Monies under this Section 11.06 to the payment of the principal of, premium, interest and Additional Interest, if any, on the Notes shall for all purposes of this Indenture be deemed the equivalent of the deposit of money with the Trustee in trust for such purpose. Such Trust Monies and any cash deposited with the Trustee pursuant to paragraph (c) of this Section 11.06 for the payment of accrued interest shall not, after compliance with the foregoing provisions of this Section, be deemed to be part of the Collateral or Trust Monies. -114- SECTION 11.07. Disposition of Notes Retired. ---------------------------- All Notes received by the Trustee and for whose purchase Trust Monies are applied under Section 11.06, if not otherwise cancelled, shall be promptly delivered to the Trustee for cancellation and destruction in accordance with the Trustee's customary procedures. ARTICLE 12 SUBSIDIARY GUARANTEES SECTION 12.01. Guarantees. ---------- Subject to the provisions of this Article 12, each Subsidiary Guarantor, jointly and severally with each other Subsidiary Guarantor, hereby fully and unconditionally Guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, that: (a) the principal of, and premium and interest and Additional Interest, if any, on the Notes shall be duly and punctually paid in full when due, whether at maturity, by acceleration or otherwise, and interest on overdue principal, and premium, if any, and (to the extent permitted by law) interest on any interest, if any, on the Notes and all other Obligations of the Company to the Holders or the Trustee hereunder or under the Notes or under the Collateral Documents (including fees, expenses or other Obligations) shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise (collectively, the "Guarantee Obligations"). Failing payment when due of any Guarantee Obligation or failing performance of any other Obligation of the Company to the Holders, for whatever reason, each Subsidiary Guarantor shall be obligated to pay, or to perform or to cause the performance of, the same immediately. An Event of Default under this Indenture or the Notes shall constitute an event of default under this Guarantee, and shall entitle the Trustee or the Holders to accelerate the Guarantee Obligations of each Subsidiary Guarantor hereunder in the same manner and to the same extent as the Company Obligations. Each Subsidiary Guarantor hereby agrees that its Guarantee Obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any thereof, the entry of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Subsidiary Guarantor. Each Subsidiary Guarantor hereby waives and relinquishes: (a) any right to require the Trustee, the Holders or the Company (each, a "Benefitted Party") to proceed against the Company, the Subsidiaries or any other Person or to proceed against or exhaust any security held by a Benefitted Party at any time or to pursue any other remedy in any secured party's power before proceeding against such Subsidiary Guarantor; (b) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other Person or Persons or the failure of a Benefitted Party to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other Person or Persons; (c) demand, protest and notice of any kind (except as expressly required -115- by this Indenture), including but not limited to notice of the existence, creation or incurring of any new or additional Indebtedness or Obligation or of any action or non-action on the part of the Subsidiary Guarantors, the Company, the Subsidiaries, any Benefitted Party, any creditor of the Subsidiary Guarantors, the Company or the Subsidiaries or on the part of any other Person whomsoever in connection with any Obligations the performance of which are hereby guaranteed; (d) any defense based upon an election of remedies by a Benefitted Party, including but not limited to an election to proceed against the Subsidiary Guarantors for reimbursement; (e) any defense based upon any statute or rule of law which provides that the Obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (f) any defense arising because of a Benefitted Party's election in any proceeding instituted under the Bankruptcy Law of the application of Section 1111(b)(2) of the Bankruptcy Code; and (g) any defense based on any borrowing or grant of a security interest under Section 364 of the Bankruptcy Code. The Subsidiary Guarantors hereby covenant that the Guarantees shall not be discharged except by payment in full of all Guarantee Obligations, including the principal, premium, if any, and interest on the Notes and all other costs provided for under this Indenture, the Collateral Documents or as provided in Section 8.01. If any Holder or the Trustee is required by any court or otherwise to return to either the Company or the Subsidiary Guarantors, or any trustee or similar official acting in relation to either the Company or the Subsidiary Guarantors, any amount paid by the Company or the Subsidiary Guarantors to the Trustee or such Holder, the Guarantees, to the extent theretofore discharged, shall be reinstated in full force and effect. Each of the Subsidiary Guarantors agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Guarantee Obligations hereby until payment in full of all such Obligations. Each Subsidiary Guarantor agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes hereof, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guarantee Obligations, and (y) in the event of any acceleration of such Obligations as provided in Article 6 hereof, such Guarantee Obligations (whether or not due and payable) shall forthwith become due and payable by such Subsidiary Guarantor for the purpose of the Guarantee. SECTION 12.02. Execution and Delivery of Subsidiary Guarantees. ----------------------------------------------- To evidence the Guarantees set forth in Section 12.01 hereof, each of the Subsidiary Guarantors agrees that a notation of the Guarantees substantially in the form included in Exhibit A hereto shall be endorsed on each --------- Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of the Subsidiary Guarantors by the President or one of the Vice Presidents of the Subsidiary Guarantors. Each of the Subsidiary Guarantors agree that the Subsidiary Guarantees set forth in this Article 12 shall remain in full force and effect and apply to all the Notes notwithstanding any failure to endorse on each Note a notation of the Subsidiary Guarantees. If an Officer whose facsimile signature is on a Note no longer holds that office at the time the Trustee authenticates the Note on which the Guarantees are endorsed, the Subsidiary Guarantees shall be valid nevertheless. -116- The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantees set forth in this Indenture on behalf of the Subsidiary Guarantors. SECTION 12.03. Subsidiary Guarantors May Consolidate, etc., on Certain Terms. ------------------------------------------------------------- (a) Nothing contained in this Indenture or in the Notes shall prevent any consolidation or merger of a Subsidiary Guarantor with or into the Company or another Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor, or shall prevent the transfer of all or substantially all of the assets of a Subsidiary Guarantor to the Company or another Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor. Upon any such consolidation, merger, transfer or sale, the Subsidiary Guarantee of such Subsidiary Guarantor shall no longer have any force or effect. (b) Subject to the provisions of clause (c) below, no Subsidiary Guarantor shall, directly or indirectly, consolidate or merge with or into (whether or not such Subsidiary Guarantor is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another Person, other than the Company or another Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor, unless: (1) either: (i) the Subsidiary Guarantor is the surviving corporation; or (ii) the Person formed by or surviving any such consolidation or merger (if other than the Subsidiary Guarantor) is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia (the "Surviving Guarantor Entity"); (2) the Surviving Guarantor Entity (if other than the Subsidiary Guarantor) assumes all the Obligations of the Subsidiary Guarantor under its Subsidiary Guarantee, this Indenture, the Registration Rights Agreement and the Collateral Documents pursuant to agreements reasonably satisfactory to the Trustee; (3) immediately after such transaction no Default or Event of Default exists; (4) the transaction would not result in the loss, suspension or material impairment of any Gaming License unless a comparable replacement Gaming License is effective prior to or simultaneously with the loss, suspension or material impairment; (5) (i) the Company shall have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction; and (ii) the Company shall, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.08(a); (6) the Surviving Guarantor Entity causes such amendments, supplements or other instruments to be filed and recorded in such jurisdictions as may be required by applicable law -117- to preserve and protect the Lien of the Collateral Documents on the Collateral owned by or transferred to the Surviving Guarantor Entity, together with such financing statements as may be required to perfect any security interests in such Collateral which may be perfected by the filing of a financing statement under the UCC of the relevant states; (7) the Collateral owned by or transferred to the Surviving Guarantor Entity shall: (i) continue to constitute Collateral under this Indenture and the Collateral Documents, (ii) be subject to the Lien in favor of the Trustee for the benefit of the Holders, and (iii) not be subject to any Lien other than Permitted Liens; (8) the property and assets of the Person which is merged or consolidated with or into the Surviving Guarantor Entity, to the extent that they are property or assets of the types which would constitute Collateral under the Collateral Documents, shall be treated as After-Acquired Property and the Surviving Guarantor Entity shall take such action as may be reasonably necessary to cause such property and assets to be made subject to the Lien of the Collateral Documents in the manner and to the extent required in this Indenture; and (9) such transaction would not require any Holder or beneficial owner of Notes to obtain a Gaming License or be qualified or found suitable under the law of any applicable gaming jurisdiction; provided that such Holder or beneficial owner would not have been required to obtain a Gaming License or be qualified or found suitable under the laws of any applicable gaming jurisdiction in the absence of such transaction. Notwithstanding the foregoing, Gameco Acquisition may, concurrently with the consummation of the Pending Acquisitions, merge with and into Colonial, at which time Gameco Acquisition shall be released from its Subsidiary Guarantee under this Indenture. The Trustee, subject to the provisions of Section 12.04 hereof, shall be entitled to receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale or conveyance, and any such assumption of Guarantee Obligations, comply with the provisions of this Section 12.03. Such Officers' Certificate and Opinion of Counsel shall comply with the provisions of Section 12.05. (c) In the event of: (x) a sale or other disposition of all or substantially all of the assets of any Subsidiary Guarantor, by way of merger, consolidation or otherwise; or (y) a sale or other disposition of all of the Capital Stock of any Subsidiary Guarantor, in each case to a Person which is not the Company or a Restricted Subsidiary (but ex- -118- cluding a Restricted Subsidiary that is a Non-Guarantor Restricted Subsidiary) or another Affiliate of the Company; then such Subsidiary Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the Capital Stock of such Subsidiary Guarantor) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Subsidiary Guarantor) shall be released and relieved of any Obligations under its Subsidiary Guarantee, this Indenture and the Collateral Documents; provided that: (1) the Net Proceeds of such sale or other disposition are applied in accordance with the provisions described in Section 4.11; and (2) all Obligations of such Subsidiary Guarantor under all of its guarantees of, and under all of its pledges of assets or other Liens which secure, Indebtedness of the Company or any of its Subsidiaries, shall also terminate. SECTION 12.04. Limitation of Subsidiary Guarantor's Liability. ---------------------------------------------- Each Subsidiary Guarantor, and by its acceptance hereof each Holder, hereby confirms that it is the intention of all such parties that the Guarantee by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute a fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law. To effectuate the foregoing intention, the Holders and such Subsidiary Guarantor hereby irrevocably agree that the Guarantee Obligations of such Subsidiary Guarantor under this Article 12 shall be limited to the maximum amount as shall, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the Guarantee Obligations of such other Subsidiary Guarantor under this Article 12, result in the Guarantee Obligations of such Subsidiary Guarantor under the Subsidiary Guarantee of such Subsidiary Guarantor not constituting a fraudulent transfer or conveyance. SECTION 12.05. Application of Certain Terms and Provisions to the Subsidiary ------------------------------------------------------------- Guarantors. - ---------- (a) For purposes of any provision of this Indenture which provides for the delivery by any Subsidiary Guarantor of an Officers' Certificate and/or an Opinion of Counsel, the definitions of such terms in Section 1.01 shall apply to such Subsidiary Guarantor as if references therein to the Company were references to such Subsidiary Guarantor. (b) Any request, direction, order or demand which by any provision of this Indenture is to be made by any Subsidiary Guarantor, shall be sufficient if evidenced as described in Section 13.02 as if references therein to the Company were references to such Subsidiary Guarantor. (c) Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders to or on any Subsidiary Guarantor may be given or served as described in Section 13.02 as if references therein to the Company were references to such Subsidiary Guarantor. -119- (d) Upon any demand, request or application by any Subsidiary Guarantor to the Trustee to take any action under this Indenture, such Subsidiary Guarantor shall furnish to the Trustee such certificates and opinions as are required in Section 13.04 hereof as if all references therein to the Company were references to such Subsidiary Guarantor. ARTICLE 13 MISCELLANEOUS SECTION 13.01. Trust Indenture Act Controls. ---------------------------- If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA (S) 318(c), the imposed duties shall control. SECTION 13.02. Notices. ------- Any notice or communication by the Company or the Trustee to the other is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the other's address: If to the Company: Gameco, Inc. 240 Main Street Black Hawk, Colorado 80422 Attention: President Telephone No.: (303) 582-1117 Telecopier No.: (303) 582-0239 and a copy to: Baker & Hostetler LLP 1900 East 9th Street 3200 National City Center Cleveland, Ohio 44114 Attention: Robert Weible, Esq. Telephone No.: (216) 861-7553 Telecopier No.: (216) 696-0740 -120- If to the Trustee: Wells Fargo Bank Minnesota, National Association 213 Court Street, Suite 902 Middletown, CT 06457 Attention: Corporate Trust Services Telephone No.: (860) 704-6216 Telecopier No.: (860) 704-6219 The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee); when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA (S) 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 13.03. Communication by Holders with Other Holders. ------------------------------------------- Holders may communicate pursuant to TIA (S) 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA (S) 312(c). SECTION 13.04. Certificate and Opinion as to Conditions Precedent. -------------------------------------------------- Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the -121- opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 13.05. Statements Required in Certificate or Opinion. --------------------------------------------- Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA 314(a)(4)) shall comply with the provisions of TIA 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) 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; (c) a statement that, in the opinion of such Person, he or she 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 satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. SECTION 13.06. Rules by Trustee and Agents. --------------------------- The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 13.07. No Personal Liability of Directors, Officers, Employees and ----------------------------------------------------------- Stockholders. - ------------ No past, present or future director, officer, employee, incorporator or stockholder of the Company or any of its Subsidiaries, as such, shall have any liability for any Obligations of the Company under the Notes, the Subsidiary Guarantees, this Indenture, the Registration Rights Agreement or the Collateral 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 issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. -122- SECTION 13.08. Governing Law. ------------- THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES. SECTION 13.09. No Adverse Interpretation of Other Agreements. --------------------------------------------- This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 13.10. Successors. ---------- All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 13.11. Severability. ------------ 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 13.12. Counterpart Originals. --------------------- The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 13.13. Table of Contents, Headings, etc. -------------------------------- The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following pages] -123- SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. ISSUER: GAMECO, INC. By: /s/ Jeffrey P. Jacobs ------------------------------------ Name: Title: SUBSIDIARY GUARANTORS: BH ACQUISITION, INC. By: /s/ Jeffrey P. Jacobs ------------------------------------ Name: Title: GAMECO ACQUISITION, INC. By: /s/ Jeffrey P. Jacobs ------------------------------------ Name: Title: TRUSTEE: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: ____________________________________ Name: Title: SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. ISSUER: GAMECO, INC. By: ____________________________________ Name: Title: SUBSIDIARY GUARANTORS: BH ACQUISITION, INC. By: ____________________________________ Name: Title: GAMECO, INC. By: ____________________________________ Name: Title: TRUSTEE: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: /s/ Robert L. Reynolds ------------------------------------ Name: ROBERT L. REYNOLDS Title: VICE PRESIDENT EXHIBIT A THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, AND TRANSFERS OF INTERESTS IN THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.16 OF THE INDENTURE. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) AGREES THAT IT WILL NOT, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS NOTE AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE), RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF SUBPARA-GRAPH 501(a)(1), (2), (3), or (7) UNDER THE SECURITIES ACT THAT, PRIOR TO SUCH A-1 TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS NOTE), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (2) WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE PRIOR TO THE RESALE RESTRICTION TERMINATION DATE, IF THE PROPOSED TRANSFER IS BEING MADE PURSUANT TO CLAUSE (C) OR (E) ABOVE, PRIOR TO SUCH TRANSFER, THE HOLDER WILL BE REQUIRED TO FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. A-2 (Face of Note) FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND THE REGULATIONS THEREUNDER, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS NOTE, (1) THE ISSUE PRICE IS $960.40; (2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $39.60; (3) THE ISSUE DATE IS FEBRUARY 8, 2002; AND (4) THE YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY) IS 12.75%. CUSIP No: [ ] 11 7/8% Senior Secured Notes due 2009 No. [ ] $ GAMECO, INC. promises to pay to [ ] or registered assigns, the principal sum of Dollars on [ ]. Interest Payment Dates: February 1 and August 1, commencing August 1, 2002 Record Dates: January 15 and July 15 Dated: GAMECO, INC. By: ______________________________ Name: Title: A-3 Certificate of Authentication: This is one of the Global Notes referred to in the within-mentioned Indenture: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: _________________________________ Authorized Signatory Dated: A-4 (Back of Note) 11 7/8% Senior Secured Notes due 2009 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. Gameco, Inc., a Delaware corporation (the "Company"), -------- promises to pay interest on the principal amount of this Note at 11 7/8% per annum. The Company shall pay interest and Additional Interest, if any, semi-annually on February 1 and August 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance of this Note. The Company shall pay interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 2% per annum in excess of the rate then in effect; it shall pay interest (including Accrued Bankruptcy Interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company shall pay interest on the Notes ----------------- (except defaulted interest) and Additional Interest to the Persons who are registered Holders at the close of business on the January 15 or July 15 next preceding the Interest Payment Date, even if such Notes are cancelled after such Record Date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture (as defined below) with respect to defaulted interest. The Notes shall be payable as to principal, premium, interest and Additional Interest, if any, at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Additional Interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of and interest, premium and Additional Interest on all Global Notes and all other Notes the Holders of more than $1,000 in aggregate principal amount of Notes which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. Paying Agent and Registrar. Initially, Wells Fargo Bank -------------------------- Minnesota, National Association, the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated --------- as of February 8, 2002 ("Indenture") among the Company, the Subsidiary Guarantors and the Trustee. 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, as amended (15 U.S. Code 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of A-5 such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Obligations under the Indenture, the Escrow Agreement, the Notes and the Guarantees thereof are secured by the Collateral described in the Collateral Documents, subject to the provisions of such documents. Holders are referred to the Collateral Documents for a statement of such terms. 5. Optional Redemption. After February 1, 2006, the Company may ------------------- redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, thereon to the applicable Redemption Date, if redeemed during the 12-month period beginning on February 1 of the years indicated below: Year Percentage 2006 ............. 105.938% 2007 ............. 102.969% 2008 ............. 100.000% In addition, at any time prior to February 1, 2005, the Company may on one occasion redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price of 111.875% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the Redemption Date, with the net cash proceeds of any Equity Offering; provided that: (1) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and (2) the redemption must occur within 45 days after the date of the closing of such Equity Offering. Except pursuant to the preceding paragraph, the Notes shall not be redeemable at the Company's option prior to February 1, 2006. 6. Mandatory Redemption. Other than as set forth in Paragraphs 7 and -------------------- 8 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. Special Mandatory Redemption. The Notes shall be subject to ---------------------------- special mandatory redemption (a) to the extent that the escrow funds have not been released to the Company on or prior to March 20, 2002, (b) in the event that any of the agreements relating to the Pending Acquisitions are terminated or (c) in the event that at any time the Company determines that any of the Pending Acquisitions are likely not to be able to be consummated in a manner consistent in all material respects with the description of such transactions contained in the Offering Memorandum; provided that (1) in the case of clause (a) above, such redemption shall occur no later than April 1, 2002, (2) in the case of A-6 clause (b) above, such redemption shall occur within 10 calendar days after the termination of any such agreement and (3) in the case of clause (c) above, such redemption shall occur within 10 calendar days after the date of the Company's determination. The redemption price, in each case, shall be at a price equal to 97.12% of the principal amount thereof together with accrued and unpaid interest to the date of redemption. Upon consummation of each of the Pending Acquisitions, the foregoing provisions relating to the special mandatory redemption of the Notes shall be of no further effect. 8. Mandatory Disposition in Accordance with Gaming Laws. If any Gaming ---------------------------------------------------- Authority requires that a Holder or beneficial owner of Notes be licensed, qualified or found suitable under any applicable Gaming Law and such Holder or beneficial owner (i) fails to apply for a license, qualification or a finding of suitability within 30 days (or such shorter period as may be required by the applicable Gaming Authority) after being requested to do so by the Gaming Authority or (ii) is denied such license or qualification or not found suitable, the Company shall have the right, at its option (1) to require any such Holder or beneficial owner to dispose of its Notes within 30 days (or such earlier date as may be required by the applicable Gaming Authority) of the occurrence of the event described in clause (i) or (ii) above or (2) to redeem the Notes of such Holder or beneficial owner at a redemption price equal to the lesser of (y) the principal amount thereof, together with accrued and unpaid interest and Additional Interest, if any, to the earlier of the date of redemption or the date of the denial of license or qualification or of the finding of unsuitability by such Gaming Authority and (z) the price at which such Holder or beneficial owner acquired the Notes, together with accrued and unpaid interest and Additional Interest, if any, to the earlier of the date of redemption or the date of the denial of license or qualification or of the finding of unsuitability by such Gaming Authority. The Company shall notify the Trustee in writing of any redemption pursuant to Section 3.10 of the Indenture as soon as practicable. Immediately upon a determination by a Gaming Authority that a Holder or beneficial owner of the Notes will not be licensed, qualified or found suitable, the Holder or beneficial owner will, to the extent required by applicable law, have no further right (i) to exercise, directly or indirectly, through any trustee or nominee or any other person or entity, any right conferred by the Notes; or (ii) to receive any interest, dividend, economic interests or any other distributions or payments with respect to the Notes or any remuneration in any form with respect to the Notes from the Company, the Subsidiary Guarantors or the Trustee. The Holder or beneficial owner that is required to apply for a license, qualification or a finding of suitability shall pay all fees and costs of applying for and obtaining the license, qualification or finding of suitability and of any investigation by the applicable Gaming Authorities. 9. Change of Control Offer. Upon the occurrence of a Change of ----------------------- Control, the Company shall offer to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest thereon to the date of purchase. Within 10 days following any Change of Control, the Company shall mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes pursuant to the procedures required by the Indenture and described in such notice. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act A-7 and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. 10. Denominations, Transfer, Exchange. The Notes are in registered form --------------------------------- without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 Business Days before a selection of Notes to be redeemed. 11. Persons Deemed Owners. The registered holder of a Note may be treated --------------------- as its owner for all purposes. 12. Amendment, Supplement and Waiver. Subject to certain exceptions, the -------------------------------- Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes, and any existing Default or noncompliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the TIA. Notwithstanding the foregoing, Collateral may be released with the consent of the Holders of at least 75% in aggregate principal amount of the then outstanding Notes in addition to releases of Collateral expressly permitted by the Collateral Documents. 13. Defaults and Remedies. Events of Default are set forth in the --------------------- Indenture. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences A-8 under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture and the Collateral Documents, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 14. Ranking and Security. The Notes shall be senior Obligations of the -------------------- Company and shall rank equal in right of payment with all existing and future senior indebtedness of the Company and senior in right of payment to all existing and future subordinated debt. The Company's Obligations under the Notes shall be fully and unconditionally guaranteed on a senior basis, jointly and severally, by each of the Subsidiary Guarantors. The Subsidiary Guarantees shall be senior Obligations of the Subsidiary Guarantors and shall rank equal in right of payment with all existing and future senior debt of the Subsidiary Guarantors and senior in right of payment to any Indebtedness of the Subsidiary Guarantors that is subordinated to such Subsidiary Guarantees. Pursuant to the Collateral Documents, the Notes and the Subsidiary Guarantees shall be secured by a first priority Lien (subject to certain exceptions described herein) on the Collateral. 15. 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 or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 16. No Recourse Against Others. A director, officer, employee, -------------------------- incorporator or stockholder, of the Company, as such, shall not have any liability for any Obligations of the Company under the Notes or the Indenture 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. 17. Authentication. This Note shall not be valid until authenticated -------------- by the manual or facsimile signature of the Trustee or an authenticating agent. 18. 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 entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 19. Additional Rights of Holders of Notes. In addition to the rights ------------------------------------- provided to Holders under the Indenture, Holders of Notes shall have all the rights set forth in the Registration Rights Agreement dated as of the Issue Date, among the Company, the Subsidiary Guarantors and the Initial Purchasers. 20. CUSIP Numbers. Pursuant to a recommendation promulgated by the ------------- Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a conven- A-9 ience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of this Indenture, the Collateral Documents and/or the Registration Rights Agreement. Requests may be made to: Gameco, Inc. 420 Main Street Black Hawk, Colorado 80422 Attention: President Telephone No.: (303) 582-1117 Telecopier No.: (303) 582-0239 A-10 SUBSIDIARY GUARANTEE The Subsidiary Guarantors listed below (hereinafter referred to as the "Subsidiary Guarantors," which term includes any successors or assigns under the Indenture and any additional Subsidiary Guarantors), have irrevocably and unconditionally guaranteed the Guarantee Obligations, which include that: (a) the principal of, and premium and interest and Additional Interest, if any, on the 11 7/8% Senior Secured Notes due 2009 (the "Notes") of Gameco, Inc. (the "Company"), shall be duly and punctually paid in full when due, whether at maturity, by acceleration or otherwise, and interest on overdue principal, and premium, if any, and (to the extent permitted by law) interest on any interest, if any, on the Notes and all other Obligations of the Company to the Holders or the Trustee hereunder or under the Notes or under the Collateral Documents (including fees, expenses or other) shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The Obligations of each Subsidiary Guarantor to the Holders and to the Trustee pursuant to this Subsidiary Guarantee and this Indenture are expressly set forth in Article 12 of the Indenture and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guarantee. The Obligations are secured by a pledge of the Collateral pursuant to Articles 10 and 11 of the Indenture and the Collateral Documents. No stockholder, officer, director or incorporator, as such, past, present or future of each Subsidiary Guarantor shall have any liability under this Subsidiary Guarantee by reason of his or its status as such stockholder, officer, director or incorporator. Except as set forth in the Indenture, this is a continuing Guarantee and shall remain in full force and effect and shall be binding upon each Subsidiary Guarantor and its successors and assigns until full and final payment of all of the Company's Obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders, and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Guarantee of payment and not of collectibility. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. The Obligations of each Subsidiary Guarantor under its Subsidiary Guarantee shall be limited to the extent necessary to insure that it does not constitute a fraudulent conveyance under applicable law. THE TERMS OF ARTICLE 12 OF THE INDENTURE ARE INCORPORATED HEREIN BY REFERENCE. A-11 Capitalized terms used herein have the same meanings given in this Indenture unless otherwise indicated. Dated as of February 8, 2002 SUBSIDIARY GUARANTORS: BH ACQUISITION INC. By:_______________________ Name: Title: GAMECO ACQUISITION INC. By:_______________________ Name: Title: A-12 Assignment Form To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to --------------------------------------------------------------- --------------- (Insert assignee's soc. sec. or tax I.D. no.) --------------------------------------------------------------------------- --- --------------------------------------------------------------------------- --- --------------------------------------------------------------------------- --- --------------------------------------------------------------------------- --- (Print or type assignee's name, address and zip code) and irrevocably appoint_________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date:______________________ Your Signature:________________________________________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee. A-13 Option of Holder to Elect Purchase If you want to elect to have this Note purchased by the Company pursuant to Section 4.11, 4.14 or 4.16 of the Indenture, check the box below: [_]Section 4.11 [_]Section 4.14 [_]Section 4.16 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.14, 4.16 or 4.11 of the Indenture, state the amount you elect to have purchased: $___________ Date:__________________________________ Your Signature:_______________________ (Sign exactly as your name appears on the Note) Tax Identification No.:_______________ Signature Guarantee:_____________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) A-14 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE The following exchanges of a part of this Global Note for an interest in another Global Note or for a Certificated Note, or exchanges of a part of another Global Note or Certificated Note for an interest in this Global Note, have been made:
Principal Amount of Signature of Amount of decrease in Amount of decrease in this Global Note authorized officer of Principal Amount of Principal Amount of following such decrease Trustee or Note Date of Exchange this Global Note this Global Note (or increase) Custodian - ---------------- ---------------- ---------------- ----------- ---------
A-15 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Re: Gameco, Inc. (the "Company") 11 7/8% Senior Secured Notes due 2009 (the "Notes") -------------------------------------------------- This Certificate relates to $_______ principal amount of Notes held in the form of* ___ a beneficial interest in a Global Note or* _______ Certificated Notes by ______ (the "Transferor"). The Transferor: [_] has requested by written order that the Registrar deliver in exchange for its beneficial interest in the Global Note held by the Depository a Certificated Note or Certificated Notes in definitive, registered form of authorized denominations and an aggregate number equal to its beneficial interest in such Global Note (or the portion thereof indicated above); or [_] has requested by written order that the Registrar exchange or register the transfer of a Certificated Note or Certificated Notes. In connection with such request and in respect of each such Note, the Transferor does hereby certify that the Transferor is familiar with the Indenture relating to the above captioned Notes and the restrictions on transfers thereof as provided in Section 2.16 of such Indenture, and that the transfer of the Notes does not require registration under the Securities Act of 1933, as amended (the "Securities Act"), because*: -------------- [_] Such Note is being acquired for the Transferor's own account, without transfer (in satisfaction of Section 2.16 of the Indenture). [_] Such Note is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act), in reliance on Rule 144A. [_] Such Note is being transferred to an institutional "accredited investor" (within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act) which delivers a certificate to the Trustee in the form of Exhibit C to the Indenture. --------- [_] Such Note is being transferred in reliance on Regulation S under the Securities Act and a transfer certificate for Regulation S transfers in the form of Exhibit D to the Indenture accompanies this certification. [An --------- Opinion of Counsel to the effect that such transfer does not require registration under the Securities Act accompanies this certification.] B-1 [_] Such Note is being transferred in reliance on Rule 144 under the Securities Act. [An Opinion of Counsel to the effect that such transfer does not require registration under the Securities Act accompanies this certification.] [_] Such Note is being transferred in reliance on and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144A or Rule 144 under the Securities Act to a person other than an institutional "accredited investor." [An Opinion of Counsel to the effect that such transfer does not require registration under the Securities Act accompanies this certification.] __________________________________ [INSERT NAME OF TRANSFEROR] By:_______________________________ [Authorized Signatory] Date:________________________ *Check applicable box. B-2 EXHIBIT C Form of Transferee Letter of Representation ------------------------------------------- Wells Fargo Bank Minnesota, National Association 213 Court Street, Suite 902 Middletown, CT 06457 Attention: Corporate Trust Services Ladies and Gentlemen: This certificate is delivered to request a transfer of $________ principal amount of the 11 7/8% Senior Secured Notes due 2009 of Gameco, Inc. (the "Company"), and any guarantee thereof (the "Notes"). Upon transfer, the ------- ----- Notes would be registered in the name of the new beneficial owner as follows: Name:________________________________________ Address:_____________________________________ Taxpayer ID Number:__________________________ The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the "Securities ---------- Act")) purchasing Notes for our own account or for the account of such an - --- institutional "accredited investor" and we are acquiring the Notes not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risk of our investment in the Notes and we invest in or purchase securities similar to the Notes in the normal course of our business. We and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 2. We acknowledge that we have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto, as we deem necessary. 3. We understand that the Notes have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Notes that we shall not prior to the date (the "Resale Restriction Termination Date") that is two years after the later of ----------------------------------- the original issuance of the Notes and the last date on which the Company or any affiliate of the Company was the owner of such Notes (or any predecessor thereto) offer, sell or otherwise transfer such Notes except (a) to the Company or any subsidiary of the Company, (b) inside the United States to a "qualified institutional buyer" in compliance with Rule 144A under the Securities Act C-1 (c) inside the United States to an "institutional accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the Trustee a signed letter substantially in the form of this letter (d) outside the United States in an offshore transaction in compliance with Rule 904 under the Securities Act (e) pursuant to any other available exemption from the registration requirements of the Securities Act or (f) pursuant to an effective registration statement under the Securities Act. We acknowledge that the Company and the Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Restriction Termination Date of the applicable Notes pursuant to clause (c) or (e) above to require the delivery of an Opinion of Counsel, certification and/or other information satisfactory to the Company and the Trustee. We understand that the Trustee shall not be required to accept for registration of transfer any Notes acquired by us, except upon presentation of evidence satisfactory to the Company and the Trustee that the foregoing restrictions on transfer have been complied with. We further understand that any Notes purchased by us shall be in the form of definitive physical certificates and that such certificates shall bear a legend reflecting the substance of paragraph 3 of this letter. We further agree to provide to any person acquiring any of the Notes from us a notice advising such person that transfers of such Notes are restricted as stated herein and that certificates representing such Notes shall bear a legend to that effect. We represent that the Company and the Trustee and others are entitled to rely upon the truth and accuracy of our acknowledgments, representations and agreements set forth herein, and we agree to notify you promptly in writing if any of our acknowledgments, representations or agreements herein cease to be accurate and complete. You are also irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. We represent to you that we have full power to make the foregoing acknowledgments, representations and agreements on our own behalf and on behalf of any investor account for which we are acting as fiduciary agent. As used herein, the terms "offshore transaction," "United States" and "U.S. person" have the respective meanings given to them in Regulation S under the Securities Act. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. Dated:_____________________________ TRANSFEREE: By:________________________ C-2 EXHIBIT D Form of Certificate To Be Delivered in Connection with Regulation S Transfers ---------------, ---- Wells Fargo Bank Minnesota, National Association 213 Court Street, Suite 902 Middletown, CT 06457 Attention: Corporate Trust Services Re: Gameco, Inc.'s 11 7/8% Senior Secured Notes due 2009 (the "Notes") ----------------------------------- Ladies and Gentlemen: In connection with our proposed sale of $__________ aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: -------------- (1) the offer of the Notes was not made to a person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been prearranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(a) or Rule 904(a) of Regulation S, as applicable; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and (5) we have advised the transferee of the transfer restrictions applicable to the Notes. D-1 You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Defined terms used herein without definition have the respective meanings provided in Regulation S. Very truly yours, [Name of Transferor] By:____________________________________ D-2 EXHIBIT E FORM OF SECURITY AGREEMENT E-1 EXHIBIT F-1 FORM OF MORTGAGE F-1-1 EXHIBIT F-2 FORM OF LEASEHOLD MORTGAGE F-2-1 EXHIBIT F-3 FORM OF DEED OF TRUST F-3-1 EXHIBIT F-4 FORM OF LEASEHOLD DEED OF TRUST F-4-1 EXHIBIT G FORM OF JACOBS SUBORDINATION AND INTERCREDITOR AGREEMENT G-1 EXHIBIT H FORM OF SELLER INTERCREDITOR AGREEMENT H-1 EXHIBIT I FORM OF SENIOR INTERCREDITOR AGREEMENT I-1 EX-4.3 34 dex43.txt SUPPLEMENTAL INDENTURE DATED 2/22/2002 Exhibit 4.3 SUPPLEMENTAL INDENTURE ---------------------- SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ---------------------- February 22, 2002 among the guarantors listed on the signature pages attached hereto (each, New Guarantor " "), a subsidiary of Gameco, Inc. (or its ------------------- successor), a Delaware corporation (the Company"), and Wells Fargo Bank ----------- Minnesota, National Association, as " trustee under the Indenture referred to below (the Trustee"). " ----------- W I T N E S S E T H : - - - - - - - - - - WHEREAS the Company has heretofore executed and delivered to the Trustee an Indenture (as such may be amended from time to time, the Indenture"), ------------- dated as of February 8, 2002, providing for the issuance of its 11 7/8% " Senior Secured Notes due 2009 (the "Notes"); --------- WHEREAS Section 4.18 of the Indenture provides that under certain circumstances the Company is required to cause the New Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor shall unconditionally guarantee all of the Company's obligations under the Notes pursuant to a Guarantee on the terms and conditions set forth herein; and WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee and the Company are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor, the Company and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders as follows: 1. Definitions. (a) Capitalized terms used herein without definition ----------- shall have the meanings assigned to them in the Indenture. (b) For all purposes of this Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires: (i) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (ii) the words "herein," "hereof" and "hereby" and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof. 2. Agreement to Guarantee. The New Guarantor hereby agrees, jointly ---------------------- and severally with all other Guarantors, to Guarantee the Company's obligations under the Notes on the terms and subject to the conditions set forth in Article 10 of the Indenture and to be bound by all other applicable provisions of the Indenture. From and after the date hereof, the New Guarantor shall be a Guarantor for all purposes under the Indenture and the Notes. 3. Ratification of Indenture; Supplemental Indenture Part of --------------------------------------------------------- Indenture. Except as expressly amended hereby, the Indenture is in all respects - --------- ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder heretofore or hereafter authenticated and delivered shall be bound hereby. 4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY ------------- AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE. 5. Trustee Makes No Representation. The Trustee shall not be ------------------------------- responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which are made solely by the Company. 6. Multiple Counterparts. The parties may sign multiple counterparts --------------------- of this Supplemental Indenture. Each signed counterpart shall be deemed an original, but all of them together represent one and the same agreement. 7. Headings. The headings of this Supplemental Indenture have been -------- inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. [Remainder of page intentionally blank] IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date and year first above written. NEW GUARANTORS: BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. By: /s/ Stephen R. Roark ------------------------ Name: Stephen R. Roark Title: President GOLD DUST WEST CASINO, INC. By: /s/ Stephen R. Roark ------------------------ Name: Stephen R. Roark Title: Vice President and Secretary GILPIN VENTURES, INC. By: /s/ Stephen R. Roark ------------------------ Name: Stephen R. Roark Title: President GILPIN HOTEL VENTURE By: GILPIN VENTURES, INC., its partner /s/ Stephen R. Roark By:_______________________________ Name: Stephen R. Roark Title: President By: BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC., its partner /s/ Stephen R. Roark By:_______________________________ Name: Stephen R. Roark Title: President BLACK HAWK/JACOBS ENTERTAINMENT LLC By: BH ENTERTAINMENT, LTD., its co- manager By: JACOBS ENTERTAINMENT LTD., its manager /s/ Jeffrey P. Jacobs By:___________________________ Name: Jeffrey P. Jacobs Title: President By: BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC, its co-manager /s/ Stephen R. Roark By:_______________________________ Name: Stephen R. Roark Title: President DIVERSIFIED OPPORTUNITIES GROUP LTD. By: /s/ Jeffrey P. Jacobs ---------------------------------- Name: Jeffrey P. Jacobs Title: JALOU L.L.C. By: /s/ Ian M. Stewart ---------------------------------- Name: Ian M. Stewart Title: President and Manager HOUMA TRUCK PLAZA & CASINO, L.L.C. By: /s/ Ian M. Stewart ---------------------------------- Name: Ian M. Stewart Title: President and Manager BAYOU VISTA TRUCK PLAZA AND CASINO, L.L.C. By: /s/ Ian M. Stewart ---------------------------------- Name: Ian M. Stewart Title: President and Manager LUCKY MAGNOLIA TRUCK STOP AND CASINO L.L.C. By: /s/ Ian M. Stewart ---------------------------------- Name: Ian M. Stewart Title: President and Manager JALOU-CASH'S L.L.C. By: /s/ Ian M. Stewart ---------------------------------- Name: Ian M. Stewart Title: President and Manager RACELAND TRUCK PLAZA AND CASINO, L.L.C. By: /s/ Ian M. Stewart ---------------------------------- Name: Ian M. Stewart Title: President and Manager JALOU II INC. By: /s/ Ian M. Stewart ---------------------------------- Name: Ian M. Stewart Title: President WINNER'S CHOICE CASINO, INC. By: /s/ Ian M. Stewart ---------------------------------- Name: Ian M. Stewart Title: President JACE, INC. By: /s/ Ian M. Stewart ---------------------------------- Name: Ian M. Stewart Title: President THE COMPANY: GAMECO, INC. By: /s/ Jeffrey P. Jacobs ---------------------------------- Name: Jeffrey P. Jacobs Title: President THE TRUSTEE: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION By: /s/ Robert L. Reynolds ------------------------ Name: Robert L. Reynolds Title: Vice President EX-4.5 35 dex45.txt REGISTRATION RIGHTS AGREEMENT DATED 2/8/2002 Exhibit 4.5 REGISTRATION RIGHTS AGREEMENT Dated as of February 8, 2002 by and among GAMECO, INC., THE GUARANTORS named herein and CIBC WORLD MARKETS CORP. and LIBRA SECURITIES, LLC, as Initial Purchasers __________________________ $125,000,000 11 7/8% SENIOR SECURED NOTES DUE 2009 TABLE OF CONTENTS -----------------
Page ---- 1. Definitions ............................................................... 1 2. Exchange Offer ............................................................ 5 3. Shelf Registration ........................................................ 8 4. Additional Interest ....................................................... 10 5. Registration Procedures ................................................... 11 6. Registration Expenses ..................................................... 20 7. Indemnification ........................................................... 21 8. Rules 144 and 144A ........................................................ 24 9. Underwritten Registrations ................................................ 25 10. Miscellaneous ............................................................. 25 (a) Remedies .............................................................. 25 (b) No Inconsistent Agreements ............................................ 25 (c) [Reserved] ............................................................ 25 (c) Amendments and Waivers ................................................ 26 (d) Notices ............................................................... 26 (e) Successors and Assigns ................................................ 27 (f) Counterparts .......................................................... 28 (g) Headings .............................................................. 28 (h) Governing Law ......................................................... 28 (i) Severability .......................................................... 28 (j) Notes Held by any Issuer or their Affiliates .......................... 28 (l) Third Party Beneficiaries ............................................. 29 (k) Entire Agreement ...................................................... 29 (l) Joint and Several Obligations ......................................... 29
REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is made and --------- entered into as of February 8, 2002, by and among Gameco, Inc., a Delaware corporation (the "Company"), the Guarantors (as defined) and CIBC World Markets ------- Corp. and Libra Securities, LLC (the "Initial Purchasers"). ------- ---------- This Agreement is entered into in connection with the Purchase Agreement, dated February 1, 2002, by and among the Company, the Guarantors and the Initial Purchasers (the "Purchase Agreement") relating to the sale by the ------------------ Company to the Initial Purchasers of $125,000,000 aggregate principal amount of the Company's 117/8 % Senior Secured Notes due 2009 (the "Notes") and the ----- unconditional guarantee thereof by the Guarantors on a joint and several basis (the "Guarantee"). In order to induce the Initial Purchasers to enter into the --------- Purchase Agreement, the Issuers (as defined) have agreed to provide the registration rights set forth in this Agreement for the benefit of the holders of Registrable Notes (as defined), including, without limitation, the Initial Purchasers. The execution and delivery of this Agreement is a condition to the Initial Purchasers' obligation to purchase the Notes under the Purchase Agreement. The parties hereby agree as follows: 1. Definitions ----------- As used in this Agreement, the following terms shall have the following meanings: Additional Interest: See Section 4(a). ------------------- Advice: See the last paragraph of Section 5. ------ Agreement: See the first introductory paragraph to this --------- Agreement. Applicable Period: See Section 2(b). ----------------- Business Day: A day that is not a Saturday, a Sunday, or a day ------------ on which banking institutions in New York, New York are required to be closed. Closing Date: The Closing Date as defined in the Purchase ------------ Agreement. Commission: The Securities and Exchange Commission. ---------- Company: See the first introductory paragraph to this Agreement. ------- Effectiveness Date: The 210th day after the Issue Date, in the ------------------ case of the Exchange Registration Statement, and, in the case of the Initial Shelf Registration, the 90th day after the filing of the Initial Shelf Registration. Effectiveness Period: See Section 3(a). -------------------- Event Date: See Section 4(b). ---------- Exchange Act: The Securities Exchange Act of 1934, as amended, ------------ and the rules and regulations of the Commission promulgated thereunder. Exchange Notes: See Section 2(a). -------------- Exchange Offer: See Section 2(a). -------------- Exchange Registration Statement: See Section 2(a). ------------------------------- Filing Date: The 120th day after the Issue Date (regardless of ----------- whether the actual filing precedes such date). Guarantee: See the second introductory paragraph to this --------- Agreement. Guarantors: BH Acquisition, Inc., a Colorado corporation, and ---------- Gameco Acquisition, Inc. a Virginia corporation, in each case, as of each applicable date, to the extent a Guarantor on such date. Holder: Any registered holder of Registrable Notes. ------ Indemnified Person: See Section 7(c). ------------------ Indemnifying Person: See Section 7(c). ------------------- Indenture: The Indenture, dated as of February 8, 2002, by and --------- among the Issuers and Wells Fargo Bank Minnesota, National Association, as trustee, pursuant to which the Notes are being issued, as amended or supplemented from time to time in accordance with the terms thereof. Initial Purchasers: See the first introductory paragraph to this ------------------ Agreement. Initial Shelf Registration: See Section 3(a). -------------------------- Inspectors: See Section 5(o). ---------- Issue Date: The date on which the Notes were sold to the Initial ---------- Purchasers pursuant to the Purchase Agreement. Issuers: The Company and the Guarantors, collectively. ------- NASD: National Association of Securities Dealers, Inc. ---- Notes: See the second introductory paragraph to this Agreement. ----- Participant: See Section 7(a). ----------- Participating Broker-Dealer: See Section 2(b). --------------------------- Person: Any individual, corporation, partnership, limited ------ liability company, joint venture, association, joint stock company, trust, unincorporated organization or government (including any agency or political subdivision thereof). Potential Material Event: (i) An event or circumstance which ------------------------ occurs and is continuing as a result of which any Shelf Registration, any related prospectus or any document incorporated therein by reference as then amended or supplemented or proposed to be filed would, in the good faith determination of the Board of Directors of the Company, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and (ii) either (a) the Board of Directors of the Company determines in good faith that the disclosure of such event at such time would have a material adverse effect on the Company's business, operations or prospects or (b) the disclosure otherwise relates to a material business transaction or development which has not yet been publicly disclosed. Private Exchange: See Section 2(b). ---------------- Private Exchange Notes: See Section 2(b). ---------------------- Prospectus: The prospectus included in any Registration ---------- Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Notes covered by such Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. Purchase Agreement: See the second introductory paragraph to ------------------ this Agreement. Records: See Section 5(o). ------- Registrable Notes: Each Note upon original issuance thereof and ----------------- at all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof is applicable upon original issuance thereof and at all times subsequent thereto and each Private Exchange Note upon original issuance thereof and at all times subsequent thereto, until, in the case of any such Note, Exchange Note or Private Exchange Note, as the case may be, the earliest to occur of (i) a Registration Statement covering such Note, Exchange Note or Private Exchange Note, as the case may be, has been declared effective by the Commission and such Note, Exchange Note or Private Exchange Note, as the case may be, has been disposed of in accordance with such effective Registration Statement, (ii) such Note, Exchange Note or Private Exchange Note, as the case may be, is sold in compliance with Rule 144, (iii) in the case of any Note, such Note has or could have been exchanged pursuant to the Exchange Offer for an Exchange Note or Exchange Notes which may be resold without restriction under federal securities laws, or (iv) such Note, Exchange Note or Private Exchange Note, as the case may be, ceases to be outstanding for purposes of the Indenture. Registration Statement: Any registration statement of the ---------------------- Company, including, but not limited to, the Exchange Registration Statement, that covers any of the Registrable Notes pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. Rule 144: Rule 144 under the Securities Act, as such Rule may be -------- amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the Commission providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. Rule 144A: Rule 144A under the Securities Act, as such Rule may --------- be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the Commission. Rule 415: Rule 415 under the Securities Act, as such Rule may be -------- amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. Securities Act: The Securities Act of 1933, as amended, and the -------------- rules and regulations of the Commission promulgated thereunder. Shelf Notice: See Section 2(c). ------------ Shelf Registration: See Section 3(b). ------------------ Suspension Period: See Section 5. ----------------- Subsequent Shelf Registration: See Section 3(b). ----------------------------- TIA: The Trust Indenture Act of 1939, as amended. --- Trustee: The trustee under the Indenture and, if existent, the ------- trustee under any indenture governing the Exchange Notes and Private Exchange Notes (if any). Underwritten registration or underwritten offering: A -------------------------------------------------- registration in which securities of one or more of the Issuers are sold to an underwriter for reoffering to the public. 2. Exchange Offer -------------- (a) Each of the Issuers agrees to file with the Commission no later than the Filing Date, an offer to exchange (the "Exchange Offer") any -------------- and all of the Registrable Notes (other than Private Exchange Notes, if any) for a like aggregate principal amount of debt securities of the Company which are identical in all material respects to the Notes (the "Exchange Notes") (and -------------- which are entitled to the benefits of the Indenture or a trust indenture which is identical in all material respects to the Indenture (including, without limitation, the guarantee provisions thereof) (other than such changes to the Indenture or any such identical trust indenture as are necessary to comply with any requirements of the Commission to effect or maintain the qualification thereof under the TIA) and which, in either case, has been qualified under the TIA), except that the Exchange Notes shall have been registered pursuant to an effective Registration Statement under the Securities Act and shall contain no restrictive legend thereon. The Exchange Offer shall be registered under the Securities Act on the appropriate form (the "Exchange Registration Statement") ------------------------------- and shall comply with all applicable tender offer rules and regulations under the Exchange Act. Each of the Issuers agrees to use its best efforts to (x) cause the Exchange Registration Statement to be declared effective under the Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at least 30 Business Days (or longer if required by applicable law) after the date that notice of the Exchange Offer is first mailed to Holders; and (z) consummate the Exchange Offer on or prior to the 60th day following the date on which the Exchange Registration Statement is declared effective. If after such Exchange Registration Statement is initially declared effective by the Commission, the Exchange Offer or the issuance of the Exchange Notes thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or any other governmental agency or court, such Exchange Registration Statement shall be deemed not to have become effective for purposes of this Agreement. Each Holder who participates in the Exchange Offer will be required to represent that any Exchange Notes received by it will be acquired in the ordinary course of its business, that at the time of the consummation of the Exchange Offer such Holder will have no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes, that such Holder is not an affiliate of any Issuer within the meaning of the Securities Act, and any additional representations that in the written opinion of counsel to the Issuers are necessary under then-existing interpretations of the Commission in order for the Exchange Registration Statement to be declared effective. Upon consummation of the Exchange Offer in accordance with this Section 2, the provisions of this Agreement shall continue to apply, mutatis mutandis, solely with respect to Registrable Notes that are ------- -------- Private Exchange Notes and Exchange Notes held by Participating Broker-Dealers, and the Issuers shall have no further obligation to register Registrable Notes (other than Private Exchange Notes and other than in respect of any Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to Section 3 of this Agreement. (b) The Issuers shall include within the Prospectus contained in the Exchange Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the Staff of the Commission with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"), whether such positions or policies have been --------------------------- publicly disseminated by the Staff of the Commission or such positions or policies, in the judgment of the Initial Purchasers, represent the prevailing views of the Staff of the Commission. Such "Plan of Distribution" section shall also allow, to the extent permitted by applicable policies and regulations of the Commission, the use of the Prospectus by all Persons subject to the prospectus delivery requirements of the Securities Act, including, to the extent so permitted, all Participating Broker-Dealers, and include a statement describing the manner in which Participating Broker-Dealers may resell the Exchange Notes. Each of the Issuers shall use its best efforts to keep the Exchange Registration Statement effective and to amend and supplement the Prospectus contained therein, in order to permit such Prospectus to be lawfully delivered by all Persons subject to the prospectus delivery requirements of the Securities Act for such period of time beginning when the Exchange Notes are first issued in the Exchange Offer and ending upon the earlier of the expiration of the 180th day after the Exchange Offer has been completed and such Persons are no longer required to comply with the prospectus delivery requirements in connection with offers and sales of the Exchange Notes (the "Applicable Period"). ----------------- If, upon consummation of the Exchange Offer, any Initial Purchaser holds any Notes acquired by it and having the status of an unsold allotment in the initial distribution, the Issuers upon the request of that Initial Purchaser shall, simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to such Initial Purchaser, in exchange (the "Private Exchange") for the Notes held by such Initial Purchaser, a like ---------------- principal amount of debt securities of the Company that are identical in all material respects to the Exchange Notes except for the existence of restrictions on transfer thereof under the Securities Act and securities laws of the several states of the U.S. (the "Private Exchange Notes") (and which are issued pursuant ---------------------- to the same indenture as the Exchange Notes). The Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes. Interest on the Exchange Notes and Private Exchange Notes will accrue from the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the Issue Date. In connection with the Exchange Offer, the Issuers shall: (1) mail to each Holder a copy of the Prospectus forming part of the Exchange Registration Statement, together with an appropriate letter of transmittal and related documents; (2) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York, which may be the Trustee or an affiliate thereof; (3) permit Holders to withdraw tendered Registrable Notes at any time prior to the close of business, New York time, on the last Business Day on which the Exchange Offer shall remain open; and (4) otherwise comply in all material respects with all applicable laws. As soon as practicable after the close of the Exchange Offer or the Private Exchange, as the case may be, the Issuers shall: (1) accept for exchange all Registrable Notes validly tendered and not validly withdrawn pursuant to the Exchange Offer or the Private Exchange; (2) deliver to the Trustee for cancellation all Registrable Notes so accepted for exchange; and (3) cause the Trustee to authenticate and deliver promptly to each Holder tendering such Registrable Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Notes of such Holder so accepted for exchange. The Exchange Notes and the Private Exchange Notes may be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture, which in either event will provide that the Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture and that the Exchange Notes, the Private Exchange Notes and the Notes, if any, will vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Notes, if any, will have the right to vote or consent as a separate class on any matter. (c) If, (i) because of any change in law or in currently prevailing interpretations of the staff of the Commission, the Company is not permitted to effect an Exchange Offer, (ii) the Exchange Offer is not consummated within 255 days of the Issue Date, (iii) any holder of Private Exchange Notes so requests in writing to the Company or (iv) in the case of any Holder that participates in the Exchange Offer (and validly tenders and does not withdraw its Registrable Notes prior to the expiration thereof), such Holder does not receive Exchange Notes on the date of the exchange that may be sold without restriction under federal securities laws (other than due solely to the status of such Holder as an affiliate of any Issuer within the meaning of the Securities Act) and so notifies the Company within 30 days following the consummation of the Exchange Offer (and provides a reasonable basis for its conclusions), in the case of each of clauses (i)-(iv), then the Issuers shall promptly deliver to the Holders and the Trustee written notice thereof (the "Shelf Notice") and shall file a Shelf Registration pursuant to Section 3. ------------ 3. Shelf Registration ------------------ If a Shelf Notice is delivered as contemplated by Section 2(c), then: (a) Shelf Registration. The Issuers shall as promptly as ------------------ reasonably practicable file with the Commission a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes (the "Initial Shelf Registration"). If the Issuers shall -------------------------- not have filed the Exchange Registration Statement, each of the Issuers shall file with the Commission the Initial Shelf Registration on or prior to the Filing Date and shall use its best efforts to cause such Initial Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date. Otherwise, each of the Issuers shall file with the Commission the Initial Shelf Registration within 120 days of the delivery of the Shelf Notice and shall use its best efforts to cause such Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date. The Initial Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Issuers shall not permit any securities other than the Registrable Notes to be included in any Shelf Registration. Each of the Issuers shall use its best efforts to keep the Initial Shelf Registration continuously effective under the Securities Act until the date which is 24 months from the Issue Date (or, if Rule 144(k) under the Securities Act is amended to permit unlimited resales by non-affiliates within a lesser period, such lesser period) (subject to extension pursuant to the last and penultimate paragraphs of Section 5 hereof) (the "Effectiveness Period") or such shorter -------------------- period ending when (i) all Registrable Notes covered by the Initial Shelf Registration have been sold in the manner set forth and as contemplated in the Initial Shelf Registration or (ii) a Subsequent Shelf Registration covering all of the Registrable Notes has been declared effective under the Securities Act. (b) Subsequent Shelf Registrations. If the Initial Shelf ------------------------------ Registration or any Subsequent Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), each of the Issuers shall use its best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 30 days of such cessation of effectiveness amend the Shelf Registration in a manner to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Notes then outstanding (a "Subsequent Shelf Registration"). If a ----------------------------- Subsequent Shelf Registration is filed, each of the Issuers shall use its best efforts to cause the Subsequent Shelf Registration to be declared effective as soon as practicable after such filing and to keep such Subsequent Shelf Registration continuously effective for a period equal to the number of days in the Effectiveness Period less the aggregate number of days during which the Initial Shelf Registration or any Subsequent Shelf Registrations was previously continuously effective. As used herein the term "Shelf Registration" means the ------------------ Initial Shelf Registration and any Subsequent Shelf Registration. (c) Supplements and Amendments. Each of the Issuers shall -------------------------- promptly supplement and amend any Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, or if required by the Securities Act. 4. Additional Interest ------------------- (a) The Issuers and the Initial Purchasers agree that the Holders of Registrable Notes will suffer damages if the Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, each of the Issuers agrees to pay, as liquidated damages, additional interest on the Registrable Notes ("Additional Interest") under the circumstances and to the ------------------- extent set forth below (each of which shall be given independent effect): (i) if (A) neither the Exchange Registration Statement nor the Initial Shelf Registration has been filed on or prior to the Filing Date or (B) notwithstanding that the Issuers have consummated or will consummate an Exchange Offer, the Issuers are required to file a Shelf Registration and such Shelf Registration is not filed on or prior to the 120th day after delivery of the Shelf Notice, then, in the case of subclause (A), commencing on the day after the Filing Date or, in the case of subclause (B), commencing on the 121st day following delivery of the Shelf Notice, Additional Interest shall accrue on the Registrable Notes over and above the stated interest at a rate of 1.0% per annum for the first 90 days immediately following the Filing Date or such 120th day, as the case may be, such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of each subsequent 90-day period; (ii) if (A) neither the Exchange Registration Statement nor the Initial Shelf Registration is declared effective on or prior to the Effectiveness Date applicable thereto or (B) notwithstanding that the Issuers have consummated or will consummate an Exchange Offer, the Issuers are required to file a Shelf Registration and such Shelf Registration is not declared effective by the Commission on or prior to the applicable Effectiveness Date, then, commencing on the day after such applicable Effectiveness Date, Additional Interest shall accrue on the Registrable Notes over and above the stated interest at a rate of 1.0% per annum for the first 90 days immediately following the day after the applicable Effectiveness Date, such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of each subsequent 90-day period; and (iii) if (A) the Company has not exchanged Exchange Notes for all Notes validly tendered and not withdrawn in accordance with the terms of the Exchange Offer on or prior to the 255th day after the Issue Date, (B) the Exchange Registration Statement ceases to be effective prior to consummation of the Exchange Offer or (C) if applicable, a Shelf Registration has been declared effective and such Shelf Registration ceases to be effective at any time during the Effectiveness Period (other than as a result of the imposition of any Suspension Period in compliance with the penultimate paragraph of Section 5 of this Agreement) then Additional Interest shall accrue on the Registrable Notes over and above the stated interest at a rate of 1.0% per annum for the first 90 days commencing on the (x) 256th day after the Issue Date in the case of (A) above or (y) the day such Exchange Registration Statement or Shelf Registration ceases to be effective in the case of (B) and (C) above, such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of each such subsequent 90-day period; provided, however, that the Additional Interest rate on the Registrable Notes - -------- ------- may not exceed in the aggregate 2.0% per annum; provided further that (1) upon -------- ------- the filing of the Exchange Registration Statement or each Shelf Registration (in the case of (i) above), (2) upon the effectiveness of the Exchange Registration Statement or each Shelf Registration, as the case may be (in the case of (ii) above), or (3) upon the exchange of Exchange Notes for all Registrable Notes tendered (in the case of (iii)(A) above) or upon the effectiveness of an Exchange Registration Statement or Shelf Registration which had ceased to remain effective (in the case of (iii)(B) and (C) above), Additional Interest on any Registrable Notes then accruing Additional Interest as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. (b) The Issuers shall notify the Trustee within one Business Day after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "Event Date"). Any amounts of ---------- Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable in cash semi-annually on each regular interest payment date specified in the Indenture (to the Holders of Registrable Notes of record on the regular record date therefor (as specified in the Indenture) immediately preceding such dates), commencing with the first such regular interest payment date occurring after any such Additional Interest commences to accrue. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the Notes subject thereto, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360. 5. Registration Procedures ----------------------- In connection with the filing of any Registration Statement pursuant to Section 2 or 3 hereof, each Issuer shall effect such registration to permit the sale of such securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by each Issuer hereunder, each Issuer shall: (a) Prepare and file with the Commission prior to the Filing Date, the Exchange Registration Statement or if the Exchange Registration Statement is not filed or is unavailable, a Shelf Registration as prescribed by Section 2 or 3, and use its best efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided -------- that, if (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period and has advised the Company that it is a Participating Broker-Dealer, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Issuers shall, if requested, furnish to and afford the Holders of the Registrable Notes to be registered pursuant to such Shelf Registration or each such Participating Broker-Dealer, as the case may be, covered by such Registration Statement, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (in each case at least five Business Days prior to such filing). The Issuers shall not file any such Registration Statement or Prospectus or any amendments or supplements thereto if the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement, or any such Participating Broker-Dealer, as the case may be, their counsel, or the managing underwriters, if any, shall reasonably object thereto. (b) Prepare and file with the Commission such amendments and post-effective amendments to each Shelf Registration or Exchange Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period, as the case may be; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act applicable to it with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus. The Issuers shall be deemed not to have used their best efforts to keep a Registration Statement effective during the Applicable Period if they voluntarily take any action that would result in selling Holders of the Registrable Notes covered thereby or Participating Broker-Dealers seeking to sell Exchange Notes not being able to sell such Registrable Notes or such Exchange Notes during that period unless such action is required by applicable law, rule or regulation or unless the Issuers comply with this Agreement, including, without limitation, the provisions of paragraph 5(k) hereof and the last and penultimate paragraphs of Section 5. (c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period from whom the Issuers have received written notice that it will be a Participating Broker-Dealer, notify the selling Holders of Registrable Notes, and each such Participating Broker-Dealer, their counsel and the managing underwriters, if any, promptly (but in any event within two Business Days), and confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective (including in such notice a written statement that any Holder may, upon request, obtain, without charge, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Notes the representations and warranties of any Issuer contained in any agreement (including any underwriting agreement contemplated by Section 5(n) hereof) cease to be true and correct in any material respect, (iv) of the receipt by any Issuer of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event, the existence of any condition or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in, or amendments or supplements to, such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (vi) of the Issuers' reasonable determination that a post-effective amendment to a Registration Statement would be appropriate. (d) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use its best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued, to use its best efforts to obtain the withdrawal of any such order at the earliest possible date. (e) If a Shelf Registration is filed pursuant to Section 3 and if requested by the managing underwriters, if any, or the Holders of a majority in aggregate principal amount of the Registrable Notes being sold in connection with an underwritten offering, (i) as promptly as practicable incorporate in a prospectus supplement or post-effective amendment such information or revisions to information therein relating to such underwriters or selling Holders as the managing underwriters, if any, or such Holders or their counsel reasonably request to be included or made therein, (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Issuers have received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment, and (iii) supplement or make amendments to such Registration Statement. (f) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Registrable Notes and to each such Participating Broker-Dealer who so requests and to counsel and each managing underwriter, if any, without charge, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. (g) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer, deliver to each selling Holder of Registrable Notes or each such Participating Broker-Dealer, as the case may be, their respective counsel, and the underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last and penultimate paragraphs of this Section 5, the Issuers hereby consent to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Notes and each Participating Broker-Dealer, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Notes covered by, or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Notes or any delivery of a Prospectus contained in the Exchange Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use its best efforts to register or qualify, and cooperate with the selling Holders of Registrable Notes and each such Participating Broker-Dealer, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Notes or Exchange Notes, as the case may be, for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriter or underwriters, if any, reasonably request in writing; provided that where Exchange Notes held by Participating -------- Broker-Dealers or Registrable Notes are offered pursuant to an underwritten offering, counsel to the underwriters shall, at the cost and expense of the Issuers, perform the Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(h); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Exchange Notes by Participating Broker-Dealers or the Registrable Notes covered by the applicable Registration Statement; provided that no Issuer shall be required to (A) qualify generally to -------- do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject. (i) If a Shelf Registration is filed pursuant to Section 3, cooperate with the selling Holders of Registrable Notes, any Participating Broker-Dealer and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Notes to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or Holders may reasonably request. (j) Use its best efforts to cause the Registrable Notes covered by the Registration Statement to be registered with or approved by such governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Registrable Notes, in which case the Issuers will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals. (k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to Section 5(a) hereof) file with the Commission, at the Issuers' sole expense, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (l) Use its commercially reasonable efforts to cause the Registrable Notes covered by a Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement or the managing underwriter or underwriters, if any. (m) Prior to the effective date of the first Registration Statement relating to the Registrable Notes, (i) provide the Trustee with printed certificates for the Registrable Notes or the Exchange Notes, as the case may be, in a form eligible for deposit with the Depository Trust Company and (ii) provide a CUSIP number for the Registrable Notes or the Exchange Notes, as the case may be. (n) In connection with an underwritten offering of Registrable Notes pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Notes and take all such other actions as are reasonably requested by the managing underwriter or underwriters in order to expedite or facilitate the registration or the disposition of such Registrable Notes and, in such connection, (i) make such representations and warranties to the underwriters, with respect to the business of the Issuers and their subsidiaries and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings of debt securities similar to the Notes, and confirm the same in writing if and when requested; (ii) obtain the opinion of counsel to the Issuers and updates thereof in form and substance reasonably satisfactory to the managing underwriter or underwriters, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings of debt securities similar to the Notes and such other matters as may be reasonably requested by managing underwriters; and (iii) obtain "cold comfort" letters and updates thereof in form and substance reasonably satisfactory to the managing underwriter or underwriters from the independent certified public accountants of the Issuers (and, if necessary, any other independent certified public accountants of any subsidiary of any Issuer or of any business acquired by the Company any Issuer for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings of debt securities similar to the Notes and such other matters as are reasonably requested by the managing underwriter or underwriters. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder. (o) If (1) a Shelf Registration is filed pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by a representative of a majority in interest of the selling Holders of such Registrable Notes being sold, and each Participating Broker-Dealer, any underwriter participating in any such disposition of Registrable Notes, if any, and any attorney, accountant or other agent retained by any such representative, each Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business ---------- hours, all financial and other records, pertinent corporate documents and properties of each Issuer and its subsidiaries (collectively, the "Records") as ------- shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of each Issuer and its subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement. Records which an Issuer determines, in good faith, to be confidential and any Records which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a material misstatement or omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) the information in such Records has been made generally available to the public other than as a result of a disclosure or failure to safeguard by such Inspector or (iv) disclosure of such information is, in the reasonable opinion of counsel for any Inspector, necessary or advisable in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Inspector and arising out of, based upon, related to, or involving this Agreement, or any transactions contemplated hereby or arising hereunder. Each selling Holder of such Registrable Notes and each Participating Broker-Dealer will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any transactions in the securities of any Issuer unless and until such is made generally available to the public. Each Inspector, each selling Holder of such Registrable Notes and each Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction pursuant to clause (ii) or (iv) of the previous sentence or otherwise, give notice to the Issuers and allow the Issuers to undertake appropriate action to obtain a protective order or otherwise prevent disclosure of the Records deemed confidential at its expense. (p) Provide an indenture trustee for the Registrable Notes or the Exchange Notes, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a), as the case may be, to be qualified under the TIA not later than the effective date of the Exchange Offer or the first Registration Statement relating to the Registrable Notes; and in connection therewith, cooperate with the trustee under any such indenture and the Holders of the Registrable Notes, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its best efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the Commission to enable such indenture to be so qualified in a timely manner. (q) Comply with all applicable rules and regulations of the Commission and make generally available to its securityholders earnings statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Notes are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (r) Upon consummation of the Exchange Offer or a Private Exchange, obtain an opinion of counsel to the Issuers, in a form customary for underwritten transactions, addressed to the Trustee for the benefit of all Holders of Registrable Notes participating in the Exchange Offer or the Private Exchange, as the case may be, that the Exchange Notes or the Private Exchange Notes, as the case may be, the Guarantees and the related indenture constitute legally valid and binding obligations of the Issuers, enforceable against the Issuers in accordance with their respective terms. (s) If the Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes by Holders to the Issuers (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Issuers shall mark, or caused to be marked, on such Registrable Notes that such Registrable Notes are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Registrable Notes be marked as paid or otherwise satisfied. (t) Cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings required to be made with the NASD. (u) Use its best efforts to take all other steps reasonably necessary to effect the registration of the Registrable Notes covered by a Registration Statement contemplated hereby. The Issuers may require each seller of Registrable Notes as to which any registration is being effected to furnish to the Issuers such information regarding such seller and the distribution of such Registrable Notes as the Issuers may, from time to time, reasonably request. The Issuers may exclude from such registration the Registrable Notes of any seller who fails to furnish such information within a reasonable time after receiving such request. Each seller as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Issuers all information required to be disclosed in order to make the information previously furnished to the Issuers by such seller not materially misleading. Each Holder of Registrable Notes and each Participating Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, that, upon receipt of any notice from the Issuers of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) or a notice given in accordance with the last paragraph of this Section 5, such Holder will forthwith discontinue disposition of such Registrable Notes covered by such Registration Statement or Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as the case may be, and, in each case, dissemination of such Prospectus until such Holder's or Participating Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(k), or until it is advised in writing (the "Advice") ------ by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. In the event the Issuers shall give any such notice, each of the Effectiveness Period and the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Notes covered by such Registration Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(k) or (y) the Advice. Notwithstanding anything to the contrary in this Agreement, if at any time or from time to time after the effective date of a Shelf Registration filed pursuant to Section 2, the Company notifies in writing each Holder of Registrable Notes to be sold pursuant to the Shelf Registration of the existence of a Potential Material Event, the Holders shall not offer to sell any Registrable Notes pursuant to the prospectus contained in such Shelf Registration from the time of the giving of notice with respect to a Potential Material Event until the Holders receive written notice from the Company that such Potential Material Event either has been disclosed to the public or no longer constitutes a Potential Material Event; provided, however, that (i) in no -------- ------- event shall the effectiveness of such Shelf Registration be suspended for a period of more than 30 days (a "Suspension ---------- Period"), (ii) the Company may not declare Suspension Periods more than two (2) - ------ times in any calendar year and (iii) in each such case the Effectiveness Period of the Shelf Registration provided for in Section 2 shall be extended by the number of days of the applicable Suspension Period pursuant to the foregoing and Additional Interest shall not apply during the Suspension Period to the extent that such Additional Interest is due solely as a result of the imposition of the Suspension Period. 6. Registration Expenses --------------------- All fees and expenses incident to the performance of or compliance with this Agreement by the Issuers shall be borne by the Issuers whether or not the Exchange Offer or a Shelf Registration is filed or becomes effective, including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (B) fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Notes or Exchange Notes and determination of the eligibility of the Registrable Notes or Exchange Notes for investment under the laws of such jurisdictions (x) where the holders of Registrable Notes are located, in the case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Notes or Exchange Notes in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by the managing underwriter or underwriters, if any, or by the Holders of a majority in aggregate principal amount of the Registrable Notes included in any Registration Statement or by any Participating Broker-Dealer, as the case may be, (iii) reasonable messenger, telephone and delivery expenses incurred in connection with the Exchange Registration Statement and any Shelf Registration, (iv) fees and disbursements of counsel for the Issuers and fees and disbursements of one firm of special counsel for the Initial Purchasers in connection with the Exchange Offer and for the sellers of Registrable Notes in connection with any Shelf Registration, (v) fees and disbursements of all independent certified public accountants referred to in Section 5(n)(iii) (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance in accordance with this Agreement), (vi) rating agency fees, (vii) Securities Act liability insurance, if any Issuer desires such insurance, (viii) fees and expenses of all other Persons retained by the Issuers, (ix) internal expenses of the Issuers (including, without limitation, all salaries and expenses of officers and employees of the Issuers performing legal or accounting duties), (x) the expense of any annual or special audit, (xi) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, (xi) the fees and disbursements of underwriters, if any, customarily paid by issuers or sell- ers of securities (but not including any underwriting discounts or commissions or transfer taxes, if any, attributable to the sale of the Registrable Notes, which discounts, commissions or taxes shall be paid by Holders of such Registrable Notes) and (xiii) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, securities sales agreements, indentures and any other documents necessary in order to comply with this Agreement. 7. Indemnification --------------- (a) Each of the Issuers jointly and severally agrees to indemnify and hold harmless each Holder of Registrable Notes and each Participating Broker-Dealer, the officers, directors, employees and agents of each such Person, and each Person, if any, who controls any such Person within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from and against any and all losses, claims, damages ----------- and liabilities (including, without limitation, the reasonable legal fees and other reasonable expenses actually incurred in connection with any suit, action or proceeding or any claim asserted) caused by, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (as amended or supplemented if the Issuers shall have furnished any amendments or supplements thereto) or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Participant furnished to the Issuers in writing by or on behalf of such Participant expressly for use therein; provided, however, that the Issuers shall -------- ------- not be liable if such untrue statement or omission or alleged untrue statement or omission was contained or made in any preliminary prospectus and corrected in the Prospectus or any amendment or supplement thereto and the Prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission of a material fact that was the subject matter of the related proceeding and any such loss, liability, claim, damage or expense suffered or incurred by the Participants resulted from any action, claim or suit by any Person who purchased Registrable Notes or Exchange Notes which are the subject thereof from such Participant and it is established in the related proceeding that such Participant failed to deliver or provide a copy of the Prospectus (as amended or supplemented) to such Person with or prior to the confirmation of the sale of such Registrable Notes or Exchange Notes sold to such Person if required by applicable law, unless such failure to deliver or provide a copy of the Prospectus (as amended or supplemented) was a result of noncompliance by the Issuers with Section 5 of this Agreement. (b) Each Participant will be required to agree, severally and not jointly, to indemnify and hold harmless each Issuer, its directors and officers and each Person who controls each Issuer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Issuers to each Participant, but only with reference to information relating to any Participant furnished to the Issuers in writing by such Participant expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary prospectus. The liability of any Participant under this paragraph shall in no event exceed the proceeds received by such Participant from sales of Registrable Notes or Exchange Notes giving rise to such obligations. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such Person (the "Indemnified Person") shall promptly ------------------ notify the Person against whom such indemnity may be sought (the "Indemnifying ------------ Person") in writing, and the Indemnifying Person, upon request of the - ------ Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Person may reasonably designate in such proceeding and shall pay the reasonable fees and expenses actually incurred by such counsel related to such proceeding; provided, however, that the failure to so notify the -------- ------- Indemnifying Person shall not relieve it of any obligation or liability which it may have hereunder except to the extent that the indemnifying party is unaware of the commencement of such action and such omission results in the forfeiture by the indemnifying party of substantial rights and defenses. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed in writing to the contrary, (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and the Indemnified Person shall have reasonably concluded that there may be one or more legal defenses available to it and/or other Indemnified Persons that are different from or in addition to those available to any such Indemnifying Person. It is understood that, unless there is a conflict among Indemnified Persons, the Indemnifying Person shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm for the Participants and control Persons of Participants shall be designated in writing by Participants who sold a majority in interest of Registrable Notes sold by all such Participants and any such separate firm for the Issuers, their respective directors, officers and such control Persons of the Issuers shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there is a final non-appealable judgment for the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested an Indemnifying Person to reimburse the Indemnified Person for reasonable fees and expenses actually incurred by counsel as contemplated by the third sentence of this paragraph, the Indemnifying Person agrees that it shall be liable for any settlement of any proceeding effected without its consent if (i) such settlement is entered into more than 30 days after receipt by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement; provided, however, that the Indemnifying Person shall not be liable -------- ------- for any settlement effected without its consent pursuant to this sentence if the Indemnifying Person is contesting, in good faith, the request for reimbursement. No Indemnifying Person shall, without the prior written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional release of such Indemnified Person, in form and substance satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of an Indemnified Person. (d) If the indemnification provided for in the first and second paragraphs of this Section 7 is unavailable to, or insufficient to hold harmless, an Indemnified Person in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other in connection with the statements or omissions (or alleged statements or omissions) that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers on the one hand or by the Participants or such other Indemnified Person, as the case may be, on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission and any other equitable considerations appropriate under the circumstances. (e) The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation --- ---- (even if the Participants were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall a Participant be required to contribute any amount in excess of the amount by which proceeds received by such Participant from sales of Registrable Notes or Exchange Notes, as the case may be, exceeds the amount of any damages that such Participant has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. 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. (f) The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the Indemnifying Persons may otherwise have to the Indemnified Persons referred to above. 8. Rules 144 and 144A ------------------ Each of the Issuers covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder in a timely manner and, if at any time it is not required to file such reports, it will, upon the request of any Holder of Registrable Notes, make publicly available other information so long as necessary to permit sales pursuant to Rule 144 and Rule 144A under the Securities Act. Each of the Issuers further covenants, for so long as any Registrable Notes remain outstanding, to make available to any Holder or beneficial owner of Registrable Notes in connection with any sale thereof and any prospective purchaser of such Registrable Notes from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Registrable Notes pursuant to Rule 144A. 9. Underwritten Registrations -------------------------- If any of the Registrable Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Notes included in such offering and reasonably acceptable to the Issuers. No Holder of Registrable Notes may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 10. Miscellaneous ------------- (a) Remedies. In the event of a breach by any Issuer of any of its -------- obligations under this Agreement, each Holder of Registrable Notes and each Participating Broker-Dealer holding Exchange Notes, in addition to being entitled to exercise all rights provided herein, in the Indenture or, in the case of an Initial Purchaser, in the Purchase Agreement, or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. Each Issuer agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (b) No Inconsistent Agreements. None of the Issuers has entered, as -------------------------- of the date hereof, and none of the Issuers shall enter, after the date of this Agreement, into any agreement with respect to any of its securities that is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the provisions hereof. None of the Issuers has entered and none of the Issuers shall enter into any agreement with respect to any of its securities which will grant to any Person piggy-back rights with respect to a Registration Statement. (c) [Reserved]. -------- (d) Amendments and Waivers. The provisions of this Agreement may not ---------------------- be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of (A) the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Notes and (B) in circumstances that would adversely affect Participating Broker-Dealers, the Participating Broker-Dealers holding not less than a majority in aggregate principal amount of the Exchange Notes held by all Participating Broker-Dealers; provided, however, -------- ------- that Section 7 and this Section 10(d) may not be amended, modified or supplemented without the prior written consent of each Holder and each Participating Broker-Dealer (including any person who was a Holder or Participating Broker-Dealer of Registrable Notes or Exchange Notes, as the case may be, disposed of pursuant to any Registration Statement). Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Notes whose securities are being tendered pursuant to the Exchange Offer or sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being tendered or being sold by such Holders pursuant to such Registration Statement. (e) Notices. All notices and other communications provided for ------- or permitted hereunder shall be made in writing by hand delivery, registered first-class mail, next-day air courier or telecopier: 1. if to a Holder of Registrable Notes or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture, with a copy in like manner to the Initial Purchasers as follows: CIBC WORLD MARKETS CORP. LIBRA SECURITIES, LLC c/o CIBC World Markets Corp. 424 Lexington Avenue 3rd Floor New York, New York 10017 Facsimile No.: (212) 885-4998 Attention: Leveraged Finance Group with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Facsimile No.: (212) 269-5420 Attention: Roger Meltzer, Esq. 2. if to the Initial Purchasers, at the address specified in Section 10(e)(1); 3. if to the Issuers, as follows: Gameco, Inc. 240 Main Street Black Hawk, Colorado 80422 Facsimile No.: (303) 582-0239 Attention: President with copies to: Baker & Hostetler LLP 1900 East 9th Street 3700 National Center Cleveland, Ohio 44114 Facsimile No.: (216) 696-0740 Attention: Robert A. Weible, Esq. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; one Business Day after being timely delivered to a next-day air courier guaranteeing overnight delivery; and when receipt is acknowledged by the addressee, if telecopied. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee under the Indenture at the address specified in such Indenture. (f) Successors and Assigns. This Agreement shall inure to the ---------------------- benefit of and be binding upon the successors and assigns of each of the parties hereto and the Holders; provided, however, that this Agreement shall not inure -------- ------- to the benefit of or be binding upon a successor or assign of a Holder unless, and only to the extent such successor or assign holds Registrable Notes. (g) Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience -------- of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND ------------- CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. (j) Severability. If any term, provision, covenant or restriction ------------ of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (k) Notes Held by any Issuer or their Affiliates. Whenever the -------------------------------------------- consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by any Issuer or its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (l) Third Party Beneficiaries. Holders of Registrable Notes and ------------------------- Participating Broker-Dealers are intended third party beneficiaries of this Agreement and this Agreement may be enforced by such Persons. (m) Entire Agreement. This Agreement, together with the Purchase ---------------- Agreement and the Indenture, is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein and any and all prior oral or written agreements, representations, or warranties, contracts, understandings, correspondence, conversations and memoranda among the Initial Purchasers on the one hand and the Issuers on the other, or between or among any agents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof and thereof are merged herein and replaced hereby. (n) Joint and Several Obligations. All of the obligations of the ----------------------------- Issuers hereunder shall be joint and several obligations of each of them. S-1 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. GAMECO, INC. By: /s/ Jeffrey P. Jacobs ---------------------------- Name: Title: BH ACQUISITION, INC. By: /s/ Jeffrey P. Jacobs ---------------------------- Name: Title: GAMECO ACQUISITION, INC. By: /s/ Jeffrey P. Jacobs ---------------------------- Name: Title: Accepted and agreed: CIBC WORLD MARKETS CORP. By: /s/ Carter Harned ------------------------------- Name: Carter Harned Title: Executive Director LIBRA SECURITIES, LLC By:_______________________________ Name: Title: Accepted and agreed: CIBC WORLD MARKETS CORP. By: __________________________ Name: Title: LIBRA SECURITIES, LLC By: /s/ Jess M. Ravich -------------------------- Name: Jess M. Ravich Title: CEO S-2 Accepted and agreed: CIBC WORLD MARKETS CORP. By: _____________________________________ Name: Title: LIBRA SECURITIES, LLC By: _____________________________________ Name: Title: EX-4.6 36 dex46.txt SECURITY AGREEMENT DATED 2/8/2002 Exhibit 4.6 ================================================================================ SECURITY AGREEMENT By GAMECO, INC. as Issuer and THE GUARANTORS PARTY HERETO and WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee ---------------------- Dated as of February 8, 2002 ================================================================================ TABLE OF CONTENTS
Page ---- PREAMBLE ................................................................ 1 RECITALS ................................................................ 1 AGREEMENT ............................................................... 2 ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions ................................................. 2 SECTION 1.2 Interpretation .............................................. 11 SECTION 1.3 Resolution of Drafting Ambiguities .......................... 11 ARTICLE II GRANT OF SECURITY AND SECURED OBLIGATIONS SECTION 2.1 Pledge ...................................................... 12 SECTION 2.2 Secured Obligations ......................................... 12 SECTION 2.3 Security Interest ........................................... 12 SECTION 2.4 No Release .................................................. 13 ARTICLE III PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES; USE OF PLEDGED COLLATERAL SECTION 3.1 Delivery of Certificated Securities Collateral .............. 13 SECTION 3.2 Perfection of Uncertificated Securities Collateral .......... 14 SECTION 3.3 Financing Statements and Other Filings ...................... 14 SECTION 3.4 Other Actions ............................................... 14 SECTION 3.5 Joinder of Additional Guarantors ............................ 18 SECTION 3.6 Motor Vehicles .............................................. 18 SECTION 3.7 Supplements; Further Assurances ............................. 18 SECTION 3.8 Use and Pledge of Pledged Collateral ........................ 18 ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 4.1 Title and Authority ......................................... 19
SECTION 4.2 Validity of Security Interest ............................................ 19 SECTION 4.3 Limitation on Liens ...................................................... 19 SECTION 4.4 Other Financing Statements ............................................... 20 SECTION 4.5 Chief Executive Office; Change of Name; Jurisdiction of Organization ............................................................. 20 SECTION 4.6 Location of Inventory and Equipment ...................................... 21 SECTION 4.7 Condition and Maintenance of Equipment ................................... 21 SECTION 4.8 Corporate Names; Prior Transactions ...................................... 21 SECTION 4.9 Due Authorization and Issuance ........................................... 21 SECTION 4.10 No Violations, etc. ...................................................... 22 SECTION 4.11 No Options, Warrants, etc ................................................ 22 SECTION 4.12 No Claims ................................................................ 22 SECTION 4.13 No Conflicts, Consents, etc. ............................................. 22 SECTION 4.14 Pledged Collateral ....................................................... 23 SECTION 4.15 Insurance ................................................................ 23 SECTION 4.16 Payment of Taxes; Compliance with Laws; Contesting Liens; Claims ......... 23 SECTION 4.17 Access to Pledged Collateral, Books and Records; Other Information ....... 24 SECTION 4.18 Acquisition Documents .................................................... 24 SECTION 4.19 Benefit to Guarantors .................................................... 25 ARTICLE V CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL SECTION 5.1 Pledge of Additional Securities Collateral ............................... 25 SECTION 5.2 Voting Rights; Distributions; etc ........................................ 25 SECTION 5.3 Operative Agreements ..................................................... 26 SECTION 5.4 Defaults, etc ............................................................ 27 ARTICLE VI CERTAIN PROVISIONS CONCERNING INTELLECTUAL PROPERTY COLLATERAL SECTION 6.1 Grant of License ......................................................... 27 SECTION 6.2 Registrations ............................................................ 27 SECTION 6.3 No Violations or Proceedings ............................................. 27 SECTION 6.4 Protection of Trustee's Security ......................................... 28 SECTION 6.5 After-Acquired Property .................................................. 29 SECTION 6.6 Modifications ............................................................ 29 SECTION 6.7 Litigation ............................................................... 29 ARTICLE VII CERTAIN PROVISIONS CONCERNING ACCOUNTS SECTION 7.01. Special Representations and Warranties ................................... 30
SECTION 7.02. Maintenance of Records .................................................. 30 SECTION 7.03. Legend .................................................................. 30 SECTION 7.04. Modification of Terms, etc .............................................. 30 SECTION 7.05. Collection .............................................................. 31 ARTICLE VIII TRANSFERS AND OTHER LIENS ARTICLE IX REMEDIES SECTION 9.1 Remedies ................................................................. 31 SECTION 9.2 Notice of Sale ........................................................... 34 SECTION 9.3 Waiver of Notice and Claims .............................................. 34 SECTION 9.4 Certain Sales of Pledged Collateral ...................................... 34 SECTION 9.5 No Waiver; Cumulative Remedies ........................................... 36 SECTION 9.6 Certain Additional Actions Regarding Intellectual Property ............... 36 ARTICLE X APPLICATION OF PROCEEDS ARTICLE XI MISCELLANEOUS SECTION 11.1 Concerning Trustee ...................................................... 37 SECTION 11.2 Trustee May Perform; Trustee Appointed Attorney-in-Fact ................. 38 SECTION 11.3 Expenses ................................................................ 38 SECTION 11.4 Indemnity ............................................................... 39 SECTION 11.5 Continuing Security Interest; Assignment ................................ 40 SECTION 11.6 Termination; Release .................................................... 40 SECTION 11.7 Modification in Writing ................................................. 40 SECTION 11.8 Notices ................................................................. 40 SECTION 11.9 GOVERNING LAW ........................................................... 41 SECTION 11.10 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY TRIAL ...... ........................................... 41 SECTION 11.11 Severability of Provisions .............................................. 41 SECTION 11.12 Execution in Counterparts ............................................... 41 SECTION 11.13 Business Days ........................................................... 42 SECTION 11.14 Waiver of Stay .......................................................... 42 SECTION 10.15 No Credit for Payment of Taxes or Imposition ............................ 42 SECTION 11.16 No Claims Against Trustee ............................................... 42 SECTION 11.17 Obligations Absolute .................................................... 42
SECTION 11.18 Senior Intercreditor Agreement .......................................... 43
SIGNATURES SCHEDULE 1.1(a) Initial Pledged Interests SCHEDULE 1.1(b) Initial Pledged Shares SCHEDULE 1.1(c) Initial Intercompany Notes and Supporting Obligations SCHEDULE 1.1(d) Prior Liens SCHEDULE 1.1(e) Copyrights SCHEDULE 1.1(f) Licenses SCHEDULE 1.1(g) Patents SCHEDULE 1.1(h) Trademarks SCHEDULE 3.4(a) Instruments and Tangible Chattel Paper SCHEDULE 3.4(b) Initial Deposit Accounts SCHEDULE 3.4(c) Initial Securities Accounts and Commodity Accounts SCHEDULE 3.4(f) Commercial Tort Claims SCHEDULE 4.12 Required Consents SCHEDULE 7.3 Violations or Proceedings EXHIBIT 1 Form of Issuer Acknowledgment EXHIBIT 2 Form of Securities Pledge Amendment EXHIBIT 3 Form of Joinder Agreement EXHIBIT 4 Form of Control Agreement SECURITY AGREEMENT SECURITY AGREEMENT (the "Agreement"), dated as of February 8, 2002, made by --------- GAMECO, INC., a Delaware corporation having an office at 1001 North U.S. Highway One, #710, Jupiter, Florida 33477 (the "Issuer"), and EACH OF THE GUARANTORS ------ LISTED ON THE SIGNATURE PAGES HERETO OR FROM TIME TO TIME PARTY HERETO BY EXECUTION OF A JOIN-DER AGREEMENT (collectively, the "Guarantors"), as pledgors, ---------- assignors and debtors (the Issuer, together with the Guarantors, in such capacities and together with any successors in such capacities, the "Pledgors," -------- and each, a "Pledgor"), in favor of WELLS FARGO BANK MINNESOTA, NATIONAL ------- ASSOCIATION, a national banking association having an office at 213 Court Street, Suite 902, Middletown, CT 06457, in its capacity as trustee pursuant to the Indenture (as hereinafter defined), as pledgee, assignee and secured party (in such capacities and together with any successors in such capacities, the "Trustee"). ------- R E C I T A L S : - - - - - - - - A. The Pledgors and the Trustee have, in connection with the execution and delivery of this Agreement, entered into that certain indenture, dated as of February 8, 2002 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Indenture"), pursuant to which the --------- Issuer has issued its 117/8% senior secured notes due 2009 (the "Senior Secured -------------- Notes") in the aggregate principal amount of $125,000,000. It is contemplated - ----- that the Issuer may, after the date hereof, issue Additional Notes (as defined in the Indenture) and Exchange Notes (as defined in the Indenture; the Exchange Notes, together with the Additional Notes and the Senior Secured Notes, the "Notes"), in each case, pursuant to the provisions of the Indenture. ----- B. Each Guarantor has, pursuant to the Indenture, among other things, unconditionally guaranteed (the "Guarantee") the obligations of the Issuer under the Indenture and the Notes. C. Each Guarantor will receive substantial benefits from the execution, delivery and performance of the obligations under the Indenture and the Notes and is, therefore, willing to enter into this Agreement. D. Each Pledgor is or will be the legal and/or beneficial owner of the Pledged Collateral (as hereinafter defined) to be pledged by it hereunder. E. This Agreement is given by each Pledgor in favor of the Trustee for its benefit and the benefit of the Holders of the Notes (collectively, the "Secured Parties") to secure the payment and performance of --------------- all of the Secured Obligations (as hereinafter defined). -2- A G R E E M E N T : - - - - - - - - - NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Pledgor and the Trustee hereby agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions. ----------- (a) Unless otherwise defined herein, terms used herein that are defined in the UCC shall have the meanings assigned to them in the UCC, including the following which are capitalized herein: "Accounts"; "Bank"; "Certificates of Title"; "Chattel Paper"; ---- --------------------- ------------- "Commercial Tort Claim"; "Commodity Account"; "Commodity Contract"; "Commodity --------------------- ----------------- ------------------ --------- Intermediary"; "Credit Agreement"; "Credit Agreement Collateral"; "Documents"; - ------------ ---------------- -------------------------- ---------- "Electronic Chattel Paper"; "Entitlement Holder"; "Entitlement Order"; ------------------------ ------------------ ----------------- "Equipment"; "Financial Asset"; "Fixtures"; "Goods"; "Instruments" (as defined --------- --------------- -------- ----- ----------- in Article 9 rather than Article 3); "Inventory"; "Investment Property"; --------- ------------------- "Letter-of-Credit Rights"; "Letters of Credit"; "Securities Account"; "Security ----------------------- ----------------- ------------------ -------- Entitlement"; "Securities Intermediary"; "Supporting Obligations"; and "Tangible - ----------- ----------------------- ---------------------- -------- Chattel Paper". - ------------- (b) Capitalized terms used but not otherwise defined herein that are defined in the Indenture shall have the meanings given to them in the Indenture, including the following: "Business Day"; "Capital Lease Obligations"; "Cash Equivalents"; ------------ ------------------------- ---------------- "Collateral Account"; "Collateral Documents"; "Event of Default"; "GAAP"; ----------------- -------------------- --------------- ----- "Holders"; "Lien"; "Mortgage"; "Net Loss Proceeds"; "Permitted Liens"; "Person"; ------- ---- -------- ----------------- --------------- ------ "Purchase Money Obligations"; "Senior Intercreditor Agreement"; "Subsidiary"; -------------------------- ------------------------------ ---------- and "Trust Monies". ------------ (c) The following terms shall have the following meanings: "Acquisition Document Rights" shall mean, with respect to each --------------------------- Pledgor, collectively, all of such Pledgor's rights, title and interest in, to and under the Acquisition Documents including, without limitation, (i) all rights and remedies relating to monetary damages, including indemnification rights and remedies, and claims for damages or other relief pursuant to or in respect of the Acquisition Documents, (ii) all rights and remedies relating to monetary damages, including indemnification rights and remedies, and claims for monetary damages under or in respect of the agreements, documents and instruments referred to in the Acquisition Documents or related thereto and (iii) all proceeds, colle c-tions, recoveries and rights of subrogation with respect to the foregoing. -3- "Acquisition Documents" shall mean, collectively, (i) that certain --------------------- Agreement and Plan of Merger dated April 25, 2001, as amended on November 12, 2001, among Black Hawk Gaming & Development Company, Inc., a Colorado corporation, BH Acquisition, Inc., a Colorado corporation, and the Issuer; (ii) that certain Agreement and Plan of Merger dated June 11, 2001, as amended on No-vember 16, 2001, among Colonial Holdings, Inc., a Virginia corporation, Gameco Acquisition, Inc., a Virginia corporation, and the Issuer; and (iii) that certain Exchange Agreement, dated the date hereof, among Jeffrey P. Jacobs, The Richard E. Jacobs Revocable Trust, and the Issuer; in each case, together with any and all documents, agreements and other instruments then or at any time thereafter executed and/or delivered in connection therewith or related thereto in each case as amended, amended and restated, supplemented, extended, renewed, replaced or otherwise modified from time to time. "Additional Pledged Interests" shall mean, collectively, with respect ---------------------------- to each Pledgor, (i) all options, warrants, rights, agreements, additional membership or partnership interests or other interests of whatever class of any issuer of Initial Pledged Interests or any interest in any such issuer, including, without limitation, all rights, privileges, authority and powers of such Pledgor relating to the equity or membership or partnership interests in any such issuer or under the Operative Agreement of any such issuer, from time to time acquired by such Pledgor in any manner and (ii) all the membership, partnership or other interests, as applicable, of each limited liability company, partnership or other entity (other than a corporation) hereafter acquired or formed by such Pledgor and all options, warrants, rights, agreements, additional membership or partnership interests or other interests of whatever class of such limited liability company, partnership or other entity including, without limitation, all rights, privileges, authority and powers of such Pledgor relating to such equity or membership or partnership interests or under the Operative Agreement of such limited liability company, partnership or other entity, from time to time acquired by such Pledgor in any manner, in each case, including the certificates, instruments and agreements representing such additional interests and any and all interest of such Pledgor in the entries on the books of any financial intermediary pertaining to such additional interests. "Additional Pledged Shares" shall mean, collectively, with respect to ------------------------- each Pledgor, all (i) options, warrants, rights, agreements, additional shares of capital stock of whatever class of any issuer of the Initial Pledged Shares or any interest in any such issuer, including, without limitation, all rights, privileges, authority and powers of such Pledgor relating to such additional shares issued by any such issuer under the Operative Agreement of any such issuer, from time to time acquired by such Pledgor in any manner and (ii) all the issued and outstanding shares of capital stock of each corporation hereafter acquired or formed by such Pledgor and all options, warrants, rights, agreements or additional shares of capital stock of whatever class of such corporation including, without limitation, all rights, privileges, authority and powers of such Pledgor relating to such shares or under the Operative Agreement of such corporation, from time to time acquired by such Pledgor in any manner, in each case, including the certificates representing such additional shares and any and all interest of such Pledgor in the entries on the books of any Securities Intermediary pertaining to such additional shares. "Agreement" shall mean this Agreement, as amended, amended and --------- restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof. -4- "Charges" shall mean any and all property and other taxes, ------- assessments and special assessments, levies, fees and all governmental charges imposed upon or assessed against, and all claims (including, without limitation, landlords', carriers', mechanics', workmen's, repairmen's, laborers', materialmen's, suppliers' and warehousemen's Liens and other claims arising by operation of law) against, all or any portion of the Pledged Collateral. "Collateral Account Funds" shall mean, collectively, the following ------------------------ from time to time on deposit in the Collateral Account: all funds (including, without limitation, all Trust Monies), investments (including, without limitation, Cash Equivalents) and all certificates and instruments from time to time representing or evidencing such investments; all notes, certificates of deposit, checks and other instruments from time to time hereafter delivered to or otherwise possessed by the Trustee for or on behalf of any Pledgor in substitution for, or in addition to, any or all of the Pledged Collateral or Mortgaged Property; and all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the items constituting Pledged Collateral or Mortgaged Property. "Collateral Material Adverse Effect" shall mean, as of any date of ---------------------------------- determination and whether individually or in the aggregate (a) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the business or operations as presently conducted in connection with the Pledged Collateral; (b) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the value or utility of the Pledged Colla t-eral; or (c) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably expect to cause or result in) a material adverse effect on the legality, priority or enforceability of the Lien created by this Agreement or the rights and remedies of the Trustee hereunder. "Contested Liens" shall mean, collectively, any Liens incurred in --------------- respect of any Charges to the extent that the amounts owing in respect thereof are not yet delinquent or are being contested and otherwise comply with the provisions of Section 4.16 hereof. ------------ "Contracts" shall mean, collectively, with respect to each Pledgor, --------- all sale, service, performance, equipment or property lease contracts, agreements and grants and all other contracts, agreements or grants (in each case, whether written or oral, or third party or intercompany), between such Pledgor and third parties, and all assignments, amendments, restatements, supplements, extensions, renewals, replacements or modifications thereof. "Copyrights" shall mean, collectively, with respect to each Pledgor, ---------- all copyrights (whether statutory or common law and whether established or registered in the United States or any other country) and all copyright registrations and applications made by such Pledgor, in each case, whether now owned or hereafter created or acquired by or assigned to such Pledgor, whether published or unpublished, including, without limitation, the copyrights, registrations and applications listed in Schedule 1.1(e) annexed hereto, together with any and all (i) rights and privileges arising under applicable law with respect to such Pledgor's use of such copyrights, (ii) reissues, renewals, continuations and extensions thereof, (iii) income, fees, royalties, damages, claims and payments now or hereafter due -5- and/or payable with respect thereto, including, without limitation, damages and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present or future infringements thereof. "Deposit Accounts" shall mean, collectively, with respect to ---------------- each Pledgor, (i) all "deposit accounts" as such term is defined in the UCC and (ii) all cash, funds, checks, notes and instruments from time to time on deposit in any of the accounts described in clause (i) of this definition. "Destruction" shall mean any and all damage to, or loss or ----------- destruction of, all or any portion of the Pledged Collateral or Mortgaged Property. "Distributions" shall mean, collectively, with respect to each ------------- Pledgor, all dividends, cash, options, warrants, rights, instruments, distributions, returns of capital or principal, income, interest, profits and other property, interests (debt or equity) or proceeds, including as a result of a split, revision, reclassification or other like change of the Pledged Securities, from time to time received, receivable or otherwise distributed to such Pledgor in respect of or in exchange for any or all of the Pledged Securities or Intercompany Notes. "Excluded Property" shall mean Special Property other than the ----------------- following: (a) the right to receive any payment of money (including, without limitation, Accounts, General Intangibles and Payment Intangibles) or any other rights referred to in Sections 9-406(f), 9-407(a) or 9-408(a) of the UCC; and (b) any Proceeds, substitutions or replacements of any Special Property (unless such Proceeds, substitutions or replacements would constitute Special Property). "Gaming Authorities" shall have the meaning assigned to such ------------------ term in the Indenture. "Gaming Law" shall have the meaning assigned to such term in ---------- the Indenture. "General Collateral" shall mean the Pledged Collateral other ------------------ than the Securities Collateral, the Investment Property and the Intellectual Property Collateral. "General Intangibles" shall mean, collectively, with respect ------------------- to each Pledgor, all "general intangibles," as such term is defined in the UCC, of such Pledgor and, in any event, shall include, without limitation, (i) all of such Pledgor's rights, title and interest in, to and under all Insurance Policies and Contracts, (ii) all know-how and warranties relating to any of the Pledged Collateral or the Mortgaged Property, (iii) any and all other rights, claims, choses-in-action and causes of action of such Pledgor against any other Person and the benefits of any and all collateral or other security given by any other Person in connection therewith, (iv) all guarantees, endorsements and indemnifications on, or of, any of the Pledged Collateral or any of the Mortgaged Property, (v) all lists, books, records, correspondence, ledgers, print-outs, files (whether in printed form or stored electronically), tapes and other papers or materials containing information relating to any of the Pledged Collateral or any of the Mort- -6- gaged Property, including, without limitation, all customer or tenant lists, identification of suppliers, data, plans, blueprints, specifications, designs, drawings, appraisals, recorded knowledge, surveys, studies, engineering reports, test reports, manuals, standards, processing standards, performance standards, catalogs, research data, computer and automatic machinery software and programs and the like, field repair data, accounting information pertaining to such Pledgor's operations or any of the Pledged Collateral or any of the Mortgaged Property and all media in which or on which any of the information or knowledge or data or records may be recorded or stored and all computer programs used for the compilation or printout of such information, knowledge, records or data, (vi) all licenses, consents, permits, variances, certifications, authorizations and approvals, however characterized, of any Governmental Authority (or any Person acting on behalf of a Governmental Authority) now or hereafter acquired or held by such Pledgor pertaining to operations now or hereafter conducted by such Pledgor or any of the Pledged Collateral or any of the Mortgaged Property including, without limitation, building permits, certificates of occupancy, environmental certificates, industrial permits or licenses and certificates of operation, and (vii) all rights to reserves, deferred payments, deposits, refunds, indemnification of claims to the extent the foregoing relate to any Pledged Collateral or Mortgaged Property and claims for tax or other refunds against any Governmental Authority relating to any Pledged Collateral or any of the Mortgaged Property. "Goodwill" shall mean, collectively, with respect to each -------- Pledgor, the goodwill connected with such Pledgor's business including, without limitation, (i) all goodwill connected with the use of and symbolized by any of the Intellectual Property Collateral in which such Pledgor has any interest and (ii) all know-how, trade secrets, customer and supplier lists, proprietary information, inventions, methods, procedures, formulae, descriptions, compositions, technical data, drawings, specifications, name plates, catalogs, confidential information and the right to limit the use or disclosure thereof by any Person, pricing and cost information, business and marketing plans and proposals, consulting agreements, engineering contracts and such other assets which relate to such goodwill. "Governmental Authority" shall mean any Federal, state, local, ---------------------- foreign or other governmental, quasi-governmental or administrative (including self-regulatory) body, instrumentality, department, agency, authority, board, bureau, commission, office of any nature whatsoever or other subdivision thereof, or any court, tribunal, administrative hearing body, arbitration panel or other similar dispute-resolving body, whether now or hereafter in existence, or any officer or official thereof, having jurisdiction over any Pledgor or the Pledged Collateral or any portion thereof. "Guarantee" shall have the meaning assigned to such term in --------- Recital B hereof. - --------- "Guarantors" shall have the meaning assigned to such term in ---------- the Preamble hereof. "Indemnified Liabilities" shall have the meaning assigned to ----------------------- such term in Section 11.4(i) hereof. -------------- "Indemnitees" shall have the meaning assigned to such term in ----------- Section 11.4(i) hereof. - -------------- "Indenture" shall have the meaning assigned to such term in --------- Recital A hereof. - ---------- -7- "Initial Pledged Interests" shall mean, with respect to each ------------------------- Pledgor, all membership, partnership or other equity interests (other than in a corporation), as applicable, of each issuer described in Schedule1.1(a) annexed hereto, together with all rights, privileges, authority and powers of such Pledgor in and to each such issuer or under the Operative Agreement of each such issuer, and the certificates, instruments and agreements representing such membership, partnership or other interests and any and all interest of such Pledgor in the entries on the books of any financial intermediary pertaining to such membership, partnership or other interests. "Initial Pledged Shares" shall mean, collectively, with ---------------------- respect to each Pledgor, the issued and outstanding shares of capital stock of each Person described in Schedule 1.1(b) annexed hereto together with all rights, privileges, authority and powers of such Pledgor in and to each such issuer or under the Operative Agreement of each such issuer, and the certificates, instruments and agreements representing the Initial Pledged Shares and any and all interest of such Pledgor in the entries on the books of any Securities Intermediary pertaining to the Initial Pledged Shares. "Insurance Policies" shall mean the insurance policies and ------------------ coverages required to be maintained by the Pledgors with respect to the Pledged Collateral and the Mortgaged Property pursuant to Section 4.19 of the Indenture and all renewals and extensions thereof. "Insurance Requirements" means, collectively, with respect to ---------------------- each Pledgor, all provisions of the Insurance Policies, all requirements of the issuer of any of the Insurance Policies and all orders, rules, regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon such Pledgor and applicable to the Pledged Collateral or the Mortgaged Property or any use or condition thereof. "Intellectual Property Collateral" shall mean, collectively, -------------------------------- the Patents, Trademarks, Copyrights, Licenses and Goodwill. "Intercompany Notes" shall mean, with respect to each Pledgor, ------------------ (i) all intercompany notes described in Schedule 1.1(c) annexed hereto (and each other intercompany note hereafter acquired by such Pledgor) and all certificates, instruments or agreements evidencing such intercompany notes, (ii) all Supporting Obligations described in Schedule 1.1(c) annexed hereto with respect to the intercompany notes described in clause (i) of this definition (and each other Supporting Obligation hereafter acquired by such Pledgor) and all certificates, instruments or agreements evidencing such Supporting Obligations, and (iii) all assignments, amendments, restatements, supplements, extensions, renewals, replacements or modifications of the items described in clauses (i) and (ii) of this definition to the extent permitted pursuant to the terms hereof. "Issuer" shall have the meaning assigned to such term in the ------ Preamble hereof. "Joinder Agreement" shall mean the form of joinder agreement ----------------- attached hereto as Exhibit 3. --------- -8- "Licenses" shall mean, collectively, with respect to each -------- Pledgor, all license and distribution agreements and covenants not to sue with any other party with respect to any Patent, Trademark or Copyright or any other patent, trademark or copyright, whether such Pledgor is a licensor or licensee, distributor or distributee under any such license or distribution agreement, including, without limitation, the license and distribution agreements listed in Schedule 1.1(f) annexed hereto, together with any and all (i) renewals, extensions, supplements and continuations thereof, (ii) income, fees, royalties, damages, claims and payments now and hereafter due and/or payable thereunder and with respect thereto including, without limitation, damages and payments for past, present or future infringements or violations thereof, (iii) rights to sue for past, present and future infringements or violations thereof and (iv) any other rights to use, exploit or practice any or all of the Patents, Trademarks or Copyrights or any other patent, trademark or copyright. "Mortgaged Property" shall have the meaning assigned to such ------------------ term in the Mortgages. "Nevada Board" means the Nevada Gaming Control Board. ------------ "Notes" shall have the meaning assigned to such term in ----- Recital A of this Agreement. - --------- "Officers' Certificate" shall have the meaning assigned to --------------------- such term in the Indenture. "Operative Agreement" shall mean (i) in the case of any ------------------- limited liability company or partnership or other non-corporate entity, any membership or partnership agreement or other organizational agreement or document thereof and (ii) in the case of any corporation, any charter or certificate of incorporation and by-laws thereof. "Patents" shall mean, collectively, with respect to each ------- Pledgor, all patents issued or assigned to and all patent applications and registrations made by such Pledgor (whether established or registered or recorded in the United States or any other country), including, without limitation, the patents, patent applications, registrations and recordings listed in Schedule 1.1(g) annexed hereto, together with any and all (i) rights and privileges arising under applicable law with respect to such Pledgor's use of any patents, (ii) inventions and improvements described and claimed therein, (iii) reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof, (iv) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable thereunder and with respect thereto including, without limitation, damages and payments for past, present or future infringements thereof, (v) rights corresponding thereto throughout the world and (vi) rights to sue for past, present or future infringements thereof. "Perfection Certificate" shall mean that certain perfection ---------------------- certificate dated February 8, 2001, executed and delivered by the Issuer in favor of the Trustee for the benefit of the Secured Parties, and each other perfection certificate (which shall be in form and substance reasonably acceptable to the Trustee) executed and delivered by the applicable Guarantor in favor of the Trustee for the benefit of the Secured Parties contemporaneously with the execution and delivery of each Joinder Agreement executed in accordance with Section 3.5 hereof. ----------- -9- "Permitted Collateral Liens" shall have the meaning assigned to -------------------------- such term in Section 4.3 hereof. ----------- "Pledge Amendment" shall have the meaning assigned to such term ---------------- in Section 5.1 hereof. ----------- "Pledged Collateral" shall have the meaning assigned to such term ----------------- in Section 2.1 hereof. ----------- "Pledged Interests" shall mean, collectively, the Initial Pledged ----------------- Interests and the Additional Pledged Interests. "Pledged Securities" shall mean, collectively, the Pledged ------------------ Interests, the Pledged Shares and the Successor Interests. "Pledged Shares" shall mean, collectively, the Initial Pledged -------------- Shares and the Additional Pledged Shares. "Pledgor" shall have the meaning assigned to such term in the ------- Preamble hereof. "Prior Liens" shall mean, collectively, the Liens identified in ----------- Schedule 1.1(d) annexed hereto relating to the items of Pledged Collateral identified in such Schedule. "Proceeds" shall mean, collectively, all "proceeds," as such term -------- is defined in Section 9-102 of the UCC or under other relevant law. "Prudent Operator" shall mean the standard of care taken by a ---------------- prudent operator of property and assets similar in use and configuration to the Pledged Collateral or Mortgaged Property, as the case may be, and located in the locality where the Pledged Collateral or Mortgaged Property, as the case may be, is located. "Requirements of Law" shall mean, collectively, any and all ------------------- requirements of any Governmental Authority including, without limitation, any and all laws, ordinances, rules, regulations or similar statutes or case law. "Secured Obligations" shall mean all obligations (whether or not ------------------- constituting future advances, obligatory or otherwise) of the Issuer and any and all of the Guarantors from time to time arising under or in respect of this Agreement, the Indenture, the Notes and the other Collateral Documents (including, without limitation, the obligations to pay principal, interest and all other charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Agreement, the Indenture, the Notes and the other Collateral Documents), in each case whether (i) such obligations are direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due whether at stated maturity, by acceleration or otherwise, (ii) arising in the regular course of business or otherwise, (iii) for payment or performance -10- and/or (iv) now existing or hereafter arising (including, without limitation, interest and other obligations arising or accruing after the commencement of any bankruptcy, insolvency, reorganization or similar proceeding with respect to any Pledgor or any other Person, or which would have arisen or accrued but for the commencement of such proceeding, even if such obligation or the claim therefor is not enforceable or allowable in such proceeding). "Secured Parties" shall have the meaning assigned to such term in --------------- Recital E hereof. - --------- "Securities Act" shall have the meaning assigned to such term in -------------- Section 8.4(ii) hereof. - -------------- "Securities Collateral" shall mean, collectively, the Pledged --------------------- Securities, the Intercom-pany Notes and the Distributions. "Special Property" shall mean: ---------------- (a) any permit, lease or license held by any Pledgor that validly prohibits the creation by such Pledgor of a security interest therein; (b) any permit, lease or license held by any Pledgor to the extent that any Requirement of Law applicable thereto prohibits the creation of a security interest therein; and (c) Equipment owned by any Pledgor on the date hereof or hereafter acquired that is subject to a Lien securing a Purchase Money Obligation or Capital Lease Obligation permitted to be incurred pursuant to the provisions of the Indenture if the contract or other agreement in which such Lien is granted (or the documentation providing for such Purchase Money Obligation or Capital Lease Obligation) validly prohibits the creation of any other Lien in such Equipment; provided, however, that in each case described in clauses (a), (b) and (c) of - -------- ------- this definition, such property shall constitute "Special Property" only to the extent and for so long as such permit, lease, license, contract or other agreement or Requirement of Law applicable thereto, validly prohibits the creation of a Lien in such property in favor of the Trustee and, upon the termination of such prohibition (howsoever occurring), such property shall cease to constitute "Special Property". "Successor Interests" shall mean, collectively, with respect to ------------------- each Pledgor, all shares of each class of the capital stock of the successor corporation or interests or certificates of the successor limited liability company, partnership or other entity owned by such Pledgor (unless such successor is such Pledgor itself) formed by or resulting from any consolidation or merger in which any Person listed in Schedule 1.1(a) or Schedule 1.1(b) annexed hereto is not the surviving entity; provided, however, that the pledge -------- ------- of the Successor Interests affected hereby shall in no event affect the obligations of such Pledgor under any provision prohibiting such action hereunder or under the Indenture. "Taking" shall mean any taking of the Pledged Collateral or the ------ Mortgaged Property or any portion thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, -11- general or special, or by reason of the temporary requisition of the use of the Pledged Collateral or Mortgaged Property or any portion thereof, by any Governmental Authority, civil or military. "Tax Code" shall mean the Internal Revenue Code of 1986, as -------- amended from time to time. "Trademarks" shall mean, collectively, with respect to each ---------- Pledgor, all trademarks (including service marks), logos, slogans, logos, certification marks, trade dress, uniform resource locations (URL's), domain names, corporate names and trade names, whether registered or unregistered, owned by or assigned to such Pledgor and all registrations and applications for the foregoing (whether statutory or common law and whether established or registered in the United States or any other Country), including, without limitation, the registrations and applications listed in Schedule 1.1(h) annexed hereto, together with any and all (i) rights and privileges arising under applicable law with respect to such Pledgor's use of any trademarks, (ii) reissues, continuations, extensions and renewals thereof, (iii) income, fees, royalties, damages and payments now and hereafter due and/or payable thereunder and with respect thereto, including, without limitation, damages, claims and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present and future infringements thereof. "Trustee" shall have the meaning assigned to such term in the ------ Preamble of this Agreement. "UCC" shall mean the Uniform Commercial Code as in effect on the --- date hereof in the State of New York; provided, however, that if by reason of -------- ------- mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any item or portion of the Pledged Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. SECTION 1.2 Interpretation. The rules of construction set forth -------------- in Section 1.04 of the Indenture shall be applicable to this Agreement. ------------ SECTION 1.3 Resolution of Drafting Ambiguities. Each Pledgor ---------------------------------- acknowledges and agrees that it was represented by counsel in connection with the execution and delivery hereof, that it and its counsel reviewed and participated in the preparation and negotiation hereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party (i.e., the Trustee) shall not be employed in the interpretation hereof. -12- ARTICLE II GRANT OF SECURITY AND SECURED OBLIGATIONS SECTION 2.1 Pledge. As collateral security for the payment and ------ performance in full of all the Secured Obligations, each Pledgor hereby pledges, assigns, transfers and grants to the Trustee for its benefit and for the benefit of the Secured Parties, a first priority security interest in and to and pledge of all of the right, title and interest of such Pledgor in, to and under the following property, wherever located, whether now existing or hereafter arising or acquired from time to time (collectively, the "Pledged Collateral"): (i) ------------------ Goods; (ii) Equipment; (iii) Documents; (iv) Instruments; (v) Chattel Paper; (vi) Letter-of-Credit Rights; (vii) Pledged Securities; (viii) Intercompany Notes; (ix) Distributions; (x) Accounts; (xi) Inventory; (xii) Investment Property and Financial Assets; (xiii) Intellectual Property Collateral; (xiv) Commercial Tort Claims; (xv) General Intangibles; (xvi) Deposit Accounts; (xvii) the Collateral Account and all Collateral Account Funds; (xviii) Fixtures; (xix) Supporting Obligations; (xx) Acquisition Documents and Acquisition Document Rights; (xxi) all books and records relating to the Pledged Collateral; and (xxii) to the extent not covered by clauses (i) through (xxi) of this sentence, all other personal property and all Proceeds of any and all of the foregoing; provided, however, that Pledged Collateral shall not include any Excluded - -------- ------- Property. SECTION 2.2 Secured Obligations. This Agreement secures, and the ------------------- Pledged Collateral is collateral security for, the payment and performance in full when due of the Secured Obligations. SECTION 2.3 Security Interest. (a) Each Pledgor hereby ----------------- irrevocably authorizes the Trustee at any time and from time to time to file in any relevant jurisdiction any initial financing statements (including fixture filings) and amendments thereto that contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Pledged Collateral, including, without limitation, (i) whether the Pledgor is an organization, the type of organization and any organizational identification number issued to the Pledgor and (ii) in the case of a financing statement filed as a fixture filing or covering Pledged Collateral constituting minerals or the like to be extracted or timber to be cut, a sufficient description of the real property to which such Pledged Collateral relates. The Pledgor agrees to provide such information to the Trustee promptly upon request. (b) Each Pledgor hereby ratifies its authorization for the Trustee to file in any relevant jurisdiction any initial financing statements or amendments thereto relating to the Pledged Collateral if filed prior to the date hereof. (c) The Trustee is further authorized to file filings with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) or other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the security interest granted by each Pledgor hereunder, without the signature of any Pledgor, and naming any Pledgor or the Pledgors, as debtors, and the Trustee, as secured party. -13- SECTION 2.4 No Release. Nothing set forth in this Agreement shall ---------- relieve the Pledgor from the performance of any term, covenant, condition or agreement on the Pledgor's part to be performed or observed under or in respect of any of the Pledged Collateral or from any liability to any Person under or in respect of any of the Pledged Collateral or shall impose any obligation on the Trustee or any other Secured Party to perform or observe any such term, covenant, condition or agreement on the Pledgor's part to be so performed or observed or shall impose any liability on the Trustee or any other Secured Party for any act or omission on the part of the Pledgor relating thereto or for any breach of any representation or warranty on the part of the Pledgor contained in this Agreement, the Indenture, the Notes or the other Collateral Documents, or under or in respect of the Pledged Collateral or made in connection herewith or therewith. The obligations of the Pledgor contained in this Section 2.4 shall ----------- survive the termination hereof and the discharge of the Pledgor's other obligations under this Agreement and the Indenture, the Notes and the other Collateral Documents. ARTICLE III PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES; USE OF PLEDGED COLLATERAL SECTION 3.1 Delivery of Certificated Securities Collateral. All ---------------------------------------------- certificates, agreements or instruments representing or evidencing the Securities Collateral, to the extent not previously delivered to the Trustee, shall immediately upon receipt thereof by any Pledgor be delivered to and held by or on behalf of the Trustee pursuant hereto. All certificated Securities Collateral shall be in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Trustee. The Trustee shall maintain the certificates evidencing the Pledged Securities issued by Gold Dust West Casino, Inc. at all times at a location in Nevada designated to the Nevada Gaming Control Board (the "Nevada Board"), and shall make the certificate(s) or instrument(s) representing or evidencing such Pledged Securities available for inspection by agents or employees of the Nevada Board promptly upon the prior request of the Ne-vada Board during normal business hours. The Trustee shall have the right, at any time upon the occurrence and during the continuance of any Event of Default, to endorse, assign or otherwise transfer to or to register in the name of the Trustee or any of its nominees or endorse for negotiation any or all of the Securities Collateral, without any indication that such Securities Collateral is subject to the security interest hereunder. In addition, the Trustee shall have the right at any time to exchange certificates representing or evidencing Securities Collateral for certificates of smaller or larger denominations. SECTION 3.2 Perfection of Uncertificated Securities Collateral. -------------------------------------------------- If any issuer of Pledged Securities is organized in a jurisdiction which does not permit the use of certificates to evidence equity ownership, or if any of the Pledged Securities are at any time not evidenced by certificates of ownership, then each applicable Pledgor shall, to the extent permitted by applicable law, record such pledge on the equityholder register or the books of the issuer, cause the issuer to execute and deliver to the Trustee an acknowledgment of the pledge of such Pledged Securities substantially in the form of Exhibit 1 annexed hereto, execute any customary pledge forms or other --------- documents necessary -14- or appropriate to complete the pledge and give the Trustee the right to transfer such Pledged Securities under the terms hereof and provide to the Trustee an opinion of counsel, in form and substance satisfactory to the Trustee, confirming such pledge and perfection thereof. SECTION 3.3 Financing Statements and Other Filings. The only -------------------------------------- filings, registrations and recordings necessary and appropriate to create, preserve, protect, publish notice of and perfect the security interest granted by each Pledgor to the Trustee (for the benefit of the Secured Parties) pursuant to this Agreement in respect of the Pledged Collateral are listed in Schedule 7 of the Perfection Certificate. All such filings, registrations and recordings have been duly executed and delivered to the Trustee for filing in each governmental, municipal or other office specified in Schedule 7 of the Perfection Certificate and shall be filed, registered and recorded immediately after the date thereof. Each Pledgor agrees that at any time and from time to time, at the sole cost and expense of the Pledgors, it will execute and file and refile, or permit the Trustee to file and refile, such financing statements, continuation statements and other documents (including, without limitation, this Agreement), in form reasonably acceptable to the Trustee, in such offices (including, without limitation, the United States Patent and Trademark Office and the United States Copyright Office) as the Trustee may in its reasonable judgment deem necessary or appropriate, wherever required or permitted by law in order to perfect, continue and maintain a valid, enforceable, first priority security interest in the Pledged Collateral as provided herein and to preserve the other rights and interests granted to the Trustee hereunder, as against third parties, with respect to any Pledged Collateral. Each Pledgor hereby authorizes the Trustee to file any such financing or continuation statement or other document without the signature of such Pledgor where permitted by law, including, without limitation, the filing of a financing statement describing the Pledged Collateral as "all assets in which the debtor now owns or hereafter acquires rights." SECTION 3.4 Other Actions. In order to further insure the ------------- attachment, perfection and priority of, and the ability of the Trustee to enforce, the Trustee's security interest in the Pledged Collateral, each Pledgor agrees, in each case at such Pledgor's own expense, to take the following actions with respect to the following Pledged Colla teral: (a) Instruments and Tangible Chattel Paper. As of the date -------------------------------------- hereof, each Pledgor hereby represents and warrants that no amount individually or in the aggregate in excess of $100,000 payable under or in connection with any of the Pledged Collateral is evidenced by any Instrument or Tangible Chattel Paper other than such Instruments and Tangible Chattel Paper as are listed in Schedule 3.4(a) annexed hereto and have been delivered to the Trustee. If any amount individually or in the aggregate in excess of $100,000 payable under or in connection with any of the Pledged Collateral shall be evidenced by any Instrument or Tangible Chattel Paper, the Pledgor acquiring such Instrument or Tangible Chattel Paper shall forthwith endorse, assign and deliver the same to the Trustee, accompanied by such instruments of transfer or assignment duly executed in blank as the Trustee may from time to time specify; provided, however, that so long as no Event of Default shall -------- ------- have occurred and be continuing, the Trustee shall return such Instrument or Tangible Chattel Paper to such Pledgor from time to time, at such time for collection in the ordinary course of such Pledgor's business. -15- (b) Deposit Accounts. As of the date hereof, each Pledgor hereby ---------------- represents and warrants that it has neither opened nor maintains any Deposit Account other than the Colla t-eral Account established and maintained pursuant to the Indenture and the accounts listed in Schedule 3.4(b) annexed hereto. For each Deposit Account that any Pledgor at any time opens or maintains, such Pledgor shall promptly notify the Trustee thereof and, pursuant to an agreement in form and substance satisfactory to the Trustee, either (a) cause the depositary bank to agree to comply at any time with instructions from the Trustee to such depositary bank directing the disposition of funds from time to time credited to such Deposit Account, without further consent of such Pledgor or (b) arrange for the Trustee to become the customer of the depositary bank with respect to the Deposit Account, with the Pledgor being permitted, only with the consent of the Trustee, to exercise rights to withdraw funds from such Deposit Account. The Trustee agrees with each Pledgor that the Trustee shall not give any such instructions or withhold any withdrawal rights from any Pledgor, unless an Event of Default has occurred and is continuing, or, after giving effect to any withdrawal that would occur. The provisions of this Section 3.4(b) -------------- shall not apply to Deposit Accounts for which the Trustee is the depositary. (c) Investment Property. (i) As of the date hereof each Pledgor ------------------- hereby represents and warrants that it has neither opened nor maintains any Securities Account or Commodity Account other than those listed in Schedule 3.4 (c) annexed hereto. (ii) If any Pledgor shall at any time hold or acquire any certificated securities constituting Investment Property, such Pledgor shall immediately endorse, assign and deliver the same to the Trustee, accompanied by such instruments of transfer or assignment duly executed in blank, all in form and substance reasonably satisfactory to the Trustee. If any securities now or hereafter acquired by any Pledgor constituting Investment Property are uncertificated and are issued to such Pledgor or its nominee directly by the Issuer thereof, such Pledgor shall immediately notify the Trustee thereof and pursuant to an agreement in form and substance satisfactory to the Trustee, either (a) cause the issuer to agree to comply with instructions from the Trustee as to such securities, without further consent of any Pledgor or such nominee, or (b) arrange for the Trustee to become the registered owner of the securities. If any securities constituting Investment Property, whether certificated or uncertificated, or other Investment Property now or hereafter acquired by any Pledgor are held by such Pledgor or its nominee through a Securities Intermediary or Commodity Intermediary, such Pledgor shall immediately notify the Trustee thereof and, pursuant to an agreement in form and substance satisfactory to the Trustee, either (i) cause such Securities Intermediary or Commodity Intermediary, as the case may be, to agree to comply with Entitlement Orders or other instructions from the Trustee to such Securities Intermediary as to such securities or other Investment Property, or to apply any value distributed on account of any Commodity Contract as directed by the Trustee to such Commodity Intermediary, as the case may be, in each case without further consent of any Pledgor or such nominee, or (ii) in the case of Financial Assets constituting Investment Property or other Investment Property held through a Securities Intermediary, arrange for the Trustee to become the Entitlement Holder with respect to such Investment Property, with the -16- Pledgor being permitted, only with the consent of the Trustee, to exercise rights to withdraw or otherwise deal with such Investment Property. The Trustee agrees with each of the Pledgors that the Trustee shall not give any such Entitlement Orders or instructions or directions to any such issuer, Securities Intermediary or Commodity Intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by any Pledgor, unless an Event of Default has occurred and is continuing, or, after giving effect to any such investment and withdrawal rights would occur. The provisions of this Section ------- 3.4(c) shall not apply to any Financial Assets credited to a Securities Account - ----- for which the Trustee is the Securities Intermediary. (iii) As between the Trustee and the Pledgors, the Pledgors shall bear the investment risk with respect to the Investment Property, and the risk of loss of, damage to, or the destruction of the Investment Property, whether in the possession of, or maintained as a security entitlement by, or subject to the control of, the Trustee, a Securities Intermediary, Commody Intermediary the Pledgor or any other Person; provided, however, that nothing contained in this ----------------- Section 3.4(c) shall release or relieve any Securities Intermediary or Commodity - ------------- Intermediary of its duties and obligations to the Pledgors or any other Person under any control agreement or under applicable law. Each Pledgor shall promptly pay all Charges and fees of whatever kind or nature with respect to the Investment Property pledged by it under this Agreement. In the event any Pledgor shall fail to make such payment contemplated in the immediately preceding sentence, the Trustee may do so for the account of such Pledgor and the Pledgors shall promptly reimburse and indemnify the Trustee from all costs and expenses incurred by the Trustee under this Section 3.4(c) in accordance with Section ------------- ------- 11.3 hereof. - ---- (d) Electronic Chattel Paper and Transferable Records. If any amount ------------------------------------------------- individually or in the aggregate in excess of $100,000 payable under or in connection with any of the Pledged Collateral shall be evidenced by any Electronic Chattel Paper or any "transferable record," as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, the Pledgor acquiring such Electronic Chattel Paper or transferable record shall promptly notify the Trustee thereof and shall take such action as the Trustee may reasonably request to vest in the Trustee control under UCC Section 9-105 of such Electronic Chattel Paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Ele c-tronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The Trustee agrees with such Pledgor that the Trustee will arrange, pursuant to procedures satisfactory to the Trustee and so long as such procedures will not result in the Trustee's loss of control, for the Pledgor to make alterations to the Electronic Chattel Paper or transferable record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act of Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Pledgor with respect to such Electronic Chattel Paper or transferable record. -17- (e) Letter-of-Credit Rights. If any Pledgor is at any time a ----------------------- beneficiary under a Letter of Credit now or hereafter issued in favor of such Pledgor in an amount individually or in the aggregate in excess of $100,000, such Pledgor shall promptly notify the Trustee thereof and such Pledgor shall, pursuant to an agreement in form and substance satisfactory to the Trustee, either (i) arrange for the issuer and any confirmer of such Letter of Credit to consent to an assignment to the Trustee of the proceeds of any drawing under the Letter of Credit or (ii) arrange for the Trustee to become the transferee beneficiary of the Letter of Credit, with the Trustee agreeing, in each case, that the proceeds of any drawing under the Letter of Credit are to be applied as provided in the Indenture. (f) Commercial Tort Claims. As of the date hereof each Pledgor ---------------------- hereby represents and warrants that it holds no Commercial Tort Claims other than those listed in Schedule 3.4(f) annexed hereto. If any Pledgor shall at any time hold or acquire a Commercial Tort Claim, the Pledgor shall immediately notify the Trustee in writing signed by such Pledgor of the brief details thereof and grant to the Trustee in such writing a security interest therein and in the Proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Trustee. (g) Excluded Property. After the Trustee's request therefor, ----------------- the Pledgors shall deliver to the Trustee an Officer's Certificate setting forth all permits, leases or licenses constituting Special Property` that are material to the operation of each Pledgor's business. At the Trustee's request, each Pledgor shall use commercially reasonable efforts to obtain as soon as practicable the consent (which shall be in form and substance reasonably satisfactory to the Trustee) of the other parties to each permit, lease or license listed in such Officer's Certificate to permit the assignment, transfer or grant of security interest in such permit, lease or license pursuant to the terms hereof. No Pledgor shall permit to become effective in any document creating, governing or providing for any permit, lease or license, a provision that would prohibit the creation of a Lien on such permit, lease or license in favor of the Trustee unless such Pledgor believes, in its reasonable judgment, that such prohibition is usual and customary in transactions of such type. SECTION 3.5 Joinder of Additional Guarantors. The Pledgors -------------------------------- shall cause each Restricted Subsidiary of the Issuer which, from time to time, after the date hereof shall be required to pledge any assets to the Trustee for the benefit of the Secured Parties pursuant to the provisions of the Indenture, to execute and deliver to the Trustee (i) a joinder agreement substantially in the form of Exhibit 3 annexed hereto and (ii) a Perfection Certificate, in each --------- case, within ten (10) Business Days of the date on which it was acquired or created and, upon such execution and delivery, such Restricted Subsidiary shall constitute a "Guarantor" and a "Pledgor" for all purposes hereunder with the same force and effect as if originally named as a Guarantor and Pledgor herein. The execution and delivery of such joinder agreement shall not require the consent of any Pledgor hereunder. The rights and obligations of each Pledgor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor and Pledgor as a party to this Agreement. -18- SECTION 3.6 Motor Vehicles. At any time after the occurrence -------------- and during the continuance of an Event of Default, each Pledgor shall, upon the request of the Trustee, promptly (but in no event later than 30 days following such request) deliver to the Trustee originals of the certificates of title or ownership for all motor vehicles (and any other Equipment covered by Certificates of Title or ownership) owned by it with the Trustee listed as lienholder therein unless such vehicles or Equipment constitutes Excluded Property. SECTION 3.7 Supplements; Further Assurances. Each Pledgor agrees ------------------------------- to take such further actions, and to execute and deliver to the Trustee such additional assignments, agreements, supplements, powers and instruments, as the Trustee may in its reasonable judgment deem necessary or appropriate, wherever required or permitted by law, in order to perfect, preserve and protect the security interest in the Pledged Collateral as provided herein and the rights and interests granted to the Trustee hereunder, to carry into effect the purposes hereof or better to assure and confirm unto the Trustee or permit the Trustee to exercise and enforce its respective rights, powers and remedies hereunder with respect to any Pledged Collateral. Without limiting the generality of the foregoing, each Pledgor shall make, execute, endorse, acknowledge, file or refile and/or deliver to the Trustee from time to time upon request such lists, descriptions and designations of the Pledged Collateral, copies of warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, supplements, additional security agreements, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments. The Trustee may institute and maintain, in its own name or in the name of any Pledgor, such suits and proceedings as the Trustee may be advised by counsel shall be necessary or expedient to prevent any impairment of the security interest in or the perfection thereof in the Pledged Collateral. All of the foregoing shall be at the sole cost and expense of the Pledgors. SECTION 3.8 Use and Pledge of Pledged Collateral. Unless an Event ------------------------------------ of Default shall have occurred and be continuing, the Trustee shall from time to time execute and deliver, upon written request of any Pledgor and at the sole cost and expense of the Pledgors, any and all instruments, certificates or other documents, in a form reasonably requested by such Pledgor, necessary or appropriate in the reasonable judgment of such Pledgor to enable such Pledgor to continue to exploit, license, use, enjoy and protect the Pledged Collateral in accordance with the terms hereof and of the Indenture. The Pledgors and the Trustee acknowledge that this Agreement is intended to grant to the Trustee for the benefit of the Secured Parties a security interest in and Lien upon the Pledged Colla t-eral and shall not constitute or create a present assignment of any of the Pledged Collateral. -19- ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS Each Pledgor represents, warrants and covenants as follows: SECTION 4.1 Title and Authority. Such Pledgor has good and valid ------------------- rights in and title to the Pledged Collateral with respect to which it has purported to grant a security interest and Lien hereunder and has full power and authority to grant to the Trustee the security interest in and Liens on such Pledged Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other Person other than any consent or approval that has been obtained. SECTION 4.2 Validity of Security Interest. The security interest in ----------------------------- and Lien on the Pledged Collateral granted to the Trustee (for the benefit of the Secured Parties) hereunder constitutes (a) a legal and valid security interest in all the Pledged Collateral securing the payment and performance of the Secured Obligations, and (b) subject to the filings described in Schedule 7 of the Perfection Certificate, a perfected security interest in all Pledged Collateral. The security interest and Lien granted to the Trustee for the benefit of the Secured Parties pursuant to this Agreement in and on the Pledged Collateral will constitute a perfected, continuing first priority security interest therein, superior and prior to the rights of all other Persons therein other than in the case of any Pledged Collateral (other than Securities Collateral) with respect to the holders of Permitted Collateral Liens. SECTION 4.3 Limitation on Liens. Such Pledgor is as of the date ------------------- hereof, and, as to Pledged Collateral acquired by it from time to time after the date hereof, such Pledgor will be, the sole direct and beneficial owner of all Pledged Collateral pledged by it hereunder free from any Lien or other right, title or interest of any Person other than (except in the case of any Securities Collateral) (i) Prior Liens, (ii) the Lien and security interest created by this Agreement, (iii) Contested Liens and (iv) the Liens described in clauses (1), (2), (3), (4), (5), (6), (7), (8), (9), (10), (11), (13), (14), (15), (16), (17), and (18) of the definition of Permitted Liens (the Liens described in clauses (i) through (iv) of this sentence, collectively, "Permitted Collateral -------------------- Liens"). Such Pledgor shall, at its own cost and expense, defend title to the - ----- Pledged Collateral pledged by it hereunder and the security interest therein and Lien thereon granted to the Trustee and the priority thereof against all claims and demands of all Persons, at its own cost and expense, at any time claiming any interest therein adverse to the Trustee or any other Secured Party. There is no agreement, and no Pledgor shall enter into any agreement or take any other action, that would result in the imposition of any other Lien, restrict the transferability of any of the Pledged Collateral or otherwise impair or conflict with such Pledgors' obligations or the rights of the Trustee hereunder. SECTION 4.4 Other Financing Statements. There is no (nor will there -------------------------- be any) valid or effective financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Pledged Collateral other than in the case of Pledged Collateral (other than the Securities Collateral) financing statements relating to -20- Permitted Collateral Liens. So long as any of the Secured Obligations remain unpaid, no Pledgor shall execute, authorize or permit to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to any Pledged Collateral, except, in the case of any Pledged Collateral (other than the Securities Collateral), financing statements filed or to be filed in respect of and covering the security interests granted by such Pledgor to the holder of the Permitted Collateral Liens. SECTION 4.5 Chief Executive Office; Change of Name; Jurisdiction of ------------------------------------------------------- Organization. (a) The exact legal name, type of organization, jurisdiction of - ------------ organization, Federal Taxpayer Identification Number, organizational identification number and chief executive office of such Pledgor is indicated next to its name in Schedules 1(a) and 2(a) of the Perfection Certificate. Such Pledgor shall not change (i) its corporate name, (ii) the location of its chief executive office, its principal place of business, any office in which it maintains books or records relating to Pledged Collateral owned by it or any office or facility at which Pledged Collateral owned by it is located (including the establishment of any such new office or facility), (iii) its identity or type of organization or corporate structure, (iv) its Federal Taxpayer Identification Number or organizational identification number or (v) its jurisdiction of organization (in each case, including, without limitation, by merging with or into any other entity, reorganizing, dissolving, liquidating, reincorporating or incorporating in any other jurisdiction) until (A) it shall have given the Trustee not less than 30 days' prior written notice (in the form of an Officers' Certificate) of its intention so to do, clearly describing such change and providing such other information in connection therewith as the Trustee may request and (B) with respect to such change, such Pledgor shall have taken all action reasonably satisfactory to the Trustee to maintain the perfection and priority of the security interest of the Trustee for the benefit of the Secured Parties in the Pledged Collateral intended to be granted hereby, including, without limitation, using commercially reasonable efforts to obtain waivers of landlord's or warehousemen's liens with respect to such new location, if applicable. Each Pledgor agrees to promptly provide the Trustee with certified organizational documents reflecting any of the changes described in the preceding sentence. (b) The Trustee may rely on opinions of counsel as to whether any or all UCC financing statements of the Pledgors need to be amended as a result of any of the changes described in Section 4.5(a). If any Pledgor fails to provide information to the Trustee about such changes on a timely basis, the Trustee shall not be liable or responsible to any party for any failure to maintain a perfected security interest in such Pledgor's property constituting Pledged Collateral, for which the Trustee needed to have information relating to such changes. The Trustee shall have no duty to inquire about such changes if any Pledgor does not inform the Trustee of such changes, the parties acknowledging and agreeing that it would not be feasible or practical for the Trustee to search for information on such changes if such information is not provided by any Pledgor. SECTION 4.6 Location of Inventory and Equipment. All Inventory and ----------------------------------- Equipment of such Pledgor is located at the chief executive office or such other location listed in Schedules 2(a), 2(b), 2(c), 2(d) or 2(e) of the Perfection Certificate. Such Pledgor shall not move any Inventory and Equipment to any location other than one within the Continental United States that is listed in such Schedules of the Perfection Certificate with respect to such Pledgor until (i) it shall have given the -21- Trustee not less than 30 days' prior written notice (in the form of an Officers' Certificate) of its intention so to do, clearly describing such new location within the Continental United States and providing such other information in connection therewith as the Trustee may request and (ii) with respect to such new location, such Pledgor shall have taken all action reasonably satisfactory to the Trustee to maintain the perfection and priority of the security interest of the Trustee for the benefit of the Secured Parties in the Pledged Collateral intended to be granted hereby, including, without limitation, using commercially reasonable efforts to obtain waivers of landlord's or warehouseman's liens with respect to such new location, if applicable. SECTION 4.7 Condition and Maintenance of Equipment. The Equipment of -------------------------------------- such Pledgor is in good repair, working order and condition, reasonable wear and tear excepted. Each Pledgor shall cause the Equipment to be maintained and preserved in good repair, working order and condition, reasonable wear and tear excepted, and shall as quickly as commercially practicable make or cause to be made all repairs, replacements and other improvements which are necessary or appropriate in the conduct of such Pledgor's business. SECTION 4.8 Corporate Names; Prior Transactions. Such Pledgor has ----------------------------------- not, during the past five years, been known by or used any other corporate or fictitious name or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its property or assets out of the ordinary course of business, except as set forth in Schedules 1(b), 1(c), and 4 of the Perfection Certificate. SECTION 4.9 Due Authorization and Issuance. All of the Initial ------------------------------ Pledged Shares have been, and to the extent any Pledged Shares are hereafter issued, such shares will be, upon such issuance, duly authorized, validly issued and fully paid and non-assessable. All of the Initial Pledged Interests have been fully paid for, and there is no amount or other obligation owing by any Pledgor to any issuer of the Initial Pledged Interests in exchange for or in connection with the issuance of the Initial Pledged Interests or any Pledgor's status as a partner or a member of any issuer of the Initial Pledged Interests. SECTION 4.10 No Violations, etc. The pledge of the Pledged Securities ------------------ pursuant to this Agreement does not violate Regulation T, U or X of the Federal Reserve Board. SECTION 4.11 No Options, Warrants, etc. There are no options, ------------------------- warrants, calls, rights, commitments or agreements of any character to which such Pledgor is a party or by which it is bound obligating such Pledgor to issue, deliver or sell or cause to be issued, delivered or sold additional Pledged Securities or obligating such Pledgor to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no voting trusts or other agreements or understandings to which such Pledgor is a party with respect to the transfer, voting or exercise of any other right of the equity interests of any issuer of the Pledged Securities. SECTION 4.12 No Claims. Such Pledgor owns or has rights to use all of --------- the Pledged Collateral pledged by it hereunder and all rights with respect to any of the foregoing used in, necessary for or material to such Pledgor's business as currently conducted. The use by such Pledgor of such -22- Pledged Collateral and all such rights with respect to the foregoing do not infringe on the rights of any Person other than such infringement which would not, individually or in the aggregate, result in a Colla t-eral Material Adverse Effect. No claim has been made and remains outstanding that such Pledgor's use of any Pledged Collateral does or may violate the rights of any third Person that would individually, or in the aggregate, have a Collateral Material Adverse Effect. SECTION 4.13 No Conflicts, Consents, etc. Neither the execution and --------------------------- delivery hereof by each Pledgor nor the consummation of the transactions herein contemplated nor the fulfillment of the terms hereof (i) violates any Operative Agreement of such Pledgor or any issuer of Pledged Securities, (ii) violates the terms of any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or other document to which such Pledgor is a party, or by which it may be bound or to which any of its properties or assets may be subject, which violation would, individually or in the aggregate, have a Collateral Material Adverse Effect, (iii) conflicts with any Requirement of Law applicable to any such Pledgor or its property, which conflict would, individually or in the aggregate, have a Collateral Material Adverse Effect, or (iv) results in or requires the creation or imposition of any Lien (other than the Lien contemplated hereby) upon or with respect to any of the property now owned or hereafter acquired by such Pledgor. No consent of any party (including, without limitation, equityholders or creditors of such Pledgor) and no consent, authorization, approval, license or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person is required (A) for the pledge by such Pledgor of the Pledged Collateral pledged by it pursuant to this Agreement or for the execution, delivery or performance hereof by such Pledgor, except as set forth in Schedule 4.13 annexed hereto, (B) except for the prior approval of the applicable Gaming Authorities with respect to any Securities Collateral, for the exercise by the Trustee of the voting or other rights provided for in this Agreement or (C) except for the prior approval of the applicable Gaming Authorities with respect to the Securities Collateral, for the exercise by the Trustee of the remedies in respect of the Pledged Collateral pursuant to this Agreement. In the event that the Trustee desires to exercise any remedies, voting or consensual rights or attorney-in-fact powers set forth in this Agreement and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other Person therefor, then, upon the reasonable request of the Trustee, such Pledgor agrees to use its best efforts to assist and aid the Trustee to obtain as soon as practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers. SECTION 4.14 Pledged Collateral. All information set forth herein, ------------------ including the schedules annexed hereto, and all information contained in any documents, schedules and lists heretofore delivered to any Secured Party in connection with this Agreement, in each case, relating to the Pledged Collateral, is accurate and complete in all material respects. The Pledged Collateral described on the schedules annexed hereto constitutes all of the property of such type of Pledged Collateral owned or held by the Pledgors. SECTION 4.15 Insurance. (a) The Pledgors, at their own expense, shall --------- maintain or cause to be maintained the insurance policies and coverages required under Section 4.19 of the Indenture with respect to the Pledged Collateral. ------------ -23- (b) If there shall occur any Destruction, individually or in the aggregate, in excess of $100,000, the applicable Pledgor shall promptly send to the Trustee a written notice setting forth the nature and extent of such Destruction. If there shall occur any Taking, the applicable Pledgor shall immediately notify the Trustee upon receiving notice of such Taking or commencement of proceedings therefor. The Net Loss Proceeds are hereby assigned and shall be paid to the Trustee. Each Pledgor shall take all steps necessary to notify the condemning authority of such assignment. All Net Loss Proceeds shall be applied in accordance with the provisions of Section 4.16 of the Indenture. ------------ (c) In the event that the proceeds of any insurance claim are paid after the Trustee has exercised its right to foreclose after an Event of Default such proceeds shall be paid to the Trustee to satisfy any deficiency remaining after such foreclosure. The Trustee shall retain its interest in the Insurance Policies required to be maintained pursuant to this Agreement during any redemption period. SECTION 4.16 Payment of Taxes; Compliance with Laws; Contesting -------------------------------------------------- Liens; Claims. Each Pledgor represents and warrants that all Charges imposed - ------------- upon or assessed against the Pledged Collateral have been paid and discharged except to the extent such Charges constitute a Lien not yet due and payable or a Permitted Lien. Each Pledgor shall comply with all Requirements of Law applicable to the Pledged Collateral the failure to comply with which would, individually or in the aggregate, have a Collateral Material Adverse Effect. Each Pledgor may at its own expense contest the validity, amount or applicability of any Charges so long as the contest thereof shall be conducted in accordance with, and permitted pursuant to the provisions of, the Indenture. Notwithstanding the foregoing provisions of this Section 4.16, (i) no contest of ------------ any such obligation may be pursued by such Pledgor if such contest would expose the Trustee or any other Secured Party to (A) any possible criminal liability or (B) unless such Pledgor shall have furnished a bond or other security therefor satisfactory to the Trustee, or such Secured Party, as the case may be, any additional civil liability for failure to comply with such obligations and (ii) if at any time payment or performance of any obligation contested by such Pledgor pursuant to this Section 4.16 shall become necessary to prevent the ------------ imposition of remedies because of non-payment, such Pledgor shall pay or perform the same, in sufficient time to prevent the imposition of remedies in respect of such default or prospective default. SECTION 4.17 Access to Pledged Collateral, Books and Records; Other ------------------------------------------------------ Information. Upon reasonable request to each Pledgor, the Trustee, its agents, - ------------ accountants and attorneys shall have full and free access to visit and inspect, as applicable, during normal business hours and such other reasonable times as may be requested by the Trustee all of the Pledged Collateral and Mortgaged Property including, without limitation, all of the books, correspondence and records of such Pledgor relating thereto. The Trustee and its representatives may examine the same, take extracts therefrom and make photocopies thereof, and such Pledgor agrees to render to the Trustee, at such Pledgor's cost and expense, such clerical and other assistance as may be reasonably requested by the Trustee with regard thereto. Such Pledgor shall, at any and all times, within a reasonable time after written request by the Trustee, furnish or cause to be furnished to the Trustee, in such manner and in such detail as may be reasonably requested by the Trustee, additional information with respect to the Pledged Collateral. -24- SECTION 4.18 Acquisition Documents. Each Pledgor shall perform and --------------------- comply with the terms and conditions in all material respects of all Acquisition Documents. Each Pledgor shall not without the consent of the Trustee (i) cancel or terminate any of the Acquisition Documents or consent to or accept any cancellation or termination thereof, (ii) amend, supplement or otherwise modify any of the Acquisition Documents (in each case as in effect on the date hereof), (iii) waive any default under or breach of any of the Acquisition Documents or waive, fail to enforce, forgive or release any right, interest, or entitlement of any kind, howsoever arising, under or in respect of such Acquisition Documents or, vary or agree to the variation of any of the provisions of any of such Acquisition Documents or of the performance of any other Person under any of such Acquisition Documents, or (iv) petition, request or take any other legal or administrative action which seeks, or may be expected, to rescind, terminate or suspend, any of the Acquisition Documents or amend or modify any thereof. Each Pledgor shall notify the Trustee in the event it receives any notice or communication with respect to the Acquisition Documents including, without limitation, notices of default, and shall forward promptly copies of any such notices or communications to the Trustee. In the event of any Pledgor's default under any of the Acquisition Documents, the parties thereto shall permit the Trustee to cure such default and thereafter perform any of such Pledgor's obligations thereunder and such performance by the Trustee will not constitute a default under any such Acquisition Document. SECTION 4.19 Benefit to Guarantors. Each Guarantor will receive --------------------- substantial benefit as a result of the execution, delivery and performance of the Indenture and other documents evidencing the Secured Obligations. ARTICLE V CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL SECTION 5.1 Pledge of Additional Securities Collateral. Each Pledgor ------------------------------------------ shall, upon obtaining any Pledged Securities or Intercompany Notes of any Person, accept the same in trust for the benefit of the Trustee and forthwith deliver to the Trustee a pledge amendment, duly executed by such Pledgor, in substantially the form of Exhibit 2 annexed hereto (each, a "Pledge Amendment"), --------- ---------------- and the certificates and other documents required under Section 3.1 and Section ----------- ------- 3.2 in respect of the additional Pledged Securities or Intercompany Notes which - --- are to be pledged pursuant to this Agreement, and confirming the attachment of the Lien hereby created on and in respect of such additional Pledged Securities or Intercompany Notes. Each Pledgor hereby authorizes the Trustee to attach each Pledge Amendment to this Agreement and agrees that all Pledged Interests or Intercompany Notes listed on any Pledge Amendment delivered to the Trustee shall for all purposes hereunder be considered Pledged Colla teral. SECTION 5.2 Voting Rights; Distributions; etc. --------------------------------- (i) So long as no Event of Default shall have occurred and be continuing: -25- (A) Each Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Securities Collateral or any part thereof for any purpose not inconsistent with the terms or purposes hereof, the Indenture or any other document evidencing the Secured Obligations; provided, -------- however, that no Pledgor shall in any event exercise such rights in any manner - ------- which may have an adverse effect on the value of the Pledged Collateral or the Lien and security interest intended to be granted to the Trustee hereunder. (B) Each Pledgor shall be entitled to receive and retain, and to utilize free and clear of the Lien hereof, any and all Distributions, but only if and to the extent made in accordance with the provisions of the Indenture; provided, however, that any and all such Distributions consisting of rights or - -------- ------- interests in the form of securities shall be forthwith delivered to the Trustee to hold as Pledged Collateral and shall, if received by any Pledgor, be received in trust for the benefit of the Trustee, be segregated from the other property or funds of such Pledgor and be forthwith delivered to the Trustee as Pledged Collateral in the same form as so received (with any necessary endorsement). (C) The Trustee shall be deemed without further action or formality to have granted to each Pledgor all necessary consents relating to voting rights and shall, if necessary, upon written request of any Pledgor and at the sole cost and expense of the Pledgors, from time to time execute and deliver (or cause to be executed and delivered) to such Pledgor all such instruments as such Pledgor may reasonably request in order to permit such Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to Section ------- 5.2(i)(A) hereof and to receive the Distributions which it is authorized to - --------- receive and retain pursuant to Section 52(i)(B) hereof. ---------------- (ii) Upon the occurrence and during the continuance of any Event of Default: (A) All rights of each Pledgor to exercise the voting and other consensual rights it would otherwise be entitled to exercise pursuant to Section ------- 5.2(i)(A) hereof without any action, other than, in the case of any Securities - -------- Collateral, any applicable approval required pursuant to applicable Gaming Law, or the giving of any notice shall cease, and all such rights shall thereupon become vested in the Trustee, which shall thereupon have the sole right to exercise such voting and other consensual rights. (B) All rights of each Pledgor to receive Distributions which it would otherwise be authorized to receive and retain pursuant to Section 5.2(i)(B) ----------------- hereof shall cease and all such rights shall thereupon become vested in the Trustee, which shall thereupon have the sole right to receive and hold as Pledged Collateral such Distributions. (iii) Each Pledgor shall, at its sole cost and expense, from time to time execute and deliver to the Trustee appropriate instruments as the Trustee may request in order to permit the Trustee to exercise the voting and other rights which it may be entitled to exercise pursuant to Section 5.2(ii)(A) ------------------ hereof and to receive all Distributions which it may be entitled to receive under Section 5.2(ii)(B) hereof. ------------------ -26- (iv) All Distributions which are received by any Pledgor contrary to the provisions of Section 5.2(ii)(B) hereof shall be ------------------ received in trust for the benefit of the Trustee, shall be segregated from other funds of such Pledgor and shall immediately be paid over to the Trustee as Pledged Collateral in the same form as so received (with any necessary endorsement). SECTION 5.3 Operative Agreements. Each Pledgor has delivered -------------------- to the Trustee true, correct and complete copies of the Operative Agreements. The Operative Agreements are in full force and effect, have not as of the date hereof been amended or modified except as disclosed to the Trustee, and there is no existing default by any party thereunder or any event which, with the giving of notice of passage of time or both, would constitute a default by any party thereunder. Each Pledgor shall deliver to the Trustee a copy of any notice of default given or received by it under any Operative Agreement within ten days after such Pledgor gives or receives such notice. No Pledgor will terminate or agree to terminate any Operative Agreement or make any amendment or modification to any Operative Agreement which may have a material adverse effect on the value of the Pledged Interests and Distributions relating thereto or the Lien and security intended to be granted to the Trustee hereunder. SECTION 5.4 Defaults, etc. Such Pledgor is not in default in ------------- the payment of any portion of any mandatory capital contribution, if any, required to be made under any agreement to which such Pledgor is a party relating to the Pledged Securities pledged by it, and such Pledgor is not in violation of any other provisions of any such agreement to which such Pledgor is a party, or otherwise in default or violation thereunder. No Securities Collateral pledged by such Pledgor is subject to any defense, offset or counterclaim, nor have any of the foregoing been asserted or alleged against such Pledgor by any Person with respect thereto, and as of the date hereof, there are no certificates, instruments, documents or other writings (other than the Operative Agreements and certificates, if any, delivered to the Trustee) which evidence any Pledged Securities of such Pledgor. ARTICLE VI CERTAIN PROVISIONS CONCERNING INTELLECTUAL PROPERTY COLLATERAL SECTION 6.1 Grant of License. For the purpose of enabling the ---------------- Trustee, during the continuance of an Event of Default, to exercise rights and remedies under Article VIII hereof at such time as the Trustee shall be lawfully ------------ entitled to exercise such rights and remedies, and for no other purpose, each Pledgor hereby grants to the Trustee, to the extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to such Pledgor) to use, assign, license or sublicense any of the Intellectual Property Collateral now owned or hereafter acquired by such Pledgor, wherever the same may be located, including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout hereof. -27- SECTION 6.2 Registrations. Except pursuant to licenses and ------------- other user agreements entered into by any Pledgor in the ordinary course of business that are listed in Schedule 1.1(f) annexed hereto, on and as of the date hereof (i) each Pledgor owns and possesses the right to use, and has done nothing to authorize or enable any other Person to use, any Copyright, Patent or Trademark listed in Schedules 1.1(e), 1.1(g) and 1.1(h) annexed hereto, and (ii) all registrations listed in Schedules 1.1(e), 1.1(g) and 1.1(h) annexed hereto are valid and in full force and effect. SECTION 6.3 No Violations or Proceedings. To each Pledgor's ---------------------------- knowledge, on and as of the date hereof, (i) except as set forth in Schedule 6.3 annexed hereto, there is no material violation by others of any right of such Pledgor with respect to any Copyright, Patent or Trademark listed in Schedules 1.1(e), 1.1(g) and 1.1(h) annexed hereto, respectively, pledged by it under the name of such Pledgor, (ii) such Pledgor is not infringing upon any Copyright, Patent or Trademark of any other Person other than such infringement that, individually or in the aggregate, would not (or would not reasonably be expected to) result in a material adverse effect on the value or utility of the Intellectual Property Collateral or any portion thereof material to the use and operation of the Pledged Collateral or Mortgaged Property and (iii) no proceedings have been instituted or are pending against such Pledgor or, to such Pledgor's knowledge, threatened, and no claim against such Pledgor has been received by such Pledgor, alleging any such violation, except as may be set forth in Schedule 6.3. SECTION 6.4 Protection of Trustee's Security. On a continuing -------------------------------- basis, each Pledgor shall, at its sole cost and expense, (i) promptly following its becoming aware thereof, notify the Trustee of (A) any materially adverse determination in any proceeding in the United States Patent and Trademark Office or the United States Copyright Office with respect to any material Patent, Trademark or Copyright or (B) the institution of any proceeding or any adverse determination in any Federal, state or local court or administrative body regarding such Pledgor's claim of ownership in or right to use any of the Intellectual Property Collateral material to the use and operation of the Pledged Collateral or Mortgaged Property, its right to register such Intellectual Property Collateral or its right to keep and maintain such registration in full force and effect, (ii) maintain and protect the Intellectual Property Collateral material to the use and operation of the Pledged Collateral or Mortgaged Property as presently used and operated and as contemplated by the Indenture, (iii) not permit to lapse or become abandoned any Intellectual Property Collateral material to the use and operation of the Pledged Collateral or Mortgaged Property as presently used and operated and as contemplated by the Indenture, and not settle or compromise any pending or future litigation or administrative proceeding with respect to such Intelle c-tual Property Collateral, in each case except as shall be consistent with commercially reasonable business judgment, (iv) upon such Pledgor obtaining knowledge thereof, promptly notify the Trustee in writing of any event which may be reasonably expected to materially and adversely affect the value or utility of the Intellectual Property Collateral or any portion thereof material to the use and operation of the Pledged Collateral or Mortgaged Property, the ability of such Pledgor or the Trustee to dispose of the Intellectual Property Collateral or any portion thereof or the rights and remedies of the Trustee in relation thereto including, without limitation, a levy or threat of levy or any legal process against the Intellectual Property Collateral or any portion thereof, (v) not license the Intellectual Property Collateral other than licenses entered into by such Pledgor in, or incidental to, the ordinary course of business, or amend or permit the amendment of any of the licenses in a manner that materially and adversely af- -28- fects the right to receive payments thereunder, or in any manner that would materially impair the value of the Intellectual Property Collateral or the Lien on and security interest in the Intellectual Property Collateral intended to be granted to the Trustee for the benefit of the Secured Parties, without the consent of the Trustee, (vi) until the Trustee exercises its rights to make collection, diligently keep adequate records respecting the Intellectual Property Collateral and (vii) furnish to the Trustee from time to time upon the Trustee's reasonable request therefor detailed statements and amended schedules further identifying and describing the Intellectual Property Collateral and such other materials evidencing or reports pertaining to the Intellectual Property Collateral as the Trustee may from time to time request. SECTION 6.5 After-Acquired Property. If any Pledgor shall, at ----------------------- any time before the Secured Obligations have been paid in full (other than contingent indemnification obligations which, pursuant to the provisions of the Indenture or the Collateral Documents, survive the termination thereof), (i) obtain any rights to any additional Intellectual Property Collateral or (ii) become entitled to the benefit of any additional Intellectual Property Collateral or any renewal or extension thereof, including any reissue, division, continuation, or continuation-in-part of any Intellectual Property Collateral, or any improvement on any Intellectual Property Collateral, the provisions hereof shall automatically apply thereto and any such item enumerated in clause (i) or (ii) of this Section 6.5 with respect to such Pledgor shall automatically ----------- constitute Intellectual Property Collateral if such would have constituted Intellectual Property Collateral at the time of execution hereof and be subject to the Lien and security interest created by this Agreement without further action by any party. Each Pledgor shall promptly (i) provide to the Trustee written notice of any of the foregoing and (ii) confirm the attachment of the Lien and security interest created by this Agreement to any rights described in clauses (i) and (ii) of the immediately preceding sentence of this Section 6.5 ----------- by execution of an instrument in form reasonably acceptable to the Trustee. SECTION 6.6 Modifications. Each Pledgor authorizes the Trustee ------------- to modify this Agreement by amending Schedules 1.1(e), 1.1(f), 1.1(g) and 1.1(h) annexed hereto to include any Intellectual Property Collateral acquired or arising after the date hereof of such Pledgor including, without limitation, any of the items listed in Section 6.5 hereof. ----------- SECTION 6.7 Litigation. Unless there shall occur and be ---------- continuing any Event of Default, each Pledgor shall have the right to commence and prosecute in its own name, as the party in interest, for its own benefit and at the sole cost and expense of the Pledgors, such applications for protection of the Intellectual Property Collateral and suits, proceedings or other actions to prevent the infringement, counterfeiting, unfair competition, dilution, diminution in value or other damage as are necessary to protect the Intellectual Property Collateral. Upon the occurrence and during the continuance of any Event of Default, the Trustee shall have the right but shall in no way be obligated to file applic a-tions for protection of the Intellectual Property Collateral and/or bring suit in the name of any Pledgor, the Trustee or the Secured Parties to enforce the Intellectual Property Collateral and any license there-under. In the event of such suit, each Pledgor shall, at the reasonable request of the Trustee, do any and all lawful acts and execute any and all documents requested by the Trustee in aid of such enforcement and the Pledgors shall promptly reimburse and indemnify the Trustee, as the case may be, for all costs and expenses incurred by the Trustee in the exercise of its rights under this Section 6.7 in - ----------- -29- accordance with Section 11.3 hereof. In the event that the Trustee shall elect ------------ not to bring suit to enforce the Intellectual Property Collateral, each Pledgor agrees, at the reasonable request of the Trustee, to take all commercially reasonable actions necessary, whether by suit, proceeding or other action, to prevent the infringement, counterfeiting, unfair competition, dilution, diminution in value of or other damage to any of the Intellectual Property Collateral by others and for that purpose agrees to diligently maintain any suit, proceeding or other action against any Person so infringing necessary to prevent such infringement. ARTICLE VII CERTAIN PROVISIONS CONCERNING ACCOUNTS SECTION 7.01 Special Representations and Warranties. As of the -------------------------------------- time when each of its Accounts arises, each Pledgor shall be deemed to have represented and warranted that such Account and all records, papers and documents relating thereto (i) are genuine and correct and in all material respects what they purport to be, (ii) represent the legal, valid and binding obligation of the account debtor, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability, evidencing indebtedness unpaid and owed by such account debtor, arising out of the performance of labor or services or the sale, lease, license, assignment or other disposition and delivery of the goods or other property listed therein or out of an advance or a loan, (iii) will, in the case of a Account, except for the original or duplicate original invoice sent to a purchaser evidencing such purchaser's account, be the only original writings evidencing and embodying such obligation of the account debtor named therein and (iv) are in all material respects in compliance and conform with all applicable Federal, state and local laws and applicable laws of any relevant foreign jurisdiction. SECTION 7.02 Maintenance of Records. Each Pledgor shall keep and ---------------------- maintain at its own cost and expense complete records of each Account, in a manner consistent with prudent business practice, including, without limitation, records of all payments received, all credits granted thereon, all merchandise returned and all other documentation relating thereto. Each Pledgor shall, at such Pledgor's sole cost and expense, upon the Trustee's demand made at any time after the occurrence and during the continuance of any Event of Default, deliver all tangible evidence of Accounts, including, without limitation, all documents evidencing Accounts and any books and records relating thereto to the Trustee or to its representatives (copies of which evidence and books and records may be retained by such Pledgor). Upon the occurrence and during the continuance of any Event of Default, the Trustee may transfer a full and complete copy of any Pledgor's books, records, credit information, reports, memoranda and all other writings relating to the Accounts to and for the use by any Person that has acquired or is contemplating acquisition of an interest in the Accounts or the Trustee's security interest therein without the consent of any Pledgor. SECTION 7.03 Legend. Each Pledgor shall legend, at the request of ------ the Trustee made at any time after the occurrence of any Event of Default and in form and manner satisfactory to -30- the Trustee, the Accounts and the other books, records and documents of such Pledgor evidencing or pertaining to the Accounts with an appropriate reference to the fact that the Accounts have been assigned to the Trustee for the benefit of the Secured Parties and that the Trustee has a security interest therein. SECTION 7.04 Modification of Terms, etc. No Pledgor shall rescind -------------------------- or cancel any indebtedness evidenced by any Account or modify any term thereof or make any adjustment with respect thereto except in the ordinary course of business consistent with prudent business practice, or extend or renew any such indebtedness except in the ordinary course of business consistent with prudent business practice or compromise or settle any dispute, claim, suit or legal proceeding relating thereto or sell any Account or interest therein except in the ordinary course of business consistent with prudent business practice without the prior written consent of the Trustee. Each Pledgor shall timely fulfill all obligations on its part to be fulfilled under or in connection with the Accounts. SECTION 7.05 Collection. Each Pledgor shall cause to be collected ---------- from the account debtor of each of the Accounts, as and when due in the ordinary course of business consistent with prudent business practice (including, without limitation, Accounts that are delinquent, such Accounts to be collected in accordance with generally accepted commercial collection procedures), any and all amounts owing under or on account of such Account, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Account, except that any Pledgor may, with respect to an Account, allow in the ordinary course of business (i) a refund or credit due as a result of returned or damaged or defective merchandise and (ii) such extensions of time to pay amounts due in respect of Accounts and such other modifications of payment terms or settlements in respect of Accounts as shall be commercially reasonable in the circumstances, all in accordance with such Pledgor's ordinary course of business consistent with its collection practices as in effect from time to time. The costs and expenses (including, without limitation, attorneys' fees) of collection, in any case, whether incurred by any Pledgor, the Trustee or any Secured Party, shall be paid by the Pledgors. ARTICLE VIII TRANSFERS AND OTHER LIENS No Pledgor shall (i) sell, convey, assign or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral pledged by it hereunder except as permitted by the Indenture or (ii) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral pledged by it hereunder other than in the case of Pledged Collateral (other than Securities Collateral) Permitted Collateral Liens. -31- ARTICLE IX REMEDIES SECTION 9.1 Remedies. (a) Upon the occurrence and during the -------- continuance of any Event of Default, and, in the case of any Securities Collateral, subject to any applicable approval required pursuant to applicable Gaming Law, the Trustee may from time to time exercise in respect of the Pledged Collateral, in addition to the other rights and remedies provided for herein or otherwise available to it: (i) Personally, or by agents or attorneys, immediately take possession of the Pledged Collateral or any part thereof, from any Pledgor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon any Pledgor's premises where any of the Pledged Collateral is located, remove such Pledged Collateral, remain present at such premises to receive copies of all communic a-tions and remittances relating to the Pledged Collateral and use in connection with such removal and possession any and all services, supplies, aids and other facilities of any Pledgor; (ii) Demand, sue for, collect or receive any money or property at any time payable or receivable in respect of the Pledged Collateral including, without limitation, instructing the obligor or obligors on any agreement, instrument or other obligation constituting part of the Pledged Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Trustee, and in connection with any of the foregoing, compromise, settle, extend the time for payment and make other modifications with respect thereto; provided, however, that in the event that any such payments are made -------- ------- directly to any Pledgor, prior to receipt by any such obligor of such instruction, such Pledgor shall segregate all amounts received pursuant thereto in trust for the benefit of the Trustee and shall promptly (but in no event later than one Business Day after receipt thereof) pay such amounts to the Trustee; (iii) Sell, assign, grant a license to use or otherwise liquidate, or direct any Pledgor to sell, assign, grant a license to use or otherwise liquidate, any and all investments made in whole or in part with the Pledged Collateral or any part thereof, and take possession of the proceeds of any such sale, assignment, license or liquidation; (iv) Take possession of the Pledged Collateral or any part thereof, by directing any Pledgor in writing to deliver the same to the Trustee at any place or places so designated by the Trustee, in which event such Pledgor shall at its own expense: (A) forthwith cause the same to be moved to the place or places designated by the Trustee and there delivered to the Trustee, (B) store and keep any Pledged Collateral so delivered to the Trustee at such place or places pending further action by the Trustee and (C) while the Pledged Collateral shall be so stored and kept, provide such security and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition. Each Pledgor's obligation -32- to deliver the Pledged Collateral as contemplated in this Section ------- 9.1(iv) is of the essence hereof. Upon application to a court of equity ------ having jurisdiction, the Trustee shall be entitled to a decree requiring specific performance by any Pledgor of such obligation; (v) Withdraw all moneys, instruments, securities and other property in any bank, financial securities, deposit or other account of any Pledgor constituting Pledged Collateral for application to the Secured Obligations as provided in Article X hereof; --------- (vi) Retain and apply the Distributions to the Secured Obligations as provided in Article X hereof; --------- (vii) Exercise any and all rights as beneficial and legal owner of the Pledged Collateral, including, without limitation, perfecting assignment of and exercising any and all voting, consensual and other rights and powers with respect to any Pledged Colla teral; and (viii) All the rights and remedies of a secured party on default under the UCC, and the Trustee may also in its sole discretion, without notice except as specified in Section 9.2 hereof, sell, assign ----------- or grant a license to use the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of the Trustee's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Trustee may deem commercially reasonable. The Trustee or any other Secured Party or any of their respective Affiliates may be the purchaser, licensee, assignee or recipient of any or all of the Pledged Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold, assigned or licensed at such sale, to use and apply any of the Secured Obligations owed to such Person as a credit on account of the purchase price of any Pledged Collateral payable by such Person at such sale. Each purchaser, assignee, licensee or recipient at any such sale shall acquire the property sold, assigned or licensed absolutely free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives, to the fullest extent permitted by law, all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Trustee shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Trustee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Pledgor hereby waives, to the fullest extent permitted by law, any claims against the Trustee arising by reason of the fact that the price at which any Pledged Collateral may have been sold, assigned or licensed at such a private sale was less than the price which might have been obtained at a public sale, even if the Trustee accepts the first offer received and does not offer such Pledged Collateral to more than one offeree. (b) In the event that, upon the occurrence and during the continuance of an Event of Default, the Trustee intends to exercise any of the voting and other rights afforded under Article V or this Section 9.1 with respect to any Securities Collateral, including, but not limited to (i) re- -33- registration of any Securities Collateral, or (ii) foreclosure, transfer or other enforcement of the security interests in any Securities Collateral, pursuant to applicable Gaming Law, such exercise of remedies shall require the prior approval of the applicable Gaming Authorities and/or licensing of the Trustee or its nominee (unless such licensing requirement is waived by the applicable Gaming Authorities upon the application of the Trustee or its nominee), pursuant to applicable Gaming Law. (c) The approval by the applicable Gaming Authorities of this Agreement shall not act or be construed as the approval, either express or implied, for the Trustee to take any action or steps provided for in this Agreement for which prior approval of any applicable Gaming Authorities is required, without first obtaining such prior approval of such applicable Gaming Authorities to the extent then required by applicable Gaming Law. SECTION 9.2 Notice of Sale. Each Pledgor acknowledges and -------------- agrees that, to the extent notice of sale shall be required by law, ten days' notice to such Pledgor of the time and place of any public sale or of the time after which any private sale or other intended disposition is to take place shall be commercially reasonable notification of such matters. No notification need be given to any Pledgor if it has signed, after the occurrence of an Event of Default, a statement renouncing or modifying any right to notification of sale or other intended disposition. SECTION 9.3 Waiver of Notice and Claims. Each Pledgor hereby --------------------------- waives, to the fullest extent permitted by applicable law, notice or judicial hearing in connection with the Trustee's taking possession or the Trustee's disposition of any of the Pledged Collateral, including, without limitation, any and all prior notice and hearing for any prejudgment remedy or remedies and any such right which such Pledgor would otherwise have under law, and each Pledgor hereby further waives, to the fullest extent permitted by applicable law: (i) all damages occasioned by such taking of possession, (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Trustee's rights hereunder and (iii) all rights of redemption, appraisal, valuation, stay, extension or moratorium now or hereafter in force under any applicable law. The Trustee shall not be liable for any incorrect or improper payment made pursuant to this Article IX in the absence of ---------- gross negligence or willful misconduct. Any sale of, or the grant of options to purchase, or any other realization upon, any Pledged Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the applicable Pledgor therein and thereto, and shall be a perpetual bar both at law and in equity against such Pledgor and against any and all Persons claiming or attempting to claim the Pledged Collateral so sold, optioned or realized upon, or any part thereof, from, through or under such Pledgor. SECTION 9.4 Certain Sales of Pledged Collateral. ----------------------------------- (i) Each Pledgor recognizes that, by reason of certain prohibitions contained in law, rules, regulations or orders of any Governmental Authority, the Trustee may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who meet the requirements of such Governmental Authority. Each Pledgor acknowledges that any such sales may be at prices and on terms less favorable to the Trustee than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such restricted sale -34- shall be deemed to have been made in a commercially reasonable manner and that, except as may be required by applicable law, the Trustee shall have no obligation to engage in public sales. (ii) Each Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the -------------- "Securities Act"), and applicable state securities laws, the Trustee may be compelled, with respect to any sale of all or any part of the Securities Collateral, to limit purchasers to Persons who will agree, among other things, to acquire such Securities Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Each Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to the Trustee than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Trustee shall have no obligation to engage in public sales and no obligation to delay the sale of any Securities Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would agree to do so. (iii) Notwithstanding the foregoing, each Pledgor shall, upon the occurrence and during the continuance of any Event of Default, at the reasonable request of the Trustee, for the benefit of the Trustee, cause any registration, qualification under or compliance with any Federal or state securities law or laws to be effected with respect to all or any part of the Securities Collateral as soon as practicable and at the sole cost and expense of the Pledgors. Each Pledgor will use its best efforts to cause such registration to be effected (and be kept effective) and will use its commercially reasonable efforts to cause such qualification and compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Securities Collateral including, without limitation, registration under the Securities Act (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with all other requirements of any Governmental Authority. Each Pledgor shall use its commercially reasonable efforts to cause the Trustee to be kept advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, shall furnish to the Trustee such number of prospectuses, offering circulars or other documents incident thereto as the Trustee from time to time may request, and shall indemnify and shall cause the issuer of the Securities Collateral to indemnify the Trustee and all others participating in the distribution of such Securities Collateral against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading. (iv) If the Trustee determines to exercise its right to sell any or all of the Securities Collateral, upon written request, the applicable Pledgor shall from time to time furnish to the Trustee all such information as the Trustee may request in order to determine the number of securities included in the Securities Collateral which may be sold by the Trustee as exempt transactions under the Securities -35- Act and the rules of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. (v) Each Pledgor further agrees that a breach of any of the covenants contained in this Section 9.4 will cause irreparable injury to the Trustee and other Secured Parties, that the Trustee and the other Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 9.4 shall be specifically enforceable against such Pledgor, and such Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred and is continuing. SECTION 9.5 No Waiver; Cumulative Remedies. ------------------------------ (i) No failure on the part of the Trustee to exercise, no course of dealing with respect to, and no delay on the part of the Trustee in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy; nor shall the Trustee be required to look first to, enforce or exhaust any other security, collateral or guaranties. The remedies herein provided are cumulative and are not exclusive of any remedies provided by law. (ii) In the event that the Trustee shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee, then and in every such case, the Pledgors, the Trustee and each other Secured Party shall be restored to their respective former positions and rights hereunder with respect to the Pledged Collateral, and all rights, remedies and powers of the Trustee and the other Secured Parties shall continue as if no such proceeding had been instituted. SECTION 9.6 Certain Additional Actions Regarding Intellectual ------------------------------------------------- Property. If any Event of Default shall have occurred and be continuing, upon - -------- the written demand of Trustee, each Pledgor shall execute and deliver to Trustee an assignment or assignments of the registered Patents, Trademarks and/or Copyrights and such other documents as are necessary or appropriate to carry out the intent and purposes hereof. Within five Business Days of written notice thereafter from Trustee, each Pledgor shall make available to Trustee, to the extent within such Pledgor's power and authority, such personnel in such Pledgor's employ on the date of the Event of Default as Trustee may reasonably designate to permit such Pledgor to continue, directly or indirectly, to produce, advertise and sell the products and services sold by such Pledgor under the registered Patents, Trademarks and/or Copyrights, and such persons shall be available to perform their prior functions on Trustee's behalf. -36- ARTICLE X APPLICATION OF PROCEEDS The proceeds received by the Trustee in respect of any sale of, collection from or other realization upon all or any part of the Pledged Collateral pursuant to the exercise by the Trustee of its remedies as a secured creditor as provided in Article IX hereof shall be applied, together with any ---------- other sums then held by the Trustee in the manner set forth in the Indenture. ARTICLE XI MISCELLANEOUS SECTION 11.1 Concerning Trustee. ------------------ (i) The Trustee has been appointed as trustee pursuant to the Indenture. The actions of the Trustee hereunder are subject to the provisions of the Indenture. The Trustee shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of the Pledged Collateral), in accordance with this Agreement and the Indenture. The Trustee may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. The Trustee may resign and a successor Trustee may be appointed in the manner provided in the Indenture. Upon the acceptance of any appointment as the Trustee by a successor Trustee, that successor Trustee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Trustee under this Agreement, and the retiring Trustee shall thereupon be discharged from its duties and obligations under this Agreement. After any retiring Trustee's resignation, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was the Trustee. (ii) The Trustee shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if such Pledged Collateral is accorded treatment substantially equivalent to that which the Trustee, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Trustee nor any of the Secured Parties shall have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Securities Collateral, whether or not the Trustee or any other Secured Party has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any Person with respect to any Pledged Collateral. -37- (iii) The Trustee shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person, and, with respect to all matters pertaining to this Agreement and its duties hereunder, upon advice of counsel selected by it. (iv) If any item of Pledged Collateral also constitutes collateral granted to Trustee under any other deed of trust, mortgage, security agreement, pledge or instrument of any type, in the event of any conflict between the provisions hereof and the provisions of such other deed of trust, mortgage, security agreement, pledge or instrument of any type in respect of such collateral, Trustee, in its sole discretion, shall select which provision or provisions shall control. SECTION 11.2 Trustee May Perform; Trustee Appointed -------------------------------------- Attorney-in-Fact. If any Pledgor shall fail to perform any covenants contained - ---------------- in this Agreement (including, without limitation, such Pledgor's covenants to (i) pay the premiums in respect of all required insurance policies hereunder, (ii) pay Charges, (iii) make repairs, (iv) discharge Liens or (v) pay or perform any obligations of such Pledgor under any Pledged Collateral) or if any warranty on the part of any Pledgor contained herein shall be breached, the Trustee may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose; provided, however, that Trustee shall in no event be bound to inquire into the validity of any tax, lien, imposition or other obligation which such Pledgor fails to pay or perform as and when required hereby and which such Pledgor does not contest in accordance in accordance with the provision of Section 4.16 hereof. Any and all ------------ amounts so expended by the Trustee shall be paid by the Pledgors in accordance with the provisions of Section 11.3 hereof. Neither the provisions of this ------------ Section 11.2 nor any action taken by Trustee pursuant to the provisions of this - ------------ Section 11.2 shall prevent any such failure to observe any covenant contained in - ------------ this Agreement nor any breach of warranty form constituting an Event of Default. Each Pledgor hereby appoints the Trustee its attorney-in fact, with full authority in the place and stead of such Pledgor and in the name of such Pledgor, or otherwise, from time to time in the Trustee's discretion to take any action and to execute any instrument consistent with the terms of the Indenture and the other Collateral Documents which the Trustee may deem necessary or advisable to accomplish the purposes hereof. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. Each Pledgor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. SECTION 11.3 Expenses. Each Pledgor will upon demand pay to -------- the Trustee the amount of any and all costs and expenses, including the fees and expenses of its counsel and the fees and expenses of any experts and agents which the Trustee may incur in connection with (i) any action, suit or other proceeding affecting the Pledged Collateral or any part thereof commenced, in which action, suit or proceeding the Trustee is made a party or participates or in which the right to use the Pledged Collateral or any part thereof is threatened, or in which it becomes necessary in the judgment of the Trustee to defend or uphold the Lien hereof (including, without limitation, any action, suit or proceeding to establish or uphold the compliance of the Pledged Collateral with any requirements of any Governmental Authority or law), (ii) the collection of the Secured Obligations, (iii) the enforcement and administration hereof, (iv) the custody or preservation of, or the sale of, collection from, or other reali- -38- zation upon, any of the Pledged Collateral, (v) the exercise or enforcement of any of the rights of the Trustee or any Secured Party hereunder or (vi) the failure by any Pledgor to perform or observe any of the provisions hereof. All amounts expended by the Trustee and payable by any Pledgor under this Section ------- 11.3 shall be due upon demand therefor (together with interest thereon accruing - --- at the highest rate then in effect under the Indenture during the period from and including the date on which such funds were so expended to the date of repayment) and shall be part of the Secured Obligations. Each Pledgor's obligations under this Section 11.3 shall survive the termination hereof and the ----------- discharge of such Pledgor's other obligations under this Agreement, the Indenture and the other Collateral Documents. SECTION 11.4 Indemnity. (i) Indemnity. Each Pledgor agrees to indemnify, pay and --------- hold harmless the Trustee and each of the other Secured Parties and the officers, directors, employees, agents and Affiliates of the Trustee and each of the other Secured Parties (collectively, the "Indemnitees") from and against any ----------- and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs (including, without limitation, settlement costs), expenses or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) which may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of this Agreement, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (including, without limitation, any misrepresentation by any Pledgor in this Agreement, the Indenture, the Notes, other Collateral Document or any other document evidencing the Secured Obligations) (the "Indemnified Liabilities"); provided, however, that no Pledgor ----------------------- -------- ------- shall have any obligation to an Indemnitee hereunder with respect to Indemnified Liabilities if it has been determined by a final decision (after all appeals and the expiration of time to appeal) of a court of competent jurisdiction that such Indemnified Liabilities arose from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, each Pledgor shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. (ii) Survival. The obligations of the Pledgors contained in -------- this Section 10.4 shall survive the termination hereof and the discharge of the ------------ Pledgors' other obligations under this Agreement, the Indenture and under the other Collateral Documents. (iii) Reimbursement. Any amounts paid by any Indemnitee as to ------------- which such In-demnitee has the right to reimbursement shall constitute Secured Obligations secured by the Pledged Collateral. SECTION 11.5 Continuing Security Interest; Assignment. This ---------------------------- Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) be binding upon the Pledgors, -39- their respective successors and assigns and (ii) inure, together with the rights and remedies of the Trustee hereunder, to the benefit of the Trustee and the other Secured Parties and each of their respective successors, transferees and assigns. No other Persons (including, without limitation, any other creditor of any Pledgor) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (ii), any Secured Party may assign or otherwise transfer any indebtedness held by it secured by this Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Secured Party, herein or otherwise, subject however, to the provisions of the Indenture. SECTION 11.6 Termination; Release. The Pledged Collateral -------------------- shall be released from the Lien of this Agreement and the applicable Subsidiary Guarantor shall be relieved of its obligations under this Agreement in accordance with the provisions of the Indenture. Upon termination hereof or any release of Pledged Collateral in accordance with the provisions of the Indenture, the Trustee shall, upon the request and at the sole cost and expense of the Pledgors, assign, transfer and deliver to Pledgor, against receipt and without recourse to or warranty by the Trustee, such of the Pledged Collateral to be released (in the case of a release) as may be in possession of the Trustee and as shall not have been sold or otherwise applied pursuant to the terms hereof, and, with respect to any other Pledged Collateral, proper documents and instruments (including UCC-3 termination statements or releases) acknowledging the termination hereof or the release of such Pledged Collateral, as the case may be. SECTION 11.7 Modification in Writing. No amendment, ----------------------- modification, supplement, termination or waiver of or to any provision hereof, nor consent to any departure by any Pledgor therefrom, shall be effective unless the same shall be made in accordance with the terms of the Indenture and unless in writing and signed by the Trustee. Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by any Pledgor from the terms of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement or any other document evidencing the Secured Obligations, no notice to or demand on any Pledgor in any case shall entitle any Pledgor to any other or further notice or demand in similar or other circumstances. SECTION 11.8 Notices. Unless otherwise provided herein or in ------- the Indenture, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Indenture, as to any Pledgor, addressed to it at the address of the Issuer set forth in the Indenture and as to the Trustee, addressed to it at the address set forth in the Indenture, or in each case at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 11.8. ------------ SECTION 11.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED ------------- BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. -40- SECTION 11.10 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; ---------------------------------------------- WAIVER OF JURY TRIAL. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR WITH - ------------------- RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND APPELLATE COURTS OF ANY THEREOF, AND BY EXECUTION AND DELIVERY HEREOF, EACH PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. EACH PLEDGOR AGREES THAT SERVICE OF PROCESS IN ANY PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE ISSUER AT ITS ADDRESS SET FORTH IN THE INDENTURE OR AT SUCH OTHER ADDRESS OF WHICH THE TRUSTEE SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. IF ANY AGENT APPOINTED BY ANY PLEDGOR REFUSES TO ACCEPT SERVICE, SUCH PLEDGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE TRUSTEE TO BRING PROCEEDINGS AGAINST ANY PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION. THE PLEDGORS HEREBY IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 11.11 Severability of Provisions. Any provision -------------------------- hereof which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 11.12 Execution in Counterparts. This Agreement and ------------------------- any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement. SECTION 11.13 Business Days. In the event any time period or ------------- any date provided in this Agreement ends or falls on a day other than a Business Day, then such time period shall be deemed to end and such date shall be deemed to fall on the next succeeding Business Day, and performance herein may be made on such Business Day, with the same force and effect as if made on such other day. -41- SECTION 11.14 Waiver of Stay. Each Pledgor agrees that in the event -------------- that such Pledgor or any property or assets of such Pledgor shall hereafter become the subject of a voluntary or involuntary proceeding under the Bankruptcy Code or such Pledgor shall otherwise be a party to any Federal or state bankruptcy, insolvency, moratorium or similar proceeding to which the provisions relating to the automatic stay under Section 362 of the Bankruptcy Code or any similar provision in any such law is applicable, then, in any such case, whether or not the Trustee has commenced foreclosure proceedings under this Agreement, the Trustee shall be entitled to relief from any such automatic stay as it relates to the exercise of any of the rights and remedies (including, without limitation, any foreclosure proceedings) available to the Trustee as provided in this Agreement, in any other Collateral Document or any other document evidencing the Secured Obligations. SECTION 11.15 No Credit for Payment of Taxes or Imposition. Such -------------------------------------------- Pledgor shall not be entitled to any credit against the principal, premium, if any, or interest payable under the Indenture or the Notes, and such Pledgor shall not be entitled to any credit against any other sums which may become payable under the terms thereof or hereof, by reason of the payment of any Tax on the Pledged Collateral or any part thereof. SECTION 11.16 No Claims Against Trustee. Nothing contained in this ------------------------- Agreement shall constitute any consent or request by the Trustee, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Pledged Collateral or any part thereof, nor as giving any Pledgor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the Trustee in respect thereof or any claim that any Lien based on the performance of such labor or services or the furnishing of any such materials or other property is prior to the Lien hereof. SECTION 11.17 Obligations Absolute. All obligations of each Pledgor -------------------- hereunder shall be absolute and unconditional irrespective of: (i) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of any Pledgor; (ii) any lack of validity or enforceability of the Indenture, the Notes or any other Collateral Document, or any other agreement or instrument relating thereto; (iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Indenture, the Notes or any other Collateral Document, or any other agreement or instrument relating thereto; (iv) any pledge, exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations; -42- (v) any exercise, non-exercise or waiver of any right, remedy, power or privilege under or in respect hereof, the Indenture, the Notes or any other Collateral Document except as specifically set forth in a waiver granted pursuant to the provisions of Section 11.7 hereof; or ------------ (vi) any other circumstances which might otherwise constitute a defense available to, or a discharge of, any Pledgor. SECTION 11.18 Senior Intercreditor Agreement. With respect to any ------------------------------ Credit Agreement Collateral securing the Pledgors' obligations under the Credit Agreement, the rights and remedies of the Trustee with Respect to the Credit Agreement Collateral shall be subject to the provisions of the Senior Intercreditor Agreement until such time as the Senior Intercreditor Agreement shall no longer be in effect. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Pledgors and the Trustee have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first above written. GAMECO, INC., as Pledgor By: /s/ Jeffrey P. Jacobs ---------------------------------- Name: Jeffrey P. Jacobs Title: President BH ACQUISITION, INC., as a Guarantor and a Pledgor By: /s/ Jeffrey P. Jacobs ---------------------------------- Name: Jeffrey P. Jacobs Title: President GAMECO ACQUISITION, INC., as a Guarantor and a Pledgor By: /s/ Jeffrey P. Jacobs ---------------------------------- Name: Jeffrey P. Jacobs Title: President WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: __________________________________ Name: Title: IN WITNESS WHEREOF, the Pledgors and the Trustee have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first above written. GAMECO INC., as Pledgor By: __________________________________ Name: Title: BH ACQUISTION, INC., as a Guarantor and a Pledgor By: __________________________________ Name: Title: GAMECO ACQUISITION, INC., as a Guarantor and a Pledgor By: __________________________________ Name: Title: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: /s/ Robert L. Reynolds ---------------------------------- Name: ROBERT L. REYNOLDS Title: VICE PRESIDENT SCHEDULE 1.1(a) --------------- Initial Pledged Interests ------------------------- Pledgor: Gameco, Inc. PERCENTAGE OF ALL ISSUED NUMBER CAPITAL OR OTHER TYPE OF CERTIFICATE OF EQUITY INTERESTS ISSUER INTEREST NO(S). SHARES OF ISSUER - ---------- ------------ --------------- ---------- ---------------------- [_____]% NONE Pledgor: BH Acquisition, Inc. PERCENTAGE OF ALL ISSUED NUMBER CAPITAL OR OTHER TYPE OF CERTIFICATE OF EQUITY INTERESTS ISSUER INTEREST NO(S). SHARES OF ISSUER - ---------- ------------ --------------- ---------- ---------------------- [_____]% NONE Pledgor: Gameco Acquisition, Inc. PERCENTAGE OF ALL ISSUED NUMBER CAPITAL OR OTHER TYPE OF CERTIFICATE OF EQUITY INTERESTS ISSUER INTEREST NO(S). SHARES OF ISSUER - ---------- ------------ --------------- ---------- ---------------------- [_____]% NONE Note: A separate sheet should be used for each Pledgor. SCHEDULE 1.1(b) Initial Pledged Shares ---------------------- Pledgor: Gameco, Inc.
PERCENTAGE OF ALL ISSUED NUMBER CAPITAL OR OTHER CLASS OF CERTIFICATE OF EQUITY INTERESTS ISSUER STOCK NO(S). SHARES OF ISSUER - -------------------------- ------------ --------------- ---------- ---------------------- BH Acquisition, Inc. Common 1 1,000 100% Gameco Acquisition, Inc. Common 1 1,000 100%
Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE Note: A separate sheet should be used for each Pledgor. SCHEDULE 1.1(c) --------------- Initial Intercompany Notes -------------------------- PRINCIPAL DATE OF MATURITY ISSUER AMOUNT ISSUANCE INTEREST RATE DATE - -------------- ------------- ------------ ----------------- ------------ Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE Initial Supporting Obligations ------------------------------ Not applicable SCHEDULE 1.1(d) --------------- Prior Liens ----------- FILE DEBTOR JURISDICTION SECURED PARTY NUMBER/DATE COLLATERAL - ------------ -------------- ----------------- --------------- -------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE SCHEDULE 1.1(e) --------------- Copyrights ---------- REGISTRATION/ REGISTRATION/ APPLICATION APPLICATION NO. DATE COPYRIGHTS COUNTRY DESCRIPTION - ------------------- --------------- ------------ ----------- --------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE Note: A separate sheet should be used for each Pledgor. SCHEDULE 1.1(f) Licenses NAME OF AGREEMENT PARTIES DATE OF AGREEMENT - ----------------------------- ----------------- --------------------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE Note: A separate sheet should be used for each Pledgor. SCHEDULE 1.1(g) --------------- Patents ------- Registrations: REGISTRATION REGISTRATION NUMBER DATE COUNTRY DESCRIPTION - -------------------- -------------------- --------------- ------------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE Applications: APPLICATION APPLICATION NUMBER DATE COUNTRY DESCRIPTION - -------------------- -------------------- --------------- ------------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE Note: A separate sheet should be used for each Pledgor. SCHEDULE 1.1(h) -------------- Trademarks ---------- Registrations: REGISTRATION REGISTRATION NUMBER DATE COUNTRY DESCRIPTION - --------------------- ---------------- ------------ -------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE Applications: APPLICATION APPLICATION NUMBER DATE COUNTRY DESCRIPTION - --------------------- ---------------- ------------ -------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE Note: A separate sheet should be used for each Pledgor. SCHEDULE 3.4(a) -------------- Instruments and Tangible Chattel Paper -------------------------------------- Pledgor: Gameco, Inc. Pledgor: BH Acquisition, Inc. Pledgor: Gameco Acquisition, Inc. Note: A separate sheet should be used for each Pledgor. SCHEDULE 3.4(b) -------------- Initial Deposit Accounts ------------------------ Pledgor: Gameco, Inc. Pledgor: BH Acquisition, Inc. Pledgor: Gameco Acquisition, Inc. Note: A separate sheet should be used for each Pledgor. SCHEDULE 3.4(c) -------------- Initial Securities Accounts and Commodity Accounts -------------------------------------------------- Pledgor: Gameco, Inc. Pledgor: BH Acquisition, Inc. Pledgor: Gameco Acquisition, Inc. Note: A separate sheet should be used for each Pledgor. SCHEDULE 3.4(f) --------------- Commercial Tort Claims ---------------------- Pledgor: Gameco, Inc. Pledgor: BH Acquisition, Inc. Pledgor: Gameco Acquisition, Inc. Note: A separate sheet should be used for each Pledgor. SCHEDULE 4.13 ------------- Required Consents ----------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE SCHEDULE 6.3 ------------ Violations or Proceedings ------------------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE EXHIBIT 1 ISSUER ACKNOWLEDGMENT The undersigned hereby (i) acknowledges receipt of a copy of that certain security agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Security Agreement"; capitalized terms used but ------------------ not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement), dated as of February 8, 2002, among Gameco, Inc. (the "Issuer"), the Guarantors from time to time party thereto, and WELLS FARGO BANK MINNE-SOTA, NATIONAL ASSOCIATION, as Trustee (in such capacity and together with any successors in such capacity, the "Trustee"), (ii) agrees promptly to note on ------- its books the security interests granted to the Trustee and confirmed under the Security Agreement, (iii) agrees that it will comply with instructions of the Trustee with respect to the applicable Securities Collateral without further consent by the applicable Pledgor, (iv) agrees to notify the Trustee upon obtaining knowledge of any interest in favor of any Person in the applicable Securities Collateral that is adverse to the interest of the Trustee therein and (v) waives any right or requirement at any time hereafter to receive a copy of the Security Agreement in connection with the registration of any Securities Collateral thereunder in the name of the Trustee or its nominee or the exercise of voting rights by the Trustee or its nominee. GAMECO, INC. By: _____________________________________ Name: Title: EXHIBIT 2 SECURITY AGREEMENT AMENDMENT This Security Pledge Amendment, dated as of February 8, 2002, is delivered pursuant to Section 6.1 of that certain security agreement (as ----------- amended, amended and restated, supplemented or otherwise modified from time to time, the "Security Agreement"; capitalized terms used but not otherwise defined ------------------ herein shall have the meanings assigned to such terms in the Security Agreement), dated as of February 8, 2002, among Gameco, Inc. (the "Issuer"), the undersigned, the other Guarantors from time to time party thereto and Wells Fargo Bank Minnesota, National Association, as Trustee (in such capacity and together with any successors in such capacity, the "Trustee"). The undersigned ------- hereby agrees that this Pledge Amendment may be attached to the Security Agreement and that the Pledged Securities and/or Intercompany Notes listed on this Pledge Amendment shall be deemed to be and shall become part of the Pledged Collateral and shall secure all Secured Obligations. PLEDGED SECURITIES CLASS NUMBER OF PERCENTAGE OF OF STOCK SHARES ALL ISSUED CAPITAL OR PAR CERTIFICATE OR OR OTHER EQUITY ISSUER INTERESTS VALUE NO(S). INTERESTS INTERESTS OF ISSUER - ---------- ----------- ------- ------------- ----------- --------------------- INTERCOMPANY NOTES PRINCIPAL DATE OF INTEREST MATURITY ISSUER AMOUNT ISSUANCE RATE DATE - ---------- ---------------- ---------- ---------- ----------------- [________________________________], as Pledgor By: _______________________________ Name: Title: -2- AGREED TO AND ACCEPTED: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By:________________________ Name: Title: EXHIBIT 3 [Name of New Pledgor] [Address of New Pledgor] [Date] Wells Fargo Bank Minnesota, National Association Corporate Trust Services 213 Court Street - Suite 902 Middletown, CT 06457 Ladies and Gentlemen: Reference is made to that certain security agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Security -------- Agreement"; capitalized terms used but not otherwise defined herein shall have - --------- the meanings assigned to such terms in the Security Agreement), dated as of February 8, 2002, among Gameco, Inc. (the "Issuer"), each of the Guarantors ------ listed on the signature pages thereto or from time to time party thereto by execution of a joinder agreement, and Wells Fargo Bank Minnesota, National Association, as Trustee (in such capacity and together with any successors in such capacity, the "Trustee"). ------- This letter supplements the Security Agreement and is delivered by the undersigned, ______________ (the "New Pledgor"), pursuant to ----------- Section 3.5 of the Security Agreement. The New Pledgor hereby agrees to be bound - ----------- as a Guarantor and as a Pledgor by all of the terms, covenants and conditions set forth in the Security Agreement to the same extent that it would have been bound if it had been a signatory to the Security Agreement on the execution date of the Security Agreement and without limiting the generality of the foregoing, hereby grants and pledges to the Administrative Agent, as collateral security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations, a Lien on and security interest in, all of its right, title and interest in, to and under the Pledged Collateral and expressly assumes all obligations and liabilities of a Guarantor and Pledgor thereunder. The New Pledgor hereby makes each of the representations and warranties and agrees to each of the covenants applicable to the Pledgors contained in the Security Agreement. Attached hereto are supplements to each of the schedules to the Security Agreement with respect to the New Pledgor. Such supplements shall be deemed to be part of the Security Agreement. This agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, -2- each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. -3- IN WITNESS WHEREOF, the New Pledgor has caused this letter agreement to be executed and delivered by its duly authorized officer as of the date first above written. [NEW PLEDGOR] By: _______________________ Name: Title: AGREED TO AND ACCEPTED: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: ________________________ Name: Title: [Schedules to be attached] EX-4.7 37 dex47.txt AMENDMENT TO SECURITY AGREEMENT DATED 2/22/2002 Exhibit 4.7 AMENDMENT NO.1 TO SECURITY AGREEMENT ------------------ This AMENDMENT NO.1 to SECURITY AGREEMENT, dated as of February 22, 2002 (the "Amendment"), to that certain Security Agreement dated as --------- of February 8, 2002, among GAMECO, INC., (the "Issuer"), EACH OF THE GUARANTORS ------ LISTED ON THE SIGNATURE PAGES HERETO (collectively, the "Guarantors"; together ---------- with the Issuer, the "Pledgors", and each, a "Pledgor"), in favor of WELLS -------- ------- FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, in its capacity as Trustee (in such capacity and together with any successors in such capacity, the "Trustee") under ------- the Indenture (as hereinafter defined). RECITALS: -------- A. The Pledgors and the Trustee entered into that certain security agreement dated as of February 8, 2002 (the "Original Security ----------------- Agreement"), to secure, among other things, payment and performance by the - --------- Pledgors of all the Secured Obligations (as defined in the Original Security Agreement). B. The Pledgors and the Trustee, in connection with the execution and delivery of the Original Security Agreement, entered into that certain indenture, dated as of February 8, 2000 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Indenture"), pursuant to which the Issuer issued its 11 7/8% senior secured --------- notes due 2009 (the "Senior Secured Notes") in the aggregate principal amount -------------------- of $125,000,000. It is contemplated that the Issuer may, after the date hereof, issue Additional Notes (as defined in the Indenture) and Exchange Notes (as defined in the Indenture; the Exchange Notes, together with the Additional Notes and the Senior Secured Notes, the "Notes"), in each case, pursuant to ----- the provisions of the Indenture. C. The Pledgors have, concurrently with the execution hereof, consummated the Pending Acquisitions contemplated by the Acquistion Documents (as each is defined in the Original Security Agreement). D. The Pledgors and the Trustee desire to amend the Original Security Agreement (the Original Security Agreement, as amended by this Amendment, the "Security Agreement"; capitalized terms used but not otherwise ------------------ defined herein shall have the meanings assigned to such terms in the Security Agreement) in order to, among other things, (i) reflect the consummation of the Pending Acquisitions, (ii) confirm the attachment of the Lien created by the Security Agreement on the assets of the Pledgors acquired pursuant to the Acquisition Documents and (iii) continue and confirm the prior pledge pursuant to the Original Security Agreement of the Pledged Collateral (as defined in the Original Security Agreement) as security for the payment and performance of the Secured Obligations. AGREEMENT: --------- -2- NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: SECTION 1. Each Pledgor hereby (a) confirms and continues the pledge and security interest in the Pledged Collateral granted by it pursuant to the Original Security Agreement, (b) acknowledges and agrees that the pledge and security interest in the Pledged Collateral granted by it pursuant to the Original Security Agreement shall be in favor of the Trustee and shall continue to secure the Secured Obligations, (c) represents that contemporaneously with the execution and delivery of this Amendment (i) in connection with the merger of BH Acquisition, Inc. with and into Black Hawk Gaming & Development Company, Inc., the shares BH Acquisition, Inc. are being converted into shares of Black Hawk Gaming & Development Company, Inc. and (ii) in connection with the merger of Gameco Acquisition, Inc. with and into Colonial Holdings, Inc. ("Colonial Holdings"), the shares of Gameco Acquisition, Inc. are being converted into shares of Colonial Holdings (which, as of the date hereof, constitutes a Non-Guarantor Restricted Subsidiary under the Indenture) and Gameco Acquisition, Inc. will no longer be a party to the Security Agreement. SECTION 2. Amendment --------- (a) The Original Security Agreement is hereby amended as follows: (i) Schedule 1.l(a) is hereby deleted in its entirety and -------------- Exhibit A annexed hereto is inserted in lieu thereof; - --------- (ii) Schedule 1.1(b) is hereby deleted in its entirety and --------------- Exhibit B annexed hereto is inserted in lieu thereof; - --------- (iii) Schedule 1.1(c) is hereby deleted in its entirety and --------------- Exhibit C annexed hereto is inserted in lieu thereof; - --------- (iv) Schedule 1.1(d) is hereby deleted in its entirety and ---------------- Exhibit D annexed hereto is inserted in lieu thereof; - --------- (v) Schedule 1.1(e) is hereby deleted in its entirety and --------------- Exhibit E annexed hereto is inserted in lieu thereof; - --------- (vi) Schedule 1.1(f) is hereby deleted in its entirety and ---------------- Exhibit F annexed hereto is inserted in lieu thereof; - --------- (vii) Schedule 1.1(g) is hereby deleted in its entirety and --------------- Exhibit G annexed hereto is inserted in lieu thereof; - --------- (viii) Schedule 1.1(h) is hereby deleted in its entirety and ---------------- Exhibit H annexed hereto is inserted in lieu thereof; - --------- -3- (ix) Schedule 3.4(a) is hereby deleted in its entirety and --------------- Exhibit I annexed hereto is inserted in lieu thereof; - --------- (x) Schedule 3.4(b) is hereby deleted in its entirety and --------------- Exhibit J annexed hereto is inserted in lieu thereof; - --------- (xi) Schedule 3.4(c) is hereby deleted in its entirety and --------------- Exhibit K annexed hereto is inserted in lieu thereof; - --------- (xii) Schedule 3.4(f) is hereby deleted in its entirety and --------------- Exhibit L annexed hereto is inserted in lieu thereof; - --------- (xiii) Schedule 4.l3 is hereby deleted in its entirety and ------------- Exhibit M is inserted in lieu thereof; and - --------- (xiv) Schedule 6.3 is hereby deleted in its entirety and ------------ Exhibit N annexed hereto is inserted in lieu thereof; - --------- (b) Each Pledgor hereby agrees that Pledged Securities, Intercompany Notes and other items of Pledged Collateral listed on the Exhibits to this Amendment shall be deemed to be and shall become part of the Pledged Collateral and shall secure all Secured Obligations. SECTION 3. Representations and Warranties. The Pledgors ------------------------------ hereby confirm, reaffirm and restate the representations and warranties made by it in the Original Security Agreement and all such representations and warranties are true and correct in all material respects as of the date hereof. SECTION 4. Miscellaneous. ------------- (a) This Amendment shall not constitute a consent to or waiver or modification of any other provision, term or condition of the Security Agreement. (b) All terms, provisions, covenants, representations, warranties, agreements and conditions contained in the Security Agreement shall remain in full force and effect except as expressly provided herein. (c) From and after the execution of this Amendment by the parties hereto, each reference in the Original Security Agreement to "this Agreement", "hereof", "herein", "hereby" or words of like import referring to the Security Ageement shall be deemed to be a reference to the Original Security Agreement as amended by this Amendment. (d) This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but al1 such counterparts together shall constitute but one and the same instrument. -4- (e) THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ------------------------------------------------------ ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES - ------------------------------------------------------------------------------- OF CONFLICT OF LAWS. - ------------------- IN WITNESS WHEREOF, the Pledgors and the Trustee have caused this Amendment to be duly executed and delivered by their duly authorized officers as of the date first above written. GAMECO INC., as Pledgor By: /s/ Jeffrey P. Jacobs ---------------------------------- Name: Jeffrey P. Jacobs Title: President BH ACQUISTION, INC., as a Guarantor and a Pledgor By: /s/ Jeffrey P. Jacobs ---------------------------------- Name: Jeffrey P. Jacobs Title: President GAMECO ACQUISITION, INC., as a Guarantor and a Pledgor By: /s/ Jeffrey P. Jacobs ---------------------------------- Name: Jefrrey P. Jacobs Title: President WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: ---------------------------------- Name: Title: N-1 IN WITNESS WHEREOF, the Pledgors and the Trustee have caused this Amendment to be duly executed and delivered by their duly authorized officers as of the date first above written. GAMECO, INC., as Pledgor By: __________________________________ Name: Jeffrey P. Jacobs Title: President BH ACQUISTION, INC., as a Guarantor and a Pledgor By: __________________________________ Name: Jeffrey P. Jacobs Title: President GAMECO ACQUISITION, INC., as a Guarantor and a Pledgor By: __________________________________ Name: Jeffrey P. Jacobs Title: President WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: /s/ Joseph P. O'Donnell ---------------------------------- Name: JOSEPH P. O'DONNELL Title: Corporate Trust Officer EXHIBIT A TO AMENDMENT NO. 1 --------------- SCHEDULE 1.1(a) --------------- Initial Pledged Interests ------------------------- Pledgor: Gameco, Inc. PERCENTAGE OF ALL ISSUED CAPITAL OR NUMBER OTHER EQUITY TYPE OF CERTIFICATE OF INTERESTS OF ISSUER INTEREST NO(S). SHARES ISSUER - ----------- ----------- ------------- --------- ---------------- Diversified L.L.C 5 100 100% Opportunities Group Ltd. Pledgor: BH Acquisition, Inc. PERCENTAGE OF ALL ISSUED CAPITAL OR NUMBER OTHER EQUITY TYPE OF CERTIFICATE OF INTERESTS OF ISSUER INTEREST NO(S). SHARES ISSUER - ----------- ----------- ------------- --------- ---------------- NONE Pledgor: Gameco Acquisition, Inc. PERCENTAGE OF ALL ISSUED CAPITAL OR NUMBER 0THER EQUITY TYPE OF CERTIFICATE OF INTERESTS OF ISSUER INTEREST NO(S). SHARES ISSUER - ----------- ----------- ------------- --------- --------------- NONE A-1 EXHIBIT B TO AMENDMENT NO- 1 --------------- SCHEDULE 1.1(b) Initial Pledged Shares ---------------------- Pledgor: Gameco, Inc Intercompany Notes - ------------------ PERCENTAGE OF ALL ISSUED CAPITAL OR NUMBER OTHER EQUITY CLASS OF CERTIFICATE OF INTERESTS OF ISSUER STOCK NO(s). SHARES ISSUER - -------------------- ------------ ----------- ----------- --------------- Black Hawk Gaming & Common 2 1,000 100% Development Company, Inc. Jalou II Inc. Common 3 1,000 100% Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE B-1 EXHIBIT C TO AMENDMENT NO. 1 --------------- SCHEDULE 1.1(c) --------------- Initial Intercompany Notes and Supporting Obligations ----------------------------------------------------- Pledgor: Gameco, Inc. Intercompany Notes - ------------------
PRINCIPAL DATE 0F MATURITY ISSUER AMOUNT ISSUANCE INTEREST RATE DATE - -------------------- ------------- ---------------- --------------- --------------- Colonial Holdings, $ 5,700,000 February 22, 2002 9.96% February 1, 2009 Inc. Colonial Downs, L.P. $10,000,000 February 22, 2002 9.96% February 1, 2009
Supporting Obligations - ---------------------- Amended and Restated Term Notes by and between Colonial Holdings, Inc. and Gameco, Inc. dated as of February 22, 2002. Amended and Restated Term Notes by and between Colonial Downs, LP and Gameco, Inc. dated as of February 22, 2002. Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE C-1 EXHIBIT D TO AMENDMENT NO.1 -------------- SCHEDULE 1.1(d) --------------- Prior Liens ----------- FILE DEBTOR JURISDICTION SECURED PARTY NUMBER/DATE COLLATERAL - --------- --------------- --------------- ------------- ------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE D-1 EXHIBIT E TO AMENDMENT NO. 1 --------------- SCHEDULE 1.1(e) --------------- Copyrights ---------- REGISTRATION/ REGISTRATION/ APPLICATION APPLICATION NO. DATE COPYRIGHTS COUNTRY DESCRIPTION - --------------- ------------- ---------- ------- ----------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE E-1 EXHIBIT F TO AMENDMENT NO. 1 --------------- SCHEDULE 1.1(f) --------------- Licenses -------- NAME OF AGREEMENT PARTIES DATE OF AGREEMENT - ----------------- ------- ----------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE F-1 EXHIBIT G TO AMENDMENT NO. 1 --------------- SCHEDULE 1.1(g) --------------- Patents ------- Registrations: REGISTRATION REGISTRATION NUMBER DATE COUNTRY DESCRIPTION ------------ ------------ ------- ----------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE Applications: APPLICATION APPLICATION NUMBER DATE COUNTRY DESCRIPTION ----------- ----------- ------- ----------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE G-1 EXHIBIT H TO AMENDMENT NO. 1 --------------- SCHEDULE 1.1(h) --------------- Trademarks ---------- Registrations: REGISTRATION REGISTRATION NUMBER DATE COUNTRY DESCRIPTION - -------------- ------------ ------- ----------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE Applications: APPLICATION APPLICATION NUMBER DATE COUNTRY DESCRIPTION - ------------- ------------ ------- ----------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE H-1 EXHIBIT I TO AMENDMENT NO. 1 --------------- SCHEDULE 3.4(a) --------------- Instruments and Tangible Chattel Paper -------------------------------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE I-1 EXHIBIT J TO AMENDMENT NO. 1 --------------- SCHEDULE 3.4(b) --------------- Initial Deposit Accounts ------------------------ Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE J-1 EXHIBIT K TO AMENDMENT NO. 1 --------------- SCHEDULE 3.4(c) --------------- Initial Securities Accounts and Commodity Accounts -------------------------------------------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE K-1 EXHIBIT L TO AMENDMENT NO. 1 --------------- SCHEDULE 3.4(f) --------------- Commercial Tort Claims ---------------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE L-1 EXHIBIT M TO AMENDMENT NO. 1 --------------- SCHEDULE 4.13 ------------- Required Consents ----------------- Pledgor: Gameco, Inc. NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE M-1 EXHIBIT N TO AMENDMENT NO. 1 --------------- SCHEDULE 6.3 ------------ Violations or Proceedings ------------------------- Pledgor: Gameco, Inc NONE Pledgor: BH Acquisition, Inc. NONE Pledgor: Gameco Acquisition, Inc. NONE N-1 EX-4.8 38 dex48.txt JOINDER AGREEMENT DATED 2/22/2002 Exhibit 4.8 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. 240 Main Street Black Hawk, Colorado 80422 February 22, 2002 Wells Fargo Bank Minnesota, National Association Corporate Trust Services 213 Court Street - Suite 902 Middletown, CT 06457 Ladies and Gentlemen: Reference is made to that certain security agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Security Agreement"; capitalized terms used but not otherwise defined herein ------------------ shall have the meanings assigned to such terms in the Security Agreement), dated as of February 8, 2002, among Gameco, Inc. (the "Issuer"), each of the ------ Guarantors listed on the signature pages thereto or from time to time party thereto by execution of a joinder agreement, and Wells Fargo Bank Minnesota, National Association, as Trustee (in such capacity and together with any successors in such capacity, the "Trustee"). ------- This letter supplements the Security Agreement and is delivered by the undersigned, BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC., a Colorado corporation (the "New Pledgor"), pursuant to Section 3.5 of the Security --- ------- ----------- Agreement. The New Pledgor hereby agrees to be bound as a Guarantor and as a Pledgor by all of the terms, covenants and conditions set forth in the Security Agreement to the same extent that it would have been bound if it had been a signatory to the Security Agreement on the execution date of the Security Agreement and without limiting the generality of the foregoing, hereby grants and pledges to the Trustee, for its benefit and for the benefit of the Secured Parties, as collateral security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations, a Lien on and security interest in, all of its right, title and interest in, to and under the Pledged Collateral and expressly assumes all obligations and liabilities of a Guarantor and Pledgor thereunder. The New Pledgor hereby makes each of the representations and warranties and agrees to each of the covenants applicable to the Pledgors contained in the Security Agreement. Attached hereto are supplements to each of the schedules to the Security Agreement with respect to the New Pledgor. Such supplements shall be deemed to be part of the Security Agreement. This agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the New Pledgor has caused this letter agreement to be executed and delivered by its duly authorized officer as of the date first above written. BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. /s/ Stephen R. Roark By: ___________________________________ Name: Stephen R. Roark Title: President AGREED TO AND ACCEPTED: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee /s/ Joseph P. O'Donnell By: ________________________________ Name: Joseph P. O'Donnell Title: Corporate Trust Officer Schedule to Exhibit 4.8 ----------------------- Omitted Documents ----------------- Document Party - -------- ----- Joinder Agreement Gold Dust West Casino, Inc. Joinder Agreement Black Hawk/Jacobs Entertainment, LLC Joinder Agreement Gilpin Hotel Venture Joinder Agreement Gilpin Ventures, Inc. Joinder Agreement Jalou II Inc. Joinder Agreement Winner's Choice Casino, Inc. Joinder Agreement Diversified Opportunities Group Ltd. Joinder Agreement Jalou L.L.C. Joinder Agreement Houma Truck Plaza & Casino, L.L.C. Joinder Agreement Jalou-Cash's L.L.C. Joinder Agreement JACE, Inc. Joinder Agreement Lucky Magnolia Truck Stop and Casino L.L.C. Joinder Agreement Bayou Vista Truck Plaza and Casino, L.L.C. Joinder Agreement Raceland Truck Plaza and Casino, L.L.C. EX-4.9 39 dex49.txt GUARANTY OF EACH GUARANTOR DATED 2/22/2002 Exhibit 4.9 SUBSIDIARY GUARANTEE The Subsidiary Guarantors listed below (hereinafter referred to as the "Subsidiary Guarantors," which term includes any successors or assigns under the Indenture and any additional Subsidiary Guarantors), have irrevocably and unconditionally guaranteed the Guarantee Obligations, which include that: (a) the principal of, and premium and interest and Additional Interest, if any, on the 11 7/8% Senior Secured Notes due 2009 (the "Notes") of Gameco, Inc. (the "Company"), shall be duly and punctually paid in full when due, whether at maturity, by acceleration or otherwise, and interest on overdue principal, and premium, if any, and (to the extent permitted by law) interest on any interest, if any, on the Notes and all other Obligations of the Company to the Holders or the Trustee hereunder or under the Notes or under the Collateral Documents (including fees, expenses or other) shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The Obligations of each Subsidiary Guarantor to the Holders and to the Trustee pursuant to this Subsidiary Guarantee and this Indenture are expressly set forth in Article 12 of the Indenture and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guarantee. The Obligations are secured by a pledge of the Collateral pursuant to Articles 10 and 11 of the Indenture and the Collateral Documents. No stockholder, officer, director or incorporator, as such, past, present or future of each Subsidiary Guarantor shall have any liability under this Subsidiary Guarantee by reason of his or its status as such stockholder, officer, director or incorporator. Except as set forth in the Indenture, this is a continuing Guarantee and shall remain in full force and effect and shall be binding upon each Subsidiary Guarantor and its successors and assigns until full and final payment of all of the Company's Obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders, and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Guarantee of payment and not of collectibility. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. The Obligations of each Subsidiary Guarantor under its Subsidiary Guarantee shall be limited to the extent necessary to insure that it does not constitute a fraudulent conveyance under applicable law. THE TERMS OF ARTICLE 12 OF THE INDENTURE ARE INCORPORATED HEREIN BY REFERENCE. 1 Capitalized terms used herein have the same meanings given in this Indenture unless otherwise indicated. Dated as of February 22, 2002 BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. By: /s/ Stephen R. Roark -------------------------------- Name: Stephen R. Roark Title: President Schedule to Exhibit 4.9 ----------------------- Omitted Documents ----------------- Document Party - -------- ----- Subsidiary Guarantee Gold Dust West Casino, Inc. Subsidiary Guarantee Black Hawk/Jacobs Entertainment, LLC Subsidiary Guarantee Gilpin Hotel Venture Subsidiary Guarantee Gilpin Ventures, Inc. Subsidiary Guarantee Jalou II Inc. Subsidiary Guarantee Winner's Choice Casino, Inc. Subsidiary Guarantee Diversified Opportunities Group Ltd. Subsidiary Guarantee Jalou L.L.C. Subsidiary Guarantee Houma Truck Plaza & Casino, L.L.C. Subsidiary Guarantee Jalou-Cash's L.L.C. Subsidiary Guarantee JACE, Inc. Subsidiary Guarantee Lucky Magnolia Truck Stop and Casino L.L.C. Subsidiary Guarantee Bayou Vista Truck Plaza and Casino, L.L.C. Subsidiary Guarantee Raceland Truck Plaza and Casino, L.L.C. EX-4.10 40 dex410.txt FEE AND LEASEHOLD DEED OF TRUST-BLACK HAWK Exhibit 4.10 ================================================================================ FEE AND LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING BY BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC. BLACK HAWK/JACOBS ENTERTAINMENT, LLC, AND GILPIN HOTEL VENTURE, as Grantors TO THE PUBLIC TRUSTEE OF GILPIN COUNTY, STATE OF COLORADO as Trustee for the benefit of WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Beneficiary Securing Principal Indebtedness of $125,000,000; Dated as of February 22, 2002 Relating to Premises in: Gilpin County, Colorado ================================================================================ After recording, please return to: Athy A. Mobilia, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 ________________ TABLE OF CONTENTS
Page ---- PREAMBLE............................................................... 1 RECITALS............................................................... 1 AGREEMENT.............................................................. 2 ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions............................................... 2 SECTION 1.2 Interpretation............................................ 9 SECTION 1.3 Resolution of Drafting Ambiguities........................ 9 ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Mortgaged Property............................... 9 SECTION 2.2 Assignment of Leases and Rents............................ 10 SECTION 2.3 Secured Obligations....................................... 11 SECTION 2.4 Future Advances........................................... 11 SECTION 2.5 No Release................................................ 11 ARTICLE III REPRESENTATIONS AND WARRANTIES OF GRANTORS SECTION 3.1 Authority and Validity.................................... 12 SECTION 3.2 Warranty of Title......................................... 12 SECTION 3.3 Condition of Mortgaged Property........................... 13 SECTION 3.4 Leases.................................................... 14 SECTION 3.5 Insurance................................................. 15 SECTION 3.6 Charges................................................... 15 SECTION 3.7 Environmental............................................. 16 SECTION 3.8 No Conflicts, Consents, etc............................... 16 SECTION 3.9 Benefit to the Grantors................................... 17
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Page ---- ARTICLE IV CERTAIN COVENANTS OF GRANTORS SECTION 4.1 Preservation of Corporate Existence.................................. 17 SECTION 4.2 Title................................................................ 17 SECTION 4.3 Maintenance and Use of Mortgaged Property; Alterations............... 18 SECTION 4.4 Notices Regarding Certain Defaults................................... 19 SECTION 4.5 Access to Mortgaged Property, Books and Records; Other Information... 19 SECTION 4.6 Limitation on Liens; Transfer Restrictions........................... 19 SECTION 4.7 Environmental........................................................ 20 SECTION 4.8 Estoppel Certificates................................................ 21 ARTICLE V LEASES SECTION 5.1 Grantors' Affirmative Covenants with Respect to Leases............... 21 SECTION 5.2 Grantors' Negative Covenants with Respect to Leases.................. 22 SECTION 5.3 Additional Requirements with Respect to New Leases................... 22 ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Grantors.......................... 23 SECTION 6.2 Collection of Rents by the Beneficiary............................... 23 SECTION 6.3 No Release........................................................... 23 SECTION 6.4 Irrevocable Interest................................................. 24 SECTION 6.5 Amendment to Leases.................................................. 24 ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges................................................... 24 SECTION 7.2 Escrow of Taxes...................................................... 24 SECTION 7.3 Certain Statutory Liens.............................................. 24 SECTION 7.4 Stamp and Other Taxes................................................ 25 SECTION 7.5 Certain Tax Law Changes.............................................. 25 SECTION 7.6 Proceeds of Tax Claim................................................ 25 ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages............................ 25
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Page ---- SECTION 8.2 Delivery After Foreclosure................................................ 25 ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens........................... 26 SECTION 9.2 Contesting of Insurance................................................... 26 ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction............................................................... 26 SECTION 10.2 Condemnation.............................................................. 26 ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default......................................................... 27 SECTION 11.2 Remedies in Case of an Event of Default................................... 27 SECTION 11.3 Sale of Mortgaged Property if Event of Default Occurs; Proceeds of Sale................................................................... 28 SECTION 11.4 Additional Remedies in Case of an Event of Default........................ 29 SECTION 11.5 Legal Proceedings After an Event of Default............................... 30 SECTION 11.6 Remedies Not Exclusive.................................................... 30 SECTION 11.7 Sale of Mortgaged Leases.................................................. 31 ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement........................................................ 31 SECTION 12.2 Fixture Filing............................................................ 31 ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security................................ 32 SECTION 13.2 Further Acts.............................................................. 32 SECTION 13.3 Additional Security....................................................... 33
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Page ---- ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Owned Premises and Leased Premises......... 33 SECTION 14.2 No Merger............................................................ 33 SECTION 14.3 Concerning Beneficiary and Trustee................................... 33 SECTION 14.4 Beneficiary May Perform; Beneficiary Appointed Attorney-in-Fact...... 34 SECTION 14.5 Expenses............................................................. 35 SECTION 14.6 Indemnity............................................................ 35 SECTION 14.7 Continuing Security Interest; Assignment............................. 36 SECTION 14.8 Termination; Release................................................. 36 SECTION 14.9 Modification in Writing.............................................. 36 SECTION 14.10 Notices.............................................................. 36 SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL............................................................ 36 SECTION 14.12 Severability of Provisions........................................... 37 SECTION 14.13 Limitation on Interest Payable....................................... 37 SECTION 14.14 Business Days........................................................ 37 SECTION 14.15 Relationship......................................................... 37 SECTION 14.16 Waiver of Stay....................................................... 38 SECTION 14.17 No Credit for Payment of Taxes or Impositions........................ 38 SECTION 14.18 No Claims Against the Beneficiary.................................... 38 SECTION 14.19 Obligations Absolute................................................. 38 SECTION 14.20 Last Dollars Secured................................................. 39 SECTION 14.21 Trustee Provisions................................................... 39 SECTION 14.22 Mortgaged Leases..................................................... 39 SECTION 14.23 Senior Intercreditor Agreement....................................... 40 SECTION 14.24 Subordination, Non-Disturbance and Attornment........................ 40
SIGNATURE ACKNOWLEDGMENT SCHEDULE A Legal Description SCHEDULE B Mortgaged Leases SCHEDULE C Prior Liens SCHEDULE D Leases EXHIBIT 1 Form of Subordination, Non-Disturbance and Attornment Agreement -iv- FEE AND LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING FEE AND LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Deed of Trust"), dated as of February ------------- 22, 2002, made by BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC., a Colorado corporation, having an office at 240 Main Street, Black Hawk, Colorado 80422 ("Black Hawk"), BLACK HAWK/JACOBS ENTERTAINMENT, LLC, a Colorado limited ---------- liability corporation, having an office at 240 Main Street, Black Hawk, Colorado 80422 ("Black Hawk/Jacobs") and GILPIN HOTEL VENTURE, a Colorado joint venture, ----------------- having an office at 240 Main Street, Black Hawk, Colorado 80422 ("Gilpin"), each ------ as a grantor, assignor and debtor (Black Hawk, Black Hawk/Jacobs and Gilpin, collectively in such capacities and together with any successors in such capacities, the "Grantors" and each a "Grantor"), in favor of The Public Trustee -------- of Gilpin County, State of Colorado, having an address at 203 Eureka Street, P.O. Box 358, Central City, Colorado 80427, as trustee (together with any successors in such capacity, the "Trustee") for the benefit of WELLS FARGO BANK ------- MINNESOTA, NATIONAL ASSOCIATION, a national banking association having an office at 213 Court Street, Suite 902, Middletown, CT 06457, in its capacity as trustee pursuant to the Indenture (as hereinafter defined), as beneficiary, assignee and secured party (in such capacities and together with any successors in such capacities, the "Beneficiary"). ------------ R E C I T A L S : - - - - - - - - A. Gameco, Inc. (the "Issuer"), certain of its Subsidiaries (as ------ hereinafter defined), the Grantors and the Beneficiary have, in connection with the execution and delivery of this Deed of Trust, entered into that certain indenture, dated as of February 8, 2002 (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Indenture"), --------- pursuant to which the Issuer has issued its 11 7/8% senior secured notes due 2009 (the "Senior Secured Notes") in the aggregate principal amount of -------------------- $125,000,000. It is contemplated that the Issuer may, after the date hereof, issue Additional Notes (as defined in the Indenture) and Exchange Notes (as defined in the Indenture); the Exchange Notes, together with the Additional Notes and the Senior Secured Notes, the "Notes"), in each case, pursuant to the ----- provisions of the Indenture. B. The Issuer owns, directly or through its Subsidiaries, all of the issued and outstanding shares of each Grantor. C. Each Grantor has, pursuant to the Indenture, among other things, unconditionally guaranteed (the "Guarantee") the obligations of the Issuer under --------- the Indenture and the Notes. D. Each Grantor will receive substantial benefits from the execution and delivery of, and the performance of the obligations under, the Indenture and the Notes, and is therefore willing to enter into this Deed of Trust. E. Black Hawk and Black Hawk/Jacobs are or will be the legal owners of the Mortgaged Property (as hereinafter defined) pledged by it hereunder. -2- F. Gilpin is the legal owner and holder of the tenant's interest under those certain leases described in Schedule B annexed hereto (as such leases may ---------- be amended from time to time in accordance with the provisions of this Deed of Trust, the "Mortgaged Leases"; each, a "Mortgaged Lease"), which affect the Leased Land (as hereinafter defined). A memorandum of lease relating to each Mortgaged Lease was recorded in the real property records of Gilpin County, as set forth in Schedule B annexed hereto. ---------- G. This Deed of Trust is given by each Grantor to the Trustee for the benefit of the Beneficiary and for the benefit of the Holders of the Notes (collectively, the "Secured Parties") to secure the payment and performance of --------------- all of the Secured Obligations (as hereinafter defined). A G R E E M E N T: - - - - - - - - - NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor hereby covenants and agrees for the benefit of the Beneficiary and the other Secured Parties as follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions. Capitalized terms used but not otherwise ----------- defined herein shall have the meanings assigned to such terms in the Indenture. The following terms used in this Deed of Trust shall have the following meanings: "ACM" shall have the meaning assigned to such term in Section 4.7(ii) --- --------------- hereof. "Affiliate" shall have the meaning assigned to such term in the --------- Indenture. "Alteration" shall mean any and all alterations, installations, ---------- improvements, additions, modifications or changes of a structural nature of or to the Owned Premises or the Leased Premises. "Beneficiary" shall have the meanings assigned to such term in the ----------- Preamble hereof. "Business Day" shall have the meaning assigned to such term in the ------------ Indenture. "Charges" shall mean any and all real estate, property and other ------- taxes, assessments and special assessments, levies, fees, all water and sewer rents and charges and all other governmental charges or Liens imposed upon or assessed against, and all claims (including, without limitation, landlords', carriers', mechanics', workmen's, repairmen's, laborers', materialmen's, suppliers' and warehousemen's Liens and other claims arising by operation of law) against, all or any portion of the Mortgaged Property. "Collateral Account" shall have the meaning assigned to such term in ------------------ the Indenture. "Collateral Documents" shall have the meaning assigned to such term in -------------------- the Indenture. -3- "Contested Liens" shall mean, collectively, any Liens incurred in --------------- respect of any Charges to the extent that the amounts owing in respect thereof are not yet delinquent or are being contested and otherwise comply with the provisions of Section 9.1 hereof. ----------- "Contracts" shall mean, collectively, any and all right, title and --------- interest of each Grantor in and to any and all contracts and other general intangibles relating to the Mortgaged Property (including, without limitation, all reciprocal easements and/or operating agreements, covenants, conditions and restrictions and similar agreements affecting all or any portion of the Mortgaged Property) and all reserves, deferred payments, deposits, refunds and claims of every kind, nature or character relating thereto. "Credit Agreement" shall have the meaning assigned to such term in the ---------------- Indenture. "Credit Agreement Collateral" shall have the meaning assigned to such --------------------------- term in the Indenture. "Deed of Trust" shall have the meaning assigned to such term in the ------------- Preamble hereof. "Default Rate" shall mean the rate per annum equal to the highest rate ------------ then payable under the Indenture. "Destruction" shall mean any and all damage to, or loss or destruction ----------- of, the Owned Premises or Leased Premises or any part thereof. "Environmental Law" shall mean any applicable federal, state, local or ----------------- municipal statute, law, rule, regulation, ordinance, code, policy or rule of common law and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment binding on each Grantor, relating to pollution or protection of the environment, or health or safety including, without limitation, any relating to the release or threatened release of any Hazardous Materials. "Event of Default" shall have the meaning assigned to such term in the ---------------- Indenture. "Fixture" shall mean (1) all machinery, apparatus, equipment, ------- fittings, fixtures, improvements and articles of personal property of every kind, description and nature whatsoever now or hereafter attached or affixed to the Owned Land or any other Improvement or used in connection with the use and enjoyment of the Owned Land or any other Improvement or the maintenance or preservation thereof, which by the nature of their location thereon or attachment thereto are fixtures under the UCC or any other applicable law including, without limitation, all utility systems, fire sprinkler and security systems, drainage facilities, lighting facilities, all water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone and other utility equipment and facilities, pipes, fittings and other items of every kind and description now or hereafter attached to or located on the Owned Land which by the nature of their location thereon or attachment thereto are real property under applicable law, HVAC equipment, boilers, electronic data processing, telecommunications or computer equipment, refrigeration, electronic monitoring, water or lighting systems, power, sanitation, waste removal, elevators, maintenance or other systems or equipment and all additions thereto and betterments, renewals, substitutions and replacements thereof and (2) all of the Gilpin's estate, right, title and interest in, to and under all machinery, apparatus, equipment, fittings, fixtures, improvements and articles of personal property of every kind, description and nature whatsoever now or hereafter attached or affixed to the Leased Land or any other Improvement or used in connection -4- with the use and enjoyment of the Leased Land or any other Improvement or the maintenance or preservation thereof, which by the nature of their location thereon or attachment thereto are fixtures under the UCC or any other applicable law including, without limitation, all utility systems, fire sprinkler and security systems, drainage facilities, lighting facilities, all water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone and other utility equipment and facilities, pipes, fittings and other items of every kind and description now or hereafter attached to or located on the Leased Land which by the nature of their location thereon or attachment thereto are real property under applicable law, HVAC equipment, boilers, electronic data processing, telecommunications or computer equipment, refrigeration, electronic monitoring, water or lighting systems, power, sanitation, waste removal, elevators, maintenance or other systems or equipment and all additions thereto and betterments, renewals, substitutions and replacements thereof to the extent of the Gilpin's estate, right, title and interest therein. "GAAP" shall have the meaning assigned to such term in the Indenture. ---- "Governmental Authority" shall mean any federal, state, local, foreign ---------------------- or other governmental, quasi-governmental or administrative (including self-regulatory) body, instrumentality, department, agency, authority, board, bureau, commission, office of any nature whatsoever or other subdivision thereof, or any court, tribunal, administrative hearing body, arbitration panel or other similar dispute-resolving body, whether now or hereafter in existence, or any officer or official thereof, having jurisdiction over the Grantors or the Mortgaged Property or any portion thereof. "Grantors" shall have the meaning assigned to such term in the -------- Preamble hereof. "Grantor's Interest" shall have the meaning assigned to such term in ------------------ Section 2.2 hereof. "Guarantee" shall have the meaning assigned to such term in Recital C --------- --------- hereof. "Guarantors" shall have the meaning assigned to such term in the ---------- Indenture. "Hazardous Materials" shall mean any substance, chemical, material, ------------------- pollutant, waste, contaminant or constituent, which is subject to regulation under or could give rise to liability under any Environmental Law. "Holder" shall have the meaning assigned to such term in the ------ Indenture. "Improvements" shall mean (1) all buildings, structures and other ------------ improvements of every kind or description and any and all Alterations now or hereafter located, attached or erected on the Owned Land including, without limitation (i) all Fixtures of the type described in clause (1) of the definition thereof, (ii) all attachments, railroad tracks, foundations, sidewalks, drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer rights, parking areas, driveways, fences and walls and (iii) all materials now or hereafter located on the Owned Land intended for the construction, reconstruction, repair, replacement, alteration, addition or improvement of or to such buildings, Fixtures of the type described in clause (1) of the definition thereof, structures and improvements, all of which materials shall be deemed to be part of the Improvements immediately upon delivery thereof on the Owned Land and to be part of the improvements immediately upon their incorporation therein; and (2) all of the Gilpin's estate, right, title and interest in, to and under all buildings, structures and other improvements of every kind or description and any and all Alterations now or hereafter located, attached or erected on the Leased Land including, -5- without limitation (i) all Fixtures of the type described in clause (2) of the definition thereof, (ii) all attachments, railroad tracks, foundations, sidewalks, drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer rights, parking areas, driveways, fences and walls and (iii) all materials now or hereafter located on the Leased Land intended for the construction, reconstruction, repair, replacement, alteration, addition or improvement of or to such buildings, Fixtures of the type described in clause (2) of the definition thereof, structures and improvements, all of which materials shall be deemed to be part of the Improvements immediately upon delivery thereof on the Leased Land and to be part of the improvements immediately upon their incorporation therein to the extent of Gilpin's estate, right, title and interest therein. "Indemnified Liabilities" shall have the meaning assigned to such term ----------------------- in Section 14.6(i) hereof. --------------- "Indemnitees" shall have the meaning assigned to such term in Section ----------- ------- 14.6(i) hereof. - ------- "Indenture" shall have the meaning assigned to such term in Recital A --------- --------- hereof. "Insurance Policies" means the insurance policies and coverages ------------------ required to be maintained by each Grantor with respect to the Mortgaged Property pursuant to Section 4.19(b) of the Indenture and all renewals and extensions thereof. "Insurance Requirements" means, collectively, all provisions of the ---------------------- Insurance Policies, all requirements of the issuer of any of the Insurance Policies and all orders, rules, regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon any Grantor and applicable to the Mortgaged Property or any use or condition thereof. "Issuer" shall have the meaning assigned to such term in Recital A ------ --------- hereof. "Landlord" shall mean any landlord, sublandlord, lessor, sublessor, -------- franchisor, licensor or grantor, as applicable. "Leased Land" shall mean, in the case of Gilpin, the land described in ----------- Schedule A annexed hereto as Parcels 1, 2, 3, 4 and 5 and any and all easements, - ---------- rights-of-way, strips and gores of land, waters, water courses, water rights, mineral, gas and oil rights and all power, air, light and other rights, estates, titles, interests, privileges, liberties, servitudes, licenses, tenements, hereditaments and appurtenances whatsoever, in any way demised under the Mortgaged Leases or belonging, relating or appertaining thereto, or any part thereof, or which hereafter shall in any way be demised under the Mortgaged Leases or belong, relate or be appurtenant thereto. "Leased Premises" shall mean, collectively, (1) the lessee's interest --------------- and estate in the Mortgaged Leases and all recorded or unrecorded extensions, amendments, supplements and restatements thereof, and (2) all right, title and interest of the lessee under the Mortgaged Leases in and to (i) the Leased Land and (ii) Improvements of the type described in clause (2) of the definition thereof. "Leases" shall mean, collectively, any and all interests of each ------ Grantor, as Landlord, in all leases and subleases of space, tenancies, franchise agreements, licenses, occupancy, rental, access or concession agreements and any other agreements pursuant to which any Person is granted a possessory interest in or right to use or occupy all or any portion of the Mortgaged Property, in each case whether -6- now existing or hereafter entered into, whether or not of record, relating in any manner to the Owned Premises or Leased Premises or the use or occupancy thereof and any and all amendments, modifications, supplements, replacements, extensions, renewals and/or guarantees, if any thereof, whether now in effect or hereafter coming into effect. "Lessor" shall mean each of Black Hawk and Black Hawk/Jacobs, in its ------ capacity as lessor under the applicable Mortgaged Lease. "Lien" shall have the meaning assigned to such term in the Indenture. ---- "Mortgaged Leases" shall have the meaning assigned to such Term in ---------------- Recital F hereof. - --------- "Mortgaged Property" shall have the meaning assigned to such term in ------------------ Section 2.1 hereof. - ----------- "Net Loss Proceeds" shall have the meaning assigned to such term in ----------------- the Indenture. "Net Proceeds" shall have the meaning assigned to such term in the Indenture. "Notes" shall have the meaning assigned to such term in Recital A --------- hereof. "Officers' Certificate" shall have the meaning assigned to such term --------------------- in the Indenture. "Owned Land" shall mean (i) in the case of Black Hawk, the land ---------- described in Schedule A annexed hereto as Parcels 1, 2, 3, 4 and 5 and (ii) in ---------- the case of Black Hawk/Jacobs, the land described in Schedule A annexed hereto ---------- as Parcel 6, in each case together with Black Hawk's or Black Hawk/Jacobs's, as the case may be, reversionary rights therein and each of the Grantors' rights in and to any and all easements, rights-of-way, strips and gores of land, waters, water courses, water rights, mineral, gas and oil rights and all power, air, light and other rights, estates, titles, interests, privileges, liberties, servitudes, licenses, tenements, hereditaments and appurtenances whatsoever, in any way belonging, relating or appertaining thereto, or any part thereof, or which hereafter shall in any way belong, relate or be appurtenant thereto. "Owned Premises" shall mean, collectively, (i) the Owned Land and (ii) -------------- Improvements of the type described in clause (1) of the definition thereof. "Permit" shall mean any and all permits, certificates, approvals, ------ authorizations, consents, licenses, variances, franchises or other instruments, however characterized, of any Governmental Authority (or any Person acting on behalf of a Governmental Authority) now or hereafter acquired or held, together with all amendments, modifications, extensions, renewals and replacements of any thereof issued or in any way furnished in connection with the Mortgaged Property including, without limitation, building permits, certificates of occupancy, environmental certificates, industrial permits or licenses and certificates of operation. "Permitted Collateral Liens" shall have the meaning assigned to such -------------------------- term in Section 4.6 hereof. ----------- -7- "Permitted Liens" shall have the meaning assigned to such term in the --------------- Indenture. "Person" shall have the meaning assigned to such term in the ------ Indenture. "Prior Liens" shall mean, collectively, the Liens identified in ----------- Schedule C annexed to this Deed of Trust. - ---------- "Proceeds" shall mean, collectively, any and all cash proceeds and -------- noncash proceeds and shall include, without limitation, all (i) proceeds of the conversion, voluntary or involuntary, of any of the Mortgaged Property or any portion thereof into cash or liquidated claims, (ii) proceeds of any insurance (except payments made to a Person, other than the Issuer or any Subsidiary thereof, that is not a party to this Deed of Trust), indemnity, warranty, guaranty or claim payable to the Beneficiary or to any Grantor from time to time with respect to any of the Mortgaged Property including, without limitation, all Net Loss Proceeds relating thereto, (iii) payments (in any form whatsoever) made or due and payable to any Grantor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any portion of the Mortgaged Property by any Governmental Authority (or any Person acting on behalf of a Governmental Authority) including, without limitation, all Net Loss Proceeds relating thereto, (iv) products of the Mortgaged Property and (v) other amounts from time to time paid or payable under or in connection with any of the Mortgaged Property including, without limitation, refunds of real estate taxes and assessments, including interest thereon. "Property Material Adverse Effect" shall mean, as of any date of -------------------------------- determination and whether individually or in the aggregate (a) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the business or operations as presently conducted at the Mortgaged Property; (b) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the value or utility of the Mortgaged Property; and (c) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the legality, priority or enforceability of the Lien created by this Deed of Trust or the rights and remedies of the Beneficiary or Trustee hereunder. "Prudent Operator" shall mean the standard of care taken by a prudent ---------------- operator of property similar in use and configuration to the Owned Premises or Leased Premises, as the case may be, and located in the locality where the Owned Premises or Leased Premises, as the case may be, are located. "Records" shall mean, collectively, any and all right, title and ------- interest of each Grantor in and to any and all drawings, plans, specifications, file materials, operating and maintenance records, catalogues, tenant lists, correspondence, advertising materials, operating manuals, warranties, guarantees, appraisals, studies and data relating to the Mortgaged Property or the construction of any Alteration or the maintenance of any Permit. "Rents" shall mean, collectively, any and all rents, additional rents, ----- royalties, issues, cash, guaranties, letters of credit, bonds, sureties or securities deposited under any Lease to secure performance of the Tenant's obligations thereunder, revenues, earnings, profits and income, advance rental payments, payments incident to assignment, sublease or surrender of a Lease, claims for forfeited deposits and claims for damages, now due or hereafter to become due, with respect to any Lease, any indemnification against, -8- or reimbursement for, sums paid and costs and expenses incurred by each Grantor under any Lease or otherwise, and any award in the event of the bankruptcy of any Tenant under or guarantor of a Lease. "Requirements of Law" shall mean, collectively, any and all ------------------- requirements of any Governmental Authority including, without limitation, any and all orders, decrees, determinations, laws, treaties, ordinances, rules, regulations or similar statutes or case law. "Secured Obligations" shall mean all obligations (whether or not ------------------- constituting future advances, obligatory or otherwise) of the Issuer and any and all of the Guarantors from time to time arising under or in respect of this Deed of Trust, the Indenture, the Notes and the other Collateral Documents (including, without limitation, the obligations to pay principal, interest and all other charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Deed of Trust, the Indenture, the Notes and the other Collateral Documents), in each case whether (i) such obligations are direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due whether at stated maturity, by acceleration or otherwise, (ii) arising in the regular course of business or otherwise, (iii) for payment or performance and/or (iv) now existing or hereafter arising (including, without limitation, interest and other obligations arising or accruing after the commencement of any bankruptcy, insolvency, reorganization or similar proceeding with respect to the Issuer, any Guarantor or any other Person, or which would have arisen or accrued but for the commencement of such proceeding, even if such obligation or the claim therefor is not enforceable or allowable in such proceeding). "Secured Parties" shall have the meaning assigned to such term in --------------- Recital G hereof. - --------- "Senior Intercreditor Agreement" shall have the meaning assigned to ------------------------------ such term in the Indenture. "Senior Secured Notes" shall have the meaning assigned to such term in -------------------- Recital A hereof. - --------- "Subordination Agreement" shall mean a subordination, nondisturbance ----------------------- and attornment agreement substantially in the form of Exhibit 1 annexed to this --------- Deed of Trust. "Subsidiaries" shall have the meaning assigned to such term in the ------------ Indenture. "Taking" shall mean any taking of the Mortgaged Property or any part ------ thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, general or special, or by reason of the temporary requisition of the use or occupancy of the Mortgaged Property or any part thereof, by any Governmental Authority, civil or military. "Tax Escrow Fund" shall have the meaning assigned to such term in --------------- Section 7.2 hereof. - ----------- "Tenant" shall mean any tenant, subtenant, lessee, sublessee, ------ franchisee, licensee, grantee or obligee, as applicable. "UCC" shall mean the Uniform Commercial Code as in effect on the date --- hereof in the jurisdiction in which the Owned Premises and the Leased Premises are located; provided, however, that if by reason of mandatory provisions of -------- ------- law, the perfection or the effect of perfection or non-perfection of -9- the security interest in any item or portion of the Mortgaged Property is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the jurisdiction in which the Owned Premises and the Leased Premises are located, "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. SECTION 1.2 Interpretation. In this Deed of Trust, unless otherwise -------------- specified, (i) singular words include the plural and plural words include the singular, (ii) words importing any gender include the other gender, (iii) references to any Person include such Person's successors and assigns and in the case of an individual, the word "successors" includes such Person's heirs, devisees, legatees, executors, administrators and personal representatives, (iv) references to any statute or other law include all applicable rules, regulations and orders adopted or made thereunder and all statutes or other laws amending, consolidating or replacing the statute or law referred to, (v) the words "consent," "approve" and "agree," and derivations thereof or words of similar import, mean the prior written consent, approval or agreement of the Person in question not to be unreasonably withheld, (vi) the words "include" and "including," and words of similar import, shall be deemed to be followed by the words "without limitation," (vii) the words "hereto," "herein," "hereof" and "hereunder," and words of similar import, refer to this Deed of Trust in its entirety, (viii) references to Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are to the Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses hereof, (ix) the Schedules and Exhibits to this Deed of Trust, in each case as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof, are incorporated herein by reference, (x) the titles and headings of Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are inserted as a matter of convenience only and shall not affect the constructions of any provisions hereof and (xi) all obligations of each Grantor hereunder shall be satisfied by such Grantor at its sole cost and expense. SECTION 1.3 Resolution of Drafting Ambiguities. Each Grantor ---------------------------------- acknowledges and agrees that it was represented by counsel in connection with the execution and delivery hereof, that it and its counsel reviewed and participated in the preparation and negotiation hereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party (i.e., Beneficiary) shall not be employed in the interpretation --- hereof. ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Mortgaged Property. Each Grantor to the extent of --------------------------- its interest, if any, hereby pledges, gives, grants, bargains, sells, transfers assigns and conveys to the Trustee, in trust, with powers of sale, for the use and benefit of the Beneficiary (for its benefit and for the benefit of the other Secured Parties), and hereby grants to the Beneficiary (for its benefit and for the benefit of the other Secured Parties), a security interest in and Lien upon all of such Grantor's estate, right, title and interest in, to and under the following property, whether now owned or held or hereafter acquired from time to time (collectively, the "Mortgaged Property"): ------------------ (i) Owned Premises; -10- (ii) Leased Premises; (iii) Leases; (iv) Rents; (v) Permits; (vi) Contracts; (vii) Records; and (viii) Proceeds. Notwithstanding the foregoing provisions of this Section 2.1, ----------- Mortgaged Property shall not include a grant of any of such Grantor's right, title or interest in (i) any Contract to which such Grantor is a party or any of its rights or interests thereunder (other than (x) the right to receive any payment of money (including without limitation accounts, general intangibles and payment intangibles (each as defined in the UCC) or any other rights referred to in Sections 9-406(f), 9-407(a) or 9-408(a) of the UCC and (y) any proceeds, substitutions or replacements thereof) to the extent, but only to the extent, that such a grant would, under the terms of such Contract, result in a breach or termination of the terms of, or constitute a default under or termination of such Contract and (ii) any Permit to the extent, but only to the extent that, such grant shall constitute or result in abandonment, invalidation or rendering unenforceable any right, title or interest of such Grantor therein; provided, -------- however, that at such time as any Contract or Permit described in clauses (i) - ------- and (ii) of this sentence is no longer subject to such restriction, such applicable Contract or Permit shall (without any act or delivery by any Person) constitute Mortgaged Property hereunder. TO HAVE AND TO HOLD the Mortgaged Property, together with the rights, privileges and appurtenances thereto belonging unto (i) the Trustee, his substitutes or successors, forever, to the extent the same constitutes real property or an interest therein and (ii) the Beneficiary, to the extent the same does not constitute real property or an interest therein, in either case for the benefit of the Beneficiary and the Beneficiary's successors and assigns forever, for the purpose of securing payment and performance by each Grantor of the Secured Obligations, and each Grantor hereby binds itself and its successors and assigns to warrant and forever defend the Mortgaged Property unto each of the Trustee and Beneficiary, their substitutes, successors and assigns, as the case may be, against the claim or claims of all persons claiming or to claim the same or any part thereof. SECTION 2.2 Assignment of Leases and Rents. During the term hereof, ------------------------------ each Grantor absolutely, presently, unconditionally and irrevocably pledges, grants, sells, conveys, delivers, hypothecates, assigns, transfers and sets over to the Beneficiary, and grants to the Beneficiary, subject to the terms of Article VI hereof, all of such Grantor's estate, right, title, interest, claim and demand, as Landlord, under any and all of the Leases including, without limitation, the following (such assigned rights, the "Grantor's Interest"): ------------------ (i) the immediate and continuing right to receive and collect Rents payable by the Tenants pursuant to the Leases; -11- (ii) all claims, rights, powers, privileges and remedies of such Grantor, whether provided for in the Leases or arising by statute or at law or in equity or otherwise, consequent on any failure on the part of the Tenants to perform or comply with any term of the Leases including damages or other amounts payable to such Grantor as a result of such failure; (iii) all rights to take all actions upon the happening of a default under the Leases as shall be permitted by the Leases or by law including, without limitation, the commencement, conduct and consummation of proceeding at law or in equity; and (iv) the full power and authority, in the name of such Grantor or otherwise, to enforce, collect, receive and receipt for any and all of the foregoing and to take all other actions whatsoever which such Grantor, as Landlord, is or may be entitled to take under the Leases. SECTION 2.3 Secured Obligations. This Deed of Trust secures, and the ------------------- Mortgaged Property is collateral security for, the payment and performance in full when due of the Secured Obligations. SECTION 2.4 Future Advances. This Deed of Trust shall secure future --------------- advances. The maximum aggregate amount of all advances of principal under the Indenture (which advances are obligatory to the extent the conditions set forth in the Indenture relating thereto are satisfied) that may be outstanding hereunder at any time is $125,000,000 plus interest thereon, collection costs, sums advanced for the payment of taxes, assessments, maintenance and repair charges, insurance premiums and any other reasonable costs incurred to protect the security encumbered hereby or the Lien hereof, reasonable expenses incurred by the Beneficiary by reason of any default by any Grantor under the terms hereof, together with all other sums secured hereby. SECTION 2.5 No Release. Nothing set forth in this Deed of Trust shall ---------- relieve any Grantor from the performance of any term, covenant, condition or agreement on such Grantor's part to be performed or observed under or in respect of any of the Mortgaged Property or from any liability to any Person under or in respect of any of the Mortgaged Property or shall impose any obligation on the Beneficiary or any other Secured Party to perform or observe any such term, covenant, condition or agreement on such Grantor's part to be so performed or observed or shall impose any liability on the Beneficiary or any other Secured Party for any act or omission on the part of such Grantor relating thereto or for any breach of any representation or warranty on the part of such Grantor contained in this Deed of Trust, the Indenture, the Notes or the Collateral Documents, or under or in respect of the Mortgaged Property or made in connection herewith or therewith. The obligations of each Grantor contained in this Section 2.5 shall survive the termination hereof and the discharge of each Grantor's other obligations under this Deed of Trust and the Indenture, the Notes and the Collateral Documents. -12- ARTICLE III REPRESENTATIONS AND WARRANTIES OF GRANTORS SECTION 3.1 Authority and Validity. ---------------------- Each Grantor represents and warrants that as of the date hereof: (i) it is duly organized or formed, validly existing and, if applicable, in good standing under the laws of the jurisdiction of its organization; (ii) it is duly qualified to transact business and is in good standing in the state in which the Mortgaged Property is located; (iii) it has full corporate or other organizational power and lawful authority to execute and deliver this Deed of Trust and to mortgage and grant a Lien on and security interest in the Mortgaged Property and otherwise assign such Grantor's Interest and otherwise perform its obligations as contemplated herein, and all corporate and governmental actions, consents, authorizations and approvals necessary or required therefor have been duly and effectively taken or obtained; and (iv) this Deed of Trust is a legal, valid and binding obligation of such Grantor, enforceable against such Grantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. SECTION 3.2 Warranty of Title. Each Grantor represents and warrants ----------------- (with respect to its respective interest only) that: (i) in the case of each of Black Hawk and Black Hawk/Jacobs, it has good fee simple title to the Owned Premises and the Landlord's interest and estate under or in respect of the Leases relating thereto and good title to the interest it purports to own or hold in and to each of the Permits, the Contracts and the Records, in each case subject to no Liens, except for Permitted Collateral Liens; (ii) in the case of Gilpin, it owns the tenant's interest in the Mortgaged Lease and has a valid leasehold interest in the Leased Premises and the Landlord's interest and estate under or in respect of the Leases relating thereto and good title to the interest it purports to own or hold in and to each of the Permits, the Contracts and the Records, in each case subject to no Liens, except for Permitted Collateral Liens; (iii) the Mortgaged Lease (a) is a valid and subsisting lease, superior and paramount to all other leases respecting the Leased Premises, (b) is in full force and effect and no default (nor any event which, with notice or lapse of time or both, would constitute such a default) has occurred or is continuing under the Mortgaged Lease and (c) is not subject to any defenses, offsets or counterclaims and there have been no renewals or extensions of or supplements, modifications -13- or amendments to the Mortgaged Lease not previously disclosed to the Beneficiary or the Trustee except those that would not result in a Property Material Adverse Effect; (iv) Gilpin is in actual possession of the Leased Premises; (v) it has good title to the interest it purports to own or hold in and to all rights and appurtenances to or that constitute a portion of the Mortgaged Property, except for Permitted Collateral Liens; (vi) it is in compliance with each term, condition and provision of any obligation of such Grantor which is secured by the Mortgaged Property or the noncompliance with which would result in a Property Material Adverse Effect; and (vii) this Deed of Trust creates and constitutes a valid and enforceable first priority Lien on the Mortgaged Property subject to Permitted Collateral Liens, and, to the extent any of the Mortgaged Property shall consist of Fixtures, a first priority security interest in the Fixtures, which first priority Lien and first priority security interest are subject only to Permitted Collateral Liens. SECTION 3.3 Condition of Mortgaged Property. Each Grantor represents ------------------------------- and warrants (with respect to its respective interest only) that: (i) there has been issued and there remains in full force and effect subject to no revocation, suspension, forfeiture or modification, each and every Permit necessary for the present use, operation and occupancy of the Owned Premises or Leased Premises, as the case may be, by such Grantor and its Tenants and the conduct of their respective businesses and all required zoning, building code, land use, environmental and other similar Permits, except where the failure to be so issued and to be in full force and effect would not result in a Property Material Adverse Effect; (ii) the Owned Premises and Leased Premises and the present and contemplated use and occupancy thereof comply with all applicable zoning ordinances, building codes, land use laws, setback or other development and/or use requirements of Governmental Authorities except where such noncompliance would not result in a Property Material Adverse Effect; (iii) the Owned Premises and Leased Premises are served by all utilities (including, without limitation, water and sewer systems) necessary for the present use thereof, and all utility services are provided by public or private utilities and the Owned Premises and Leased Premises have accepted or are equipped to accept such utility services and such Grantor has not received notice of termination of such utility service, except where the failure to be so served would not result in a Property Material Adverse Effect; (iv) such Grantor has access to the Owned Premises or Leased Premises, as the case may be, from roads sufficient to allow such Grantor and its Tenants and invitees to conduct their respective businesses at the Owned Premises and Leased Premises, as the case may be, in accordance with sound commercial practices and such Grantor has not received notice of termination of -14- such access, except where the failure to have such access would not result in a Property Material Adverse Effect; (v) such Grantor has not received notice of any Taking or the commencement or pendency of any action or proceeding therefor, other than such Takings as would not result in a Property Material Adverse Effect; (vi) there has not occurred any Destruction of the Owned Premises or Leased Premises or any portion thereof as a result of any fire or other casualty that, as of the date hereof, has not been repaired in all material respects, other than such Destruction as would not have a Property Material Adverse Effect; (vii) there are no disputes regarding boundary lines, location, encroachments or possession of any portions of the Mortgaged Property and no state of facts exists which could give rise to any such claim other than such disputes as would not result in a Property Material Adverse Effect; (viii) all liquid and solid waste disposal, septic and sewer systems located on the Owned Premises or Leased Premises are in a good and safe condition and repair and in compliance with all Requirements of Law, except where the failure to so comply would not result in a Property Material Adverse Effect; (ix) no portion of the Owned Premises or Leased Premises is located in an area identified by the Federal Emergency Management Agency or any successor thereto as an area having special flood hazards pursuant to the Flood Insurance Acts or, if any portion of the Leased Premises is located within such area, the Grantors have obtained the insurance prescribed in Article VIII hereof; ------------ (x) the Owned Premises and Leased Premises are assessed for real estate tax purposes as one or more wholly independent tax lot or lots, separate from any adjoining land or improvements not constituting a portion of such lot or lots, and no other land or improvements are assessed and taxed together with the Owned Premises and Leased Premises or any portion thereof, other than such cases where the failure to be so assessed would not result in a Property Material Adverse Effect; and (xi) there are no options or rights of first refusal to purchase or acquire all or any portion of the Mortgaged Property, other than such options or rights of first refusal as would not result in a Property Material Adverse Effect. SECTION 3.4 Leases. Each Grantor represents and warrants (to the ------ extent of its respective interest only) that as of the date hereof: (i) the Leases identified in Schedule D attached hereto are the ---------- only Leases in existence on the date hereof relating to the Leased Premises; -15- (ii) true copies of such Leases have been previously delivered to the Beneficiary and there are no agreements with any Tenant under such Leases other than those agreements expressly set forth therein; (iii) such Grantor is the sole owner of all of such Grantor's Interest in such Leases; (iv) each of such Leases is in full force and effect, constitutes a legal, valid and binding obligation of such Grantor and the applicable Tenant thereunder, and is enforceable against such Grantor and such Tenant in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability; (v) there is no default under any of such Leases and there is existing no condition which with the giving of notice or passage of time or both would cause a default thereunder; (vi) all Rents due under such Leases have been paid in full; (vii) none of the Rents reserved under such Leases have been assigned or otherwise pledged or hypothecated except in favor of the Beneficiary pursuant to the provisions hereof; (viii) none of the Rents (other than any security deposit collected in accordance with the provisions of the applicable Lease) have been collected for more than one (1) month in advance; (ix) there exists no offsets or defenses to the payment of any portion of the Rents and such Grantor owes no monetary obligation to any Tenant under any such Lease; (x) such Grantor has received no notice from any Tenant challenging the validity or enforceability of any such Lease; (xi) no such Lease contains any option to purchase, right of first refusal to purchase, right of first refusal to relet, or any other similar provision; and (xii) each such Lease is subordinate to this Deed of Trust either pursuant to its terms or pursuant to a recordable Subordination Agreement. SECTION 3.5 Insurance. Each Grantor represents and warrants (with --------- respect to its respective interest only) that, except where the failure of clauses (i), (ii) or (iii) hereof to be true would not have a Property Material Adverse Effect, (i) the Owned Premises and Leased Premises and the use, occupancy and operation thereof comply with all Insurance Requirements and there exists no default under any Insurance Requirement, (ii) all premiums due and payable with respect to the Insurance Policies have been paid, (iii) all Insurance Policies are in full force and effect and such Grantor has not received notice of violation or cancellation thereof and (iv) all insurance certificates required pursuant to the Indenture have been delivered to the Beneficiary. SECTION 3.6 Charges. Each Grantor represents and warrants (with ------- respect to its respective interest only) that all Charges imposed upon or assessed against such Grantor's interest in the Mortgaged Property (and in the case of Gilpin, to the extent such Charges are payable by Gilpin in accor- -16- dance with the terms of the Mortgaged Lease) have been paid and discharged by such Grantor except to the extent such Charges constitute a Lien not yet due and payable or to the extent such Charges are being contested in accordance with Section 9.1 hereof. SECTION 3.7 Environmental. Each Grantor represents and warrants (with ------------- respect to its respective interest only) that: (i) it has obtained all Permits which are necessary with respect to the ownership and operation of its business and the Mortgaged Property under any and all applicable Environmental Laws and is in compliance with all terms and conditions thereof, except where the failure so to obtain or to be in compliance would not result in a Property Material Adverse Effect; (ii) it is in compliance with any and all applicable Environmental Laws including, without limitation, all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws, except where the failure so to be in compliance would not result in a Property Material Adverse Effect; (iii) there is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice of demand letter pending or threatened against it or any Affiliate under the Environmental Laws which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect; and (iv) there are no past or present events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance with the Environmental Laws, or which may give rise to any common law or legal liability including, without limitation, liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any other Environmental Law or related common law theory or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing or notice of violation, study or investigation, based on or related to the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Materials which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect . SECTION 3.8 No Conflicts, Consents, etc. Neither the execution and --------------------------- delivery hereof by any Grantor nor the consummation of the transactions herein contemplated nor the fulfillment of the terms hereof (i) violates the terms of any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or other document to which such Grantor is a party, or by which it may be bound or to which any of its properties or assets may be subject, (ii) conflicts with any Requirement of Law applicable to the Grantor or its property or (iii) results in or requires the creation or imposition of any Lien (other than the Lien contemplated hereby) upon or with respect to any of the Mortgaged Property, except where such violation, conflict, creation or imposition would not have a Property Material Adverse Effect. No consent of any party (including, without limitation, equityholders or creditors of such Grantor) and no consent, authorization, approval, license or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person (other than with respect to any required Permits) is required for (i) the granting of a mortgage Lien on and security interest in the Mortgaged Property by such Grantor granted by -17- it pursuant to this Deed of Trust or for the execution, delivery or performance hereof by such Grantor except for the filing of this Deed of Trust and the other filings contemplated hereby or (ii) the exercise by the Beneficiary of the remedies in respect of the Mortgaged Property pursuant to this Deed of Trust other than those required by law in connection with the exercise of the applicable remedy. SECTION 3.9 Benefit to the Grantors. Each Grantor represents and ----------------------- warrants that it will receive substantial benefit as a result of the execution, delivery, and performance of the Indenture, the Notes and the Collateral Documents. ARTICLE IV CERTAIN COVENANTS OF GRANTORS SECTION 4.1 Preservation of Corporate Existence. Each Grantor (with ----------------------------------- respect to its respective interest only) shall: (i) preserve and maintain in full force and effect its existence and good standing under the laws of the jurisdiction of its organization; (ii) preserve and maintain in full force and effect its qualification to transact business and good standing in the state in which the Mortgaged Property is located; and (iii) preserve and maintain in full force and effect all consents, authorizations and approvals necessary or required of any Governmental Authority or any other Person relating to the execution, delivery and performance hereof, except where the failure to do so would not result in a Property Material Adverse Effect. SECTION 4.2 Title. Each Grantor (with respect to its respective ----- interest only) shall: (i) (A) keep in effect all material rights and appurtenances to or that constitute a part of the Mortgaged Property and (B) protect, preserve and defend its interest in the Mortgaged Property and title thereto, except against Permitted Collateral Liens (other than the Lien created by this Deed of Trust); (ii) (A) comply, in all material respects, with each of the terms, conditions and provisions of any obligation of such Grantor which is secured by the Mortgaged Property, except where the failure to so comply would not result in a Property Material Adverse Effect, or the noncompli-ance with which may result in the imposition of a Lien on the Mortgaged Property, (B) forever warrant and defend to the Beneficiary the Lien and security interests created and evidenced hereby and the validity and priority hereof in any action or proceeding against the claims of any and all Persons whomsoever affecting or purporting to affect the Mortgaged Property or any of the rights of the Beneficiary hereunder, except against Permitted Collateral Liens (other than the Lien of this Deed of Trust), and (C) maintain a valid and enforceable first priority Lien, except for Permitted Collateral Liens (other than the Lien of this Deed of Trust) on the Mortgaged Property and, to the extent any of the Mortgaged Property shall consist of Fixtures, a first priority security -18- interest in the Mortgaged Property, which first priority Lien and security interest shall be subject only to Permitted Collateral Liens; and (iii) immediately upon obtaining knowledge of the pendency of any proceedings for the eviction of such Grantor from the Mortgaged Property or any part thereof by paramount title or otherwise questioning such Grantor's right, title and interest in, to and under the Mortgaged Property as warranted in this Deed of Trust, or of any condition that could give rise to any such proceedings, notify the Beneficiary thereof. The Beneficiary may participate in such proceedings and such Grantor will deliver or cause to be delivered to the Beneficiary all instruments requested by the Beneficiary to permit such participation. In any such proceedings, the Beneficiary may be represented by counsel reasonably satisfactory to the Beneficiary at the reasonable expense of the Grantors. If, upon the resolution of such proceedings,such Grantor shall suffer a loss of the Mortgaged Property or any part thereof or interest therein and title insurance proceeds shall be payable in connection therewith, such proceeds are hereby assigned to and shall be paid to the Beneficiary for deposit into the Collateral Account and shall be applied in the manner applicable to Net Loss Proceeds in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) of the Indenture. SECTION 4.3 Maintenance and Use of Mortgaged Property; Alterations. ------------------------------------------------------ (i) Maintenance. Each Grantor shall cause the representations and ----------- warranties set forth in Section 3.3 hereof to continue to be true in each and ----------- every respect and shall pay or cause to be paid when due all Charges imposed upon or assessed against such Grantor's interest in the Mortgaged Property (and, in the case of Gilpin, to the extent such charges are payable by Gilpin in accordance with the terms of the Mortgaged Leases) costs and expenses relating thereto, other than such Charges being contested in accordance with Section 9.1 hereof. (ii) Maintenance of Premises. Each Grantor shall not commit or ----------------------- suffer any waste on the Owned Premises or Leased Premises. In the case of the Owned Premises, except to the extent to do so shall be Gilpin's obligation under the Mortgaged Leases, Black Hawk and Black Hawk/Jacobs shall at all times maintain the Owned Premises in good working order, condition and repair, reasonable wear and tear excepted, and shall use commercially reasonable efforts to make or cause to be made all repairs structural or nonstructural which are necessary or appropriate in the conduct of such Grantors' business. In the case of the Leased Premises, except to the extent to do so shall be the Lessor's obligation under the Mortgaged Leases, Gilpin shall, at all times, maintain the Leased Premises in good working order, condition and repair, reasonable wear and tear excepted, and shall use commercially reasonable efforts to make or cause to be made all repairs, structural (to the extent permitted under the Mortgaged Leases) or nonstructural, which are necessary or appropriate in the conduct of the Grantors' business. No Grantor shall, except as permitted in Section ------- 4.3(iii) hereof, alter the occupancy or use of all or any portion of the Owned - -------- Premises or Leased Premises without the prior written consent of the Beneficiary, which consent shall not be unreasonably withheld. Except to the extent permitted pursuant to the provisions of Section 4.3(iii) hereof, no ---------------- Grantor shall remove, demolish or alter the structural character of any Improvement now or hereafter erected upon all or any portion of the Owned Premises or Leased Premises, or permit any such removal, demolition or alteration, without the prior written consent of the Beneficiary, which consent shall not be unreasonably withheld. (iii) Alterations. No Grantor shall, without the prior written ----------- consent of the Beneficiary, which consent shall not be unreasonably withheld (and, in the case of Gilpin, the consent of the Lessor -19- under the Mortgaged Lease, if any, as may be required under the Mortgaged Leases), make any Alteration to the Owned Premises or Leased Premises except as permitted by Sections 10.04 and 10.06 of the Indenture. Whether or not the making of any Alteration shall require the consent of the Beneficiary pursuant to the immediately preceding sentence, each Grantor shall (A) complete each Alteration promptly, in a good and workmanlike manner and in compliance, in all material respects, with all applicable local laws, ordinances and requirements and (B) pay when due all claims for labor performed and materials furnished in connection with such Alteration, unless contested in accordance with the provisions of Article IX hereof. ---------- (iv) Permits. Each Grantor shall maintain, or cause to be maintained ------- for the operation of its business at the Owned Premises or Leased Premises, as the case may be, and otherwise to the extent such Grantor is obligated to do so under the Mortgaged Lease, in full force and effect all Permits contemplated by and subject to Section 3.3(i) hereof. Unless and to the extent contested by any -------------- Grantor in accordance with the provisions of Article IX hereof, the Grantors ---------- shall comply, in all material respects, with all requirements set forth in the Permits and all Requirements of Law applicable to all or any portion of the Mortgaged Property or the condition, use or occupancy of all or any portion thereof or any recorded deed of restriction, declaration, covenant running with the land or otherwise, now or hereafter in force, subject to the provisions of Section 3.3 hereof. - ----------- (v) Zoning. No Grantor shall initiate, join in, or consent to any ------ change in the zoning or any other permitted use classification of the Owned Premises or Leased Premises without the prior written consent of the Beneficiary, which consent shall not be unreasonably withheld. SECTION 4.4 Notices Regarding Certain Defaults. Each Grantor shall, ---------------------------------- promptly upon receipt of any written notice regarding (i) any default by such Grantor relating to the Mortgaged Property or any portion thereof or (ii) the failure to discharge any of such Grantor's obligations with respect to the Mortgaged Property or any portion thereof described herein, furnish a copy of such notice to the Beneficiary. SECTION 4.5 Access to Mortgaged Property, Books and Records; Other ------------------------------------------------------ Information. Upon request to any Grantor, the Beneficiary, its agents, - ----------- accountants and attorneys shall have full and free access to visit and inspect, as applicable, during normal business hours and such other reasonable time as may be requested by the Beneficiary to all of the Mortgaged Property including, without limitation, all of the books, correspondence and records of such Grantor relating thereto. The Beneficiary and its representatives may examine the same, take extracts therefrom and make photocopies thereof. Each Grantor shall, at any and all times, within a reasonable time after written request by the Beneficiary, furnish or cause to be furnished to the Beneficiary, in such manner and in such detail as may be reasonably requested by the Beneficiary, additional information with respect to the Mortgaged Property. SECTION 4.6 Limitation on Liens; Transfer Restrictions. No Grantor ------------------------------------------ may, without the prior written consent of the Beneficiary, further mortgage, encumber, hypothecate, sell, convey or assign all or any part of the Mortgaged Property or suffer or allow any of the foregoing to occur by operation of law or otherwise; provided, however, that such Grantor shall have the right to (1) -------- ------- sell, convey or assign all or any portion of the Mortgaged Property in accordance with Section 10 of the Indenture and (2) suffer to exist the following Liens in respect of the Mortgaged Property: (i) Prior Liens (but not extensions, amendments, supplements or replacements of Prior Liens unless (A) extended, amended, supplemented or replaced in a manner permitted by the Indenture or (B) consented to by the Beneficiary which consent shall not be unreasonably withheld), (ii) the Lien and security interest created by this Deed of Trust or any -20- other Collateral Document, (iii) Contested Liens, (iv) Liens described in clause (9) of the definition of Permitted Liens (provided, however, that such Liens -------- ------- shall not extend to or cover any Mortgaged Property other than equipment subject to Capital Leases Obligations or Purchase Money Obligations incurred in accordance with the provisions of the Indenture) or clause (4) of the definition of Permitted Liens, (v) Leases to the extent permitted pursuant to the provisions of Article V hereof, and (vi) in the case of Gilpin, rights, title --------- and interest of the Lessor under the Mortgaged Lease and any Liens against the Lessor's interest in the Leased Land and the Leased Premises (the Liens described in clauses (i) through (vi) of this sentence, collectively, "Permitted --------- Collateral Liens"). - ---------------- SECTION 4.7 Environmental. ------------- (i) Hazardous Materials. Each Grantor (with respect to its ------------------- respective interest only) shall (A) comply with any and all present and future Environmental Laws applicable to the Mortgaged Property, (B) not release, store, treat, handle, generate, discharge or dispose of any Hazardous Materials at, on, under or from the Mortgaged Property in violation of or in a manner that could result in any material liability under any present and future Environmental Law and (C) take all necessary steps to initiate and expeditiously complete all remedial, corrective and other action to eliminate any such effect. In the event any Grantor fails to comply with the covenants in the preceding sentence, the Beneficiary may, in addition to any other remedies set forth herein, as agent for such Grantor and at the Grantors' sole cost and expense, cause any remediation, removal or response action relating to Hazardous Materials required by applicable Environmental Laws to be taken and the Grantors shall provide to the Beneficiary and its agents and employees access to the Mortgaged Property for such purpose. Any reasonable costs or expenses incurred by the Beneficiary for such purpose shall be immediately due and payable by the Grantors and shall bear interest at the Default Rate. The Beneficiary shall have the right at any time when an Event of Default shall have occurred and be continuing and at such other times when a potential violation of any present or future Environmental Law exists which in the Beneficiary's reasonable judgment could result in any material liability or obligation under such Environmental Law, at the sole cost and expense of the Grantors, to conduct an environmental audit of the Mortgaged Property by such persons or firms appointed by the Beneficiary, and the Grantors shall cooperate in all respects in the conduct of such environmental audit, including, without limitation, by providing access to the Mortgaged Property and to all records in the Grantors' or any of their respective agents' possession relating thereto. To the extent that any such environmental audit identifies conditions which in the Beneficiary's reasonable judgment would result in any material liability or obligation under any present or future Environmental Law, the Grantors agree (to the extent caused by any Grantor) to expeditiously correct any such violation or respond to conditions giving rise to such liability or obligations in a manner which complies in all material respects with the Environmental Laws and mitigates associated health and environmental risks. Each Grantor shall indemnify and hold the Beneficiary and each of the other Secured Parties harmless from and against all loss, cost, damage or reasonable expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Beneficiary or any other Secured Party may sustain by reason of the assertion against the Beneficiary or any Secured Party by any party of any claim relating to such Hazardous Materials on, under or from the Mortgaged Property or actions taken with respect thereto as authorized hereunder, except to the extent arising from the gross negligence or willful misconduct of the Beneficiary or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof; and (ii) Asbestos. No Grantor shall install nor permit to be installed -------- in or removed from the Mortgaged Property, asbestos or any asbestos-containing material (collectively, "ACM") except in com- --- -21- pliance, in all material respects, with all applicable Environmental Laws, and with respect to any ACM currently present in the Mortgaged Property, the Grantors shall promptly either (A) remove any ACM which such Environmental Laws require to be removed or (B) otherwise comply, in all material respects, with such Environmental Laws with respect to such ACM, all at the Grantors' sole cost and expense. If the Grantors shall fail so to remove any ACM or otherwise comply, in all material respects, with such laws or regulations, the Beneficiary may, in addition to any other remedies set forth herein, take reasonable or necessary steps to eliminate any ACM from the Mortgaged Property or otherwise comply, in all material respects, with applicable law, regulations or orders and the Grantors shall provide to the Beneficiary and its agents and employees access to the Mortgaged Property for such purpose. Any reasonable costs or expenses incurred by the Beneficiary for such purpose shall be immediately due and payable by the Grantors and bear interest at the Default Rate. The Grantors shall indemnify and hold the Beneficiary and the other Secured Parties harmless from and against all loss, cost, damage and expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Beneficiary or the other Secured Parties may sustain, as a result of the presence of any ACM and any removal thereof from the Mortgaged Property by the Grantors or compliance with all applicable Environmental Laws, except to the extent arising from the gross negligence or willful misconduct of the Beneficiary or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof. SECTION 4.8 Estoppel Certificates. Each Grantor shall, from time to --------------------- time, upon thirty (30) days' prior written reasonable request of the Beneficiary, execute, acknowledge and deliver to the Beneficiary an Officers' Certificate stating that this Deed of Trust, the Indenture, the Notes and the Collateral Documents are unmodified and in full force and effect (or, if there have been modifications, that this Deed of Trust, the Indenture, the Notes and the Collateral Documents, as applicable, is or are in full force and effect as modified and setting forth such modifications) and stating the date to which principal and interest have been paid on the Notes. ARTICLE V LEASES SECTION 5.1 Grantors' Affirmative Covenants with Respect to Leases. ------------------------------------------------------ With respect to each Lease, each Grantor that has an interest in such Lease shall: (i) observe and perform, in all material respects, all the obligations imposed upon the Landlord under such Lease; (ii) promptly send copies to the Beneficiary of all notices of default which such Grantor shall send or receive thereunder; and (iii) enforce all of the terms, covenants and conditions contained in such Lease upon the part of the Tenant thereunder to be observed or performed to the extent it would be commercially reasonable to do so. -22- SECTION 5.2 Grantors' Negative Covenants with Respect to Leases. With --------------------------------------------------- respect to each Lease, no Grantor that has an interest in such Lease shall, without the prior written consent of the Beneficiary, which consent shall not be unreasonably withheld: (i) receive or collect, or permit the receipt or collection of, any Rent under such Lease more than one (1) month in advance of the respective period in respect of which such Rent is to accrue, except: (A) in connection with the execution and delivery of such Lease (or of any amendment to such Lease), Rent thereunder may be collected and received in advance in an amount not in excess of one (1) month's Rent; (B) the amount held by Landlord as a reasonable security deposit thereunder; and (C) any amount received and collected for escalation and other charges in accordance with the terms of such Lease; (ii) assign, transfer or hypothecate (other than to the Beneficiary hereunder) any Rent under such Lease whether then due or to accrue in the future or the interest of such Grantor as Landlord under such Lease; (iii) enter into any amendment or modification of such Lease which would materially decrease the unexpired term thereof or decrease the amount of the Rents payable thereunder or materially impair the value or utility of the Mortgaged Property or the security provided by this Deed of Trust; (iv) terminate (whether by exercising any contractual right of such Grantor to recapture leased space or otherwise) or permit the termination of such Lease or accept surrender of all or any portion of the space demised under such Lease prior to the end of the term thereof or accept assignment of such Lease to such Grantor unless: (A) the Tenant under such Lease has not paid the equivalent of two (2) months' Rent and such Grantor has made reasonable efforts to collect such Rent; and (B) it would be commercially reasonable to terminate such Lease; or (v) waive, excuse, condone or in any manner discharge or release any Tenants of or from the material obligations of such Tenants under their respective Leases or guarantors of Tenants from any material obligations under any guarantees of the Leases except as the same would be done by a Prudent Operator with due regard for the security afforded the Beneficiary thereby. SECTION 5.3 Additional Requirements with Respect to New Leases. In -------------------------------------------------- addition to the requirements of Sections 5.1 and 5.2 hereof, no Grantor shall ------------ --- enter into any Lease after the date hereof unless the Tenant under such Lease has entered into a Subordination Agreement and has otherwise complied with the provisions of Section 10.06 of the Indenture. -23- ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Grantors. Section ------------------------------------------- 2.2 of this Deed of Trust constitutes a present, absolute, effective, irrevocable and complete assignment by each Grantor that has an interest in such Leases and Rents to the Beneficiary of the Leases and Rents and the right, subject to applicable law, to collect all sums payable to such Grantor thereunder and apply the same as the Beneficiary may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Mortgaged Property), which is not conditioned upon the Beneficiary being in possession of the Owned Premises or Leased Premises. The Beneficiary hereby grants to each applicable Grantor, however, a license to collect and apply the Rents and to enforce the obligations of Tenants under the Leases. Immediately upon the occurrence of and during the continuance of any Event of Default or a Default, the license granted in the immediately preceding sentence shall cease and terminate, with or without any notice, action or proceeding or the intervention of a receiver appointed by a court. SECTION 6.2 Collection of Rents by the Beneficiary. -------------------------------------- (i) From and after the occurrence and during the continuance of an Event of Default or a Default, any Rents receivable by the Beneficiary hereunder, after payment of all proper costs and expenses as Beneficiary may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Mortgaged Property), shall be applied to the Secured Obligations or, at the option of the Beneficiary, shall be held by the Beneficiary as additional collateral to secure the performance by the Grantors of the Secured Obligations. The Beneficiary shall be accountable to the applicable Grantor only for Rents actually received by the Beneficiary. The collection of such Rents and the application thereof shall not cure or waive any Event of Default or a Default or waive, modify or affect notice of Event of Default or a Default or invalidate any act done pursuant to such notice. (ii) Each Grantor hereby irrevocably authorizes and directs Tenant under each Lease to rely upon and comply with any and all notices or demands from the Beneficiary for payment of Rents to the Beneficiary and such Grantor shall have no claim against Tenant for Rents paid by Tenant to the Beneficiary pursuant to such notice or demand. SECTION 6.3 No Release. Neither this Deed of Trust nor any action ---------- or inaction on the part of the Beneficiary shall release any Tenant under any Lease, any guarantor of any Lease or any Grantor from any of their respective obligations under such Leases or constitute an assumption of any such obligation on the part of the Beneficiary. No action or failure to act on the part of any Grantor shall adversely affect or limit the rights of the Beneficiary under this Deed of Trust or, through this Deed of Trust, under such Leases. Nothing contained herein shall operate or be construed to (i) obligate the Beneficiary to perform any of the terms, covenants or conditions contained in any Lease or otherwise to impose any obligation upon the Beneficiary with respect to such Lease (including, without limitation, any obligation arising out of any covenant of quiet enjoyment contained in such Lease in the event that Tenant under such Lease shall have been joined as a party defendant in any action by which the estate of such Tenant shall be terminated) or (ii) place upon the Beneficiary any obligation for the operation, control, care, management or repair of the Owned Premises or Leased Premises. -24- SECTION 6.4 Irrevocable Interest. All rights, powers and -------------------- privileges of the Beneficiary herein set forth are coupled with an interest and are irrevocable, subject to the terms and conditions hereof, and no Grantor shall take any action under the Leases or otherwise which is inconsistent with this Deed of Trust or any of the terms hereof and any such action inconsistent herewith or therewith shall be void. SECTION 6.5 Amendment to Leases. Each Lease, including, without ------------------- limitation, all amendments, modifications, supplements, replacements, extensions and renewals thereof, shall continue to be subject to the provisions hereof without the necessity of any further act by any of the parties hereto. ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges. Unless and to the extent ------------------ contested by any Grantor in accordance with the provisions of Article IX hereof, ---------- such Grantor shall pay and discharge, or cause to be paid and discharged, from time to time when the same shall become due (or within any applicable grace period) (and, in the case of the Leased Premises, to the extent such payment and discharge shall be due from Gilpin pursuant to the terms of the Mortgaged Leases), all Charges subject to this Article VII. Each Grantor shall, upon the ----------- Beneficiary's request, deliver to the Beneficiary evidence of the payment by such Grantor of all such Charges. SECTION 7.2 Escrow of Taxes. From and after the occurrence and --------------- during the continuance of an Event of Default or a Default, at the option and upon the request of the Beneficiary, the Grantors shall deposit with the Beneficiary in an account maintained by the Beneficiary (the "Tax Escrow Fund"), --------------- on the first day of each month, an amount estimated by the Beneficiary to be equal to one-twelfth of the annual real property taxes and other annual Charges required to be discharged by the Grantors under Section 7.1 hereof. Such amounts ----------- shall be held by the Beneficiary without interest to the Grantors and applied to the payment of the obligations in respect of which such amounts were deposited, in such priority as the Beneficiary shall determine, on or before the respective dates on which such obligations or any part thereof would become delinquent. Nothing contained in this Article VII shall (i) affect any right or remedy of ----------- the Beneficiary under any provision hereof or of any statute or rule of law to pay any such amount as provided above from its own funds and to add the amount so paid, together with interest at the Default Rate during such time that any amount remains outstanding, to the Secured Obligations or (ii) relieve any Grantor of its obligations to make or provide for the payment of the annual real property taxes and other annual Charges required to be discharged by the Grantors under Section 7.1 hereof. Notwithstanding the provisions of this ----------- Section 7.2, with respect to the Leased Land, no deposit with the Beneficiary in respect of any Charge shall be required if and for so long as deposits in respect of such Charge are made by the Grantors under the Mortgaged Lease. SECTION 7.3 Certain Statutory Liens. Unless and to the extent ----------------------- contested by any Grantor in accordance with the provisions of Article IX hereof, ---------- the Grantors shall timely pay, or cause to be paid, all lawful claims and demands of mechanics, materialmen, laborers, government agencies administering worker's compensation insurance, old age pensions and social security benefits and all other claims, judgments, demands or amounts of any nature which, relate to the Grantors' (or their respective successors' or assignees') actions at or affecting the Owned Premises, Leased Premises or the Mortgaged Prop- -25- erty and, if unpaid, would result in, or permit the creation of, a Lien on the Mortgaged Property or any part thereof, or which would result in forfeiture of all or any part of the Mortgaged Property. SECTION 7.4 Stamp and Other Taxes. Unless and to the extent --------------------- contested by any Grantor in accordance with the provisions of Article IX hereof, ---------- the Grantors shall pay any United States documentary stamp taxes, with interest and fines and penalties, and any mortgage recording taxes, with interest and fines and penalties, that may hereafter be levied, imposed or assessed under or upon or by reason hereof or the Secured Obligations or any instrument or transaction affecting or relating to either thereof and in default thereof the Beneficiary may advance the same and the amount so advanced shall be payable by the Grantors to the Beneficiary in accordance with the provisions of Section ------- 14.5 hereof. - ---- SECTION 7.5 Certain Tax Law Changes. In the event of the passage ----------------------- after the date hereof of any law deducting from the value of real property, for the purpose of taxation, amounts in respect of any Lien thereon or changing in any way the laws for the taxation of mortgages or debts secured by mortgages for state or local purposes or the manner of the collection of any Charges, and imposing any Charges, either directly or indirectly, on this Deed of Trust, the Indenture or any other Collateral Document, the Grantors shall promptly pay to the Beneficiary such amount or amounts as may be necessary from time to time to pay any such Charges. SECTION 7.6 Proceeds of Tax Claim. In the event that the proceeds --------------------- of any tax claim to which the Grantors are entitled are paid after the Beneficiary has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Beneficiary to satisfy any deficiency remaining after such foreclosure. The Beneficiary shall retain its interest in the proceeds of any tax claim during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Beneficiary shall in a prompt manner be released to the Issuer. ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages. The ----------------------------------------- Grantors shall maintain in respect of the Owned Premises and Leased Premises the insurance policies and coverages required under Section 4.19(b) of the Indenture. SECTION 8.2 Delivery After Foreclosure. In the event that the -------------------------- proceeds of any insurance claim to which the Grantors are entitled are paid after the Beneficiary has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Beneficiary to satisfy any deficiency remaining after such foreclosure. Beneficiary shall retain its interest in the Insurance Policies required to be maintained pursuant to this Deed of Trust during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Beneficiary shall be released to the Issuer. ARTICLE IX CONTESTING OF PAYMENTS -26- SECTION 9.1 Contesting of Taxes and Certain Statutory Liens. Each ----------------------------------------------- Grantor may at its own expense contest the validity, amount or applicability of any Charges as long as the contest thereof shall be conducted in accordance with, and permitted pursuant to the provisions of, the Indenture. Notwithstanding the foregoing provisions of this Section 9.1, (i) no contest of ----------- any such obligations may be pursued by such Grantor (A) if such contest would expose the Beneficiary or any Holder to any possible criminal liability or (B) unless such Grantor shall have furnished a bond or other security therefor reasonably satisfactory to the Beneficiary or such Holder, as the case may be, any additional civil liability for failure to comply with such obligations and (ii) if at any time payment or performance of any obligation contested by such Grantor pursuant to this Section 9.1 shall become necessary to prevent the ----------- imminent imposition of remedies because of non-payment, such Grantor shall pay or perform the same in sufficient time to prevent the imposition of remedies in respect of such default or prospective default. SECTION 9.2 Contesting of Insurance. No Grantor shall take any ----------------------- action that would reasonably be expected to cause the termination, revocation or denial of any insurance coverage required to be maintained under this Deed of Trust or that would be the basis for a defense to any claim under any Insurance Policy maintained in respect of the Owned Premises or Leased Premises and such Grantor shall otherwise comply in all respects with all Insurance Requirements in respect of the Owned Premises and Leased Premises; provided, however, that -------- ------- such Grantor may, at its own expense and after written notice to the Beneficiary, (i) contest the applicability or enforceability of any such Insurance Requirements by appropriate legal proceedings, prosecution of which does not constitute a basis for cancellation or revocation of any insurance coverage required under Article VIII hereof or (ii) cause the Insurance Policy ------------ containing any such Insurance Requirement to be replaced by a new policy complying with the provisions of Article VIII hereof. ------------ ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction. If there shall occur any Destruction of ----------- the Mortgaged Property, individually or in the aggregate, in excess of $100,000, the applicable Grantor shall promptly send to the Beneficiary a written notice setting forth the nature and extent of such Destruction. The Proceeds of any insurance payable in respect of such Destruction are hereby assigned and shall be paid to the Beneficiary. The Net Loss Proceeds arising out of such Destruction, shall be applied in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) of the Indenture. SECTION 10.2 Condemnation. If there shall occur any Taking or the ------------ commencement of any proceeding thereof, the applicable Grantor shall immediately notify the Beneficiary upon receiving notice of such Taking or commencement of proceedings therefor. The Beneficiary may, at its option, participate in any proceedings or negotiations which might result in any Taking, and the applicable Grantor shall deliver or cause to be delivered to the Beneficiary all instruments requested by it to permit such participation. The Beneficiary may be represented by counsel reasonably satisfactory to it at the reasonable expense of the Grantors in connection with any such participation. The Grantors shall pay all reasonable fees, costs and expenses incurred by the Beneficiary in connection with any Taking and in seeking and obtaining any award or payment on account thereof. Any proceeds, award or payment in respect of any Taking of any Mortgaged Property are hereby assigned by each Grantor and shall be paid to the Beneficiary. The Grantors shall take all steps necessary to notify the condemning authority of such assignment. -27- The Net Loss Proceeds arising out of such Taking shall be applied in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) of the Indenture. ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default. It shall be an Event of Default ----------------- hereunder if there shall have occurred and be continuing an Event of Default under the Indenture. SECTION 11.2 Remedies in Case of an Event of Default. If any --------------------------------------- Event of Default shall have occurred and be continuing, the Grantors hereby acknowledge and agree that the Beneficiary or the Trustee may, at the Beneficiary's option, in addition to any other action permitted under this Deed of Trust or the Indenture or by law, statute or in equity, take one or more of the following actions to the greatest extent permitted by local law: (i) by written notice to the Issuer, declare the entire unpaid amount of the Secured Obligations to be due and payable immediately; (ii) personally, or by its agents or attorneys, (A) give notice of such Event of Default to the Lessors under the Mortgaged Leases, (B) act in all respects as lessee under the Mortgaged Leases and perform on behalf of and for the account of the applicable Grantor any of the obligations of lessee thereunder, (C) enter into and upon and take possession of all or any part of the Owned Premises and Leased Premises together with the books, records and accounts of the Grantors relating thereto and, exclude the Grantors, their respective agents and servants wholly therefrom, (D) use, operate, manage and control the Leased Premises and conduct the business thereof, (E) maintain and restore the Owned Premises and Leased Premises, (F) make all necessary or proper repairs, renewals and replacements and such useful Alterations thereto and thereon as the Beneficiary may deem advisable, (G) manage, lease and operate the Owned Premises and Leased Premises and carry on the business thereof and exercise all rights and powers of the Grantors with respect thereto either in the name of the Grantors or otherwise or (H) collect and receive all Rents. The Beneficiary shall be under no liability for or by reason of any such taking of possession, entry, removal or holding, operation or management except that any amounts so received by the Beneficiary shall be applied in accordance with the provisions of the Indenture; (iii) commence foreclosure proceedings through the Trustee by filing with the Trustee written notice declaring the default and Beneficiary's election and demand that the Mortgaged Property (en mass or in separate parcels) be advertised and sold under the power of sale granted by this Deed of Trust and in accordance with the statutes of Colorado; (iv) commence an action in any court of competent jurisdictions to judicially foreclosure this Deed of Trust or take such steps to protect and enforce its rights whether by action, suit or proceeding at law or in equity for the specific performance of any covenant, condition or agreement in the Indenture, the Notes and the Collateral Documents, or in aid of the execution of any power granted in this Deed of Trust, or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy or otherwise as the Beneficiary shall elect; or -28- (v) exercise all rights and remedies set forth in Article XII, including all rights of a secured party under the UCC. SECTION 11.3 Sale of Mortgaged Property if Event of Default ---------------------------------------------- Occurs; Proceeds of Sale. - ------------------------ (i) If any Event of Default shall have occurred and be continuing, the Beneficiary may commence foreclosure proceedings through Trustee by filing with Trustee written notice declaring the default and Beneficiary's election and demand that the Mortgaged Property (en mass or in separate parcels) be advertised and sold under the power of sale granted by this Deed of Trust and in accordance with the statutes of Colorado; or institute an action to foreclose this Deed of Trust or take such other action as may be permitted and available to the Beneficiary at law or in equity for the enforcement of the Indenture and the Notes and realization on the Mortgaged Property and proceeds thereon to final judgment and execution thereof for the Secured Obligations, and in furtherance thereof the Beneficiary may sell or cause the sale of the Mortgaged Property at one or more sales, as an entirety or in parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law or statute or in equity. The Beneficiary or the Trustee may execute and deliver to the purchaser at such sale a conveyance of the Mortgaged Property in fee simple and an assignment or conveyance of all each Grantor's Interest in the Leases and the Mortgaged Property, each of which conveyances and assignments shall contain recitals as to the Event of Default upon which the execution of the power of sale herein granted depends, and each Grantor hereby constitutes and appoints the Beneficiary or the Trustee the true and lawful attorneys-in-fact of such Grantor to make any such recitals, sale, assignment and conveyance, and all of the acts of the Beneficiary or the Trustee as such attorneys-in-fact are hereby ratified and confirmed. Each Grantor agrees that such recitals shall be binding and conclusive upon such Grantor and that any assignment or conveyance to be made by the Beneficiary or the Trustee shall divest such Grantor of all right, title, interest, equity and right of redemption, including any statutory redemption, in and to the Mortgaged Property. The power and agency hereby granted are coupled with an interest and are irrevocable by death or dissolution, or otherwise, and are in addition to any and all other remedies which the Beneficiary or the Trustee may have hereunder, at law or in equity. So long as the Secured Obligations, or any part thereof, remain unpaid, such Grantor agrees that possession of the Mortgaged Property by such Grantor, or any Person claiming under such Grantor, shall be as tenant, and, in case of a sale under power or upon foreclosure as provided in this Deed of Trust, such Grantor and any Person in possession under such Grantor, as to whose interest such sale was not made subject, shall, at the option of the purchaser at such sale, then become and be tenants holding over, and shall forthwith deliver possession to such purchaser, or be summarily dispossessed in accordance with the laws applicable to tenants holding over. In case of any sale under this Deed of Trust by virtue of the exercise of the powers herein granted, or pursuant to any order in any judicial proceeding or otherwise, the Mortgaged Property may be sold as an entirety or in separate parcels in such manner or order as the Beneficiary or the Trustee in its sole discretion may elect. One or more exercises of powers herein granted shall not extinguish or exhaust such powers, until the entire Mortgaged Property is sold or all amounts secured hereby are paid in full. (ii) In the event of any sale made under or by virtue of this Article XI, the entire principal of, and interest in respect of the Secured - ---------- Obligations, if not previously due and payable, shall, at the option of the Beneficiary, immediately become due and payable, anything in this Deed of Trust to the contrary notwithstanding. -29- (iii) The Proceeds of any sale made under or by virtue of this Article ------- XI, together with any other sums which then may be held by the Beneficiary or - -- the Trustee under this Deed of Trust, whether under the provisions of this Article XI or otherwise, shall be applied in accordance with the provisions of - ---------- the Indenture. (iv) The Beneficiary may bid for and acquire the Mortgaged Property or any part thereof at any sale made under or by virtue of this Article XI and, ---------- in lieu of paying cash therefor, may make settlement for the purchase price by crediting against the purchase price the unpaid amounts (whether or not then due and owing) in respect of the Secured Obligations, after deducting from the sales price the expense of the sale and the reasonable costs of the action or proceedings and any other sums that the Beneficiary is authorized to deduct under this Deed of Trust. (v) The Beneficiary may adjourn or cause the Trustee to adjourn from time to time any sale by the Trustee to be made under or by virtue hereof by announcement at the time and place appointed for such sale or for such adjourned sale or sales, and, the Beneficiary or the Trustee, without further notice or publication, may cause such sale at the time and place to which the same shall be so adjourned. (vi) If the Owned Premises or Leased Premises are comprised of more than one parcel of land, the Beneficiary or the Trustee may take any of the actions authorized by this Section 11.3 in respect of any or a number of ------------ individual parcels. SECTION 11.4 Additional Remedies in Case of an Event of Default. -------------------------------------------------- (i) The Beneficiary shall be entitled to recover judgment as aforesaid either before, after or during the pendency of any proceedings for the enforcement of the provisions hereof, and the right of the Beneficiary to recover such judgment shall not be affected by any entry or sale hereunder, or by the exercise of any other right, power or remedy for the enforcement of the provisions hereof, or the foreclosure of, or absolute conveyance pursuant to, this Deed of Trust. In case of proceedings against any Grantor in insolvency or bankruptcy or any proceedings for its reorganization or involving the liquidation of its assets, the Beneficiary shall be entitled to prove the whole amount of principal and interest and other payments, charges and costs due in respect of the Secured Obligations to the full amount thereof without deducting therefrom any proceeds obtained from the sale of the whole or any part of the Mortgaged Property; provided, however, that in no case shall the Beneficiary receive a greater amount than the aggregate of such principal, interest and such other payments, charges and costs (with interest at the Default Rate) from the proceeds of the sale of the Mortgaged Property and the distribution from the estate of such Grantor. (ii) Any recovery of any judgment by the Beneficiary and any levy of any execution under any judgment upon the Mortgaged Property shall not affect in any manner or to any extent the Lien and security interests created and evidenced hereby upon the Mortgaged Property or any part thereof, or any conveyances, powers, rights and remedies of the Beneficiary hereunder, but such conveyances, powers, rights and remedies shall continue unimpaired as before. (iii) Any monies collected by the Beneficiary under this Section 11.4 ------------ shall be applied in accordance with the provisions of Section 11.3(iii). ----------------- -30- SECTION 11.5 Legal Proceedings After an Event of Default. ------------------------------------------- (i) After the occurrence and during the continuance of any Event of Default and immediately upon the commencement of any action, suit or legal proceedings to obtain judgment for the Secured Obligations or any part thereof, or of any proceedings to foreclose the Lien and security interest created and evidenced hereby or otherwise enforce the provisions hereof or of any other proceedings in aid of the enforcement hereof, each applicable Grantor shall enter its voluntary appearance in such action, suit or proceeding. (ii) Upon the occurrence and during the continuance of an Event of Default, the Beneficiary shall be entitled forthwith as a matter of right, concurrently or independently of any other right or remedy hereunder either before or after declaring the Secured Obligations or any part thereof to be due and payable, to the appointment of a receiver without giving notice to any party and without regard to the adequacy or inadequacy of any security for the Secured Obligations or the solvency or insolvency of any person or entity then legally or equitably liable for the Secured Obligations or any portion thereof. Each Grantor hereby consents to the appointment of such receiver. Notwithstanding the appointment of any receiver, the Beneficiary shall be entitled as pledgee to the possession and control of any cash, deposits or instruments at the time held by or payable or deliverable under the terms of the Indenture to the Beneficiary. (iii) No Grantor shall (A) at any time insist upon, or plead, or in any manner whatsoever claim or take any benefit or advantage of any stay or extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance hereof, (B) claim, take or insist on any benefit or advantage of any law now or hereafter in force providing for the valuation or appraisal of the Mortgaged Property, or any part thereof, prior to any sale or sales of the Mortgaged Property which may be made pursuant to this Deed of Trust, or pursuant to any decree, judgment or order of any court of competent jurisdiction or (C) after any such sale or sales, claim or exercise any right under any statute heretofore or hereafter enacted to redeem the property so sold or any part thereof. To the extent permitted by applicable law, each Grantor hereby expressly (A) waives all benefit or advantage of any such law or laws, including, without limitation, any statute of limitations applicable to this Deed of Trust, (B) waives all rights to have the Mortgaged Property marshalled on any foreclosure of this Deed of Trust, (C) waives any and all rights to trial by jury in any action or proceeding related to the enforcement hereof, (D) waives any objection which it may now or hereafter have to the laying of venue of any action, suit or proceeding brought in connection with this Deed of Trust and further waives and agrees not to plead that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum and (E) covenants not to hinder, delay or impede the execution of any power granted or delegated to the Beneficiary by this Deed of Trust but to suffer and permit the execution of every such power as though no such law or laws had been made or enacted. The Beneficiary shall not be liable for any incorrect or improper payment made pursuant to this Article XI in the absence of gross negligence or willful ---------- misconduct. SECTION 11.6 Remedies Not Exclusive. No remedy conferred upon or ---------------------- reserved to the Beneficiary by this Deed of Trust is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Deed of Trust or now or hereafter existing at law or in equity. Any delay or omission of the Beneficiary to exercise any right or power accruing on any Event of Default shall not impair any such right or power and shall not be construed to be a waiver of or acquiescence in any such Event of Default. Every power and -31- remedy given by this Deed of Trust may be exercised from time to time concurrently or independently, when and as often as may be deemed expedient by the Beneficiary in such order and manner as the Beneficiary, in its sole discretion, may elect. If the Beneficiary accepts any monies required to be paid by any Grantor under this Deed of Trust after the same become due, such acceptance shall not constitute a waiver of the right either to require prompt payment, when due, of all other sums secured by this Deed of Trust or to declare an Event of Default with regard to subsequent defaults. If the Beneficiary accepts any monies required to be paid by any Grantor under this Deed of Trust in an amount less than the sum then due, such acceptance shall be deemed an acceptance on account only and on the condition that it shall not constitute a waiver of the obligation of such Grantor to pay the entire sum then due, and such Grantor's failure to pay the entire sum then due shall be and continue to be a default hereunder notwithstanding acceptance of such amount on account. SECTION 11.7 Sale of Mortgaged Leases. The word "sale" as used in ------------------------ this Article XI with respect to the Mortgaged Leases shall mean the sale, ---------- transfer, assignment or conveyance for value of the leasehold interest of the applicable Grantor in the Mortgaged Leases, together with all of such Grantor's right, title and interest in and to the other items comprising the Mortgaged Property. ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement. To the extent that the Mortgaged ------------------ Property includes personal property or items of personal property which are or are to become fixtures under applicable law, this Deed of Trust shall also be construed as a security agreement under the UCC (with each Grantor as the "Debtor" and the Beneficiary as the "Secured Party"); and, upon and during the continuance of an Event of Default, the Beneficiary shall be entitled with respect to such personal property to exercise all remedies hereunder, all remedies available under the UCC with respect to fixtures and all other remedies available under applicable law. Without limiting the foregoing, such personal property may, at the Beneficiary's option and upon and during the continuance of an Event of Default, (i) be sold hereunder together with any sale of any portion of the Mortgaged Property or otherwise, (ii) be sold pursuant to the UCC, or (iii) be dealt with by the Beneficiary in any other manner permitted under applicable law. The Beneficiary may require the Grantors to assemble such personal property and make it available to the Beneficiary at a place to be designated by the Beneficiary. Each Grantor acknowledges and agrees that a disposition of the personal property in accordance with the Beneficiary's rights and remedies in respect to the Mortgaged Property as heretofore provided is a commercially reasonable disposition thereof; provided, however, that the -------- ------- Beneficiary shall give the applicable Grantor not less than ten (10) days' prior notice of the time and place of any intended disposition. SECTION 12.2 Fixture Filing. To the extent that the Mortgaged -------------- Property includes items of personal property which are or are to become fixtures under applicable law, and to the extent permitted under applicable law, the filing hereof in the real estate records of the county in which such Mortgaged Property is located shall also operate from the time of filing as a fixture filing with respect to such Mortgaged Property, and the following information is applicable for the purpose of such fixture filing, to wit: ---------------------------------------------------------------------------- Name and Address of the debtors: Name and Address of the secured party: ---------------------------------------------------------------------------- -32- ----------------------------------------------------------------------------- Each Grantor being the type of entity The Beneficiary having the address and having the address described in described in the Preamble hereof. the Pre-amble hereof with respect thereto. ----------------------------------------------------------------------------- This Financing Statement covers the following types or items of property: The Mortgaged Property. This instrument covers goods or items of personal property which are or are to become fixtures upon the real property described in Schedule A attached hereto. The name of the record owner of the Property on which such fixtures are or are to be located is (i) in the case of Parcels 1, 2, 3, 4 and 5 described on Schedule A attached hereto, Black Hawk and (ii) in the case of Parcel 6 described on Schedule A attached hereto, Black Hawk/Jacobs. ----------------------------------------------------------------------------- ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security. Each Grantor ------------------------------------------ shall, forthwith after the execution and delivery hereof and thereafter, from time to time, cause this Deed of Trust and any financing statement, continuation statement or similar instrument relating to any thereof or to any property intended to be subject to the Lien hereof to be filed, registered and recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the validity and priority thereof or the Lien hereof purported to be created upon the Mortgaged Property and the interest and rights of the Beneficiary therein. The applicable Grantors shall (if they have not already done so), at their sole cost and expense, properly, duly and validly record an appropriate memorandum of each Mortgaged Lease and any amendments or supplements thereto in each jurisdiction in which any of the Leased Premises may be situated. The Grantors shall pay or cause to be paid all taxes and fees incident to such filing, registration and recording, and all reasonable expenses incident to the preparation, execution and acknowledgment thereof, and of any instrument of further assurance, and all Federal or state stamp taxes or other taxes, duties and charges arising out of or in connection with the execution and delivery of such instruments. SECTION 13.2 Further Acts. Each Grantor shall, at the sole cost and ------------ expense of the Grantors, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers, financing statements, continuation statements, instruments and assurances as the Beneficiary shall from time to time reasonably request, which may be necessary in the judgment of the Beneficiary from time to time to assure, perfect, convey, assign, mortgage, transfer and confirm unto the Beneficiary, the property and rights hereby conveyed or assigned or which such Grantor may be or may hereafter become bound to convey or assign to the Beneficiary or for carrying out the intention or facilitating the performance of the terms hereof or the filing, registering or recording hereof. Without limiting the generality of the foregoing, in the event that the Beneficiary desires to exercise any remedies, consensual rights or attorney-in-fact powers set forth in this Deed of Trust and deter- -33- mines it necessary to obtain any approvals or consents of any Governmental Authority or any other Person therefor, then, upon the reasonable request of the Beneficiary, each Grantor agrees to use its reasonable efforts to assist and aid the Beneficiary to obtain as soon as practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers. In the event any Grantor shall fail (i) within ten (10) Business Days after demand, to execute or take any action required to be executed or taken by such Grantor under this Section 13.2 to the extent same is necessary to maintain perfection ------------ of the Lien granted to Beneficiary hereunder or (ii) such failure shall constitute an Event of Default, to execute or take any action required to be executed or taken by such Grantor under this Section 13.2 (other than the type ------------ described in clause (i) of this sentence) then, in each of the cases described in clauses (i) and (ii) of this sentence, the Beneficiary may execute or take the same as the attorney-in-fact for such Grantor, such power of attorney being coupled with an interest and is irrevocable. SECTION 13.3 Additional Security. Without notice to or consent of any ------------------- Grantor and without impairment of the Lien and rights created by this Deed of Trust, the Beneficiary may accept (but no Grantor shall be obligated to furnish) from such Grantor or from any other Person, additional security for the Secured Obligations. Neither the giving hereof nor the acceptance of any such additional security shall prevent the Beneficiary from resorting, first, to such additional security, and, second, to the security created by this Deed of Trust without affecting the Beneficiary's Lien and rights under this Deed of Trust. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Owned Premises and Leased --------------------------------------------------- Premises. All of the grants, covenants, terms, provisions and conditions in this - -------- Deed of Trust shall run with the Owned Premises and Leased Premises and shall apply to, and bind the successors and assigns of, the Grantors. If there shall be more than one grantor with respect to the Mortgaged Property, the covenants and warranties hereof shall be joint and several. SECTION 14.2 No Merger. The rights and estate created by this Deed of --------- Trust shall not, under any circumstances, be held to have merged into any other estate or interest now owned or hereafter acquired by the Beneficiary unless the Beneficiary shall have consented to such merger in writing, such consent not to be unreasonably withheld. SECTION 14.3 Concerning Beneficiary and Trustee. ---------------------------------- (i) The Beneficiary has been appointed as trustee pursuant to the Indenture. The actions of the Beneficiary hereunder are subject to the provisions of the Indenture. The Beneficiary shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of the Mortgaged Property), in accordance with this Deed of Trust and the Indenture. The Beneficiary may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. The Beneficiary may resign and a successor Beneficiary may be appointed in the manner provided in the Indenture. Upon the acceptance of any appointment as the Beneficiary by a successor Beneficiary, that successor Beneficiary shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the re- -34- tiring Beneficiary under this Deed of Trust, and the retiring Beneficiary shall thereupon be discharged from its duties and obligations under this Deed of Trust. After any retiring Beneficiary's resignation, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it under this Deed of Trust while it was the Beneficiary. (ii) The Beneficiary shall be deemed to have exercised reasonable care in the custody and preservation of the Mortgaged Property in its possession if such Mortgaged Property is accorded treatment substantially equivalent to that which the Beneficiary, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Beneficiary nor any of the Secured Parties shall have responsibility for taking any necessary steps to preserve rights against any Person with respect to any Mortgaged Property. (iii) The Beneficiary shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper Person, and, with respect to all matters pertaining to this Deed of Trust and its duties hereunder, upon advice of counsel selected by it. (iv) If any portion of the Mortgaged Property also constitutes collateral granted to the Beneficiary under any other deed of trust, mortgage, security agreement, pledge or instrument of any type, in the event of any conflict between the provisions hereof and the provisions of such other deed of trust, mortgage, security agreement, pledge or instrument of any type in respect of such collateral, the Beneficiary, in its sole discretion, shall select which provision or provisions shall control. SECTION 14.4 Beneficiary May Perform; Beneficiary Appointed ---------------------------------------------- Attorney-in-Fact. If any Grantor shall fail to perform any covenants contained - ---------------- in this Deed of Trust, subject to any applicable grace periods or contest rights permitted pursuant to Article IX hereof or as otherwise permitted by any ---------- Collateral Document (including, without limitation, such Grantor's covenants to (i) pay the premiums in respect of all required insurance policies hereunder, (ii) pay Charges, (iii) make repairs, (iv) discharge Liens or (v) pay or perform any obligations of such Grantor under any Mortgaged Property) or if any warranty on the part of such Grantor contained herein shall be breached, the Beneficiary may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose; provided, however, that -------- ------- the Beneficiary shall in no event be bound to inquire into the validity of any tax, Lien, imposition or other obligation which such Grantor fails to pay or perform as and when required hereby and which such Grantor does not contest in accordance with the provisions of Article IX hereof. Any and all amounts ---------- reasonably so expended by the Beneficiary shall be paid by the Grantors in accordance with the provisions of Section 14.5 hereof. Neither the provisions of ------------ this Section 14.4 nor any action taken by the Beneficiary pursuant to the ------------ provisions of this Section 14.4 shall prevent any such failure to observe any ------------ covenant contained in this Deed of Trust nor any breach of warranty from constituting an Event of Default. Upon the occurrence and during the continuance of an Event of Default each Grantor hereby appoints the Beneficiary its attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor to take any action and to execute any instrument consistent with the terms hereof and the other Collateral Documents which the Beneficiary may deem necessary or advisable to accomplish the purposes hereof. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. Each Grantor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. -35- SECTION 14.5 Expenses The Grantors will upon demand pay to the -------- Beneficiary the amount of any and all reasonable costs and expenses, including the reasonable fees and expenses of its counsel and the reasonable fees and expenses of any experts and agents which the Beneficiary may incur in connection with (i) any action, suit or other proceeding affecting the Mortgaged Property or any part thereof commenced, in which action, suit or proceeding the Beneficiary is made a party or participates or in which the right to use the Mortgaged Property or any part thereof is threatened, or in which it becomes necessary in the judgment of the Beneficiary to defend or uphold the Lien hereof (including, without limitation, any action, suit or proceeding to establish or uphold the compliance of the Mortgaged Property with any Requirements of Law), (ii) the collection of the Secured Obligations, (iii) the enforcement and administration hereof, (iv) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Mortgaged Property, (v) the exercise or enforcement of any of the rights of the Beneficiary or any Secured Party hereunder or (vi) the failure by the Grantors to perform or observe any of the provisions hereof. All amounts expended by the Beneficiary and payable by the Grantors under this Section 14.5 shall be due upon demand ------------ therefor (together with interest thereon accruing at the Default Rate during the period from and including the date on which such funds were so expended to the date of repayment) and shall be part of the Secured Obligations. The Grantors' obligations under this Section 14.5 shall survive the termination hereof and the ------------ discharge of the Grantors' other obligations under this Deed of Trust. SECTION 14.6 Indemnity. --------- (i) The Grantors agree to indemnify, pay and hold harmless the Beneficiary, the Trustee and each of the other Secured Parties and the officers, directors, employees, agents and Affiliates of the Beneficiary, the Trustee and each of the other Secured Parties (collectively, the "Indemnitees") from and ----------- against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs (including, without limitation, settlement costs), expenses or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, commenced or threatened, whether or not such Indemnitee shall be designated a party thereto), which may be imposed on, incurred by or asserted against that Indemnitee, in any manner relating to or arising out hereof, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (including, without limitation, any misrepresentation by any Grantor in this Deed of Trust, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (the "Indemnified Liabilities"); provided, however, that the ----------------------- -------- ------- Grantors shall have no obligation to an Indemnitee hereunder with respect to Indemnified Liabilities to the extent it has been determined by a final decision (after all appeals and the expiration of time to appeal) by a court of competent jurisdiction that such Indemnified Liabilities arose from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Grantors shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. (ii) Survival. The obligations of the Grantors contained in this -------- Section 14.6 shall survive the termination hereof and the discharge of the - ------------ Grantors'other obligations under this Deed of Trust, the Indenture and the other Collateral Documents. -36- (iii) Reimbursement. Any amount paid by any Indemnitee as to which ------------- such Indemnitee has the right to reimbursement shall constitute Secured Obligations secured by the Mortgaged Property. SECTION 14.7 Continuing Security Interest; Assignment. This Deed of ---------------------------------------- Trust shall create a continuing Lien on and security interest in the Mortgaged Property and shall (i) be binding upon each Grantor (with respect to its respective interest only), its respective successors and assigns and (ii) inure, together with the rights and remedies of the Beneficiary and the Trustee hereunder, to the benefit of the Beneficiary and the Trustee and the other Secured Parties and each of their respective successors, transferees and assigns. No other Persons (including, without limitation, any other creditor of the Grantors) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (ii), any Holder of the Notes may assign or otherwise transfer any indebtedness held by it secured by this Deed of Trust to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Holder, herein or otherwise, subject however, to the provisions of the Indenture. SECTION 14.8 Termination; Release. The Mortgaged Property shall be -------------------- released from the Lien of this Deed of Trust in accordance with the provisions of Article 10 of the Indenture. ---------- SECTION 14.9 Modification in Writing. No amendment, modification, ----------------------- supplement, termination or waiver of or to any provision hereof, nor consent to any departure by any Grantor therefrom, shall be effective unless the same shall be done in accordance with the terms of the Indenture and unless in writing and signed by the Beneficiary and any Grantor. Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by any Grantor from the terms of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Deed of Trust or any other Collateral Document, no notice to or demand on the Grantors in any case shall entitle the Grantors to any other or further notice or demand in similar or other circumstances. SECTION 14.10 Notices. Unless otherwise provided herein or in the ------- Indenture, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Indenture, if to the Grantors, addressed to it at the address of the Issuer set forth in the Indenture, and as to the Beneficiary, addressed to it at its address set forth in the Indenture, and as to the Trustee, addressed to it at the address set forth in the Preamble hereof, or in each case at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 14.10. ------------- SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL. ------------------------------------------------------- THIS DEED OF TRUST SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR ITEM OR TYPE OF MORTGAGED PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. EACH GRANTOR AGREES THAT SERVICE OF PROCESS IN ANY PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE ISSUER AT ITS ADDRESS SET FORTH IN THE INDENTURE OR AT SUCH OTHER AD- -37- DRESS OF WHICH THE BENEFICIARY SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. IF ANY AGENT APPOINTED BY ANY GRANTOR REFUSES TO ACCEPT SERVICE, EACH GRANTOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE BENEFICIARY TO BRING PROCEEDINGS AGAINST THE GRANTORS IN THE COURTS OF ANY OTHER JURISDICTION. EACH GRANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS DEED OF TRUST OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 14.12 Severability of Provisions. Any provision hereof which -------------------------- is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 14.13 Limitation on Interest Payable. It is the intention of ------------------------------ the parties to conform strictly to the usury laws, whether state or Federal, that are applicable to the transaction of which this Deed of Trust is a part. All agreements between the Grantors and the Beneficiary, whether now existing or hereafter arising and whether oral or written, are hereby expressly limited so that in no contingency or event whatsoever shall the amount paid or agreed to be paid by the Grantors for the use, forbearance or detention of the money to be loaned or advanced under the Indenture or any related document or for the payment or performance of any covenant or obligation contained herein or in the Indenture or any related document exceed the maximum amount permissible under applicable Federal or state usury laws. If under any circumstances whatsoever fulfillment of any such provision, at the time performance of such provision shall be due, shall involve exceeding the limit of validity prescribed by law, then the obligation to be fulfilled shall be reduced to the limit of such validity. If under any circumstances the Grantors shall have paid an amount deemed interest by applicable law, which would exceed the highest lawful rate, such amount that would be excessive interest under applicable usury laws shall be applied to the reduction of the principal amount owing in respect of the Secured Obligations and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal and any other amounts due hereunder, the excess shall be refunded to the Issuer. All sums paid or agreed to be paid for the use, forbearance or detention of the principal under any extension of credit by the Beneficiary shall, to the extent permitted by applicable law, and to the extent necessary to preclude exceeding the limit of validity prescribed by law, be amortized, prorated, allocated and spread from the date hereof until payment in full of the Secured Obligations so that the actual rate of interest on account of such principal amounts is uniform throughout the term hereof. SECTION 14.14 Business Days. In the event any time period or any date ------------- provided in this Deed of Trust ends or falls on a day other than a Business Day, then such time period shall be deemed to end and such date shall be deemed to fall on the next succeeding Business Day, and performance herein may be made on such Business Day, with the same force and effect as if made on such other day. SECTION 14.15 Relationship. The relationship of the Beneficiary to the ------------ Grantors hereunder is strictly and solely that of lender and borrowers and grantors and beneficiary and nothing contained in the Indenture, the Notes, this Deed of Trust or any other document or instrument now existing and delivered in connection therewith or otherwise in connection with the Secured Obligations is intended to create, or shall in any event or under any circumstance be construed as creating a partnership, joint -38- venture, tenancy-in-common, joint tenancy or other relationship of any nature whatsoever between the Beneficiary and the Grantors other than as lender and borrowers and grantors and beneficiary. SECTION 14.16 Waiver of Stay. -------------- (i) Each Grantor agrees that in the event that such Grantor or any property or assets of such Grantor shall hereafter become the subject of a voluntary or involuntary proceeding under the Bankruptcy Code or each Grantor shall otherwise be a party to any Federal or state bankruptcy, insolvency, moratorium or similar proceeding to which the provisions relating to the automatic stay under Section 362 of the Bankruptcy Code or any similar provision in any such law is applicable, then, in any such case, whether or not the Beneficiary has commenced foreclosure proceedings under this Deed of Trust, the Beneficiary shall be entitled to relief from any such automatic stay as it relates to the exercise of any of the rights and remedies (including, without limitation, any foreclosure proceedings) available to the Beneficiary as provided in this Deed of Trust, in any other Collateral Document or any other document evidencing the Secured Obligations. (ii) The Beneficiary shall have the right to petition or move any court having jurisdiction over any proceeding described in Section 14.16(i) ---------------- hereof for the purposes provided therein, and each Grantor agrees (i) not to oppose any such petition or motion and (ii) at the Grantors' sole cost and expense, to assist and cooperate with the Beneficiary, as may be requested by the Beneficiary from time to time, in obtaining any relief requested by the Beneficiary, including, without limitation, by filing any such petitions, supplemental petitions, requests for relief, documents, instruments or other items from time to time requested by the Beneficiary or any such court. SECTION 14.17 No Credit for Payment of Taxes or Impositions. No --------------------------------------------- Grantor shall be entitled to any credit against the principal, premium, if any, or interest payable under the Indenture or the Notes, and no Grantor shall be entitled to any credit against any other sums which may become payable under the terms thereof or hereof, by reason of the payment of any Charge on the Mortgaged Property or any part thereof. SECTION 14.18 No Claims Against the Beneficiary. Nothing contained in --------------------------------- this Deed of Trust shall constitute any consent or request by the Beneficiary, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Owned Premises or Leased Premises or any part thereof, nor as giving the Grantors any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the Beneficiary in respect thereof or any claim that any Lien based on the performance of such labor or services or the furnishing of any such materials or other property is prior to the Lien hereof. SECTION 14.19 Obligations Absolute. All obligations of the Grantors -------------------- hereunder shall be absolute and unconditional irrespective of: (i) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of any Grantor, the Issuer or any other Guarantor; (ii) any lack of validity or enforceability of the Indenture, the Notes or any other agreement or instrument relating thereto; -39- (iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Indenture, the Notes or any other agreement or instrument relating thereto; (iv) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations; (v) any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect hereof, the Indenture, the Notes or any agreement or instrument relating thereto except as specifically set forth in a waiver granted pursuant to the provisions of Section 14.9 hereof; or ------------ (vi) any other circumstances which might otherwise constitute a defense available to, or a discharge of, any Grantor. SECTION 14.20 Last Dollars Secured. This Deed of Trust secures only a -------------------- portion of the Indebtedness owing or which may become owing by the Grantors. The parties agree that any payments or repayments of such Indebtedness by the Grantors shall be and be deemed to be applied first to the portion of the Indebtedness that is not secured hereby, it being the parties' intent that the portion of the Indebtedness last remaining unpaid shall be secured hereby. SECTION 14.21 This Section is intentionally omitted. SECTION 14.22 Mortgaged Leases. ---------------- (i) The applicable Grantors shall punctually and properly perform, observe and otherwise comply with each and every covenant, agreement, requirement and condition set forth in the Mortgaged Leases and do or cause to be done all things necessary or appropriate to keep the Mortgaged Leases in full force and effect and to preserve and keep unimpaired the rights of the applicable Grantor thereun-der. Upon request of the Beneficiary, the applicable Grantors constituting the Lessors and Tenants under the Mortgaged Leases shall deliver an estoppel certificate, addressed to the Beneficiary, stating that there is no default under the Mortgaged Leases or any state of facts which, with the passage of time or notice or both, would constitute a default thereunder, or if there be any default under the Mortgaged Leases, giving the details thereof. (ii) In the event the applicable Grantor acquires the fee simple title or any other estate or interest in the property subject to any Mortgaged Lease, such acquisition will not merge with the leasehold estate created by such Mortgaged Lease, but such other estate or interest will remain discrete and immediately become subject to the Lien of this Deed of Trust, and the applicable Grantor shall execute, acknowledge and deliver any instruments requested by the Beneficiary to confirm the coverage of the Lien evidenced hereby upon such other estate or interest. The Grantors shall pay any and all conveyance or -40- mortgage taxes and filing or similar fees in connection with the execution, delivery, filing or recording of any such instrument. (iii) The applicable Grantor shall promptly notify the Beneficiary in wiring of the occurrence of any default (or any event which, with the lapse of time or notice or both, would constitute a default) on the part of or caused by any party to the Mortgaged Leases. If for any reason the applicable Grantor cannot timely make any payment under any Mortgaged Lease or perform or comply with any of its obligations under any Mortgaged Lease, the applicable Grantor shall notify the Beneficiary in sufficient time to enable the Beneficiary (but the Beneficiary shall not be obligated) timely to make such payments and/or to perform or comply with such other obligations. On receipt by the Beneficiary from the applicable Grantor pursuant to this Section 14.21(iii), or from the ------------------ applicable Lessor under the Mortgaged Leases, of any such notice of default by, or inability to make any payment by, the Grantor thereunder, the Beneficiary may rely thereon and, after reasonable notice to the applicable Grantor, take such action as the Beneficiary deems necessary or desirable to cure such default, even though the existence of such default or the nature thereof is denied by the applicable Grantor or by any other Person. (iv) Except as otherwise permitted under Section 10.6 of the Indenture, no Grantor shall, without the prior written consent of the Beneficiary, amend, modify, surrender, impair, forfeit, cancel or terminate, or permit the amendment, modification, surrender, impairment, forfeiture, cancellation or termination of, any Mortgaged Lease in whole or in part, whether or not a default shall have occurred and shall be continuing under either thereof. Any such termination, cancellation, modification, change, supplement, alteration, amendment or extension without the prior written consent contemplated by this subsection 14.21(iv) shall be void and of no force or effect. (v) The leasehold estate of the applicable Grantor created by the Mortgaged Leases and the estate of the Lessor, under the Mortgaged Leases shall each at all times remain separate and apart and retain their separate identities, and no merger of the leasehold or easement estate of the applicable Grantor with the estate of the Lessor, will result with respect to the Beneficiary or with respect to any purchaser acquiring the Mortgaged Property at any sale on foreclosure of the Lien of this Deed of Trust without the written consent of the Beneficiary. (vi) Each Grantor covenants and agrees that if it shall be the subject of a proceeding under the Federal Bankruptcy Code, it shall not elect to treat any Mortgaged Lease as terminated (pursuant to Section 365 of the Federal Bankruptcy Code or any similar statute or law) without the prior written consent of the Beneficiary. Each Grantor hereby irrevocably assigns to the Beneficiary the right to exercise such election. SECTION 14.23 Senior Intercreditor Agreement. With respect to any ------------------------------ Credit Agreement Collateral securing the Grantors' obligations under the Credit Agreement and at such time as and for so long as the Senior Intercreditor Agreement shall be in effect, the rights and remedies of the Trustee with respect to the Credit Agreement Collateral shall be subject to the provisions of the Senior Intercreditor Agreement. SECTION 14.24 Subordination, Non-Disturbance and Attornment --------------------------------------------- (i) Subordination. Notwithstanding anything to the contrary set ------------- forth in any Mortgaged Lease, the Mortgaged Leases and the leasehold estate created thereby and all of Gilpin's rights thereunder -41- are and shall at all times be subject and subordinate in all respects to this Deed of Trust and the other Collateral Documents and the Lien thereof, and to all rights of the Trustee and Beneficiary hereunder and thereunder, and to any and all advances to be made hereunder and thereunder, and to all renewals, modifications, consolidations, replacements and extensions hereof. (ii) Attornment. Gilpin agrees to attorn to, accept and recognize the ---------- Beneficiary or any other Person acquiring title to the Leased Premises through a foreclosure (an "Acquiring Party") as the landlord under the Mortgaged Leases pursuant to the provisions expressly set forth therein for the then remaining balance of the term of the Mortgaged Leases, and any extensions thereof as made pursuant to the Mortgaged Leases. The foregoing provision shall be self-operative and shall not require the execution of any further instrument or agreement by Gilpin as a condition to its effectiveness. For purposes of this Section 14.24, a "foreclosure" shall include (but not be limited to) a sheriff's - ------------- or trustee's sale under the power of sale contained in the this Deed of Trust or other Collateral Document, the termination of any superior lease of the Leased Premises and any other transfer of the Lessor's interest in the Mortgaged Property under peril of foreclosure, including, without limitation to the generality of the foregoing, an assignment or sale in lieu of foreclosure. (iii) Notwithstanding anything to the contrary contained herein or in the Mortgaged Leases, it is specifically understood and agreed that neither the Trustee, the Beneficiary, any receiver nor any Acquiring Party shall be: (a) liable for any act, omission, negligence or default of any prior landlord (including the Lessors); or (b) liable for any failure of any prior landlord (including the Lessors) to construct any improvements or bound by any covenant to construct any improvement either at the commencement of the term of the Mortgaged Leases or upon any renewal or extension thereof or upon the addition of additional space pursuant to any expansion right contained in the Mortgage Leases; or (c) subject to any offsets, credits, claims or defenses which Gilpin might have against any prior landlord (including the Lessors); or (d) bound by any rent or additional rent which is payable on a monthly basis and which Gilpin might have paid for more than one (1) month in advance to any prior landlord (including the Lessors) or by any security deposit or other prepaid charge which Gilpin might have paid in advance to any prior landlord (including the Lessors); or (e) liable to Gilpin hereunder or under the terms of the Mortgaged Leases beyond its interest in the Leased Premises; or (f) bound by any assignment, subletting, renewal, extension or any other agreement or modification of the Mortgaged Leases made without the written consent of the Beneficiary, such consent not to be unreasonably withheld; or (g) bound by any consensual or negotiated surrender, cancellation or termination of the Mortgaged Leases, in whole or in part, agreed upon between the Lessors and Gilpin unless effected unilaterally by Gilpin pursuant to the express terms of the Mortgaged Leases. -42- Notwithstanding the foregoing, Gilpin reserves its right to any and all claims or causes of action (i) against such prior landlord for prior losses or damages and (ii) against the successor landlord for all losses or damages arising from and after the date that such successor landlord takes title to the Leased Premises. (iv) Certain Acknowledgments and Agreements by Tenant. Gilpin has ------------------------------------------------ notice that the Mortgaged Leases and the rents and all other sums due thereunder have been assigned to the Beneficiary as security for the notes secured by the Collateral Documents. In the event the Beneficiary notifies Gilpin of the occurrence of a Default under the Collateral Documents and demands that Gilpin pay its rents and all other sums due or to become due under the Mortgaged Leases directly to the Beneficiary, Gilpin shall honor such demand and pay its rent and all other sums due under the such Mortgaged Lease directly to the Beneficiary or as otherwise authorized in writing by the Beneficiary. The Lessors irrevocably authorize Gilpin to make the foregoing payments to the Beneficiary upon such notice and demand. (v) Trustee to Receive Default Notices. Gilpin shall notify the ---------------------------------- Beneficiary of any default by the Lessors under the Mortgaged Leases which would entitle Gilpin to cancel the Mortgaged Leases, and agrees that, notwithstanding any provisions of the Mortgaged Leases to the contrary, no notice of cancellation thereof shall be effective unless the Beneficiary shall have received notice of default giving rise to such cancellation and shall have failed within sixty (60) days after receipt of such notice to cure such default or, if such default cannot be cured within sixty (60) days, shall have failed within sixty (60) days after receipt of such notice to commence and thereafter diligently pursue any action necessary to cure such default. (vi) Estoppel. Gilpin hereby certifies and represents to the -------- Beneficiary that as of the date of this Deed of Trust: (a) each Mortgaged Lease is in full force and effect; (b) all requirements for the commencement and validity of each Mortgaged Lease have been satisfied and there are no unfulfilled conditions to Gilpin's obligations under such Mortgaged Lease; (c) Gilpin is not in default under any Mortgaged Lease and has not received any uncured notice of any default by Gilpin under such Mortgaged Lease; to the best of Gilpin's knowledge, no Lessor is in default under any Mortgaged Lease; no act, event or condition has occurred which with notice or the lapse of time, or both, would constitute a default by Gilpin or any Lessor under any Mortgaged Lease; no claim by Gilpin of any nature exists against any Lessor under any Mortgaged Lease; and all obligations of each Lessor have been fully performed; (d) there are no defenses, counterclaims or setoffs against rents or charges due or which may become due under any Mortgaged Lease; (e) none of the rent which Gilpin is required to pay under any Mortgaged Lease has been prepaid, or will in the future be prepaid, more than one (1) month in advance; (f) Gilpin has no right or option contained in any Mortgaged Lease or in any other document to purchase all or any portion of the Leased Premises; -43- (g) no Mortgaged Lease has been modified or amended and each Mortgaged Lease constitutes the entire agreement between the applicable Lessor and Gilpin relating to the applicable Leased Premises; and (h) Gilpin has not assigned, mortgaged, sublet, encumbered, conveyed or otherwise transferred any or all of its interest under the Mortgaged Leases except pursuant to this Deed of Trust. (vii) Limitation of Benficiary's Liability. (a) The Beneficiary shall ------------------------------------ have no obligations nor incur any liability with respect to any warranties of any nature whatsoever, whether pursuant to any Mortgaged Lease or otherwise, including, without limitation, any warranties respecting use, compliance with zoning, any Lessor's title, any Lessor's authority, habitability, fitness for purpose or possession. (b) In the event that the Beneficiary shall acquire title to any Leased Premises subject to a Mortgaged Lease, the Beneficiary shall have no obligation, nor incur any liability, beyond the Beneficiary's then equity interest, if any, in the Leased Premises, and Gilpin shall look exclusively to such equity interest of the Beneficiary, if any, in the Leased Premises for the payment and discharge of any obligations imposed upon the Beneficiary hereunder or under any Lease, and the Beneficiary is hereby released and relieved of any other obligations hereunder and under such Mortgaged Lease. (viii) Lien of Collateral Documents. Nothing contained in this Section ---------------------------- ------- 14.24 shall in any way impair or affect the Lien created by this Deed of Trust - ----- or any other Collateral Document or the provisions hereof or thereof. (ix) Compliance with Lease. The Tenant agrees that in the event there --------------------- is any inconsistency between the terms and provisions of this Deed of Trust and the terms and provisions of any Mortgaged Lease, the terms and provisions of this Deed of Trust shall be controlling. (x) Further Actions. Gilpin agrees at its own expense to execute and --------------- deliver, at any time and from time to time upon the request of the Beneficiary or any Acquiring Party, such documents and instruments (in recordable form, if requested) as may be necessary or appropriate, in the reasonable opinion of the Beneficiary or any Acquiring Party, to fully implement or to further evidence the understandings and agreements contained in this Section 14.24. Moreover, ------------- Gilpin hereby irrevocably appoints and constitutes the Beneficiary or any Acquiring Party as its true and lawful attorney-in-fact to execute and deliver any such documents or instruments which may be necessary or appropriate, in the reasonable opinion of the Beneficiary or any Acquiring Party, to implement or further evidence such understandings and agreements and which Gilpin, after ten (10) days' notice from the Beneficiary or any Acquiring Party, has failed to execute and deliver. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Grantors have caused this Deed of Trust to be duly executed and delivered under seal the day and year first above written. BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC., a Colorado corporation /s/ Stephen R. Roark By: _______________________________ Stephen R. Roark, President GILPIN HOTEL VENTURE, a Colorado joint venture partnership By: BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC., a Colorado corporation, Its Joint Venture Partner /s/ Stephen R. Roark By: __________________________ Stephen R. Roark, President By: GILPIN VENTURES, INC., a Colorado corporation Its Joint Venture Partner /s/ Stephen R. Roark By: ___________________________ Stephen R. Roark, President BLACK HAWK/JACOBS ENTERTAINMENT, LLC, a Colorado limited liability company By: BH ENTERTAINMENT LTD., an Ohio limited liability company, Its Co-Manager By: JACOBS ENTERTAINMENT LTD., an Ohio limited liability company, Its Manager /s/ Jeffrey P. Jacobs By: ________________________ Jeffrey P. Jacobs, President By: BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC., a Colorado corporation, Its Co-Manager /s/ Stephen R. Roark By: ___________________________ Stephen R. Roark, President Colorado State of _____________________) ) ss.: ) Denver City and County of ___________) 19th The foregoing instrument was acknowledged before me this _______ day of February, 2002 by Stephen R. Roark as President of Black Hawk Gaming & Development Company, Inc., a Colorado corporation. Witness my hand and official seal. 1/11/2005 My commission expires: ___________________ /s/ Vicki L. Jaynes [SEAL] ________________________________________ __________ Notary Public Colorado State of _____________________) ) ss.: Denver City and County of ___________) 19th The foregoing instrument was acknowledged before me this ________ day of February, 2002 by Stephen R. Roark as President of Black Hawk Gaming & Development Company, Inc., a Colo-rado corporation, and as President of Gilpin Ventures, Inc., a Colorado corporation, the joint venture partners of Gilpin Hotel Venture, a Colorado joint venture partnership. Witness my hand and official seal. 1/11/2005 My commission expires: ___________________ /s/ Vicki L. Jaynes [SEAL] ________________________________________ __________ Notary Public Colorado State of _____________________) ) ss.: Denver City and County of ___________) 19th The foregoing instrument was acknowledged before me this ______ day of February, 2002 by Stephen R. Roark as President of Black Hawk Gaming & Development Company, Inc., a Colo-rado corporation, the Co-Manager of Black Hawk/Jacobs Entertainment LLC, a Colorado limited liability company. Witness my hand and official seal. 1/11/2005 My commission expires: ______________________ /s/ Vicki L. Jaynes [SEAL] _________________________________________ ___________ Notary Public Florida State of _____________) ) ss.: Palm Beach County of ____________) 18th The foregoing instrument was acknowledged before me this _________ day of February, 2002 by Jeffrey P. Jacobs as President of Jacobs Entertainment Ltd., an Ohio limited liability company, the Manager of BH Entertainment Ltd., a Ohio limited liability company, the Co-Manager of Black Hawk/Jacobs Entertainment, LLC, a Colorado limited liability company. Witness my hand and official seal. 6-28-04 My commission expires: ______________________ /s/ Linda B. Boschen [SEAL] _________________________________________ __________ Notary Public Schedule A ---------- Legal Description [to come from title policy] Schedule B ---------- Mortgaged Leases 1. That certain Gilpin Land Lease by and between Black Hawk Gaming & Development Company, Inc., as Lessor, and Gilpin Hotel Venture, as Lessee, affecting the Leased Land and commonly known as the Gilpin Hotel property and Millsite 29 and part of Millsite 30 situated in the City of Black Hawk, County of Gilpin, State of Colorado. A Memorandum of Lease relating to such lease was recorded on April 24, 1998 in the real property records of Gilpin County, Colorado in Book 639, Page 124, as Document No. 95479. 2. That certain Parking Garage Lease Agreement by and between Black Hawk/Jacobs Entertainment LLC, as Landlord, and Gilpin Hotel Venture, as Tenant, affecting the Leased Land and the Parking Garage Improvement on Parcel 6 of the Owned Land situated in the City of Black Hawk, County of Gilpin, State of Colorado. A Memorandum of Lease relating to such lease was recorded on April 24, 1998 in the real property records of Gilpin County, Colorado in Book 639, Page 129, as Document No. 95480. Schedule C ---------- Prior Liens ----------- 1. Each of the liens and other encumbrances excepted as being prior to the Lien hereof as set forth in Schedule B of the pro forma title policy to be issued pursuant to the title insurance commitment issued by Clear Creek - Abstract & Title Corp., agent for First American Title Insurance Company, dated as of the date hereof and delivered to the Beneficiary on the date hereof, bearing Clear Creek - Abstract & Title Corp., agent for First American Title Insurance Company reference number FG2001-3729 relating to the real property described in Schedule A attached hereto. 2. Zoning and building ordinances and regulations, to the extent they constitute Permitted Liens of the type described in clause (4) of the definition thereof. Schedule D ---------- Leases Affecting the Mortgaged Property NONE Exhibit 1 --------- FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the "Agreement") is made and entered into as of the ____ day of _______, ____ by and between ________________________________, as trustee, having an office at _________________ (in such capacity, "Trustee"), and _____________________, having an office at __________________________ ("Tenant"). R E C I T A L S: - - - - - - - - A. Tenant is the tenant under a certain lease dated _____________, ____ between ________________________________, as landlord ("Landlord"), and Tenant, as tenant (as amended through the date hereof, the "Lease"), pursuant to which Tenant leased a portion (the "Leased Premises") of the property known as _____________________________, located at _____________________________, as more particularly described in Schedule A attached hereto (the "Property"). ---------- B. Landlord has or will grant a deed of trust lien on and security interest in the Property to Trustee (for its benefit and for the benefit of the holders of certain senior secured notes and notes issued in exchange therefor pursuant to that certain indenture dated as of [________ ___, 2002]) pursuant to one or more mortgages, deeds of trust, deeds to secure debt or similar security instruments (collectively, the "Security Instruments"). C. Tenant has agreed to subordinate the Lease to the Security Instruments and to the lien thereof and Trustee has agreed not to disturb Tenant's possessory rights in the Leased Premises under the Lease on the terms and conditions hereinafter set forth. A G R E E M E N T: - - - - - - - - - NOW, THEREFORE, the parties hereto mutually agree as follows: 1. Subordination. Notwithstanding anything to the contrary set ------------- forth in the Lease, the Lease and the leasehold estate created thereby and all of Tenant's rights thereunder are and shall at all times be subject and subordinate in all respects to the Security Instruments and the lien thereof, and to all rights of Trustee thereunder, and to any and all advances to be made thereunder, and to all renewals, modifications, consolidations, replacements and extensions thereof. 2. Nondisturbance. So long as Tenant complies with the -------------- provisions of this Agreement, pays all rents and other charges as specified in the Lease and is not otherwise in default (beyond applicable notice and cure periods) of any of its obligations and covenants pursuant to the Lease, Trustee agrees for itself and its successors in interest and for any other person acquiring title to the Property through a foreclosure (an "Acquiring Party"), that Tenant's possession of the Leased Premises as described in the Lease will not be disturbed during the term of the Lease by reason of a foreclosure. For purposes of this Agreement, a "foreclosure" shall include (but not be limited to) a sheriff's or trustee's sale under the power of sale con- -2- tained in the Security Instruments, the termination of any superior lease of the Property and any other transfer of the Landlord's interest in the Property under peril of foreclosure, including, without limitation to the generality of the foregoing, an assignment or sale in lieu of foreclosure. 3. Attornment. Tenant agrees to attorn to, accept and recognize any ---------- Acquiring Party as the landlord under the Lease pursuant to the provisions expressly set forth therein for the then remaining balance of the term of the Lease, and any extensions thereof as made pursuant to the Lease. The foregoing provision shall be self-operative and shall not require the execution of any further instrument or agreement by Tenant as a condition to its effectiveness. 4. No Liability. Notwithstanding anything to the contrary contained herein ------------ or in the Lease, it is specifically understood and agreed that neither the Trustee, any receiver nor any Acquiring Party shall be: (a) liable for any act, omission, negligence or default of any prior landlord (including Landlord); or (b) liable for any failure of any prior landlord (including Landlord) to construct any improvements or bound by any covenant to construct any improvement either at the commencement of the term of the Lease or upon any renewal or extension thereof or upon the addition of additional space pursuant to any expansion right contained in the Lease; or (c) subject to any offsets, credits, claims or defenses which Tenant might have against any prior landlord (including Landlord); or (d) bound by any rent or additional rent which is payable on a monthly basis and which Tenant might have paid for more than one (1) month in advance to any prior landlord (including Landlord) or by any security deposit or other prepaid charge which Tenant might have paid in advance to any prior landlord (including Landlord); or (e) liable to Tenant hereunder or under the terms of the Lease beyond its interest in the Property; or (f) bound by any assignment, subletting, renewal, extension or any other agreement or modification of the Lease made without the written consent of Trustee; or (g) bound by any consensual or negotiated surrender, cancellation or termination of the Lease, in whole or in part, agreed upon between Landlord and Tenant unless effected unilaterally by Tenant pursuant to the express terms of the Lease. Notwithstanding the foregoing, Tenant reserves its right to any and all claims or causes of action (i) against such prior landlord for prior losses or damages and (ii) against the successor landlord for all losses or damages arising from and after the date that such successor landlord takes title to the Property. 5. Certain Acknowledgments and Agreements by Tenant. (a) Tenant has notice ------------------------------------------------ that the Lease and the rents and all other sums due thereunder have been assigned to Trustee as security for the notes secured by the Security Instruments. In the event Trustee notifies Tenant of the occurrence of a de- -3- fault under the Security Instruments and demands that Tenant pay its rents and all other sums due or to become due under the Lease directly to Trustee, Tenant shall honor such demand and pay its rent and all other sums due under the Lease directly to Trustee or as otherwise authorized in writing by Trustee. Landlord irrevocably authorizes Tenant to make the foregoing payments to Trustee upon such notice and demand. (b) Tenant shall send a copy of any and all notices or statements under the Lease to Trustee at the same time such notices or statements are sent to Landlord. (c) This Agreement satisfies any and all conditions or requirements in the Lease relating to the granting of a non-disturbance agreement. 6. Trustee to Receive Default Notices. Tenant shall notify Trustee of ---------------------------------- any default by Landlord under the Lease which would entitle Tenant to cancel the Lease, and agrees that, notwithstanding any provisions of the Lease to the contrary, no notice of cancellation thereof shall be effective unless Trustee shall have received notice of default giving rise to such cancellation and shall have failed within sixty (60) days after receipt of such notice to cure such default or, if such default cannot be cured within sixty (60) days, shall have failed within sixty (60) days after receipt of such notice to commence and thereafter diligently pursue any action necessary to cure such default. 7. Estoppel. Tenant hereby certifies and represents to Trustee -------- that as of the date of this Agreement: (a) the Lease is in full force and effect; (b) all requirements for the commencement and validity of the Lease have been satisfied and there are no unfulfilled conditions to Tenant's obligations under the Lease; (c) Tenant is not in default under the Lease and has not received any uncured notice of any default by Tenant under the Lease; to the best of Tenant's knowledge, Landlord is not in default under the Lease; no act, event or condition has occurred which with notice or the lapse of time, or both, would constitute a default by Tenant or Landlord under the Lease; no claim by Tenant of any nature exists against Landlord under the Lease; and all obligations of Landlord have been fully performed; (d) there are no defenses, counterclaims or setoffs against rents or charges due or which may become due under the Lease; (e) none of the rent which Tenant is required to pay under the Lease has been prepaid, or will in the future be prepaid, more than one (1) month in advance; (f) Tenant has no right or option contained in the Lease or in any other document to purchase all or any portion of the Leased Premises; (g) the Lease has not been modified or amended and constitutes the entire agreement between Landlord and Tenant relating to the Leased Premises; -4- (h) Tenant has not assigned, mortgaged, sublet, encumbered, conveyed or otherwise transferred any or all of its interest under the Lease; and (i) Tenant has full authority to enter into this Agreement, which has been duly authorized by all necessary action. 8. Notices. All notices or other written communications hereunder ------- shall be deemed to have been properly given (i) upon delivery, if delivered in person with receipt acknowledged by the recipient thereof, (ii) one (1) Business Day (hereinafter defined) after having been deposited for overnight delivery with any reputable overnight courier service, or (iii) three (3) Business Days after having been deposited in any post office or mail depository regularly maintained by the United States Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested, addressed to the receiving party at its address set forth above or addressed as such party may from time to time designate by written notice to the other parties. For purposes of this Section 8, the term "Business Day" shall mean any day other than Saturday, Sunday or any other day on which banks are required or authorized to close in New York, New York. Either party by notice to the other may designate additional or different addresses for subsequent notices or communications. 9. Successors. The obligations and rights of the parties pursuant to ---------- this Agreement shall bind and inure to the benefit of the successors, assigns, heirs and legal representatives of the respective parties; provided, however, -------- ------- that in the event of the assignment or transfer of the interest of Trustee, all obligations and liabilities of Trustee under this Agreement shall terminate, and thereupon all such obligations and liabilities shall be the responsibility of the party to whom Trustee's interest is assigned or transferred; and provided, -------- further, that the interest of Tenant under this Agreement may not be assigned or - ------- transferred without the prior written consent of Trustee. In addition, Tenant acknowledges that all references herein to Landlord shall mean the owner of the landlord's interest in the Lease, even if said owner shall be different from the Landlord named in the Recitals. 10. Duplicate Original; Counterparts. This Agreement may be -------------------------------- executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Agreement. 11. Limitation of Trustee's Liability. (a) Trustee shall have no --------------------------------- obligations nor incur any liability with respect to any warranties of any nature whatsoever, whether pursuant to the Lease or otherwise, including, without limitation, any warranties respecting use, compliance with zoning, Landlord's title, Landlord's authority, habitability, fitness for purpose or possession. (b) In the event that Trustee shall acquire title to the Leased Premises or the Property, Trustee shall have no obligation, nor incur any liability, beyond Trustee's then equity interest, if any, in the Leased Premises, and Tenant shall look exclusively to such equity interest of Trustee, if any, in the Leased Premises for the payment and discharge of any obligations imposed upon Trustee hereunder or under the Lease, and Trustee is hereby released and relieved of any other obligations hereunder and under the Lease. 12. Modification in Writing. This Agreement may not be modified except ----------------------- by an agreement in writing signed by the parties hereto or their respective successors in interest. -5- 13. Lien of Security Instruments. Nothing contained in this ---------------------------- Agreement shall in any way impair or affect the lien created by the Security Instruments or the provisions thereof. 14. Compliance with Lease. Tenant agrees that in the event there is --------------------- any inconsistency between the terms and provisions hereof and the terms and provisions of the Lease, the terms and provisions hereof shall be controlling. 15. Governing Law; Severability. This Agreement shall be governed by --------------------------- the laws of the State of [ ]. If any term of this Agreement or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such terms to any person or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 16. Further Actions. Tenant agrees at its own expense to execute and --------------- deliver, at any time and from time to time upon the request of Trustee or any Acquiring Party, such documents and instruments (in recordable form, if requested) as may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to fully implement or to further evidence the understandings and agreements contained in this Agreement. Moreover, Tenant hereby irrevocably appoints and constitutes Trustee or any Acquiring Party as its true and lawful attorney-in-fact to execute and deliver any such documents or instruments which may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to implement or further evidence such understandings and agreements and which Tenant, after thirty (30) days' notice from Trustee or any Acquiring Party, has failed to execute and deliver. S-1 IN WITNESS WHEREOF, Trustee and Tenant have duly executed this Agreement as of the date first above written. ___________________________________________, as Trustee By: ______________________________________ Name: Title: ___________________________________________, as Tenant By: ______________________________________ Name: Title: The undersigned, as the Landlord named in the Recitals, having duly executed this Agreement as of the date first written above, and as grantor, pledgor, assignor or debtor under the Security Instruments, hereby accepts and agrees for itself and its successors and assigns, (i) to be bound by the provisions of Section 5 hereof, (ii) that nothing contained in the foregoing Agreement (x) shall in any way be deemed to constitute a waiver by Trustee of any of its rights or remedies under the Security Instruments or (y) shall in any way be deemed to release Landlord from its obligations to comply with the terms, provisions, conditions, covenants and agreements set forth in the Security Instruments and (iii) that the provisions of the Security Instruments remain in full force and effect and must be complied with by Landlord. ________________________________, a ________________________________ By: ______________________________________ Name: Title: ACKNOWLEDGMENT State of___________) ) ss.: County of _________) [Local counsel to provide appropriate acknowledgment] SCHEDULE A to EXHIBIT 1 ----------------------- Description of Real Property ---------------------------- EX-4.11 41 dex411.txt FEE AND LEASEHOLD DEED OF TRUST-GOLD DUST CASINO Exhibit 4.11 [NEVADA] AP Nos. 007-271-02, 007-271-03, 007-271-04, 007-271-05, 007-271-06, 007-271 07, 007-271-08, 007-271-09, 007-271-10, 007-271-11 and 007-271-13 After recording, please return to: Athy A. Mobilia, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 ================================================================================ FEE AND LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING BY GOLD DUST WEST CASINO, INC., a Nevada corporation, as Trustor, TO FIRST AMERICAN TITLE COMPANY OF NEVADA, a Nevada corporation, as Trustee under this instrument, for the benefit of WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee under the Indenture referred to herein, as Beneficiary Securing Principal Indebtedness of $125,000,000; Dated as of February 22, 2002 Relating to Premises in: Washoe County, Nevada TABLE OF CONTENTS
Page PREAMBLE ..................................................................... 1 RECITALS ..................................................................... 1 AGREEMENT .................................................................... 2 ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions ................................................ 3 SECTION 1.2 Interpretation ............................................. 9 SECTION 1.3 Resolution of Drafting Ambiguities ......................... 9 ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Trust Property .................................... 10 SECTION 2.2 Assignment of Leases and Rents ............................. 11 SECTION 2.3 Secured Obligations ........................................ 11 SECTION 2.4 Future Advances ............................................ 11 SECTION 2.5 No Release ................................................. 12 ARTICLE III REPRESENTATIONS AND WARRANTIES OF TRUSTOR SECTION 3.1 Authority and Validity ..................................... 12 SECTION 3.2 Warranty of Title .......................................... 13 SECTION 3.3 Condition of Trust Property ................................ 14 SECTION 3.4 Leases ..................................................... 15 SECTION 3.5 Insurance .................................................. 16 SECTION 3.6 Charges .................................................... 16 SECTION 3.7 Environmental .............................................. 17 SECTION 3.8 No Conflicts, Consents, etc ................................ 17 SECTION 3.9 Benefit to the Trustor ..................................... 18
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Page ---- ARTICLE IV CERTAIN COVENANTS OF TRUSTOR SECTION 4.1 Preservation of Corporate Existence ............................. 18 SECTION 4.2 Title ........................................................... 18 SECTION 4.3 Maintenance and Use of Trust Property; Alterations .............. 19 SECTION 4.4 Notices Regarding Certain Defaults .............................. 20 SECTION 4.5 Access to Trust Property, Books and Records; Other Information .. 20 SECTION 4.6 Limitation on Liens; Transfer Restrictions ...................... 21 SECTION 4.7 Environmental ................................................... 21 SECTION 4.8 Estoppel Certificates ........................................... 22 ARTICLE V LEASES SECTION 5.1 Trustor's Affirmative Covenants with Respect to Leases .......... 23 SECTION 5.2 Trustor's Negative Covenants with Respect to Leases ............. 23 SECTION 5.3 Additional Requirements with Respect to New Leases .............. 24 ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Trustor ...................... 24 SECTION 6.2 Collection of Rents by the Beneficiary .......................... 25 SECTION 6.3 No Release ...................................................... 25 SECTION 6.4 Irrevocable Interest ............................................ 25 SECTION 6.5 Amendment to Leases ............................................. 25 ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges .............................................. 26 SECTION 7.2 Escrow of Taxes ................................................. 26 SECTION 7.3 Certain Statutory Liens ......................................... 26 SECTION 7.4 Stamp and Other Taxes ........................................... 26 SECTION 7.5 Certain Tax Law Changes ......................................... 27 SECTION 7.6 Proceeds of Tax Claim ........................................... 27 ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages ....................... 27
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Page ---- SECTION 8.2 Delivery After Foreclosure ............................................ 27 ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens ....................... 28 SECTION 9.2 Contesting of Insurance ............................................... 28 ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction ........................................................... 28 SECTION 10.2 Condemnation .......................................................... 28 ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default ..................................................... 29 SECTION 11.2 Remedies in Case of an Event of Default ............................... 29 SECTION 11.3 Sale of Trust Property if Event of Default Occurs; Proceeds of Sale ... 30 SECTION 11.4 Additional Remedies in Case of an Event of Default .................... 32 SECTION 11.5 Legal Proceedings After an Event of Default ........................... 33 SECTION 11.6 Remedies Not Exclusive ................................................ 34 SECTION 11.7 Sale of Trust Lease ................................................... 34 ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement .................................................... 34 SECTION 12.2 Fixture Filing ........................................................ 35 ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security ............................ 36 SECTION 13.2 Further Acts .......................................................... 36 SECTION 13.3 Additional Security ................................................... 36
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Page ----- ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Owned Premises and Leased Premises ...... 37 SECTION 14.2 No Merger ......................................................... 37 SECTION 14.3 Concerning Beneficiary and Trustee ................................ 37 SECTION 14.4 Beneficiary May Perform; Beneficiary Appointed Attorney-in-Fact ... 38 SECTION 14.5 Expenses .......................................................... 38 SECTION 14.6 Indemnity ......................................................... 39 SECTION 14.7 Continuing Security Interest; Assignment .......................... 40 SECTION 14.8 Termination; Release .............................................. 40 SECTION 14.9 Modification in Writing ........................................... 40 SECTION 14.10 Notices ........................................................... 40 SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL .......................................................... 41 SECTION 14.12 Severability of Provisions ........................................ 41 SECTION 14.13 Limitation on Interest Payable .................................... 41 SECTION 14.14 Business Days ..................................................... 42 SECTION 14.15 Relationship ...................................................... 42 SECTION 14.16 Waiver of Stay .................................................... 42 SECTION 14.17 No Credit for Payment of Taxes or Impositions ..................... 43 SECTION 14.18 No Claims Against the Beneficiary ................................. 43 SECTION 14.19 Obligations Absolute .............................................. 43 SECTION 14.20 Last Dollars Secured .............................................. 44 SECTION 14.21 Trustee Provisions ................................................ 44 SECTION 14.22 Trust Lease ....................................................... 46
SIGNATURE ACKNOWLEDGMENT SCHEDULE A Legal Description SCHEDULE B Prior Liens SCHEDULE C Leases EXHIBIT 1 Form of Subordination, Non-Disturbance and Attornment Agreement iv FEE AND LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING FEE AND LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Deed of Trust"), dated as of February ------------- 22, 2002, made by GOLD DUST WEST CASINO, INC., a Nevada corporation, having an office at 444 Vine Street, Reno, Nevada 89505, as trustor, assignor and debtor (in such capacities and together with any successors in such capacities, the "Trustor"), to FIRST AMERICAN TITLE COMPANY OF NEVADA, a Nevada corporation, as ------- trustee under this Deed of Trust (together with any successors in such capacity, "Trustee") in favor of WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association having an office at 213 Court Street, Suite 902, Middletown, CT 06457, in its capacity as trustee pursuant to the Indenture (as hereinafter defined), as beneficiary, assignee and secured party (in such capacities and together with any successors in such capacities, the "Beneficiary"). ----------- R E C I T A L S : - - - - - - - - A. Gameco, Inc. (the "Issuer"), certain of its Subsidiaries (as ------ hereinafter defined), the Trustor and the Beneficiary have, in connection with the execution and delivery of this Deed of Trust, entered into that certain indenture, dated as of February 8, 2002 (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Indenture"), --------- pursuant to which the Issuer has issued its 11 7/8% senior secured notes due 2009 (the "Senior Secured Notes") in the aggregate principal amount of -------------------- $125,000,000. It is contemplated that the Issuer may, after the date hereof, issue Additional Notes (as defined in the Indenture) and Exchange Notes (as defined in the Indenture); the Exchange Notes, together with the Additional Notes and the Senior Secured Notes, the "Notes"), in each case, pursuant to the ----- provisions of the Indenture. B. The Issuer owns, directly or through its Subsidiaries, all of the issued and outstanding shares of the Trustor. C. The Trustor has, pursuant to the Indenture, among other things, unconditionally guaranteed (the "Guarantee") the obligations of the Issuer under --------- the Indenture and the Notes. D. The Trustor will receive substantial benefits from the execution and delivery of, and the performance of the obligations under, the Indenture and the Notes, and is therefore willing to enter into this Deed of Trust. E. The Trustor is or will be the legal owner of the Trust Property (as hereinafter defined) pledged by it hereunder. F. The Trustor is the legal owner and holder of the tenant's interest under that certain lease, dated as of November 24, 1975 between Chester J. Piazzo, Darlene Piazzo, Lincoln E. Piazzo and Helen J. Piazzo as lessors, and John E. Cavanaugh and Barbara A. Cavanaugh as lessees, (the "Original Lease"), as disclosed by a Memorandum of Lease recorded on November 25, 1975 in Book 932 at Page 820 as Document No. 386577 in the Official Records of Washoe County, Nevada (the "Official Records"), and as amended by an Addendum to Lease recorded in the Official Records on July 26, 1977 in -2- Book 1108 at Page 339 as Document No. 478005, a Supplement to Lease recorded in the Official Records on July 26, 1977 in Book 1108 at Page 351 as Document No. 478006, an Amendment to Lease recorded in the Official Records on July 26, 1977 in Book 1108 at Page 355 as Document No. 478007, a document dated as of July 22, 1977 and entitled "Agreement," recorded in the Official Records on July 26, 1977 in Book 1108 at Page 358 as Document No. 478008, with the Lessor recognized as the successor in interest to the original lessors under the Original Lease (as amended) pursuant to a Letter Agreement dated July 8,1988, by William C. Sanford, Jr. addressed to John E. Cavanaugh and Barbara A. Cavanaugh, and with all interest of Lincoln E. Piazzo and Helen J. Piazzo in the premises demised under the Original Lease having been conveyed to Chester J. Piazzo and Darlene Piazzo pursuant to that certain Deed recorded in the Official Records on September 26, 1984 in Book 2071 at Page 0558 as Document No. 952043; all interest of Chester J. Piazzo and Darlene Piazzo in the premises demised under the Original Lease having been conveyed to Chester J. Piazzo and Darlene Piazzo as Co-Trustees of the C. & D. Piazzo Family Trust (collectively with their successors and assigns in such capacity, the "Lessor"), pursuant to that certain Grant Deed recorded in the Official Records on February 12, 1992 in Book 3417 at Page 0325 as Document No. 1545623; all interest of Barbara A. Cavanaugh as a lessee under the Original Lease, as it had then been amended, having been assigned to John E. Cavanaugh pursuant to an Assignment of Lease recorded in the Official Records on November 8, 1991 in Book 3360 at Page 364 as Document No. 1522682; all interest of Leslie A. Cavanaugh in and to the Original Lease, as it had then been amended, having been assigned to John E. Cavanaugh pursuant to that certain Assignment of Lease, Option, and Right of First Refusal dated July 17, 2000 and recorded September 5, 2000 in the Official Records as Document No. 2479631; all interest of John E. Cavanaugh as lessee under the Original Lease, as it had then been amended, having been assigned to Black Hawk Gaming & Development Company, Inc., a Colorado corporation pursuant to that certain Assignment of Lease, Option and Right of First Refusal recorded in the Official Records on January 4, 2001 as Document No. 2512899, and all interest of Black Hawk Gaming & Development Company, Inc., as lessee under the Original Lease, as it had then been amended, having been assigned to the Trustor, as tenant, pursuant to that certain Assignment of Lease, Option and Right of First Refusal recorded in the Official Records on January 4, 2001 as Document No. 2512900 (as such lease may be amended from time to time in accordance with the provisions of this Deed of Trust, the "Trust Lease"), which affects the Leased Land (as hereinafter defined). G. This Deed of Trust is given by the Trustor for the benefit of the Beneficiary (for the ratable benefit of the Secured Parties (as hereinafter defined), pursuant to the Indenture) to secure the payment and performance of all of the Secured Obligations (as hereinafter defined). A G R E E M E N T: - - - - - - - - - NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Trustor hereby covenants and agrees with the Trustee for the benefit of the Beneficiary (for the ratable benefit of the Secured Parties) as follows: -3- ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions. Capitalized terms used but not otherwise defined ----------- herein shall have the meanings assigned to such terms in the Indenture. The following terms used in this Deed of Trust shall have the following meanings: "ACM" shall have the meaning assigned to such term in Section 4.7(ii) --- -------------- hereof. "Affiliate" shall have the meaning assigned to such term in the Indenture. --------- "Alteration" shall mean any and all alterations, installations, ---------- improvements, additions, modifications or changes of a structural nature of or to the Owned Premises or the Leased Premises. "Beneficiary" shall have the meanings assigned to such term in the Preamble ----------- hereof. "Business Day" shall have the meaning assigned to such term in the ------------ Indenture. "Charges" shall mean any and all real estate, property and other taxes, ------- assessments and special assessments, levies, fees, all water and sewer rents and charges and all other governmental charges or Liens imposed upon or assessed against, and all claims (including, without limitation, landlords', carriers', mechanics', workmen's, repairmen's, laborers', materialmen's, suppliers' and warehousemen's Liens and other claims arising by operation of law) against, all or any portion of the Trust Property. "Collateral Account" shall have the meaning assigned to such term in the ------------------ Indenture. "Collateral Documents" shall have the meaning assigned to such term in the -------------------- Indenture. "Contested Liens" shall mean, collectively, any Liens incurred in respect --------------- of any Charges to the extent that the amounts owing in respect thereof are not yet delinquent or are being contested and otherwise comply with the provisions of Section 9.1 hereof. ----------- "Contracts" shall mean, collectively, any and all right, title and interest --------- of the Trustor in and to any and all contracts and other general intangibles relating to the Trust Property (including, without limitation, all reciprocal easements and/or operating agreements, covenants, conditions and restrictions and similar agreements affecting all or any portion of the Trust Property) and all reserves, deferred payments, deposits, refunds and claims of every kind, nature or character relating thereto. "Deed of Trust" shall have the meaning assigned to such term in the ------------- Preamble hereof. "Default Rate" shall mean the rate per annum equal to the highest rate then ------------ payable under the Indenture. "Destruction" shall mean any and all damage to, or loss or destruction of, ----------- the Owned Premises or Leased Premises or any part thereof. -4- "Environmental Law" shall mean any applicable federal, state, local or ----------------- municipal statute, law, rule, regulation, ordinance, code, policy or rule of common law and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment binding on the Trustor, relating to pollution or protection of the environment, or health or safety including, without limitation, any relating to the release or threatened release of any Hazardous Materials. "Event of Default" shall have the meaning assigned to such term in the ---------------- Indenture. "Fixture" shall mean (1) all machinery, apparatus, equipment, fittings, ------- fixtures, improvements and articles of personal property of every kind, description and nature whatsoever now or hereafter attached or affixed to the Owned Land or any other Improvement or used in connection with the use and enjoyment of the Owned Land or any other Improvement or the maintenance or preservation thereof, which by the nature of their location thereon or attachment thereto are fixtures under the UCC or any other applicable law including, without limitation, all utility systems, fire sprinkler and security systems, drainage facilities, lighting facilities, all water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone and other utility equipment and facilities, pipes, fittings and other items of every kind and description now or hereafter attached to or located on the Owned Land which by the nature of their location thereon or attachment thereto are real property under applicable law, HVAC equipment, boilers, electronic data processing, telecommunications or computer equipment, refrigeration, electronic monitoring, water or lighting systems, power, sanitation, waste removal, elevators, maintenance or other systems or equipment and all additions thereto and betterments, renewals, substitutions and replacements thereof and (2) all of the Trustor's estate, right, title and interest in, to and under all machinery, apparatus, equipment, fittings, fixtures, improvements and articles of personal property of every kind, description and nature whatsoever now or hereafter attached or affixed to the Leased Land or any other Improvement or used in connection with the use and enjoyment of the Leased Land or any other Improvement or the maintenance or preservation thereof, which by the nature of their location thereon or attachment thereto are fixtures under the UCC or any other applicable law including, without limitation, all utility systems, fire sprinkler and security systems, drainage facilities, lighting facilities, all water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone and other utility equipment and facilities, pipes, fittings and other items of every kind and description now or hereafter attached to or located on the Leased Land which by the nature of their location thereon or attachment thereto are real property under applicable law, HVAC equipment, boilers, electronic data processing, telecommunications or computer equipment, refrigeration, electronic monitoring, water or lighting systems, power, sanitation, waste removal, elevators, maintenance or other systems or equipment and all additions thereto and betterments, renewals, substitutions and replacements thereof to the extent of the Trustor's estate, right, title and interest therein. "Governmental Authority" shall mean any federal, state, local, foreign or ---------------------- other governmental, quasi-governmental or administrative (including self-regulatory) body, instrumentality, department, agency, authority, board, bureau, commission, office of any nature whatsoever or other subdivision thereof, or any court, tribunal, administrative hearing body, arbitration panel or other similar dispute-resolving body, whether now or hereafter in existence, or any officer or official thereof, having jurisdiction over the Trustor or the Trust Property or any portion thereof. "Guarantee" shall have the meaning assigned to such term in Recital C --------- --------- hereof. "Guarantors" shall have the meaning assigned to such term in the ---------- Indenture. -5- "Hazardous Materials" shall mean any substance, chemical, material, ------------------- pollutant, waste, contaminant or constituent, which is subject to regulation under or could give rise to liability under any Environmental Law. "Holder" shall have the meaning assigned to such term in the Indenture. ------ "Improvements" shall mean (1) all buildings, structures and other ------------ improvements of every kind or description and any and all Alterations now or hereafter located, attached or erected on the Owned Land including, without limitation (i) all Fixtures of the type described in clause (1) of the definition thereof, (ii) all attachments, railroad tracks, foundations, sidewalks, drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer rights, parking areas, driveways, fences and walls and (iii) all materials now or hereafter located on the Owned Land intended for the construction, reconstruction, repair, replacement, alteration, addition or improvement of or to such buildings, Fixtures of the type described in clause (1) of the definition thereof, structures and improvements, all of which materials shall be deemed to be part of the Improvements immediately upon delivery thereof on the Owned Land and to be part of the improvements immediately upon their incorporation therein; and (2) all of the Trustor's estate, right, title and interest in, to and under all buildings, structures and other improvements of every kind or description and any and all Alterations now or hereafter located, attached or erected on the Leased Land including, without limitation (i) all Fixtures of the type described in clause (2) of the definition thereof, (ii) all attachments, railroad tracks, foundations, sidewalks, drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer rights, parking areas, driveways, fences and walls and (iii) all materials now or hereafter located on the Leased Land intended for the construction, reconstruction, repair, replacement, alteration, addition or improvement of or to such buildings, Fixtures of the type described in clause (2) of the definition thereof, structures and improvements, all of which materials shall be deemed to be part of the Improvements immediately upon delivery thereof on the Leased Land and to be part of the improvements immediately upon their incorporation therein, to the extent of Trustor's estate, right, title and interest therein. "Indemnified Liabilities" shall have the meaning assigned to such term in ----------------------- Section 14.6(i) hereof. - --------------- "Indemnitees" shall have the meaning assigned to such term in Section ----------- ------- 14.6(i) hereof. - ------- "Indenture" shall have the meaning assigned to such term in Recital A --------- --------- hereof. "Insurance Policies" means the insurance policies and coverages required ------------------ to be maintained by the Trustor with respect to the Trust Property pursuant to Section 4.19(b) of the Indenture and all renewals and extensions thereof. "Insurance Requirements" means, collectively, all provisions of the ---------------------- Insurance Policies, all requirements of the issuer of any of the Insurance Policies and all orders, rules, regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon the Trustor and applicable to the Trust Property or any use or condition thereof. "Issuer" shall have the meaning assigned to such term in Recital A hereof. ------ --------- -6- "Landlord" shall mean any landlord, sublandlord, lessor, sublessor, -------- franchisor, licensor or grantor, as applicable. "Leased Land" shall mean the land described in Schedule A annexed ----------- hereto as Parcel 1 and any and all easements, rights-of-way, strips and gores of land, waters, water courses, water rights, mineral, gas and oil rights and all power, air, light and other rights, estates, titles, interests, privileges, liberties, servitudes, licenses, tenements, hereditaments and appurtenances whatsoever, in any way demised under the Trust Lease or belonging, relating or appertaining thereto, or any part thereof, or which hereafter shall in any way be demised under the Trust Lease or belong, relate or be appurtenant thereto. "Leased Premises" shall mean, collectively, (1) the lessee's interest --------------- and estate in the Trust Lease and all recorded or unrecorded extensions, amendments, supplements and restatements thereof, and (2) all right, title and interest of the lessee under the Trust Lease in and to (i) the Leased Land and (ii) Improvements of the type described in clause (2) of the definition thereof. "Leases" shall mean, collectively, any and all interests of the ------ Trustor, as Landlord, in all leases and subleases of space, tenancies, franchise agreements, licenses, occupancy, rental, access or concession agreements and any other agreements pursuant to which any Person is granted a possessory interest in or right to use or occupy all or any portion of the Trust Property, in each case whether now existing or hereafter entered into, whether or not of record, relating in any manner to the Owned Premises or Leased Premises or the use or occupancy thereof and any and all amendments, modifications, supplements, replacements, extensions, renewals and/or guarantees, if any thereof, whether now in effect or hereafter coming into effect. "Lessor" shall have the meaning assigned to such term in Recital F ------ hereof. "Lien" shall have the meaning assigned to such term in the Indenture. ---- "Net Loss Proceeds" shall have the meaning assigned to such term in ----------------- the Indenture. "Net Proceeds" shall have the meaning assigned to such term in the ------------ Indenture. "Notes" shall have the meaning assigned to such term in Recital A ----- --------- hereof. "Officers' Certificate" shall have the meaning assigned to such term --------------------- in the Indenture. "Owned Land" shall mean the land described in Schedule A annexed ---------- hereto as Parcels 2, 3, 4, and 5 together with the Trustor's rights in and to any and all easements, rights-of-way, strips and gores of land, waters, water courses, water rights, mineral, gas and oil rights and all power, air, light and other rights, estates, titles, interests, privileges, liberties, servitudes, licenses, tenements, hereditaments and appurtenances whatsoever, in any way belonging, relating or appertaining thereto, or any part thereof, or which hereafter shall in any way belong, relate or be appurtenant thereto. "Owned Premises" shall mean, collectively, (i) the Owned Land and (ii) -------------- Improvements of the type described in clause (1) of the definition thereof. -7- "Permit" shall mean any and all permits, certificates, approvals, ------ authorizations, consents, licenses, variances, franchises or other instruments, however characterized, of any Governmental Authority (or any Person acting on behalf of a Governmental Authority) now or hereafter acquired or held, together with all amendments, modifications, extensions, renewals and replacements of any thereof issued or in any way furnished in connection with the Trust Property including, without limitation, building permits, certificates of occupancy, environmental certificates, industrial permits or licenses and certificates of operation. "Permitted Collateral Liens" shall have the meaning assigned to such -------------------------- term in Section 4.6 hereof. ----------- "Permitted Liens" shall have the meaning assigned to such term in the --------------- Indenture. "Person" shall have the meaning assigned to such term in the ------ Indenture. "Prior Liens" shall mean, collectively, the Liens identified in ----------- Schedule B annexed to this Deed of Trust. - ---------- "Proceeds" shall mean, collectively, any and all cash proceeds and -------- noncash proceeds and shall include, without limitation, all (i) proceeds of the conversion, voluntary or involuntary, of any of the Trust Property or any portion thereof into cash or liquidated claims, (ii) proceeds of any insurance (except payments made to a Person, other than the Issuer or any Subsidiary thereof, that is not a party to this Deed of Trust), indemnity, warranty, guaranty or claim payable to the Beneficiary or to the Trustor from time to time with respect to any of the Trust Property including, without limitation, all Net Loss Proceeds relating thereto, (iii) payments (in any form whatsoever) made or due and payable to the Trustor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any portion of the Trust Property by any Governmental Authority (or any Person acting on behalf of a Governmental Authority) including, without limitation, all Net Loss Proceeds relating thereto, (iv) products of the Trust Property and (v) other amounts from time to time paid or payable under or in connection with any of the Trust Property including, without limitation, refunds of real estate taxes and assessments, including interest thereon. "Property Material Adverse Effect" shall mean, as of any date of -------------------------------- determination and whether individually or in the aggregate (a) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the business or operations as presently conducted at the Trust Property; (b) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the value or utility of the Trust Property; and (c) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the legality, priority or enforceability of the Lien created by this Deed of Trust or the rights and remedies of the Beneficiary or Trustee hereunder. "Prudent Operator" shall mean the standard of care taken by a prudent ---------------- operator of property similar in use and configuration to the Owned Premises or Leased Premises, as the case may be, and located in the locality where the Owned Premises or Leased Premises, as the case may be, are located. -8- "Records" shall mean, collectively, any and all right, title and ------- interest of the Trustor in and to any and all drawings, plans, specifications, file materials, operating and maintenance records, catalogues, tenant lists, correspondence, advertising materials, operating manuals, warranties, guarantees, appraisals, studies and data relating to the Trust Property or the construction of any Alteration or the maintenance of any Permit. "Rents" shall mean, collectively, any and all rents, additional rents, ----- royalties, issues, cash, guaranties, letters of credit, bonds, sureties or securities deposited under any Lease to secure performance of the Tenant's obligations thereunder, revenues, earnings, profits and income, advance rental payments, payments incident to assignment, sublease or surrender of a Lease, claims for forfeited deposits and claims for damages, now due or hereafter to become due, with respect to any Lease, any indemnification against, or reimbursement for, sums paid and costs and expenses incurred by the Trustor under any Lease or otherwise, and any award in the event of the bankruptcy of any Tenant under or guarantor of a Lease. "Requirements of Law" shall mean, collectively, any and all ------------------- requirements of any Governmental Authority including, without limitation, any and all orders, decrees, determinations, laws, treaties, ordinances, rules, regulations or similar statutes or case law. "Secured Obligations" shall mean all obligations (whether or not ------------------- constituting future advances, obligatory or otherwise) of the Issuer and any and all of the Guarantors from time to time arising under or in respect of this Deed of Trust, the Indenture, the Notes and the other Collateral Documents (including, without limitation, the obligations to pay principal, interest and all other charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Deed of Trust, the Indenture, the Notes and the other Collateral Documents), in each case whether (i) such obligations are direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due whether at stated maturity, by acceleration or otherwise, (ii) arising in the regular course of business or otherwise, (iii) for payment or performance and/or (iv) now existing or hereafter arising (including, without limitation, interest and other obligations arising or accruing after the commencement of any bankruptcy, insolvency, reorganization or similar proceeding with respect to the Issuer, any Guarantor or any other Person, or which would have arisen or accrued but for the commencement of such proceeding, even if such obligation or the claim therefor is not enforceable or allowable in such proceeding). "Secured Parties" shall mean, collectively, the Beneficiary and the --------------- Holders of the Notes. "Senior Secured Notes" shall have the meaning assigned to such term in -------------------- Recital A hereof. - --------- "Subordination Agreement" shall mean a subordination, nondisturbance ----------------------- and attornment agreement substantially in the form of Exhibit 1 annexed to this --------- Deed of Trust. "Subsidiaries" shall have the meaning assigned to such term in the ------------ Indenture. "Taking" shall mean any taking of the Trust Property or any part ------ thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, general or special, or by reason of the temporary requisition of the use or occupancy of the Trust Property or any part thereof, by any Governmental Authority, civil or military. -9- "Tax Escrow Fund" shall have the meaning assigned to such term in --------------- Section 7.2 hereof. - ----------- "Tenant" shall mean any tenant, subtenant, lessee, sublessee, ------ franchisee, licensee, grantee or obligee, as applicable. "Trust Lease" shall have the meaning assigned to such Term in Recital ----------- F hereof. "Trust Property" shall have the meaning assigned to such term in -------------- Section 2.1 hereof. - ----------- "Trustor" shall have the meaning assigned to such term in the Preamble ------- hereof. "Trustor's Interest" shall have the meaning assigned to such term in ------------------ Section 2.2 hereof. "UCC" shall mean the Uniform Commercial Code as in effect on the date --- hereof in the jurisdiction in which the Owned Premises and the Leased Premises are located; provided, however, that if by reason of mandatory provisions of -------- ------- law, the perfection or the effect of perfection or non-perfection of the security interest in any item or portion of the Trust Property is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the jurisdiction in which the Owned Premises and the Leased Premises are located, "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. SECTION 1.2 Interpretation. In this Deed of Trust, unless otherwise -------------- specified, (i) singular words include the plural and plural words include the singular, (ii) words importing any gender include the other gender, (iii) references to any Person include such Person's successors and assigns and in the case of an individual, the word "successors" includes such Person's heirs, devisees, legatees, executors, administrators and personal representatives, (iv) references to any statute or other law include all applicable rules, regulations and orders adopted or made thereunder and all statutes or other laws amending, consolidating or replacing the statute or law referred to, (v) the words "consent," "approve" and "agree," and derivations thereof or words of similar import, mean the prior written consent, approval or agreement of the Person in question not to be unreasonably withheld, (vi) the words "include" and "including," and words of similar import, shall be deemed to be followed by the words "without limitation," (vii) the words "hereto," "herein," "hereof" and "hereunder," and words of similar import, refer to this Deed of Trust in its entirety, (viii) references to Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are to the Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses hereof, (ix) the Schedules and Exhibits to this Deed of Trust, in each case as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof, are incorporated herein by reference, (x) the titles and headings of Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are inserted as a matter of convenience only and shall not affect the constructions of any provisions hereof and (xi) all obligations of the Trustor hereunder shall be satisfied by the Trustor at its sole cost and expense. SECTION 1.3 Resolution of Drafting Ambiguities. The Trustor ---------------------------------- acknowledges and agrees that it was represented by counsel in connection with the execution and delivery hereof, that it and its counsel reviewed and participated in the preparation and negotiation hereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party (i.e., Beneficiary) shall not be employed in the interpretation --- hereof. -10- ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Trust Property. The Trustor hereby pledges, ----------------------- gives, grants, bargains, sells, transfers, assigns and conveys to the Trustee, and its successors and assigns, in trust, with power of sale, for and on behalf of the Beneficiary (for the ratable benefit of the Secured Parties), subject to the terms and conditions hereof, and hereby grants to the Beneficiary (for the ratable benefit of the Secured Parties), also subject to the terms and conditions hereof, a security interest in all of the Trustor's estate, right, title and interest in, to and under the following property, whether now owned or held or hereafter acquired from time to time (collectively, the "Trust ----- Property"): - -------- (i) Owned Premises; (ii) Leased Premises; (iii) Leases; (iv) Rents; (v) Permits; (vi) Contracts; (vii) Records; and (viii) Proceeds. Notwithstanding the foregoing provisions of this Section 2.1, Trust ----------- Property shall not include a grant of any of the Trustor's right, title or interest in (i) any Contract to which the Trustor is a party or any of its rights or interests thereunder (other than (x) the right to receive any payment of money (including without limitation accounts, general intangibles and payment intangibles (each as defined in the UCC) or any other rights referred to in Sections 9-406(f), 9-407(a) or 9-408(a) of the UCC and (y) any proceeds, substitutions or replacements thereof) to the extent, but only to the extent, that such a grant would, under the terms of such Contract, result in a breach or termination of the terms of, or constitute a default under or termination of such Contract and (ii) any Permit to the extent, but only to the extent that, such grant shall constitute or result in abandonment, invalidation or rendering unenforceable any right, title or interest of the Trustor therein; provided, -------- however, that at such time as any Contract or Permit described in clauses (i) - ------- and (ii) of this sentence is no longer subject to such restriction, such applicable Contract or Permit shall (without any act or delivery by any Person) constitute Trust Property hereunder. TO HAVE AND TO HOLD the Trust Property, together with the rights, privileges and appurtenances thereto belonging unto (i) the Trustee, his substitutes or successors, forever, to the extent the same constitutes real property or an interest therein and (ii) the Beneficiary, to the extent the same does not constitute real property or an interest therein, in either case for the benefit of the Beneficiary and the Beneficiary's successors and assigns forever, for the purpose of securing payment and performance by the Trustor of the Secured Obligations, and the Trustor hereby binds itself and its successors and assigns to warrant and for -11- ever defend the Trust Property unto each of the Trustee and Beneficiary, their substitutes, successors and assigns, as the case may be, against the claim or claims of all persons claiming or to claim the same or any part thereof. SECTION 2.2 Assignment of Leases and Rents. During the term hereof, ------------------------------ the Trustor absolutely, presently, unconditionally and irrevocably pledges, grants, sells, conveys, delivers, hypothecates, assigns, transfers and sets over to the Beneficiary, and grants to the Beneficiary (for the ratable benefit of the Secured Parties), subject to the terms of Article VI hereof, all of the Trustor's estate, right, title, interest, claim and demand, as Landlord, under any and all of the Leases including, without limitation, the following (such assigned rights, the "Trustor's Interest"): ------------------ (i) the immediate and continuing right to receive and collect Rents payable by the Tenants pursuant to the Leases; (ii) all claims, rights, powers, privileges and remedies of the Trustor, whether provided for in the Leases or arising by statute or at law or in equity or otherwise, consequent on any failure on the part of the Tenants to perform or comply with any term of the Leases including damages or other amounts payable to the Trustor as a result of such failure; (iii) all rights to take all actions upon the happening of a default under the Leases as shall be permitted by the Leases or by law including, without limitation, the commencement, conduct and consummation of proceeding at law or in equity; and (iv) the full power and authority, in the name of the Trustor or otherwise, to enforce, collect, receive and receipt for any and all of the foregoing and to take all other actions whatsoever which the Trustor, as Landlord, is or may be entitled to take under the Leases. SECTION 2.3 Secured Obligations. This Deed of Trust secures, and the ------------------- Trust Property is collateral security for, the payment and performance in full when due of the Secured Obligations. SECTION 2.4 Future Advances. This Deed of Trust shall secure future --------------- advances. The maximum aggregate amount of all advances of principal under the Indenture (which advances are obligatory to the extent the conditions set forth in the Indenture relating thereto are satisfied) that may be outstanding hereunder at any time is $125,000,000 plus interest thereon, collection costs, sums advanced for the payment of taxes, assessments, maintenance and repair charges, insurance premiums and any other reasonable costs incurred to protect the security encumbered hereby or the Lien hereof, reasonable expenses incurred by the Beneficiary by reason of any default by the Trustor under the terms hereof, together with all other sums secured hereby. SECTION 2.5 No Release. Nothing set forth in this Deed of Trust shall ---------- relieve the Trustor from the performance of any term, covenant, condition or agreement on the Trustor's part to be performed or observed under or in respect of any of the Trust Property or from any liability to any Person under or in respect of any of the Trust Property or shall impose any obligation on the Beneficiary or any other Secured Party to perform or observe any such term, covenant, condition or agreement on the Trus-tor's part to be so performed or observed or shall impose any liability on the Beneficiary or any other Secured Party for any act or omission on the part of the Trustor relating thereto or for any breach of any representation or warranty on the part of the Trustor contained in this Deed of Trust, the Indenture, the Notes -12- or the Collateral Documents, or under or in respect of the Trust Property or made in connection herewith or therewith. The obligations of the Trustor contained in this Section 2.5 shall survive the termination hereof and the ----------- discharge of the Trustor's other obligations under this Deed of Trust and the Indenture, the Notes and the Collateral Documents. ARTICLE III REPRESENTATIONS AND WARRANTIES OF TRUSTOR SECTION 3.1 Authority and Validity. ---------------------- The Trustor represents and warrants that as of the date hereof: (i) it is duly organized or formed, validly existing and, if applicable, in good standing under the laws of the jurisdiction of its organization; (ii) it is duly qualified to transact business and is in good standing in the state in which the Trust Property is located; (iii) it has full corporate or other organizational power and lawful authority to execute and deliver this Deed of Trust and to mortgage and grant a Lien on and security interest in the Trust Property and otherwise assign the Trustor's Interest and otherwise perform its obligations as contemplated herein, and all corporate and governmental actions, consents, authorizations and approvals necessary or required therefor have been duly and effectively taken or obtained; and (iv) this Deed of Trust is a legal, valid and binding obligation of the Trustor, enforceable against the Trustor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. SECTION 3.2 Warranty of Title. The Trustor represents and warrants ----------------- that: (i) it has good fee simple title to the Owned Premises and the Landlord's interest and estate under or in respect of the Leases relating thereto and good title to the interest it purports to own or hold in and to each of the Permits, the Contracts and the Records, in each case subject to no Liens, except for Permitted Collateral Liens; (ii) it owns the tenant's interest in the Trust Lease and has a valid leasehold interest in the Leased Premises and the Landlord's interest and estate under or in respect of the Leases relating thereto and good title to the interest it purports to own or hold in and to each of the Permits, the Contracts and the Records, in each case subject to no Liens, except for Permitted Collateral Liens; (iii) the Trust Lease (a) is a valid and subsisting lease, superior and paramount to all other leases respecting the Leased Premises, (b) is in full force and effect and no default (nor any -13- event which, with notice or lapse of time or both, would constitute such a default) has occurred or is continuing under the Trust Lease and (c) is not subject to any defenses, offsets or counterclaims and there have been no renewals or extensions of or supplements, modifications or amendments to the Trust Lease not previously disclosed to the Beneficiary or the Trustee except those that would not result in a Property Material Adverse Effect; (iv) It is in actual possession of the Leased Premises; (v) it has good title to the interest it purports to own or hold in and to all rights and appurtenances to or that constitute a portion of the Trust Property, except for Permitted Collateral Liens; (vi) it is in compliance with each term, condition and provision of any obligation of the Trustor which is secured by the Trust Property or the noncompliance with which would result in a Property Material Adverse Effect; and (vii) this Deed of Trust creates and constitutes a valid and enforceable first priority Lien on the Trust Property subject to Permitted Collateral Liens, and, to the extent any of the Trust Property shall consist of Fixtures, a first priority security interest in the Fixtures, which first priority Lien and first priority security interest are subject only to Permitted Collateral Liens. SECTION 3.3 Condition of Trust Property. The Trustor represents and --------------------------- warrants that: (i) there has been issued and there remains in full force and effect subject to no revocation, suspension, forfeiture or modification, each and every Permit necessary for the present use, operation and occupancy of the Owned Premises or Leased Premises, as the case may be, by the Trustor and its Tenants and the conduct of their respective businesses and all required zoning, building code, land use, environmental and other similar Permits, except where the failure to be so issued and to be in full force and effect would not result in a Property Material Adverse Effect; (ii) the Owned Premises and Leased Premises and the present and contemplated use and occupancy thereof comply with all applicable zoning ordinances, building codes, land use laws, setback or other development and/or use requirements of Governmental Authorities except where such noncompliance would not result in a Property Material Adverse Effect; (iii) the Owned Premises and Leased Premises are served by all utilities (including, without limitation, water and sewer systems) necessary for the present use thereof, and all utility services are provided by public or private utilities and the Owned Premises and Leased Premises have accepted or are equipped to accept such utility services and the Trustor has not received notice of termination of such utility service, except where the failure to be so served would not result in a Property Material Adverse Effect; (iv) the Trustor has access to the Owned Premises or Leased Premises, as the case may be, from roads sufficient to allow the Trustor and its Tenants and invitees to conduct their respective businesses at the Owned Premises and Leased Premises, as the case may be, in accordance with sound commercial practices and the Trustor has not received notice of termination of -14- such access, except where the failure to have such access would not result in a Property Material Adverse Effect; (v) the Trustor has not received notice of any Taking or the commencement or pendency of any action or proceeding therefor, other than such Takings as would not result in a Property Material Adverse Effect; (vi) there has not occurred any Destruction of the Owned Premises or Leased Premises or any portion thereof as a result of any fire or other casualty that, as of the date hereof, has not been repaired in all material respects, other than such Destruction as would not have a Property Material Adverse Effect; (vii) there are no disputes regarding boundary lines, location, encroachments or possession of any portions of the Trust Property and no state of facts exists which could give rise to any such claim other than such disputes as would not result in a Property Material Adverse Effect; (viii) all liquid and solid waste disposal, septic and sewer systems located on the Owned Premises or Leased Premises are in a good and safe condition and repair and in compliance with all Requirements of Law, except where the failure to so comply would not result in a Property Material Adverse Effect; (ix) no portion of the Owned Premises or Leased Premises is located in an area identified by the Federal Emergency Management Agency or any successor thereto as an area having special flood hazards pursuant to the Flood Insurance Acts or, if any portion of the Leased Premises is located within such area, the Trustor has obtained the insurance prescribed in Article VIII hereof; ------------ (x) the Owned Premises and Leased Premises are assessed for real estate tax purposes as one or more wholly independent tax lot or lots, separate from any adjoining land or improvements not constituting a portion of such lot or lots, and no other land or improvements are assessed and taxed together with the Owned Premises and Leased Premises or any portion thereof, other than such cases where the failure to be so assessed would not result in a Property Material Adverse Effect; and (xi) there are no options or rights of first refusal to purchase or acquire all or any portion of the Trust Property, other than such options or rights of first refusal as would not result in a Property Material Adverse Effect. SECTION 3.4 Leases. The Trustor represents and warrants that as of ------ the date hereof: (i) the Leases identified in Schedule C attached hereto are the ---------- only Leases in existence on the date hereof relating to the Leased Premises; (ii) true copies of such Leases have been previously delivered to the Beneficiary and there are no agreements with any Tenant under such Leases other than those agreements expressly set forth therein; -15- (iii) the Trustor is the sole owner of all of the Trustor's Interest in such Leases; (iv) each of such Leases is in full force and effect, constitutes a legal, valid and binding obligation of the Trustor and the applicable Tenant thereunder, and is enforceable against the Trustor and such Tenant in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability; (v) there is no default under any of such Leases and there is existing no condition which with the giving of notice or passage of time or both would cause a default thereunder; (vi) all Rents due under such Leases have been paid in full; (vii) none of the Rents reserved under such Leases have been assigned or otherwise pledged or hypothecated except in favor of the Beneficiary pursuant to the provisions hereof; (viii) none of the Rents (other than any security deposit collected in accordance with the provisions of the applicable Lease) have been collected for more than one (1) month in advance; (ix) there exists no offsets or defenses to the payment of any portion of the Rents and the Trustor owes no monetary obligation to any Tenant under any such Lease; (x) the Trustor has received no notice from any Tenant challenging the validity or enforceability of any such Lease; (xi) no such Lease contains any option to purchase, right of first refusal to purchase, right of first refusal to relet, or any other similar provision; and (xii) each such Lease is subordinate to this Deed of Trust either pursuant to its terms or pursuant to a recordable Subordination Agreement. SECTION 3.5 Insurance. The Trustor represents and warrants that, --------- except where the failure of clauses (i), (ii) or (iii) hereof to be true would not have a Property Material Adverse Effect, (i) the Owned Premises and Leased Premises and the use, occupancy and operation thereof comply with all Insurance Requirements and there exists no default under any Insurance Requirement, (ii) all premiums due and payable with respect to the Insurance Policies have been paid, (iii) all Insurance Policies are in full force and effect and the Trustor has not received notice of violation or cancellation thereof and (iv) all insurance certificates required pursuant to the Indenture have been delivered to the Beneficiary. SECTION 3.6 Charges. The Trustor represents and warrants that all ------- Charges imposed upon or assessed against the Trustor's interest in the Trust Property (and, in the case of the Leased Premises, to the extent such Charges are payable by the Trustor in accordance with the terms of the Trust Lease) have been paid and discharged by the Trustor except to the extent such Charges constitute a Lien not yet due and payable or to the extent such Charges are being contested in accordance with Section 9.1 hereof. -16- SECTION 3.7 Environmental. The Trustor represents and warrants that: ------------- (i) it has obtained all Permits which are necessary with respect to the ownership and operation of its business and the Trust Property under any and all applicable Environmental Laws and is in compliance with all terms and conditions thereof, except where the failure so to obtain or to be in compliance would not result in a Property Material Adverse Effect; (ii) it is in compliance with any and all applicable Environmental Laws including, without limitation, all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws, except where the failure so to be in compliance would not result in a Property Material Adverse Effect; (iii) there is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice of demand letter pending or threatened against it or any Affiliate under the Environmental Laws which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect; and (iv) there are no past or present events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance with the Environmental Laws, or which may give rise to any common law or legal liability including, without limitation, liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any other Environmental Law or related common law theory or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing or notice of violation, study or investigation, based on or related to the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Materials which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect. SECTION 3.8 No Conflicts, Consents, etc. Neither the execution and --------------------------- delivery hereof by the Trustor nor the consummation of the transactions herein contemplated nor the fulfillment of the terms hereof (i) violates the terms of any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or other document to which the Trustor is a party, or by which it may be bound or to which any of its properties or assets may be subject, (ii) conflicts with any Requirement of Law applicable to the Trustor or its property or (iii) results in or requires the creation or imposition of any Lien (other than the Lien contemplated hereby) upon or with respect to any of the Trust Property, except where such violation, conflict, creation or imposition would not have a Property Material Adverse Effect. No consent of any party (including, without limitation, equityholders or creditors of the Trustor) and no consent, authorization, approval, license or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person (other than with respect to any required Permits) is required for (i) the granting of a mortgage Lien on and security interest in the Trust Property by the Trustor granted by it pursuant to this Deed of Trust or for the execution, delivery or performance hereof by the Trustor except for the filing of this Deed of Trust and the other filings contemplated hereby or (ii) the exercise by the Beneficiary of the remedies in respect of the Trust Property pursuant to this Deed of Trust other than those required by law in connection with the exercise of the applicable remedy. -17- SECTION 3.9 Benefit to the Trustor. The Trustor represents and ---------------------- warrants that it will receive substantial benefit as a result of the execution, delivery, and performance of the Indenture, the Notes and the Collateral Documents. ARTICLE IV CERTAIN COVENANTS OF TRUSTOR SECTION 4.1 Preservation of Corporate Existence. The Trustor ----------------------------------- shall: (i) preserve and maintain in full force and effect its existence and good standing under the laws of the jurisdiction of its organization; (ii) preserve and maintain in full force and effect its qualification to transact business and good standing in the state in which the Trust Property is located; and (iii) preserve and maintain in full force and effect all consents, authorizations and approvals necessary or required of any Governmental Authority or any other Person relating to the execution, delivery and performance hereof, except where the failure to do so would not result in a Property Material Adverse Effect. SECTION 4.2 Title. The Trustor shall: ----- (i) (A) keep in effect all material rights and appurtenances to or that constitute a part of the Trust Property and (B) protect, preserve and defend its interest in the Trust Property and title thereto, except against Permitted Collateral Liens (other than the Lien created by this Deed of Trust); (ii) (A) comply, in all material respects, with each of the terms, conditions and provisions of any obligation of the Trustor which is secured by the Trust Property, except where the failure to so comply would not result in a Property Material Adverse Effect, or the noncompliance with which may result in the imposition of a Lien on the Trust Property, (B) forever warrant and defend to the Beneficiary the Lien and security interests created and evidenced hereby and the validity and priority hereof in any action or proceeding against the claims of any and all Persons whomsoever affecting or purporting to affect the Trust Property or any of the rights of the Beneficiary hereunder, except against Permitted Collateral Liens (other than the Lien of this Deed of Trust), and (C) maintain a valid and enforceable first priority Lien, except for Permitted Collateral Liens (other than the Lien of this Deed of Trust) on the Trust Property and, to the extent any of the Trust Property shall consist of Fixtures, a first priority security interest in the Trust Property, which first priority Lien and security interest shall be subject only to Permitted Collateral Liens; and (iii) immediately upon obtaining knowledge of the pendency of any proceedings for the eviction of the Trustor from the Trust Property or any part thereof by paramount title or otherwise questioning the Trustor's right, title and interest in, to and under the Trust Property as warranted in this Deed of Trust, or of any condition that could give rise to any such proceedings, notify the -18- Beneficiary thereof. The Beneficiary may participate in such proceedings and the Trustor will deliver or cause to be delivered to the Beneficiary all instruments requested by the Beneficiary to permit such participation. In any such proceedings, the Beneficiary may be represented by counsel reasonably satisfactory to the Beneficiary at the reasonable expense of the Trustor. If, upon the resolution of such proceedings,the Trustor shall suffer a loss of the Trust Property or any part thereof or interest therein and title insurance proceeds shall be payable in connection therewith, such proceeds are hereby assigned to and shall be paid to the Beneficiary for deposit into the Collateral Account and shall be applied in the manner applicable to Net Loss Proceeds in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) of the Indenture. SECTION 4.3 Maintenance and Use of Trust Property; Alterations. -------------------------------------------------- (i) Maintenance. The Trustor shall cause the representations ----------- and warranties set forth in Section 3.3 hereof to continue to be true in each ----------- and every respect and shall pay or cause to be paid when due all Charges imposed upon or assessed against the Trustor's interest in the Trust Property (and, in the case of the Leased Premises, to the extent such charges are payable by the Trustor in accordance with the terms of the Trust Lease) costs and expenses relating thereto, other than such Charges being contested in accordance with Section 9.1 hereof. (ii) Maintenance of Premises. The Trustor shall not commit or ----------------------- suffer any waste on the Owned Premises or Leased Premises. In the case of the Owned Premises, the Trustor shall at all times maintain the Owned Premises in good working order, condition and repair, reasonable wear and tear excepted, and shall use commercially reasonable efforts to make or cause to be made all repairs structural or nonstructural which are necessary or appropriate in the conduct of the Trustor's business. In the case of the Leased Premises, except to the extent to do so shall be the Lessor's obligation under the Trust Lease, the Grantor shall at all times maintain the Leased Premises in good working order, condition and repair, reasonable wear and tear excepted, and shall use commercially reasonable efforts to make or cause to be made all repairs structural (to the extent permitted under the Trust Lease) or nonstructural, which are necessary or appropriate in the conduct of the Trustor's business. The Trustor shall not, except as permitted in Section 4.3(iii) hereof, alter the ---------------- occupancy or use of all or any portion of the Owned Premises or Leased Premises without the prior written consent of the Beneficiary, which consent shall not be unreasonably withheld. Except to the extent permitted pursuant to the provisions of Section 4.3(iii) hereof, the Trustor shall not remove, demolish or alter the --------------- structural character of any Improvement now or hereafter erected upon all or any portion of the Owned Premises or Leased Premises, or permit any such removal, demolition or alteration, without the prior written consent of the Beneficiary, which consent shall not be unreasonably withheld. (iii) Alterations. The Trustor shall not, without the prior ----------- written consent of the Beneficiary, which consent shall not be unreasonably withheld (and the consent of the Lessor under the Trust Lease, if any, as may be required under the Trust Lease), make any Alteration to the Owned Premises or Leased Premises except as permitted by Sections 10.04 and 10.06 of the Indenture. Whether or not the making of any Alteration shall require the consent of the Beneficiary pursuant to the immediately preceding sentence, the Trustor shall (A) complete each Alteration promptly, in a good and workmanlike manner and in compliance, in all material respects, with all applicable local laws, ordinances and requirements and (B) pay when due all claims for labor performed and materials furnished in connection with such Alteration, unless contested in accordance with the provisions of Article IX hereof. ---------- -19- (iv) Permits. The Trustor shall maintain, or cause to be ------- maintained for the operation of its business at the Owned Premises or Leased Premises, as the case may be, and otherwise to the extent the Trustor is obligated to do so under the Trust Lease, in full force and effect all Permits contemplated by and subject to Section 3.3(i) hereof. Unless and to the extent -------------- contested by the Trustor in accordance with the provisions of Article IX hereof, ---------- the Trustor shall comply, in all material respects, with all requirements set forth in the Permits and all Requirements of Law applicable to all or any portion of the Trust Property or the condition, use or occupancy of all or any portion thereof or any recorded deed of restriction, declaration, covenant running with the land or otherwise, now or hereafter in force, subject to the provisions of Section 3.3 hereof. ----------- (v) Zoning. The Trustor shall not initiate, join in, or consent ------ to any change in the zoning or any other permitted use classification of the Owned Premises or Leased Premises without the prior written consent of the Beneficiary, which consent shall not be unreasonably withheld. SECTION 4.4 Notices Regarding Certain Defaults. The Trustor ---------------------------------- shall, promptly upon receipt of any written notice regarding (i) any default by the Trustor relating to the Trust Property or any portion thereof or (ii) the failure to discharge any of the Trustor's obligations with respect to the Trust Property or any portion thereof described herein, furnish a copy of such notice to the Beneficiary. SECTION 4.5 Access to Trust Property, Books and Records; Other -------------------------------------------------- Information. Upon request to the Trustor, the Beneficiary, its agents, - ----------- accountants and attorneys shall have full and free access to visit and inspect, as applicable, during normal business hours and such other reasonable time as may be requested by the Beneficiary to all of the Trust Property including, without limitation, all of the books, correspondence and records of the Trustor relating thereto. The Beneficiary and its representatives may examine the same, take extracts therefrom and make photocopies thereof. The Trustor shall, at any and all times, within a reasonable time after written request by the Beneficiary, furnish or cause to be furnished to the Beneficiary, in such manner and in such detail as may be reasonably requested by the Beneficiary, additional information with respect to the Trust Property. SECTION 4.6 Limitation on Liens; Transfer Restrictions. The ------------------------------------------ Trustor may not, without the prior written consent of the Beneficiary, further mortgage, encumber, hypothecate, sell, convey or assign all or any part of the Trust Property or suffer or allow any of the foregoing to occur by operation of law or otherwise; provided, however, that the Trustor shall have the right to -------- ------- (1) sell, convey or assign all or any portion of the Trust Property in accordance with the provisions of Section 10 of the Indenture and (2) suffer to exist the following Liens in respect of the Trust Property: (i) Prior Liens (but not extensions, amendments, supplements or replacements of Prior Liens unless (A) extended, amended, supplemented or replaced in a manner permitted by the Indenture or (B) consented to by the Beneficiary which consent shall not be unreasonably withheld), (ii) the Lien and security interest created by this Deed of Trust or any other Collateral Document, (iii) Contested Liens, (iv) Liens described in clause (9) of the definition of Permitted Liens (provided, however, -------- ------- that such Liens shall not extend to or cover any Trust Property other than equipment subject to Capital Leases Obligations or Purchase Money Obligations incurred in accordance with the provisions of the Indenture) or clause (4) of the definition of Permitted Liens, (v) Leases to the extent permitted pursuant to the provisions of Article V hereof, and (vi) in the case of the Leased --------- Premises, rights, title and interest of the Lessor under the Trust Lease and any Liens against the Lessor's interest in the Leased Land and the Leased Premises (the Liens described in clauses (i) through (vi) of this sentence, collectively, "Permitted Collateral Liens"). -------------------------- -20- SECTION 4.7 Environmental. ------------- (i) Hazardous Materials. The Trustor shall (A) comply with any ------------------- and all present and future Environmental Laws applicable to the Trust Property, (B) not release, store, treat, handle, generate, discharge or dispose of any Hazardous Materials at, on, under or from the Trust Property in violation of or in a manner that could result in any material liability under any present and future Environmental Law and (C) take all necessary steps to initiate and expeditiously complete all remedial, corrective and other action to eliminate any such effect. In the event the Trustor fails to comply with the covenants in the preceding sentence, the Beneficiary may, in addition to any other remedies set forth herein, as agent for the Trustor and at the Trustor's sole cost and expense, cause any remediation, removal or response action relating to Hazardous Materials required by applicable Environmental Laws to be taken and the Trustor shall provide to the Beneficiary and its agents and employees access to the Trust Property for such purpose. Any reasonable costs or expenses incurred by the Beneficiary for such purpose shall be immediately due and payable by the Trustor and shall bear interest at the Default Rate. The Beneficiary shall have the right at any time when an Event of Default shall have occurred and be continuing and at such other times when a potential violation of any present or future Environmental Law exists which in the Beneficiary's reasonable judgment could result in any material liability or obligation under such Environmental Law, at the sole cost and expense of the Trustor, to conduct an environmental audit of the Trust Property by such persons or firms appointed by the Beneficiary, and the Trustor shall cooperate in all respects in the conduct of such environmental audit, including, without limitation, by providing access to the Trust Property and to all records in the Trustor's or any of their respective agents' possession relating thereto. To the extent that any such environmental audit identifies conditions which in the Beneficiary's reasonable judgment would result in any material liability or obligation under any present or future Environmental Law, the Trustor agree (to the extent caused by the Trustor) to expeditiously correct any such violation or respond to conditions giving rise to such liability or obligations in a manner which complies in all material respects with the Environmental Laws and mitigates associated health and environmental risks. The Trustor shall indemnify and hold the Beneficiary and each of the other Secured Parties harmless from and against all loss, cost, damage or reasonable expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Beneficiary or any other Secured Party may sustain by reason of the assertion against the Beneficiary or any Secured Party by any party of any claim relating to such Hazardous Materials on, under or from the Trust Property or actions taken with respect thereto as authorized hereunder, except to the extent arising from the gross negligence or willful misconduct of the Beneficiary or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof; and (ii) Asbestos. The Trustor shall neither install nor permit to -------- be installed in or removed from the Trust Property, asbestos or any asbestos-containing material (collectively, "ACM") except in compliance, in all material respects, with all applicable Environmental Laws, and with respect to any ACM currently present in the Trust Property, the Trustor shall promptly either (A) remove any ACM which such Environmental Laws require to be removed (and, in the case of the Leased Premises, to the extent permitted by the Trust Lease) or (B) otherwise comply, in all material respects, with such Environmental Laws with respect to such ACM, all at the Trustor's sole cost and expense. If the Trustor shall fail so to remove any ACM or otherwise comply, in all material respects, with such laws or regulations, the Beneficiary may, in addition to any other remedies set forth herein, take reasonable or necessary steps to eliminate any ACM from the Trust Property or otherwise comply, in all material respects, with applicable law, regulations or orders and the Trustor shall provide to the Beneficiary and its agents and employees access to the Trust Property for such purpose. Any reasonable costs or expenses incurred by the Beneficiary for such -21- purpose shall be immediately due and payable by the Trustor and bear interest at the Default Rate. The Trustor shall indemnify and hold the Beneficiary and the other Secured Parties harmless from and against all loss, cost, damage and expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Beneficiary or the other Secured Parties may sustain, as a result of the presence of any ACM and any removal thereof from the Trust Property by the Trustor or compliance with all applicable Environmental Laws, except to the extent arising from the gross negligence or willful misconduct of the Beneficiary or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof. SECTION 4.8 Estoppel Certificates. The Trustor shall, from time --------------------- to time, upon thirty (30) days' prior written reasonable request of the Beneficiary, execute, acknowledge and deliver to the Beneficiary an Officers' Certificate stating that this Deed of Trust, the Indenture, the Notes and the Collateral Documents are unmodified and in full force and effect (or, if there have been modifications, that this Deed of Trust, the Indenture, the Notes and the Collateral Documents, as applicable, is or are in full force and effect as modified and setting forth such modifications) and stating the date to which principal and interest have been paid on the Notes. ARTICLE V LEASES SECTION 5.1 Trustor's Affirmative Covenants with Respect to ----------------------------------------------- Leases. With respect to each Lease, the Trustor shall: - ------ (i) observe and perform, in all material respects, all the obligations imposed upon the Landlord under such Lease; (ii) promptly send copies to the Beneficiary of all notices of default which the Trustor shall send or receive thereunder; and (iii) enforce all of the terms, covenants and conditions contained in such Lease upon the part of the Tenant thereunder to be observed or performed to the extent it would be commercially reasonable to do so. SECTION 5.2 Trustor's Negative Covenants with Respect to Leases. --------------------------------------------------- With respect to each Lease, the Trustor shall not, without the prior written consent of the Beneficiary, which consent shall not be unreasonably withheld: (i) receive or collect, or permit the receipt or collection of, any Rent under such Lease more than one (1) month in advance of the respective period in respect of which such Rent is to accrue, except: (A) in connection with the execution and delivery of such Lease (or of any amendment to such Lease), Rent thereunder may be collected and received in advance in an amount not in excess of one (1) month's Rent; -22- (B) the amount held by Landlord as a reasonable security deposit thereunder; and (C) any amount received and collected for escalation and other charges in accordance with the terms of such Lease; (ii) assign, transfer or hypothecate (other than to the Beneficiary hereunder) any Rent under such Lease whether then due or to accrue in the future or the interest of the Trustor as Landlord under such Lease; (iii) enter into any amendment or modification of such Lease which would materially decrease the unexpired term thereof or decrease the amount of the Rents payable thereunder or materially impair the value or utility of the Trust Property or the security provided by this Deed of Trust; (iv) terminate (whether by exercising any contractual right of the Trustor to recapture leased space or otherwise) or permit the termination of such Lease or accept surrender of all or any portion of the space demised under such Lease prior to the end of the term thereof or accept assignment of such Lease to the Trustor unless: (A) the Tenant under such Lease has not paid the equivalent of two (2) months' Rent and the Trustor has made reasonable efforts to collect such Rent; and (B) it would be commercially reasonable to terminate such Lease; or (v) waive, excuse, condone or in any manner discharge or release any Tenants of or from the material obligations of such Tenants under their respective Leases or guarantors of Tenants from any material obligations under any guarantees of the Leases except as the same would be done by a Prudent Operator with due regard for the security afforded the Beneficiary thereby. SECTION 5.3 Additional Requirements with Respect to New Leases. -------------------------------------------------- In addition to the requirements of Sections 5.1 and 5.2 hereof, the Trustor ------------ --- shall not enter into any Lease after the date hereof unless the Tenant under such Lease has entered into a Subordination Agreement and has otherwise complied with the provisions of Section 10.06 of the Indenture. ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Trustor. Section ------------------------------------------ 2.2 of this Deed of Trust constitutes a present, absolute, effective, irrevocable and complete assignment by the Trustor to the Beneficiary of the Leases and Rents and the right, subject to applicable law, to collect all sums payable to the Trustor thereunder and apply the same as the Beneficiary may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Trust Property), which is not conditioned upon the Beneficiary being in possession of the Owned Premises or Leased Premises. The Beneficiary -23- hereby grants to the Trustor, however, a license to collect and apply the Rents and to enforce the obligations of Tenants under the Leases. Immediately upon the occurrence of and during the continuance of any Event of Default or a Default, the license granted in the immediately preceding sentence shall cease and terminate, with or without any notice, action or proceeding or the intervention of a receiver appointed by a court. SECTION 6.2 Collection of Rents by the Beneficiary. -------------------------------------- (i) From and after the occurrence and during the continuance of an Event of Default or a Default, any Rents receivable by the Beneficiary hereunder, after payment of all proper costs and expenses as Beneficiary may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Trust Property), shall be applied to the Secured Obligations or, at the option of the Beneficiary, shall be held by the Beneficiary as additional collateral to secure the performance by the Trustor of the Secured Obligations. The Beneficiary shall be accountable to the Trustor only for Rents actually received by the Beneficiary. The collection of such Rents and the application thereof shall not cure or waive any Event of Default or a Default or waive, modify or affect notice of Event of Default or a Default or invalidate any act done pursuant to such notice. (ii) The Trustor hereby irrevocably authorizes and directs Tenant under each Lease to rely upon and comply with any and all notices or demands from the Beneficiary for payment of Rents to the Beneficiary and the Trustor shall have no claim against Tenant for Rents paid by Tenant to the Beneficiary pursuant to such notice or demand. SECTION 6.3 No Release. Neither this Deed of Trust nor any ---------- action or inaction on the part of the Beneficiary shall release any Tenant under any Lease, any guarantor of any Lease or the Trustor from any of their respective obligations under such Leases or constitute an assumption of any such obligation on the part of the Beneficiary. No action or failure to act on the part of the Trustor shall adversely affect or limit the rights of the Beneficiary under this Deed of Trust or, through this Deed of Trust, under such Leases. Nothing contained herein shall operate or be construed to (i) obligate the Beneficiary to perform any of the terms, covenants or conditions contained in any Lease or otherwise to impose any obligation upon the Beneficiary with respect to such Lease (including, without limitation, any obligation arising out of any covenant of quiet enjoyment contained in such Lease in the event that Tenant under such Lease shall have been joined as a party defendant in any action by which the estate of such Tenant shall be terminated) or (ii) place upon the Beneficiary any obligation for the operation, control, care, management or repair of the Owned Premises or Leased Premises. SECTION 6.4 Irrevocable Interest. All rights, powers and -------------------- privileges of the Beneficiary herein set forth are coupled with an interest and are irrevocable, subject to the terms and conditions hereof, and the Trustor shall not take any action under the Leases or otherwise which is inconsistent with this Deed of Trust or any of the terms hereof and any such action inconsistent herewith or therewith shall be void. SECTION 6.5 Amendment to Leases. Each Lease, including, without ------------------- limitation, all amendments, modifications, supplements, replacements, extensions and renewals thereof, shall continue to be subject to the provisions hereof without the necessity of any further act by any of the parties hereto. -24- ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges. Unless and to the extent ------------------ contested by the Trustor in accordance with the provisions of Article IX hereof, ---------- the Trustor shall pay and discharge, or cause to be paid and discharged, from time to time when the same shall become due (or within any applicable grace period) (and, in the case of the Leased Premises, to the extent such payment and discharge shall be due from the Trustor pursuant to the terms of the Trust Lease), all Charges subject to this Article VII. The Trustor shall, upon the ----------- Beneficiary's request, deliver to the Beneficiary evidence of the payment by the Trustor of all such Charges. SECTION 7.2 Escrow of Taxes. From and after the occurrence and --------------- during the continuance of an Event of Default or a Default, at the option and upon the request of the Beneficiary, the Trustor shall deposit with the Beneficiary in an account maintained by the Beneficiary (the "Tax Escrow Fund"), --------------- on the first day of each month, an amount estimated by the Beneficiary to be equal to one-twelfth of the annual real property taxes and other annual Charges required to be discharged by the Trustor under Section 7.1 hereof. Such amounts ----------- shall be held by the Beneficiary without interest to the Trustor and applied to the payment of the obligations in respect of which such amounts were deposited, in such priority as the Beneficiary shall determine, on or before the respective dates on which such obligations or any part thereof would become delinquent. Nothing contained in this Article VII shall (i) affect any right or remedy of ----------- the Beneficiary under any provision hereof or of any statute or rule of law to pay any such amount as provided above from its own funds and to add the amount so paid, together with interest at the Default Rate during such time that any amount remains outstanding, to the Secured Obligations or (ii) relieve the Trustor of its obligations to make or provide for the payment of the annual real property taxes and other annual Charges required to be discharged by the Trustor under Section 7.1 hereof. Notwithstanding the provisions of this Section 7.2, ----------- ----------- with respect to the Leased Land, no deposit with the Beneficiary in respect of any Charge shall be required if and for so long as deposits in respect of such Charge are made by the Grantor to the Lessor under the Trust Lease. SECTION 7.3 Certain Statutory Liens. Unless and to the extent ----------------------- contested by the Trustor in accordance with the provisions of Article IX hereof, ---------- the Trustor shall timely pay, or cause to be paid, all lawful claims and demands of mechanics, materialmen, laborers, government agencies administering worker's compensation insurance, old age pensions and social security benefits and all other claims, judgments, demands or amounts of any nature which, relate to the Trustor's (or its successors' or assignees') actions at or affecting the Owned Premises, Leased Premises or the Trust Property and, if unpaid, would result in, or permit the creation of, a Lien on the Trust Property or any part thereof, or which would result in forfeiture of all or any part of the Trust Property. SECTION 7.4 Stamp and Other Taxes. Unless and to the extent --------------------- contested by the Trus-tor in accordance with the provisions of Article IX ---------- hereof, the Trustor shall pay any United States documentary stamp taxes, with interest and fines and penalties, and any mortgage recording taxes, with interest and fines and penalties, that may hereafter be levied, imposed or assessed under or upon or by reason hereof or the Secured Obligations or any instrument or transaction affecting or relating to either thereof and in default thereof the Beneficiary may advance the same and the amount so advanced shall be payable by the Trustor to the Beneficiary in accordance with the provisions of Section 14.5 hereof. - ------------ -25- SECTION 7.5 Certain Tax Law Changes. In the event of the ----------------------- passage after the date hereof of any law deducting from the value of real property, for the purpose of taxation, amounts in respect of any Lien thereon or changing in any way the laws for the taxation of mortgages or debts secured by mortgages for state or local purposes or the manner of the collection of any Charges, and imposing any Charges, either directly or indirectly, on this Deed of Trust, the Indenture or any other Collateral Document, the Trustor shall promptly pay to the Beneficiary such amount or amounts as may be necessary from time to time to pay any such Charges. SECTION 7.6 Proceeds of Tax Claim. In the event that the --------------------- proceeds of any tax claim to which the Trustor is entitled are paid after the Beneficiary has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Beneficiary to satisfy any deficiency remaining after such foreclosure. The Beneficiary shall retain its interest in the proceeds of any tax claim during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Beneficiary shall in a prompt manner be released to the Issuer. ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages. The ----------------------------------------- Trustor shall maintain in respect of the Owned Premises and Leased Premises the insurance policies and coverages required under Section 4.19(b) of the Indenture. SECTION 8.2 Delivery After Foreclosure. In the event that the -------------------------- proceeds of any insurance claim to which the Trustor is entitled are paid after the Beneficiary has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Beneficiary to satisfy any deficiency remaining after such foreclosure. Beneficiary shall retain its interest in the Insurance Policies required to be maintained pursuant to this Deed of Trust during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Beneficiary shall be released to the Issuer. ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens. ----------------------------------------------- The Trustor may at its own expense contest the validity, amount or applicability of any Charges as long as the contest thereof shall be conducted in accordance with, and permitted pursuant to the provisions of, the Indenture. Notwithstanding the foregoing provisions of this Section 9.1, (i) no contest of ----------- any such obligations may be pursued by the Trustor (A) if such contest would expose the Beneficiary or any Holder to any possible criminal liability or (B) unless the Trustor shall have furnished a bond or other security therefor reasonably satisfactory to the Beneficiary or such Holder, as the case may be, any additional civil liability for failure to comply with such obligations and (ii) if at any time payment or performance of any obligation contested by the Trustor pursuant to this Section 9.1 shall become necessary to prevent the ----------- imminent imposition of remedies because of non-payment, the Trustor shall pay or perform the same in sufficient time to prevent the imposition of remedies in respect of such default or prospective default. -26- SECTION 9.2 Contesting of Insurance. The Trustor shall not take ----------------------- any action that would reasonably be expected to cause the termination, revocation or denial of any insurance coverage required to be maintained under this Deed of Trust or that would be the basis for a defense to any claim under any Insurance Policy maintained in respect of the Owned Premises or Leased Premises and the Trustor shall otherwise comply in all respects with all Insurance Requirements in respect of the Owned Premises and Leased Premises; provided, however, that the Trustor may, at its own expense and after written - -------- ------- notice to the Beneficiary, (i) contest the applicability or enforceability of any such Insurance Requirements by appropriate legal proceedings, prosecution of which does not constitute a basis for cancellation or revocation of any insurance coverage required under Article VIII hereof or (ii) cause the ------------ Insurance Policy containing any such Insurance Requirement to be replaced by a new policy complying with the provisions of Article VIII hereof. ------------ ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction. If there shall occur any Destruction ----------- of the Trust Property, individually or in the aggregate, in excess of $100,000, the Trustor shall promptly send to the Beneficiary a written notice setting forth the nature and extent of such Destruction. The Proceeds of any insurance payable in respect of such Destruction are hereby assigned (with resepct to the Leased Premises, subject to and to the extent permitted by the Trust Lease) to and shall be paid to the Beneficiary. The Net Loss Proceeds arising out of such Destruction, shall be applied in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) of the Indenture. SECTION 10.2 Condemnation. If there shall occur any Taking or ------------ the commencement of any proceeding thereof, the Trustor shall immediately notify the Beneficiary upon receiving notice of such Taking or commencement of proceedings therefor. The Beneficiary may, at its option, participate in any proceedings or negotiations which might result in any Taking, and the Trustor shall deliver or cause to be delivered to the Beneficiary all instruments requested by it to permit such participation. The Beneficiary may be represented by counsel reasonably satisfactory to it at the reasonable expense of the Trustor in connection with any such participation. The Trustor shall pay all reasonable fees, costs and expenses incurred by the Beneficiary in connection with any Taking and in seeking and obtaining any award or payment on account thereof. Any proceeds, award or payment in respect of any Taking of any Trust Property are hereby assigned by the Trustor (with resepct to the Leased Premises, subject to and to the extent permitted by the Trust Lease) and shall be paid to the Beneficiary. The Trustor shall take all steps necessary to notify the condemning authority of such assignment. The Net Loss Proceeds arising out of such Taking shall be applied in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) of the Indenture. ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default. It shall be an Event of Default ----------------- hereunder if there shall have occurred and be continuing an Event of Default under the Indenture. -27- SECTION 11.2 Remedies in Case of an Event of Default. If any --------------------------------------- Event of Default shall have occurred and be continuing, the Beneficiary or the Trustee may at the Beneficiary's option, in addition to any other action permitted under this Deed of Trust or the Indenture or by law, statute or in equity, take one or more of the following actions to the greatest extent permitted by local law: (i) by written notice to the Trustor and the Issuer, declare the entire unpaid amount of the Secured Obligations to be due and payable immediately; (ii) personally, or by its agents or attorneys, (A) give notice of such Event of Default to the Lessor under the Trust Lease, (B) to the extent permitted by the Trust Lease, act in all respects as lessee under the Trust Lease and perform on behalf of and for the account of the Trustor any of the obligations of lessee thereunder, (C) enter into and upon and take possession of all or any part of the Owned Premises and Leased Premises together with the books, records and accounts of the Trustor relating thereto and, exclude the Trustor, its agents and servants wholly therefrom, (D) use, operate, manage and control the Leased Premises and conduct the business thereof, (E) maintain and restore the Owned Premises and Leased Premises, (F) make all necessary or proper repairs, renewals and replacements and such useful Alterations thereto and thereon as the Beneficiary may deem advisable, (G) manage, lease and operate the Owned Premises and Leased Premises and carry on the business thereof and exercise all rights and powers of the Trustor with respect thereto either in the name of the Trustor or otherwise or (H) collect and receive all Rents. The Beneficiary shall be under no liability for or by reason of any such taking of possession, entry, removal or holding, operation or management except that any amounts so received by the Beneficiary shall be applied in accordance with the provisions of the Indenture; (iii) with or without entry, personally or by its agents or attorneys, (A) sell the Trust Property and all estate, right, title and interest, claim and demand therein at one or more sales in one or more parcels, in accordance with the provisions of Section 11.3, including, ------------ without limitation, providing for the exercise of the power of sale hereunder in accordance with the provisions of Section 11.3(vii) or (B) ----------------- institute and prosecute proceedings for the complete or partial foreclosure of the Lien and security interests created and evidenced hereby; or (iv) take such steps to protect and enforce its rights whether by action, suit or proceeding at law or in equity for the specific performance of any covenant, condition or agreement in the Indenture, the Notes and the Collateral Documents, or in aid of the execution of any power granted in this Deed of Trust, or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy or otherwise as the Beneficiary shall elect. SECTION 11.3 Sale of Trust Property if Event of Default Occurs; Proceeds ----------------------------------------------------------- of Sale; Exercise of Power of Sale. Trustor agrees that, to the fullest ---------------------------------- extent permitted by law: (i) If any Event of Default shall have occurred and be continuing, the Beneficiary or the Trustee may institute an action to foreclose this Deed of Trust or take such other action as may be permitted and available to the Beneficiary at law or in equity for the enforcement of the Indenture and the Notes and realization on the Trust Property and proceeds thereon through power of sale or to final judgment and execution thereof for the Secured Obligations, and in furtherance thereof the Beneficiary or the Trustee may sell the Trust Property at one or more sales, as an entirety or in parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law or statute or -28- in equity. The Beneficiary or the Trustee may execute and deliver to the purchaser at such sale a conveyance of the Trust Property in fee simple and an assignment or conveyance of all the Trustor's Interest in the Leases and the Trust Property, each of which conveyances and assignments shall contain recitals as to the Event of Default upon which the execution of the power of sale herein granted depends, and the Trustor hereby constitutes and appoints the Beneficiary or the Trustee the true and lawful attorneys-in-fact of the Trustor to make any such recitals, sale, assignment and conveyance, and all of the acts of the Beneficiary or the Trustee as such attorneys-in-fact are hereby ratified and confirmed. The Trustor agrees that such recitals shall be binding and conclusive upon the Trustor and that any assignment or conveyance to be made by the Beneficiary or the Trustee shall divest the Trustor of all right, title, interest, equity and right of redemption, including any statutory redemption, in and to the Trust Property. The power and agency hereby granted are coupled with an interest and are irrevocable by death or dissolution, or otherwise, and are in addition to any and all other remedies which the Beneficiary or the Trustee may have hereunder, at law or in equity. So long as the Secured Obligations, or any part thereof, remain unpaid, the Trustor agrees that possession of the Trust Property by the Trustor, or any Person claiming under the Trustor, shall be as tenant, and, in case of a sale under power or upon foreclosure as provided in this Deed of Trust, the Trustor and any Person in possession under the Trustor, as to whose interest such sale was not made subject, shall, at the option of the purchaser at such sale, then become and be tenants holding over, and shall forthwith deliver possession to such purchaser, or be summarily dispossessed in accordance with the laws applicable to tenants holding over. In case of any sale under this Deed of Trust by virtue of the exercise of the powers herein granted, or pursuant to any order in any judicial proceeding or otherwise, the Trust Property may be sold as an entirety or in separate parcels in such manner or order as the Beneficiary or the Trustee in its sole discretion may elect. One or more exercises of powers herein granted shall not extinguish or exhaust such powers, until the entire Trust Property is sold or all amounts secured hereby are paid in full. (ii) In the event of any sale made under or by virtue of this Article XI, the entire principal of, and interest in respect of the Secured - ---------- Obligations, if not previously due and payable, shall, at the option of the Beneficiary, immediately become due and payable, anything in this Deed of Trust to the contrary notwithstanding. (iii) The Proceeds of any sale made under or by virtue of this Article XI, together with any other sums which then may be held by the - ---------- Beneficiary or the Trustee under this Deed of Trust, whether under the provisions of this Article XI or otherwise, shall be applied in accordance with ---------- the provisions of the Indenture. (iv) The Beneficiary may bid for and acquire the Trust Property or any part thereof at any sale made under or by virtue of this Article XI and, ---------- in lieu of paying cash therefor, may make settlement for the purchase price by crediting against the purchase price the unpaid amounts (whether or not then due and owing) in respect of the Secured Obligations, after deducting from the sales price the expense of the sale and the reasonable costs of the action or proceedings and any other sums that the Beneficiary is authorized to deduct under this Deed of Trust. (v) The Beneficiary or the Trustee may adjourn from time to time any sale by it to be made under or by virtue hereof by announcement at the time and place appointed for such sale or for such adjourned sale or sales, and, the Beneficiary or the Trustee, without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned. -29- (vi) If the Owned Premises or Leased Premises are comprised of more than one parcel of land, the Beneficiary or the Trustee may take any of the actions authorized by this Section 11.3 in respect of any or a number of individual parcels. (vii) Without limiting the generality of the foregoing, if the notice of breach and election to sell which is required by Chapter 107 of the Nevada Revised Statutes shall be first recorded, and if the time period after such recording, which is required by Chapter 107 of the Nevada Revised Statutes, shall have elapsed, then Trustee, its successors or assigns, on demand by Beneficiary, shall sell the above-granted Trust Property, in order to accomplish the objects of these trusts, in the manner following, namely: (a) the Trustee shall first give notice of the time and place of such sale, in the manner provided by the laws of the State of Nevada for the sale of real property under execution, and may from time to time postpone such sale by such advertisement as it may deem reasonable, or without further advertisement, by proclamation made to the persons assembled at the time and place previously appointed and advertised for such sale (as such time may have been previously postponed), and: (aa) on the day of sale so advertised, the Trustee may, in its discretion, sell the Trust Property so advertised, or any portion thereof, in one or more lots (and thereafter postpone such sale, in accordance herewith, as to any portion of the Trust Property remaining unsold, if Trustee so elects); and (bb) on any day to which such sale may have been postponed, the Trustee may, in its discretion, sell all or any portion of the Trust Property then remaining unsold, in one or more lots (and thereafter further postpone such sale, in accordance herewith, as to any portion of the Trust Property remaining unsold, if Trustee so elects); all at public auction, at the time and place specified in the notice (as such time may have been postponed), either in the county in which the Trust Property, or any part thereof, to be sold, is situated, or at the principal office of the Trustee, in its discretion, to the highest cash bidder. The Beneficiary, Trustee or holders of the Notes (and/or other obligations) secured hereby may bid (including by credit bid) and purchase at such sale. The Beneficiary may, after recording the notice of breach and election, waive or withdraw the same or any proceedings there-under, and shall thereupon be restored to its former position and have and enjoy the same rights as though such notice had not been recorded. (b) the Trustee, upon such sale, shall make (without warranty), execute and, after due payment made, deliver to purchaser or purchasers, his, her or their heirs or assigns, a deed or deeds of the premises so sold which shall convey to the purchaser all the title of the Trustor in the premises so sold. The recital, in any such deed, of: (aa) default; (bb) recording notice of breach and election of sale; (cc) the elapsing of the three (3) month period after such recording; (dd) the giving of notice of sale; and (ee) demand by Beneficiary, its heirs or assigns, that such sale should be made, shall be conclusive proof of such default, recording, elapsing of time and of the due giving of notice and that the sale was regularly and validly made on due and proper demand by Beneficiary, its heirs and assigns; and any such deed or deeds with such recitals therein shall be effectual and conclusive against the Trustor or its successors and assigns, and all other Persons; and the receipt for the purchase money recited or contained in any deed executed to the purchaser as aforesaid shall be sufficient discharge to such purchaser from all obligation to see to the proper application of the purchase money, according to the provisions hereof. -30- SECTION 11.4 Additional Remedies in Case of an Event of Default. -------------------------------------------------- Trustor agrees that, to the fullest extent permitted by law: (i) The Beneficiary shall be entitled to recover judgment as aforesaid either before, after or during the pendency of any proceedings for the enforcement of the provisions hereof, and the right of the Beneficiary to recover such judgment shall not be affected by any entry or sale hereunder, or by the exercise of any other right, power or remedy for the enforcement of the provisions hereof, or the foreclosure of, or absolute conveyance pursuant to, this Deed of Trust. In case of proceedings against the Trustor in insolvency or bankruptcy or any proceedings for its reorganization or involving the liquidation of its assets, the Beneficiary shall be entitled to prove the whole amount of principal and interest and other payments, charges and costs due in respect of the Secured Obligations to the full amount thereof without deducting therefrom any proceeds obtained from the sale of the whole or any part of the Trust Property; provided, however, that in no case shall the Beneficiary receive -------- ------- a greater amount than the aggregate of such principal, interest and such other payments, charges and costs (with interest at the Default Rate) from the proceeds of the sale of the Trust Property and the distribution from the estate of the Trustor. (ii) Any recovery of any judgment by the Beneficiary and any levy of any execution under any judgment upon the Trust Property shall not affect in any manner or to any extent the Lien and security interests created and evidenced hereby upon the Trust Property or any part thereof, or any conveyances, powers, rights and remedies of the Beneficiary hereunder, but such conveyances, powers, rights and remedies shall continue unimpaired as before. (iii) Any monies collected by the Beneficiary under this Section 11.4 ------------ shall be applied in accordance with the provisions of Section 11.3(iii). ----------------- SECTION 11.5 Legal Proceedings After an Event of Default. Trustor ------------------------------------------- agrees that, to the fullest extent permitted by law: (i) After the occurrence and during the continuance of any Event of Default and immediately upon the commencement of any action, suit or legal proceedings to obtain judgment for the Secured Obligations or any part thereof, or of any proceedings to foreclose the Lien and security interest created and evidenced hereby or otherwise enforce the provisions hereof or of any other proceedings in aid of the enforcement hereof, the Trustor shall enter its voluntary appearance in such action, suit or proceeding. (ii) Upon the occurrence and during the continuance of an Event of Default, the Beneficiary shall be entitled forthwith as a matter of right, concurrently or independently of any other right or remedy hereunder either before or after declaring the Secured Obligations or any part thereof to be due and payable, to the appointment of a receiver without giving notice to any party and without regard to the adequacy or inadequacy of any security for the Secured Obligations or the solvency or insolvency of any person or entity then legally or equitably liable for the Secured Obligations or any portion thereof. The Trustor hereby consents to the appointment of such receiver. Notwithstanding the appointment of any receiver, the Beneficiary shall be entitled as pledgee to the possession and control of any cash, deposits or instruments at the time held by or payable or deliverable under the terms of the Indenture to the Beneficiary. (iii) The Trustor shall not (A) at any time insist upon, or plead, or in any manner whatsoever claim or take any benefit or advantage of any stay or extension or moratorium law, any exemption -31- from execution or sale of the Trust Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance hereof, (B) claim, take or insist on any benefit or advantage of any law now or hereafter in force providing for the valuation or appraisal of the Trust Property, or any part thereof, prior to any sale or sales of the Trust Property which may be made pursuant to this Deed of Trust, or pursuant to any decree, judgment or order of any court of competent jurisdiction or (C) after any such sale or sales, claim or exercise any right under any statute heretofore or hereafter enacted to redeem the property so sold or any part thereof. To the extent permitted by applicable law, the Trustor hereby expressly (A) waives all benefit or advantage of any such law or laws, including, without limitation, any statute of limitations applicable to this Deed of Trust, (B) waives all rights to have the Trust Property marshalled on any foreclosure of this Deed of Trust, (C) waives any and all rights to trial by jury in any action or proceeding related to the enforcement hereof, (D) waives any objection which it may now or hereafter have to the laying of venue of any action, suit or proceeding brought in connection with this Deed of Trust and further waives and agrees not to plead that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum and (E) covenants not to hinder, delay or impede the execution of any power granted or delegated to the Beneficiary by this Deed of Trust but to suffer and permit the execution of every such power as though no such law or laws had been made or enacted. The Beneficiary shall not be liable for any incorrect or improper payment made pursuant to this Article XI in the absence of gross negligence or ---------- willful misconduct. SECTION 11.6 Remedies Not Exclusive. No remedy conferred upon ---------------------- or reserved to the Beneficiary by this Deed of Trust is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Deed of Trust or now or hereafter existing at law or in equity. Any delay or omission of the Beneficiary to exercise any right or power accruing on any Event of Default shall not impair any such right or power and shall not be construed to be a waiver of or acquiescence in any such Event of Default. Every power and remedy given by this Deed of Trust may be exercised from time to time concurrently or independently, when and as often as may be deemed expedient by the Beneficiary in such order and manner as the Beneficiary, in its sole discretion, may elect. If the Beneficiary accepts any monies required to be paid by the Trustor under this Deed of Trust after the same become due, such acceptance shall not constitute a waiver of the right either to require prompt payment, when due, of all other sums secured by this Deed of Trust or to declare an Event of Default with regard to subsequent defaults. If the Beneficiary accepts any monies required to be paid by the Trustor under this Deed of Trust in an amount less than the sum then due, such acceptance shall be deemed an acceptance on account only and on the condition that it shall not constitute a waiver of the obligation of the Trustor to pay the entire sum then due, and the Trustor's failure to pay the entire sum then due shall be and continue to be a default hereunder notwithstanding acceptance of such amount on account. SECTION 11.7 Sale of Trust Lease. The word "sale" as used in ------------------- this Article XI with respect to the Trust Lease shall mean the sale, transfer, ---------- assignment or conveyance for value of the leasehold interest of the Trustor in the Trust Lease, together with all of the Trustor's right, title and interest in and to the other items comprising the Trust Property. -32- ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement. To the extent that the Trust ------------------ Property includes personal property or items of personal property which are or are to become fixtures under applicable law, this Deed of Trust shall also be construed as a security agreement under the UCC; and, upon and during the continuance of an Event of Default, the Beneficiary shall be entitled with respect to such personal property to exercise all remedies hereunder, all remedies available under the UCC with respect to fixtures and all other remedies available under applicable law. Without limiting the foregoing, such personal property may, at the Beneficiary's option and upon and during the continuance of an Event of Default, (i) be sold hereunder together with any sale of any portion of the Trust Property or otherwise, (ii) be sold pursuant to the UCC, or (iii) be dealt with by the Beneficiary in any other manner permitted under applicable law. The Beneficiary may require the Trustor to assemble such personal property and make it available to the Beneficiary at a place to be designated by the Beneficiary. The Trustor acknowledges and agrees that a disposition of the personal property in accordance with the Beneficiary's rights and remedies in respect to the Trust Property as heretofore provided is a commercially reasonable disposition thereof; provided, however, that the Beneficiary shall give the Trustor not less than ten (10) days' prior notice of the time and place of any intended disposition. The Beneficiary may, in the sole discretion of the Beneficiary, appoint the Trustee as the agent of the Beneficiary for the purpose of disposition of the personal property in accordance with the UCC. SECTION 12.2 Fixture Filing. To the extent that the Trust -------------- Property includes items of personal property which are or are to become fixtures under applicable law, and to the extent permitted under applicable law, the filing hereof in the real estate records of the county in which such Trust Property is located shall also operate from the time of filing as a fixture filing with respect to such Trust Property, and the following information is applicable for the purpose of such fixture filing, to wit:
------------------------------------------------------------------------------------------------------------ Name and Address of the debtor: Name and Address of the secured party: The Trustor being the type of entity and The Beneficiary having the address described having the organizational identification in the Preamble hereof. number and address described in the Preamble hereof. ------------------------------------------------------------------------------------------------------------
This Financing Statement covers the following types or items of property: The Trust Property. This instrument covers goods or items of personal property which are or are to become fixtures upon the real property described in Schedule A attached hereto. The name of the record owner of the Property on which such fixtures are or are to be located is (i) in the case of Parcels 2, 3, 4, and 5 described on Schedule A attached hereto, Gold Dust West Casino, Inc., and (ii) in the case of Parcel 1 described on Schedule A attached hereto, Chester J. Piazzo and Darlene Piazzo, as Co-Trustees of the C. & D. Piazzo ------------------------------------------------------------------------------- -33- Family Trust. --------------------------------------------------------------------- ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security. The Trustor shall, ------------------------------------------ forthwith after the execution and delivery hereof and thereafter, from time to time, cause this Deed of Trust and any financing statement, continuation statement or similar instrument relating to any thereof or to any property intended to be subject to the Lien hereof to be filed, registered and recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the validity and priority thereof or the Lien hereof purported to be created upon the Trust Property and the interest and rights of the Beneficiary therein. The Trustor shall (if it has not already done so), at its sole cost and expense, properly, duly and validly record an appropriate memorandum of the Trust Lease and any amendments or supplements thereto in each jurisdiction in which any of the Leased Premises may be situated. The Trustor shall pay or cause to be paid all taxes and fees incident to such filing, registration and recording, and all reasonable expenses incident to the preparation, execution and acknowledgment thereof, and of any instrument of further assurance, and all Federal or state stamp taxes or other taxes, duties and charges arising out of or in connection with the execution and delivery of such instruments. SECTION 13.2 Further Acts. The Trustor shall, at the sole cost and expense ------------ of the Trustor, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers, financing statements, continuation statements, instruments and assurances as the Beneficiary shall from time to time reasonably request, which may be necessary in the judgment of the Beneficiary from time to time to assure, perfect, convey, assign, mortgage, transfer and confirm unto the Beneficiary, the property and rights hereby conveyed or assigned or which the Trustor may be or may hereafter become bound to convey or assign to the Beneficiary or for carrying out the intention or facilitating the performance of the terms hereof or the filing, registering or recording hereof. Without limiting the generality of the foregoing, in the event that the Beneficiary desires to exercise any remedies, consensual rights or attorney-in-fact powers set forth in this Deed of Trust and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other Person therefor, then, upon the reasonable request of the Beneficiary, the Trustor agrees to use its reasonable efforts to assist and aid the Beneficiary to obtain as soon as practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers. In the event the Trustor shall fail (i) within ten (10) Business Days after demand, to execute or take any action required to be executed or taken by the Trustor under this Section 13.2 to the extent same is necessary to maintain ------------ perfection of the Lien granted to Beneficiary hereunder or (ii) such failure shall constitute an Event of Default, to execute or take any action required to be executed or taken by the Trustor under this Section 13.2 (other than the type ------------ described in clause (i) of this sentence) then, in each of the cases described in clauses (i) and (ii) of this sentence, the Beneficiary may execute or take the same as the attorney-in-fact for the Trustor, such power of attorney being coupled with an interest and is irrevocable. SECTION 13.3 Additional Security. Without notice to or consent of the ------------------- Trustor and without impairment of the Lien and rights created by this Deed of Trust, the Beneficiary may accept (but -34- the Trustor shall not be obligated to furnish) from the Trustor or from any other Person, additional security for the Secured Obligations. Neither the giving hereof nor the acceptance of any such additional security shall prevent the Beneficiary from resorting, first, to such additional security, and, second, to the security created by this Deed of Trust without affecting the Beneficiary's Lien and rights under this Deed of Trust. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Owned Premises and Leased --------------------------------------------------- Premises. All of the grants, covenants, terms, provisions and conditions in this - -------- Deed of Trust shall run with the Owned Premises and Leased Premises and shall apply to, and bind the successors and assigns of, the Trustor. If there shall be more than one grantor with respect to the Trust Property, the covenants and warranties hereof shall be joint and several. SECTION 14.2 No Merger. The rights and estate created by this Deed of --------- Trust shall not, under any circumstances, be held to have merged into any other estate or interest now owned or hereafter acquired by the Beneficiary unless the Beneficiary shall have consented to such merger in writing, such consent not to be unreasonably withheld. SECTION 14.3 Concerning Beneficiary and Trustee. ---------------------------------- (i) The Beneficiary has been appointed as trustee pursuant to the Indenture. The actions of the Beneficiary hereunder are subject to the provisions of the Indenture. The Beneficiary shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of the Trust Property), in accordance with this Deed of Trust and the Indenture. The Beneficiary may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. The Beneficiary may resign and a successor Beneficiary may be appointed in the manner provided in the Indenture. Upon the acceptance of any appointment as the Beneficiary by a successor Beneficiary, that successor Beneficiary shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Beneficiary under this Deed of Trust, and the retiring Beneficiary shall thereupon be discharged from its duties and obligations under this Deed of Trust. After any retiring Beneficiary's resignation, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it under this Deed of Trust while it was the Beneficiary. (ii) The Beneficiary shall be deemed to have exercised reasonable care in the custody and preservation of the Trust Property in its possession if such Trust Property is accorded treatment substantially equivalent to that which the Beneficiary, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Beneficiary nor any of the Secured Parties shall have responsibility for taking any necessary steps to preserve rights against any Person with respect to any Trust Property. (iii) The Beneficiary shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to -35- have been signed, sent or made by the proper Person, and, with respect to all matters pertaining to this Deed of Trust and its duties hereunder, upon advice of counsel selected by it. (iv) If any portion of the Trust Property also constitutes collateral granted to the Beneficiary under any other deed of trust, mortgage, security agreement, pledge or instrument of any type, in the event of any conflict between the provisions hereof and the provisions of such other deed of trust, mortgage, security agreement, pledge or instrument of any type in respect of such collateral, the Beneficiary, in its sole discretion, shall select which provision or provisions shall control. (v) The Beneficiary may without notice to or consent of the Trustor extend the time of the payment of any indebtedness secured hereby to any successors in interest of the Trustor without discharging the Trustor from liability thereon. SECTION 14.4 Beneficiary May Perform; Beneficiary Appointed ---------------------------------------------- Attorney-in-Fact. If the Trustor shall fail to perform any covenants contained - ---------------- in this Deed of Trust, subject to any applicable grace periods or contest rights permitted pursuant to Article IX hereof or as otherwise permitted by any ---------- Collateral Document (including, without limitation, the Trustor's covenants to (i) pay the premiums in respect of all required insurance policies hereunder, (ii) pay Charges, (iii) make repairs, (iv) discharge Liens or (v) pay or perform any obligations of the Trustor under any Trust Property) or if any warranty on the part of the Trustor contained herein shall be breached, the Beneficiary may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose; provided, however, that the -------- ------- Beneficiary shall in no event be bound to inquire into the validity of any tax, Lien, imposition or other obligation which the Trustor fails to pay or perform as and when required hereby and which the Trustor does not contest in accordance with the provisions of Article IX hereof. Any and all amounts reasonably so ---------- expended by the Beneficiary shall be paid by the Trustor in accordance with the provisions of Section 14.5 hereof. Neither the provisions of this Section 14.4 ------------ ------------ nor any action taken by the Beneficiary pursuant to the provisions of this Section 14.4 shall prevent any such failure to observe any covenant contained in - ------------ this Deed of Trust nor any breach of warranty from constituting an Event of Default. Upon the occurrence and during the continuance of an Event of Default the Trustor hereby appoints the Beneficiary its attorney-in-fact, with full authority in the place and stead of the Trustor and in the name of the Trustor to take any action and to execute any instrument consistent with the terms hereof and the other Collateral Documents which the Beneficiary may deem necessary or advisable to accomplish the purposes hereof. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. The Trustor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. SECTION 14.5 Expenses The Trustor will upon demand pay to the -------- Beneficiary the amount of any and all reasonable costs and expenses, including the reasonable fees and expenses of its counsel and the reasonable fees and expenses of any experts and agents which the Beneficiary may incur in connection with (i) any action, suit or other proceeding affecting the Trust Property or any part thereof commenced, in which action, suit or proceeding the Beneficiary is made a party or participates or in which the right to use the Trust Property or any part thereof is threatened, or in which it becomes necessary in the judgment of the Beneficiary to defend or uphold the Lien hereof (including, without limitation, any action, suit or proceeding to establish or uphold the compliance of the Trust Property with any Requirements of Law), (ii) the collection of the Secured Obligations, (iii) the enforcement and administration hereof, (iv) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Trust Property, (v) the exercise or enforcement of any of the rights of the Beneficiary or any Secured Party here- -36- under or (vi) the failure by the Trustor to perform or observe any of the provisions hereof. All amounts expended by the Beneficiary and payable by the Trustor under this Section 14.5 shall be due upon demand therefor (together with ------------ interest thereon accruing at the Default Rate during the period from and including the date on which such funds were so expended to the date of repayment) and shall be part of the Secured Obligations. The Trustor's obligations under this Section 14.5 shall survive the termination hereof and the ------------ discharge of the Trustor's other obligations under this Deed of Trust. SECTION 14.6 Indemnity. --------- (i) The Trustor agrees to indemnify, pay and hold harmless the Beneficiary, the Trustee and each of the other Secured Parties and the officers, directors, employees, agents and Affiliates of the Beneficiary, the Trustee and each of the other Secured Parties (collectively, the "Indemnitees") from and ----------- against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs (including, without limitation, settlement costs), expenses or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, commenced or threatened, whether or not such Indemnitee shall be designated a party thereto), which may be imposed on, incurred by or asserted against that Indemnitee, in any manner relating to or arising out hereof, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (including, without limitation, any misrepresentation by the Trustor in this Deed of Trust, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (the "Indemnified Liabilities"); provided, however, that the ----------------------- -------- ------- Trustor shall have no obligation to an Indem-nitee hereunder with respect to Indemnified Liabilities to the extent it has been determined by a final decision (after all appeals and the expiration of time to appeal) by a court of competent jurisdiction that such Indemnified Liabilities arose from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Trustor shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. (ii) Survival. The obligations of the Trustor contained in this -------- Section 14.6 shall survive the termination hereof and the discharge of the - ------------ Trustor's other obligations under this Deed of Trust, the Indenture and the other Collateral Documents. (iii) Reimbursement. Any amount paid by any Indemnitee as to which ------------- such Indemnitee has the right to reimbursement shall constitute Secured Obligations secured by the Trust Property. SECTION 14.7 Continuing Security Interest; Assignment. This Deed of ---------------------------------------- Trust shall create a continuing Lien on and security interest in the Trust Property and shall (i) be binding upon the Trus-tor, its respective successors and assigns and (ii) inure, together with the rights and remedies of the Beneficiary and the Trustee hereunder, to the benefit of the Beneficiary for the ratable benefit of the Secured Parties and each of their respective successors, transferees and assigns. No other Persons (including, without limitation, any other creditor of the Trustor) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (ii), any Holder of the Notes may assign or otherwise transfer any indebtedness held by it secured by this Deed of Trust to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Holder, herein or otherwise, subject however, to the provisions of the Indenture. -37- SECTION 14.8 Termination; Release. The Trust Property shall be -------------------- released from the Lien of this Deed of Trust in accordance with the provisions of Article 10 of the Indenture and in accordance with this Section 14.8. ---------- ------------ (i) At any time, and from time to time, without liability therefor and without notice to Trustor, in accordance with the provisions of the Indenture and upon written request of the Beneficiary, and without affecting the effect of this Deed of Trust upon the remainder of said Trust Property, the Trustee may: reconvey to the Trustor any part of said Trust Property; consent in writing to the making of any map or plat thereof; or join in granting any easement thereon. (ii) In accordance with the provisions of the Indenture and upon written request of the Beneficiary reciting that all of the Secured Obligations have been satisfied, the Trustee shall reconvey, without warranty or recourse and at the expense of the Trustor, the Trust Property then held hereunder, and the assignment set forth by Section 2.2 hereof shall be of no further force or ----------- effect. The recitals in such reconveyance of any matters of fact shall be conclusive proof of the truth thereof. The Grantee in such reconveyance may be described in general terms as "the person or persons legally entitled thereto". SECTION 14.9 Modification in Writing. No amendment, modification, ----------------------- supplement, termination or waiver of or to any provision hereof, nor consent to any departure by the Trustor therefrom, shall be effective unless the same shall be done in accordance with the terms of the Indenture and unless in writing and signed by the Beneficiary and the Trustor. Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by the Trus-tor from the terms of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Deed of Trust or any other Collateral Document, no notice to or demand on the Trustor in any case shall entitle the Trustor to any other or further notice or demand in similar or other circumstances. SECTION 14.10 Notices. Unless otherwise provided herein or in the ------- Indenture, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Indenture, if to the Trustor, addressed to it at the address of the Issuer set forth in the Indenture, and as to the Beneficiary, addressed to it at its address set forth in the Indenture, and as to the Trustee, addressed to it at the address set forth in the Preamble hereof, or in each case at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 14.10. ------------- SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL. ------------------------------------------------------- THIS DEED OF TRUST SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR ITEM OR TYPE OF TRUST PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. THE TRUSTOR AGREES THAT SERVICE OF PROCESS IN ANY PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE ISSUER AT ITS ADDRESS SET FORTH IN THE INDENTURE OR AT SUCH OTHER ADDRESS OF WHICH THE BENEFICIARY SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. IF ANY AGENT AP- -38- POINTED BY THE TRUSTOR REFUSES TO ACCEPT SERVICE, THE TRUSTOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE BENEFICIARY TO BRING PROCEEDINGS AGAINST THE TRUSTOR IN THE COURTS OF ANY OTHER JURISDICTION. THE TRUSTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS DEED OF TRUST OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 14.12 Severability of Provisions. Any provision hereof which -------------------------- is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 14.13 Limitation on Interest Payable. It is the intention of ------------------------------ the parties to conform strictly to the usury laws, whether state or Federal, that are applicable to the transaction of which this Deed of Trust is a part. All agreements between the Trustor and the Beneficiary, whether now existing or hereafter arising and whether oral or written, are hereby expressly limited so that in no contingency or event whatsoever shall the amount paid or agreed to be paid by the Trustor for the use, forbearance or detention of the money to be loaned or advanced under the Indenture or any related document or for the payment or performance of any covenant or obligation contained herein or in the Indenture or any related document exceed the maximum amount permissible under applicable Federal or state usury laws. If under any circumstances whatsoever fulfillment of any such provision, at the time performance of such provision shall be due, shall involve exceeding the limit of validity prescribed by law, then the obligation to be fulfilled shall be reduced to the limit of such validity. If under any circumstances the Trustor shall have paid an amount deemed interest by applicable law, which would exceed the highest lawful rate, such amount that would be excessive interest under applicable usury laws shall be applied to the reduction of the principal amount owing in respect of the Secured Obligations and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal and any other amounts due hereunder, the excess shall be refunded to the Issuer. All sums paid or agreed to be paid for the use, forbearance or detention of the principal under any extension of credit by the Beneficiary shall, to the extent permitted by applicable law, and to the extent necessary to preclude exceeding the limit of validity prescribed by law, be amortized, prorated, allocated and spread from the date hereof until payment in full of the Secured Obligations so that the actual rate of interest on account of such principal amounts is uniform throughout the term hereof. SECTION 14.14 Business Days. In the event any time period or any date ------------- provided in this Deed of Trust ends or falls on a day other than a Business Day, then such time period shall be deemed to end and such date shall be deemed to fall on the next succeeding Business Day, and performance herein may be made on such Business Day, with the same force and effect as if made on such other day. SECTION 14.15 Relationship. The relationship of the Beneficiary to the ------------ Trustor hereunder is strictly and solely that of lender and borrowers and grantors and beneficiary and nothing contained in the Indenture, the Notes, this Deed of Trust or any other document or instrument now existing and delivered in connection therewith or otherwise in connection with the Secured Obligations is intended to create, or shall in any event or under any circumstance be construed as creating a partnership, joint -39- venture, tenancy-in-common, joint tenancy or other relationship of any nature whatsoever between the Beneficiary and the Trustor other than as lender and borrowers and grantors and beneficiary. SECTION 14.16 Waiver of Stay. -------------- (i) The Trustor agrees that in the event that the Trustor or any property or assets of the Trustor shall hereafter become the subject of a voluntary or involuntary proceeding under the Bankruptcy Code or the Trustor shall otherwise be a party to any Federal or state bankruptcy, insolvency, moratorium or similar proceeding to which the provisions relating to the automatic stay under Section 362 of the Bankruptcy Code or any similar provision in any such law is applicable, then, in any such case, whether or not the Beneficiary has commenced foreclosure proceedings under this Deed of Trust, the Beneficiary shall be entitled to relief from any such automatic stay as it relates to the exercise of any of the rights and remedies (including, without limitation, any foreclosure proceedings) available to the Beneficiary as provided in this Deed of Trust, in any other Collateral Document or any other document evidencing the Secured Obligations. (ii) The Beneficiary shall have the right to petition or move any court having jurisdiction over any proceeding described in Section 14.16(i) --------------- hereof for the purposes provided therein, and the Trustor agrees (i) not to oppose any such petition or motion and (ii) at the Trustor's sole cost and expense, to assist and cooperate with the Beneficiary, as may be requested by the Beneficiary from time to time, in obtaining any relief requested by the Beneficiary, including, without limitation, by filing any such petitions, supplemental petitions, requests for relief, documents, instruments or other items from time to time requested by the Beneficiary or any such court. SECTION 14.17 No Credit for Payment of Taxes or Impositions. The --------------------------------------------- Trustor shall not be entitled to any credit against the principal, premium, if any, or interest payable under the Indenture or the Notes, and the Trustor shall not be entitled to any credit against any other sums which may become payable under the terms thereof or hereof, by reason of the payment of any Charge on the Trust Property or any part thereof. SECTION 14.18 No Claims Against the Beneficiary. Nothing contained in --------------------------------- this Deed of Trust shall constitute any consent or request by the Beneficiary, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Owned Premises or Leased Premises or any part thereof, nor as giving the Trustor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the Beneficiary in respect thereof or any claim that any Lien based on the performance of such labor or services or the furnishing of any such materials or other property is prior to the Lien hereof. SECTION 14.19 Obligations Absolute. All obligations of the Trustor -------------------- hereunder shall be absolute and unconditional irrespective of: (i) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Trustor, the Issuer or any other Guarantor; (ii) any lack of validity or enforceability of the Indenture, the Notes or any other agreement or instrument relating thereto; -40- (iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Indenture, the Notes or any other agreement or instrument relating thereto; (iv) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations; (v) any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect hereof, the Indenture, the Notes or any agreement or instrument relating thereto except as specifically set forth in a waiver granted pursuant to the provisions of Section 14.9 hereof; or ------------ (vi) any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Trustor. SECTION 14.20 Last Dollars Secured. To the fullest extent permitted by -------------------- law, this Deed of Trust shall be deemed to secure only a portion of the Indebtedness owing or which may become owing by the Trustor. The parties agree that, to the fullest extent permitted by law, any payments or repayments of such Indebtedness by the Trustor shall be and be deemed to be applied first to the portion of the Indebtedness that is not secured hereby, it being the parties' intent that the portion of the Indebtedness last remaining unpaid shall be secured hereby. SECTION 14.21 Trustee Provisions. ------------------ (i) No Required Action. The Trustee shall not be required to take any ------------------ action toward the execution and enforcement of the trust hereby created or to institute, appear in, or defend any action, suit, or other proceeding in connection therewith where, in the Trustee's opinion, such action would be likely to involve the Trustee in expense or liability, unless requested so to do by a written instrument signed by Beneficiary and, if the Trustee so requests, unless the Trustee is tendered security and indemnity satisfactory to the Trustee against any and all cost, expense, and liability arising therefrom. The Trustee shall not be responsible for the execution, acknowledgment, or validity of this Deed of Trust, or for the proper authorization thereof, or for the sufficiency of the lien and security interest purported to be created hereby, and the Trustee makes no representation in respect thereof or in respect of the rights, remedies, and recourses of Beneficiary. (ii) Certain Rights. With the approval of Beneficiary, the Trustee -------------- shall have the right to take any and all of the following actions: (i) to select, employ, and advise with counsel (who may be, but need not be, counsel for Beneficiary) upon any matters arising hereunder, including the preparation, execution, and interpretation of this Deed of Trust, and shall be fully protected in relying as to legal matters on the advice of counsel, (ii) to execute any of the trusts and powers hereof and to perform any duty hereunder either directly or through her agents or attorneys, (iii) to select and employ, in and about the execution of the Trustee's duties hereunder, suitable accountants, engineers and other experts, agents and attorneys-in-fact, either corporate or individual, not regularly in the employ of the Trustee, and the Trustee shall not be answerable for any act, default, negligence, or misconduct of any such accountant, engineer or other expert, agent or attorney-in-fact, if selected with reasonable care, or for any error of judgment or act done by the Trustee in good faith, or be otherwise responsible or accountable under any circumstances -41- whatsoever, except for the Trustee's gross negligence or bad faith, and (iv) any and all other lawful action as Beneficiary may instruct the Trustee to take to protect or enforce Beneficiary's rights hereunder. The Trustee shall not be personally liable in case of entry by the Trustee, or anyone entering by virtue of the powers herein granted to the Trustee, upon the Trust Property for debts contracted for or liability or damages incurred in the management or operation of the Trust Property. The Trustee shall have the right to rely on any instrument, document, or signature authorizing or supporting any action taken or proposed to be taken by the Trustee hereunder, believed by the Trustee in good faith to be genuine. The Trustee shall be entitled to reimbursement for reasonable expenses incurred by the Trustee in the performance of Trustee's duties hereunder and to reasonable compensation for such of the Trustee's services hereunder as shall be rendered. The Trustor will, from time to time, pay the reasonable compensation due to the Trustee hereunder and reimburse the Trustee for, and save the Trustee harmless against, any and all liability and reasonable expenses which may be incurred by Trustee in the performance of Trustee's duties hereunder. (iii) Substitution of Trustee. Subject to the restrictions ----------------------- regarding the substitution of trustees in the Indenture, if, for any reason, with or without cause, the Beneficiary shall elect to substitute for the Trustee herein named (or for any successor to said Trustee), the Beneficiary shall have the right to appoint successor Trustee(s) by duly acknowledged written instruments, and each new Trustee immediately upon recordation of the instrument so appointing him shall become successor in title to the Owned Premises and Leased Premises for the uses and purposes of this Deed of Trust, with all the powers, duties and obligations conferred on the Trustee in the same manner and to the same effect as though he were named herein as the Trustee. If there be more than one trustee, either may act alone and execute the trusts upon the request of the Beneficiary, and all his acts thereunder shall be deemed to be the acts of all trustees, and the recital in any conveyance executed by such sole trustee of such request shall be conclusive evidence thereof, and of the authority of such sole trustee to act. (iv) Successor Trustees. The Trustee accepts this trust when this ------------------ Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. The Trustee may resign by the giving of notice of such resignation in writing or verbally to Beneficiary. If the Trustee shall die, resign, or become disqualified from acting in the execution of this trust, or if, for any reason, Beneficiary shall prefer to appoint a substitute trustee or multiple substitute trustees, or successive substitute trustees or successive multiple substitute trustees, to act instead of the aforenamed Trustee, Beneficiary shall have full power to appoint a substitute trustee (or, if preferred, multiple substitute trustees) in succession who shall succeed (and if multiple substitute trustees are appointed, each of such multiple substitute trustees shall succeed) to all the estates, rights, powers, and duties of the aforenamed Trustee. Such appointment may be executed by any authorized agent of Beneficiary, and if such Beneficiary be a corporation and such appointment be executed in its behalf by any officer of such corporation, such appointment shall be conclusively presumed to be executed with authority and shall be valid and sufficient without proof of any action by the board of directors or any superior officer of the corporation. The Trustor hereby ratifies and confirms any and all acts which the aforenamed Trustee, or her successor or successors in this trust, shall do lawfully by virtue hereof. If multiple substitute Trustees are appointed, each of such multiple substitute Trustees shall be empowered and authorized to act alone without the necessity of the joinder of the other multiple substitute trustees, whenever any action or undertaking of such substitute trustees is requested or required under or pursuant to this Deed of Trust or applicable law. (v) Perfection of Appointment. Should any deed, conveyance, or ------------------------- instrument of any nature be required from the Trustor by any Trustee or substitute Trustee to more fully and certainly vest in and confirm to the Trustee or substitute Trustee such estates, rights, powers, and duties, then, upon request -42- by the Trustee or substitute Trustee, any and all such deeds, conveyances and instruments shall be made, executed, acknowledged, and delivered and shall be caused to be recorded and/or filed by the Trustor. (vi) Succession Instruments. Any substitute Trustee appointed ---------------------- pursuant to any of the provisions hereof shall, without any further act, deed, or conveyance, become vested with all the estates, properties, rights, powers, and trusts of its or his predecessor in the rights hereunder with like effect as if originally named as Trustee herein; but nevertheless, upon the written request of Beneficiary or of the substitute Trustee, the Trustee ceasing to act shall execute and deliver any instrument transferring to such substitute Trustee, upon the trusts herein expressed, all the estates, properties, rights, powers, and trusts of the Trustee so ceasing to act, and shall duly assign, transfer and deliver any of the property and moneys held by such Trustee to the substitute Trustee so appointed in the Trustee's place. (vii) No Representation by Trustee or Beneficiary. By accepting or ------------------------------------------- approving anything required to be observed, performed, or fulfilled or to be given to the Trustee or Beneficiary pursuant to the Collateral Documents, including without limitation, any officer's certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal, or insurance policy, neither the Trustee nor the Beneficiary shall be deemed to have warranted, consented to, or affirmed the sufficiency, legality, effectiveness, or legal effect of the same, or of any term, provision, or condition thereof, and such acceptance or approval thereof shall not be or constitute any warranty or affirmation with respect thereto by the Trustee or the Beneficiary. SECTION 14.22 Trust Lease. ----------- (i) The Trustor shall punctually and properly perform, observe and otherwise comply with each and every covenant, agreement, requirement and condition set forth in the Trust Lease and do or cause to be done all things necessary or appropriate to keep the Trust Lease in full force and effect and to preserve and keep unimpaired the rights of the Trustor thereunder. Upon request of the Beneficiary, the Trustor shall, subject to the terms of the Trust Lease, request from the Lessor an estoppel certificate, addressed to the Beneficiary, stating that there is no default under the Trust Lease or any state of facts which, with the passage of time or notice or both, would constitute a default thereunder, or if there be any default under the Trust Lease, giving the details thereof. (ii) In the event the Trustor acquires the fee simple title or any other estate or interest in the property subject to any Trust Lease, such acquisition will not merge with the leasehold estate created by such Trust Lease, but such other estate or interest will remain discrete and immediately become subject to the Lien of this Deed of Trust, and the Trustor shall execute, acknowledge and deliver any instruments requested by the Beneficiary to confirm the coverage of the Lien evidenced hereby upon such other estate or interest. The Trustor shall pay any and all conveyance or mortgage taxes and filing or similar fees in connection with the execution, delivery, filing or recording of any such instrument. (iii) The Trustor shall promptly notify the Beneficiary in wiring of the occurrence of any default (or any event which, with the lapse of time or notice or both, would constitute a default) on the part of or caused by any party to the Trust Lease. If for any reason the Trustor cannot timely make any payment under any Trust Lease or perform or comply with any of its obligations under any Trust Lease, the Trustor shall notify the Beneficiary in sufficient time to enable the Beneficiary (but the Beneficiary shall not be obligated) timely to make such payments and/or to perform or comply with such other obligations. On receipt by the Beneficiary from the Trustor pursuant to this Section 14.21(iii), or from the applicable ------------------ -43- Lessor under the Trust Lease, of any such notice of default by, or inability to make any payment by, the Trustor thereunder, the Beneficiary may rely thereon and, after reasonable notice to the Trustor, take such action as the Beneficiary deems necessary or desirable to cure such default, even though the existence of such default or the nature thereof is denied by the Trustor or by any other Person. (iv) Except as otherwise permitted under Section 10.6 of the Indenture, the Trustor shall not, without the prior written consent of the Beneficiary, amend, modify, surrender, impair, forfeit, cancel or terminate, or permit the amendment, modification, surrender, impairment, forfeiture, cancellation or termination of, any Trust Lease in whole or in part, whether or not a default shall have occurred and shall be continuing under either thereof. Any such termination, cancellation, modification, change, supplement, alteration, amendment or extension without the prior written consent contemplated by this subsection 14.21(iv) shall be void and of no force or effect. (v) The leasehold estate of the Trustor created by the Trust Lease and the estate of the Lessor, under the Trust Lease shall each at all times remain separate and apart and retain their separate identities, and no merger of the leasehold or easement estate of the Trustor with the estate of the Lessor, will result with respect to the Beneficiary or with respect to any purchaser acquiring the Trust Property at any sale on foreclosure of the Lien of this Deed of Trust without the written consent of the Beneficiary. (vi) The Trustor covenants and agrees that if it shall be the subject of a proceeding under the Federal Bankruptcy Code, it shall not elect to treat any Trust Lease as terminated (pursuant to Section 365 of the Federal Bankruptcy Code or any similar statute or law) without the prior written consent of the Beneficiary. The Trustor hereby irrevocably assigns to the Beneficiary the right to exercise such election. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Trustor has caused this Deed of Trust to be duly executed and delivered under seal the day and year first above written. GOLD DUST WEST CASINO, INC., a Nevada corporation /s/ Stephen R. Roark By: ____________________________________ Stephen R. Roark, Vice President Colorado STATE OF _______________________________________) ) ss Denver CITY AND COUNTY OF _____________________________) 19 This instrument was acknowledged before me on February ____, 2002, by Stephen R. Roark, as Vice President of GOLD DUST WEST CASINO, INC. /s/ Vicki L. Jaynes ____________________________ Notary Public Schedule A ---------- [Legal Description] [to come from title policy] Schedule B ---------- Prior Liens ----------- 1. Each of the liens and other encumbrances excepted as being prior to the Lien hereof as set forth in Schedule B to the marked title insurance commitment issued by First American Title Company of Nevada, dated as of the date hereof and delivered to the Beneficiary on the date hereof, bearing First American Title Company of Nevada reference number 2001-58642-RB relating to the real property described in Schedule A ------------- attached hereto. 2. Zoning and building ordinances and regulations, to the extent they constitute Permitted Liens of the type described in clause (4) of the definition thereof. Schedule C ---------- Leases Affecting the Trust Property Operating Lease dated July 27, 1998 between GOLD DUST MOTEL, INC., a Nevada corporation and John E. Cavanaugh dba Gold Dust West as landlord ("Original Landlord"), and SIERRA DEVELOPMENT COMPANY dba CLUB CAL-NEVA, a Nevada corporation, as tenant ("Tenant"), as assigned on January 4, 2001 by Original Landlord to GOLD DUST WEST CASINO, INC., a Nevada corporation, and as amended through the date hereof, pursuant to which Tenant leases a portion of the property known as Gold Dust West Casino, located at 444 Vine Street (701 West 4/th/ Street), Reno, NV 89505, as more particularly described in Schedule A ---------- attached to this Deed of Trust. Exhibit 1 --------- FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the "Agreement") is made and entered into as of the ____ day of _______, ____ by and between ________________________________, as trustee, having an office at _________________ (in such capacity, "Trustee"), and _____________________, having an office at __________________________ ("Tenant"). R E C I T A L S: - - - - - - - - A. Tenant is the tenant under a certain lease dated _____________, ____ between ________________________________, as landlord ("Landlord"), and Tenant, as tenant (as amended through the date hereof, the "Lease"), pursuant to which Tenant leased a portion (the "Leased Premises") of the property known as _____________________________, located at _____________________________, as more particularly described in Schedule A attached hereto (the "Property"). ---------- B. Landlord has or will grant a deed of trust lien on and security interest in the Property to Trustee (for its benefit and for the benefit of the holders of certain senior secured notes and notes issued in exchange therefor pursuant to that certain indenture dated as of [________ ___, 2002]) pursuant to one or more mortgages, deeds of trust, deeds to secure debt or similar security instruments (collectively, the "Security Instruments"). C. Tenant has agreed to subordinate the Lease to the Security Instruments and to the lien thereof and Trustee has agreed not to disturb Tenant's possessory rights in the Leased Premises under the Lease on the terms and conditions hereinafter set forth. A G R E E M E N T: - - - - - - - - - NOW, THEREFORE, the parties hereto mutually agree as follows: 1. Subordination. Notwithstanding anything to the contrary set forth ------------- in the Lease, the Lease and the leasehold estate created thereby and all of Tenant's rights thereunder are and shall at all times be subject and subordinate in all respects to the Security Instruments and the lien thereof, and to all rights of Trustee thereunder, and to any and all advances to be made thereunder, and to all renewals, modifications, consolidations, replacements and extensions thereof. 2. Nondisturbance. So long as Tenant complies with the provisions of -------------- this Agreement, pays all rents and other charges as specified in the Lease and is not otherwise in default (beyond applicable notice and cure periods) of any of its obligations and covenants pursuant to the Lease, Trustee agrees for itself and its successors in interest and for any other person acquiring title to the Property through a foreclosure (an "Acquiring Party"), that Tenant's possession of the Leased Premises as described in the Lease will not be disturbed during the term of the Lease by reason of a foreclosure. For purposes of this Agreement, a "foreclosure" shall include (but not be limited to) a sheriff's or trustee's sale under the power of sale con- -2- tained in the Security Instruments, the termination of any superior lease of the Property and any other transfer of the Landlord's interest in the Property under peril of foreclosure, including, without limitation to the generality of the foregoing, an assignment or sale in lieu of foreclosure. 3. Attornment. Tenant agrees to attorn to, accept and recognize any ---------- Acquiring Party as the landlord under the Lease pursuant to the provisions expressly set forth therein for the then remaining balance of the term of the Lease, and any extensions thereof as made pursuant to the Lease. The foregoing provision shall be self-operative and shall not require the execution of any further instrument or agreement by Tenant as a condition to its effectiveness. 4. No Liability. Notwithstanding anything to the contrary contained ------------ herein or in the Lease, it is specifically understood and agreed that neither the Trustee, any receiver nor any Acquiring Party shall be: (a) liable for any act, omission, negligence or default of any prior landlord (including Landlord); or (b) liable for any failure of any prior landlord (including Landlord) to construct any improvements or bound by any covenant to construct any improvement either at the commencement of the term of the Lease or upon any renewal or extension thereof or upon the addition of additional space pursuant to any expansion right contained in the Lease; or (c) subject to any offsets, credits, claims or defenses which Tenant might have against any prior landlord (including Landlord); or (d) bound by any rent or additional rent which is payable on a monthly basis and which Tenant might have paid for more than one (1) month in advance to any prior landlord (including Landlord) or by any security deposit or other prepaid charge which Tenant might have paid in advance to any prior landlord (including Landlord); or (e) liable to Tenant hereunder or under the terms of the Lease beyond its interest in the Property; or (f) bound by any assignment, subletting, renewal, extension or any other agreement or modification of the Lease made without the written consent of Trustee; or (g) bound by any consensual or negotiated surrender, cancellation or termination of the Lease, in whole or in part, agreed upon between Landlord and Tenant unless effected unilaterally by Tenant pursuant to the express terms of the Lease. Notwithstanding the foregoing, Tenant reserves its right to any and all claims or causes of action (i) against such prior landlord for prior losses or damages and (ii) against the successor landlord for all losses or damages arising from and after the date that such successor landlord takes title to the Property. 5. Certain Acknowledgments and Agreements by Tenant. (a) Tenant has ------------------------------------------------ notice that the Lease and the rents and all other sums due thereunder have been assigned to Trustee as security for the notes secured by the Security Instruments. In the event Trustee notifies Tenant of the occurrence of a de- -3- fault under the Security Instruments and demands that Tenant pay its rents and all other sums due or to become due under the Lease directly to Trustee, Tenant shall honor such demand and pay its rent and all other sums due under the Lease directly to Trustee or as otherwise authorized in writing by Trustee. Landlord irrevocably authorizes Tenant to make the foregoing payments to Trustee upon such notice and demand. (b) Tenant shall send a copy of any and all notices or statements under the Lease to Trustee at the same time such notices or statements are sent to Landlord. (c) This Agreement satisfies any and all conditions or requirements in the Lease relating to the granting of a non-disturbance agreement. 6. Trustee to Receive Default Notices. Tenant shall notify Trustee ---------------------------------- of any default by Landlord under the Lease which would entitle Tenant to cancel the Lease, and agrees that, notwithstanding any provisions of the Lease to the contrary, no notice of cancellation thereof shall be effective unless Trustee shall have received notice of default giving rise to such cancellation and shall have failed within sixty (60) days after receipt of such notice to cure such default or, if such default cannot be cured within sixty (60) days, shall have failed within sixty (60) days after receipt of such notice to commence and thereafter diligently pursue any action necessary to cure such default. 7. Estoppel. Tenant hereby certifies and represents to Trustee that -------- as of the date of this Agreement: (a) the Lease is in full force and effect; (b) all requirements for the commencement and validity of the Lease have been satisfied and there are no unfulfilled conditions to Tenant's obligations under the Lease; (c) Tenant is not in default under the Lease and has not received any uncured notice of any default by Tenant under the Lease; to the best of Tenant's knowledge, Landlord is not in default under the Lease; no act, event or condition has occurred which with notice or the lapse of time, or both, would constitute a default by Tenant or Landlord under the Lease; no claim by Tenant of any nature exists against Landlord under the Lease; and all obligations of Landlord have been fully performed; (d) there are no defenses, counterclaims or setoffs against rents or charges due or which may become due under the Lease; (e) none of the rent which Tenant is required to pay under the Lease has been prepaid, or will in the future be prepaid, more than one (1) month in advance; (f) Tenant has no right or option contained in the Lease or in any other document to purchase all or any portion of the Leased Premises; (g) the Lease has not been modified or amended and constitutes the entire agreement between Landlord and Tenant relating to the Leased Premises; -4- (h) Tenant has not assigned, mortgaged, sublet, encumbered, conveyed or otherwise transferred any or all of its interest under the Lease; and (i) Tenant has full authority to enter into this Agreement, which has been duly authorized by all necessary action. 8. Notices. All notices or other written communications hereunder ------- shall be deemed to have been properly given (i) upon delivery, if delivered in person with receipt acknowledged by the recipient thereof, (ii) one (1) Business Day (hereinafter defined) after having been deposited for overnight delivery with any reputable overnight courier service, or (iii) three (3) Business Days after having been deposited in any post office or mail depository regularly maintained by the United States Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested, addressed to the receiving party at its address set forth above or addressed as such party may from time to time designate by written notice to the other parties. For purposes of this Section 8, the term "Business Day" shall mean any day other than Saturday, Sunday or any other day on which banks are required or authorized to close in New York, New York. Either party by notice to the other may designate additional or different addresses for subsequent notices or communications. 9. Successors. The obligations and rights of the parties pursuant to ---------- this Agreement shall bind and inure to the benefit of the successors, assigns, heirs and legal representatives of the respective parties; provided, however, -------- ------- that in the event of the assignment or transfer of the interest of Trustee, all obligations and liabilities of Trustee under this Agreement shall terminate, and thereupon all such obligations and liabilities shall be the responsibility of the party to whom Trustee's interest is assigned or transferred; and provided, -------- further, that the interest of Tenant under this Agreement may not be assigned or - ------- transferred without the prior written consent of Trustee. In addition, Tenant acknowledges that all references herein to Landlord shall mean the owner of the landlord's interest in the Lease, even if said owner shall be different from the Landlord named in the Recitals. 10. Duplicate Original; Counterparts. This Agreement may be executed -------------------------------- in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Agreement. 11. Limitation of Trustee's Liability. (a) Trustee shall have no --------------------------------- obligations nor incur any liability with respect to any warranties of any nature whatsoever, whether pursuant to the Lease or otherwise, including, without limitation, any warranties respecting use, compliance with zoning, Landlord's title, Landlord's authority, habitability, fitness for purpose or possession. (b) In the event that Trustee shall acquire title to the Leased Premises or the Property, Trustee shall have no obligation, nor incur any liability, beyond Trustee's then equity interest, if any, in the Leased Premises, and Tenant shall look exclusively to such equity interest of Trustee, if any, in the Leased Premises for the payment and discharge of any obligations imposed upon Trustee hereunder or under the Lease, and Trustee is hereby released and relieved of any other obligations hereunder and under the Lease. 12. Modification in Writing. This Agreement may not be modified ----------------------- except by an agreement in writing signed by the parties hereto or their respective successors in interest. -5- 13. Lien of Security Instruments. Nothing contained in this Agreement ---------------------------- shall in any way impair or affect the lien created by the Security Instruments or the provisions thereof. 14. Compliance with Lease. Tenant agrees that in the event there is --------------------- any inconsistency between the terms and provisions hereof and the terms and provisions of the Lease, the terms and provisions hereof shall be controlling. 15. Governing Law; Severability. This Agreement shall be governed by -------------------------- the laws of the State of [ ]. If any term of this Agreement or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such terms to any person or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 16. Further Actions. Tenant agrees at its own expense to execute and --------------- deliver, at any time and from time to time upon the request of Trustee or any Acquiring Party, such documents and instruments (in recordable form, if requested) as may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to fully implement or to further evidence the understandings and agreements contained in this Agreement. Moreover, Tenant hereby irrevocably appoints and constitutes Trustee or any Acquiring Party as its true and lawful attorney-in-fact to execute and deliver any such documents or instruments which may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to implement or further evidence such understandings and agreements and which Tenant, after thirty (30) days' notice from Trustee or any Acquiring Party, has failed to execute and deliver. S-1 IN WITNESS WHEREOF, Trustee and Tenant have duly executed this Agreement as of the date first above written. ___________________________________________, as Trustee By: ________________________________________ Name: Title: ___________________________________________, as Tenant By: ________________________________________ Name: Title: The undersigned, as the Landlord named in the Recitals, having duly executed this Agreement as of the date first written above, and as grantor, pledgor, assignor or debtor under the Security Instruments, hereby accepts and agrees for itself and its successors and assigns, (i) to be bound by the provisions of Section 5 hereof, (ii) that nothing contained in the foregoing Agreement (x) shall in any way be deemed to constitute a waiver by Trustee of any of its rights or remedies under the Security Instruments or (y) shall in any way be deemed to release Landlord from its obligations to comply with the terms, provisions, conditions, covenants and agreements set forth in the Security Instruments and (iii) that the provisions of the Security Instruments remain in full force and effect and must be complied with by Landlord. ________________________________, a ________________________________ By: ______________________________________ Name: Title: ACKNOWLEDGMENT STATE OF _______________________________) ) ss COUNTY OF ______________________________) This instrument was acknowledged before me on _______________________, by ___________________, as ______________________________ of _____________________________. ____________________________ Notary Public SCHEDULE A to EXHIBIT 1 ----------------------- Description of Real Property ---------------------------- [Leave a space 3 inches square in lower right corner of last page of exhibits for Recorder's use] EX-4.12 42 dex412.txt LEASEHOLD MORTGAGE Exhibit 4.12 ================================================================================ LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING BY HOUMA TRUCK PLAZA & CASINO, L.L.C., Mortgagor, TO WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee, Mortgagee Securing Principal Indebtedness of $125,000,000; Dated as of February 22, 2002 Relating to Premises in: Terrebonne Parish, Louisiana ================================================================================ After recording, please return to: Athy A. Mobilia, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 ___________________ TABLE OF CONTENTS
Page ---- PREAMBLE ............................................................................ 1 RECITALS ............................................................................ 1 AGREEMENT ........................................................................... 2 ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions ....................................................... 2 SECTION 1.2 Interpretation .................................................... 8 SECTION 1.3 Resolution of Drafting Ambiguities ................................ 8 ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Mortgaged Property ....................................... 8 SECTION 2.2 Assignment of Leases and Rents .................................... 9 SECTION 2.3 Secured Obligations ............................................... 10 SECTION 2.4 Future Advances ................................................... 10 SECTION 2.5 No Release ........................................................ 10 ARTICLE III REPRESENTATIONS AND WARRANTIES OF MORTGAGOR SECTION 3.1 Authority and Validity ............................................ 11 SECTION 3.2 Warranty of Title ................................................. 11 SECTION 3.3 Condition of Mortgaged Property ................................... 12 SECTION 3.4 Leases ............................................................ 13 SECTION 3.5 Insurance ......................................................... 14 SECTION 3.6 Charges ........................................................... 14 SECTION 3.7 Environmental ..................................................... 14 SECTION 3.8 No Conflicts, Consents, etc ....................................... 15 [SECTION 3.9 Benefit to the Mortgagor] ......................................... 15
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Page ---- ARTICLE IV CERTAIN COVENANTS OF MORTGAGOR SECTION 4.1 Preservation of Corporate Existence .................................... 15 SECTION 4.2 Title .................................................................. 16 SECTION 4.3 Maintenance and Use of Mortgaged Property; Alterations ................. 16 SECTION 4.4 Notices Regarding Certain Defaults ..................................... 17 SECTION 4.5 Access to Mortgaged Property, Books and Records; Other Information ..... 17 SECTION 4.6 Limitation on Liens; Transfer Restrictions ............................. 18 SECTION 4.7 Environmental .......................................................... 18 SECTION 4.8 Estoppel Certificates .................................................. 19 ARTICLE V LEASES SECTION 5.1 Mortgagor's Affirmative Covenants with Respect to Leases ............... 20 SECTION 5.2 Mortgagor's Negative Covenants with Respect to Leases .................. 20 SECTION 5.3 Additional Requirements with Respect to New Leases ..................... 21 ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Mortgagor ........................... 21 SECTION 6.2 Collection of Rents by the Mortgagee ................................... 21 SECTION 6.3 No Release ............................................................. 22 SECTION 6.4 Irrevocable Interest ................................................... 22 SECTION 6.5 Amendment to Leases .................................................... 22 ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges ..................................................... 22 SECTION 7.2 Escrow of Taxes ........................................................ 22 SECTION 7.3 Certain Statutory Liens ................................................ 23 SECTION 7.4 Stamp and Other Taxes .................................................. 23 SECTION 7.5 Certain Tax Law Changes ................................................ 23 SECTION 7.6 Proceeds of Tax Claim .................................................. 23 ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages .............................. 24
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Page ---- SECTION 8.2 Delivery After Foreclosure ................................. 24 ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens ............ 24 SECTION 9.2 Contesting of Insurance .................................... 24 ARTICLE X ESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction ................................................ 25 SECTION 10.2 Condemnation ............................................... 25 ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default .......................................... 25 SECTION 11.2 Remedies in Case of an Event of Default .................... 25 SECTION 11.3 Sale of Mortgaged Property if Event of Default Occurs; Proceeds of Sale ......................................... 26 SECTION 11.4 Additional Remedies in Case of an Event of Default ......... 27 SECTION 11.5 Legal Proceedings After an Event of Default ................ 28 SECTION 11.6 Remedies Not Exclusive ..................................... 29 SECTION 11.7 Sale of Mortgaged Lease .................................... 29 ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement ......................................... 30 SECTION 12.2 Fixture Filing ............................................. 30 ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security ................. 32 SECTION 13.2 Further Acts ............................................... 33 SECTION 13.3 Additional Security ........................................ 33
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Page ---- ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Leased Premises .................... 33 SECTION 14.2 No Merger .................................................... 33 SECTION 14.3 Concerning Mortgagee ......................................... 34 SECTION 14.4 Mortgagee May Perform; Mortgagee Appointed Attorney-in-Fact .. 34 SECTION 14.5 Expenses ..................................................... 35 SECTION 14.6 Indemnity .................................................... 35 SECTION 14.7 Continuing Security Interest; Assignment ..................... 36 SECTION 14.8 Termination; Release ......................................... 36 SECTION 14.9 Modification in Writing ...................................... 36 SECTION 14.10 Notices ...................................................... 36 SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL ...................................................... 36 SECTION 14.12 Severability of Provisions ................................... 37 SECTION 14.13 Limitation on Interest Payable ............................... 37 SECTION 14.14 Business Days ................................................ 37 SECTION 14.15 Relationship ................................................. 38 SECTION 14.16 Waiver of Stay ............................................... 38 SECTION 14.17 No Credit for Payment of Taxes or Impositions ................ 38 SECTION 14.18 No Claims Against the Mortgagee .............................. 38 SECTION 14.19 Obligations Absolute ......................................... 38 SECTION 14.20 Last Dollars Secured ......................................... 39 SECTION 14.21 Mortgaged Lease .............................................. 39
SIGNATURE ACKNOWLEDGMENTS SCHEDULE A Legal Description SCHEDULE B Prior Liens SCHEDULE C Leases EXHIBIT 1 Form of Subordination, Non-Disturbance and Attornment Agreement -iv- LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Mortgage"), dated as of February __, 2002, made -------- by HOUMA TRUCK PLAZA & CASINO, L.L.C., a Louisiana limited liability company having an office at 1406 S. Range Avenue, Suite 2, Denham Springs, Louisiana 70726, as mortgagor, assignor and debtor (in such capacities and together with any successors in such capacities, the "Mortgagor"), in favor of WELLS FARGO --------- BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association having an office at 213 Court Street, Suite 902, Middletown, CT 06457, in its capacity as trustee pursuant to the Indenture (as hereinafter defined), as mortgagee, assignee and secured party (in such capacities and together with any successors in such capacities, the "Mortgagee"). --------- R E C I T A L S : - - - - - - - - A. Gameco, Inc. (the "Issuer"), certain of its Subsidiaries (as hereinafter ------ defined), the Mortgagor and the Mortgagee have, in connection with the execution and delivery of this Mortgage, entered into that certain indenture, dated as of February 8, 2002 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Indenture"), pursuant to which the Issuer has --------- issued its 11 7/8% senior secured notes due 2009 (the "Senior Secured Notes") in -------------------- the aggregate principal amount of $125,000,000. It is contemplated that the Issuer may, after the date hereof, issue Additional Notes (as defined in the Indenture) and Exchange Notes (as defined in the Indenture; the Exchange Notes, together with the Additional Notes and the Senior Secured Notes, the "Notes"), ----- in each case, pursuant to the provisions of the Indenture. B. The Issuer owns, directly or through its Subsidiaries, all of the issued and outstanding shares of the Mortgagor. C. The Mortgagor has, pursuant to the Indenture, among other things, unconditionally guaranteed (the "Guarantee") the obligations of the Issuer under --------- the Indenture and the Notes. D. The Mortgagor will receive substantial benefits from the execution and delivery of, and the performance of the obligations under, the Indenture and the Notes, and is therefore willing to enter into this Mortgage. E. The Mortgagor is the legal owner and holder of the tenant's interest under that certain lease, dated as of June 3, 1999 (as amended from time to time in accordance with the provisions of this Mortgage, the "Mortgaged Lease") --------------- between Houma-Terrebonne Airport Commission, as landlord (together with its successors and assigns, the "Lessor"), and the Mortgagor, as tenant, which ------ affects the property described on Schedule A annexed hereto. The Mortgaged Lease ---------- was recorded in COB 1649, Folio 831, Entry 1047472, in the real property records of Terrebonne Parish, Louisiana. F. This Mortgage is given by the Mortgagor in favor of the Mortgagee for its benefit and for the benefit of the Holders of the Notes (collectively, the "Secured Parties") to secure the payment and performance of all of the Secured --------------- Obligations (as hereinafter defined). -2- A G R E E M E N T: - - - - - - - - - NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Mortgagor hereby covenants and agrees with the Mortgagee as follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions. Capitalized terms used but not otherwise defined ----------- herein shall have the meanings assigned to such terms in the Indenture. The following terms used in this Mortgage shall have the following meanings: "ACM" shall have the meaning assigned to such term in Section 4.7(ii) --------------- hereof. "Affiliate" shall have the meaning assigned to such term in the Indenture. --------- "Alteration" shall mean any and all alterations, installations, ---------- improvements, additions, modifications or changes of a structural nature of or to the Leased Premises. "Business Day" shall have the meaning assigned to such term in the ------------ Indenture. "Charges" shall mean any and all real estate, property and other taxes, ------- assessments and special assessments, levies, fees, all water and sewer rents and charges and all other governmental charges or Liens imposed upon or assessed against, and all claims (including, without limitation, landlords', carriers', mechanics', workmen's, repairmen's, laborers', materialmen's, suppliers' and warehousemen's Liens and other claims arising by operation of law) against, all or any portion of the Mortgaged Property. "Collateral Account" shall have the meaning assigned to such term in the ------------------ Indenture. "Collateral Documents" shall have the meaning assigned to such term in the -------------------- Indenture. "Contested Liens" shall mean, collectively, any Liens incurred in respect of any Charges to the extent that the amounts owing in respect thereof are not yet delinquent or are being contested and otherwise comply with the provisions of Section 9.1 hereof. ----------- "Contracts" shall mean, collectively, any and all right, title and interest --------- of the Mortgagor in and to any and all contracts, instruments, documents and other general intangibles, whether now existing or hereafter arising or entered into, relating to the Mortgaged Property (including, without limitation, all reciprocal easements and/or operating agreements, covenants, conditions and restrictions and similar agreements affecting all or any portion of the Mortgaged Property and any and all present or future options to sell or lease the Mortgaged Property or any interest therein) and all reserves, deferred payments, deposits or other security or advance payments (including, without limitation, those made by or on behalf of the Mortgagor to others with respect to (i) utility service regarding the Mortgaged Property, (ii) cleaning, maintenance, repair or similar services regarding the Mortgaged Property, (iii) refuse removal or sewage -3- service regarding the Mortgaged Property, (iv) rentals of equipment, if any, used in the operation by or on behalf of Mortgagor regarding the Mortgaged Property, and/or (v) parking or similar services or rights regarding the Mortgaged Property), refunds, liens, security interests, guarantees, remedies and claims of every kind, nature or character relating thereto. "Default Rate" shall mean the rate per annum equal to the highest rate then ------------ payable under the Indenture. "Destruction" shall mean any and all damage to, or loss or destruction of, ----------- the Leased Premises or any part thereof. "Environmental Law" shall mean any applicable federal, state, local or ----------------- municipal statute, law, rule, regulation, ordinance, code, policy or rule of common law and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment binding on the Mortgagor relating to pollution or protection of the environment, or health or safety including, without limitation, any relating to the release or threatened release of any Hazardous Materials. "Event of Default" shall have the meaning assigned to such term in the ---------------- Indenture. "Fixture" shall mean all of the Mortgagor's estate, right, title and ------- interest in, to and under all machinery, apparatus, equipment, fittings, fixtures, improvements and articles of personal property of every kind, description and nature whatsoever now or hereafter attached or affixed to the Leased Premises or any other Improvement or used in connection with the use and enjoyment of the Leased Premises or any other Improvement or the maintenance or preservation thereof, which by the nature of their location thereon or attachment thereto are fixtures under the UCC or any other applicable law including, without limitation, all utility systems, fire sprinkler and security systems, drainage facilities, lighting facilities, all water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone and other utility equipment and facilities, pipes, fittings and other items of every kind and description now or hereafter attached to or located on the Leased Premises which by the nature of their location thereon or attachment thereto are real property under applicable law, HVAC equipment, boilers, electronic data processing, telecommunications or computer equipment, refrigeration, electronic monitoring, water or lighting systems, power, sanitation, waste removal, elevators, maintenance or other systems or equipment and all additions thereto and betterments, renewals, substitutions and replacements thereof to the extent of the Mortgagor's estate, right, title and interest therein. "GAAP" shall have the meaning assigned to such term in the Indenture. ---- "Governmental Authority" shall mean any federal, state, local, foreign or ---------------------- other governmental, quasi-governmental or administrative (including self-regulatory) body, instrumentality, department, agency, authority, board, bureau, commission, office of any nature whatsoever or other subdivision thereof, or any court, tribunal, administrative hearing body, arbitration panel or other similar dispute-resolving body, whether now or hereafter in existence, or any officer or official thereof, having jurisdiction over the Mortgagor or the Mortgaged Property or any portion thereof. "Guarantee" shall have the meaning assigned to such term in Recital C --------- --------- hereof. "Guarantors" shall have the meaning assigned to such term in the Indenture. ---------- -4- "Hazardous Materials" shall mean any substance, chemical, material, ------------------- pollutant, waste, contaminant or constituent which is subject to regulation under or could give rise to liability under any Environmental Law. "Holder" shall have the meaning assigned to such term in the Indenture. ------ "Improvements" shall mean all of the Mortgagor's estate, right, title and ------------ interest in, to and under all buildings, structures and other improvements of every kind or description and any and all Alterations now or hereafter located, attached or erected on the Land and the Leased Premises including, without limitation, (i) all Fixtures, (ii) all attachments, railroad tracks, foundations, sidewalks, drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer rights, parking areas, driveways, fences and walls and (iii) all materials now or hereafter located on the Leased Premises intended for the construction, reconstruction, repair, replacement, alteration, addition or improvement of or to such buildings, Fixtures, structures and improvements, all of which materials shall be deemed to be part of the Improvements immediately upon delivery thereof on the Leased Premises and to be part of the Improvements immediately upon their incorporation therein. "Indemnified Liabilities" shall have the meaning assigned to such term in ----------------------- Section 14.6(i) hereof. - --------------- "Indemnitees" shall have the meaning assigned to such term in Section ----------- 14.6(i) hereof. - ------- "Indenture" shall have the meaning assigned to such term in Recital A --------- --------- hereof. "Insurance Policies" means the insurance policies and coverages required to ------------------ be maintained by the Mortgagor with respect to the Mortgaged Property pursuant to Section 4.19(b) of the Indenture and all renewals and extensions thereof. "Insurance Requirements" means, collectively, all provisions of the ---------------------- Insurance Policies, all requirements of the issuer of any of the Insurance Policies and all orders, rules, regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon the Mortgagor and applicable to the Mortgaged Property or any use or condition thereof. "Issuer" shall have the meaning assigned to such term in Recital A hereof. ------ --------- "Land" shall mean those certain tracts or parcels of land described in ---- Schedule A annexed to this Mortgage. - ---------- "Landlord" shall mean any landlord, sublandlord, lessor, sublessor, -------- franchisor, licensor or grantor, as applicable. "Leased Premises" shall mean the lessee's interest and estate in the --------------- Mortgaged Lease and all recorded or unrecorded extensions, amendments, supplements and restatements thereof, together with all right, title and interest of the lessee under the Mortgaged Lease in and to (i) the Land, (ii) any and all easements, rights-of-way, reversions, sidewalks, strips and gores of land, drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer rights, waters, water courses, water rights, mineral, gas and oil -5- rights, and all power, air, light and other rights, estates, titles, interests, privileges, liberties, servitudes, licenses, tenements, hereditaments and appurtenances whatsoever, in any way demised under the Mortgaged Lease or belonging, relating or appertaining to the Land demised under the Mortgaged Lease, if any, and/or described in Schedule A or any part thereof, or which ---------- hereafter shall in any way be demised under the Mortgaged Lease or belong, relate or be appurtenant to such Land and (iii) the Improvements. "Leases" shall mean, collectively, any and all right, title and ------ interests of the Mortgagor, as Landlord, in all leases and subleases of space, tenancies, franchise agreements, licenses, occupancy, rental, access or concession agreements and any other agreements pursuant to which any Person is granted a possessory interest in or right to use or occupy all or any portion of the Mortgaged Property (including, without limitation, all of the Mortgagor's rights to enforce all such leases, subleases, tenancies or other agreements and to receive and enforce any rights that the Mortgagor may have to collect Rents thereunder), in each case whether now existing or hereafter entered into, whether or not of record, relating in any manner to the Leased Premises or the use or occupancy thereof and any and all amendments, modifications, supplements, replacements, extensions, renewals and/or guarantees, if any thereof, whether now in effect or hereafter coming into effect. "Lessor" shall have the meaning assigned to such term in Recital [E] ------ ----------- hereof. "Lien" shall have the meaning assigned to such term in the Indenture. ---- "Mortgage" shall have the meaning assigned to such term in the -------- Preamble hereof. "Mortgaged Lease" shall have the meaning assigned to such term in --------------- Recital [E] hereof. - ----------- "Mortgaged Property" shall have the meaning assigned to such term in ------------------ Section 2.1 hereof. - ----------- "Mortgagee" shall have the meaning assigned to such term in the --------- Preamble hereof. "Mortgagor" shall have the meaning assigned to such term in the --------- Preamble hereof. "Mortgagor's Interest" shall have the meaning assigned to such term in -------------------- Section 2.2 hereof. - ----------- "Net Loss Proceeds" shall have the meaning assigned to such term in ----------------- the Indenture. "Net Proceeds" shall have the meaning assigned to such term in the ------------ Indenture. "Notes" shall have the meaning assigned to such term in Recital A ----- --------- hereof. "Officers' Certificate" shall have the meaning assigned to such term --------------------- in the Indenture. "Permit" shall mean any and all permits, certificates, approvals, ------ authorizations, consents, licenses, variances, franchises or other instruments, however characterized, of any Governmental Authority (or any Person acting on behalf of a Governmental Authority) now or hereafter acquired or held, together with all amendments, modifications, extensions, renewals and replacements of any thereof issued or -6- in any way furnished in connection with the Mortgaged Property including, without limitation, building permits, certificates of occupancy, environmental certificates, industrial permits or licenses and certificates of operation. "Permitted Collateral Liens" shall have the meaning assigned to such -------------------------- term in Section 4.6 hereof. ----------- "Permitted Liens" shall have the meaning assigned to such term in the --------------- Indenture. "Person" shall have the meaning assigned to such term in the ------ Indenture. "Prior Liens" shall mean, collectively, the Liens identified in ----------- Schedule B annexed to this Mortgage. - ---------- "Proceeds" shall mean, collectively, any and all cash proceeds and -------- noncash proceeds derived or to be derived from the Mortgaged Property and shall include, without limitation, all (i) proceeds of the sale, transfer or conveyance of the Mortgaged Property or the conversion, voluntary or involuntary, of any of the Mortgaged Property or any portion thereof into cash or liquidated claims, (ii) proceeds of any insurance (except payments made to a Person, other than the Issuer or any Subsidiary thereof, that is not a party to this Mortgage), indemnity, warranty, guaranty or claim payable to the Mortgagee or to the Mortgagor from time to time with respect to any of the Mortgaged Property including, without limitation, all Net Loss Proceeds relating thereto, (iii) payments (in any form whatsoever) made or due and payable to the Mortgagor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any portion of the Mortgaged Property by any Governmental Authority (or any Person acting on behalf of a Governmental Authority) including, without limitation, all Net Loss Awards relating thereto, (iv) products of the Mortgaged Property, (v) other amounts from time to time paid or payable under or in connection with any of the Mortgaged Property including, without limitation, refunds of real estate taxes and assessments, including interest thereon and any unearned insurance premiums relating thereto and (vi) the right to enforce any and all rights that the Mortgagor has or may have to collect all such proceeds, including, without limitation, the Mortgagor's rights to commence any and all appropriate collection or enforcement actions incident thereto. "Property Material Adverse Effect" shall mean, as of any date of -------------------------------- determination and whether individually or in the aggregate, (a) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the business or operations as presently conducted at the Mortgaged Property; (b) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the value or utility of the Mortgaged Property; and (c) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the legality, priority or enforceability of the Lien created by this Mortgage or the rights and remedies of the Mortgagee hereunder. "Prudent Operator" shall mean the standard of care taken by a prudent ---------------- operator of property similar in use and configuration to the Leased Premises and located in the locality where the Leased Premises are located. -7- "Records" shall mean, collectively, any and all right, title and ------- interest of the Mortgagor in and to any and all drawings, plans, specifications, file materials, operating and maintenance records, catalogues, tenant lists, correspondence, advertising materials, operating manuals, warranties, guarantees, appraisals, studies and data relating to the Mortgaged Property or the construction of any Alteration or the maintenance of any Permit. "Rents" shall mean, collectively, any and all rents, additional rents, ----- royalties, issues, cash, guaranties, letters of credit, bonds, sureties or security deposited under any Lease to secure performance of the Tenant's obligations thereunder, revenues, earnings, profits, bonuses and income, advance rental payments, payments incident to assignment, sublease or surrender of a Lease, claims for forfeited deposits and claims for damages, now due or hereafter to become due, with respect to any Lease, any indemnification against, or reimbursement for, sums paid and costs and expenses incurred by the Mortgagor under any Lease or otherwise, and any award in the event of the bankruptcy of any Tenant under or guarantor of a Lease. "Requirements of Law" shall mean, collectively, any and all ------------------- requirements of any Governmental Authority including, without limitation, any and all orders, decrees, determinations, laws, treaties, ordinances, rules, regulations or similar statutes or case law. "Secured Obligations" shall mean all obligations (whether or not ------------------- constituting future advances, obligatory or otherwise) of the Issuer and any and all of the Guarantors from time to time arising under or in respect of this Mortgage, the Indenture, the Notes and the other Collateral Documents (including, without limitation, the obligations to pay principal, interest and all other charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Mortgage, the Indenture, the Notes and the other Collateral Documents), in each case whether (i) such obligations are direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due whether at stated maturity, by acceleration or otherwise, (ii) arising in the regular course of business or otherwise, (iii) for payment or performance and/or (iv) now existing or hereafter arising (including, without limitation, interest and other obligations arising or accruing after the commencement of any bankruptcy, insolvency, reorganization or similar proceeding with respect to the Issuer, any Guarantor or any other Person, or which would have arisen or accrued but for the commencement of such proceeding, even if such obligation or the claim therefor is not enforceable or allowable in such proceeding). "Secured Parties" shall have the meaning assigned to such term in --------------- Recital F hereof. - --------- "Senior Secured Notes" shall have the meaning assigned to such term in -------------------- Recital A hereof. - --------- "Subordination Agreement" shall mean a subordination, nondisturbance ----------------------- and attornment agreement substantially in the form of Exhibit 1 annexed to this --------- Mortgage. "Subsidiaries" shall have the meaning assigned to such term in the ------------ Indenture. "Taking" shall mean any taking of the Mortgaged Property or any part ------ thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, general or special, or by reason of the temporary requisition of the use or occupancy of the Mortgaged Property or any part thereof, by any Governmental Authority, civil or military. -8- "Tax Escrow Fund" shall have the meaning assigned to such term in --------------- Section 7.2 hereof. - ----------- "Tenant" shall mean any tenant, subtenant, lessee, sublessee, ------ franchisee, licensee, grantee or obligee, as applicable. "UCC" shall mean the Uniform Commercial Code as in effect on the date --- hereof in the jurisdiction in which the Leased Premises are located; provided, -------- however, that if by reason of mandatory provisions of law, the perfection or the - ------- effect of perfection or non-perfection of the security interest in any item or portion of the Mortgaged Property is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the jurisdiction in which the Leased Premises are located, "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. SECTION 1.2 Interpretation. In this Mortgage, unless otherwise -------------- specified, (i) singular words include the plural and plural words include the singular, (ii) words importing any gender include the other gender, (iii) references to any Person include such Person's successors and assigns and in the case of an individual, the word "successors" includes such Person's heirs, devisees, legatees, executors, administrators and personal representatives, (iv) references to any statute or other law include all applicable rules, regulations and orders adopted or made thereunder and all statutes or other laws amending, consolidating or replacing the statute or law referred to, (v) the words "consent," "approve" and "agree," and derivations thereof or words of similar import, mean the prior written consent, approval or agreement of the Person in question not to be unreasonably withheld, (vi) the words "include" and "including," and words of similar import, shall be deemed to be followed by the words "without limitation," (vii) the words "hereto," "herein," "hereof" and "hereunder," and words of similar import, refer to this Mortgage in its entirety, (viii) references to Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are to the Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses hereof, (ix) the Schedules and Exhibits to this Mortgage, in each case as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof, are incorporated herein by reference, (x) the titles and headings of Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are inserted as a matter of convenience only and shall not affect the constructions of any provisions hereof and (xi) all obligations of the Mortgagor hereunder shall be satisfied by the Mortgagor at the Mortgagor's sole cost and expense. SECTION 1.3 Resolution of Drafting Ambiguities. The Mortgagor ---------------------------------- acknowledges and agrees that it was represented by counsel in connection with the execution and delivery hereof, that it and its counsel reviewed and participated in the preparation and negotiation hereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party (i.e., Mortgagee) shall not be employed in the interpretation --- hereof. ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Mortgaged Property. The Mortgagor hereby grants, --------------------------- mortgages, bargains, sells, assigns and conveys to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), and hereby grants to the Mortgagee (for its benefit and for the benefit of the other Secured -9- Parties), a security interest in and upon all of the Mortgagor's estate, right, title and interest in, to and under the following property, whether now owned or held or hereafter acquired from time to time (collectively, the "Mortgaged --------- Property"): - -------- (i) Leased Premises; (ii) Leases; (iii) Rents; (iv) Permits; (v) Contracts; (vi) Records; and (vii) Proceeds. Notwithstanding the foregoing provisions of this Section 2.1, ----------- Mortgaged Property shall not include a grant of any of the Mortgagor's right, title or interest in (i) any Contract to which the Mortgagor is a party or any of its rights or interests thereunder (other than (x) the right to receive any payment of money (including without limitation accounts, general intangibles and payment intangibles (each as defined in the UCC) or any other rights referred to in Sections 9-406(f), 9-407(a) or 9-408(a) of the UCC and (y) any proceeds, substitutions or replacements thereof) to the extent, but only to the extent, that such a grant would, under the terms of such Contract, result in a breach or termination of the terms of, or constitute a default under or termination of, such Contract and (ii) any Permit to the extent, but only to the extent, that such grant shall constitute or result in abandonment, invalidation or rendering unenforceable any right, title or interest of the Mortgagor therein; provided, -------- however, that at such time as any Contract or Permit described in clauses (i) - ------- and (ii) of this sentence is no longer subject to such restriction, such applicable Contract or Permit shall (without any act or delivery by any Person) constitute Mortgaged Property hereunder. TO HAVE AND TO HOLD the Mortgaged Property, together with all estate, right, title and interest of the Mortgagor and anyone claiming by, through or under the Mortgagor in and to the Mortgaged Property and all rights and appurtenances relating thereto, unto the Mortgagee, its successors and assigns, for the purpose of securing the payment and performance in full of all the Secured Obligations. SECTION 2.2 Collateral Assignment and Pledge of Mortgagor's ----------------------------------------------- Interest as Additional Security. As additional collateral security for the - ------------------------------- prompt and punctual payment and satisfaction of the Secured Obligations, and all additional advances that the Mortgagee may make on the Mortgagor's behalf pursuant to this Mortgage, together with interest thereon as provided herein, the Mortgagor hereby assigns, pledges and grants to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), a continuing security interest in and to all of the Mortgagor's estate, right, title, interest, claim and demand, as Landlord, under any and all of the Leases including, without limitation, the following (such assigned rights, the "Mortgagor's Interest"): -------------------- -10- (i) the immediate and continuing right to receive and collect Rents payable by the Tenants pursuant to the Leases; (ii) all claims, rights, powers, privileges and remedies of the Mortgagor, whether provided for in the Leases or arising by statute or at law or in equity or otherwise, consequent on any failure on the part of the Tenants to perform or comply with any term of the Leases including damages or other amounts payable to the Mortgagor as a result of such failure; (iii) all rights to take all actions upon the happening of a default under the Leases as shall be permitted by the Leases or by law including, without limitation, the commencement, conduct and consummation of proceeding at law or in equity; and (iv) the full power and authority, in the name of the Mortgagor or otherwise, to enforce, collect, receive and receipt for any and all of the foregoing and to take all other actions whatsoever which the Mortgagor, as Landlord, is or may be entitled to take under the Leases. SECTION 2.3 Secured Obligations. This Mortgage secures, and the ------------------- Mortgaged Property is collateral security for, the payment and performance in full when due of the Secured Obligations. SECTION 2.4 Mortgage Securing Future Indebtedness. This Mortgage ------------------------------------- has been executed by Mortgagor pursuant to Article 3298 of the Louisiana Civil Code for the purpose of securing the Mortgagor's indebtedness (including, without limitation, the Secured Obligations) that may now be existing or that may arise in the future as provided herein and in the Indenture, with the preferences and priorities provided under applicable Louisiana law. This Mortgage shall be further entitled to the preferences and priorities as provided under the Louisiana Private Works Act (La. R.S. 9:4801, et seq.). However, nothing under this Mortgage shall be construed as limiting the duration of this Mortgage or the purpose or purposes for which the Mortgagor's indebtedness (including, without limitation, the Secured Obligations) may be requested or extended. The Mortgagor's additional indebtedness will automatically be secured by this Mortgage without the necessity that the Mortgagor agrees or consents to such a result at the time additional indebtedness is made and that the note or notes evidencing such additional indebtedness reference the fact that such notes are secured by this Mortgage. The Mortgagor understands that the Mortgagor may not subsequently have a change of mind and insist that the Mortgagor's additional indebtedness not be secured by this Mortgage unless the Mortgagee specifically agrees to such a request in writing. SECTION 2.5 No Release. Nothing set forth in this Mortgage shall ---------- relieve the Mortgagor from the performance of any term, covenant, condition or agreement on the Mortgagor's part to be performed or observed under or in respect of any of the Mortgaged Property or from any liability to any Person under or in respect of any of the Mortgaged Property or shall impose any obligation on the Mortgagee or any other Secured Party to perform or observe any such term, covenant, condition or agreement on the Mortgagor's part to be so performed or observed or shall impose any liability on the Mortgagee or any other Secured Party for any act or omission on the part of the Mortgagor relating thereto or for any breach of any representation or warranty on the part of the Mortgagor contained in this Mortgage, the Indenture, the Notes or the Collateral Documents, or under or in respect of the Mortgaged Property or made in connection herewith or therewith. The obligations of the Mortgagor contained in this Section 2.5 shall survive the termination hereof and the discharge of ----------- the Mortgagor's other obligations under this Mortgage and the Indenture, the Notes and the Collateral Documents. -11- ARTICLE III REPRESENTATIONS AND WARRANTIES OF MORTGAGOR SECTION 3.1 Authority and Validity. ---------------------- The Mortgagor represents and warrants that as of the date hereof: (i) it is duly organized or formed, validly existing and, if applicable, in good standing under the laws of the jurisdiction of its organization; (ii) it is duly qualified to transact business and is in good standing in the state in which the Mortgaged Property is located; (iii) it has full corporate or other organizational power and lawful authority to execute and deliver this Mortgage and to mortgage and grant a Lien on and security interest in the Mortgaged Property and otherwise assign the Mortgagor's Interest and otherwise perform its obligations as contemplated herein, and all corporate and governmental actions, consents, authorizations and approvals necessary or required therefor have been duly and effectively taken or obtained; and (iv) this Mortgage is a legal, valid and binding obligation of the Mortgagor, enforceable against the Mortgagor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. SECTION 3.2 Warranty of Title. The Mortgagor represents and warrants ----------------- that: (i) it owns the tenant's interest in the Mortgaged Lease and has a valid leasehold interest in the Leased Premises and the Landlord's interest and estate under or in respect of the Leases and good title to the interest it purports to own or hold in and to each of the Permits, the Contracts and the Records, in each case subject to no Liens, except for Permitted Collateral Liens; (ii) the Mortgaged Lease (a) is a valid and subsisting lease, superior and paramount to all other leases respecting the Leased Premises, (b) is in full force and effect and no default (nor any event which, with notice or lapse of time or both, would constitute such a default) has occurred or is continuing under the Mortgaged Lease and (c) is not subject to any defenses, offsets or counterclaims and there have been no renewals or extensions of or supplements, modifications or amendments to the Mortgaged Lease not previously disclosed to the Mortgagee except those that would not result in a Property Material Adverse Effect; (iii) it is in actual possession of the Leased Premises; (iv) it has good title to the interest it purports to own or hold in and to all rights and appurtenances to or that constitute a portion of the Mortgaged Property, except for Permitted Collateral Liens; -12- (v) it is in compliance with each term, condition and provision of any obligation of the Mortgagor which is secured by the Mortgaged Property or the noncompliance with which would result in a Property Material Adverse Effect; and (vi) this Mortgage creates and constitutes a valid and enforceable first priority Lien on the Mortgaged Property subject to Permitted Collateral Liens, and, to the extent any of the Mortgaged Property shall consist of Fixtures, a first priority security interest in the Fixtures, which first priority Lien and first priority security interest are subject only to Permitted Collateral Liens. SECTION 3.3 Condition of Mortgaged Property. The Mortgagor represents ------------------------------- and warrants that: (i) there has been issued and there remains in full force and effect subject to no revocation, suspension, forfeiture or modification, each and every Permit necessary for the present use, operation and occupancy of the Leased Premises by the Mortgagor and its Tenants and the conduct of their respective businesses and all required zoning, building code, land use, environmental and other similar Permits, except where the failure to be so issued and to be in full force and effect would not result in a Property Material Adverse Effect; (ii) the Leased Premises and the present and contemplated use and occupancy thereof comply with all applicable zoning ordinances, building codes, land use laws, setback or other development and/or use requirements of Governmental Authorities except where such noncompli-ance would not result in a Property Material Adverse Effect; (iii) the Leased Premises are served by all utilities (including, without limitation, water and sewer systems) necessary for the present use thereof, and all utility services are provided by public or private utilities and the Leased Premises have accepted or are equipped to accept such utility services and the Mortgagor has not received notice of termination of such utility service, except where the failure to be so served would not result in a Property Material Adverse Effect; (iv) the Mortgagor has access to the Leased Premises from roads sufficient to allow the Mortgagor and its Tenants and invitees to conduct their respective businesses at the Leased Premises in accordance with sound commercial practices and the Mortgagor has not received notice of termination of such access, except where the failure to have such access would not result in a Property Material Adverse Effect; (v) the Mortgagor has not received notice of any Taking or the commencement or pendency of any action or proceeding therefor, other than such Takings as would not result in a Property Material Adverse Effect; (vi) there has not occurred any Destruction of the Leased Premises or any portion thereof as a result of any fire or other casualty that, as of the date hereof, has not been repaired in all material respects, other than such Destruction as would not have a Property Material Adverse Effect; (vii) there are no disputes regarding boundary lines, location, encroachments or possession of any portions of the Mortgaged Property and no state of facts exists which could give rise -13- to any such claim other than such disputes as would not result in a Property Material Adverse Effect; (viii) all liquid and solid waste disposal, septic and sewer systems located on the Leased Premises are in a good and safe condition and repair and in compliance with all Requirements of Law, except where the failure to so comply would not result in a Property Material Adverse Effect; (ix) no portion of the Leased Premises is located in an area identified by the Federal Emergency Management Agency or any successor thereto as an area having special flood hazards pursuant to the Flood Insurance Acts or, if any portion of the Leased Premises is located within such area, the Mortgagor has obtained the insurance prescribed in Article ------- VIII hereof; ---- (x) there are no options or rights of first refusal to purchase or acquire all or any portion of the Mortgaged Property, other than such options or rights of first refusal as would not result in a Property Material Adverse Effect. SECTION 3.4 Leases. The Mortgagor represents and warrants that as of ------ the date hereof: (i) the Leases identified in Schedule C attached hereto are the ---------- only Leases in existence on the date hereof relating to the Leased Premises; (ii) true copies of such Leases have been previously delivered to the Mortgagee and there are no agreements with any Tenant under such Leases other than those agreements expressly set forth therein; (iii) the Mortgagor is the sole owner of all of the Mortgagor's Interest in such Leases; (iv) each of such Leases is in full force and effect, constitutes a legal, valid and binding obligation of the Mortgagor and the applicable Tenant thereunder, and is enforceable against the Mortgagor and such Tenant in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability; (v) there is no default under any of such Leases and there is existing no condition which with the giving of notice or passage of time or both would cause a default thereunder; (vi) all Rents due under such Leases have been paid in full; (vii) none of the Rents reserved under such Leases have been assigned or otherwise pledged or hypothecated except in favor of the Mortgagee pursuant to the provisions hereof; (viii) none of the Rents (other than any security deposit collected in accordance with the provisions of the applicable Lease) have been collected for more than one (1) month in advance; (ix) there exist no offsets or defenses to the payment of any portion of the Rents and the Mortgagor owes no monetary obligation to any Tenant under any such Lease; -14- (x) the Mortgagor has received no notice from any Tenant challenging the validity or enforceability of any such Lease; (xi) no such Lease contains any option to purchase, right of first refusal to purchase, right of first refusal to relet, or any other similar provision; and (xii) each such Lease is subordinate to this Mortgage either pursuant to its terms or pursuant to a recordable Subordination Agreement. SECTION 3.5 Insurance. The Mortgagor represents and warrants --------- that, except where the failure of clauses (i), (ii) or (iii) hereof to be true would not have a Property Material Adverse Effect, (i) the Premises and the use, occupancy and operation thereof comply with all Insurance Requirements and there exists no default under any Insurance Requirement, (ii) all premiums due and payable with respect to the Insurance Policies have been paid, (iii) all Insurance Policies are in full force and effect and the Mortgagor has not received notice of violation or cancellation thereof and (iv) all insurance certificates required pursuant to the Indenture have been delivered to the Mortgagee. SECTION 3.6 Charges. The Mortgagor represents and warrants that ------- all Charges imposed upon or assessed against the Mortgagor's interest in the Mortgaged Property in accordance with the terms of the Mortgaged Lease have been paid and discharged by the Mortgagor except to the extent such Charges constitute a Lien not yet due and payable or to the extent such Charges are being contested in accordance with Section 9.1 hereof. ----------- SECTION 3.7 Environmental. The Mortgagor represents and ------------- warrants that: (i) it has obtained all Permits which are necessary with respect to the ownership and operation of its business and the Mortgaged Property under any and all applicable Environmental Laws and is in compliance with all terms and conditions thereof, except where the failure so to obtain or to be in compliance would not result in a Property Material Adverse Effect; (ii) it is in compliance with any and all applicable Environmental Laws relating to the Mortgaged Property including, without limitation, all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws, except where the failure so to be in compliance would not result in a Property Material Adverse Effect; (iii) there is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice of demand letter pending or threatened against it or any Affiliate under the Environmental Laws which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect; and (iv) there are no past or present events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance with the Environmental Laws, or which may give rise to any common law or legal liability including, without limitation, liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any other Environmental Law or related common law theory or -15- otherwise form the basis of any claim, action, demand, suit, proceeding, hearing or notice of violation, study or investigation, based on or related to the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Materials which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect . SECTION 3.8 No Conflicts, Consents, etc. Neither the execution --------------------------- and delivery hereof by the Mortgagor nor the consummation of the transactions herein contemplated nor the fulfillment of the terms hereof (i) violates the terms of any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or other document to which the Mortgagor is a party, or by which it may be bound or to which any of its properties or assets may be subject, (ii) conflicts with any Requirement of Law applicable to the Mortgagor or its property or (iii) results in or requires the creation or imposition of any Lien (other than the Lien contemplated hereby) upon or with respect to any of the Mortgaged Property, except where such violation, conflict, creation or imposition would not have a Property Material Adverse Effect. No consent of any party (including, without limitation, equityholders or creditors of the Mortgagor) and no consent, authorization, approval, license or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person (other than with respect to any required Permits) is required for (i) the granting of a mortgage Lien on and security interest in the Mortgaged Property by the Mortgagor granted by it pursuant to this Mortgage or for the execution, delivery or performance hereof by the Mortgagor except for the filing of this Mortgage and the other filings contemplated hereby or (ii) the exercise by the Mortgagee of the remedies in respect of the Mortgaged Property pursuant to this Mortgage other than those required by law in connection with the exercise of the applicable remedy. SECTION 3.9 Benefit to the Mortgagor. The Mortgagor represents ------------------------ and warrants that it will receive substantial benefit as a result of the execution, delivery and performance of the Indenture, the Notes and the Collateral Documents. ARTICLE IV CERTAIN COVENANTS OF MORTGAGOR SECTION 4.1 Preservation of Corporate Existence. The Mortgagor ----------------------------------- shall: (i) preserve and maintain in full force and effect its existence and good standing under the laws of the jurisdiction of its organization; (ii) preserve and maintain in full force and effect its qualification to transact business and good standing in the state in which the Mortgaged Property is located; and (iii) preserve and maintain in full force and effect all consents, authorizations and approvals necessary or required of any Governmental Authority or any other Person relating to the execution, delivery and performance hereof, except where the failure to do so would not result in a Property Material Adverse Effect. -16- SECTION 4.2 Title. The Mortgagor shall: ----- (i) (A) keep in effect all material rights and appurtenances to or that constitute a part of the Mortgaged Property and (B) protect, preserve and defend its interest in the Mortgaged Property and title thereto, except against Permitted Collateral Liens (other than the Lien created by this Mortgage); (ii) (A) comply, in all material respects, with each of the terms, conditions and provisions of any obligation of the Mortgagor which is secured by the Mortgaged Property, except where the failure to so comply would not result in a Property Material Adverse Effect, or the non-compliance with which may result in the imposition of a Lien on the Mortgaged Property, (B) forever warrant and defend to the Mortgagee the Lien and security interests created and evidenced hereby and the validity and priority hereof in any action or proceeding against the claims of any and all Persons whomsoever affecting or purporting to affect the Mortgaged Property or any of the rights of the Mortgagee hereunder, except against Permitted Collateral Liens (other than the Lien of this Mortgage), and (C) maintain a valid and enforceable first priority Lien, except for Permitted Collateral Liens (other than the Lien of this Mortgage) on the Mortgaged Property and, to the extent any of the Mortgaged Property shall consist of Fixtures, a first priority security interest in the Mortgaged Property, which first priority Lien and security interest shall be subject only to Permitted Collateral Liens; and (iii) immediately upon obtaining knowledge of the pendency of any proceedings for the eviction of the Mortgagor from the Mortgaged Property or any part thereof by paramount title or otherwise questioning the Mortgagor's right, title and interest in, to and under the Mortgaged Property as warranted in this Mortgage, or of any condition that could give rise to any such proceedings, notify the Mortgagee thereof. The Mortgagee may participate in such proceedings and the Mortgagor will deliver or cause to be delivered to the Mortgagee all instruments requested by the Mortgagee to permit such participation. In any such proceedings, the Mortgagee may be represented by counsel reasonably satisfactory to the Mortgagee at the reasonable expense of the Mortgagor. If, upon the resolution of such proceedings, the Mortgagor shall suffer a loss of the Mortgaged Property or any part thereof or interest therein and title insurance proceeds shall be payable in connection therewith, such proceeds are hereby assigned to and shall be paid to the Mortgagee for deposit into the Collateral Account and shall be applied in the manner applicable to Net Loss Proceeds in accordance with the provisions of Sections 4.16, 10.05(c), and 11.02 of the Indenture. SECTION 4.3 Maintenance and Use of Mortgaged Property; ------------------------------------------ Alterations. - ----------- (i) Maintenance. The Mortgagor shall cause the representations ----------- and warranties set forth in Section 3.3 hereof to continue to be true in each ----------- and every respect and shall pay or cause to be paid when due all Charges imposed upon or assessed against the Mortgagor's interest in the Mortgaged Property in accordance with the terms of the Mortgaged Lease, costs and expenses relating thereto, other than such Charges being contested in accordance with Section 9.1 ----------- hereof. (ii) Maintenance of Leased Premises. The Mortgagor shall not ------------------------------ commit or suffer any waste on the Leased Premises. Except to the extent to do so shall be the Lessor's obligation under the Mortgaged Lease, the Mortgagor shall, at all times, maintain the Leased Premises in good working order, -17- condition and repair, reasonable wear and tear excepted, and shall use commercially reasonable efforts to make or cause to be made all repairs, structural (to the extent permitted under the Mortgaged Lease) or nonstructural, which are necessary or appropriate in the conduct of the Mortgagor's business. The Mortgagor shall not, except as permitted in Section 4.3(iii) hereof, alter ---------------- the occupancy or use of all or any portion of the Leased Premises without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. Except to the extent permitted pursuant to the provisions of Section ------- 4.3(iii) hereof, the Mortgagor shall not remove, demolish or alter the - -------- structural character of any Improvement now or hereafter erected upon all or any portion of the Leased Premises, or permit any such removal, demolition or alteration, without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. (iii) Alterations. The Mortgagor shall not, without the prior ----------- written consent of the Mortgagee, which consent shall not be unreasonably withheld (and the consent of the Lessor under the Mortgaged Lease, if any, as may be required under the Mortgaged Lease), make any Alteration to the Premises except as permitted by Sections 10.04 and 10.06 of the Indenture. Whether or not the making of any Alteration shall require the consent of the Mortgagee pursuant to the immediately preceding sentence, the Mortgagor shall (A) complete each Alteration promptly, in a good and workmanlike manner and in compliance, in all material respects, with all applicable local laws, ordinances and requirements and (B) pay when due all claims for labor performed and materials furnished in connection with such Alteration, unless contested in accordance with the provisions of Article IX hereof. ---------- (iv) Permits. The Mortgagor shall maintain, or cause to be ------- maintained for the operation of its business at the Leased Premises and otherwise to the extent the Mortgagor is obligated to do so under the Mortgaged Lease, in full force and effect all Permits contemplated by and subject to Section 3.3(i) hereof. Unless and to the extent contested by the Mortgagor in - -------------- accordance with the provisions of Article IX hereof, the Mortgagor shall comply, ---------- in all material respects, with all requirements set forth in the Permits and all Requirements of Law applicable to all or any portion of the Mortgaged Property or the condition, use or occupancy of all or any portion thereof or any recorded deed of restriction, declaration, covenant running with the land or otherwise, now or hereafter in force, subject to the provisions of Section 3.3 hereof. ----------- (v) Zoning. The Mortgagor shall not initiate, join in or ------ consent to any change in the zoning or any other permitted use classification of the Leased Premises without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. SECTION 4.4 Notices Regarding Certain Defaults. The Mortgagor ---------------------------------- shall, promptly upon receipt of any written notice regarding (i) any default by the Mortgagor relating to the Mortgaged Property or any portion thereof or (ii) the failure to discharge any of Mortgagor's obligations with respect to the Mortgaged Property or any portion thereof described herein, furnish a copy of such notice to the Mortgagee. SECTION 4.5 Access to Mortgaged Property, Books and Records; ------------------------------------------------ Other Information. Upon request to the Mortgagor, the Mortgagee, its agents, - ----------------- accountants and attorneys shall have full and free access to visit and inspect, as applicable, during normal business hours and such other reasonable time as may be requested by the Mortgagee to all of the Mortgaged Property including, without limitation, all of the books, correspondence and records of the Mortgagor relating thereto. The Mortgagee and its representatives may examine the same, take extracts therefrom and make photocopies thereof. The Mortgagor -18- shall, at any and all times, within a reasonable time after written request by the Mortgagee, furnish or cause to be furnished to the Mortgagee, in such manner and in such detail as may be reasonably requested by the Mortgagee, additional information with respect to the Mortgaged Property. SECTION 4.6 Limitation on Liens; Transfer Restrictions. The ------------------------------------------ Mortgagor may not, without the prior written consent of the Mortgagee, further mortgage, encumber, hypothecate, sell, convey or assign all or any part of the Mortgaged Property or suffer or allow any of the foregoing to occur by operation of law or otherwise; provided, however, that the Mortgagor shall have the right -------- ------- to (1) sell, convey or assign all or any portion of the Mortgaged Property in accordance with the provisions of the Indenture and (2) suffer to exist the following Liens in respect of the Mortgaged Property: (i) Prior Liens (but not extensions, amendments, supplements or replacements of Prior Liens unless (A) extended, amended, supplemented or replaced in a manner permitted by the Indenture or (B) consented to by the Mortgagee, which consent shall not be unreasonably withheld), (ii) the Lien and security interest created by this Mortgage or any other Collateral Document, (iii) Contested Liens, (iv) Liens described in clause (9) of the definition of Permitted Liens (provided, however, -------- ------- that such Liens shall not extend to or cover any Mortgaged Property other than equipment subject to Capital Leases, Obligations or Purchase Money Obligations incurred in accordance with the provisions of the Indenture) or clause (4) of the definition of Permitted Liens, (v) Leases to the extent permitted pursuant to the provisions of Article V hereof and (vi) rights, title and interest of the --------- Lessor under the Mortgaged Lease and any Liens against the Lessor's interest in the Land and the Leased Premises (the Liens described in clauses (i) through (vi) of this sentence, collectively, "Permitted Collateral Liens"). -------------------------- SECTION 4.7 Environmental. ------------- (i) Hazardous Materials. The Mortgagor shall (A) comply with ------------------- any and all present and future Environmental Laws applicable to the Mortgaged Property, (B) not release, store, treat, handle, generate, discharge or dispose of any Hazardous Materials at, on, under or from the Mortgaged Property in violation of or in a manner that could result in any material liability under any present and future Environmental Law and (C) take all necessary steps to initiate and expeditiously complete all remedial, corrective and other action to eliminate any such effect. In the event the Mortgagor fails to comply with the covenants in the preceding sentence, the Mortgagee may, in addition to any other remedies set forth herein, as agent for the Mortgagor and at the Mortgagor's sole cost and expense, cause any remediation, removal or response action relating to Hazardous Materials required by applicable Environmental Laws to be taken and the Mortgagor shall provide to the Mortgagee and its agents and employees access to the Mortgaged Property for such purpose. Any reasonable costs or expenses incurred by the Mortgagee for such purpose shall be immediately due and payable by the Mortgagor and shall bear interest at the Default Rate. The Mortgagee shall have the right at any time when an Event of Default shall have occurred and be continuing and at such other times when a potential violation of any present or future Environmental Law exists which in the Mortgagee's reasonable judgment could result in any material liability or obligation under such Environmental Law, at the sole cost and expense of the Mortgagor, upon the prior written consent of the Lessor to the extent required under the Mortgaged Lease, to conduct an environmental audit of the Mortgaged Property by such persons or firms appointed by the Mortgagee, and the Mortgagor shall cooperate in all respects in the conduct of such environmental audit, including, without limitation, by providing access to the Mortgaged Property and to all records in the Mortgagor's or any of its agents' possession relating thereto. To the extent that any such environmental audit identifies conditions which in the Mortgagee's reasonable judgment would result in any material liability or obligation under any present or future Environmental Law, the Mortgagor agrees (to the extent caused by the Mortgagor) to expeditiously correct any -19- such violation or respond to conditions giving rise to such liability or obligations in a manner which complies in all material respects with the Environmental Laws and mitigates associated health and environmental risks. The Mortgagor shall indemnify and hold the Mortgagee and each of the other Secured Parties harmless from and against all loss, cost, damage or reasonable expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Mortgagee or any other Secured Party may sustain by reason of the assertion against the Mortgagee or any Secured Party by any party of any claim relating to such Hazardous Materials on, under or from the Mortgaged Property or actions taken with respect thereto as authorized hereunder, except to the extent arising from the gross negligence or willful misconduct of the Mortgagee or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof. (ii) Asbestos. The Mortgagor shall not install nor permit to be -------- installed in or removed from the Mortgaged Property, asbestos or any asbestos-containing material (collectively, "ACM") except in compliance, in all material respects, with all applicable Environmental Laws, and with respect to any ACM currently present in the Mortgaged Property, the Mortgagor shall promptly either (A) to the extent permitted by the Mortgaged Lease, remove any ACM which such Environmental Laws require to be removed or (B) otherwise comply, in all material respects, with such Environmental Laws with respect to such ACM, all at the Mortgagor's sole cost and expense. If the Mortgagor shall fail so to remove any ACM or otherwise comply, in all material respects, with such laws or regulations, the Mortgagee may, in addition to any other remedies set forth herein, take reasonable or necessary steps to eliminate any ACM from the Mortgaged Property or otherwise comply, in all material respects, with applicable law, regulations or orders and the Mortgagor shall provide to the Mortgagee and its agents and employees access to the Mortgaged Property for such purpose. Any reasonable costs or expenses incurred by the Mortgagee for such purpose shall be immediately due and payable by the Mortgagor and bear interest at the Default Rate. The Mortgagor shall indemnify and hold the Mortgagee and the other Secured Parties harmless from and against all loss, cost, damage and expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Mortgagee or the other Secured Parties may sustain, as a result of the presence of any ACM and any removal thereof from the Leased Premises by the Mortgagor or compliance with all applicable Environmental Laws, except to the extent arising from the gross negligence or willful misconduct of the Mortgagee or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof. SECTION 4.8 Estoppel Certificates. The Mortgagor shall, from --------------------- time to time, upon thirty (30) days' prior written reasonable request of the Mortgagee, execute, acknowledge and deliver to the Mortgagee an Officers' Certificate stating that this Mortgage, the Indenture, the Notes and the Collateral Documents are unmodified and in full force and effect (or, if there have been modifications, that this Mortgage, the Indenture, the Notes and the Collateral Documents, as applicable, is or are in full force and effect as modified and setting forth such modifications) and stating the date to which principal and interest have been paid on the Notes. -20- ARTICLE V LEASES SECTION 5.1 Mortgagor's Affirmative Covenants with Respect to ------------------------------------------------- Leases. With respect to each Lease, the Mortgagor shall: - ------ (i) observe and perform, in all material respects, all the obligations imposed upon the Landlord under such Lease; (ii) promptly send copies to the Mortgagee of all notices of default which the Mortgagor shall send or receive thereunder; and (iii) enforce all of the terms, covenants and conditions contained in such Lease upon the part of the Tenant thereunder to be observed or performed to the extent it would be commercially reasonable to do so. SECTION 5.2 Mortgagor's Negative Covenants with Respect to Leases. With ----------------------------------------------------- respect to each Lease, the Mortgagor shall not, without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld: (i) receive or collect, or permit the receipt or collection of, any Rent under such Lease more than one (1) month in advance of the respective period in respect of which such Rent is to accrue, except: (A) in connection with the execution and delivery of such Lease (or of any amendment to such Lease), Rent thereunder may be collected and received in advance in an amount not in excess of one (1) month's Rent; (B) the amount held by Landlord as a reasonable security deposit thereunder; and (C) any amount received and collected for escalation and other charges in accordance with the terms of such Lease; (ii) assign, transfer or hypothecate (other than to the Mortgagee hereunder) any Rent under such Lease whether then due or to accrue in the future or the interest of the Mortgagor as Landlord under such Lease; (iii) enter into any amendment or modification of such Lease which would materially decrease the unexpired term thereof or decrease the amount of the Rents payable thereunder or materially impair the value or utility of the Mortgaged Property or the security provided by this Mortgage; (iv) terminate (whether by exercising any contractual right of the Mortgagor to recapture leased space or otherwise) or permit the termination of such Lease or accept surrender of all or -21- any portion of the space demised under such Lease prior to the end of the term thereof or accept assignment of such Lease to the Mortgagor unless: (A) the Tenant under such Lease has not paid the equivalent of two (2) months' Rent and the Mortgagor has made reasonable efforts to collect such Rent; and (B) it would be commercially reasonable to terminate such Lease; or (v) waive, excuse, condone or in any manner discharge or release any Tenants of or from the material obligations of such Tenants under their respective Leases or guarantors of Tenants from any material obligations under any guarantees of the Leases except as the same would be done by a Prudent Operator with due regard for the security afforded the Mortgagee thereby. SECTION 5.3 Additional Requirements with Respect to New Leases. -------------------------------------------------- In addition to the requirements of Sections 5.1 and 5.2 hereof, the Mortgagor ------------ --- shall not enter into any Lease after the date hereof unless the Tenant under such Lease has entered into a Subordination Agreement and has otherwise complied with the provisions of Section 10.06 of the Indenture. ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Mortgagor. Section -------------------------------------------- -------- 2.2 of this Mortgage constitutes a present, absolute, effective, --- irrevocable and complete assignment by the Mortgagor to the Mortgagee of the Leases and Rents and the right, subject to applicable law, to collect all sums payable to the Mortgagor thereunder and apply the same as the Mortgagee may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Mortgaged Property), which is not conditioned upon the Mortgagee being in possession of the Leased Premises. The Mortgagee hereby grants to the Mortgagor, however, a license to collect and apply the Rents and to enforce the obligations of Tenants under the Leases. Immediately upon the occurrence of and during the continuance of any Event of Default or a Default, the license granted in the immediately preceding sentence shall cease and terminate, with or without any notice, action or proceeding or the intervention of a receiver appointed by a court. SECTION 6.2 Collection of Rents by the Mortgagee. ------------------------------------ (i) From and after the occurrence and during the continuance of an Event of Default or a Default, any Rents receivable by the Mortgagee hereunder, after payment of all proper costs and expenses as Mortgagee may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Mortgaged Property), shall be applied to the Secured Obligations or, at the option of the Mortgagee, shall be held by the Mortgagee as additional collateral to secure the performance by the Mortgagor of the Secured Obligations. The Mortgagee shall be accountable to the Mortgagor only for Rents actually received by the Mortgagee. The collection of such Rents and the application thereof shall -22- not cure or waive any Event of Default or a Default or waive, modify or affect notice of Event of Default or a Default or invalidate any act done pursuant to such notice. (ii) The Mortgagor hereby irrevocably authorizes and directs Tenant under each Lease to rely upon and comply with any and all notices or demands from the Mortgagee for payment of Rents to the Mortgagee and the Mortgagor shall have no claim against Tenant for Rents paid by Tenant to the Mortgagee pursuant to such notice or demand. SECTION 6.3 No Release. Neither this Mortgage nor any action or inaction on ---------- the part of the Mortgagee shall release any Tenant under any Lease, any guarantor of any Lease or the Mortgagor from any of their respective obligations under such Leases or constitute an assumption of any such obligation on the part of the Mortgagee. No action or failure to act on the part of the Mortgagor shall adversely affect or limit the rights of the Mortgagee under this Mortgage or, through this Mortgage, under such Leases. Nothing contained herein shall operate or be construed to (i) obligate the Mortgagee to perform any of the terms, covenants or conditions contained in any Lease or otherwise to impose any obligation upon the Mortgagee with respect to such Lease (including, without limitation, any obligation arising out of any covenant of quiet enjoyment contained in such Lease in the event that Tenant under such Lease shall have been joined as a party defendant in any action by which the estate of such Tenant shall be terminated) or (ii) place upon the Mortgagee any obligation for the operation, control, care, management or repair of the Leased Premises. SECTION 6.4 Irrevocable Interest. All rights, powers and privileges of the -------------------- Mortgagee herein set forth are coupled with an interest and are irrevocable, subject to the terms and conditions hereof, and the Mortgagor shall not take any action under the Leases or otherwise which is inconsistent with this Mortgage or any of the terms hereof and any such action inconsistent herewith or therewith shall be void. SECTION 6.5 Amendment to Leases. Each Lease, including, without limitation, ------------------- all amendments, modifications, supplements, replacements, extensions and renewals thereof, shall continue to be subject to the provisions hereof without the necessity of any further act by any of the parties hereto. ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges. Unless and to the extent contested by the ------------------ Mortgagor in accordance with the provisions of Article IX hereof, the Mortgagor ---------- shall pay and discharge, or cause to be paid and discharged, from time to time when the same shall become due (or within any applicable grace period), to the extent such payment and discharge shall be due from the Mortgagor pursuant to the terms of the Mortgaged Lease, all Charges subject to this Article VII. The ----------- Mortgagor shall, upon the Mortgagee's request, deliver to the Mortgagee evidence of the payment by the Mortgagor under the Mortgaged Lease of all such Charges. SECTION 7.2 Escrow of Taxes. From and after the occurrence and during the --------------- continuance of an Event of Default or a Default, at the option and upon the request of the Mortgagee, the Mortgagor shall deposit with the Mortgagee in an account maintained by the Mortgagee (the "Tax Escrow Fund"), on the first day of --------------- each month, an amount estimated by the Mortgagee to be equal to one-twelfth -23- of the annual real property taxes and other annual Charges required to be discharged by the Mortgagor under Section 7.1 hereof. Such amounts shall be held ----------- by the Mortgagee without interest to the Mortgagor and applied to the payment of the obligations in respect of which such amounts were deposited, in such priority as the Mortgagee shall determine, on or before the respective dates on which such obligations or any part thereof would become delinquent. Nothing contained in this Article VII shall (i) affect any right or remedy of the ----------- Mortgagee under any provision hereof or of any statute or rule of law to pay any such amount as provided above from its own funds and to add the amount so paid, together with interest at the Default Rate during such time that any amount remains outstanding, to the Secured Obligations or (ii) relieve the Mortgagor of its obligations to make or provide for the payment of the annual real property taxes and other annual Charges required to be discharged by the Mortgagor under Section 7.1 hereof. Notwithstanding the provisions of this Section 7.2, no - ----------- ----------- deposit with the Mortgagee in respect of any Charge shall be required if and for so long as deposits in respect of such Charge are made by the Mortgagor to the Lessor under the Mortgaged Lease. SECTION 7.3 Certain Statutory Liens. Unless and to the extent ----------------------- contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall timely pay, or cause to be paid, all lawful claims and demands of mechanics, materialmen, laborers, government agencies administering worker's compensation insurance, old age pensions and social security benefits and all other claims, judgments, demands or amounts of any nature which relate to the Mortgagor's (or its successors' or assigns') actions at or affecting the Leased Premises or the Mortgaged Property and, if unpaid, would result in, or permit the creation of, a Lien on the Mortgaged Property or any part thereof, or which would result in forfeiture of all or any part of the Mortgaged Property. SECTION 7.4 Stamp and Other Taxes. Unless and to the extent --------------------- contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall pay any United States documentary stamp taxes, with interest and fines and penalties, and any mortgage recording taxes, with interest and fines and penalties, that may hereafter be levied, imposed or assessed under or upon or by reason hereof or the Secured Obligations or any instrument or transaction affecting or relating to either thereof and in default thereof the Mortgagee may advance the same and the amount so advanced shall be payable by the Mortgagor to the Mortgagee in accordance with the provisions of Section 14.5 hereof. - ------------ SECTION 7.5 Certain Tax Law Changes. In the event of the ----------------------- passage after the date hereof of any law deducting from the value of real property, for the purpose of taxation, amounts in respect of any Lien thereon or changing in any way the laws for the taxation of mortgages or debts secured by mortgages for state or local purposes or the manner of the collection of any Charges, and imposing any Charges, either directly or indirectly, on this Mortgage, the Indenture or any other Collateral Document, the Mortgagor shall promptly pay to the Mortgagee such amount or amounts as may be necessary from time to time to pay any such Charges. SECTION 7.6 Proceeds of Tax Claim. In the event that the --------------------- proceeds of any tax claim to which Mortgagor is entitled pursuant to the provisions of the Mortgaged Lease are paid after the Mortgagee has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Mortgagee to satisfy any deficiency remaining after such foreclosure. The Mortgagee shall retain its interest in the proceeds of any tax claim during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Mortgagee shall in a prompt manner be released to the Mortgagor. -24- ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages. The ----------------------------------------- Mortgagor shall maintain in respect of the Premises the insurance policies and coverages required under Section 4.19(b) of the Indenture. SECTION 8.2 Delivery After Foreclosure. In the event that the -------------------------- proceeds of any insurance claim to which the Mortgagor is entitled pursuant to the provisions of the Mortgaged Lease are paid after the Mortgagee has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Mortgagee to satisfy any deficiency remaining after such foreclosure. Mortgagee shall retain its interest in the Insurance Policies required to be maintained pursuant to this Mortgage during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Mortgagee shall be released to the Mortgagor. ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens. ----------------------------------------------- The Mortgagor may at its own expense contest the validity, amount or applicability of any Charges as long as the contest thereof shall be conducted in accordance with, and permitted pursuant to the provisions of, the Indenture. Notwithstanding the foregoing provisions of this Section 9.1, (i) no contest of ----------- any such obligations may be pursued by the Mortgagor (A) if such contest would expose the Mortgagee or any Holder to any possible criminal liability or (B) unless the Mortgagor shall have furnished a bond or other security therefor reasonably satisfactory to the Mortgagee or such Holder, as the case may be, any additional civil liability for failure to comply with such obligations and (ii) if at any time payment or performance of any obligation contested by the Mortgagor pursuant to this Section 9.1 shall become necessary to prevent the ----------- imminent imposition of remedies because of non-payment, the Mortgagor shall pay or perform the same in sufficient time to prevent the imposition of remedies in respect of such default or prospective default. SECTION 9.2 Contesting of Insurance. The Mortgagor shall not ----------------------- take any action that would reasonably be expected to cause the termination, revocation or denial of any insurance coverage required to be maintained under this Mortgage or that would be the basis for a defense to any claim under any Insurance Policy maintained in respect of the Leased Premises and the Mortgagor shall otherwise comply in all respects with all Insurance Requirements in respect of the Leased Premises; provided, however, that the Mortgagor may, at -------- ------- its own expense and after written notice to the Mortgagee, (i) contest the applicability or enforceability of any such Insurance Requirements by appropriate legal proceedings, prosecution of which does not constitute a basis for cancellation or revocation of any insurance coverage required under Article ------- VIII hereof or (ii) cause the Insurance Policy containing any such Insurance - ---- Requirement to be replaced by a new policy complying with the provisions of Article VIII hereof. - ------------ -25- ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction. If there shall occur any Destruction ----------- of the Leased Premises, individually or in the aggregate, in excess of $100,000, the Mortgagor shall promptly send to the Mortgagee a written notice setting forth the nature and extent of such Destruction. The proceeds of any insurance payable in respect of such Destruction are hereby assigned and, subject to the provisions of and to the greatest extent permitted by the Mortgaged Lease, shall be paid to the Mortgagee. The Net Loss Proceeds arising out of such Destruction, shall be applied in accordance with the provisions of Sections 4.16, 10.05(c), and 11.02 of the Indenture. SECTION 10.2 Condemnation. If there shall occur any Taking or ------------ the commencement of any proceeding thereof, the Mortgagor shall immediately notify the Mortgagee upon receiving notice of such Taking or commencement of proceedings therefor. The Mortgagee may, at its option, participate in any proceedings or negotiations which might result in any Taking, and the Mortgagor shall deliver or cause to be delivered to the Mortgagee all instruments requested by it to permit such participation. The Mortgagee may be represented by counsel reasonably satisfactory to it at the reasonable expense of the Mortgagor in connection with any such participation. The Mortgagor shall pay all reasonable fees, costs and expenses incurred by the Mortgagee in connection with any Taking and in seeking and obtaining any award or payment on account thereof. Any proceeds, award or payment in respect of any Taking of any Mortgaged Property is hereby assigned and, subject to the provisions of and to the greatest extent permitted by the Mortgaged Lease, shall be paid to the Mortgagee. The Mortgagor shall take all steps necessary to notify the condemning authority of such assignment. The Net Loss Proceeds arising out of such Taking, shall be applied in accordance with the provisions of Sections 4.16, 10.05(c), and 11.02 of the Indenture. ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default. It shall be an Event of Default ----------------- hereunder if there shall have occurred and be continuing an Event of Default under the Indenture. SECTION 11.2 Remedies in Case of an Event of Default. If any --------------------------------------- Event of Default shall have occurred and be continuing, the Mortgagee may at its option, in addition to any other action permitted under this Mortgage or the Indenture or by law, statute or in equity, take one or more of the following actions to the greatest extent permitted by local law: (i) by written notice to the Issuer and the Mortgagor, declare the entire unpaid amount of the Secured Obligations to be due and payable immediately; (ii) personally, or by its agents or attorneys, (A) give notice of such Event of Default to the Lessor under the Mortgaged Lease, (B) to the extent permitted by the Mortgaged Lease, act in all respects as lessee under the Mortgaged Lease and perform on behalf of and for the account of the Mortgagor any of the obligations of lessee thereunder, (C) enter into and upon and take possession of all or any part of the Leased Premises, together with the books, records and accounts of -26- the Mortgagor relating thereto, and exclude the Mortgagor, its agents and servants wholly therefrom, (D) use, operate, manage and control the Leased Premises and conduct the business thereof, (E) maintain and restore the Leased Premises, (F) make all necessary or proper repairs, renewals and replacements and such useful Alterations thereto and thereon as the Mortgagee may deem advisable, (G) manage, lease and operate the Leased Premises and carry on the business thereof and exercise all rights and powers of the Mortgagor with respect thereto either in the name of the Mortgagor or otherwise or (H) collect and receive all Rents. The Mortgagee shall be under no liability for or by reason of any such taking of possession, entry, removal or holding, operation or management except that any amounts so received by the Mortgagee shall be applied in accordance with the provisions of the Indenture; (iii) with or without entry, personally or by its agents or attorneys, (A) sell the Mortgaged Property and all estate, right, title and interest, claim and demand therein at one or more sales in one or more parcels, in accordance with the provisions of Section 11.3 or (B) institute and ------------ prosecute proceedings for the complete or partial foreclosure of the Lien and security interests created and evidenced hereby; or (iv) take such steps to protect and enforce its rights whether by action, suit or proceeding at law or in equity for the specific performance of any covenant, condition or agreement in the Indenture, the Notes and the Collateral Documents, or in aid of the execution of any power granted in this Mortgage, or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy or otherwise as the Mortgagee shall elect. SECTION 11.3 Sale of Mortgaged Property if Event of Default Occurs; ------------------------------------------------------ Proceeds of Sale. - ---------------- (i) If any Event of Default shall have occurred and be continuing, the Mortgagee may institute an action to foreclose this Mortgage or take such other action as may be permitted and available to the Mortgagee at law or in equity for the enforcement of the Indenture and the Notes and realization on the Mortgaged Property and proceeds thereon through power of sale or to final judgment and execution thereof for the Secured Obligations, and in furtherance thereof the Mortgagee may sell the Mortgaged Property at one or more sales, as an entirety or in parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law or statute or in equity. The Mortgagee may execute and deliver to the purchaser at such sale a conveyance of the Mortgaged Property in fee simple and an assignment or conveyance of all the Mortgagor's Interest in the Leases and the Mortgaged Property, each of which conveyances and assignments shall contain recitals as to the Event of Default upon which the execution of the power of sale herein granted depends, and the Mortgagor hereby constitutes and appoints the Mortgagee the true and lawful attorney in fact of the Mortgagor to make any such recitals, sale, assignment and conveyance, and all of the acts of the Mortgagee as such attorney in fact are hereby ratified and confirmed. The Mortgagor agrees that such recitals shall be binding and conclusive upon the Mortgagor and that any assignment or conveyance to be made by the Mortgagee shall divest the Mortgagor of all right, title, interest, equity and right of redemption, including any statutory redemption, in and to the Mortgaged Property. The power and agency hereby granted are coupled with an interest and are irrevocable by death or dissolution, or otherwise, and are in addition to any and all other remedies which the Mortgagee may have hereunder, at law or in equity. So long as the Secured Obligations, or any part thereof, remain unpaid, the Mortgagor agrees that possession of the Mortgaged Property by the Mortgagor, or any person claiming under the Mortgagor, shall be as tenant, and, in case of a sale under power or upon -27- foreclosure as provided in this Mortgage, the Mortgagor and any person in possession under the Mortgagor, as to whose interest such sale was not made subject, shall, at the option of the purchaser at such sale, then become and be tenants holding over, and shall forthwith deliver possession to such purchaser, or be summarily dispossessed in accordance with the laws applicable to tenants holding over. In case of any sale under this Mortgage by virtue of the exercise of the powers herein granted, or pursuant to any order in any judicial proceeding or otherwise, the Mortgaged Property may be sold as an entirety or in separate parcels in such manner or order as the Mortgagee in its sole discretion may elect. One or more exercises of powers herein granted shall not extinguish or exhaust such powers, until the entire Mortgaged Property is sold or all amounts secured hereby are paid in full. (ii) In the event of any sale made under or by virtue of this Article ------- XI, the entire principal of, and interest in respect of the Secured Obligations, - -- if not previously due and payable, shall, at the option of the Mortgagee, immediately become due and payable, anything in this Mortgage to the contrary notwithstanding. (iii) The proceeds of any sale made under or by virtue of this Article ------- XI, together with any other sums which then may be held by the Mortgagee under - -- this Mortgage, whether under the provisions of this Article XI or otherwise, ---------- shall be applied in accordance with the provisions of the Indenture. (iv) The Mortgagee may bid for and acquire the Mortgaged Property or any part thereof at any sale made under or by virtue of this Article XI and, in ---------- lieu of paying cash therefor, may make settlement for the purchase price by crediting against the purchase price the unpaid amounts (whether or not then due and owing) in respect of the Secured Obligations, after deducting from the sales price the expense of the sale and the reasonable costs of the action or proceedings and any other sums that the Mortgagee is authorized to deduct under this Mortgage. (v) The Mortgagee may adjourn from time to time any sale by it to be made under or by virtue hereof by announcement at the time and place appointed for such sale or for such adjourned sale or sales, and, the Mortgagee, without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned. (vi) If the Leased Premises is comprised of more than one parcel of land, the Mortgagee may take any of the actions authorized by this Section 11.3 ------------ in respect of any or a number of individual parcels. SECTION 11.4 Additional Remedies in Case of an Event of Default. -------------------------------------------------- (i) The Mortgagee shall be entitled to recover judgment as aforesaid either before, after or during the pendency of any proceedings for the enforcement of the provisions hereof, and the right of the Mortgagee to recover such judgment shall not be affected by any entry or sale hereunder, or by the exercise of any other right, power or remedy for the enforcement of the provisions hereof, or the foreclosure of, or absolute conveyance pursuant to, this Mortgage. In case of proceedings against the Mortgagor in insolvency or bankruptcy or any proceedings for its reorganization or involving the liquidation of its assets, the Mortgagee shall be entitled to prove the whole amount of principal and interest and other payments, charges and costs due in respect of the Secured Obligations to the full amount thereof without deducting therefrom any proceeds obtained from the sale of the whole or any part of the Mortgaged Property; provided, however, that in no case shall the Mortgagee -------- ------- receive a greater amount than the aggregate of such -28- principal, interest and such other payments, charges and costs (with interest at the Default Rate) from the proceeds of the sale of the Mortgaged Property and the distribution from the estate of the Mortgagor. (ii) Any recovery of any judgment by the Mortgagee and any levy of any execution under any judgment upon the Mortgaged Property shall not affect in any manner or to any extent the Lien and security interests created and evidenced hereby upon the Mortgaged Property or any part thereof, or any conveyances, powers, rights and remedies of the Mortgagee hereunder, but such conveyances, powers, rights and remedies shall continue unimpaired as before. (iii) Any monies collected by the Mortgagee under this Section 11.4 ------------ shall be applied in accordance with the provisions of Section 11.3(iii). ----------------- SECTION 11.5 Legal Proceedings After an Event of Default. ------------------------------------------- (i) After the occurrence and during the continuance of any Event of Default and immediately upon the commencement of any action, suit or legal proceedings to obtain judgment for the Secured Obligations or any part thereof, or of any proceedings to foreclose the Lien and security interest created and evidenced hereby or otherwise enforce the provisions hereof or of any other proceedings in aid of the enforcement hereof, the Mortgagor shall enter its voluntary appearance in such action, suit or proceeding. (ii) Upon the occurrence and during the continuance of an Event of Default, the Mortgagee shall be entitled forthwith as a matter of right, concurrently or independently of any other right or remedy hereunder either before or after declaring the Secured Obligations or any part thereof to be due and payable, to the appointment of a receiver without giving notice to any party and without regard to the adequacy or inadequacy of any security for the Secured Obligations or the solvency or insolvency of any person or entity then legally or equitably liable for the Secured Obligations or any portion thereof. The Mortgagor hereby consents to the appointment of such receiver. Notwithstanding the appointment of any receiver, the Mortgagee shall be entitled as pledgee to the possession and control of any cash, deposits or instruments at the time held by or payable or deliverable under the terms of the Indenture to the Mortgagee. (iii) The Mortgagor shall not (A) at any time insist upon, or plead, or in any manner whatsoever claim or take any benefit or advantage of any stay or extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance hereof, (B) claim, take or insist on any benefit or advantage of any law now or hereafter in force providing for the valuation or appraisal of the Mortgaged Property, or any part thereof, prior to any sale or sales of the Mortgaged Property which may be made pursuant to this Mortgage, or pursuant to any decree, judgment or order of any court of competent jurisdiction or (C) after any such sale or sales, claim or exercise any right under any statute heretofore or hereafter enacted to redeem the property so sold or any part thereof. To the extent permitted by applicable law, the Mortgagor hereby expressly (A) waives all benefit or advantage of any such law or laws, including, without limitation, any statute of limitations applicable to this Mortgage, (B) waives all rights to have the Mortgaged Property marshalled on any foreclosure of this Mortgage, (C) waives any and all rights to trial by jury in any action or proceeding related to the enforcement hereof, (D) waives any objection which it may now or hereafter have to the laying of venue of any action, suit or proceeding brought in connection with this Mortgage and further waives and agrees not to plead that any -29- such action, suit or proceeding brought in any such court has been brought in an inconvenient forum and (E) covenants not to hinder, delay or impede the execution of any power granted or delegated to the Mortgagee by this Mortgage but to suffer and permit the execution of every such power as though no such law or laws had been made or enacted. The Mortgagee shall not be liable for any incorrect or improper payment made pursuant to this Article XI in the absence of ---------- gross negligence or willful misconduct. SECTION 11.6 Remedies Not Exclusive. No remedy conferred upon or ---------------------- reserved to the Mortgagee by this Mortgage is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Mortgage or now or hereafter existing at law or in equity. Any delay or omission of the Mortgagee to exercise any right or power accruing on any Event of Default shall not impair any such right or power and shall not be construed to be a waiver of or acquiescence in any such Event of Default. Every power and remedy given by this Mortgage may be exercised from time to time concurrently or independently, when and as often as may be deemed expedient by the Mortgagee in such order and manner as the Mortgagee, in its sole discretion, may elect. If the Mortgagee accepts any monies required to be paid by the Mortgagor under this Mortgage after the same become due, such acceptance shall not constitute a waiver of the right either to require prompt payment, when due, of all other sums secured by this Mortgage or to declare an Event of Default with regard to subsequent defaults. If the Mortgagee accepts any monies required to be paid by the Mortgagor under this Mortgage in an amount less than the sum then due, such acceptance shall be deemed an acceptance on account only and on the condition that it shall not constitute a waiver of the obligation of the Mortgagor to pay the entire sum then due, and the Mortgagor's failure to pay the entire sum then due shall be and continue to be a default hereunder notwithstanding acceptance of such amount on account. SECTION 11.7 Sale of Mortgaged Lease. The word "sale" as used in this ----------------------- Article XI with respect to the Mortgaged Lease shall mean the sale, transfer, - ---------- assignment or conveyance for value of the leasehold interest of the Mortgagor in the Mortgaged Lease, together with all of the Mortgagor's right, title and interest in and to the other items comprising the Mortgaged Property. SECTION 11.8 Special Louisiana Provisions. ---------------------------- (i) Without limiting the generality of the foregoing, should one or more Events of Default occur or exist and be continuing under this Mortgage, as provided above, the Mortgagee, at its option, may exercise any one or more of this following rights and remedies, in addition to any other rights and remedies provided by law and under this Mortgage to the greatest extent permitted by applicable Louisiana law. Nothing contained herein shall be construed as constituting the Mortgagee as mortgagee in possession in absence of the actual taking of possession of the Premises by the Mortgagee. (ii) The Mortgagee shall have the right, at its sole option, to accelerate the maturity and demand immediate payment in full of any and all of the Secured Obligations. The Mortgagee shall then have the right to commence appropriate foreclosure proceedings against the Mortgaged Property and against the Mortgagor's rights as provided in this Mortgage. (iii) In the event that the Mortgagee elects to commence appropriate Louisiana foreclosure proceedings under this Mortgage, the Mortgagee may cause the Mortgaged Property, or any part or parts thereof, to be immediately seized and sold, whether in term of court or in vacation, under ordinary or executory process, in accordance with applicable Louisiana law, to the highest bidder for cash, with or -30- without appraisement, and without the necessity of making additional demand upon or notifying the Mortgagor or placing the Mortgagor in default, all of which are expressly waived. (iv) For purposes of foreclosure under Louisiana executory process procedures, the Mortgagor confesses judgment and acknowledges to be indebted to the Mortgagee, up to the full amount of the indebtedness in principal, interest, costs, expenses, reasonable attorney's fees and other fees and charges and amounts contemplated hereunder. The Mortgagor further confesses judgment and acknowledges to be indebted unto and in favor of the Mortgagee in the amount of all future advances that the Mortgagee may make on the Mortgagor's behalf pursuant to this Mortgage, together with interest thereon. To the extent permitted under applicable Louisiana law, the Mortgagor additionally waives: (1) the benefit of appraisal as provided in Articles 2332, 2336, 2723, and 2724 of the Louisiana Code of Civil Procedure, and all other laws with regard to appraisal upon judicial sale; (2) the demand and three (3) days' delay provided under Articles 22639 and 2721 of the Louisiana Code of Civil Procedure; (3) the notice of seizure as provided under Articles 2293 and 2721 of the Louisiana Code of Civil Procedure; (4) the three (3) days' delay provided under Articles 2331, 2722 and 2723 of the Louisiana Code of Civil Procedure and all other Articles not specifically mentioned above. The Mortgagor further agrees that any declaration of fact made by authentic act before a Notary Public and two witnesses, by a Person declaring that such facts are within his or her knowledge, shall constitute authentic evidence of such facts for purposes of foreclosure under applicable Louisiana law and for purposes of La, R.S. 9:3504(D)(6) and La. R.S. 10:9-508, to the extent applicable. (v) Should any or all of the Mortgaged Property be seized as an incident to an action for the recognition or enforcement of this Mortgage, by executory process, sequestration, attachment, writ of fieri facias or otherwise, the Mortgagor hereby agrees that the court issuing any such order shall, if requested by the Mortgagee, appoint the Mortgagee, or any agent designated by the Mortgagee or any Person named by the Mortgagee at the time such seizure is requested, or any time thereafter, as Keeper of the Mortgaged Property as provided under La. R.S. 9:5136, et seq. Such a Keeper shall be entitled to reasonable compensation. The Mortgagor agrees to pay the reasonable fees of such Keeper which compensation to the Keeper shall also be secured by this Mortgage in the form of an future advances as provided in this Mortgage. (vi) Should it become necessary for the Mortgagee to foreclose under this Mortgage, all declarations of fact, which are made under an authentic act before a Notary Public in the presence of two witnesses, by a person declaring such facts to lie within his or her knowledge, shall constitute authentic evidence for purposes of executory process and also for purposes of La. R.S. 9:3509.1, La. R.S. 9:3504(D)(6) and La. R.S. 10:9-508, where applicable. (vii) Should one or more Events of Default occur or exist under this Mortgage, the Mortgagee shall have the additional right, at its sole option, to separately sell the aforesaid rights, or any part of parts thereof, at private or public compensation, or on credit, or for future delivery, without the assumption of any credit risk. The sale of the aforesaid rights may be without appraisement, the benefit of which is also expressly waived by the Mortgagor. The Mortgagee may exercise any other remedies with regard to the Mortgagor's rights as may be authorized under the Louisiana Commercial Laws (La. R.S. 10:9-101, et seq.). (viii) To the extent provided by law, and in the event of foreclosure under this Mortgage, or other transfer of title or assignment of the Mortgaged Property, or any part or parts thereof, in lieu of -31- payment of the Secured Obligations, whether in whole or in part, all policies of insurance and other rights applicable to the foreclosed Mortgaged Property upon transfer of the Mortgaged Property shall automatically inure to the benefit of and shall pass to the purchaser(s) or transferee(s) thereof, subject to the rights of the purchaser(s) or transferee(s) to reject such insurance coverage and/or rights at its or their sole option and election. (ix) The Mortgagee may, in addition to or in lieu of the foregoing remedies, in the Mortgagee's sole discretion, commence an appropriate action against the Mortgagor seeking specific performance of any covenant contained in this Mortgage or in aid of the execution or enforcement of any power in this Mortgage granted. (x) Except as may be prohibited by applicable law, all of the Mortgagee's rights and remedies, whether evidenced by this Mortgage or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by the Mortgagee to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of the Mortgagor under this Mortgage, after the Mortgagor's failure to perform shall not affect the Mortgagee's right to declare a default and exercise its remedies. Nothing under this Mortgage or otherwise shall be construed so as to limit or restrict the rights and remedies available to the Mortgagee following an Event of Default, or in any way to limit or restrict the rights and abilities of the Mortgagee to proceed directly against Mortgagor and/or against any other co-maker, guarantor, surety or endorser of the Secured Obligations, and/or to proceed against any other collateral directly or indirectly securing the Secured Obligations. ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement. ------------------ (i) This Mortgage shall constitute a Security Agreement as defined in the Louisiana Commercial Laws, La. R.S. (S) 10:101 et seg., and shall create and evidence a security interest in all the equipment and in all the other items of Mortgaged Property in which a security interest may be granted pursuant to the Louisiana Commercial Laws (collectively, "Personal Property"). (ii) The remedies for any violation of the covenants, terms and conditions of the agreements herein contained shall be as prescribed herein or by general Louisiana law or, as to such part of the security which is also reflected in any Financing Statement filed to perfect the security interest herein created, by the specific statutory provisions now or hereinafter enacted and specified in the Louisiana Commercial Laws, all at Mortgagee's sole election. The mention in any financing statement of (1) the rights in or the proceeds of any fire or hazard insurance policy, or (2) any award in eminent domain proceedings for a taking or for loss of value, or (3) Mortgagor's interest as lessor in any present or future lease or rights to income growing out of the use or occupancy of the Mortgaged Property whether pursuant to lease or otherwise, shall never be construed as in any way altering any of the rights of Mortgagee under this Mortgage or impugning the priority of the Mortgagee's lien granted hereby or by any other recorded document. Rather, such mention in the financing statement is declared to be for the protection of the Mortgagee in the event any court or judge shall at any time hold with respect to (1), (2) and (3) above, that notice of Mort- -32- gagee's priority of interest to be effective against a particular class of persons, including, but not limited to, the Federal Government and any subdivisions or entity of the Federal Government, must be filed with the clerk of court of any parish (or Terrebonne Parish Recorder of Mortgages) pursuant to Section 9-401 of the Louisiana Commercial Laws. SECTION 12.2 Fixture Filing. From the date of its recording, this Mortgage shall be effective as a fixture financing statement with respect to all goods constituting part of the Mortgaged Property which are to become fixtures related to the Land. For this purpose, the following information is set forth: (a) Name and Address of Debtor: Houma Truck Plaza & Casino, L.L.C. 1541 Grand Caillou Parkway Houma, Louisiana 23124 (TIN 72-1447916) and (b) Name and Address of Secured Party: Wells Fargo Bank Minnesota, National Association Corporate Trust Services 213 Court Street, Suite 902 Middletown, Connecticut 06457 (c) This document covers goods which are to become fixtures. All items that are fixtures on the date of this Mortgage shall be subject to the mortgage Lien granted hereunder. ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security. The Mortgagor ------------------------------------------ shall, forthwith after the execution and delivery hereof and thereafter, from time to time, cause this Mortgage and any financing statement, continuation statement or similar instrument relating to any thereof or to any property intended to be subject to the Lien hereof to be filed, registered and recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the validity and priority thereof or the Lien hereof purported to be created upon the Mortgaged Property and the interest and rights of the Mortgagee therein. The Mortgagor shall (if it has not already done so), at its sole cost and expense, properly, duly and validly record an appropriate memorandum of the Mortgaged Lease and any amendments or supplements thereto in each jurisdiction in which any of the Leased Premises may be situated. The Mortgagor shall pay or cause to be paid all taxes and fees incident to such filing, registration and recording, and all reasonable expenses incident to the preparation, execution and acknowledgment thereof, and of any instrument of further assurance, and all Federal or state stamp taxes or other taxes, duties and charges arising out of or in connection with the execution and delivery of such instruments. -33- SECTION 13.2 Further Acts. The Mortgagor shall, at the sole cost and ------------ expense of the Mortgagor, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers, financing statements, continuation statements, instruments and assurances as the Mortgagee shall from time to time reasonably request, which may be necessary in the judgment of the Mortgagee from time to time to assure, perfect, convey, assign, mortgage, transfer and confirm unto the Mortgagee, the property and rights hereby conveyed or assigned or which the Mortgagor may be or may hereafter become bound to convey or assign to the Mortgagee or for carrying out the intention or facilitating the performance of the terms hereof or the filing, registering or recording hereof. Without limiting the generality of the foregoing, in the event that the Mortgagee desires to exercise any remedies, consensual rights or attorney-in-fact powers set forth in this Mortgage and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other Person therefor, then, upon the reasonable request of the Mortgagee, the Mortgagor agrees to use its reasonable efforts to assist and aid the Mortgagee to obtain as soon as practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers. In the event the Mortgagor shall fail (i) within ten (10) Business Days after demand, to execute or take any action required to be executed or taken by the Mortgagor under this Section 13.2 to the extent same ------------ is necessary to maintain perfection of the Lien granted to Mortgagee hereunder or (ii) such failure shall constitute an Event of Default, to execute or take any action required to be executed or taken by the Mortgagor under this Section ------- 13.2 (other than the type described in clause (i) of this sentence) then, in - ---- each of the cases described in clauses (i) and (ii) of this sentence, the Mortgagee may execute or take the same as the attorney-in-fact for the Mortgagor, such power of attorney being coupled with an interest and is irrevocable. SECTION 13.3 Additional Security. Without notice to or consent of the ------------------- Mortgagor and without impairment of the Lien and rights created by this Mortgage, the Mortgagee may accept (but the Mortgagor shall not be obligated to furnish) from the Mortgagor or from any other Person, additional security for the Secured Obligations. Neither the giving hereof nor the acceptance of any such additional security shall prevent the Mortgagee from resorting, first, to such additional security, and, second, to the security created by this Mortgage without affecting the Mortgagee's Lien and rights under this Mortgage. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Leased Premises. All of the ----------------------------------------- grants, covenants, terms, provisions and conditions in this Mortgage shall run with the Leased Premises and shall apply to, and bind the successors and assigns of, the Mortgagor. If there shall be more than one mortgagor with respect to the Mortgaged Property, the covenants and warranties hereof shall be joint and several. SECTION 14.2 No Merger. The rights and estate created by this Mortgage --------- shall not, under any circumstances, be held to have merged into any other estate or interest now owned or hereafter acquired by the Mortgagee unless the Mortgagee shall have consented to such merger in writing, such consent not to be unreasonably withheld. -34- SECTION 14.3 Concerning Mortgagee. -------------------- (i) The Mortgagee has been appointed as trustee pursuant to the Indenture. The actions of the Mortgagee hereunder are subject to the provisions of the Indenture. The Mortgagee shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of the Mortgaged Property), in accordance with this Mortgage and the Indenture. The Mortgagee may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. The Mortgagee may resign and a successor Mortgagee may be appointed in the manner provided in the Indenture. Upon the acceptance of any appointment as the Mortgagee by a successor Mortgagee, that successor Mortgagee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Mortgagee under this Mortgage, and the retiring Mortgagee shall thereupon be discharged from its duties and obligations under this Mortgage. After any retiring Mortgagee's resignation, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it under this Mortgage while it was the Mortgagee. (ii) The Mortgagee shall be deemed to have exercised reasonable care in the custody and preservation of the Mortgaged Property in its possession if such Mortgaged Property is accorded treatment substantially equivalent to that which the Mortgagee, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Mortgagee nor any of the Secured Parties shall have responsibility for taking any necessary steps to preserve rights against any Person with respect to any Mortgaged Property. (iii) The Mortgagee shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person, and, with respect to all matters pertaining to this Mortgage and its duties hereunder, upon advice of counsel selected by it. (iv) If any portion of the Mortgaged Property also constitutes collateral granted to the Mortgagee under any other deed of trust, mortgage, security agreement, pledge or instrument of any type, in the event of any conflict between the provisions hereof and the provisions of such other deed of trust, mortgage, security agreement, pledge or instrument of any type in respect of such collateral, the Mortgagee, in its sole discretion, shall select which provision or provisions shall control. SECTION 14.4 Mortgagee May Perform; Mortgagee Appointed ------------------------------------------ Attorney-in-Fact. If the Mortgagor shall fail to perform any covenants contained - ---------------- in this Mortgage, subject to any applicable grace periods or contest rights permitted pursuant to Article IX hereof or as otherwise permitted by any ---------- Collateral Document (including, without limitation, the Mortgagor's covenants to (i) pay the premiums in respect of all required insurance policies hereunder, (ii) pay Charges, (iii) make repairs, (iv) discharge Liens or (v) pay or perform any obligations of the Mortgagor under any Mortgaged Property) or if any warranty on the part of the Mortgagor contained herein shall be breached, the Mortgagee may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose; provided, -------- however, that the Mortgagee shall in no event be bound to inquire into the - ------- validity of any tax, Lien, imposition or other obligation which the Mortgagor fails to pay or perform as and when required hereby and which the Mortgagor does not contest in accordance with the provisions of Article IX hereof. Any and all ---------- amounts reasonably so expended by the Mortgagee shall be paid by the Mortgagor in accordance with the provisions of Section 14.5 hereof. Neither the provisions ------------ of this Section 14.4 nor any ac- ------------ -35- tion taken by the Mortgagee pursuant to the provisions of this Section 14.4 ------------ shall prevent any such failure to observe any covenant contained in this Mortgage nor any breach of warranty from constituting an Event of Default. Upon the occurrence and during the continuance of an Event of Default the Mortgagor hereby appoints the Mortgagee its attorney-in-fact, with full authority in the place and stead of the Mortgagor and in the name of the Mortgagor to take any action and to execute any instrument consistent with the terms hereof and the other Collateral Documents which the Mortgagee may deem necessary or advisable to accomplish the purposes hereof. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. The Mortgagor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. SECTION 14.5 Expenses The Mortgagor will upon demand pay to the -------- Mortgagee the amount of any and all reasonable costs and expenses, including the reasonable fees and expenses of its counsel and the reasonable fees and expenses of any experts and agents which the Mortgagee may incur in connection with (i) any action, suit or other proceeding affecting the Mortgaged Property or any part thereof commenced, in which action, suit or proceeding the Mortgagee is made a party or participates or in which the right to use the Mortgaged Property or any part thereof is threatened, or in which it becomes necessary in the judgment of the Mortgagee to defend or uphold the Lien hereof (including, without limitation, any action, suit or proceeding to establish or uphold the compliance of the Mortgaged Property with any Requirements of Law), (ii) the collection of the Secured Obligations, (iii) the enforcement and administration hereof, (iv) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Mortgaged Property, (v) the exercise or enforcement of any of the rights of the Mortgagee or any Secured Party hereunder or (vi) the failure by the Mortgagor to perform or observe any of the provisions hereof. All amounts expended by the Mortgagee and payable by the Mortgagor under this Section 14.5 shall be due upon demand therefor (together with interest ------------ thereon accruing at the Default Rate during the period from and including the date on which such funds were so expended to the date of repayment) and shall be part of the Secured Obligations. The Mortgagor's obligations under this Section ------- 14.5 shall survive the termination hereof and the discharge of the Mortgagor's - ---- other obligations under this Mortgage. SECTION 14.6 Indemnity. --------- (i) The Mortgagor agrees to indemnify, pay and hold harmless the Mortgagee and each of the other Secured Parties and the officers, directors, employees, agents and Affiliates of the Mortgagee and each of the other Secured Parties (collectively, the "Indemnitees") from and against any and all other ----------- liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs (including, without limitation, settlement costs), expenses or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, commenced or threatened, whether or not such Indemnitee shall be designated a party thereto), which may be imposed on, incurred by or asserted against that Indemnitee, in any manner relating to or arising out hereof, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (including, without limitation, any misrepresentation by the Mortgagor in this Mortgage, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (the "Indemnified Liabilities"); provided, however, that the Mortgagor shall have no ----------------------- -------- ------- obligation to an Indemnitee hereunder with respect to Indemnified Liabilities to the extent it has been determined by a final decision (after all appeals and the expiration of time to appeal) by a court of competent jurisdiction that such Indemnified Liabilities arose from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable be- -36- cause it is violative of any law or public policy, the Mortgagor shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. (ii) Survival. The obligations of the Mortgagor contained in this -------- Section 14.6 shall survive the termination hereof and the discharge of the - ------------ Mortgagor's other obligations under this Mortgage, the Indenture and the other Collateral Documents. (iii) Reimbursement. Any amount paid by any Indemnitee as to which ------------- such Indemnitee has the right to reimbursement shall constitute Secured Obligations secured by the Mortgaged Property. SECTION 14.7 Continuing Security Interest; Assignment. This Mortgage ---------------------------------------- shall create a continuing Lien on and security interest in the Mortgaged Property and shall (i) be binding upon the Mortgagor, its respective successors and assigns and (ii) inure, together with the rights and remedies of the Mortgagee hereunder, to the benefit of the Mortgagee and the other Secured Parties and each of their respective successors, transferees and assigns. No other Persons (including, without limitation, any other creditor of Mortgagor) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (ii), any Holder of the Notes may assign or otherwise transfer any indebtedness held by it secured by this Mortgage to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Holder, herein or otherwise, subject however, to the provisions of the Indenture. SECTION 14.8 Termination; Release. The Mortgaged Property shall be -------------------- released from the Lien of this Mortgage in accordance with the provisions of Article 10 of the Indenture. SECTION 14.9 Modification in Writing. No amendment, modification, ----------------------- supplement, termination or waiver of or to any provision hereof, nor consent to any departure by the Mortgagor therefrom, shall be effective unless the same shall be done in accordance with the terms of the Indenture and unless in writing and signed by the Mortgagee and Mortgagor. Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by the Mortgagor from the terms of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Mortgage or any other Collateral Document, no notice to or demand on the Mortgagor in any case shall entitle the Mortgagor to any other or further notice or demand in similar or other circumstances. SECTION 14.10 Notices. Unless otherwise provided herein or in the ------- Indenture, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Indenture, if to the Mortgagor, addressed to it at the address of the Issuer set forth in the Indenture, and as to the Mortgagee, addressed to it at its address set forth in the Indenture, or in each case at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 14.10. ------------- SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL. ------------------------------------------------------- THIS MORTGAGE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, -37- OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR ITEM OR TYPE OF MORTGAGED PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. THE MORTGAGOR AGREES THAT SERVICE OF PROCESS IN ANY PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE ISSUER AT ITS ADDRESS SET FORTH IN THE INDENTURE OR AT SUCH OTHER ADDRESS OF WHICH THE MORTGAGEE SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. IF ANY AGENT APPOINTED BY THE MORTGAGOR REFUSES TO ACCEPT SERVICE, THE MORTGAGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE MORTGAGEE TO BRING PROCEEDINGS AGAINST THE MORTGAGOR IN THE COURTS OF ANY OTHER JURISDICTION. THE MORTGAGOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 14.12 Severability of Provisions. Any provision hereof which -------------------------- is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 14.13 Limitation on Interest Payable. It is the intention of ------------------------------ the parties to conform strictly to the usury laws, whether state or Federal, that are applicable to the transaction of which this Mortgage is a part. All agreements between the Mortgagor and the Mortgagee, whether now existing or hereafter arising and whether oral or written, are hereby expressly limited so that in no contingency or event whatsoever shall the amount paid or agreed to be paid by the Mortgagor for the use, forbearance or detention of the money to be loaned or advanced under the Indenture or any related document or for the payment or performance of any covenant or obligation contained herein or in the Indenture or any related document exceed the maximum amount permissible under applicable Federal or state usury laws. If under any circumstances whatsoever fulfillment of any such provision, at the time performance of such provision shall be due, shall involve exceeding the limit of validity prescribed by law, then the obligation to be fulfilled shall be reduced to the limit of such validity. If under any circumstances the Mortgagor shall have paid an amount deemed interest by applicable law, which would exceed the highest lawful rate, such amount that would be excessive interest under applicable usury laws shall be applied to the reduction of the principal amount owing in respect of the Secured Obligations and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal and any other amounts due hereunder, the excess shall be refunded to the Mortgagor. All sums paid or agreed to be paid for the use, forbearance or detention of the principal under any extension of credit by the Mortgagee shall, to the extent permitted by applicable law, and to the extent necessary to preclude exceeding the limit of validity prescribed by law, be amortized, prorated, allocated and spread from the date hereof until payment in full of the Secured Obligations so that the actual rate of interest on account of such principal amounts is uniform throughout the term hereof. SECTION 14.14 Business Days. In the event any time period or any date ------------- provided in this Mortgage ends or falls on a day other than a Business Day, then such time period shall be deemed to end and such date shall be deemed to fall on the next succeeding Business Day, and performance herein may be made on such Business Day, with the same force and effect as if made on such other day. -38- SECTION 14.15 Relationship. The relationship of the Mortgagee to the ------------ Mortgagor hereunder is strictly and solely that of lender and borrower and mortgagor and mortgagee and nothing contained in the Indenture, the Notes, this Mortgage or any other document or instrument now existing and delivered in connection therewith or otherwise in connection with the Secured Obligations is intended to create, or shall in any event or under any circumstance be construed as creating a partnership, joint venture, tenancy-in-common, joint tenancy or other relationship of any nature whatsoever between the Mortgagee and the Mortgagor other than as lender and borrower and mortgagor and mortgagee. SECTION 14.16 Waiver of Stay. -------------- (i) The Mortgagor agrees that in the event that the Mortgagor or any property or assets of the Mortgagor shall hereafter become the subject of a voluntary or involuntary proceeding under the Bankruptcy Code or the Mortgagor shall otherwise be a party to any Federal or state bankruptcy, insolvency, moratorium or similar proceeding to which the provisions relating to the automatic stay under Section 362 of the Bankruptcy Code or any similar provision in any such law is applicable, then, in any such case, whether or not the Mortgagee has commenced foreclosure proceedings under this Mortgage, the Mortgagee shall be entitled to relief from any such automatic stay as it relates to the exercise of any of the rights and remedies (including, without limitation, any foreclosure proceedings) available to the Mortgagee as provided in this Mortgage, in any other Collateral Document or any other document evidencing the Secured Obligations. (ii) The Mortgagee shall have the right to petition or move any court having jurisdiction over any proceeding described in Section 14.16(i) hereof for ---------------- the purposes provided therein, and the Mortgagor agrees (i) not to oppose any such petition or motion and (ii) at the Mortgagor's sole cost and expense, to assist and cooperate with the Mortgagee, as may be requested by the Mortgagee from time to time, in obtaining any relief requested by the Mortgagee, including, without limitation, by filing any such petitions, supplemental petitions, requests for relief, documents, instruments or other items from time to time requested by the Mortgagee or any such court. SECTION 14.17 No Credit for Payment of Taxes or Impositions. The --------------------------------------------- Mortgagor shall not be entitled to any credit against the principal, premium, if any, or interest payable under the Indenture or the Notes, and the Mortgagor shall not be entitled to any credit against any other sums which may become payable under the terms thereof or hereof, by reason of the payment of any Charge on the Mortgaged Property or any part thereof. SECTION 14.18 No Claims Against the Mortgagee. Nothing contained in ------------------------------- this Mortgage shall constitute any consent or request by the Mortgagee, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Leased Premises or any part thereof, nor as giving the Mortgagor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the Mortgagee in respect thereof or any claim that any Lien based on the performance of such labor or services or the furnishing of any such materials or other property is prior to the Lien hereof. SECTION 14.19 Obligations Absolute. All obligations of the Mortgagor -------------------- hereunder shall be absolute and unconditional irrespective of: -39- (i) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Mortgagor, the Issuer or any other Guarantor; (ii) any lack of validity or enforceability of the Indenture, the Notes or any other agreement or instrument relating thereto; (iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Indenture, the Notes or any other agreement or instrument relating thereto; (iv) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations; (v) any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect hereof, the Indenture, the Notes or any agreement or instrument relating thereto except as specifically set forth in a waiver granted pursuant to the provisions of Section 14.9 hereof; or ------------ (vi) any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Mortgagor. SECTION 14.20 Last Dollars Secured. This Mortgage secures only a -------------------- portion of the Indebtedness owing or which may become owing by the Mortgagor. The parties agree that any payments or repayments of such Indebtedness by the Mortgagor shall be and be deemed to be applied first to the portion of the Indebtedness that is not secured hereby, it being the parties' intent that the portion of the Indebtedness last remaining unpaid shall be secured hereby. SECTION 14.21 Mortgaged Lease. --------------- (i) The Mortgagor shall punctually and properly perform, observe and otherwise comply in all material respects with each and every covenant, agreement, requirement and condition set forth in the Mortgaged Lease and do or cause to be done all things necessary or appropriate to keep the Mortgaged Lease in full force and effect and to preserve and keep unimpaired the rights of the Mortgagor thereunder. Upon reasonable request of the Mortgagee at reasonable intervals, the Mortgagor shall, subject to the terms of the Mortgaged Lease, request from the Lessor an estoppel certificate, addressed to the Mortgagee, stating that there is no default under the Mortgaged Lease, or any state of facts which, with the passage of time or notice or both, would constitute a default thereunder, or if there be any default under the Mortgaged Lease, giving the details thereof. (ii) In the event the Mortgagor acquires the fee simple title or any other estate or interest in the property subject to the Mortgaged Lease, such acquisition will not merge with the leasehold estate created by the Mortgaged Lease, but such other estate or interest will remain discrete and immediately become subject to the Lien of this Mortgage, and the Mortgagor shall execute, acknowledge and deliver any instruments requested by the Mortgagee to confirm the coverage of the Lien evidenced hereby upon such other estate or interest. The Mortgagor shall pay any and all conveyance or mortgage taxes and filing or similar fees in connection with the execution, delivery, filing or recording of any such instrument. -40- (iii) The Mortgagor shall promptly notify the Mortgagee in writing of the occurrence of any default (or any event which, with the lapse of time or notice or both, would constitute a default) on the part of or caused by any party to the Mortgaged Lease. If for any reason the Mortgagor cannot timely make any payment under the Mortgaged Lease or perform or comply with any of its obligations under the Mortgaged Lease, the Mortgagor shall notify the Mortgagee in sufficient time to enable the Mortgagee (but the Mortgagee shall not be obligated) timely to make such payments and/or to perform or comply with such other obligations. On receipt by the Mortgagee from the Mortgagor pursuant to this Section 14.21(iii), or from the Lessor under the Mortgaged Lease, of any ------------------ such notice of default by, or inability to make any payment by, the Mortgagor thereunder, the Mortgagee may rely thereon and, after reasonable notice to the Mortgagor, take such action as the Mortgagee deems necessary or desirable to cure such default, even though the existence of such default or the nature thereof is denied by the Mortgagor or by any other Person. (iv) Except as otherwise permitted under Section 10.6 of the Indenture, the Mortgagor shall not, without the prior written consent of the Mortgagee which consent shall not be unreasonably withheld, amend, modify, surrender, impair, forfeit, cancel or terminate, or permit the amendment, modification, surrender, impairment, forfeiture, cancellation or termination of, the Mortgaged Lease in whole or in part, whether or not a default shall have occurred and shall be continuing under either thereof. Any such termination, cancellation, modification, change, supplement, alteration, amendment or extension without the prior written consent contemplated by this subsection 14.21(iv) shall be void and of no force or effect. (v) The leasehold estate of the Mortgagor created by the Mortgaged Lease and the estate of the Lessor under the Mortgaged Lease shall each at all times remain separate and apart and retain their separate identities, and no merger of the leasehold or easement estate of the Mortgagor with the estate of the Lessor will result with respect to the Mortgagee or with respect to any purchaser acquiring the Mortgaged Property at any sale on foreclosure of the Lien of this Mortgage without the written consent of the Mortgagee. (vi) The Mortgagor covenants and agrees that if it shall be the subject of a proceeding under the Federal Bankruptcy Code, it shall not elect to treat the Mortgaged Lease as terminated (pursuant to Section 365 of the Federal Bankruptcy Code or any similar statute or law) without the prior written consent of the Mortgagee which consent shall not be unreasonably withheld. The Mortgagor hereby irrevocably assigns to the Mortgagee the right to exercise such election. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] THUS DONE AND PASSED, on the day, month and year first written above, effective as of the Effective Date, in the State and Parish aforesaid, by the undersigned Mortgagor in the presence of the undersigned Notary and the undersigned competent witnesses, who hereunto sign their names with Mortgagor after reading of the whole. WITNESSES: MORTGAGOR: HOUMA TRUCK PLAZA & CASINO, L.L.C., a Louisiana limited liability company /s/ Douglas A. Blackshear /s/ Ian M. Stewart ___________________________________ By: _____________________________________ Douglas A. Blackshear Printed Name:______________________ Ian M. Stewart Authorized Officer /s/ Sterling W. Dale, Jr. ___________________________________ Sterling W. Dale, Jr. Printed Name: _____________________ /s/ Perryann P. Whitehurst _______________________________________ Notary Public Schedule A ---------- Legal Description [to come from title policy] Schedule B ---------- Prior Liens ----------- 1. Each of the liens and other encumbrances excepted as being prior to the Lien hereof as set forth in Schedule B to the marked title insurance commitment issued by Lawyers Title Insurance Corporation, dated as of the date hereof and delivered to Trustee on the date hereof, bearing Lawyers Title Insurance Corporation reference number 37640REV relating to the real property described in Schedule A attached hereto. 2. Zoning and building ordinances and regulations, to the extent they constitute Permitted Liens of the type described in clause (4) of the definition thereof. Schedule C ---------- Leases Affecting the Mortgaged Property NONE Exhibit 1 --------- FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the "Agreement") is made and entered into as of the ____ day of _______, ____ by and between ________________________________, as trustee, having an office at _________________ (in such capacity, "Trustee"), and _____________________, having an office at __________________________ ("Tenant"). R E C I T A L S: - - - - - - - - A. Tenant is the tenant under a certain lease dated _____________, ____ between ________________________________, as landlord ("Landlord"), and Tenant, as tenant (as amended through the date hereof, the "Lease"), pursuant to which Tenant leased a portion (the "Leased Premises") of the property known as _____________________________, located at _____________________________, as more particularly described in Schedule A ---------- attached hereto (the "Property"). B. Landlord has or will grant a mortgage lien on and security interest in the Property to Trustee (for its benefit and for the benefit of the holders of certain senior secured notes and notes issued in exchange therefor pursuant to that certain indenture dated as of [________ ___, 2002]) pursuant to one or more mortgages, deeds of trust, deeds to secure debt or similar security instruments (collectively, the "Security Instruments"). C. Tenant has agreed to subordinate the Lease to the Security Instruments and to the lien thereof and Trustee has agreed not to disturb Tenant's possessory rights in the Leased Premises under the Lease on the terms and conditions hereinafter set forth. A G R E E M E N T: - - - - - - - - - NOW, THEREFORE, the parties hereto mutually agree as follows: 1. Subordination. Notwithstanding anything to the contrary set ------------- forth in the Lease, the Lease and the leasehold estate created thereby and all of Tenant's rights thereunder are and shall at all times be subject and subordinate in all respects to the Security Instruments and the lien thereof, and to all rights of Trustee thereunder, and to any and all advances to be made thereunder, and to all renewals, modifications, consolidations, replacements and extensions thereof. 2. Nondisturbance. So long as Tenant complies with the -------------- provisions of this Agreement, pays all rents and other charges as specified in the Lease and is not otherwise in default (beyond applicable notice and cure periods) of any of its obligations and covenants pursuant to the Lease, Trustee agrees for itself and its successors in interest and for any other person acquiring title to the Property through a foreclosure (an "Acquiring Party"), that Tenant's possession of the Leased Premises as described in the Lease will not be disturbed during the term of the Lease by reason of a foreclosure. For purposes of this Agreement, a "foreclosure" shall include (but not be limited to) a sheriff's or trustee's sale under the power of sale con- -2- tained in the Security Instruments, the termination of any superior lease of the Property and any other transfer of the Landlord's interest in the Property under peril of foreclosure, including, without limitation to the generality of the foregoing, an assignment or sale in lieu of foreclosure. 3. Attornment. Tenant agrees to attorn to, accept and ---------- recognize any Acquiring Party as the landlord under the Lease pursuant to the provisions expressly set forth therein for the then remaining balance of the term of the Lease, and any extensions thereof as made pursuant to the Lease. The foregoing provision shall be self-operative and shall not require the execution of any further instrument or agreement by Tenant as a condition to its effectiveness. 4. No Liability. Notwithstanding anything to the contrary ------------ contained herein or in the Lease, it is specifically understood and agreed that neither the Trustee, any receiver nor any Acquiring Party shall be: (a) liable for any act, omission, negligence or default of any prior landlord (including Landlord); or (b) liable for any failure of any prior landlord (including Landlord) to construct any improvements or bound by any covenant to construct any improvement either at the commencement of the term of the Lease or upon any renewal or extension thereof or upon the addition of additional space pursuant to any expansion right contained in the Lease; or (c) subject to any offsets, credits, claims or defenses which Tenant might have against any prior landlord (including Landlord); or (d) bound by any rent or additional rent which is payable on a monthly basis and which Tenant might have paid for more than one (1) month in advance to any prior landlord (including Landlord) or by any security deposit or other prepaid charge which Tenant might have paid in advance to any prior landlord (including Landlord); or (e) liable to Tenant hereunder or under the terms of the Lease beyond its interest in the Property; or (f) bound by any assignment, subletting, renewal, extension or any other agreement or modification of the Lease made without the written consent of Trustee; or (g) bound by any consensual or negotiated surrender, cancellation or termination of the Lease, in whole or in part, agreed upon between Landlord and Tenant unless effected unilaterally by Tenant pursuant to the express terms of the Lease. Notwithstanding the foregoing, Tenant reserves its right to any and all claims or causes of action (i) against such prior landlord for prior losses or damages and (ii) against the successor landlord for all losses or damages arising from and after the date that such successor landlord takes title to the Property. 5. Certain Acknowledgments and Agreements by Tenant. (a) ------------------------------------------------ Tenant has notice that the Lease and the rents and all other sums due thereunder have been assigned to Trustee as security for the notes secured by the Security Instruments. In the event Trustee notifies Tenant of the occurrence of a de- -3- fault under the Security Instruments and demands that Tenant pay its rents and all other sums due or to become due under the Lease directly to Trustee, Tenant shall honor such demand and pay its rent and all other sums due under the Lease directly to Trustee or as otherwise authorized in writing by Trustee. Landlord irrevocably authorizes Tenant to make the foregoing payments to Trustee upon such notice and demand. (b) Tenant shall send a copy of any and all notices or statements under the Lease to Trustee at the same time such notices or statements are sent to Landlord. (c) This Agreement satisfies any and all conditions or requirements in the Lease relating to the granting of a non-disturbance agreement. 6. Trustee to Receive Default Notices. Tenant shall notify ---------------------------------- Trustee of any default by Landlord under the Lease which would entitle Tenant to cancel the Lease, and agrees that, notwithstanding any provisions of the Lease to the contrary, no notice of cancellation thereof shall be effective unless Trustee shall have received notice of default giving rise to such cancellation and shall have failed within sixty (60) days after receipt of such notice to cure such default or, if such default cannot be cured within sixty (60) days, shall have failed within sixty (60) days after receipt of such notice to commence and thereafter diligently pursue any action necessary to cure such default. 7. Estoppel. Tenant hereby certifies and represents to Trustee -------- that as of the date of this Agreement: (a) the Lease is in full force and effect; (b) all requirements for the commencement and validity of the Lease have been satisfied and there are no unfulfilled conditions to Tenant's obligations under the Lease; (c) Tenant is not in default under the Lease and has not received any uncured notice of any default by Tenant under the Lease; to the best of Tenant's knowledge, Landlord is not in default under the Lease; no act, event or condition has occurred which with notice or the lapse of time, or both, would constitute a default by Tenant or Landlord under the Lease; no claim by Tenant of any nature exists against Landlord under the Lease; and all obligations of Landlord have been fully performed; (d) there are no defenses, counterclaims or setoffs against rents or charges due or which may become due under the Lease; (e) none of the rent which Tenant is required to pay under the Lease has been prepaid, or will in the future be prepaid, more than one (1) month in advance; (f) Tenant has no right or option contained in the Lease or in any other document to purchase all or any portion of the Leased Premises; (g) the Lease has not been modified or amended and constitutes the entire agreement between Landlord and Tenant relating to the Leased Premises; -4- (h) Tenant has not assigned, mortgaged, sublet, encumbered, conveyed or otherwise transferred any or all of its interest under the Lease; and (i) Tenant has full authority to enter into this Agreement, which has been duly authorized by all necessary action. 8. Notices. All notices or other written communications ------- hereunder shall be deemed to have been properly given (i) upon delivery, if delivered in person with receipt acknowledged by the recipient thereof, (ii) one (1) Business Day (hereinafter defined) after having been deposited for overnight delivery with any reputable overnight courier service, or (iii) three (3) Business Days after having been deposited in any post office or mail depository regularly maintained by the United States Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested, addressed to the receiving party at its address set forth above or addressed as such party may from time to time designate by written notice to the other parties. For purposes of this Section 8, the term "Business Day" shall mean any day other than Saturday, Sunday or any other day on which banks are required or authorized to close in New York, New York. Either party by notice to the other may designate additional or different addresses for subsequent notices or communications. 9. Successors. The obligations and rights of the parties ---------- pursuant to this Agreement shall bind and inure to the benefit of the successors, assigns, heirs and legal representatives of the respective parties; provided, however, that in the event of the assignment or transfer of the - -------- ------- interest of Trustee, all obligations and liabilities of Trustee under this Agreement shall terminate, and thereupon all such obligations and liabilities shall be the responsibility of the party to whom Trustee's interest is assigned or transferred; and provided, further, that the interest of Tenant under this -------- ------- Agreement may not be assigned or transferred without the prior written consent of Trustee. In addition, Tenant acknowledges that all references herein to Landlord shall mean the owner of the landlord's interest in the Lease, even if said owner shall be different from the Landlord named in the Recitals. 10. Duplicate Original; Counterparts. This Agreement may be -------------------------------- executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Agreement. 11. Limitation of Trustee's Liability. (a) Trustee shall have --------------------------------- no obligations nor incur any liability with respect to any warranties of any nature whatsoever, whether pursuant to the Lease or otherwise, including, without limitation, any warranties respecting use, compliance with zoning, Landlord's title, Landlord's authority, habitability, fitness for purpose or possession. (b) In the event that Trustee shall acquire title to the Leased Premises or the Property, Trustee shall have no obligation, nor incur any liability, beyond Trustee's then equity interest, if any, in the Leased Premises, and Tenant shall look exclusively to such equity interest of Trustee, if any, in the Leased Premises for the payment and discharge of any obligations imposed upon Trustee hereunder or under the Lease, and Trustee is hereby released and relieved of any other obligations hereunder and under the Lease. 12. Modification in Writing. This Agreement may not be modified ----------------------- except by an agreement in writing signed by the parties hereto or their respective successors in interest. -5- 13. Lien of Security Instruments. Nothing contained in this Agreement shall ---------------------------- in any way impair or affect the lien created by the Security Instruments or the provisions thereof. 14. Compliance with Lease. Tenant agrees that in the event there is any --------------------- inconsistency between the terms and provisions hereof and the terms and provisions of the Lease, the terms and provisions hereof shall be controlling. 15. Governing Law; Severability. This Agreement shall be governed by the --------------------------- laws of the State of [ ]. If any term of this Agreement or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such terms to any person or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 16. Further Actions. Tenant agrees at its own expense to execute and --------------- deliver, at any time and from time to time upon the request of Trustee or any Acquiring Party, such documents and instruments (in recordable form, if requested) as may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to fully implement or to further evidence the understandings and agreements contained in this Agreement. Moreover, Tenant hereby irrevocably appoints and constitutes Trustee or any Acquiring Party as its true and lawful attorney-in-fact to execute and deliver any such documents or instruments which may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to implement or further evidence such understandings and agreements and which Tenant, after thirty (30) days' notice from Trustee or any Acquiring Party, has failed to execute and deliver. IN WITNESS WHEREOF, Trustee and Tenant have duly executed this Agreement as of the date first above written. _________________________________________, as Trustee By: ______________________________________ Name: Title: _________________________________________, as Tenant By: ______________________________________ Name: Title: The undersigned, as the Landlord named in the Recitals, having duly executed this Agreement as of the date first written above, and as mortgagor, pledgor, assignor or debtor under the Security Instruments, hereby accepts and agrees for itself and its successors and assigns, (i) to be bound by the provisions of Section 5 hereof, (ii) that nothing contained in the foregoing Agreement (x) shall in any way be deemed to constitute a waiver by Trustee of any of its rights or remedies under the Security Instruments or (y) shall in any way be deemed to release Landlord from its obligations to comply with the terms, provisions, conditions, covenants and agreements set forth in the Security Instruments and (iii) that the provisions of the Security Instruments remain in full force and effect and must be complied with by Landlord. ________________________________, a ________________________________ By: ______________________________________ Name: Title: ACKNOWLEDGMENT State of_____________) ) ss.: County of____________) [Local counsel to provide appropriate acknowledgment] SCHEDULE A to EXHIBIT 1 ----------------------- Description of Real Property ---------------------------- EX-4.13 43 dex413.txt MORTGAGE, ASSIGNMENT OF LEASES-WINNERS CHOICE Exhibit 4.13 ================================================================================ MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING BY WINNER'S CHOICE CASINO, INC., Mortgagor, TO WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee, Mortgagee Securing Principal Indebtedness of $125,000,000 Dated as of February 22, 2002 Relating to Premises in: Calcasieu Parish, Louisiana ================================================================================ After recording, please return to: Athy A. Mobilia, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 -------------------- TABLE OF CONTENTS
Page ---- PREAMBLE ...................................................................................... 1 RECITALS ...................................................................................... 1 AGREEMENT ..................................................................................... 2 ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions ................................................................... 2 SECTION 1.2 Interpretation ................................................................ 8 SECTION 1.3 Resolution of Drafting Ambiguities ............................................ 8 ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Mortgaged Property ................................................... 8 SECTION 2.2 Assignment of Leases and Rents ................................................ 9 SECTION 2.3 Secured Obligations ........................................................... 10 SECTION 2.4 Future Advances ............................................................... 10 SECTION 2.5 No Release .................................................................... 10 ARTICLE III REPRESENTATIONS AND WARRANTIES OF MORTGAGOR SECTION 3.1 Authority and Validity ........................................................ 10 SECTION 3.2 Warranty of Title ............................................................. 11 SECTION 3.3 Condition of Mortgaged Property ............................................... 11 SECTION 3.4 Leases ........................................................................ 13 SECTION 3.5 Insurance ..................................................................... 13 SECTION 3.6 Charges ....................................................................... 14 SECTION 3.7 Environmental ................................................................. 14 SECTION 3.8 No Conflicts, Consents, etc ................................................... 14 SECTION 3.9 Benefit to the Mortgagor ...................................................... 15
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Page ---- ARTICLE IV CERTAIN COVENANTS OF MORTGAGOR SECTION 4.1 Preservation of Corporate Existence ........................................... 15 SECTION 4.2 Title ......................................................................... 15 SECTION 4.3 Maintenance and Use of Mortgaged Property; Alterations ........................ 16 SECTION 4.4 Notices Regarding Certain Defaults ............................................ 17 SECTION 4.5 Access to Mortgaged Property, Books and Records; Other Information ............ 17 SECTION 4.6 Limitation on Liens; Transfer Restrictions .................................... 17 SECTION 4.7 Environmental ................................................................. 17 SECTION 4.8 Estoppel Certificates ......................................................... 19 ARTICLE V LEASES SECTION 5.1 Mortgagor's Affirmative Covenants with Respect to Leases ...................... 19 SECTION 5.2 Mortgagor's Negative Covenants with Respect to Leases ......................... 19 SECTION 5.3 Additional Requirements with Respect to New Leases ............................ 20 ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Mortgagor .................................. 20 SECTION 6.2 Collection of Rents by the Mortgagee .......................................... 20 SECTION 6.3 No Release .................................................................... 21 SECTION 6.4 Irrevocable Interest .......................................................... 21 SECTION 6.5 Amendment to Leases ........................................................... 21 ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges ............................................................ 21 SECTION 7.2 Escrow of Taxes ............................................................... 22 SECTION 7.3 Certain Statutory Liens ....................................................... 22 SECTION 7.4 Stamp and Other Taxes ......................................................... 22 SECTION 7.5 Certain Tax Law Changes ....................................................... 22 SECTION 7.6 Proceeds of Tax Claim ......................................................... 22 ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages ..................................... 23
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Page ---- SECTION 8.2 Delivery After Foreclosure .................................................... 23 ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens ............................... 23 SECTION 9.2 Contesting of Insurance ....................................................... 23 ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction ................................................................... 24 SECTION 10.2 Condemnation .................................................................. 24 ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default ............................................................. 24 SECTION 11.2 Remedies in Case of an Event of Default ....................................... 24 SECTION 11.3 Sale of Mortgaged Property if Event of Default Occurs; Proceeds of Sale ....... 25 SECTION 11.4 Additional Remedies in Case of an Event of Default ............................ 26 SECTION 11.5 Legal Proceedings After an Event of Default ................................... 27 SECTION 11.6 Remedies Not Exclusive ........................................................ 27 ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement ............................................................ 30 SECTION 12.2 Fixture Filing ................................................................ 31 ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security .................................... 31 SECTION 13.2 Further Acts .................................................................. 31 SECTION 13.3 Additional Security ........................................................... 32
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Page ---- ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Land ................................................ 32 SECTION 14.2 No Merger ..................................................................... 32 SECTION 14.3 Concerning Mortgagee .......................................................... 32 SECTION 14.4 Mortgagee May Perform; Mortgagee Appointed Attorney-in-Fact ................... 33 SECTION 14.5 Expenses ...................................................................... 33 SECTION 14.6 Indemnity ..................................................................... 34 SECTION 14.7 Continuing Security Interest; Assignment ...................................... 34 SECTION 14.8 Termination; Release .......................................................... 34 SECTION 14.9 Modification in Writing ....................................................... 35 SECTION 14.10 Notices ....................................................................... 35 SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL ....................... 35 SECTION 14.12 Severability of Provisions .................................................... 35 SECTION 14.13 Limitation on Interest Payable ................................................ 35 SECTION 14.14 Business Days ................................................................. 36 SECTION 14.15 Relationship .................................................................. 36 SECTION 14.16 Waiver of Stay ................................................................ 36 SECTION 14.17 No Credit for Payment of Taxes or Impositions ................................. 37 SECTION 14.18 No Claims Against the Mortgagee ............................................... 37 SECTION 14.19 Obligations Absolute .......................................................... 37 SECTION 14.20 Last Dollars Secured .......................................................... 37 SIGNATURE AND ACKNOWLEDGMENT SCHEDULE A Legal Description SCHEDULE B Prior Liens SCHEDULE C Leases Affecting the Mortgaged Property EXHIBIT 1 Form of Subordination, Non-Disturbance and Attornment Agreement
-iv- MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Mortgage"), dated as of February 22, 2002, made by WINNER'S CHOICE -------- CASINO, INC., a Louisiana corporation having an office at 2650 Highway 108, Sulphur, Louisiana 70663, as mortgagor, assignor and debtor (in such capacities and together with any successors in such capacities, the "Mortgagor"), in favor --------- of WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association having an office at 213 Court Street, Suite 902, Middletown, CT 06457, in its capacity as collateral agent and trustee pursuant to the Indenture (as hereinafter defined), as mortgagee, assignee and secured party (in such capacities and together with any successors in such capacities, the "Mortgagee"). --------- R E C I T A L S: - - - - - - - - A. Gameco, Inc. (the "Issuer"), certain of its Subsidiaries (as ------ hereinafter defined), the Mortgagor and the Mortgagee have, in connection with the execution and delivery of this Mortgage, entered into that certain indenture, dated as of February 8, 2002 (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Indenture"), --------- pursuant to which the Issuer has issued its 117/8% senior secured notes due 2009 (the "Senior Secured Notes") in the aggregate principal amount of $125,000,000. -------------------- It is contemplated that the Issuer may, after the date hereof, issue Additional Notes (as defined in the Indenture) and Exchange Notes (as defined in the Indenture); the Exchange Notes, together with the Additional Notes and the Senior Secured Notes, the "Notes"), in each case, pursuant to the provisions of ----- the Indenture. B. The Issuer owns, directly or through its Subsidiaries, all of the issued and outstanding shares of the Mortgagor. C. The Mortgagor has, pursuant the Indenture, among other things, unconditionally guaranteed (the "Guarantee") the obligations of the Issuer under --------- the Indenture and the Notes. D. The Mortgagor will receive substantial benefits from the execution and delivery of, and the performance of the obligations under, the Indenture and the Notes, and is therefore willing to enter into this Mortgage. E. The Mortgagor is or will be the legal owner of the Mortgaged Property (as hereinafter defined). F. This Mortgage is given by the Mortgagor in favor of the Mortgagee for its benefit and for the benefit of the Holders of the Notes (collectively, the "Secured Parties") to secure the payment and performance of all of the --------------- Secured Obligations (as hereinafter defined). A G R E E M E N T: - - - - - - - - - NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Mortgagor hereby covenants and agrees with the Mortgagee as follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions. Capitalized terms used but not otherwise ----------- defined herein shall have the meanings assigned to such terms in the Indenture. The following terms used in this Mortgage shall have the following meanings: "ACM" shall have the meaning assigned to such term in Section 4.7(ii) --- --------------- hereof. "Affiliate" shall have the meaning assigned to such term in the --------- Indenture. "Alteration" shall mean any and all alterations, installations, ---------- improvements, additions, modifications or changes of a structural nature of or to the Premises. "Business Day" shall have the meaning assigned to such term in the ------------ Indenture. "Charges" shall mean any and all real estate, property and other ------- taxes, assessments and special assessments, levies, fees, all water and sewer rents and charges and all other governmental charges or Liens imposed upon or assessed against, and all claims (including, without limitation, landlords', carriers', mechanics', workmen's, repairmen's, laborers', materialmen's, suppliers' and warehousemen's Liens and other claims arising by operation of law) against, all or any portion of the Mortgaged Property. "Collateral Account" shall have the meaning assigned to such term in ------------------ the Indenture. "Collateral Documents" shall have the meaning assigned to such term in -------------------- the Indenture. "Contested Liens" shall mean, collectively, any Liens incurred in --------------- respect of any Charges to the extent that the amounts owing in respect thereof are not yet delinquent or are being contested and otherwise comply with the provisions of Section 9.1 hereof. ----------- "Contracts" shall mean, collectively, any and all right, title and --------- interest of the Mortgagor in and to any and all contracts, instruments, documents and other general intangibles, whether now existing or hereafter arising or entered into, relating to the Mortgaged Property (including, without limitation, all reciprocal easements and/or operating agreements, covenants, conditions and restrictions and similar agreements affecting all or any portion of the Mortgaged Property and any and all present or future options to sell or lease the Mortgaged Property or any interest therein) and all reserves, deferred payments, deposits or other security or advance payments (including, without limitation, those made by or on behalf of the Mortgagor to others with respect to (i) utility service regarding the Mortgaged Property, (ii) cleaning, maintenance, repair or similar services regarding the Mortgaged Property, (iii) refuse removal or sewage service regarding the Mortgaged Property, (iv) rentals of equipment, if any, used in the operation by or on behalf of Mortgagor regarding the Mortgaged Property, and/or (v) parking or similar services or rights regarding the Mortgaged Property), refunds, liens, security interests, guarantees, remedies and claims of every kind, nature or character relating thereto. "Default Rate" shall mean the rate per annum equal to the highest rate ------------ then payable under the Indenture. "Destruction" shall mean any and all damage to, or loss or destruction ----------- of, the Premises or any part thereof. "Environmental Law" shall mean any applicable federal, state, local or ----------------- municipal statute, law, rule, regulation, ordinance, code, policy or rule of common law and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment binding on the Mortgagor, relating to pollution or protection of the environment, or health or safety including, without limitation, any relating to the release or threatened release of any Hazardous Materials. "Event of Default" shall have the meaning assigned to such term in the ---------------- Indenture. "Fixture" shall mean all machinery, apparatus, equipment, fittings, ------- fixtures, improvements and articles of personal property of every kind, description and nature whatsoever now or hereafter attached or affixed to the Land or any other Improvement or used in connection with the use and enjoyment of the Land or any other Improvement or the maintenance or preservation thereof, which by the nature of their location thereon or attachment thereto are fixtures under the UCC or any other applicable law including, without limitation, all utility systems, fire sprinkler and security systems, drainage facilities, lighting facilities, all water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone and other utility equipment and facilities, pipes, fittings and other items of every kind and description now or hereafter attached to or located on the Land which by the nature of their location thereon or attachment thereto are real property under applicable law, HVAC equipment, boilers, electronic data processing, telecommunications or computer equipment, refrigeration, electronic monitoring, water or lighting systems, power, sanitation, waste removal, elevators, maintenance or other systems or equipment and all additions thereto and betterments, renewals, substitutions and replacements thereof. "GAAP" shall have the meaning assigned to such term in the Indenture. ---- "Governmental Authority" shall mean any federal, state, local, foreign ---------------------- or other governmental, quasi-governmental or administrative (including self-regulatory) body, instrumentality, department, agency, authority, board, bureau, commission, office of any nature whatsoever or other subdivision thereof, or any court, tribunal, administrative hearing body, arbitration panel or other similar dispute-resolving body, whether now or hereafter in existence, or any officer or official thereof, having jurisdiction over the Mortgagor or the Mortgaged Property or any portion thereof. "Guarantee" shall have the meaning assigned to such term in Recital C --------- --------- hereof. "Guarantors" shall have the meaning assigned to such term in the ---------- Indenture. "Hazardous Materials" shall mean any substance, chemical, material, ------------------- pollutant, waste, contaminant or constituent, which is subject to regulation under or could give rise to liability under any Environmental Law. "Holder" shall have the meaning assigned to such term in the ------ Indenture. "Improvements" shall mean all buildings, structures and other ------------ improvements of every kind or description and any and all Alterations now or hereafter located, attached or erected on the Land including, without limitation (i) all Fixtures, (ii) all attachments, railroad tracks, foundations, sidewalks, drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer rights, parking areas, driveways, fences and walls and (iii) all materials now or hereafter located on the Land intended for the construction, reconstruction, repair, replacement, alteration, addition or improvement of or to such buildings, Fixtures, structures and improvements, all of which materials shall be deemed to be part of the Improvements immediately upon delivery thereof on the Land and to be part of the improvements immediately upon their incorporation therein. "Indemnified Liabilities" shall have the meaning assigned to such term ----------------------- in Section 14.6(i) hereof. --------------- "Indemnitees" shall have the meaning assigned to such term in Section ----------- ------- 14.6(i) hereof. - ------- "Indenture" shall have the meaning assigned to such term in Recital A --------- --------- hereof. "Insurance Policies" means the insurance policies and coverages ------------------ required to be maintained by the Mortgagor with respect to the Mortgaged Property pursuant to Section 4.19(b) of the Indenture and all renewals and extensions thereof. "Insurance Requirements" means, collectively, all provisions of the ---------------------- Insurance Policies, all requirements of the issuer of any of the Insurance Policies and all orders, rules, regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon the Mortgagor and applicable to the Mortgaged Property or any use or condition thereof. "Issuer" shall have the meaning assigned to such term in Recital A ------ --------- hereof. "Land" shall mean those certain tracts or parcels of land described in ---- Schedule A annexed to this Mortgage, together with all of the Mortgagor's - ---------- reversionary rights therein and all of the Mortgagor's rights in and to any and all easements, rights-of-way, strips and gores of land, waters, water courses, water rights, mineral, gas and oil rights and all power, air, light and other rights, estates, titles, interests, privileges, liberties, servitudes, licenses, tenements, hereditaments and appurtenances whatsoever, in any way belonging, relating or appertaining thereto, or any part thereof, or which hereafter shall in any way belong, relate or be appurtenant thereto. "Landlord" shall mean any landlord, lessor, franchisor, licensor or -------- grantor, as applicable. "Leases" shall mean, collectively, any and all right, title and ------ interests of the Mortgagor, as Landlord, in all leases and subleases of space, tenancies, franchise agreements, licenses, occupancy, rental, access or concession agreements and any other agreements pursuant to which any Person is granted a pos- sessory interest in or right to use or occupy all or any portion of the Mortgaged Property (including, without limitation, all of the Mortgagor's rights to enforce all such leases, subleases, tenancies or other agreements and to receive and enforce any rights that the Mortgagor may have to collect Rents thereunder), in each case whether now existing or hereafter entered into, whether or not of record, relating in any manner to the Premises or the use or occupancy thereof and any and all amendments, modifications, supplements, replacements, extensions, renewals and/or guarantees, if any thereof, whether now in effect or hereafter coming into effect. "Lien" shall have the meaning assigned to such term in the Indenture. ---- "Mortgage" shall have the meaning assigned to such term in the -------- Preamble hereof. "Mortgaged Property" shall have the meaning assigned to such term in ------------------ Section 2.1 hereof. - ----------- "Mortgagee" shall have the meaning assigned to such term in the --------- Preamble hereof. "Mortgagor" shall have the meaning assigned to such term in the --------- Preamble hereof. "Mortgagor's Interest" shall have the meaning assigned to such term in -------------------- Section 2.2 hereof. - ----------- "Net Loss Proceeds" shall have the meaning assigned to such term in ----------------- the Indenture. "Net Proceeds" shall have the meaning assigned to such term in the ------------ Indenture. "Notes" shall have the meaning assigned to such term in Recital A ----- hereof. "Officers' Certificate" shall have the meaning assigned to such term --------------------- in the Indenture. "Permit" shall mean any and all permits, certificates, approvals, ------ authorizations, consents, licenses, variances, franchises or other instruments, however characterized, of any Governmental Authority (or any Person acting on behalf of a Governmental Authority) now or hereafter acquired or held, together with all amendments, modifications, extensions, renewals and replacements of any thereof issued or in any way furnished in connection with the Mortgaged Property including, without limitation, building permits, certificates of occupancy, environmental certificates, industrial permits or licenses and certificates of operation. "Permitted Collateral Liens" shall have the meaning assigned to such -------------------------- term in Section 4.6 hereof. ----------- "Permitted Liens" shall have the meaning assigned to such term in the --------------- Indenture. "Person" shall have the meaning assigned to such term in the ------ Indenture. "Premises" shall mean, collectively, the Land and the Improvements. -------- "Prior Liens" shall mean, collectively, the Liens identified in ----------- Schedule B annexed to this Mortgage. - ---------- "Proceeds" shall mean, collectively, any and all cash proceeds and -------- noncash proceeds derived or to be derived from the Mortgaged Property and shall include, without limitation, all (i) proceeds of the sale, transfer or conveyance of the Mortgaged Property or the conversion, voluntary or involuntary, of any of the Mortgaged Property or any portion thereof into cash or liquidated claims, (ii) proceeds of any insurance (except payments made to a Person, other than the Issuer or any Subsidiary thereof, that is not a party to this Mortgage), indemnity, warranty, guaranty or claim payable to the Mortgagee or to the Mortgagor from time to time with respect to any of the Mortgaged Property including, without limitation, all Net Loss Proceeds relating thereto, (iii) payments (in any form whatsoever) made or due and payable to the Mortgagor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any portion of the Mortgaged Property by any Governmental Authority (or any Person acting on behalf of a Governmental Authority) including, without limitation, all Net Loss Awards relating thereto, (iv) products of the Mortgaged Property, (v) other amounts from time to time paid or payable under or in connection with any of the Mortgaged Property including, without limitation, refunds of real estate taxes and assessments, including interest thereon and any unearned insurance premiums relating thereto and (vi) the right to enforce any and all rights that the Mortgagor has or may have to collect all such proceeds, including, without limitation, the Mortgagor's rights to commence any and all appropriate collection or enforcement actions incident thereto. "Property Material Adverse Effect" shall mean, as of any date of -------------------------------- determination and whether individually or in the aggregate (a) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the business or operations as presently conducted at the Mortgaged Property; (b) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the value or utility of the Mortgaged Property; and (c) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the legality, priority or enforceability of the Lien created by this Mortgage or the rights and remedies of the Mortgagee hereunder. "Prudent Operator" shall mean the standard of care taken by a prudent ---------------- operator of property similar in use and configuration to the Premises and located in the locality where the Premises are located. "Records" shall mean, collectively, any and all right, title and ------- interest of the Mortgagor in and to any and all drawings, plans, specifications, file materials, operating and maintenance records, catalogues, tenant lists, correspondence, advertising materials, operating manuals, warranties, guarantees, appraisals, studies and data relating to the Mortgaged Property or the construction of any Alteration or the maintenance of any Permit. "Rents" shall mean, collectively, any and all rents, additional rents, ----- royalties, issues, cash, guaranties, letters of credit, bonds, sureties or security deposited under any Lease to secure performance of the Tenant's obligations thereunder, revenues, earnings, profits, bonuses and income, advance rental payments, payments incident to assignment, sublease or surrender of a Lease, claims for forfeited deposits and claims for damages, now due or hereafter to become due, with respect to any Lease, any indemnification against, or reimbursement for, sums paid and costs and expenses incurred by the Mortgagor under any Lease or otherwise, and any award in the event of the bankruptcy of any Tenant under or guarantor of a Lease. "Requirements of Law" shall mean, collectively, any and all ------------------- requirements of any Governmental Authority including, without limitation, any and all orders, decrees, determinations, laws, treaties, ordinances, rules, regulations or similar statutes or case law. "Secured Obligations" shall mean all obligations (whether or not ------------------- constituting future advances, obligatory or otherwise) of the Issuer and any and all of the Guarantors from time to time arising under or in respect of this Mortgage, the Indenture, the Notes and the other Collateral Documents (including, without limitation, the obligations to pay principal, interest and all other charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Mortgage, the Indenture, the Notes and the other Collateral Documents), in each case whether (i) such obligations are direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due whether at stated maturity, by acceleration or otherwise, (ii) arising in the regular course of business or otherwise, (iii) for payment or performance and/or (iv) now existing or hereafter arising (including, without limitation, interest and other obligations arising or accruing after the commencement of any bankruptcy, insolvency, reorganization or similar proceeding with respect to the Issuer, any Guarantor or any other Person, or which would have arisen or accrued but for the commencement of such proceeding, even if such obligation or the claim therefor is not enforceable or allowable in such proceeding). "Secured Parties" shall have the meaning assigned to such term in --------------- Recital F hereof. - --------- "Senior Secured Notes" shall have the meaning assigned to such term in -------------------- Recital A hereof. - --------- "Subordination Agreement" shall mean a subordination, nondisturbance ----------------------- and attornment agreement substantially in the form of Exhibit 1 annexed to this --------- Mortgage. "Subsidiaries" shall have the meaning assigned to such term in the ------------ Indenture. "Taking" shall mean any taking of the Mortgaged Property or any part ------ thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, general or special, or by reason of the temporary requisition of the use or occupancy of the Mortgaged Property or any part thereof, by any Governmental Authority, civil or military. "Tax Escrow Fund" shall have the meaning assigned to such term in --------------- Section 7.2 hereof. - ----------- "Tenant" shall mean any tenant, lessee, sublessee, franchisee, ------ licensee, grantee or obligee, as applicable. "UCC" shall mean the Uniform Commercial Code as in effect on the date --- hereof in the jurisdiction in which the Premises are located; provided, however, -------- ------- that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any item or portion of the Mortgaged Property is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the jurisdiction in which the Premises are located, "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. SECTION 1.2 Interpretation. In this Mortgage, unless otherwise -------------- specified, (i) singular words include the plural and plural words include the singular, (ii) words importing any gender include the other gender, (iii) references to any Person include such Person's successors and assigns and in the case of an individual, the word "successors" includes such Person's heirs, devisees, legatees, executors, administrators and personal representatives, (iv) references to any statute or other law include all applicable rules, regulations and orders adopted or made thereunder and all statutes or other laws amending, consolidating or replacing the statute or law referred to, (v) the words "consent," "approve" and "agree," and derivations thereof or words of similar import, mean the prior written consent, approval or agreement of the Person in question not to be unreasonably withheld, (vi) the words "include" and "including," and words of similar import, shall be deemed to be followed by the words "without limitation," (vii) the words "hereto," "herein," "hereof" and "hereunder," and words of similar import, refer to this Mortgage in its entirety, (viii) references to Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are to the Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses hereof, (ix) the Schedules and Exhibits to this Mortgage, in each case as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof, are incorporated herein by reference, (x) the titles and headings of Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are inserted as a matter of convenience only and shall not affect the constructions of any provisions hereof and (xi) all obligations of the Mortgagor hereunder shall be satisfied by the Mortgagor at the Mortgagor's sole cost and expense. SECTION 1.3 Resolution of Drafting Ambiguities. The Mortgagor ---------------------------------- acknowledges and agrees that it was represented by counsel in connection with the execution and delivery hereof, that it and its counsel reviewed and participated in the preparation and negotiation hereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party (i.e., Mortgagee) shall not be employed in the interpretation hereof. ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Mortgaged Property. The Mortgagor hereby --------------------------- grants, mortgages, bargains, sells, assigns and conveys to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), and hereby grants to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), a security interest in and upon all of the Mortgagor's estate, right, title and interest in, to and under the following property, whether now owned or held or hereafter acquired from time to time (collectively, the "Mortgaged --------- Property"): - -------- (i) Land; (ii) Improvements; (iii) Leases; (iv) Rents; (v) Permits; (vi) Contracts; (vii) Records; and (viii) Proceeds. Notwithstanding the foregoing provisions of this Section 2.1, ----------- Mortgaged Property shall not include a grant of any of the Mortgagor's right, title or interest in (i) any Contract to which the Mortgagor is a party or any of its rights or interests thereunder (other than (x) the right to receive any payment of money (including without limitation accounts, general intangibles and payment intangibles (each as defined in the UCC) or any other rights referred to in Sections 9-406(f), 9-407(a) or 9-408(a) of the UCC and (y) any proceeds, substitutions or replacements thereof) to the extent, but only to the extent, that such a grant would, under the terms of such Contract, result in a breach or termination of the terms of, or constitute a default under or termination of such Contract and (ii) any Permit to the extent, but only to the extent that, such grant shall constitute or result in abandonment, invalidation or rendering unenforceable any right, title or interest of the Mortgagor therein; provided, -------- however, that at such time as any Contract or Permit described in clauses (i) - ------- and (ii) of this sentence is no longer subject to such restriction, such applicable Contract or Permit shall (without any act or delivery by any Person) constitute Mortgaged Property hereunder. TO HAVE AND TO HOLD the Mortgaged Property, together with all estate, right, title and interest of the Mortgagor and anyone claiming by, through or under the Mortgagor in and to the Mortgaged Property and all rights and appurtenances relating thereto, unto the Mortgagee, its successors and assigns, for the purpose of securing the payment and performance in full of all the Secured Obligations. SECTION 2.2 Collateral Assignment and Pledge of Mortgagor's ----------------------------------------------- Interest as Additional Security. As additional collateral security for the - ------------------------------- prompt and punctual payment and satisfaction of the Secured Obligations, and all additional advances that the Mortgagee may make on the Mortgagor's behalf pursuant to this Mortgage, together with interest thereon as provided herein, the Mortgagor hereby assigns, pledges and grants to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), a continuing security interest in and to all of the Mortgagor's estate, right, title, interest, claim and demand, as Landlord, under any and all of the Leases including, without limitation, the following (such assigned rights, the "Mortgagor's Interest"): -------------------- (i) the immediate and continuing right to receive and collect Rents payable by the Tenants pursuant to the Leases; (ii) all claims, rights, powers, privileges and remedies of the Mortgagor, whether provided for in the Leases or arising by statute or at law or in equity or otherwise, consequent on any failure on the part of the Tenants to perform or comply with any term of the Leases including damages or other amounts payable to the Mortgagor as a result of such failure; (iii) all rights to take all actions upon the happening of a default under the Leases as shall be permitted by the Leases or by law including, without limitation, the commencement, conduct and consummation of proceeding at law or in equity; and (iv) the full power and authority, in the name of the Mortgagor or otherwise, to enforce, collect, receive and receipt for any and all of the foregoing and to take all other actions whatsoever which the Mortgagor, as Landlord, is or may be entitled to take under the Leases. SECTION 2.3 Secured Obligations. This Mortgage secures, and the ------------------- Mortgaged Property is collateral security for, the payment and performance in full when due of the Secured Obligations. SECTION 2.4 Mortgage Securing Future Indebtedness. This ------------------------------------- Mortgage has been executed by Mortgagor pursuant to Article 3298 of the Louisiana Civil Code for the purpose of securing the Mortgagor's indebtedness (including, without limitation, the Secured Obligations) that may now be existing or that may arise in the future as provided herein and in the Indenture, with the preferences and priorities provided under applicable Louisiana law. This Mortgage shall be further entitled to the preferences and priorities as provided under the Louisiana Private Works Act (La. R.S. 9:4801, et seq.). However, nothing under this Mortgage shall be construed as limiting the duration of this Mortgage or the purpose or purposes for which the Mortgagor's indebtedness (including, without limitation, the Secured Obligations) may be requested or extended. The Mortgagor's additional indebtedness will automatically be secured by this Mortgage without the necessity that the Mortgagor agrees or consents to such a result at the time additional indebtedness is made and that the note or notes evidencing such additional indebtedness reference the fact that such notes are secured by this Mortgage. The Mortgagor understands that the Mortgagor may not subsequently have a change of mind and insist that the Mortgagor's additional indebtedness not be secured by this Mortgage unless the Mortgagee specifically agrees to such a request in writing. SECTION 2.5 No Release. Nothing set forth in this Mortgage ---------- shall relieve the Mortgagor from the performance of any term, covenant, condition or agreement on the Mortgagor's part to be performed or observed under or in respect of any of the Mortgaged Property or from any liability to any Person under or in respect of any of the Mortgaged Property or shall impose any obligation on the Mortgagee or any other Secured Party to perform or observe any such term, covenant, condition or agreement on the Mortgagor's part to be so performed or observed or shall impose any liability on the Mortgagee or any other Secured Party for any act or omission on the part of the Mortgagor relating thereto or for any breach of any representation or warranty on the part of the Mortgagor contained in this Mortgage, the Indenture, the Notes or the Collateral Documents, or under or in respect of the Mortgaged Property or made in connection herewith or therewith. The obligations of the Mortgagor contained in this Section 2.5 shall survive the termination hereof and the discharge of ----------- the Mortgagor's other obligations under this Mortgage and the Indenture, the Notes and the Collateral Documents. ARTICLE III REPRESENTATIONS AND WARRANTIES OF MORTGAGOR SECTION 3.1 Authority and Validity. ---------------------- The Mortgagor represents and warrants that as of the date hereof: (i) it is duly organized or formed, validly existing and, if applicable, in good standing under the laws of the jurisdiction of its organization; (ii) it is duly qualified to transact business and is in good standing in the state in which the Mortgaged Property is located; (iii) it has full corporate or other organizational power and lawful authority to execute and deliver this Mortgage and to mortgage and grant a Lien on and security interest in the Mortgaged Property and otherwise assign the Mortgagor's Interest and otherwise perform its obligations as contemplated herein, and all corporate and governmental actions, consents, authorizations and approvals necessary or required therefor have been duly and effectively taken or obtained; and (iv) this Mortgage is a legal, valid and binding obligation of the Mortgagor, enforceable against the Mortgagor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. SECTION 3.2 Warranty of Title. The Mortgagor represents and ----------------- warrants that: (i) it has good fee simple title to the Premises and the Landlord's interest and estate under or in respect of the Leases and good title to the interest it purports to own or hold in and to each of the Permits, the Contracts and the Records, in each case subject to no Liens, except for Permitted Collateral Liens; (ii) it has good title to the interest it purports to own or hold in and to all rights and appurtenances to or that constitute a portion of the Mortgaged Property, except for Permitted Collateral Liens; (iii) it is in compliance with each term, condition and provision of any obligation of the Mortgagor which is secured by the Mortgaged Property or the noncompliance with which would result in a Property Material Adverse Effect; and (iv) this Mortgage creates and constitutes a valid and enforceable first priority Lien on the Mortgaged Property subject to Permitted Collateral Liens, and, to the extent any of the Mortgaged Property shall consist of Fixtures, a first priority security interest in the Fixtures, which first priority Lien and first priority security interest are subject only to Permitted Collateral Liens. SECTION 3.3 Condition of Mortgaged Property. The Mortgagor ------------------------------- represents and warrants that: (i) there has been issued and there remains in full force and effect subject to no revocation, suspension, forfeiture or modification, each and every Permit necessary for the present use, operation and occupancy of the Premises by the Mortgagor and its Tenants and the conduct of their respective businesses and all required zoning, building code, land use, environmental and other similar Permits, except where the failure to be so issued and to be in full force and effect would not result in a Property Material Adverse Effect; (ii) the Premises and the present and contemplated use and occupancy thereof comply with all applicable zoning ordinances, building codes, land use laws, set back or other development and/or use requirements of Governmental Authorities except where such noncompliance would not result in a Property Material Adverse Effect; (iii) the Premises are served by all utilities (including, without limitation, water and sewer systems) necessary for the present use thereof, and all utility services are provided by public or private utilities and the Premises have accepted or are equipped to accept such utility services and the Mortgagor has not received notice of termination of such utility service, except where the failure to be so served would not result in a Property Material Adverse Effect; (iv) the Mortgagor has access to the Premises from roads sufficient to allow the Mortgagor and its Tenants and invitees to conduct their respective businesses at the Premises in accordance with sound commercial practices and the Mortgagor has not received notice of termination of such access, except where the failure to have such access would not result in a Property Material Adverse Effect; (v) the Mortgagor has not received notice of any Taking or the commencement or pendency of any action or proceeding therefor, other than such Takings as would not result in a Property Material Adverse Effect; (vi) there has not occurred any Destruction of the Premises or any portion thereof as a result of any fire or other casualty that, as of the date hereof, has not been repaired in all material respects, other than such Destruction as would not have a Property Material Adverse Effect; (vii) there are no disputes regarding boundary lines, location, encroachments or possession of any portions of the Mortgaged Property and no state of facts exists which could give rise to any such claim other than such disputes as would not result in a Property Material Adverse Effect; (viii) all liquid and solid waste disposal, septic and sewer systems located on the Premises are in a good and safe condition and repair and in compliance with all Requirements of Law, except where the failure to so comply would not result in a Property Material Adverse Effect; (ix) no portion of the Premises is located in an area identified by the Federal Emergency Management Agency or any successor thereto as an area having special flood hazards pursuant to the Flood Insurance Acts or, if any portion of the Premises is located within such area, the Mortgagor has obtained the insurance prescribed in Article VIII hereof; (x) the Premises are assessed for real estate tax purposes as one or more wholly independent tax lot or lots, separate from any adjoining land or improvements not constituting a portion of such lot or lots, and no other land or improvements are assessed and taxed together with the Premises or any portion thereof, other than such cases where the failure to be so assessed would not result in a Property Material Adverse Effect; and (xi) there are no options or rights of first refusal to purchase or acquire all or any portion of the Mortgaged Property, other than such options or rights of first refusal as would not result in a Property Material Adverse Effect. SECTION 3.4 Leases. The Mortgagor represents and warrants that ------ as of the date hereof: (i) the Leases identified in Schedule C attached hereto are the only Leases in existence on the date hereof relating to the Premises; (ii) true copies of such Leases have been previously delivered to the Mortgagee and there are no agreements with any Tenant under such Leases other than those agreements expressly set forth therein; (iii) the Mortgagor is the sole owner of all of the Mortgagor's Interest in such Leases; (iv) each of such Leases is in full force and effect, constitutes a legal, valid and binding obligation of the Mortgagor and the applicable Tenant thereunder, and is enforceable against the Mortgagor and such Tenant in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability; (v) there is no default under any of such Leases and there is existing no condition which with the giving of notice or passage of time or both would cause a default thereunder; (vi) all Rents due under such Leases have been paid in full; (vii) none of the Rents reserved under such Leases have been assigned or otherwise pledged or hypothecated except in favor of the Mortgagee pursuant to the provisions hereof; (viii) none of the Rents (other than any security deposit collected in accordance with the provisions of the applicable Lease) have been collected for more than one (1) month in advance; (ix) there exists no offsets or defenses to the payment of any portion of the Rents and the Mortgagor owes no monetary obligation to any Tenant under any such Lease; (x) the Mortgagor has received no notice from any Tenant challenging the validity or enforceability of any such Lease; (xi) no such Lease contains any option to purchase, right of first refusal to purchase, right of first refusal to relet, or any other similar provision; and (xii) each such Lease is subordinate to this Mortgage either pursuant to its terms or pursuant to a recordable Subordination Agreement. SECTION 3.5 Insurance. The Mortgagor represents and warrants --------- that, except where the failure of clauses (i), (ii) or (iii) hereof to be true would not have a Property Material Adverse Effect, (i) the Premises and the use, occupancy and operation thereof comply with all Insurance Requirements and there exists no default under any Insurance Requirement, (ii) all premiums due and payable with respect to the Insurance Policies have been paid, (iii) all Insurance Policies are in full force and effect and the Mortgagor has not received notice of violation or cancellation thereof and (iv) all insurance certificates required pursuant to the Indenture have been delivered to the Mortgagee. SECTION 3.6 Charges. The Mortgagor represents and warrants that ------- all Charges imposed upon or assessed against the Mortgaged Property have been paid and discharged except to the extent such Charges constitute a Lien not yet due and payable or to the extent such Charges are being contested in accordance with Section 9.1 hereof. ----------- SECTION 3.7 Environmental. The Mortgagor represents and ------------- warrants that: (i) it has obtained all Permits which are necessary with respect to the ownership and operation of its business and the Mortgaged Property under any and all applicable Environmental Laws and is in compliance with all terms and conditions thereof, except where the failure so to obtain or to be in compliance would not result in a Property Material Adverse Effect; (ii) it is in compliance with any and all applicable Environmental Laws including, without limitation, all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws, except where the failure so to be in compliance would not result in a Property Material Adverse Effect; (iii) there is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice of demand letter pending or threatened against it or any Affiliate under the Environmental Laws which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect; and (iv) there are no past or present events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance with the Environmental Laws, or which may give rise to any common law or legal liability including, without limitation, liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any other Environmental Law or related common law theory or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing or notice of violation, study or investigation, based on or related to the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Materials which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect . SECTION 3.8 No Conflicts, Consents, etc. Neither the execution --------------------------- and delivery hereof by the Mortgagor nor the consummation of the transactions herein contemplated nor the fulfillment of the terms hereof (i) violates the terms of any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or other document to which the Mortgagor is a party, or by which it may be bound or to which any of its properties or assets may be subject, (ii) conflicts with any Requirement of Law applicable to the Mortgagor or its property or (iii) results in or requires the creation or imposition of any Lien (other than the Lien contemplated hereby) upon or with respect to any of the Mortgaged Property, except where such violation, conflict, creation or imposition would not have a Property Material Adverse Effect. No consent of any party (including, without limitation, equityholders or creditors of the Mortgagor) and no consent, authorization, approval, license or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person (other than with respect to any required Permits) is required for (i) the granting of a mortgage Lien on and security interest in the Mortgaged Property by the Mortgagor granted by it pursuant to this Mortgage or for the execution, delivery or performance hereof by the Mortgagor except for the filing of this Mortgage and the other filings contemplated hereby or (ii) the exercise by the Mortgagee of the remedies in respect of the Mortgaged Property pursuant to this Mortgage other than those required by law in connection with the exercise of the applicable remedy. SECTION 3.9 Benefit to the Mortgagor. The Mortgagor represents ------------------------ and warrants that it will receive substantial benefit as a result of the execution, delivery, and performance of the Indenture, the Notes and the Collateral Documents. ARTICLE IV CERTAIN COVENANTS OF MORTGAGOR SECTION 4.1 Preservation of Corporate Existence. The Mortgagor ----------------------------------- shall: (i) preserve and maintain in full force and effect its existence and good standing under the laws of the jurisdiction of its organization; (ii) preserve and maintain in full force and effect its qualification to transact business and good standing in the state in which the Mortgaged Property is located; and (iii) preserve and maintain in full force and effect all consents, authorizations and approvals necessary or required of any Governmental Authority or any other Person relating to the execution, delivery and performance hereof, except where the failure to do so would not result in a Property Material Adverse Effect. SECTION 4.2 Title. The Mortgagor shall: ----- (i) (A) keep in effect all material rights and appurtenances to or that constitute a part of the Mortgaged Property and (B) protect, preserve and defend its interest in the Mortgaged Property and title thereto, except against Permitted Collateral Liens (other than the Lien created by this Mortgage); (ii) (A) comply, in all material respects, with each of the terms, conditions and provisions of any obligation of the Mortgagor which is secured by the Mortgaged Property, except where the failure to so comply would not result in a Property Material Adverse Effect, or the non-compliance with which may result in the imposition of a Lien on the Mortgaged Property, (B) forever warrant and defend to the Mortgagee the Lien and security interests created and evidenced hereby and the validity and priority hereof in any action or proceeding against the claims of any and all Persons whomsoever affecting or purporting to affect the Mortgaged Property or any of the rights of the Mortgagee hereunder, except against Permitted Collateral Liens (other than the Lien of this Mortgage), and (C) maintain a valid and enforceable first priority Lien, except for Permitted Collateral Liens (other than the Lien of this Mortgage) on the Mortgaged Property and, to the extent any of the Mortgaged Property shall consist of Fixtures, a first priority security interest in the Mortgaged Property, which first priority Lien and security interest shall be subject only to Permitted Collateral Liens; and (iii) immediately upon obtaining knowledge of the pendency of any proceedings for the eviction of the Mortgagor from the Mortgaged Property or any part thereof by paramount title or otherwise questioning the Mortgagor's right, title and interest in, to and under the Mortgaged Property as warranted in this Mortgage, or of any condition that could give rise to any such proceedings, notify the Mortgagee thereof. The Mortgagee may participate in such proceedings and the Mortgagor will deliver or cause to be delivered to the Mortgagee all instruments requested by the Mortgagee to permit such participation. In any such proceedings, the Mortgagee may be represented by counsel reasonably satisfactory to the Mortgagee at the reasonable expense of the Mortgagor. If, upon the resolution of such proceedings, the Mortgagor shall suffer a loss of the Mortgaged Property or any part thereof or interest therein and title insurance proceeds shall be payable in connection therewith, such proceeds are hereby assigned to and shall be paid to the Mortgagee for deposit into the Collateral Account and shall be applied in the manner applicable to Net Loss Proceeds in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) of the Indenture. SECTION 4.3 Maintenance and Use of Mortgaged Property; ------------------------------------------ Alterations. - ----------- (i) Maintenance. The Mortgagor shall cause the ----------- representations and warranties set forth in Section 3.3 hereof to continue to be ----------- true in each and every respect and shall pay or cause to be paid when due all Charges, costs and expenses relating thereto, other than such Charges being contested in accordance with Section 9.1 hereof. ----------- (ii) Maintenance of Premises. The Mortgagor shall not commit ----------------------- or suffer any waste on the Premises. The Mortgagor shall, at all times, maintain the Premises in good working order, condition and repair, reasonable wear and tear excepted, and shall use commercially reasonable efforts to make or cause to be made all repairs, structural or nonstructural, which are necessary or appropriate in the conduct of the Mortgagor's business. The Mortgagor shall not, except as permitted in Section 4.3(iii) hereof, alter the occupancy or use of ---------------- all or any portion of the Premises without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. Except to the extent permitted pursuant to the provisions of Section 4.3(iii) hereof, the ---------------- Mortgagor shall not remove, demolish or alter the structural character of any Improvement now or hereafter erected upon all or any portion of the Premises, or permit any such removal, demolition or alteration, without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. (iii) Alterations. The Mortgagor shall not, without the prior ----------- written consent of the Mortgagee, which consent shall not be unreasonably withheld, make any Alteration to the Premises except as permitted by Sections 10.04 and 10.06 of the Indenture. Whether or not the making of any Alteration shall require the consent of the Mortgagee pursuant to the immediately preceding sentence, the Mortgagor shall (A) complete each Alteration promptly, in a good and workmanlike manner and in compliance, in all material respects, with all applicable local laws, ordinances and requirements and (B) pay when due all claims for labor performed and materials furnished in connection with such Alteration, unless contested in accordance with the provisions of Article IX ---------- hereof. (iv) Permits. The Mortgagor shall maintain, or cause to be ------- maintained, in full force and effect all Permits contemplated by and subject to Section 3.3(i) hereof. Unless and to the extent contested by the Mortgagor in - -------------- accordance with the provisions of Article IX hereof, the Mortgagor shall comply, ---------- in all material respects, with all requirements set forth in the Permits and all Requirements of Law applicable to all or any portion of the Mortgaged Property or the condition, use or occupancy of all or any portion thereof or any recorded deed of restriction, declaration, covenant running with the land or otherwise, now or hereafter in force, subject to the provisions of Section ------- 3.3 hereof. - --- (v) Zoning. The Mortgagor shall not initiate, join in, or ------ consent to any change in the zoning or any other permitted use classification of the Premises without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. SECTION 4.4 Notices Regarding Certain Defaults. The Mortgagor ---------------------------------- shall, promptly upon receipt of any written notice regarding (i) any default by the Mortgagor relating to the Mortgaged Property or any portion thereof or (ii) the failure to discharge any of Mortgagor's obligations with respect to the Mortgaged Property or any portion thereof described herein, furnish a copy of such notice to the Mortgagee. SECTION 4.5 Access to Mortgaged Property, Books and Records; ------------------------------------------------ Other Information. Upon request to the Mortgagor, the Mortgagee, its agents, - ----------------- accountants and attorneys shall have full and free access to visit and inspect, as applicable, during normal business hours and such other reasonable time as may be requested by the Mortgagee to all of the Mortgaged Property including, without limitation, all of the books, correspondence and records of the Mortgagor relating thereto. The Mortgagee and its representatives may examine the same, take extracts therefrom and make photocopies thereof. The Mortgagor shall, at any and all times, within a reasonable time after written request by the Mortgagee, furnish or cause to be furnished to the Mortgagee, in such manner and in such detail as may be reasonably requested by the Mortgagee, additional information with respect to the Mortgaged Property. SECTION 4.6 Limitation on Liens; Transfer Restrictions. The ------------------------------------------ Mortgagor may not, without the prior written consent of the Mortgagee, further mortgage, encumber, hypothecate, sell, convey or assign all or any part of the Mortgaged Property or suffer or allow any of the foregoing to occur by operation of law or otherwise; provided, however, that the Mortgagor shall have the right -------- ------- to (1) sell, convey or assign all or any portion of the Mortgaged Property in accordance with the provisions of the Indenture and (2) suffer to exist the following Liens in respect of the Mortgaged Property: (i) Prior Liens (but not extensions, amendments, supplements or replacements of Prior Liens unless (A) extended, amended, supplemented or replaced in a manner permitted by the Indenture or (B) consented to by the Mortgagee which consent shall not be unreasonably withheld), (ii) the Lien and security interest created by this Mortgage or any other Collateral Document, (iii) Contested Liens, (iv) Liens described in clause (9) of the definition of Permitted Liens (provided, however, -------- ------- that such Liens shall not extend to or cover any Mortgaged Property other than equipment subject to Capital Leases, Obligations or Purchase Money Obligations incurred in accordance with the provisions of the Indenture) or clause (4) of the definition of Permitted Liens, and (v) Leases to the extent permitted pursuant to the provisions of Article V hereof (the Liens described in clauses --------- (i) through (v) of this sentence, collectively, "Permitted Collateral Liens"). -------------------------- SECTION 4.7 Environmental. ------------- (i) Hazardous Materials. The Mortgagor shall (A) comply with ------------------- any and all present and future Environmental Laws applicable to the Mortgaged Property, (B) not release, store, treat, handle, generate, discharge or dispose of any Hazardous Materials at, on, under or from the Mortgaged Property in violation of or in a manner that could result in any material liability under any present and future Environmental Law and (C) take all necessary steps to initiate and expeditiously complete all remedial, corrective and other action to eliminate any such effect. In the event the Mortgagor fails to comply with the covenants in the preceding sentence, the Mortgagee may, in addition to any other remedies set forth herein, as agent for the Mortgagor and at the Mortgagor's sole cost and expense, cause any remediation, removal or response action relating to Hazardous Materials required by applicable Environmental Laws to be taken and the Mortgagor shall provide to the Mortgagee and its agents and employees access to the Mortgaged Property for such purpose. Any reasonable costs or expenses incurred by the Mortgagee for such purpose shall be immediately due and payable by the Mortgagor and shall bear interest at the Default Rate. The Mortgagee shall have the right at any time when an Event of Default shall have occurred and be continuing and at such other times when a potential violation of any present or future Environmental Law exists which in the Mortgagee's reasonable judgment could result in any material liability or obligation under such Environmental Law, at the sole cost and expense of the Mortgagor, to conduct an environmental audit of the Mortgaged Property by such persons or firms appointed by the Mortgagee, and the Mortgagor shall cooperate in all respects in the conduct of such environmental audit, including, without limitation, by providing access to the Mortgaged Property and to all records relating thereto. To the extent that any such environmental audit identifies conditions which in the Mortgagee's reasonable judgment would result in any material liability or obligation under any present or future Environmental Law, the Mortgagor agrees to expeditiously correct any such violation or respond to conditions giving rise to such liability or obligations in a manner which complies in all material respects with the Environmental Laws and mitigates associated health and environmental risks. The Mortgagor shall indemnify and hold the Mortgagee and each of the other Secured Parties harmless from and against all loss, cost, damage or reasonable expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Mortgagee or any other Secured Party may sustain by reason of the assertion against the Mortgagee or any Secured Party by any party of any claim relating to such Hazardous Materials on, under or from the Mortgaged Property or actions taken with respect thereto as authorized hereunder, except to the extent arising from the gross negligence or willful misconduct of the Mortgagee or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof; and (ii) Asbestos. The Mortgagor shall not install nor permit to be -------- installed in or removed from the Mortgaged Property, asbestos or any asbestos-containing material (collectively, "ACM") except in compliance, in all --- material respects, with all applicable Environmental Laws, and with respect to any ACM currently present in the Mortgaged Property, the Mortgagor shall promptly either (A) remove any ACM which such Environmental Laws require to be removed or (B) otherwise comply, in all material respects, with such Environmental Laws with respect to such ACM, all at the Mortgagor's sole cost and expense. If the Mortgagor shall fail so to remove any ACM or otherwise comply, in all material respects, with such laws or regulations, the Mortgagee may, in addition to any other remedies set forth herein, take reasonable or necessary steps to eliminate any ACM from the Mortgaged Property or otherwise comply, in all material respects, with applicable law, regulations or orders and the Mortgagor shall provide to the Mortgagee and its agents and employees access to the Mortgaged Property for such purpose. Any reasonable costs or expenses incurred by the Mortgagee for such purpose shall be immediately due and payable by the Mortgagor and bear interest at the Default Rate. The Mortgagor shall indemnify and hold the Mortgagee and the other Secured Parties harmless from and against all loss, cost, damage and expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Mortgagee or the other Secured Parties may sustain, as a result of the presence of any ACM and any removal thereof or compliance with all applicable Environmental Laws, except to the extent arising from the gross negligence or willful misconduct of the Mortgagee or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof. SECTION 4.8 Estoppel Certificates. The Mortgagor shall, from --------------------- time to time, upon thirty (30) days' prior written reasonable request of the Mortgagee, execute, acknowledge and deliver to the Mortgagee an Officers' Certificate stating that this Mortgage, the Indenture, the Notes and the Collateral Documents are unmodified and in full force and effect (or, if there have been modifications, that this Mortgage, the Indenture, the Notes and the Collateral Documents, as applicable, is or are in full force and effect as modified and setting forth such modifications) and stating the date to which principal and interest have been paid on the Notes. ARTICLE V LEASES SECTION 5.1 Mortgagor's Affirmative Covenants with Respect to ------------------------------------------------- Leases. With respect to each Lease, the Mortgagor shall: - ------ (i) observe and perform, in all material respects, all the obligations imposed upon the Landlord under such Lease; (ii) promptly send copies to the Mortgagee of all notices of default which the Mortgagor shall send or receive thereunder; and (iii) enforce all of the terms, covenants and conditions contained in such Lease upon the part of the Tenant thereunder to be observed or performed to the extent it would be commercially reasonable to do so. SECTION 5.2 Mortgagor's Negative Covenants with Respect to ---------------------------------------------- Leases. With respect to each Lease, the Mortgagor shall not, without the prior - ------ written consent of the Mortgagee, which consent shall not be unreasonably withheld: (i) receive or collect, or permit the receipt or collection of, any Rent under such Lease more than one (1) month in advance of the respective period in respect of which such Rent is to accrue, except: (A) in connection with the execution and delivery of such Lease (or of any amendment to such Lease), Rent thereunder may be collected and received in advance in an amount not in excess of one (1) month's Rent; (B) the amount held by Landlord as a reasonable security deposit thereunder; and (C) any amount received and collected for escalation and other charges in accordance with the terms of such Lease; (ii) assign, transfer or hypothecate (other than to the Mortgagee hereunder) any Rent under such Lease whether then due or to accrue in the future or the interest of the Mortgagor as Landlord under such Lease; (iii) enter into any amendment or modification of such Lease which would materially decrease the unexpired term thereof or decrease the amount of the Rents payable thereunder or materially impair the value or utility of the Mortgaged Property or the security provided by this Mortgage; (iv) terminate (whether by exercising any contractual right of the Mortgagor to recapture leased space or otherwise) or permit the termination of such Lease or accept surrender of all or any portion of the space demised under such Lease prior to the end of the term thereof or accept assignment of such Lease to the Mortgagor unless: (A) the Tenant under such Lease has not paid the equivalent of two (2) months' Rent and the Mortgagor has made reasonable efforts to collect such Rent; and (B) it would be commercially reasonable to terminate such Lease; or (v) waive, excuse, condone or in any manner discharge or release any Tenants of or from the material obligations of such Tenants under their respective Leases or guarantors of Tenants from any material obligations under any guarantees of the Leases except as the same would be done by a Prudent Operator with due regard for the security afforded the Mortgagee thereby. SECTION 5.3 Additional Requirements with Respect to New Leases. -------------------------------------------------- In addition to the requirements of Sections 5.1 and 5.2 hereof, the Mortgagor ------------ --- shall not enter into any Lease after the date hereof unless the Tenant under such Lease has entered into a Subordination Agreement and has otherwise complied with the provisions of Section 10.06 of the Indenture. ------------- ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Mortgagor. -------------------------------------------- Section 2.2 of this Mortgage constitutes a present, absolute, effective, irrevocable and complete assignment by the Mortgagor to the Mortgagee of the Leases and Rents and the right, subject to applicable law, to collect all sums payable to the Mortgagor thereunder and apply the same as the Mortgagee may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Mortgaged Property), which is not conditioned upon the Mortgagee being in possession of the Premises. The Mortgagee hereby grants to the Mortgagor, however, a license to collect and apply the Rents and to enforce the obligations of Tenants under the Leases. Immediately upon the occurrence of and during the continuance of any Event of Default or a Default, the license granted in the immediately preceding sentence shall cease and terminate, with or without any notice, action or proceeding or the intervention of a receiver appointed by a court. SECTION 6.2 Collection of Rents by the Mortgagee. ------------------------------------ (i) From and after the occurrence and during the continuance of an Event of Default or a Default, any Rents receivable by the Mortgagee hereunder, after payment of all proper costs and expenses as Mortgagee may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Mortgaged Property), shall be applied to the Secured Obligations or, at the option of the Mortgagee, shall be held by the Mortgagee as additional collateral to secure the performance by the Mortgagor of the Secured Obligations. The Mortgagee shall be accountable to the Mortgagor only for Rents actually received by the Mortgagee. The collection of such Rents and the application thereof shall not cure or waive any Event of Default or a Default or waive, modify or affect notice of Event of Default or a Default or invalidate any act done pursuant to such notice. (ii) The Mortgagor hereby irrevocably authorizes and directs Tenant under each Lease to rely upon and comply with any and all notices or demands from the Mortgagee for payment of Rents to the Mortgagee and the Mortgagor shall have no claim against Tenant for Rents paid by Tenant to the Mortgagee pursuant to such notice or demand. SECTION 6.3 No Release. Neither this Mortgage nor any action or ---------- inaction on the part of the Mortgagee shall release any Tenant under any Lease, any guarantor of any Lease or the Mortgagor from any of their respective obligations under such Leases or constitute an assumption of any such obligation on the part of the Mortgagee. No action or failure to act on the part of the Mortgagor shall adversely affect or limit the rights of the Mortgagee under this Mortgage or, through this Mortgage, under such Leases. Nothing contained herein shall operate or be construed to (i) obligate the Mortgagee to perform any of the terms, covenants or conditions contained in any Lease or otherwise to impose any obligation upon the Mortgagee with respect to such Lease (including, without limitation, any obligation arising out of any covenant of quiet enjoyment contained in such Lease in the event that Tenant under such Lease shall have been joined as a party defendant in any action by which the estate of such Tenant shall be terminated) or (ii) place upon the Mortgagee any obligation for the operation, control, care, management or repair of the Premises. SECTION 6.4 Irrevocable Interest. All rights, powers and -------------------- privileges of the Mortgagee herein set forth are coupled with an interest and are irrevocable, subject to the terms and conditions hereof, and the Mortgagor shall not take any action under the Leases or otherwise which is inconsistent with this Mortgage or any of the terms hereof and any such action inconsistent herewith or therewith shall be void. SECTION 6.5 Amendment to Leases. Each Lease, including, without ------------------- limitation, all amendments, modifications, supplements, replacements, extensions and renewals thereof, shall continue to be subject to the provisions hereof without the necessity of any further act by any of the parties hereto. ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges. Unless and to the extent ------------------ contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall pay and discharge, or cause to be paid and discharged, from time to time when the same shall become due (or within any applicable grace period) , all Charges subject to this Article VII. The ----------- Mortgagor shall, upon the Mortgagee's request, deliver to the Mortgagee receipts evidencing the payment of all such Charges. SECTION 7.2 Escrow of Taxes. From and after the occurrence and --------------- during the continuance of an Event of Default or a Default, at the option and upon the request of the Mortgagee, the Mortgagor shall deposit with the Mortgagee in an account maintained by the Mortgagee (the "Tax Escrow Fund"), on --------------- the first day of each month, an amount estimated by the Mortgagee to be equal to one-twelfth of the annual real property taxes and other annual Charges required to be discharged by the Mortgagor under Section 7.1 hereof. Such amounts shall ----------- be held by the Mortgagee without interest to the Mortgagor and applied to the payment of the obligations in respect of which such amounts were deposited, in such priority as the Mortgagee shall determine, on or before the respective dates on which such obligations or any part thereof would become delinquent. Nothing contained in this Article VII shall (i) affect any right or remedy of ----------- the Mortgagee under any provision hereof or of any statute or rule of law to pay any such amount as provided above from its own funds and to add the amount so paid, together with interest at the Default Rate during such time that any amount remains outstanding, to the Secured Obligations or (ii) relieve the Mortgagor of its obligations to make or provide for the payment of the annual real property taxes and other annual Charges required to be discharged by the Mortgagor under Section 7.1 hereof. ----------- SECTION 7.3 Certain Statutory Liens. Unless and to the extent ----------------------- contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall timely pay, or cause to be paid, all lawful claims and demands of mechanics, materialmen, laborers, government agencies administering worker's compensation insurance, old age pensions and social security benefits and all other claims, judgments, demands or amounts of any nature which, if unpaid, would result in, or permit the creation of, a Lien on the Mortgaged Property or any part thereof, or which would result in forfeiture of all or any part of the Mortgaged Property. SECTION 7.4 Stamp and Other Taxes. Unless and to the extent --------------------- contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall pay any United States documentary stamp taxes, with interest and fines and penalties, and any mortgage recording taxes, with interest and fines and penalties, that may hereafter be levied, imposed or assessed under or upon or by reason hereof or the Secured Obligations or any instrument or transaction affecting or relating to either thereof and in default thereof the Mortgagee may advance the same and the amount so advanced shall be payable by the Mortgagor to the Mortgagee in accordance with the provisions of Section 14.5 hereof. - ------------ SECTION 7.5 Certain Tax Law Changes. In the event of the ----------------------- passage after the date hereof of any law deducting from the value of real property, for the purpose of taxation, amounts in respect of any Lien thereon or changing in any way the laws for the taxation of mortgages or debts secured by mortgages for state or local purposes or the manner of the collection of any Charges, and imposing any Charges, either directly or indirectly, on this Mortgage, the Indenture or any other Collateral Document, the Mortgagor shall promptly pay to the Mortgagee such amount or amounts as may be necessary from time to time to pay any such Charges. SECTION 7.6 Proceeds of Tax Claim. In the event that the --------------------- proceeds of any tax claim are paid after the Mortgagee has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Mortgagee to satisfy any deficiency remaining after such foreclosure. The Mortgagee shall retain its interest in the proceeds of any tax claim during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Mortgagee shall in a prompt manner be released to the Mortgagor. ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages. The ----------------------------------------- Mortgagor shall maintain in respect of the Premises the insurance policies and coverages required under Section 4.19(b) of the Indenture. SECTION 8.2 Delivery After Foreclosure. In the event that the -------------------------- proceeds of any insurance claim are paid after the Mortgagee has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Mortgagee to satisfy any deficiency remaining after such foreclosure. Mortgagee shall retain its interest in the Insurance Policies required to be maintained pursuant to this Mortgage during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Mortgagee shall be released to the Mortgagor. ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens. ----------------------------------------------- The Mortgagor may at its own expense contest the validity, amount or applicability of any Charges as long as the contest thereof shall be conducted in accordance with, and permitted pursuant to the provisions of, the Indenture. Notwithstanding the foregoing provisions of this Section 9.1, (i) no contest of ----------- any such obligations may be pursued by the Mortgagor (A) if such contest would expose the Mortgagee or any Holder to any possible criminal liability or (B) unless the Mortgagor shall have furnished a bond or other security therefor reasonably satisfactory to the Mortgagee or such Holder, as the case may be, any additional civil liability for failure to comply with such obligations and (ii) if at any time payment or performance of any obligation contested by the Mortgagor pursuant to this Section 9.1 shall become necessary to prevent the ----------- imminent imposition of remedies because of non-payment, the Mortgagor shall pay or perform the same in sufficient time to prevent the imposition of remedies in respect of such default or prospective default. SECTION 9.2 Contesting of Insurance. The Mortgagor shall not ----------------------- take any action that would reasonably be expected to cause the termination, revocation or denial of any insurance coverage required to be maintained under this Mortgage or that would be the basis for a defense to any claim under any Insurance Policy maintained in respect of the Premises and the Mortgagor shall otherwise comply in all respects with all Insurance Requirements in respect of the Premises; provided, however, that the Mortgagor may, at its own expense and -------- ------- after written notice to the Mortgagee, (i) contest the applicability or enforceability of any such Insurance Requirements by appropriate legal proceedings, prosecution of which does not constitute a basis for cancellation or revocation of any insurance coverage required under Article VIII hereof or ------------ (ii) cause the Insurance Policy containing any such Insurance Requirement to be replaced by a new policy complying with the provisions of Article VIII hereof. ------------ ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction. If there shall occur any Destruction, ----------- individually or in the aggregate, in excess of $100,000, the Mortgagor shall promptly send to the Mortgagee a written notice setting forth the nature and extent of such Destruction. The proceeds of any insurance payable in respect of such Destruction are hereby assigned and shall be paid to the Mortgagee. The Net Loss Proceeds arising out of such Destruction, shall be applied in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) the Indenture. SECTION 10.2 Condemnation. If there shall occur any Taking or ------------ the commencement of any proceeding thereof, the Mortgagor shall immediately notify the Mortgagee upon receiving notice of such Taking or commencement of proceedings therefor. The Mortgagee may, at its option, participate in any proceedings or negotiations which might result in any Taking, and the Mortgagor shall deliver or cause to be delivered to the Mortgagee all instruments requested by it to permit such participation. The Mortgagee may be represented by counsel reasonably satisfactory to it at the reasonable expense of the Mortgagor in connection with any such participation. The Mortgagor shall pay all reasonable fees, costs and expenses incurred by the Mortgagee in connection with any Taking and in seeking and obtaining any award or payment on account thereof. Any proceeds, award or payment in respect of any Taking are hereby assigned and shall be paid to the Mortgagee. The Mortgagor shall take all steps necessary to notify the condemning authority of such assignment. The Net Loss Proceeds arising out of such Taking shall be applied in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) the Indenture. ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default. It shall be an Event of Default ----------------- hereunder if there shall have occurred and be continuing an Event of Default under the Indenture. SECTION 11.2 Remedies in Case of an Event of Default. If any --------------------------------------- Event of Default shall have occurred and be continuing, the Mortgagee may at its option, in addition to any other action permitted under this Mortgage or the Indenture or by law, statute or in equity, take one or more of the following actions to the greatest extent permitted by local law: (i) by written notice to the Issuer and the Mortgagor, declare the entire unpaid amount of the Secured Obligations to be due and payable immediately; (ii) personally, or by its agents or attorneys, (A) enter into and upon and take possession of all or any part of the Premises together with the books, records and accounts of the Mortgagor relating thereto and, exclude the Mortgagor, its agents and servants wholly therefrom, (B) use, operate, manage and control the Premises and conduct the business thereof, (C) maintain and restore the Premises, (D) make all necessary or proper repairs, renewals and replacements and such useful Alterations thereto and thereon as the Mortgagee may deem advisable, (E) manage, lease and operate the Premises and carry on the business thereof and exercise all rights and powers of the Mort gagor with respect thereto either in the name of the Mortgagor or otherwise or (F) collect and receive all Rents. The Mortgagee shall be under no liability for or by reason of any such taking of possession, entry, removal or holding, operation or management except that any amounts so received by the Mortgagee shall be applied in accordance with the provisions of the Indenture; (iii) with or without entry, personally or by its agents or attorneys, (A) sell the Mortgaged Property and all estate, right, title and interest, claim and demand therein at one or more sales in one or more parcels, in accordance with the provisions of Section 11.3 or (B) ------------ institute and prosecute proceedings for the complete or partial foreclosure of the Lien and security interests created and evidenced hereby; or (iv) take such steps to protect and enforce its rights whether by action, suit or proceeding at law or in equity for the specific performance of any covenant, condition or agreement in the Indenture, the Notes and the Collateral Documents, or in aid of the execution of any power granted in this Mortgage, or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy or otherwise as the Mortgagee shall elect. SECTION 11.3 Sale of Mortgaged Property if Event of Default ---------------------------------------------- Occurs; Proceeds of Sale. - ------------------------ (i) If any Event of Default shall have occurred and be continuing, the Mortgagee may institute an action to foreclose this Mortgage or take such other action as may be permitted and available to the Mortgagee at law or in equity for the enforcement of the Indenture and the Notes and realization on the Mortgaged Property and proceeds thereon through power of sale or to final judgment and execution thereof for the Secured Obligations, and in furtherance thereof the Mortgagee may sell the Mortgaged Property at one or more sales, as an entirety or in parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law or statute or in equity. The Mortgagee may execute and deliver to the purchaser at such sale a conveyance of the Mortgaged Property in fee simple and an assignment or conveyance of all the Mortgagor's Interest in the Leases and the Mortgaged Property, each of which conveyances and assignments shall contain recitals as to the Event of Default upon which the execution of the power of sale herein granted depends, and the Mortgagor hereby constitutes and appoints the Mortgagee the true and lawful attorney in fact of the Mortgagor to make any such recitals, sale, assignment and conveyance, and all of the acts of the Mortgagee as such attorney in fact are hereby ratified and confirmed. The Mortgagor agrees that such recitals shall be binding and conclusive upon the Mortgagor and that any assignment or conveyance to be made by the Mortgagee shall divest the Mortgagor of all right, title, interest, equity and right of redemption, including any statutory redemption, in and to the Mortgaged Property. The power and agency hereby granted are coupled with an interest and are irrevocable by death or dissolution, or otherwise, and are in addition to any and all other remedies which the Mortgagee may have hereunder, at law or in equity. So long as the Secured Obligations, or any part thereof, remain unpaid, the Mortgagor agrees that possession of the Mortgaged Property by the Mortgagor, or any person claiming under the Mortgagor, shall be as tenant, and, in case of a sale under power or upon foreclosure as provided in this Mortgage, the Mortgagor and any person in possession under the Mortgagor, as to whose interest such sale was not made subject, shall, at the option of the purchaser at such sale, then become and be tenants holding over, and shall forthwith deliver possession to such purchaser, or be summarily dispossessed in accordance with the laws applicable to tenants holding over. In case of any sale under this Mortgage by virtue of the exercise of the powers herein granted, or pursuant to any order in any judicial proceeding or otherwise, the Mortgaged Property may be sold as an entirety or in separate parcels in such manner or order as the Mortgagee in its sole discretion may elect. One or more exercises of powers herein granted shall not extinguish or exhaust such powers, until the entire Mortgaged Property is sold or all amounts secured hereby are paid in full. (ii) In the event of any sale made under or by virtue of this Article XI, the entire principal of, and interest in respect of the Secured - ---------- Obligations, if not previously due and payable, shall, at the option of the Mortgagee, immediately become due and payable, anything in this Mortgage to the contrary notwithstanding. (iii) The proceeds of any sale made under or by virtue of this Article XI, together with any other sums which then may be held by the Mortgagee - ---------- under this Mortgage, whether under the provisions of this Article XI or ---------- otherwise, shall be applied in accordance with the provisions of the Indenture; (iv) The Mortgagee may bid for and acquire the Mortgaged Property or any part thereof at any sale made under or by virtue of this Article ------- XI and, in lieu of paying cash therefor, may make settlement for the purchase - -- price by crediting against the purchase price the unpaid amounts (whether or not then due and owing) in respect of the Secured Obligations, after deducting from the sales price the expense of the sale and the reasonable costs of the action or proceedings and any other sums that the Mortgagee is authorized to deduct under this Mortgage. (v) The Mortgagee may adjourn from time to time any sale by it to be made under or by virtue hereof by announcement at the time and place appointed for such sale or for such adjourned sale or sales, and, the Mortgagee, without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned. (vi) If the Premises is comprised of more than one parcel of land, the Mortgagee may take any of the actions authorized by this Section 11.3 in respect of any or a number of individual parcels. SECTION 11.4 Additional Remedies in Case of an Event of ------------------------------------------ Default. - ------- (i) The Mortgagee shall be entitled to recover judgment as aforesaid either before, after or during the pendency of any proceedings for the enforcement of the provisions hereof, and the right of the Mortgagee to recover such judgment shall not be affected by any entry or sale hereunder, or by the exercise of any other right, power or remedy for the enforcement of the provisions hereof, or the foreclosure of, or absolute conveyance pursuant to, this Mortgage. In case of proceedings against the Mortgagor in insolvency or bankruptcy or any proceedings for its reorganization or involving the liquidation of its assets, the Mortgagee shall be entitled to prove the whole amount of principal and interest and other payments, charges and costs due in respect of the Secured Obligations to the full amount thereof without deducting therefrom any proceeds obtained from the sale of the whole or any part of the Mortgaged Property; provided, however, that in no case shall the Mortgagee -------- ------- receive a greater amount than the aggregate of such principal, interest and such other payments, charges and costs (with interest at the Default Rate) from the proceeds of the sale of the Mortgaged Property and the distribution from the estate of the Mortgagor. (ii) Any recovery of any judgment by the Mortgagee and any levy of any execution under any judgment upon the Mortgaged Property shall not affect in any manner or to any extent the Lien and security interests created and evidenced hereby upon the Mortgaged Property or any part thereof, or any conveyances, powers, rights and remedies of the Mortgagee hereunder, but such conveyances, powers, rights and remedies shall continue unimpaired as before. (iii) Any monies collected by the Mortgagee under this Section ------- 11.4 shall be applied in accordance with the provisions of Section 11.3(iii). - ---- ----------------- SECTION 11.5 Legal Proceedings After an Event of Default. ------------------------------------------- (i) After the occurrence and during the continuance of any Event of Default and immediately upon the commencement of any action, suit or legal proceedings to obtain judgment for the Secured Obligations or any part thereof, or of any proceedings to foreclose the Lien and security interest created and evidenced hereby or otherwise enforce the provisions hereof or of any other proceedings in aid of the enforcement hereof, the Mortgagor shall enter its voluntary appearance in such action, suit or proceeding. (ii) Upon the occurrence and during the continuance of an Event of Default, the Mortgagee shall be entitled forthwith as a matter of right, concurrently or independently of any other right or remedy hereunder either before or after declaring the Secured Obligations or any part thereof to be due and payable, to the appointment of a receiver without giving notice to any party and without regard to the adequacy or inadequacy of any security for the Secured Obligations or the solvency or insolvency of any person or entity then legally or equitably liable for the Secured Obligations or any portion thereof. The Mortgagor hereby consents to the appointment of such receiver. Notwithstanding the appointment of any receiver, the Mortgagee shall be entitled as pledgee to the possession and control of any cash, deposits or instruments at the time held by or payable or deliverable under the terms of the Indenture to the Mortgagee. (iii) The Mortgagor shall not (A) at any time insist upon, or plead, or in any manner whatsoever claim or take any benefit or advantage of any stay or extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance hereof, (B) claim, take or insist on any benefit or advantage of any law now or hereafter in force providing for the valuation or appraisal of the Mortgaged Property, or any part thereof, prior to any sale or sales of the Mortgaged Property which may be made pursuant to this Mortgage, or pursuant to any decree, judgment or order of any court of competent jurisdiction or (C) after any such sale or sales, claim or exercise any right under any statute heretofore or hereafter enacted to redeem the property so sold or any part thereof. To the extent permitted by applicable law, the Mortgagor hereby expressly (A) waives all benefit or advantage of any such law or laws, including, without limitation, any statute of limitations applicable to this Mortgage, (B) waives all rights to have the Mortgaged Property marshalled on any foreclosure of this Mortgage, (C) waives any and all rights to trial by jury in any action or proceeding related to the enforcement hereof, (D) waives any objection which it may now or hereafter have to the laying of venue of any action, suit or proceeding brought in connection with this Mortgage and further waives and agrees not to plead that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum and (E) covenants not to hinder, delay or impede the execution of any power granted or delegated to the Mortgagee by this Mortgage but to suffer and permit the execution of every such power as though no such law or laws had been made or enacted. The Mortgagee shall not be liable for any incorrect or improper payment made pursuant to this Article XI in the absence of ---------- gross negligence or willful misconduct. SECTION 11.6 Remedies Not Exclusive. No remedy conferred upon ---------------------- or reserved to the Mortgagee by this Mortgage is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Mortgage or now or hereafter existing at law or in equity. Any delay or omission of the Mortgagee to exercise any right or power accruing on any Event of Default shall not impair any such right or power and shall not be construed to be a waiver of or acquiescence in any such Event of Default. Every power and remedy given by this Mortgage may be exercised from time to time concurrently or independently, when and as often as may be deemed expedient by the Mortgagee in such order and manner as the Mortgagee, in its sole discretion, may elect. If the Mortgagee accepts any monies required to be paid by the Mortgagor under this Mortgage after the same become due, such acceptance shall not constitute a waiver of the right either to require prompt payment, when due, of all other sums secured by this Mortgage or to declare an Event of Default with regard to subsequent defaults. If the Mortgagee accepts any monies required to be paid by the Mortgagor under this Mortgage in an amount less than the sum then due, such acceptance shall be deemed an acceptance on account only and on the condition that it shall not constitute a waiver of the obligation of the Mortgagor to pay the entire sum then due, and the Mortgagor's failure to pay the entire sum then due shall be and continue to be a default hereunder notwithstanding acceptance of such amount on account. SECTION 11.7 Special Louisiana Provisions. ---------------------------- (i) Without limiting the generality of the foregoing, should one or more Events of Default occur or exist and be continuing under this Mortgage, as provided above, the Mortgagee, at its option, may exercise any one or more of this following rights and remedies, in addition to any other rights and remedies provided by law and under this Mortgage to the greatest extent permitted by applicable Louisiana law. Nothing contained herein shall be construed as constituting the Mortgagee as mortgagee in possession in absence of the actual taking of possession of the Premises by the Mortgagee. (ii) The Mortgagee shall have the right, at its sole option, to accelerate the maturity and demand immediate payment in full of any and all of the Secured Obligations. The Mortgagee shall then have the right to commence appropriate foreclosure proceedings against the Mortgaged Property and against the Mortgagor's rights as provided in this Mortgage. (iii) In the event that the Mortgagee elects to commence appropriate Louisiana foreclosure proceedings under this Mortgage, the Mortgagee may cause the Mortgaged Property, or any part or parts thereof, to be immediately seized and sold, whether in term of court or in vacation, under ordinary or executory process, in accordance with applicable Louisiana law, to the highest bidder for cash, with or without appraisement, and without the necessity of making additional demand upon or notifying the Mortgagor or placing the Mortgagor in default, all of which are expressly waived. (iv) For purposes of foreclosure under Louisiana executory process procedures, the Mortgagor confesses judgment and acknowledges to be indebted to the Mortgagee, up to the full amount of the indebtedness in principal, interest, costs, expenses, reasonable attorney's fees and other fees and charges and amounts contemplated hereunder. The Mortgagor further confesses judgment and acknowledges to be indebted unto and in favor of the Mortgagee in the amount of all future advances that the Mortgagee may make on the Mortgagor's behalf pursuant to this Mortgage, together with interest thereon. To the extent permitted under applicable Louisiana law, the Mortgagor additionally waives: (1) the benefit of appraisal as provided in Articles 2332, 2336, 2723, and 2724 of the Louisiana Code of Civil Procedure, and all other laws with regard to appraisal upon judicial sale; (2) the demand and three (3) days' delay provided under Articles 22639 and 2721 of the Louisiana Code of Civil Procedure; (3) the notice of seizure as provided under Articles 2293 and 2721 of the Louisiana Code of Civil Procedure; (4) the three (3) days' delay provided under Articles 2331, 2722 and 2723 of the Louisiana Code of Civil Procedure and all other Articles not specifically mentioned above. The Mortgagor further agrees that any declaration of fact made by authentic act before a Notary Public and two witnesses, by a Person declaring that such facts are within his or her knowledge, shall constitute authentic evidence of such facts for purposes of foreclosure under applicable Louisiana law and for purposes of La, R.S. 9:3504(D)(6) and La. R.S. 10:9-508, to the extent applicable. (v) Should any or all of the Mortgaged Property be seized as an incident to an action for the recognition or enforcement of this Mortgage, by executory process, sequestration, attachment, writ of fieri facias or otherwise, the Mortgagor hereby agrees that the court issuing any such order shall, if requested by the Mortgagee, appoint the Mortgagee, or any agent designated by the Mortgagee or any Person named by the Mortgagee at the time such seizure is requested, or any time thereafter, as Keeper of the Mortgaged Property as provided under La. R.S. 9:5136, et seq. Such a Keeper shall be entitled to reasonable compensation. The Mortgagor agrees to pay the reasonable fees of such Keeper which compensation to the Keeper shall also be secured by this Mortgage in the form of an future advances as provided in this Mortgage. (vi) Should it become necessary for the Mortgagee to foreclose under this Mortgage, all declarations of fact, which are made under an authentic act before a Notary Public in the presence of two witnesses, by a person declaring such facts to lie within his or her knowledge, shall constitute authentic evidence for purposes of executory process and also for purposes of La. R.S. 9:3509.1, La. R.S. 9:3504(D)(6) and La. R.S. 10:9-508, where applicable. (vii) Should one or more Events of Default occur or exist under this Mortgage, the Mortgagee shall have the additional right, at its sole option, to separately sell the aforesaid rights, or any part of parts thereof, at private or public compensation, or on credit, or for future delivery, without the assumption of any credit risk. The sale of the aforesaid rights may be without appraisement, the benefit of which is also expressly waived by the Mortgagor. The Mortgagee may exercise any other remedies with regard to the Mortgagor's rights as may be authorized under the Louisiana Commercial Laws (La. R.S. 10:9-101, et seq.). (viii) To the extent provided by law, and in the event of foreclosure under this Mortgage, or other transfer of title or assignment of the Mortgaged Property, or any part or parts thereof, in lieu of payment of the Secured Obligations, whether in whole or in part, all policies of insurance and other rights applicable to the foreclosed Mortgaged Property upon transfer of the Mortgaged Property shall automatically inure to the benefit of and shall pass to the purchaser(s) or transferee(s) thereof, subject to the rights of the purchaser(s) or transferee(s) to reject such insurance coverage and/or rights at its or their sole option and election. (ix) The Mortgagee may, in addition to or in lieu of the foregoing remedies, in the Mortgagee's sole discretion, commence an appropriate action against the Mortgagor seeking specific performance of any covenant contained in this Mortgage or in aid of the execution or enforcement of any power in this Mortgage granted. (x) Except as may be prohibited by applicable law, all of the Mortgagee's rights and remedies, whether evidenced by this Mortgage or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by the Mortgagee to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of the Mortgagor under this Mortgage, after the Mortgagor's failure to perform shall not affect the Mortgagee's right to declare a default and exercise its remedies. Nothing under this Mortgage or otherwise shall be construed so as to limit or restrict the rights and remedies available to the Mortgagee following an Event of Default, or in any way to limit or restrict the rights and abilities of the Mortgagee to proceed directly against Mortgagor and/or against any other co-maker, guarantor, surety or endorser of the Secured Obligations, and/or to proceed against any other collateral directly or indirectly securing the Secured Obligations. ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement. ------------------ (i) This Mortgage shall constitute a Security Agreement as defined in the Louisiana Commercial Laws, La. R.S.ss. 10:101 et seg., and shall create and evidence a security interest in all the equipment and in all the other items of Mortgaged Property in which a security interest may be granted pursuant to the Louisiana Commercial Laws (collectively, "Personal Property"). (ii) The remedies for any violation of the covenants, terms and conditions of the agreements herein contained shall be as prescribed herein or by general Louisiana law or, as to such part of the security which is also reflected in any Financing Statement filed to perfect the security interest herein created, by the specific statutory provisions now or hereinafter enacted and specified in the Louisiana Commercial Laws, all at Mortgagee's sole election. The mention in any financing statement of (1) the rights in or the proceeds of any fire or hazard insurance policy, or (2) any award in eminent domain proceedings for a taking or for loss of value, or (3) Mortgagor's interest as lessor in any present or future lease or rights to income growing out of the use or occupancy of the Mortgaged Property whether pursuant to lease or otherwise, shall never be construed as in any way altering any of the rights of Mortgagee under this Mortgage or impugning the priority of the Mortgagee's lien granted hereby or by any other recorded document. Rather, such mention in the financing statement is declared to be for the protection of the Mortgagee in the event any court or judge shall at any time hold with respect to (1), (2) and (3) above, that notice of Mortgagee's priority of interest to be effective against a particular class of persons, including, but not limited to, the Federal Government and any subdivisions or entity of the Federal Government, must be filed with the clerk of court of any parish (or Calcasieu Parish Recorder of Mortgages) pursuant to Section 9-401 of the Louisi-ana Commercial Laws. SECTION 12.2 Fixture Filing. From the date of its recording, -------------- this Mortgage shall be effective as a fixture financing statement with respect to all goods constituting part of the Mortgaged Property which are to become fixtures related to the Land. For this purpose, the following information is set forth: (a) Name and Address of Debtor: Winner's Choice Casino, Inc., 2650 Highway 108 Sulphur, Louisiana 70663 TIN 72-1227314 and (b) Name and Address of Secured Party: Wells Fargo Bank Minnesota, National Association Corporate Trust Services 213 Court Street, Suite 902 Middletown, Connecticut 06457 (c) This document covers goods which are to become fixtures. All items that are fixtures on the date of this Mortgage shall be subject to the mortgage Lien granted hereunder. ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security. The ------------------------------------------ Mortgagor shall, forthwith after the execution and delivery hereof and thereafter, from time to time, cause this Mortgage and any financing statement, continuation statement or similar instrument relating to any thereof or to any property intended to be subject to the Lien hereof to be filed, registered and recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the validity and priority thereof or the Lien hereof purported to be created upon the Mortgaged Property and the interest and rights of the Mortgagee therein. The Mortgagor shall pay or cause to be paid all taxes and fees incident to such filing, registration and recording, and all reasonable expenses incident to the preparation, execution and acknowledgment thereof, and of any instrument of further assurance, and all Federal or state stamp taxes or other taxes, duties and charges arising out of or in connection with the execution and delivery of such instruments. SECTION 13.2 Further Acts. The Mortgagor shall, at the sole cost ------------ and expense of the Mortgagor, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers, financing statements, continuation statements, instruments and assurances as the Mortgagee shall from time to time reasonably request, which may be necessary in the judgment of the Mortgagee from time to time to assure, perfect, convey, assign, mortgage, transfer and confirm unto the Mortgagee, the property and rights hereby conveyed or assigned or which the Mortgagor may be or may hereafter become bound to convey or assign to the Mortgagee or for carrying out the intention or facilitating the performance of the terms hereof or the filing, registering or recording hereof. Without limiting the generality of the foregoing, in the event that the Mortgagee desires to exercise any remedies, consensual rights or attorney-in-fact powers set forth in this Mortgage and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other Person therefor, then, upon the reasonable request of the Mortgagee, the Mortgagor agrees to use its reasonable efforts to assist and aid the Mortgagee to obtain as soon as practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers. In the event the Mortgagor shall fail (i) within ten (10) Business Days after demand, to execute or take any action required to be executed or taken by the Mortgagor under this Section 13.2 to the extent same ------------ is necessary to maintain perfection of the Lien granted to Mortgagee hereunder or (ii) such failure shall constitute an Event of Default, to execute or take any action required to be executed or taken by the Mortgagor under this Section ------- 13.2 (other than the type described in clause (i) of this sentence) then, in - ---- each of the cases described in clauses (i) and (ii) of this sentence, the Mortgagee may execute or take the same as the attorney-in-fact for the Mortgagor, such power of attorney being coupled with an interest and is irrevocable. SECTION 13.3 Additional Security. Without notice to or consent ------------------- of the Mortgagor and without impairment of the Lien and rights created by this Mortgage, the Mortgagee may accept (but the Mortgagor shall not be obligated to furnish) from the Mortgagor or from any other Person, additional security for the Secured Obligations. Neither the giving hereof nor the acceptance of any such additional security shall prevent the Mortgagee from resorting, first, to such additional security, and, second, to the security created by this Mortgage without affecting the Mortgagee's Lien and rights under this Mortgage. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Land. All of the grants, ------------------------------ covenants, terms, provisions and conditions in this Mortgage shall run with the Land and shall apply to, and bind the successors and assigns of, the Mortgagor. If there shall be more than one mortgagor with respect to the Mortgaged Property, the covenants and warranties hereof shall be joint and several. SECTION 14.2 No Merger. The rights and estate created by this --------- Mortgage shall not, under any circumstances, be held to have merged into any other estate or interest now owned or hereafter acquired by the Mortgagee unless the Mortgagee shall have consented to such merger in writing, such consent not to be unreasonably withheld. SECTION 14.3 Concerning Mortgagee. -------------------- (i) The Mortgagee has been appointed as trustee pursuant to the Indenture. The actions of the Mortgagee hereunder are subject to the provisions of the Indenture. The Mortgagee shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of the Mortgaged Property), in accordance with this Mortgage and the Indenture. The Mortgagee may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. The Mortgagee may resign and a successor Mortgagee may be appointed in the manner provided in the Indenture. Upon the acceptance of any appointment as the Mortgagee by a successor Mortgagee, that successor Mortgagee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Mortgagee under this Mortgage, and the retiring Mortgagee shall thereupon be discharged from its duties and obligations under this Mortgage. After any retiring Mortgagee's resignation, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it under this Mortgage while it was the Mortgagee. (ii) The Mortgagee shall be deemed to have exercised reasonable care in the custody and preservation of the Mortgaged Property in its possession if such Mortgaged Property is accorded treatment substantially equivalent to that which the Mortgagee, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Mortgagee nor any of the Secured Parties shall have responsibility for taking any necessary steps to preserve rights against any Person with respect to any Mortgaged Property. (iii) The Mortgagee shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person, and, with respect to all matters pertaining to this Mortgage and its duties hereunder, upon advice of counsel selected by it. (iv) If any portion of the Mortgaged Property also constitutes collateral granted to the Mortgagee under any other deed of trust, mortgage, security agreement, pledge or instrument of any type, in the event of any conflict between the provisions hereof and the provisions of such other deed of trust, mortgage, security agreement, pledge or instrument of any type in respect of such collateral, the Mortgagee, in its sole discretion, shall select which provision or provisions shall control. SECTION 14.4 Mortgagee May Perform; Mortgagee Appointed ------------------------------------------ Attorney-in-Fact. If the Mortgagor shall fail to perform any covenants contained - ---------------- in this Mortgage, subject to any applicable grace periods or contest rights permitted pursuant to Article IX hereof or as otherwise permitted by any ---------- Collateral Document (including, without limitation, the Mortgagor's covenants to (i) pay the premiums in respect of all required insurance policies hereunder, (ii) pay Charges, (iii) make repairs, (iv) discharge Liens or (v) pay or perform any obligations of the Mortgagor under any Mortgaged Property) or if any warranty on the part of the Mortgagor contained herein shall be breached, the Mortgagee may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose; provided, -------- however, that the Mortgagee shall in no event be bound to inquire into the - ------- validity of any tax, Lien, imposition or other obligation which the Mortgagor fails to pay or perform as and when required hereby and which the Mortgagor does not contest in accordance with the provisions of Article IX hereof. Any and all ---------- amounts reasonably so expended by the Mortgagee shall be paid by the Mortgagor in accordance with the provisions of Section 14.5 hereof. Neither the provisions ------------ of this Section 14.4 nor any action taken by the Mortgagee pursuant to the ------------ provisions of this Section 14.4 shall prevent any such failure to observe any ------------ covenant contained in this Mortgage nor any breach of warranty from constituting an Event of Default. Upon the occurrence and during the continuance of an Event of Default the Mortgagor hereby appoints the Mortgagee its attorney-in-fact, with full authority in the place and stead of the Mortgagor and in the name of the Mortgagor to take any action and to execute any instrument consistent with the terms hereof and the other Collateral Documents which the Mortgagee may deem necessary or advisable to accomplish the purposes hereof. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. The Mortgagor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. SECTION 14.5 Expenses The Mortgagor will upon demand pay to the -------- Mortgagee the amount of any and all reasonable costs and expenses, including the reasonable fees and expenses of its counsel and the reasonable fees and expenses of any experts and agents which the Mortgagee may incur in connection with (i) any action, suit or other proceeding affecting the Mortgaged Property or any part thereof commenced, in which action, suit or proceeding the Mortgagee is made a party or participates or in which the right to use the Mortgaged Property or any part thereof is threatened, or in which it becomes necessary in the judgment of the Mortgagee to defend or uphold the Lien hereof (including, without limitation, any action, suit or proceeding to establish or uphold the compliance of the Mortgaged Property with any Requirements of Law), (ii) the collection of the Secured Obligations, (iii) the enforcement and administration hereof, (iv) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Mortgaged Property, (v) the exercise or enforcement of any of the rights of the Mortgagee or any Secured Party hereunder or (vi) the failure by the Mortgagor to perform or observe any of the provisions hereof. All amounts expended by the Mortgagee and payable by the Mortgagor under this Section 14.5 shall be due upon demand therefor (together with interest ------------ thereon accruing at the Default Rate during the period from and including the date on which such funds were so expended to the date of repayment) and shall be part of the Secured Obligations. The Mortgagor's obligations under this Section 14.5 shall survive the termination hereof and the discharge of the - ------------ Mortgagor's other obligations under this Mortgage. SECTION 14.6 Indemnity. --------- (i) The Mortgagor agrees to indemnify, pay and hold harmless the Mortgagee and each of the other Secured Parties and the officers, directors, employees, agents and Affiliates of the Mortgagee and each of the other Secured Parties (collectively, the "Indemnitees") from and against any and all other ----------- liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs (including, without limitation, settlement costs), expenses or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, commenced or threatened, whether or not such Indemnitee shall be designated a party thereto), which may be imposed on, incurred by or asserted against that Indemnitee, in any manner relating to or arising out hereof, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (including, without limitation, any misrepresentation by the Mortgagor in this Mortgage, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (the "Indemnified Liabilities"); provided, however, that the Mortgagor shall have no ----------------------- -------- ------- obligation to an Indemnitee hereunder with respect to Indemnified Liabilities to the extent it has been determined by a final decision (after all appeals and the expiration of time to appeal) by a court of competent jurisdiction that such Indemnified Liabilities arose from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Mortgagor shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. (ii) Survival. The obligations of the Mortgagor contained in -------- this Section 14.6 shall survive the termination hereof and the discharge of the ------------ Mortgagor's other obligations under this Mortgage, the Indenture and the other Collateral Documents. (iii) Reimbursement. Any amount paid by any Indemnitee as to ------------- which such Indemnitee has the right to reimbursement shall constitute Secured Obligations secured by the Mortgaged Property. SECTION 14.7 Continuing Security Interest; Assignment. This ---------------------------------------- Mortgage shall create a continuing Lien on and security interest in the Mortgaged Property and shall (i) be binding upon the Mortgagor, its respective successors and assigns and (ii) inure, together with the rights and remedies of the Mortgagee hereunder, to the benefit of the Mortgagee and the other Secured Parties and each of their respective successors, transferees and assigns. No other Persons (including, without limitation, any other creditor of Mortgagor) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (ii), any Holder of the Notes may assign or otherwise transfer any indebtedness held by it secured by this Mortgage to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Holder, herein or otherwise, subject however, to the provisions of the Indenture. SECTION 14.8 Termination; Release. The Mortgaged Property shall -------------------- be released from the Lien of this Mortgage in accordance with the provisions of Article 10 the Indenture. - ---------- SECTION 14.9 Modification in Writing. No amendment, ----------------------- modification, supplement, termination or waiver of or to any provision hereof, nor consent to any departure by the Mortgagor therefrom, shall be effective unless the same shall be done in accordance with the terms of the Indenture and unless in writing and signed by the Mortgagee and Mortgagor. Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by the Mortgagor from the terms of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Mortgage or any other Collateral Document, no notice to or demand on the Mortgagor in any case shall entitle the Mortgagor to any other or further notice or demand in similar or other circumstances. SECTION 14.10 Notices. Unless otherwise provided herein or in ------- the Indenture, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Indenture, if to the Mortgagor, addressed to it at the address of the Issuer set forth in the Indenture, and as to the Mortgagee, addressed to it at its address set forth in the Indenture, or in each case at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 14.10. ------------- SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY ------------------------------------------------- TRIAL. THIS MORTGAGE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED - ----- IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR ITEM OR TYPE OF MORTGAGED PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. THE MORTGAGOR AGREES THAT SERVICE OF PROCESS IN ANY PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE ISSUER AT ITS ADDRESS SET FORTH IN THE INDENTURE OR AT SUCH OTHER ADDRESS OF WHICH THE MORTGAGEE SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. IF ANY AGENT APPOINTED BY THE MORTGAGOR REFUSES TO ACCEPT SERVICE, THE MORTGAGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE MORTGAGEE TO BRING PROCEEDINGS AGAINST THE MORTGAGOR IN THE COURTS OF ANY OTHER JURISDICTION. THE MORTGAGOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 14.12 Severability of Provisions. Any provision hereof -------------------------- which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 14.13 Limitation on Interest Payable. It is the ------------------------------ intention of the parties to conform strictly to the usury laws, whether state or Federal, that are applicable to the transaction of which this Mortgage is a part. All agreements between the Mortgagor and the Mortgagee, whether now existing or hereafter arising and whether oral or written, are hereby expressly limited so that in no contingency or event whatsoever shall the amount paid or agreed to be paid by the Mortgagor for the use, forbearance or detention of the money to be loaned or advanced under the Indenture or any related document or for the payment or performance of any covenant or obligation contained herein or in the Indenture or any related document exceed the maximum amount permissible under applicable Federal or state usury laws. If under any circumstances whatsoever fulfillment of any such provision, at the time performance of such provision shall be due, shall involve exceeding the limit of validity prescribed by law, then the obligation to be fulfilled shall be reduced to the limit of such validity. If under any circumstances the Mortgagor shall have paid an amount deemed interest by applicable law, which would exceed the highest lawful rate, such amount that would be excessive interest under applicable usury laws shall be applied to the reduction of the principal amount owing in respect of the Secured Obligations and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal and any other amounts due hereunder, the excess shall be refunded to the Mortgagor. All sums paid or agreed to be paid for the use, forbearance or detention of the principal under any extension of credit by the Mortgagee shall, to the extent permitted by applicable law, and to the extent necessary to preclude exceeding the limit of validity prescribed by law, be amortized, prorated, allocated and spread from the date hereof until payment in full of the Secured Obligations so that the actual rate of interest on account of such principal amounts is uniform throughout the term hereof. SECTION 14.14 Business Days. In the event any time period or ------------- any date provided in this Mortgage ends or falls on a day other than a Business Day, then such time period shall be deemed to end and such date shall be deemed to fall on the next succeeding Business Day, and performance herein may be made on such Business Day, with the same force and effect as if made on such other day. SECTION 14.15 Relationship. The relationship of the Mortgagee ------------ to the Mortgagor hereunder is strictly and solely that of lender and borrower and mortgagor and mortgagee and nothing contained in the Indenture, the Notes, this Mortgage or any other document or instrument now existing and delivered in connection therewith or otherwise in connection with the Secured Obligations is intended to create, or shall in any event or under any circumstance be construed as creating a partnership, joint venture, tenancy-in-common, joint tenancy or other relationship of any nature whatsoever between the Mortgagee and the Mortgagor other than as lender and borrower and mortgagor and mortgagee. SECTION 14.16 Waiver of Stay. -------------- (i) The Mortgagor agrees that in the event that the Mortgagor or any property or assets of the Mortgagor shall hereafter become the subject of a voluntary or involuntary proceeding under the Bankruptcy Code or the Mortgagor shall otherwise be a party to any Federal or state bankruptcy, insolvency, moratorium or similar proceeding to which the provisions relating to the automatic stay under Section 362 of the Bankruptcy Code or any similar provision in any such law is applicable, then, in any such case, whether or not the Mortgagee has commenced foreclosure proceedings under this Mortgage, the Mortgagee shall be entitled to relief from any such automatic stay as it relates to the exercise of any of the rights and remedies (including, without limitation, any foreclosure proceedings) available to the Mortgagee as provided in this Mortgage, in any other Collateral Document or any other document evidencing the Secured Obligations. (ii) The Mortgagee shall have the right to petition or move any court having jurisdiction over any proceeding described in Section 14.16(i) ---------------- hereof for the purposes provided therein, and the Mortgagor agrees (i) not to oppose any such petition or motion and (ii) at the Mortgagor's sole cost and expense, to assist and cooperate with the Mortgagee, as may be requested by the Mortgagee from time to time, in obtaining any relief requested by the Mortgagee, including, without limitation, by filing any such petitions, supplemental petitions, requests for relief, documents, instruments or other items from time to time requested by the Mortgagee or any such court. SECTION 14.17 No Credit for Payment of Taxes or Impositions. --------------------------------------------- The Mortgagor shall not be entitled to any credit against the principal, premium, if any, or interest payable under the Indenture or the Notes, and the Mortgagor shall not be entitled to any credit against any other sums which may become payable under the terms thereof or hereof, by reason of the payment of any Charge on the Mortgaged Property or any part thereof. SECTION 14.18 No Claims Against the Mortgagee. Nothing ------------------------------- contained in this Mortgage shall constitute any consent or request by the Mortgagee, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Premises or any part thereof, nor as giving the Mortgagor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the Mortgagee in respect thereof or any claim that any Lien based on the performance of such labor or services or the furnishing of any such materials or other property is prior to the Lien hereof. SECTION 14.19 Obligations Absolute. All obligations of the -------------------- Mortgagor hereunder shall be absolute and unconditional irrespective of: (i) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Mortgagor, the Issuer or any other Guarantor; (ii) any lack of validity or enforceability of the Indenture, the Notes or any other agreement or instrument relating thereto; (iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Indenture, the Notes or any other agreement or instrument relating thereto; (iv) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations; (v) any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect hereof, the Indenture, the Notes or any agreement or instrument relating thereto except as specifically set forth in a waiver granted pursuant to the provisions of Section 14.9 hereof; or (vi) any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Mortgagor. SECTION 14.20 Last Dollars Secured. This Mortgage secures only -------------------- a portion of the Indebtedness owing or which may become owing by the Mortgagor. The parties agree that any payments or repayments of such Indebtedness by the Mortgagor shall be and be deemed to be applied first to the portion of the Indebtedness that is not secured hereby, it being the parties' intent that the portion of the Indebtedness last remaining unpaid shall be secured hereby. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] THUS DONE AND PASSED, on the day, month and year first written above, effective as of the Effective Date, in the State and Parish aforesaid, by the undersigned Mortgagor in the presence of the undersigned Notary and the undersigned competent witnesses, who hereunto sign their names with Mortgagor after reading of the whole. WITNESSES: MORTGAGOR: WINNER'S CHOICE CASINO, INC., a Louisiana corporation /s/ Douglas A. Blackshear /s/ Ian M. Stewart _______________________________________ By: _________________________________ Douglas A. Blackshear Printed Name: _________________________ Ian M. Stewart Authorized Officer /s/ Sterling W. Dale, Jr. _______________________________________ /s/ Sterling W. Dale, Jr. Printed Name: _________________________ /s/ Perryann P. Whitehurst _______________________________________ Notary Public Schedule A ---------- Legal Description [to come from title policy] Schedule B ---------- Prior Liens ----------- 1. Each of the liens and other encumbrances excepted as being prior to the Lien hereof as set forth in Schedule B to the marked title insurance commitment issued by Lawyers Title Insurance Corporation, dated as of the date hereof and delivered to the Trustee on the date hereof, bearing Lawyers Title Insurance Corporation reference number W0010-001 relating to the real property described in Schedule A attached hereto. 2. Zoning and building ordinances and regulations, to the extent they constitute Permitted Liens of the type described in clause (4) of the definition thereof. Schedule C ---------- Leases Affecting the Mortgaged Property None Exhibit 1 --------- FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the "Agreement") is made and entered into as of the ____ day of _______, ____ by and between ________________________________, as trustee, having an office at _________________ (in such capacity, "Trustee"), and _____________________, having an office at __________________________ ("Tenant"). R E C I T A L S: - - - - - - - - A. Tenant is the tenant under a certain lease dated _____________, ____ between ________________________________, as landlord ("Landlord"), and Tenant, as tenant (as amended through the date hereof, the "Lease"), pursuant to which Tenant leased a portion (the "Leased Premises") of the property known as _____________________________, located at _____________________________, as more particularly described in Schedule A ---------- attached hereto (the "Property"). B. Landlord has or will grant a mortgage lien on and security interest in the Property to Trustee (for its benefit and for the benefit of the holders of certain senior secured notes and notes issued in exchange therefor pursuant to that certain indenture dated as of [________ ___, 2002]) pursuant to one or more mortgages, deeds of trust, deeds to secure debt or similar security instruments (collectively, the "Security Instruments"). C. Tenant has agreed to subordinate the Lease to the Security Instruments and to the lien thereof and Trustee has agreed not to disturb Tenant's possessory rights in the Leased Premises under the Lease on the terms and conditions hereinafter set forth. A G R E E M E N T: - - - - - - - - - NOW, THEREFORE, the parties hereto mutually agree as follows: 1. Subordination. Notwithstanding anything to the contrary set ------------- forth in the Lease, the Lease and the leasehold estate created thereby and all of Tenant's rights thereunder are and shall at all times be subject and subordinate in all respects to the Security Instruments and the lien thereof, and to all rights of Trustee thereunder, and to any and all advances to be made thereunder, and to all renewals, modifications, consolidations, replacements and extensions thereof. 2. Nondisturbance. So long as Tenant complies with the -------------- provisions of this Agreement, pays all rents and other charges as specified in the Lease and is not otherwise in default (beyond applicable notice and cure periods) of any of its obligations and covenants pursuant to the Lease, Trustee agrees for itself and its successors in interest and for any other person acquiring title to the Property through a foreclosure (an "Acquiring Party"), that Tenant's possession of the Leased Premises as described in the Lease will not be disturbed during the term of the Lease by reason of a foreclosure. For purposes of this Agreement, a "foreclosure" shall include (but not be limited to) a sheriff's or trustee's sale under the power of sale con- -2- tained in the Security Instruments, the termination of any superior lease of the Property and any other transfer of the Landlord's interest in the Property under peril of foreclosure, including, without limitation to the generality of the foregoing, an assignment or sale in lieu of foreclosure. 3. Attornment. Tenant agrees to attorn to, accept and recognize ---------- any Acquiring Party as the landlord under the Lease pursuant to the provisions expressly set forth therein for the then remaining balance of the term of the Lease, and any extensions thereof as made pursuant to the Lease. The foregoing provision shall be self-operative and shall not require the execution of any further instrument or agreement by Tenant as a condition to its effectiveness. 4. No Liability. Notwithstanding anything to the contrary ------------ contained herein or in the Lease, it is specifically understood and agreed that neither the Trustee, any receiver nor any Acquiring Party shall be: (a) liable for any act, omission, negligence or default of any prior landlord (including Landlord); or (b) liable for any failure of any prior landlord (including Landlord) to construct any improvements or bound by any covenant to construct any improvement either at the commencement of the term of the Lease or upon any renewal or extension thereof or upon the addition of additional space pursuant to any expansion right contained in the Lease; or (c) subject to any offsets, credits, claims or defenses which Tenant might have against any prior landlord (including Landlord); or (d) bound by any rent or additional rent which is payable on a monthly basis and which Tenant might have paid for more than one (1) month in advance to any prior landlord (including Landlord) or by any security deposit or other prepaid charge which Tenant might have paid in advance to any prior landlord (including Landlord); or (e) liable to Tenant hereunder or under the terms of the Lease beyond its interest in the Property; or (f) bound by any assignment, subletting, renewal, extension or any other agreement or modification of the Lease made without the written consent of Trustee; or (g) bound by any consensual or negotiated surrender, cancellation or termination of the Lease, in whole or in part, agreed upon between Landlord and Tenant unless effected unilaterally by Tenant pursuant to the express terms of the Lease. Notwithstanding the foregoing, Tenant reserves its right to any and all claims or causes of action (i) against such prior landlord for prior losses or damages and (ii) against the successor landlord for all losses or damages arising from and after the date that such successor landlord takes title to the Property. 5. Certain Acknowledgments and Agreements by Tenant. (a) Tenant ------------------------------------------------ has notice that the Lease and the rents and all other sums due thereunder have been assigned to Trustee as security for the notes secured by the Security Instruments. In the event Trustee notifies Tenant of the occurrence of a de- -3- fault under the Security Instruments and demands that Tenant pay its rents and all other sums due or to become due under the Lease directly to Trustee, Tenant shall honor such demand and pay its rent and all other sums due under the Lease directly to Trustee or as otherwise authorized in writing by Trustee. Landlord irrevocably authorizes Tenant to make the foregoing payments to Trustee upon such notice and demand. (b) Tenant shall send a copy of any and all notices or statements under the Lease to Trustee at the same time such notices or statements are sent to Landlord. (c) This Agreement satisfies any and all conditions or requirements in the Lease relating to the granting of a non-disturbance agreement. 6. Trustee to Receive Default Notices. Tenant shall notify ---------------------------------- Trustee of any default by Landlord under the Lease which would entitle Tenant to cancel the Lease, and agrees that, notwithstanding any provisions of the Lease to the contrary, no notice of cancellation thereof shall be effective unless Trustee shall have received notice of default giving rise to such cancellation and shall have failed within sixty (60) days after receipt of such notice to cure such default or, if such default cannot be cured within sixty (60) days, shall have failed within sixty (60) days after receipt of such notice to commence and thereafter diligently pursue any action necessary to cure such default. 7. Estoppel. Tenant hereby certifies and represents to Trustee -------- that as of the date of this Agreement: (a) the Lease is in full force and effect; (b) all requirements for the commencement and validity of the Lease have been satisfied and there are no unfulfilled conditions to Tenant's obligations under the Lease; (c) Tenant is not in default under the Lease and has not received any uncured notice of any default by Tenant under the Lease; to the best of Tenant's knowledge, Landlord is not in default under the Lease; no act, event or condition has occurred which with notice or the lapse of time, or both, would constitute a default by Tenant or Landlord under the Lease; no claim by Tenant of any nature exists against Landlord under the Lease; and all obligations of Landlord have been fully performed; (d) there are no defenses, counterclaims or setoffs against rents or charges due or which may become due under the Lease; (e) none of the rent which Tenant is required to pay under the Lease has been prepaid, or will in the future be prepaid, more than one (1) month in advance; (f) Tenant has no right or option contained in the Lease or in any other document to purchase all or any portion of the Leased Premises; (g) the Lease has not been modified or amended and constitutes the entire agreement between Landlord and Tenant relating to the Leased Premises; -4- (h) Tenant has not assigned, mortgaged, sublet, encumbered, conveyed or otherwise transferred any or all of its interest under the Lease; and (i) Tenant has full authority to enter into this Agreement, which has been duly authorized by all necessary action. 8. Notices. All notices or other written communications ------- hereunder shall be deemed to have been properly given (i) upon delivery, if delivered in person with receipt acknowledged by the recipient thereof, (ii) one (1) Business Day (hereinafter defined) after having been deposited for overnight delivery with any reputable overnight courier service, or (iii) three (3) Business Days after having been deposited in any post office or mail depository regularly maintained by the United States Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested, addressed to the receiving party at its address set forth above or addressed as such party may from time to time designate by written notice to the other parties. For purposes of this Section 8, the term "Business Day" shall mean any day other than --------- Saturday, Sunday or any other day on which banks are required or authorized to close in New York, New York. Either party by notice to the other may designate additional or different addresses for subsequent notices or communications. 9. Successors. The obligations and rights of the parties ---------- pursuant to this Agreement shall bind and inure to the benefit of the successors, assigns, heirs and legal representatives of the respective parties; provided, however, that in the event of the assignment or transfer of the - -------- ------- interest of Trustee, all obligations and liabilities of Trustee under this Agreement shall terminate, and thereupon all such obligations and liabilities shall be the responsibility of the party to whom Trustee's interest is assigned or transferred; and provided, further, that the interest of Tenant under this -------- ------- Agreement may not be assigned or transferred without the prior written consent of Trustee. In addition, Tenant acknowledges that all references herein to Landlord shall mean the owner of the landlord's interest in the Lease, even if said owner shall be different from the Landlord named in the Recitals. 10. Duplicate Original; Counterparts. This Agreement may be -------------------------------- executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Agreement. 11. Limitation of Trustee's Liability. (a) Trustee shall have --------------------------------- no obligations nor incur any liability with respect to any warranties of any nature whatsoever, whether pursuant to the Lease or otherwise, including, without limitation, any warranties respecting use, compliance with zoning, Landlord's title, Landlord's authority, habitability, fitness for purpose or possession. (b) In the event that Trustee shall acquire title to the Leased Premises or the Property, Trustee shall have no obligation, nor incur any liability, beyond Trustee's then equity interest, if any, in the Leased Premises, and Tenant shall look exclusively to such equity interest of Trustee, if any, in the Leased Premises for the payment and discharge of any obligations imposed upon Trustee hereunder or under the Lease, and Trustee is hereby released and relieved of any other obligations hereunder and under the Lease. 12. Modification in Writing. This Agreement may not be modified ----------------------- except by an agreement in writing signed by the parties hereto or their respective successors in interest. -5- 13. Lien of Security Instruments. Nothing contained in this ---------------------------- Agreement shall in any way impair or affect the lien created by the Security Instruments or the provisions thereof. 14. Compliance with Lease. Tenant agrees that in the event --------------------- there is any inconsistency between the terms and provisions hereof and the terms and provisions of the Lease, the terms and provisions hereof shall be controlling. 15. Governing Law; Severability. This Agreement shall be --------------------------- governed by the laws of the State of [ ]. If any term of this Agreement or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such terms to any person or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 16. Further Actions. Tenant agrees at its own expense to --------------- execute and deliver, at any time and from time to time upon the request of Trustee or any Acquiring Party, such documents and instruments (in recordable form, if requested) as may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to fully implement or to further evidence the understandings and agreements contained in this Agreement. Moreover, Tenant hereby irrevocably appoints and constitutes Trustee or any Acquiring Party as its true and lawful attorney-in-fact to execute and deliver any such documents or instruments which may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to implement or further evidence such understandings and agreements and which Tenant, after thirty (30) days' notice from Trustee or any Acquiring Party, has failed to execute and deliver. IN WITNESS WHEREOF, Trustee and Tenant have duly executed this Agreement as of the date first above written. ___________________________________________, as Trustee By: ______________________________________ Name: Title: ___________________________________________, as Tenant By: ______________________________________ Name: Title: The undersigned, as the Landlord named in the Recitals, having duly executed this Agreement as of the date first written above, and as mortgagor, pledgor, assignor or debtor under the Security Instruments, hereby accepts and agrees for itself and its successors and assigns, (i) to be bound by the provisions of Section 5 hereof, (ii) that nothing contained in the foregoing Agreement (x) shall in any way be deemed to constitute a waiver by Trustee of any of its rights or remedies under the Security Instruments or (y) shall in any way be deemed to release Landlord from its obligations to comply with the terms, provisions, conditions, covenants and agreements set forth in the Security Instruments and (iii) that the provisions of the Security Instruments remain in full force and effect and must be complied with by Landlord. ________________________________, a ________________________________ By: ______________________________________ Name: Title: ACKNOWLEDGMENT State of ____________) )ss.: County of ___________) [Local counsel to provide appropriate acknowledgment] SCHEDULE A to EXHIBIT 1 ----------------------- Description of Real Property ---------------------------- EX-4.14 44 dex414.txt MORTGAGE, ASSIGNMENT OF LEASES-RACELAND TRUCK Exhibit 4.14 ================================================================================ MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING BY RACELAND TRUCK PLAZA AND CASINO, L.L.C., Mortgagor, TO WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee, Mortgagee Securing Principal Indebtedness of $125,000,000 Dated as of February 22 , 2002 Relating to Premises in: Lafourche Parish, Louisiana ================================================================================ After recording, please return to: Athy A. Mobilia, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 ------------------- TABLE OF CONTENTS
Page ---- PREAMBLE ..................................................................... 1 RECITALS ..................................................................... 1 AGREEMENT .................................................................... 2 ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions ............................................... 2 SECTION 1.2 Interpretation ............................................ 8 SECTION 1.3 Resolution of Drafting Ambiguities ........................ 8 ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Mortgaged Property ............................... 8 SECTION 2.2 Assignment of Leases and Rents ............................ 9 SECTION 2.3 Secured Obligations ....................................... 10 SECTION 2.4 Future Advances ........................................... 10 SECTION 2.5 No Release ................................................ 10 ARTICLE III REPRESENTATIONS AND WARRANTIES OF MORTGAGOR SECTION 3.1 Authority and Validity .................................... 10 SECTION 3.2 Warranty of Title ......................................... 11 SECTION 3.3 Condition of Mortgaged Property ........................... 11 SECTION 3.4 Leases .................................................... 13 SECTION 3.5 Insurance ................................................. 13 SECTION 3.6 Charges ................................................... 14 SECTION 3.7 Environmental ............................................. 14 SECTION 3.8 No Conflicts, Consents, etc ............................... 14 SECTION 3.9 Benefit to the Mortgagor .................................. 15
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Page ---- ARTICLE IV CERTAIN COVENANTS OF MORTGAGOR SECTION 4.1 Preservation of Corporate Existence ................................. 15 SECTION 4.2 Title ............................................................... 15 SECTION 4.3 Maintenance and Use of Mortgaged Property; Alterations .............. 16 SECTION 4.4 Notices Regarding Certain Defaults .................................. 17 SECTION 4.5 Access to Mortgaged Property, Books and Records; Other Information .. 17 SECTION 4.6 Limitation on Liens; Transfer Restrictions .......................... 17 SECTION 4.7 Environmental ....................................................... 17 SECTION 4.8 Estoppel Certificates ............................................... 19 ARTICLE V LEASES SECTION 5.1 Mortgagor's Affirmative Covenants with Respect to Leases ............ 19 SECTION 5.2 Mortgagor's Negative Covenants with Respect to Leases ............... 19 SECTION 5.3 Additional Requirements with Respect to New Leases .................. 20 ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Mortgagor ........................ 20 SECTION 6.2 Collection of Rents by the Mortgagee ................................ 20 SECTION 6.3 No Release .......................................................... 21 SECTION 6.4 Irrevocable Interest ................................................ 21 SECTION 6.5 Amendment to Leases ................................................. 21 ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges .................................................. 21 SECTION 7.2 Escrow of Taxes ..................................................... 22 SECTION 7.3 Certain Statutory Liens ............................................. 22 SECTION 7.4 Stamp and Other Taxes ............................................... 22 SECTION 7.5 Certain Tax Law Changes ............................................. 22 SECTION 7.6 Proceeds of Tax Claim ............................................... 22 ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages ........................... 23
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Page ---- SECTION 8.2 Delivery After Foreclosure ............................................. 23 ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens ........................ 23 SECTION 9.2 Contesting of Insurance ................................................ 23 ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction ............................................................ 24 SECTION 10.2 Condemnation ........................................................... 24 ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default ...................................................... 24 SECTION 11.2 Remedies in Case of an Event of Default ................................ 24 SECTION 11.3 Sale of Mortgaged Property if Event of Default Occurs; Proceeds of Sale ................................................................... 25 SECTION 11.4 Additional Remedies in Case of an Event of Default ..................... 26 SECTION 11.5 Legal Proceedings After an Event of Default ............................ 27 SECTION 11.6 Remedies Not Exclusive ................................................. 27 ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement ..................................................... 30 SECTION 12.2 Fixture Filing ......................................................... 31 ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security ............................. 31 SECTION 13.2 Further Acts ........................................................... 31 SECTION 13.3 Additional Security .................................................... 32
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Page ---- ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Land ...................................... 32 SECTION 14.2 No Merger ........................................................... 32 SECTION 14.3 Concerning Mortgagee ................................................ 32 SECTION 14.4 Mortgagee May Perform; Mortgagee Appointed Attorney-in-Fact ......... 33 SECTION 14.5 Expenses ............................................................ 33 SECTION 14.6 Indemnity ........................................................... 34 SECTION 14.7 Continuing Security Interest; Assignment ............................ 34 SECTION 14.8 Termination; Release ................................................ 34 SECTION 14.9 Modification in Writing ............................................. 35 SECTION 14.10 Notices ............................................................. 35 SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL ............................................................ 35 SECTION 14.12 Severability of Provisions .......................................... 35 SECTION 14.13 Limitation on Interest Payable ...................................... 35 SECTION 14.14 Business Days ....................................................... 36 SECTION 14.15 Relationship ........................................................ 36 SECTION 14.16 Waiver of Stay ...................................................... 36 SECTION 14.17 No Credit for Payment of Taxes or Impositions ....................... 37 SECTION 14.18 No Claims Against the Mortgagee ..................................... 37 SECTION 14.19 Obligations Absolute ................................................ 37 SECTION 14.20 Last Dollars Secured ................................................ 37 SIGNATURE AND ACKNOWLEDGMENT SCHEDULE A Legal Description SCHEDULE B Prior Liens SCHEDULE C Leases Affecting the Mortgaged Property EXHIBIT 1 Form of Subordination, Non-Disturbance and Attornment Agreement
-iv- MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Mortgage"), dated as of February 22, 2002, made by RACELAND TRUCK -------- PLAZA AND CASINO, L.L.C., a Louisiana limited liability company having an office at 109 S. Service Road, Raceland, Louisiana 70394, as mortgagor, assignor and debtor (in such capacities and together with any successors in such capacities, the "Mortgagor"), in favor of WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, --------- a national banking association having an office at 213 Court Street, Suite 902, Middletown, CT 06457, in its capacity as collateral agent and trustee pursuant to the Indenture (as hereinafter defined), as mortgagee, assignee and secured party (in such capacities and together with any successors in such capacities, the "Mortgagee"). --------- R E C I T A L S: - - - - - - - - A. Gameco, Inc. (the "Issuer"), certain of its Subsidiaries (as ------ hereinafter defined), the Mortgagor and the Mortgagee have, in connection with the execution and delivery of this Mortgage, entered into that certain indenture, dated as of February 8, 2002 (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Indenture"), --------- pursuant to which the Issuer has issued its 11 7/8% senior secured notes due 2009 (the "Senior Secured Notes") in the aggregate principal amount of -------------------- $125,000,000. It is contemplated that the Issuer may, after the date hereof, issue Additional Notes (as defined in the Indenture) and Exchange Notes (as defined in the Indenture); the Exchange Notes, together with the Additional Notes and the Senior Secured Notes, the "Notes"), in each case, pursuant to the ----- provisions of the Indenture. B. The Issuer owns, directly or through its Subsidiaries, all of the issued and outstanding shares of the Mortgagor. C. The Mortgagor has, pursuant the Indenture, among other things, unconditionally guaranteed (the "Guarantee") the obligations of the Issuer under --------- the Indenture and the Notes. D. The Mortgagor will receive substantial benefits from the execution and delivery of, and the performance of the obligations under, the Indenture and the Notes, and is therefore willing to enter into this Mortgage. E. The Mortgagor is or will be the legal owner of the Mortgaged Property (as hereinafter defined). F. This Mortgage is given by the Mortgagor in favor of the Mortgagee for its benefit and for the benefit of the Holders of the Notes (collectively, the "Secured Parties") to secure the payment and performance of --------------- all of the Secured Obligations (as hereinafter defined). A G R E E M E N T: - - - - - - - - - NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Mortgagor hereby covenants and agrees with the Mortgagee as follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions. Capitalized terms used but not ----------- otherwise defined herein shall have the meanings assigned to such terms in the Indenture. The following terms used in this Mortgage shall have the following meanings: "ACM" shall have the meaning assigned to such term in Section --- ------- 4.7(ii) hereof. - ------- "Affiliate" shall have the meaning assigned to such term in the --------- Indenture. "Alteration" shall mean any and all alterations, installations, ---------- improvements, additions, modifications or changes of a structural nature of or to the Premises. "Business Day" shall have the meaning assigned to such term in ------------ the Indenture. "Charges" shall mean any and all real estate, property and ------- other taxes, assessments and special assessments, levies, fees, all water and sewer rents and charges and all other governmental charges or Liens imposed upon or assessed against, and all claims (including, without limitation, landlords', carriers', mechanics', workmen's, repairmen's, laborers', materialmen's, suppliers' and warehousemen's Liens and other claims arising by operation of law) against, all or any portion of the Mortgaged Property. "Collateral Account" shall have the meaning assigned to such ------------------ term in the Indenture. "Collateral Documents" shall have the meaning assigned to such -------------------- term in the Indenture. "Contested Liens" shall mean, collectively, any Liens incurred --------------- in respect of any Charges to the extent that the amounts owing in respect thereof are not yet delinquent or are being contested and otherwise comply with the provisions of Section 9.1 hereof. ----------- "Contracts" shall mean, collectively, any and all right, title --------- and interest of the Mortgagor in and to any and all contracts, instruments, documents and other general intangibles, whether now existing or hereafter arising or entered into, relating to the Mortgaged Property (including, without limitation, all reciprocal easements and/or operating agreements, covenants, conditions and restrictions and similar agreements affecting all or any portion of the Mortgaged Property and any and all present or future options to sell or lease the Mortgaged Property or any interest therein) and all reserves, deferred payments, deposits or other security or advance payments (including, without limitation, those made by or on behalf of the Mortgagor to others with respect to (i) utility service regarding the Mortgaged Property, (ii) cleaning, maintenance, repair or similar services regarding the Mortgaged Property, (iii) refuse removal or sewage service regarding the Mortgaged Property, (iv) rentals of equipment, if any, used in the operation by or on behalf of Mortgagor regarding the Mortgaged Property, and/or (v) parking or similar services or rights regarding the Mortgaged Property), refunds, liens, security interests, guarantees, remedies and claims of every kind, nature or character relating thereto. "Default Rate" shall mean the rate per annum equal to the ------------ highest rate then payable under the Indenture. "Destruction" shall mean any and all damage to, or loss or ----------- destruction of, the Premises or any part thereof. "Environmental Law" shall mean any applicable federal, state, ----------------- local or municipal statute, law, rule, regulation, ordinance, code, policy or rule of common law and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment binding on the Mortgagor, relating to pollution or protection of the environment, or health or safety including, without limitation, any relating to the release or threatened release of any Hazardous Materials. "Event of Default" shall have the meaning assigned to such term ---------------- in the Indenture. "Fixture" shall mean all machinery, apparatus, equipment, ------- fittings, fixtures, improvements and articles of personal property of every kind, description and nature whatsoever now or hereafter attached or affixed to the Land or any other Improvement or used in connection with the use and enjoyment of the Land or any other Improvement or the maintenance or preservation thereof, which by the nature of their location thereon or attachment thereto are fixtures under the UCC or any other applicable law including, without limitation, all utility systems, fire sprinkler and security systems, drainage facilities, lighting facilities, all water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone and other utility equipment and facilities, pipes, fittings and other items of every kind and description now or hereafter attached to or located on the Land which by the nature of their location thereon or attachment thereto are real property under applicable law, HVAC equipment, boilers, electronic data processing, telecommunications or computer equipment, refrigeration, electronic monitoring, water or lighting systems, power, sanitation, waste removal, elevators, maintenance or other systems or equipment and all additions thereto and betterments, renewals, substitutions and replacements thereof. "GAAP" shall have the meaning assigned to such term in the ---- Indenture. "Governmental Authority" shall mean any federal, state, local, ---------------------- foreign or other governmental, quasi-governmental or administrative (including self-regulatory) body, instrumentality, department, agency, authority, board, bureau, commission, office of any nature whatsoever or other subdivision thereof, or any court, tribunal, administrative hearing body, arbitration panel or other similar dispute-resolving body, whether now or hereafter in existence, or any officer or official thereof, having jurisdiction over the Mortgagor or the Mortgaged Property or any portion thereof. "Guarantee" shall have the meaning assigned to such term in --------- Recital C hereof. - --------- "Guarantors" shall have the meaning assigned to such term in ---------- the Indenture. "Hazardous Materials" shall mean any substance, chemical, ------------------- material, pollutant, waste, contaminant or constituent, which is subject to regulation under or could give rise to liability under any Environmental Law. "Holder" shall have the meaning assigned to such term in the ------ Indenture. "Improvements" shall mean all buildings, structures and other ------------ improvements of every kind or description and any and all Alterations now or hereafter located, attached or erected on the Land including, without limitation (i) all Fixtures, (ii) all attachments, railroad tracks, foundations, sidewalks, drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer rights, parking areas, driveways, fences and walls and (iii) all materials now or hereafter located on the Land intended for the construction, reconstruction, repair, replacement, alteration, addition or improvement of or to such buildings, Fixtures, structures and improvements, all of which materials shall be deemed to be part of the Improvements immediately upon delivery thereof on the Land and to be part of the improvements immediately upon their incorporation therein. "Indemnified Liabilities" shall have the meaning assigned to ----------------------- such term in Section 14.6(i) hereof. --------------- "Indemnitees" shall have the meaning assigned to such term in ----------- Section 14.6(i) hereof. - --------------- "Indenture" shall have the meaning assigned to such term in --------- Recital A hereof. - --------- "Insurance Policies" means the insurance policies and coverages ------------------ required to be maintained by the Mortgagor with respect to the Mortgaged Property pursuant to Section 4.19(b) of the Indenture and all renewals and extensions thereof. "Insurance Requirements" means, collectively, all provisions of ---------------------- the Insurance Policies, all requirements of the issuer of any of the Insurance Policies and all orders, rules, regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon the Mortgagor and applicable to the Mortgaged Property or any use or condition thereof. "Issuer" shall have the meaning assigned to such term in ------ Recital A hereof. - --------- "Land" shall mean those certain tracts or parcels of land ---- described in Schedule A annexed to this Mortgage, together with all of the ---------- Mortgagor's reversionary rights therein and all of the Mortgagor's rights in and to any and all easements, rights-of-way, strips and gores of land, waters, water courses, water rights, mineral, gas and oil rights and all power, air, light and other rights, estates, titles, interests, privileges, liberties, servitudes, licenses, tenements, hereditaments and appurtenances whatsoever, in any way belonging, relating or appertaining thereto, or any part thereof, or which hereafter shall in any way belong, relate or be appurtenant thereto. "Landlord" shall mean any landlord, lessor, franchisor, -------- licensor or grantor, as applicable. "Leases" shall mean, collectively, any and all right, title and ------ interests of the Mortgagor, as Landlord, in all leases and subleases of space, tenancies, franchise agreements, licenses, occupancy, rental, access or concession agreements and any other agreements pursuant to which any Person is granted a pos- sessory interest in or right to use or occupy all or any portion of the Mortgaged Property (including, without limitation, all of the Mortgagor's rights to enforce all such leases, subleases, tenancies or other agreements and to receive and enforce any rights that the Mortgagor may have to collect Rents thereunder), in each case whether now existing or hereafter entered into, whether or not of record, relating in any manner to the Premises or the use or occupancy thereof and any and all amendments, modifications, supplements, replacements, extensions, renewals and/or guarantees, if any thereof, whether now in effect or hereafter coming into effect. "Lien" shall have the meaning assigned to such term in the ---- Indenture. "Mortgage" shall have the meaning assigned to such term in the -------- Preamble hereof. "Mortgaged Property" shall have the meaning assigned to such ------------------ term in Section 2.1 hereof. ----------- "Mortgagee" shall have the meaning assigned to such term in the --------- Preamble hereof. "Mortgagor" shall have the meaning assigned to such term in the --------- Preamble hereof. "Mortgagor's Interest" shall have the meaning assigned to such -------------------- term in Section 2.2 hereof. ----------- "Net Loss Proceeds" shall have the meaning assigned to such ----------------- term in the Indenture. "Net Proceeds" shall have the meaning assigned to such term in ------------ the Indenture. "Notes" shall have the meaning assigned to such term in ----- Recital A hereof. - --------- "Officers' Certificate" shall have the meaning assigned to such --------------------- term in the Indenture. "Permit" shall mean any and all permits, certificates, ------ approvals, authorizations, consents, licenses, variances, franchises or other instruments, however characterized, of any Governmental Authority (or any Person acting on behalf of a Governmental Authority) now or hereafter acquired or held, together with all amendments, modifications, extensions, renewals and replacements of any thereof issued or in any way furnished in connection with the Mortgaged Property including, without limitation, building permits, certificates of occupancy, environmental certificates, industrial permits or licenses and certificates of operation. "Permitted Collateral Liens" shall have the meaning assigned to -------------------------- such term in Section 4.6 hereof. ----------- "Permitted Liens" shall have the meaning assigned to such term --------------- in the Indenture. "Person" shall have the meaning assigned to such term in the ------ Indenture. "Premises" shall mean, collectively, the Land and the -------- Improvements. "Prior Liens" shall mean, collectively, the Liens identified in ----------- Schedule B annexed to this Mortgage. - ---------- "Proceeds" shall mean, collectively, any and all cash proceeds -------- and noncash proceeds derived or to be derived from the Mortgaged Property and shall include, without limitation, all (i) proceeds of the sale, transfer or conveyance of the Mortgaged Property or the conversion, voluntary or involuntary, of any of the Mortgaged Property or any portion thereof into cash or liquidated claims, (ii) proceeds of any insurance (except payments made to a Person, other than the Issuer or any Subsidiary thereof, that is not a party to this Mortgage), indemnity, warranty, guaranty or claim payable to the Mortgagee or to the Mortgagor from time to time with respect to any of the Mortgaged Property including, without limitation, all Net Loss Proceeds relating thereto, (iii) payments (in any form whatsoever) made or due and payable to the Mortgagor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any portion of the Mortgaged Property by any Governmental Authority (or any Person acting on behalf of a Governmental Authority) including, without limitation, all Net Loss Awards relating thereto, (iv) products of the Mortgaged Property, (v) other amounts from time to time paid or payable under or in connection with any of the Mortgaged Property including, without limitation, refunds of real estate taxes and assessments, including interest thereon and any unearned insurance premiums relating thereto and (vi) the right to enforce any and all rights that the Mortgagor has or may have to collect all such proceeds, including, without limitation, the Mortgagor's rights to commence any and all appropriate collection or enforcement actions incident thereto. "Property Material Adverse Effect" shall mean, as of any date -------------------------------- of determination and whether individually or in the aggregate (a) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the business or operations as presently conducted at the Mortgaged Property; (b) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the value or utility of the Mortgaged Property; and (c) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the legality, priority or enforceability of the Lien created by this Mortgage or the rights and remedies of the Mortgagee hereunder. "Prudent Operator" shall mean the standard of care taken by a ---------------- prudent operator of property similar in use and configuration to the Premises and located in the locality where the Premises are located. "Records" shall mean, collectively, any and all right, title ------- and interest of the Mortgagor in and to any and all drawings, plans, specifications, file materials, operating and maintenance records, catalogues, tenant lists, correspondence, advertising materials, operating manuals, warranties, guarantees, appraisals, studies and data relating to the Mortgaged Property or the construction of any Alteration or the maintenance of any Permit. "Rents" shall mean, collectively, any and all rents, additional ----- rents, royalties, issues, cash, guaranties, letters of credit, bonds, sureties or security deposited under any Lease to secure performance of the Tenant's obligations thereunder, revenues, earnings, profits, bonuses and income, advance rental payments, payments incident to assignment, sublease or surrender of a Lease, claims for forfeited deposits and claims for damages, now due or hereafter to become due, with respect to any Lease, any indemnification against, or reimbursement for, sums paid and costs and expenses incurred by the Mortgagor under any Lease or otherwise, and any award in the event of the bankruptcy of any Tenant under or guarantor of a Lease. "Requirements of Law" shall mean, collectively, any and all ------------------- requirements of any Governmental Authority including, without limitation, any and all orders, decrees, determinations, laws, treaties, ordinances, rules, regulations or similar statutes or case law. "Secured Obligations" shall mean all obligations (whether or ------------------- not constituting future advances, obligatory or otherwise) of the Issuer and any and all of the Guarantors from time to time arising under or in respect of this Mortgage, the Indenture, the Notes and the other Collateral Documents (including, without limitation, the obligations to pay principal, interest and all other charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Mortgage, the Indenture, the Notes and the other Collateral Documents), in each case whether (i) such obligations are direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due whether at stated maturity, by acceleration or otherwise, (ii) arising in the regular course of business or otherwise, (iii) for payment or performance and/or (iv) now existing or hereafter arising (including, without limitation, interest and other obligations arising or accruing after the commencement of any bankruptcy, insolvency, reorganization or similar proceeding with respect to the Issuer, any Guarantor or any other Person, or which would have arisen or accrued but for the commencement of such proceeding, even if such obligation or the claim therefor is not enforceable or allowable in such proceeding). "Secured Parties" shall have the meaning assigned to such term --------------- in Recital F hereof. --------- "Senior Secured Notes" shall have the meaning assigned to such -------------------- term in Recital A hereof. --------- "Subordination Agreement" shall mean a subordination, ----------------------- nondisturbance and attornment agreement substantially in the form of Exhibit 1 --------- annexed to this Mortgage. "Subsidiaries" shall have the meaning assigned to such term in ------------ the Indenture. "Taking" shall mean any taking of the Mortgaged Property or any ------ part thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, general or special, or by reason of the temporary requisition of the use or occupancy of the Mortgaged Property or any part thereof, by any Governmental Authority, civil or military. "Tax Escrow Fund" shall have the meaning assigned to such term --------------- in Section 7.2 hereof. ----------- "Tenant" shall mean any tenant, lessee, sublessee, franchisee, ------ licensee, grantee or obligee, as applicable. "UCC" shall mean the Uniform Commercial Code as in effect on --- the date hereof in the jurisdiction in which the Premises are located; provided, -------- however, that if by reason of mandatory provisions of law, the perfection or the - ------- effect of perfection or non-perfection of the security interest in any item or portion of the Mortgaged Property is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the jurisdiction in which the Premises are located, "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. SECTION 1.2 Interpretation. In this Mortgage, unless otherwise -------------- specified, (i) singular words include the plural and plural words include the singular, (ii) words importing any gender include the other gender, (iii) references to any Person include such Person's successors and assigns and in the case of an individual, the word "successors" includes such Person's heirs, devisees, legatees, executors, administrators and personal representatives, (iv) references to any statute or other law include all applicable rules, regulations and orders adopted or made thereunder and all statutes or other laws amending, consolidating or replacing the statute or law referred to, (v) the words "consent," "approve" and "agree," and derivations thereof or words of similar import, mean the prior written consent, approval or agreement of the Person in question not to be unreasonably withheld, (vi) the words "include" and "including," and words of similar import, shall be deemed to be followed by the words "without limitation," (vii) the words "hereto," "herein," "hereof" and "hereunder," and words of similar import, refer to this Mortgage in its entirety, (viii) references to Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are to the Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses hereof, (ix) the Schedules and Exhibits to this Mortgage, in each case as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof, are incorporated herein by reference, (x) the titles and headings of Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are inserted as a matter of convenience only and shall not affect the constructions of any provisions hereof and (xi) all obligations of the Mortgagor hereunder shall be satisfied by the Mortgagor at the Mortgagor's sole cost and expense. SECTION 1.3 Resolution of Drafting Ambiguities. The Mortgagor ---------------------------------- acknowledges and agrees that it was represented by counsel in connection with the execution and delivery hereof, that it and its counsel reviewed and participated in the preparation and negotiation hereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party (i.e., Mortgagee) shall not be employed in the interpretation --- hereof. ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Mortgaged Property. The Mortgagor hereby --------------------------- grants, mortgages, bargains, sells, assigns and conveys to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), and hereby grants to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), a security interest in and upon all of the Mortgagor's estate, right, title and interest in, to and under the following property, whether now owned or held or hereafter acquired from time to time (collectively, the "Mortgaged --------- Property"): - -------- (i) Land; (ii) Improvements; (iii) Leases; (iv) Rents; (v) Permits; (vi) Contracts; (vii) Records; and (viii) Proceeds. Notwithstanding the foregoing provisions of this Section 2.1, ----------- Mortgaged Property shall not include a grant of any of the Mortgagor's right, title or interest in (i) any Contract to which the Mortgagor is a party or any of its rights or interests thereunder (other than (x) the right to receive any payment of money (including without limitation accounts, general intangibles and payment intangibles (each as defined in the UCC) or any other rights referred to in Sections 9-406(f), 9-407(a) or 9-408(a) of the UCC and (y) any proceeds, substitutions or replacements thereof) to the extent, but only to the extent, that such a grant would, under the terms of such Contract, result in a breach or termination of the terms of, or constitute a default under or termination of such Contract and (ii) any Permit to the extent, but only to the extent that, such grant shall constitute or result in abandonment, invalidation or rendering unenforceable any right, title or interest of the Mortgagor therein; provided, -------- however, that at such time as any Contract or Permit described in clauses (i) - ------- and (ii) of this sentence is no longer subject to such restriction, such applicable Contract or Permit shall (without any act or delivery by any Person) constitute Mortgaged Property hereunder. TO HAVE AND TO HOLD the Mortgaged Property, together with all estate, right, title and interest of the Mortgagor and anyone claiming by, through or under the Mortgagor in and to the Mortgaged Property and all rights and appurtenances relating thereto, unto the Mortgagee, its successors and assigns, for the purpose of securing the payment and performance in full of all the Secured Obligations. SECTION 2.2 Collateral Assignment and Pledge of Mortgagor's ----------------------------------------------- Interest as Additional Security. As additional collateral security for the - ------------------------------- prompt and punctual payment and satisfaction of the Secured Obligations, and all additional advances that the Mortgagee may make on the Mortgagor's behalf pursuant to this Mortgage, together with interest thereon as provided herein, the Mortgagor hereby assigns, pledges and grants to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), a continuing security interest in and to all of the Mortgagor's estate, right, title, interest, claim and demand, as Landlord, under any and all of the Leases including, without limitation, the following (such assigned rights, the "Mortgagor's Interest"): -------------------- (i) the immediate and continuing right to receive and collect Rents payable by the Tenants pursuant to the Leases; (ii) all claims, rights, powers, privileges and remedies of the Mortgagor, whether provided for in the Leases or arising by statute or at law or in equity or otherwise, consequent on any failure on the part of the Tenants to perform or comply with any term of the Leases including damages or other amounts payable to the Mortgagor as a result of such failure; (iii) all rights to take all actions upon the happening of a default under the Leases as shall be permitted by the Leases or by law including, without limitation, the commencement, conduct and consummation of proceeding at law or in equity; and (iv) the full power and authority, in the name of the Mortgagor or otherwise, to enforce, collect, receive and receipt for any and all of the foregoing and to take all other actions whatsoever which the Mortgagor, as Landlord, is or may be entitled to take under the Leases. SECTION 2.3 Secured Obligations. This Mortgage secures, and the ------------------- Mortgaged Property is collateral security for, the payment and performance in full when due of the Secured Obligations. SECTION 2.4 Mortgage Securing Future Indebtedness. This ------------------------------------- Mortgage has been executed by Mortgagor pursuant to Article 3298 of the Louisiana Civil Code for the purpose of securing the Mortgagor's indebtedness (including, without limitation, the Secured Obligations) that may now be existing or that may arise in the future as provided herein and in the Indenture, with the preferences and priorities provided under applicable Louisiana law. This Mortgage shall be further entitled to the preferences and priorities as provided under the Louisiana Private Works Act (La. R.S. 9:4801, et seq.). However, nothing under this Mortgage shall be construed as limiting the duration of this Mortgage or the purpose or purposes for which the Mortgagor's indebtedness (including, without limitation, the Secured Obligations) may be requested or extended. The Mortgagor's additional indebtedness will automatically be secured by this Mortgage without the necessity that the Mortgagor agrees or consents to such a result at the time additional indebtedness is made and that the note or notes evidencing such additional indebtedness reference the fact that such notes are secured by this Mortgage. The Mortgagor understands that the Mortgagor may not subsequently have a change of mind and insist that the Mortgagor's additional indebtedness not be secured by this Mortgage unless the Mortgagee specifically agrees to such a request in writing. SECTION 2.5 No Release. Nothing set forth in this Mortgage ------- shall relieve the Mortgagor from the performance of any term, covenant, condition or agreement on the Mortgagor's part to be performed or observed under or in respect of any of the Mortgaged Property or from any liability to any Person under or in respect of any of the Mortgaged Property or shall impose any obligation on the Mortgagee or any other Secured Party to perform or observe any such term, covenant, condition or agreement on the Mortgagor's part to be so performed or observed or shall impose any liability on the Mortgagee or any other Secured Party for any act or omission on the part of the Mortgagor relating thereto or for any breach of any representation or warranty on the part of the Mortgagor contained in this Mortgage, the Indenture, the Notes or the Collateral Documents, or under or in respect of the Mortgaged Property or made in connection herewith or therewith. The obligations of the Mortgagor contained in this Section 2.5 shall survive the termination hereof and the discharge of the Mortgagor's other obligations under this Mortgage and the Indenture, the Notes and the Collateral Documents. ARTICLE III REPRESENTATIONS AND WARRANTIES OF MORTGAGOR SECTION 3.1 Authority and Validity. ---------------------- The Mortgagor represents and warrants that as of the date hereof: (i) it is duly organized or formed, validly existing and, if applicable, in good standing under the laws of the jurisdiction of its organization; (ii) it is duly qualified to transact business and is in good standing in the state in which the Mortgaged Property is located; (iii) it has full corporate or other organizational power and lawful authority to execute and deliver this Mortgage and to mortgage and grant a Lien on and security interest in the Mortgaged Property and otherwise assign the Mortgagor's Interest and otherwise perform its obligations as contemplated herein, and all corporate and governmental actions, consents, authorizations and approvals necessary or required therefor have been duly and effectively taken or obtained; and (iv) this Mortgage is a legal, valid and binding obligation of the Mortgagor, enforceable against the Mortgagor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. SECTION 3.2 Warranty of Title. The Mortgagor represents and ----------------- warrants that: (i) it has good fee simple title to the Premises and the Landlord's interest and estate under or in respect of the Leases and good title to the interest it purports to own or hold in and to each of the Permits, the Contracts and the Records, in each case subject to no Liens, except for Permitted Collateral Liens; (ii) it has good title to the interest it purports to own or hold in and to all rights and appurtenances to or that constitute a portion of the Mortgaged Property, except for Permitted Collateral Liens; (iii) it is in compliance with each term, condition and provision of any obligation of the Mortgagor which is secured by the Mortgaged Property or the noncompliance with which would result in a Property Material Adverse Effect; and (iv) this Mortgage creates and constitutes a valid and enforceable first priority Lien on the Mortgaged Property subject to Permitted Collateral Liens, and, to the extent any of the Mortgaged Property shall consist of Fixtures, a first priority security interest in the Fixtures, which first priority Lien and first priority security interest are subject only to Permitted Collateral Liens. SECTION 3.3 Condition of Mortgaged Property. The Mortgagor ------------------------------- represents and warrants that: (i) there has been issued and there remains in full force and effect subject to no revocation, suspension, forfeiture or modification, each and every Permit necessary for the present use, operation and occupancy of the Premises by the Mortgagor and its Tenants and the conduct of their respective businesses and all required zoning, building code, land use, environmental and other similar Permits, except where the failure to be so issued and to be in full force and effect would not result in a Property Material Adverse Effect; (ii) the Premises and the present and contemplated use and occupancy thereof comply with all applicable zoning ordinances, building codes, land use laws, set back or other development and/or use requirements of Governmental Authorities except where such noncompliance would not result in a Property Material Adverse Effect; (iii) the Premises are served by all utilities (including, without limitation, water and sewer systems) necessary for the present use thereof, and all utility services are provided by public or private utilities and the Premises have accepted or are equipped to accept such utility services and the Mortgagor has not received notice of termination of such utility service, except where the failure to be so served would not result in a Property Material Adverse Effect; (iv) the Mortgagor has access to the Premises from roads sufficient to allow the Mortgagor and its Tenants and invitees to conduct their respective businesses at the Premises in accordance with sound commercial practices and the Mortgagor has not received notice of termination of such access, except where the failure to have such access would not result in a Property Material Adverse Effect; (v) the Mortgagor has not received notice of any Taking or the commencement or pendency of any action or proceeding therefor, other than such Takings as would not result in a Property Material Adverse Effect; (vi) there has not occurred any Destruction of the Premises or any portion thereof as a result of any fire or other casualty that, as of the date hereof, has not been repaired in all material respects, other than such Destruction as would not have a Property Material Adverse Effect; (vii) there are no disputes regarding boundary lines, location, encroachments or possession of any portions of the Mortgaged Property and no state of facts exists which could give rise to any such claim other than such disputes as would not result in a Property Material Adverse Effect; (viii) all liquid and solid waste disposal, septic and sewer systems located on the Premises are in a good and safe condition and repair and in compliance with all Requirements of Law, except where the failure to so comply would not result in a Property Material Adverse Effect; (ix) no portion of the Premises is located in an area identified by the Federal Emergency Management Agency or any successor thereto as an area having special flood hazards pursuant to the Flood Insurance Acts or, if any portion of the Premises is located within such area, the Mortgagor has obtained the insurance prescribed in Article VIII hereof; ------------ (x) the Premises are assessed for real estate tax purposes as one or more wholly independent tax lot or lots, separate from any adjoining land or improvements not constituting a portion of such lot or lots, and no other land or improvements are assessed and taxed together with the Premises or any portion thereof, other than such cases where the failure to be so assessed would not result in a Property Material Adverse Effect; and (xi) there are no options or rights of first refusal to purchase or acquire all or any portion of the Mortgaged Property, other than such options or rights of first refusal as would not result in a Property Material Adverse Effect. SECTION 3.4 Leases. The Mortgagor represents and warrants that ------ as of the date hereof: (i) the Leases identified in Schedule C attached hereto are the only Leases in existence on the date hereof relating to the Premises; (ii) true copies of such Leases have been previously delivered to the Mortgagee and there are no agreements with any Tenant under such Leases other than those agreements expressly set forth therein; (iii) the Mortgagor is the sole owner of all of the Mortgagor's Interest in such Leases; (iv) each of such Leases is in full force and effect, constitutes a legal, valid and binding obligation of the Mortgagor and the applicable Tenant thereunder, and is enforceable against the Mortgagor and such Tenant in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability; (v) there is no default under any of such Leases and there is existing no condition which with the giving of notice or passage of time or both would cause a default thereunder; (vi) all Rents due under such Leases have been paid in full; (vii) none of the Rents reserved under such Leases have been assigned or otherwise pledged or hypothecated except in favor of the Mortgagee pursuant to the provisions hereof; (viii) none of the Rents (other than any security deposit collected in accordance with the provisions of the applicable Lease) have been collected for more than one (1) month in advance; (ix) there exists no offsets or defenses to the payment of any portion of the Rents and the Mortgagor owes no monetary obligation to any Tenant under any such Lease; (x) the Mortgagor has received no notice from any Tenant challenging the validity or enforceability of any such Lease; (xi) no such Lease contains any option to purchase, right of first refusal to purchase, right of first refusal to relet, or any other similar provision; and (xii) each such Lease is subordinate to this Mortgage either pursuant to its terms or pursuant to a recordable Subordination Agreement. SECTION 3.5 Insurance. The Mortgagor represents and warrants --------- that, except where the failure of clauses (i), (ii) or (iii) hereof to be true would not have a Property Material Adverse Effect, (i) the Premises and the use, occupancy and operation thereof comply with all Insurance Requirements and there exists no default under any Insurance Requirement, (ii) all premiums due and payable with respect to the Insurance Policies have been paid, (iii) all Insurance Policies are in full force and effect and the Mortgagor has not received notice of violation or cancellation thereof and (iv) all insurance certificates required pursuant to the Indenture have been delivered to the Mortgagee. SECTION 3.6 Charges. The Mortgagor represents and warrants that ------- all Charges imposed upon or assessed against the Mortgaged Property have been paid and discharged except to the extent such Charges constitute a Lien not yet due and payable or to the extent such Charges are being contested in accordance with Section 9.1 hereof. ------------ SECTION 3.7 Environmental. The Mortgagor represents and ------------- warrants that: (i) it has obtained all Permits which are necessary with respect to the ownership and operation of its business and the Mortgaged Property under any and all applicable Environmental Laws and is in compliance with all terms and conditions thereof, except where the failure so to obtain or to be in compliance would not result in a Property Material Adverse Effect; (ii) it is in compliance with any and all applicable Environmental Laws including, without limitation, all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws, except where the failure so to be in compliance would not result in a Property Material Adverse Effect; (iii) there is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice of demand letter pending or threatened against it or any Affiliate under the Environmental Laws which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect; and (iv) there are no past or present events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance with the Environmental Laws, or which may give rise to any common law or legal liability including, without limitation, liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any other Environmental Law or related common law theory or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing or notice of violation, study or investigation, based on or related to the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Materials which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect . SECTION 3.8 No Conflicts, Consents, etc. Neither the execution --------------------------- and delivery hereof by the Mortgagor nor the consummation of the transactions herein contemplated nor the fulfillment of the terms hereof (i) violates the terms of any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or other document to which the Mortgagor is a party, or by which it may be bound or to which any of its properties or assets may be subject, (ii) conflicts with any Requirement of Law applicable to the Mortgagor or its property or (iii) results in or requires the creation or imposition of any Lien (other than the Lien contemplated hereby) upon or with respect to any of the Mortgaged Property, except where such violation, conflict, creation or imposition would not have a Property Material Adverse Effect. No consent of any party (including, without limitation, equityholders or creditors of the Mortgagor) and no consent, authorization, approval, license or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person (other than with respect to any required Permits) is required for (i) the granting of a mortgage Lien on and security interest in the Mortgaged Property by the Mortgagor granted by it pursuant to this Mortgage or for the execution, delivery or performance hereof by the Mortgagor except for the filing of this Mortgage and the other filings contemplated hereby or (ii) the exercise by the Mortgagee of the remedies in respect of the Mortgaged Property pursuant to this Mortgage other than those required by law in connection with the exercise of the applicable remedy. SECTION 3.9 Benefit to the Mortgagor. The Mortgagor represents ------------------------ and warrants that it will receive substantial benefit as a result of the execution, delivery, and performance of the Indenture, the Notes and the Collateral Documents. ARTICLE IV CERTAIN COVENANTS OF MORTGAGOR SECTION 4.1 Preservation of Corporate Existence. The Mortgagor ----------------------------------- shall: (i) preserve and maintain in full force and effect its existence and good standing under the laws of the jurisdiction of its organization; (ii) preserve and maintain in full force and effect its qualification to transact business and good standing in the state in which the Mortgaged Property is located; and (iii) preserve and maintain in full force and effect all consents, authorizations and approvals necessary or required of any Governmental Authority or any other Person relating to the execution, delivery and performance hereof, except where the failure to do so would not result in a Property Material Adverse Effect. SECTION 4.2 Title. The Mortgagor shall: ----- (i) (A) keep in effect all material rights and appurtenances to or that constitute a part of the Mortgaged Property and (B) protect, preserve and defend its interest in the Mortgaged Property and title thereto, except against Permitted Collateral Liens (other than the Lien created by this Mortgage); (ii) (A) comply, in all material respects, with each of the terms, conditions and provisions of any obligation of the Mortgagor which is secured by the Mortgaged Property, except where the failure to so comply would not result in a Property Material Adverse Effect, or the non-compliance with which may result in the imposition of a Lien on the Mortgaged Property, (B) forever warrant and defend to the Mortgagee the Lien and security interests created and evidenced hereby and the validity and priority hereof in any action or proceeding against the claims of any and all Persons whomsoever affecting or purporting to affect the Mortgaged Property or any of the rights of the Mortgagee hereunder, except against Permitted Collateral Liens (other than the Lien of this Mortgage), and (C) maintain a valid and enforceable first priority Lien, except for Permitted Collateral Liens (other than the Lien of this Mortgage) on the Mortgaged Property and, to the extent any of the Mortgaged Property shall consist of Fixtures, a first priority security interest in the Mortgaged Property, which first priority Lien and security interest shall be subject only to Permitted Collateral Liens; and (iii) immediately upon obtaining knowledge of the pendency of any proceedings for the eviction of the Mortgagor from the Mortgaged Property or any part thereof by paramount title or otherwise questioning the Mortgagor's right, title and interest in, to and under the Mortgaged Property as warranted in this Mortgage, or of any condition that could give rise to any such proceedings, notify the Mortgagee thereof. The Mortgagee may participate in such proceedings and the Mortgagor will deliver or cause to be delivered to the Mortgagee all instruments requested by the Mortgagee to permit such participation. In any such proceedings, the Mortgagee may be represented by counsel reasonably satisfactory to the Mortgagee at the reasonable expense of the Mortgagor. If, upon the resolution of such proceedings, the Mortgagor shall suffer a loss of the Mortgaged Property or any part thereof or interest therein and title insurance proceeds shall be payable in connection therewith, such proceeds are hereby assigned to and shall be paid to the Mortgagee for deposit into the Collateral Account and shall be applied in the manner applicable to Net Loss Proceeds in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) of the Indenture. SECTION 4.3 Maintenance and Use of Mortgaged Property; ------------------------------------------ Alterations. - ----------- (i) Maintenance. The Mortgagor shall cause the representations ----------- and warranties set forth in Section 3.3 hereof to continue to be true in each ----------- and every respect and shall pay or cause to be paid when due all Charges, costs and expenses relating thereto, other than such Charges being contested in accordance with Section 9.1 hereof. ----------- (ii) Maintenance of Premises. The Mortgagor shall not commit or ----------------------- suffer any waste on the Premises. The Mortgagor shall, at all times, maintain the Premises in good working order, condition and repair, reasonable wear and tear excepted, and shall use commercially reasonable efforts to make or cause to be made all repairs, structural or nonstructural, which are necessary or appropriate in the conduct of the Mortgagor's business. The Mortgagor shall not, except as permitted in Section 4.3(iii) hereof, alter the occupancy or use of ---------------- all or any portion of the Premises without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. Except to the extent permitted pursuant to the provisions of Section 4.3(iii) hereof, the ---------------- Mortgagor shall not remove, demolish or alter the structural character of any Improvement now or hereafter erected upon all or any portion of the Premises, or permit any such removal, demolition or alteration, without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. (iii) Alterations. The Mortgagor shall not, without the prior ----------- written consent of the Mortgagee, which consent shall not be unreasonably withheld, make any Alteration to the Premises except as permitted by Sections 10.04 and 10.06 of the Indenture. Whether or not the making of any Alteration shall require the consent of the Mortgagee pursuant to the immediately preceding sentence, the Mortgagor shall (A) complete each Alteration promptly, in a good and workmanlike manner and in compliance, in all material respects, with all applicable local laws, ordinances and requirements and (B) pay when due all claims for labor performed and materials furnished in connection with such Alteration, unless contested in accordance with the provisions of Article IX ---------- hereof. (iv) Permits. The Mortgagor shall maintain, or cause to be ------- maintained, in full force and effect all Permits contemplated by and subject to Section 3.3(i) hereof. Unless and to the extent contested by the Mortgagor in - -------------- accordance with the provisions of Article IX hereof, the Mortgagor shall comply, ---------- in all material respects, with all requirements set forth in the Permits and all Requirements of Law applicable to all or any portion of the Mortgaged Property or the condition, use or occupancy of all or any portion thereof or any recorded deed of restriction, declaration, covenant running with the land or otherwise, now or hereafter in force, subject to the provisions of Section ------- 3.3 hereof. - --- (v) Zoning. The Mortgagor shall not initiate, join in, or ------ consent to any change in the zoning or any other permitted use classification of the Premises without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. SECTION 4.4 Notices Regarding Certain Defaults. The Mortgagor ---------------------------------- shall, promptly upon receipt of any written notice regarding (i) any default by the Mortgagor relating to the Mortgaged Property or any portion thereof or (ii) the failure to discharge any of Mortgagor's obligations with respect to the Mortgaged Property or any portion thereof described herein, furnish a copy of such notice to the Mortgagee. SECTION 4.5 Access to Mortgaged Property, Books and Records; ------------------------------------------------ Other Information. Upon request to the Mortgagor, the Mortgagee, its agents, - ----------------- accountants and attorneys shall have full and free access to visit and inspect, as applicable, during normal business hours and such other reasonable time as may be requested by the Mortgagee to all of the Mortgaged Property including, without limitation, all of the books, correspondence and records of the Mortgagor relating thereto. The Mortgagee and its representatives may examine the same, take extracts therefrom and make photocopies thereof. The Mortgagor shall, at any and all times, within a reasonable time after written request by the Mortgagee, furnish or cause to be furnished to the Mortgagee, in such manner and in such detail as may be reasonably requested by the Mortgagee, additional information with respect to the Mortgaged Property. SECTION 4.6 Limitation on Liens; Transfer Restrictions. The ------------------------------------------ Mortgagor may not, without the prior written consent of the Mortgagee, further mortgage, encumber, hypothecate, sell, convey or assign all or any part of the Mortgaged Property or suffer or allow any of the foregoing to occur by operation of law or otherwise; provided, however, that the Mortgagor shall have the right -------- ------- to (1) sell, convey or assign all or any portion of the Mortgaged Property in accordance with the provisions of the Indenture and (2) suffer to exist the following Liens in respect of the Mortgaged Property: (i) Prior Liens (but not extensions, amendments, supplements or replacements of Prior Liens unless (A) extended, amended, supplemented or replaced in a manner permitted by the Indenture or (B) consented to by the Mortgagee which consent shall not be unreasonably withheld), (ii) the Lien and security interest created by this Mortgage or any other Collateral Document, (iii) Contested Liens, (iv) Liens described in clause (9) of the definition of Permitted Liens (provided, however, -------- ------- that such Liens shall not extend to or cover any Mortgaged Property other than equipment subject to Capital Leases, Obligations or Purchase Money Obligations incurred in accordance with the provisions of the Indenture) or clause (4) of the definition of Permitted Liens, and (v) Leases to the extent permitted pursuant to the provisions of Article V hereof (the Liens described in clauses --------- (i) through (v) of this sentence, collectively, "Permitted Collateral Liens"). -------------------------- SECTION 4.7 Environmental. ------------- (i) Hazardous Materials. The Mortgagor shall (A) comply with ------------------- any and all present and future Environmental Laws applicable to the Mortgaged Property, (B) not release, store, treat, handle, generate, discharge or dispose of any Hazardous Materials at, on, under or from the Mortgaged Property in violation of or in a manner that could result in any material liability under any present and future Environmental Law and (C) take all necessary steps to initiate and expeditiously complete all remedial, corrective and other action to eliminate any such effect. In the event the Mortgagor fails to comply with the covenants in the preceding sentence, the Mortgagee may, in addition to any other remedies set forth herein, as agent for the Mortgagor and at the Mortgagor's sole cost and expense, cause any remediation, removal or response action relating to Hazardous Materials required by applicable Environmental Laws to be taken and the Mortgagor shall provide to the Mortgagee and its agents and employees access to the Mortgaged Property for such purpose. Any reasonable costs or expenses incurred by the Mortgagee for such purpose shall be immediately due and payable by the Mortgagor and shall bear interest at the Default Rate. The Mortgagee shall have the right at any time when an Event of Default shall have occurred and be continuing and at such other times when a potential violation of any present or future Environmental Law exists which in the Mortgagee's reasonable judgment could result in any material liability or obligation under such Environmental Law, at the sole cost and expense of the Mortgagor, to conduct an environmental audit of the Mortgaged Property by such persons or firms appointed by the Mortgagee, and the Mortgagor shall cooperate in all respects in the conduct of such environmental audit, including, without limitation, by providing access to the Mortgaged Property and to all records relating thereto. To the extent that any such environmental audit identifies conditions which in the Mortgagee's reasonable judgment would result in any material liability or obligation under any present or future Environmental Law, the Mortgagor agrees to expeditiously correct any such violation or respond to conditions giving rise to such liability or obligations in a manner which complies in all material respects with the Environmental Laws and mitigates associated health and environmental risks. The Mortgagor shall indemnify and hold the Mortgagee and each of the other Secured Parties harmless from and against all loss, cost, damage or reasonable expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Mortgagee or any other Secured Party may sustain by reason of the assertion against the Mortgagee or any Secured Party by any party of any claim relating to such Hazardous Materials on, under or from the Mortgaged Property or actions taken with respect thereto as authorized hereunder, except to the extent arising from the gross negligence or willful misconduct of the Mortgagee or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof; and (ii) Asbestos. The Mortgagor shall not install nor permit to be -------- installed in or removed from the Mortgaged Property, asbestos or any asbestos-containing material (collectively, "ACM") except in compliance, in all material respects, with all applicable Environmental Laws, and with respect to any ACM currently present in the Mortgaged Property, the Mortgagor shall promptly either (A) remove any ACM which such Environmental Laws require to be removed or (B) otherwise comply, in all material respects, with such Environmental Laws with respect to such ACM, all at the Mortgagor's sole cost and expense. If the Mortgagor shall fail so to remove any ACM or otherwise comply, in all material respects, with such laws or regulations, the Mortgagee may, in addition to any other remedies set forth herein, take reasonable or necessary steps to eliminate any ACM from the Mortgaged Property or otherwise comply, in all material respects, with applicable law, regulations or orders and the Mortgagor shall provide to the Mortgagee and its agents and employees access to the Mortgaged Property for such purpose. Any reasonable costs or expenses incurred by the Mortgagee for such purpose shall be immediately due and payable by the Mortgagor and bear interest at the Default Rate. The Mortgagor shall indemnify and hold the Mortgagee and the other Secured Parties harmless from and against all loss, cost, damage and expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Mortgagee or the other Secured Parties may sustain, as a result of the presence of any ACM and any removal thereof or compliance with all applicable Environmental Laws, except to the extent arising from the gross negligence or willful misconduct of the Mortgagee or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof. SECTION 4.8 Estoppel Certificates. The Mortgagor shall, from --------------------- time to time, upon thirty (30) days' prior written reasonable request of the Mortgagee, execute, acknowledge and deliver to the Mortgagee an Officers' Certificate stating that this Mortgage, the Indenture, the Notes and the Collateral Documents are unmodified and in full force and effect (or, if there have been modifications, that this Mortgage, the Indenture, the Notes and the Collateral Documents, as applicable, is or are in full force and effect as modified and setting forth such modifications) and stating the date to which principal and interest have been paid on the Notes. ARTICLE V LEASES SECTION 5.1 Mortgagor's Affirmative Covenants with Respect to ------------------------------------------------- Leases. With respect to each Lease, the Mortgagor shall: - ------ (i) observe and perform, in all material respects, all the obligations imposed upon the Landlord under such Lease; (ii) promptly send copies to the Mortgagee of all notices of default which the Mortgagor shall send or receive thereunder; and (iii) enforce all of the terms, covenants and conditions contained in such Lease upon the part of the Tenant thereunder to be observed or performed to the extent it would be commercially reasonable to do so. SECTION 5.2 Mortgagor's Negative Covenants with Respect to ---------------------------------------------- Leases. With respect to each Lease, the Mortgagor shall not, without the prior - ------ written consent of the Mortgagee, which consent shall not be unreasonably withheld: (i) receive or collect, or permit the receipt or collection of, any Rent under such Lease more than one (1) month in advance of the respective period in respect of which such Rent is to accrue, except: (A) in connection with the execution and delivery of such Lease (or of any amendment to such Lease), Rent thereunder may be collected and received in advance in an amount not in excess of one (1) month's Rent; (B) the amount held by Landlord as a reasonable security deposit thereunder; and (C) any amount received and collected for escalation and other charges in accordance with the terms of such Lease; (ii) assign, transfer or hypothecate (other than to the Mortgagee hereunder) any Rent under such Lease whether then due or to accrue in the future or the interest of the Mortgagor as Landlord under such Lease; (iii) enter into any amendment or modification of such Lease which would materially decrease the unexpired term thereof or decrease the amount of the Rents payable thereunder or materially impair the value or utility of the Mortgaged Property or the security provided by this Mortgage; (iv) terminate (whether by exercising any contractual right of the Mortgagor to recapture leased space or otherwise) or permit the termination of such Lease or accept surrender of all or any portion of the space demised under such Lease prior to the end of the term thereof or accept assignment of such Lease to the Mortgagor unless: (A) the Tenant under such Lease has not paid the equivalent of two (2) months' Rent and the Mortgagor has made reasonable efforts to collect such Rent; and (B) it would be commercially reasonable to terminate such Lease; or (v) waive, excuse, condone or in any manner discharge or release any Tenants of or from the material obligations of such Tenants under their respective Leases or guarantors of Tenants from any material obligations under any guarantees of the Leases except as the same would be done by a Prudent Operator with due regard for the security afforded the Mortgagee thereby. SECTION 5.3 Additional Requirements with Respect to New Leases. -------------------------------------------------- In addition to the requirements of Sections 5.1 and 5.2 hereof, the Mortgagor ------------ --- shall not enter into any Lease after the date hereof unless the Tenant under such Lease has entered into a Subordination Agreement and has otherwise complied with the provisions of Section 10.06 of the Indenture. ------------- ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Mortgagor. -------------------------------------------- Section 2.2 of this Mortgage constitutes a present, absolute, effective, irrevocable and complete assignment by the Mortgagor to the Mortgagee of the Leases and Rents and the right, subject to applicable law, to collect all sums payable to the Mortgagor thereunder and apply the same as the Mortgagee may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Mortgaged Property), which is not conditioned upon the Mortgagee being in possession of the Premises. The Mortgagee hereby grants to the Mortgagor, however, a license to collect and apply the Rents and to enforce the obligations of Tenants under the Leases. Immediately upon the occurrence of and during the continuance of any Event of Default or a Default, the license granted in the immediately preceding sentence shall cease and terminate, with or without any notice, action or proceeding or the intervention of a receiver appointed by a court. SECTION 6.2 Collection of Rents by the Mortgagee. ------------------------------------ (i) From and after the occurrence and during the continuance of an Event of Default or a Default, any Rents receivable by the Mortgagee hereunder, after payment of all proper costs and expenses as Mortgagee may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Mortgaged Property), shall be applied to the Secured Obligations or, at the option of the Mortgagee, shall be held by the Mortgagee as additional collateral to secure the performance by the Mortgagor of the Secured Obligations. The Mortgagee shall be accountable to the Mortgagor only for Rents actually received by the Mortgagee. The collection of such Rents and the application thereof shall not cure or waive any Event of Default or a Default or waive, modify or affect notice of Event of Default or a Default or invalidate any act done pursuant to such notice. (ii) The Mortgagor hereby irrevocably authorizes and directs Tenant under each Lease to rely upon and comply with any and all notices or demands from the Mortgagee for payment of Rents to the Mortgagee and the Mortgagor shall have no claim against Tenant for Rents paid by Tenant to the Mortgagee pursuant to such notice or demand. SECTION 6.3 No Release. Neither this Mortgage nor any action or ------- inaction on the part of the Mortgagee shall release any Tenant under any Lease, any guarantor of any Lease or the Mortgagor from any of their respective obligations under such Leases or constitute an assumption of any such obligation on the part of the Mortgagee. No action or failure to act on the part of the Mortgagor shall adversely affect or limit the rights of the Mortgagee under this Mortgage or, through this Mortgage, under such Leases. Nothing contained herein shall operate or be construed to (i) obligate the Mortgagee to perform any of the terms, covenants or conditions contained in any Lease or otherwise to impose any obligation upon the Mortgagee with respect to such Lease (including, without limitation, any obligation arising out of any covenant of quiet enjoyment contained in such Lease in the event that Tenant under such Lease shall have been joined as a party defendant in any action by which the estate of such Tenant shall be terminated) or (ii) place upon the Mortgagee any obligation for the operation, control, care, management or repair of the Premises. SECTION 6.4 Irrevocable Interest. All rights, powers and -------------------- privileges of the Mortgagee herein set forth are coupled with an interest and are irrevocable, subject to the terms and conditions hereof, and the Mortgagor shall not take any action under the Leases or otherwise which is inconsistent with this Mortgage or any of the terms hereof and any such action inconsistent herewith or therewith shall be void. SECTION 6.5 Amendment to Leases. Each Lease, including, without ------------------- limitation, all amendments, modifications, supplements, replacements, extensions and renewals thereof, shall continue to be subject to the provisions hereof without the necessity of any further act by any of the parties hereto. ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges. Unless and to the extent ------------------ contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall pay and discharge, or cause to be paid and discharged, from time to time when the same shall become due (or within any applicable grace period) , all Charges subject to this Article VII. The ----------- Mortgagor shall, upon the Mortgagee's request, deliver to the Mortgagee receipts evidencing the payment of all such Charges. SECTION 7.2 Escrow of Taxes. From and after the occurrence and --------------- during the continuance of an Event of Default or a Default, at the option and upon the request of the Mortgagee, the Mortgagor shall deposit with the Mortgagee in an account maintained by the Mortgagee (the "Tax Escrow Fund"), on --------------- the first day of each month, an amount estimated by the Mortgagee to be equal to one-twelfth of the annual real property taxes and other annual Charges required to be discharged by the Mortgagor under Section 7.1 hereof. Such amounts shall ----------- be held by the Mortgagee without interest to the Mortgagor and applied to the payment of the obligations in respect of which such amounts were deposited, in such priority as the Mortgagee shall determine, on or before the respective dates on which such obligations or any part thereof would become delinquent. Nothing contained in this Article VII shall (i) affect any right or remedy of ----------- the Mortgagee under any provision hereof or of any statute or rule of law to pay any such amount as provided above from its own funds and to add the amount so paid, together with interest at the Default Rate during such time that any amount remains outstanding, to the Secured Obligations or (ii) relieve the Mortgagor of its obligations to make or provide for the payment of the annual real property taxes and other annual Charges required to be discharged by the Mortgagor under Section 7.1 hereof. ----------- SECTION 7.3 Certain Statutory Liens. Unless and to the extent ----------------------- contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall timely pay, or cause to be paid, all lawful claims and demands of mechanics, materialmen, laborers, government agencies administering worker's compensation insurance, old age pensions and social security benefits and all other claims, judgments, demands or amounts of any nature which, if unpaid, would result in, or permit the creation of, a Lien on the Mortgaged Property or any part thereof, or which would result in forfeiture of all or any part of the Mortgaged Property. SECTION 7.4 Stamp and Other Taxes. Unless and to the extent --------------------- contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall pay any United States documentary stamp taxes, with interest and fines and penalties, and any mortgage recording taxes, with interest and fines and penalties, that may hereafter be levied, imposed or assessed under or upon or by reason hereof or the Secured Obligations or any instrument or transaction affecting or relating to either thereof and in default thereof the Mortgagee may advance the same and the amount so advanced shall be payable by the Mortgagor to the Mortgagee in accordance with the provisions of Section 14.5 hereof. - ------------ SECTION 7.5 Certain Tax Law Changes. In the event of the ----------------------- passage after the date hereof of any law deducting from the value of real property, for the purpose of taxation, amounts in respect of any Lien thereon or changing in any way the laws for the taxation of mortgages or debts secured by mortgages for state or local purposes or the manner of the collection of any Charges, and imposing any Charges, either directly or indirectly, on this Mortgage, the Indenture or any other Collateral Document, the Mortgagor shall promptly pay to the Mortgagee such amount or amounts as may be necessary from time to time to pay any such Charges. SECTION 7.6 Proceeds of Tax Claim. In the event that the --------------------- proceeds of any tax claim are paid after the Mortgagee has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Mortgagee to satisfy any deficiency remaining after such foreclosure. The Mortgagee shall retain its interest in the proceeds of any tax claim during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Mortgagee shall in a prompt manner be released to the Mortgagor. ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages. The Mortgagor ----------------------------------------- shall maintain in respect of the Premises the insurance policies and coverages required under Section 4.19(b) of the Indenture. SECTION 8.2 Delivery After Foreclosure. In the event that the proceeds -------------------------- of any insurance claim are paid after the Mortgagee has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Mortgagee to satisfy any deficiency remaining after such foreclosure. Mortgagee shall retain its interest in the Insurance Policies required to be maintained pursuant to this Mortgage during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Mortgagee shall be released to the Mortgagor. ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens. The ----------------------------------------------- Mortgagor may at its own expense contest the validity, amount or applicability of any Charges as long as the contest thereof shall be conducted in accordance with, and permitted pursuant to the provisions of, the Indenture. Notwithstanding the foregoing provisions of this Section 9.1, (i) no contest of ----------- any such obligations may be pursued by the Mortgagor (A) if such contest would expose the Mortgagee or any Holder to any possible criminal liability or (B) unless the Mortgagor shall have furnished a bond or other security therefor reasonably satisfactory to the Mortgagee or such Holder, as the case may be, any additional civil liability for failure to comply with such obligations and (ii) if at any time payment or performance of any obligation contested by the Mortgagor pursuant to this Section 9.1 shall become necessary to prevent the ----------- imminent imposition of remedies because of non-payment, the Mortgagor shall pay or perform the same in sufficient time to prevent the imposition of remedies in respect of such default or prospective default. SECTION 9.2 Contesting of Insurance. The Mortgagor shall not take any ----------------------- action that would reasonably be expected to cause the termination, revocation or denial of any insurance coverage required to be maintained under this Mortgage or that would be the basis for a defense to any claim under any Insurance Policy maintained in respect of the Premises and the Mortgagor shall otherwise comply in all respects with all Insurance Requirements in respect of the Premises; provided, however, that the Mortgagor may, at its own expense and after written - -------- ------- notice to the Mortgagee, (i) contest the applicability or enforceability of any such Insurance Requirements by appropriate legal proceedings, prosecution of which does not constitute a basis for cancellation or revocation of any insurance coverage required under Article VIII hereof or (ii) cause the ------------ Insurance Policy containing any such Insurance Requirement to be replaced by a new policy complying with the provisions of Article VIII hereof. ------------ ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction. If there shall occur any Destruction, ----------- individually or in the aggregate, in excess of $100,000, the Mortgagor shall promptly send to the Mortgagee a written notice setting forth the nature and extent of such Destruction. The proceeds of any insurance payable in respect of such Destruction are hereby assigned and shall be paid to the Mortgagee. The Net Loss Proceeds arising out of such Destruction, shall be applied in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) the Indenture. SECTION 10.2 Condemnation. If there shall occur any Taking or the ------------ commencement of any proceeding thereof, the Mortgagor shall immediately notify the Mortgagee upon receiving notice of such Taking or commencement of proceedings therefor. The Mortgagee may, at its option, participate in any proceedings or negotiations which might result in any Taking, and the Mortgagor shall deliver or cause to be delivered to the Mortgagee all instruments requested by it to permit such participation. The Mortgagee may be represented by counsel reasonably satisfactory to it at the reasonable expense of the Mortgagor in connection with any such participation. The Mortgagor shall pay all reasonable fees, costs and expenses incurred by the Mortgagee in connection with any Taking and in seeking and obtaining any award or payment on account thereof. Any proceeds, award or payment in respect of any Taking are hereby assigned and shall be paid to the Mortgagee. The Mortgagor shall take all steps necessary to notify the condemning authority of such assignment. The Net Loss Proceeds arising out of such Taking shall be applied in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) the Indenture. ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default. It shall be an Event of Default ----------------- hereunder if there shall have occurred and be continuing an Event of Default under the Indenture. SECTION 11.2 Remedies in Case of an Event of Default. If any Event of --------------------------------------- Default shall have occurred and be continuing, the Mortgagee may at its option, in addition to any other action permitted under this Mortgage or the Indenture or by law, statute or in equity, take one or more of the following actions to the greatest extent permitted by local law: (i) by written notice to the Issuer and the Mortgagor, declare the entire unpaid amount of the Secured Obligations to be due and payable immediately; (ii) personally, or by its agents or attorneys, (A) enter into and upon and take possession of all or any part of the Premises together with the books, records and accounts of the Mortgagor relating thereto and, exclude the Mortgagor, its agents and servants wholly therefrom, (B) use, operate, manage and control the Premises and conduct the business thereof, (C) maintain and restore the Premises, (D) make all necessary or proper repairs, renewals and replacements and such useful Alterations thereto and thereon as the Mortgagee may deem advisable, (E) manage, lease and operate the Premises and carry on the business thereof and exercise all rights and powers of the Mort- gagor with respect thereto either in the name of the Mortgagor or otherwise or (F) collect and receive all Rents. The Mortgagee shall be under no liability for or by reason of any such taking of possession, entry, removal or holding, operation or management except that any amounts so received by the Mortgagee shall be applied in accordance with the provisions of the Indenture; (iii) with or without entry, personally or by its agents or attorneys, (A) sell the Mortgaged Property and all estate, right, title and interest, claim and demand therein at one or more sales in one or more parcels, in accordance with the provisions of Section 11.3 or (B) institute and prosecute proceedings for the complete or partial foreclosure of the Lien and security interests created and evidenced hereby; or (iv) take such steps to protect and enforce its rights whether by action, suit or proceeding at law or in equity for the specific performance of any covenant, condition or agreement in the Indenture, the Notes and the Collateral Documents, or in aid of the execution of any power granted in this Mortgage, or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy or otherwise as the Mortgagee shall elect. SECTION 11.3 Sale of Mortgaged Property if Event of Default Occurs; ------------------------------------------------------ Proceeds of Sale. - ---------------- (i) If any Event of Default shall have occurred and be continuing, the Mortgagee may institute an action to foreclose this Mortgage or take such other action as may be permitted and available to the Mortgagee at law or in equity for the enforcement of the Indenture and the Notes and realization on the Mortgaged Property and proceeds thereon through power of sale or to final judgment and execution thereof for the Secured Obligations, and in furtherance thereof the Mortgagee may sell the Mortgaged Property at one or more sales, as an entirety or in parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law or statute or in equity. The Mortgagee may execute and deliver to the purchaser at such sale a conveyance of the Mortgaged Property in fee simple and an assignment or conveyance of all the Mortgagor's Interest in the Leases and the Mortgaged Property, each of which conveyances and assignments shall contain recitals as to the Event of Default upon which the execution of the power of sale herein granted depends, and the Mortgagor hereby constitutes and appoints the Mortgagee the true and lawful attorney in fact of the Mortgagor to make any such recitals, sale, assignment and conveyance, and all of the acts of the Mortgagee as such attorney in fact are hereby ratified and confirmed. The Mortgagor agrees that such recitals shall be binding and conclusive upon the Mortgagor and that any assignment or conveyance to be made by the Mortgagee shall divest the Mortgagor of all right, title, interest, equity and right of redemption, including any statutory redemption, in and to the Mortgaged Property. The power and agency hereby granted are coupled with an interest and are irrevocable by death or dissolution, or otherwise, and are in addition to any and all other remedies which the Mortgagee may have hereunder, at law or in equity. So long as the Secured Obligations, or any part thereof, remain unpaid, the Mortgagor agrees that possession of the Mortgaged Property by the Mortgagor, or any person claiming under the Mortgagor, shall be as tenant, and, in case of a sale under power or upon foreclosure as provided in this Mortgage, the Mortgagor and any person in possession under the Mortgagor, as to whose interest such sale was not made subject, shall, at the option of the purchaser at such sale, then become and be tenants holding over, and shall forthwith deliver possession to such purchaser, or be summarily dispossessed in accordance with the laws applicable to tenants holding over. In case of any sale under this Mortgage by virtue of the exercise of the powers herein granted, or pursuant to any order in any judicial proceeding or otherwise, the Mortgaged Property may be sold as an entirety or in separate parcels in such manner or order as the Mortgagee in its sole discretion may elect. One or more exercises of powers herein granted shall not extinguish or exhaust such powers, until the entire Mortgaged Property is sold or all amounts secured hereby are paid in full. (ii) In the event of any sale made under or by virtue of this Article XI, the entire principal of, and interest in respect of the Secured - ---------- Obligations, if not previously due and payable, shall, at the option of the Mortgagee, immediately become due and payable, anything in this Mortgage to the contrary notwithstanding. (iii) The proceeds of any sale made under or by virtue of this Article XI, together with any other sums which then may be held by the Mortgagee - ---------- under this Mortgage, whether under the provisions of this Article XI or ---------- otherwise, shall be applied in accordance with the provisions of the Indenture; (iv) The Mortgagee may bid for and acquire the Mortgaged Property or any part thereof at any sale made under or by virtue of this Article XI and, ---------- in lieu of paying cash therefor, may make settlement for the purchase price by crediting against the purchase price the unpaid amounts (whether or not then due and owing) in respect of the Secured Obligations, after deducting from the sales price the expense of the sale and the reasonable costs of the action or proceedings and any other sums that the Mortgagee is authorized to deduct under this Mortgage. (v) The Mortgagee may adjourn from time to time any sale by it to be made under or by virtue hereof by announcement at the time and place appointed for such sale or for such adjourned sale or sales, and, the Mortgagee, without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned. (vi) If the Premises is comprised of more than one parcel of land, the Mortgagee may take any of the actions authorized by this Section 11.3 in ------------ respect of any or a number of individual parcels. SECTION 11.4 Additional Remedies in Case of an Event of Default. -------------------------------------------------- (i) The Mortgagee shall be entitled to recover judgment as aforesaid either before, after or during the pendency of any proceedings for the enforcement of the provisions hereof, and the right of the Mortgagee to recover such judgment shall not be affected by any entry or sale hereunder, or by the exercise of any other right, power or remedy for the enforcement of the provisions hereof, or the foreclosure of, or absolute conveyance pursuant to, this Mortgage. In case of proceedings against the Mortgagor in insolvency or bankruptcy or any proceedings for its reorganization or involving the liquidation of its assets, the Mortgagee shall be entitled to prove the whole amount of principal and interest and other payments, charges and costs due in respect of the Secured Obligations to the full amount thereof without deducting therefrom any proceeds obtained from the sale of the whole or any part of the Mortgaged Property; provided, however, that in no case shall the Mortgagee -------- ------- receive a greater amount than the aggregate of such principal, interest and such other payments, charges and costs (with interest at the Default Rate) from the proceeds of the sale of the Mortgaged Property and the distribution from the estate of the Mortgagor. (ii) Any recovery of any judgment by the Mortgagee and any levy of any execution under any judgment upon the Mortgaged Property shall not affect in any manner or to any extent the Lien and security interests created and evidenced hereby upon the Mortgaged Property or any part thereof, or any conveyances, powers, rights and remedies of the Mortgagee hereunder, but such conveyances, powers, rights and remedies shall continue unimpaired as before. (iii) Any monies collected by the Mortgagee under this Section 11.4 ------------ shall be applied in accordance with the provisions of Section 11.3(iii). ----------------- SECTION 11.5 Legal Proceedings After an Event of Default. ------------------------------------------- (i) After the occurrence and during the continuance of any Event of Default and immediately upon the commencement of any action, suit or legal proceedings to obtain judgment for the Secured Obligations or any part thereof, or of any proceedings to foreclose the Lien and security interest created and evidenced hereby or otherwise enforce the provisions hereof or of any other proceedings in aid of the enforcement hereof, the Mortgagor shall enter its voluntary appearance in such action, suit or proceeding. (ii) Upon the occurrence and during the continuance of an Event of Default, the Mortgagee shall be entitled forthwith as a matter of right, concurrently or independently of any other right or remedy hereunder either before or after declaring the Secured Obligations or any part thereof to be due and payable, to the appointment of a receiver without giving notice to any party and without regard to the adequacy or inadequacy of any security for the Secured Obligations or the solvency or insolvency of any person or entity then legally or equitably liable for the Secured Obligations or any portion thereof. The Mortgagor hereby consents to the appointment of such receiver. Notwithstanding the appointment of any receiver, the Mortgagee shall be entitled as pledgee to the possession and control of any cash, deposits or instruments at the time held by or payable or deliverable under the terms of the Indenture to the Mortgagee. (iii) The Mortgagor shall not (A) at any time insist upon, or plead, or in any manner whatsoever claim or take any benefit or advantage of any stay or extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance hereof, (B) claim, take or insist on any benefit or advantage of any law now or hereafter in force providing for the valuation or appraisal of the Mortgaged Property, or any part thereof, prior to any sale or sales of the Mortgaged Property which may be made pursuant to this Mortgage, or pursuant to any decree, judgment or order of any court of competent jurisdiction or (C) after any such sale or sales, claim or exercise any right under any statute heretofore or hereafter enacted to redeem the property so sold or any part thereof. To the extent permitted by applicable law, the Mortgagor hereby expressly (A) waives all benefit or advantage of any such law or laws, including, without limitation, any statute of limitations applicable to this Mortgage, (B) waives all rights to have the Mortgaged Property marshalled on any foreclosure of this Mortgage, (C) waives any and all rights to trial by jury in any action or proceeding related to the enforcement hereof, (D) waives any objection which it may now or hereafter have to the laying of venue of any action, suit or proceeding brought in connection with this Mortgage and further waives and agrees not to plead that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum and (E) covenants not to hinder, delay or impede the execution of any power granted or delegated to the Mortgagee by this Mortgage but to suffer and permit the execution of every such power as though no such law or laws had been made or enacted. The Mortgagee shall not be liable for any incorrect or improper payment made pursuant to this Article XI in the absence of ---------- gross negligence or willful misconduct. SECTION 11.6 Remedies Not Exclusive. No remedy conferred upon or ---------------------- reserved to the Mortgagee by this Mortgage is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Mortgage or now or hereafter existing at law or in equity. Any delay or omission of the Mortgagee to exercise any right or power accruing on any Event of Default shall not impair any such right or power and shall not be construed to be a waiver of or acquiescence in any such Event of Default. Every power and remedy given by this Mortgage may be exercised from time to time concurrently or independently, when and as often as may be deemed expedient by the Mortgagee in such order and manner as the Mortgagee, in its sole discretion, may elect. If the Mortgagee accepts any monies required to be paid by the Mortgagor under this Mortgage after the same become due, such acceptance shall not constitute a waiver of the right either to require prompt payment, when due, of all other sums secured by this Mortgage or to declare an Event of Default with regard to subsequent defaults. If the Mortgagee accepts any monies required to be paid by the Mortgagor under this Mortgage in an amount less than the sum then due, such acceptance shall be deemed an acceptance on account only and on the condition that it shall not constitute a waiver of the obligation of the Mortgagor to pay the entire sum then due, and the Mortgagor's failure to pay the entire sum then due shall be and continue to be a default hereunder notwithstanding acceptance of such amount on account. SECTION 11.7 Special Louisiana Provisions. ---------------------------- (i) Without limiting the generality of the foregoing, should one or more Events of Default occur or exist and be continuing under this Mortgage, as provided above, the Mortgagee, at its option, may exercise any one or more of this following rights and remedies, in addition to any other rights and remedies provided by law and under this Mortgage to the greatest extent permitted by applicable Louisiana law. Nothing contained herein shall be construed as constituting the Mortgagee as mortgagee in possession in absence of the actual taking of possession of the Premises by the Mortgagee. (ii) The Mortgagee shall have the right, at its sole option, to accelerate the maturity and demand immediate payment in full of any and all of the Secured Obligations. The Mortgagee shall then have the right to commence appropriate foreclosure proceedings against the Mortgaged Property and against the Mortgagor's rights as provided in this Mortgage. (iii) In the event that the Mortgagee elects to commence appropriate Louisiana foreclosure proceedings under this Mortgage, the Mortgagee may cause the Mortgaged Property, or any part or parts thereof, to be immediately seized and sold, whether in term of court or in vacation, under ordinary or executory process, in accordance with applicable Louisiana law, to the highest bidder for cash, with or without appraisement, and without the necessity of making additional demand upon or notifying the Mortgagor or placing the Mortgagor in default, all of which are expressly waived. (iv) For purposes of foreclosure under Louisiana executory process procedures, the Mortgagor confesses judgment and acknowledges to be indebted to the Mortgagee, up to the full amount of the indebtedness in principal, interest, costs, expenses, reasonable attorney's fees and other fees and charges and amounts contemplated hereunder. The Mortgagor further confesses judgment and acknowledges to be indebted unto and in favor of the Mortgagee in the amount of all future advances that the Mortgagee may make on the Mortgagor's behalf pursuant to this Mortgage, together with interest thereon. To the extent permitted under applicable Louisiana law, the Mortgagor additionally waives: (1) the benefit of appraisal as provided in Articles 2332, 2336, 2723, and 2724 of the Louisiana Code of Civil Procedure, and all other laws with regard to appraisal upon judicial sale; (2) the demand and three (3) days' delay provided under Articles 22639 and 2721 of the Louisiana Code of Civil Procedure; (3) the notice of seizure as provided under Articles 2293 and 2721 of the Louisiana Code of Civil Procedure; (4) the three (3) days' delay provided under Articles 2331, 2722 and 2723 of the Louisiana Code of Civil Procedure and all other Articles not specifically mentioned above. The Mortgagor further agrees that any declaration of fact made by authentic act before a Notary Public and two witnesses, by a Person declaring that such facts are within his or her knowledge, shall constitute authentic evidence of such facts for purposes of foreclosure under applicable Louisiana law and for purposes of La, R.S. 9:3504(D)(6) and La. R.S. 10:9-508, to the extent applicable. (v) Should any or all of the Mortgaged Property be seized as an incident to an action for the recognition or enforcement of this Mortgage, by executory process, sequestration, attachment, writ of fieri facias or otherwise, the Mortgagor hereby agrees that the court issuing any such order shall, if requested by the Mortgagee, appoint the Mortgagee, or any agent designated by the Mortgagee or any Person named by the Mortgagee at the time such seizure is requested, or any time thereafter, as Keeper of the Mortgaged Property as provided under La. R.S. 9:5136, et seq. Such a Keeper shall be entitled to reasonable compensation. The Mortgagor agrees to pay the reasonable fees of such Keeper which compensation to the Keeper shall also be secured by this Mortgage in the form of an future advances as provided in this Mortgage. (vi) Should it become necessary for the Mortgagee to foreclose under this Mortgage, all declarations of fact, which are made under an authentic act before a Notary Public in the presence of two witnesses, by a person declaring such facts to lie within his or her knowledge, shall constitute authentic evidence for purposes of executory process and also for purposes of La. R.S. 9:3509.1, La. R.S. 9:3504(D)(6) and La. R.S. 10:9-508, where applicable. (vii) Should one or more Events of Default occur or exist under this Mortgage, the Mortgagee shall have the additional right, at its sole option, to separately sell the aforesaid rights, or any part of parts thereof, at private or public compensation, or on credit, or for future delivery, without the assumption of any credit risk. The sale of the aforesaid rights may be without appraisement, the benefit of which is also expressly waived by the Mortgagor. The Mortgagee may exercise any other remedies with regard to the Mortgagor's rights as may be authorized under the Louisiana Commercial Laws (La. R.S. 10:9-101, et seq.). (viii) To the extent provided by law, and in the event of foreclosure under this Mortgage, or other transfer of title or assignment of the Mortgaged Property, or any part or parts thereof, in lieu of payment of the Secured Obligations, whether in whole or in part, all policies of insurance and other rights applicable to the foreclosed Mortgaged Property upon transfer of the Mortgaged Property shall automatically inure to the benefit of and shall pass to the purchaser(s) or transferee(s) thereof, subject to the rights of the purchaser(s) or transferee(s) to reject such insurance coverage and/or rights at its or their sole option and election. (ix) The Mortgagee may, in addition to or in lieu of the foregoing remedies, in the Mortgagee's sole discretion, commence an appropriate action against the Mortgagor seeking specific performance of any covenant contained in this Mortgage or in aid of the execution or enforcement of any power in this Mortgage granted. (x) Except as may be prohibited by applicable law, all of the Mortgagee's rights and remedies, whether evidenced by this Mortgage or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by the Mortgagee to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of the Mortgagor under this Mortgage, after the Mortgagor's failure to perform shall not affect the Mortgagee's right to declare a default and exercise its remedies. Nothing under this Mortgage or otherwise shall be construed so as to limit or restrict the rights and remedies available to the Mortgagee following an Event of Default, or in any way to limit or restrict the rights and abilities of the Mortgagee to proceed directly against Mortgagor and/or against any other co-maker, guarantor, surety or endorser of the Secured Obligations, and/or to proceed against any other collateral directly or indirectly securing the Secured Obligations. ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement. ------------------ (i) This Mortgage shall constitute a Security Agreement as defined in the Louisiana Commercial Laws, La. R.S.ss.10:101 et seg., and shall create and evidence a security interest in all the equipment and in all the other items of Mortgaged Property in which a security interest may be granted pursuant to the Louisiana Commercial Laws (collectively, "Personal Property"). (ii) The remedies for any violation of the covenants, terms and conditions of the agreements herein contained shall be as prescribed herein or by general Louisiana law or, as to such part of the security which is also reflected in any Financing Statement filed to perfect the security interest herein created, by the specific statutory provisions now or hereinafter enacted and specified in the Louisiana Commercial Laws, all at Mortgagee's sole election. The mention in any financing statement of (1) the rights in or the proceeds of any fire or hazard insurance policy, or (2) any award in eminent domain proceedings for a taking or for loss of value, or (3) Mortgagor's interest as lessor in any present or future lease or rights to income growing out of the use or occupancy of the Mortgaged Property whether pursuant to lease or otherwise, shall never be construed as in any way altering any of the rights of Mortgagee under this Mortgage or impugning the priority of the Mortgagee's lien granted hereby or by any other recorded document. Rather, such mention in the financing statement is declared to be for the protection of the Mortgagee in the event any court or judge shall at any time hold with respect to (1), (2) and (3) above, that notice of Mortgagee's priority of interest to be effective against a particular class of persons, including, but not limited to, the Federal Government and any subdivisions or entity of the Federal Government, must be filed with the clerk of court of any parish (or Lafourche Parish Recorder of Mortgages) pursuant to Section 9-401 of the Lou-isiana Commercial Laws. SECTION 12.2 Fixture Filing. From the date of its recording, -------------- this Mortgage shall be effective as a fixture financing statement with respect to all goods constituting part of the Mortgaged Property which are to become fixtures related to the Land. For this purpose, the following information is set forth: (a) Name and Address of Debtor: Raceland Truck Plaza and Casino, L.L.C., 109 S. Service Road Raceland, Louisiana 70394 TIN 72-147884 and (b) Name and Address of Secured Party: Wells Fargo Bank Minnesota, National Association Corporate Trust Services 213 Court Street, Suite 902 Middletown, Connecticut 06457 (c) This document covers goods which are to become fixtures. All items that are fixtures on the date of this Mortgage shall be subject to the mortgage Lien granted hereunder. ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security. The ------------------------------------------ Mortgagor shall, forthwith after the execution and delivery hereof and thereafter, from time to time, cause this Mortgage and any financing statement, continuation statement or similar instrument relating to any thereof or to any property intended to be subject to the Lien hereof to be filed, registered and recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the validity and priority thereof or the Lien hereof purported to be created upon the Mortgaged Property and the interest and rights of the Mortgagee therein. The Mortgagor shall pay or cause to be paid all taxes and fees incident to such filing, registration and recording, and all reasonable expenses incident to the preparation, execution and acknowledgment thereof, and of any instrument of further assurance, and all Federal or state stamp taxes or other taxes, duties and charges arising out of or in connection with the execution and delivery of such instruments. SECTION 13.2 Further Acts. The Mortgagor shall, at the sole ------------ cost and expense of the Mortgagor, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers, financing statements, continuation statements, instruments and assurances as the Mortgagee shall from time to time reasonably request, which may be necessary in the judgment of the Mortgagee from time to time to assure, perfect, convey, assign, mortgage, transfer and confirm unto the Mortgagee, the property and rights hereby conveyed or assigned or which the Mortgagor may be or may hereafter become bound to convey or assign to the Mortgagee or for carrying out the intention or facilitating the performance of the terms hereof or the filing, registering or recording hereof. Without limiting the generality of the foregoing, in the event that the Mortgagee desires to exercise any remedies, consensual rights or attorney-in-fact powers set forth in this Mortgage and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other Person therefor, then, upon the reasonable request of the Mortgagee, the Mortgagor agrees to use its reasonable efforts to assist and aid the Mortgagee to obtain as soon as practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers. In the event the Mortgagor shall fail (i) within ten (10) Business Days after demand, to execute or take any action required to be executed or taken by the Mortgagor under this Section 13.2 to the extent same ------------ is necessary to maintain perfection of the Lien granted to Mortgagee hereunder or (ii) such failure shall constitute an Event of Default, to execute or take any action required to be executed or taken by the Mortgagor under this Section ------- 13.2 (other than the type described in clause (i) of this sentence) then, in - ---- each of the cases described in clauses (i) and (ii) of this sentence, the Mortgagee may execute or take the same as the attorney-in-fact for the Mortgagor, such power of attorney being coupled with an interest and is irrevocable. SECTION 13.3 Additional Security. Without notice to or consent ------------------- of the Mortgagor and without impairment of the Lien and rights created by this Mortgage, the Mortgagee may accept (but the Mortgagor shall not be obligated to furnish) from the Mortgagor or from any other Person, additional security for the Secured Obligations. Neither the giving hereof nor the acceptance of any such additional security shall prevent the Mortgagee from resorting, first, to such additional security, and, second, to the security created by this Mortgage without affecting the Mortgagee's Lien and rights under this Mortgage. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Land. All of the grants, ------------------------------ covenants, terms, provisions and conditions in this Mortgage shall run with the Land and shall apply to, and bind the successors and assigns of, the Mortgagor. If there shall be more than one mortgagor with respect to the Mortgaged Property, the covenants and warranties hereof shall be joint and several. SECTION 14.2 No Merger. The rights and estate created by this --------- Mortgage shall not, under any circumstances, be held to have merged into any other estate or interest now owned or hereafter acquired by the Mortgagee unless the Mortgagee shall have consented to such merger in writing, such consent not to be unreasonably withheld. SECTION 14.3 Concerning Mortgagee. -------------------- (i) The Mortgagee has been appointed as trustee pursuant to the Indenture. The actions of the Mortgagee hereunder are subject to the provisions of the Indenture. The Mortgagee shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of the Mortgaged Property), in accordance with this Mortgage and the Indenture. The Mortgagee may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. The Mortgagee may resign and a successor Mortgagee may be appointed in the manner provided in the Indenture. Upon the acceptance of any appointment as the Mortgagee by a successor Mortgagee, that successor Mortgagee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Mortgagee under this Mortgage, and the retiring Mortgagee shall thereupon be discharged from its duties and obligations under this Mortgage. After any retiring Mortgagee's resignation, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it under this Mortgage while it was the Mortgagee. (ii) The Mortgagee shall be deemed to have exercised reasonable care in the custody and preservation of the Mortgaged Property in its possession if such Mortgaged Property is accorded treatment substantially equivalent to that which the Mortgagee, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Mortgagee nor any of the Secured Parties shall have responsibility for taking any necessary steps to preserve rights against any Person with respect to any Mortgaged Property. (iii) The Mortgagee shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person, and, with respect to all matters pertaining to this Mortgage and its duties hereunder, upon advice of counsel selected by it. (iv) If any portion of the Mortgaged Property also constitutes collateral granted to the Mortgagee under any other deed of trust, mortgage, security agreement, pledge or instrument of any type, in the event of any conflict between the provisions hereof and the provisions of such other deed of trust, mortgage, security agreement, pledge or instrument of any type in respect of such collateral, the Mortgagee, in its sole discretion, shall select which provision or provisions shall control. SECTION 14.4 Mortgagee May Perform; Mortgagee Appointed ------------------------------------------ Attorney-in-Fact. If the Mortgagor shall fail to perform any covenants contained - ---------------- in this Mortgage, subject to any applicable grace periods or contest rights permitted pursuant to Article IX hereof or as otherwise permitted by any ---------- Collateral Document (including, without limitation, the Mortgagor's covenants to (i) pay the premiums in respect of all required insurance policies hereunder, (ii) pay Charges, (iii) make repairs, (iv) discharge Liens or (v) pay or perform any obligations of the Mortgagor under any Mortgaged Property) or if any warranty on the part of the Mortgagor contained herein shall be breached, the Mortgagee may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose; provided, -------- however, that the Mortgagee shall in no event be bound to inquire into the - ------- validity of any tax, Lien, imposition or other obligation which the Mortgagor fails to pay or perform as and when required hereby and which the Mortgagor does not contest in accordance with the provisions of Article IX hereof. Any and all ---------- amounts reasonably so expended by the Mortgagee shall be paid by the Mortgagor in accordance with the provisions of Section 14.5 hereof. Neither the provisions ------------ of this Section 14.4 nor any action taken by the Mortgagee pursuant to the ------------ provisions of this Section 14.4 shall prevent any such failure to observe any ------------ covenant contained in this Mortgage nor any breach of warranty from constituting an Event of Default. Upon the occurrence and during the continuance of an Event of Default the Mortgagor hereby appoints the Mortgagee its attorney-in-fact, with full authority in the place and stead of the Mortgagor and in the name of the Mortgagor to take any action and to execute any instrument consistent with the terms hereof and the other Collateral Documents which the Mortgagee may deem necessary or advisable to accomplish the purposes hereof. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. The Mortgagor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. SECTION 14.5 Expenses The Mortgagor will upon demand pay to the -------- Mortgagee the amount of any and all reasonable costs and expenses, including the reasonable fees and expenses of its counsel and the reasonable fees and expenses of any experts and agents which the Mortgagee may incur in connection with (i) any action, suit or other proceeding affecting the Mortgaged Property or any part thereof commenced, in which action, suit or proceeding the Mortgagee is made a party or participates or in which the right to use the Mortgaged Property or any part thereof is threatened, or in which it becomes necessary in the judgment of the Mortgagee to defend or uphold the Lien hereof (including, without limitation, any action, suit or proceeding to establish or uphold the compliance of the Mortgaged Property with any Requirements of Law), (ii) the collection of the Secured Obligations, (iii) the enforcement and administration hereof, (iv) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Mortgaged Property, (v) the exercise or enforcement of any of the rights of the Mortgagee or any Secured Party hereunder or (vi) the failure by the Mortgagor to perform or observe any of the provisions hereof. All amounts expended by the Mortgagee and payable by the Mortgagor under this Section 14.5 shall be due upon demand therefor (together with interest ------------ thereon accruing at the Default Rate during the period from and including the date on which such funds were so expended to the date of repayment) and shall be part of the Secured Obligations. The Mortgagor's obligations under this Section 14.5 shall survive the termination hereof and the discharge of the - ------------ Mortgagor's other obligations under this Mortgage. SECTION 14.6 Indemnity. --------- (i) The Mortgagor agrees to indemnify, pay and hold harmless the Mortgagee and each of the other Secured Parties and the officers, directors, employees, agents and Affiliates of the Mortgagee and each of the other Secured Parties (collectively, the "Indemnitees") from and against any and all other ----------- liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs (including, without limitation, settlement costs), expenses or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, commenced or threatened, whether or not such Indemnitee shall be designated a party thereto), which may be imposed on, incurred by or asserted against that Indemnitee, in any manner relating to or arising out hereof, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (including, without limitation, any misrepresentation by the Mortgagor in this Mortgage, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (the "Indemnified Liabilities"); provided, however, that the Mortgagor shall have no ----------------------- -------- ------- obligation to an Indemnitee hereunder with respect to Indemnified Liabilities to the extent it has been determined by a final decision (after all appeals and the expiration of time to appeal) by a court of competent jurisdiction that such Indemnified Liabilities arose from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Mortgagor shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. (ii) Survival. The obligations of the Mortgagor contained in -------- this Section 14.6 shall survive the termination hereof and the discharge of the Mortgagor's other obligations under this Mortgage, the Indenture and the other Collateral Documents. (iii) Reimbursement. Any amount paid by any Indemnitee as to ------------- which such Indemnitee has the right to reimbursement shall constitute Secured Obligations secured by the Mortgaged Property. SECTION 14.7 Continuing Security Interest; Assignment. This ---------------------------------------- Mortgage shall create a continuing Lien on and security interest in the Mortgaged Property and shall (i) be binding upon the Mortgagor, its respective successors and assigns and (ii) inure, together with the rights and remedies of the Mortgagee hereunder, to the benefit of the Mortgagee and the other Secured Parties and each of their respective successors, transferees and assigns. No other Persons (including, without limitation, any other creditor of Mortgagor) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (ii), any Holder of the Notes may assign or otherwise transfer any indebtedness held by it secured by this Mortgage to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Holder, herein or otherwise, subject however, to the provisions of the Indenture. SECTION 14.8 Termination; Release. The Mortgaged Property shall -------------------- be released from the Lien of this Mortgage in accordance with the provisions of Article 10 the Indenture. - ---------- SECTION 14.9 Modification in Writing. No amendment, ----------------------- modification, supplement, termination or waiver of or to any provision hereof, nor consent to any departure by the Mortgagor therefrom, shall be effective unless the same shall be done in accordance with the terms of the Indenture and unless in writing and signed by the Mortgagee and Mortgagor. Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by the Mortgagor from the terms of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Mortgage or any other Collateral Document, no notice to or demand on the Mortgagor in any case shall entitle the Mortgagor to any other or further notice or demand in similar or other circumstances. SECTION 14.10 Notices. Unless otherwise provided herein or in ------- the Indenture, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Indenture, if to the Mortgagor, addressed to it at the address of the Issuer set forth in the Indenture, and as to the Mortgagee, addressed to it at its address set forth in the Indenture, or in each case at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 14.10. ------------- SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY ------------------------------------------------- TRIAL. THIS MORTGAGE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED - ----- IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR ITEM OR TYPE OF MORTGAGED PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. THE MORTGAGOR AGREES THAT SERVICE OF PROCESS IN ANY PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE ISSUER AT ITS ADDRESS SET FORTH IN THE INDENTURE OR AT SUCH OTHER ADDRESS OF WHICH THE MORTGAGEE SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. IF ANY AGENT APPOINTED BY THE MORTGAGOR REFUSES TO ACCEPT SERVICE, THE MORTGAGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE MORTGAGEE TO BRING PROCEEDINGS AGAINST THE MORTGAGOR IN THE COURTS OF ANY OTHER JURISDICTION. THE MORTGAGOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 14.12 Severability of Provisions. Any provision hereof -------------------------- which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 14.13 Limitation on Interest Payable. It is the ------------------------------ intention of the parties to conform strictly to the usury laws, whether state or Federal, that are applicable to the transaction of which this Mortgage is a part. All agreements between the Mortgagor and the Mortgagee, whether now existing or hereafter arising and whether oral or written, are hereby expressly limited so that in no contingency or event whatsoever shall the amount paid or agreed to be paid by the Mortgagor for the use, forbearance or detention of the money to be loaned or advanced under the Indenture or any related document or for the payment or performance of any covenant or obligation contained herein or in the Indenture or any related document exceed the maximum amount permissible under applicable Federal or state usury laws. If under any circumstances whatsoever fulfillment of any such provision, at the time performance of such provision shall be due, shall involve exceeding the limit of validity prescribed by law, then the obligation to be fulfilled shall be reduced to the limit of such validity. If under any circumstances the Mortgagor shall have paid an amount deemed interest by applicable law, which would exceed the highest lawful rate, such amount that would be excessive interest under applicable usury laws shall be applied to the reduction of the principal amount owing in respect of the Secured Obligations and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal and any other amounts due hereunder, the excess shall be refunded to the Mortgagor. All sums paid or agreed to be paid for the use, forbearance or detention of the principal under any extension of credit by the Mortgagee shall, to the extent permitted by applicable law, and to the extent necessary to preclude exceeding the limit of validity prescribed by law, be amortized, prorated, allocated and spread from the date hereof until payment in full of the Secured Obligations so that the actual rate of interest on account of such principal amounts is uniform throughout the term hereof. SECTION 14.14 Business Days. In the event any time period or ------------- any date provided in this Mortgage ends or falls on a day other than a Business Day, then such time period shall be deemed to end and such date shall be deemed to fall on the next succeeding Business Day, and performance herein may be made on such Business Day, with the same force and effect as if made on such other day. SECTION 14.15 Relationship. The relationship of the Mortgagee ------------ to the Mortgagor hereunder is strictly and solely that of lender and borrower and mortgagor and mortgagee and nothing contained in the Indenture, the Notes, this Mortgage or any other document or instrument now existing and delivered in connection therewith or otherwise in connection with the Secured Obligations is intended to create, or shall in any event or under any circumstance be construed as creating a partnership, joint venture, tenancy-in-common, joint tenancy or other relationship of any nature whatsoever between the Mortgagee and the Mortgagor other than as lender and borrower and mortgagor and mortgagee. SECTION 14.16 Waiver of Stay. -------------- (i) The Mortgagor agrees that in the event that the Mortgagor or any property or assets of the Mortgagor shall hereafter become the subject of a voluntary or involuntary proceeding under the Bankruptcy Code or the Mortgagor shall otherwise be a party to any Federal or state bankruptcy, insolvency, moratorium or similar proceeding to which the provisions relating to the automatic stay under Section 362 of the Bankruptcy Code or any similar provision in any such law is applicable, then, in any such case, whether or not the Mortgagee has commenced foreclosure proceedings under this Mortgage, the Mortgagee shall be entitled to relief from any such automatic stay as it relates to the exercise of any of the rights and remedies (including, without limitation, any foreclosure proceedings) available to the Mortgagee as provided in this Mortgage, in any other Collateral Document or any other document evidencing the Secured Obligations. (ii) The Mortgagee shall have the right to petition or move any court having jurisdiction over any proceeding described in Section 14.16(i) ---------------- hereof for the purposes provided therein, and the Mortgagor agrees (i) not to oppose any such petition or motion and (ii) at the Mortgagor's sole cost and expense, to assist and cooperate with the Mortgagee, as may be requested by the Mortgagee from time to time, in obtaining any relief requested by the Mortgagee, including, without limitation, by filing any such petitions, supplemental petitions, requests for relief, documents, instruments or other items from time to time requested by the Mortgagee or any such court. SECTION 14.17 No Credit for Payment of Taxes or Impositions. --------------------------------------------- The Mortgagor shall not be entitled to any credit against the principal, premium, if any, or interest payable under the Indenture or the Notes, and the Mortgagor shall not be entitled to any credit against any other sums which may become payable under the terms thereof or hereof, by reason of the payment of any Charge on the Mortgaged Property or any part thereof. SECTION 14.18 No Claims Against the Mortgagee. Nothing ------------------------------- contained in this Mortgage shall constitute any consent or request by the Mortgagee, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Premises or any part thereof, nor as giving the Mortgagor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the Mortgagee in respect thereof or any claim that any Lien based on the performance of such labor or services or the furnishing of any such materials or other property is prior to the Lien hereof. SECTION 14.19 Obligations Absolute. All obligations of the -------------------- Mortgagor hereunder shall be absolute and unconditional irrespective of: (i) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Mortgagor, the Issuer or any other Guarantor; (ii) any lack of validity or enforceability of the Indenture, the Notes or any other agreement or instrument relating thereto; (iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Indenture, the Notes or any other agreement or instrument relating thereto; (iv) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations; (v) any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect hereof, the Indenture, the Notes or any agreement or instrument relating thereto except as specifically set forth in a waiver granted pursuant to the provisions of Section 14.9 hereof; or ------------ (vi) any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Mortgagor. SECTION 14.20 Last Dollars Secured. This Mortgage secures only a -------------------- portion of the Indebtedness owing or which may become owing by the Mortgagor. The parties agree that any payments or repayments of such Indebtedness by the Mortgagor shall be and be deemed to be applied first to the portion of the Indebtedness that is not secured hereby, it being the parties' intent that the portion of the Indebtedness that is not secured hereby, it being the parties' intent that the portion of the Indebtedness last remaining unpaid shall be secured hereby. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] THUS DONE AND PASSED, on the day, month and year first written above, effective as of the Effective Date, in the State and Parish aforesaid, by the undersigned Mortgagor in the presence of the undersigned Notary and the undersigned competent witnesses, who hereunto sign their names with Mortgagor after reading of the whole. WITNESSES: MORTGAGOR: RACELAND TRUCK PLAZA AND CASINO, L.L.C., a Louisiana limited liability company ___________________________________ By: ___________________________________ Printed Name: _____________________ Ian M. Stewart Authorized Officer ___________________________________ Printed Name: _____________________ _____________________________________ Notary Public Schedule A ---------- Legal Description [to come from title policy] Schedule B ---------- Prior Liens ----------- 1. Each of the liens and other encumbrances excepted as being prior to the Lien hereof as set forth in Schedule B to the marked title insurance commitment issued by Lawyers Title Insurance Corporation, dated as of the date hereof and delivered to the Trustee on the date hereof, bearing Lawyers Title Insurance Corporation reference number 37448REV relating to the real property described in Schedule A attached hereto. 2. Zoning and building ordinances and regulations, to the extent they constitute Permitted Liens of the type described in clause (4) of the definition thereof. Schedule C ---------- Leases Affecting the Mortgaged Property NONE Exhibit 1 --------- FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the "Agreement") is made and entered into as of the ___ day of _______, ____ by and between ______________________________, as trustee, having an office at _________________ (in such capacity, "Trustee"), and _____________________, having an office at _____________________ ("Tenant"). R E C I T A L S: - - - - - - - - A. Tenant is the tenant under a certain lease dated ___________, ___ between ___________________________, as landlord ("Landlord"), and Tenant, as tenant (as amended through the date hereof, the "Lease"), pursuant to which Tenant leased a portion (the "Leased Premises") of the property known as __________________________, located at __________________________, as more particularly described in Schedule A attached hereto (the "Property"). ---------- B. Landlord has or will grant a mortgage lien on and security interest in the Property to Trustee (for its benefit and for the benefit of the holders of certain senior secured notes and notes issued in exchange therefor pursuant to that certain indenture dated as of [________ ___, 2002]) pursuant to one or more mortgages, deeds of trust, deeds to secure debt or similar security instruments (collectively, the "Security Instruments"). C. Tenant has agreed to subordinate the Lease to the Security Instruments and to the lien thereof and Trustee has agreed not to disturb Tenant's possessory rights in the Leased Premises under the Lease on the terms and conditions hereinafter set forth. A G R E E M E N T: - - - - - - - - - NOW, THEREFORE, the parties hereto mutually agree as follows: 1. Subordination. Notwithstanding anything to the contrary set forth ------------- in the Lease, the Lease and the leasehold estate created thereby and all of Tenant's rights thereunder are and shall at all times be subject and subordinate in all respects to the Security Instruments and the lien thereof, and to all rights of Trustee thereunder, and to any and all advances to be made thereunder, and to all renewals, modifications, consolidations, replacements and extensions thereof. 2. Nondisturbance. So long as Tenant complies with the provisions of -------------- this Agreement, pays all rents and other charges as specified in the Lease and is not otherwise in default (beyond applicable notice and cure periods) of any of its obligations and covenants pursuant to the Lease, Trustee agrees for itself and its successors in interest and for any other person acquiring title to the Property through a foreclosure (an "Acquiring Party"), that Tenant's possession of the Leased Premises as described in the Lease will not be disturbed during the term of the Lease by reason of a foreclosure. For purposes of this Agreement, a "foreclosure" shall include (but not be limited to) a sheriff's or trustee's sale under the power of sale con- -2- tained in the Security Instruments, the termination of any superior lease of the Property and any other transfer of the Landlord's interest in the Property under peril of foreclosure, including, without limitation to the generality of the foregoing, an assignment or sale in lieu of foreclosure. 3. Attornment. Tenant agrees to attorn to, accept and recognize ---------- any Acquiring Party as the landlord under the Lease pursuant to the provisions expressly set forth therein for the then remaining balance of the term of the Lease, and any extensions thereof as made pursuant to the Lease. The foregoing provision shall be self-operative and shall not require the execution of any further instrument or agreement by Tenant as a condition to its effectiveness. 4. No Liability. Notwithstanding anything to the contrary ------------ contained herein or in the Lease, it is specifically understood and agreed that neither the Trustee, any receiver nor any Acquiring Party shall be: (a) liable for any act, omission, negligence or default of any prior landlord (including Landlord); or (b) liable for any failure of any prior landlord (including Landlord) to construct any improvements or bound by any covenant to construct any improvement either at the commencement of the term of the Lease or upon any renewal or extension thereof or upon the addition of additional space pursuant to any expansion right contained in the Lease; or (c) subject to any offsets, credits, claims or defenses which Tenant might have against any prior landlord (including Landlord); or (d) bound by any rent or additional rent which is payable on a monthly basis and which Tenant might have paid for more than one (1) month in advance to any prior landlord (including Landlord) or by any security deposit or other prepaid charge which Tenant might have paid in advance to any prior landlord (including Landlord); or (e) liable to Tenant hereunder or under the terms of the Lease beyond its interest in the Property; or (f) bound by any assignment, subletting, renewal, extension or any other agreement or modification of the Lease made without the written consent of Trustee; or (g) bound by any consensual or negotiated surrender, cancellation or termination of the Lease, in whole or in part, agreed upon between Landlord and Tenant unless effected unilaterally by Tenant pursuant to the express terms of the Lease. Notwithstanding the foregoing, Tenant reserves its right to any and all claims or causes of action (i) against such prior landlord for prior losses or damages and (ii) against the successor landlord for all losses or damages arising from and after the date that such successor landlord takes title to the Property. 5. Certain Acknowledgments and Agreements by Tenant. (a) Tenant ------------------------------------------------ has notice that the Lease and the rents and all other sums due thereunder have been assigned to Trustee as security for the notes secured by the Security Instruments. In the event Trustee notifies Tenant of the occurrence of a de- -3- fault under the Security Instruments and demands that Tenant pay its rents and all other sums due or to become due under the Lease directly to Trustee, Tenant shall honor such demand and pay its rent and all other sums due under the Lease directly to Trustee or as otherwise authorized in writing by Trustee. Landlord irrevocably authorizes Tenant to make the foregoing payments to Trustee upon such notice and demand. (b) Tenant shall send a copy of any and all notices or statements under the Lease to Trustee at the same time such notices or statements are sent to Landlord. (c) This Agreement satisfies any and all conditions or requirements in the Lease relating to the granting of a non-disturbance agreement. 6. Trustee to Receive Default Notices. Tenant shall notify ---------------------------------- Trustee of any default by Landlord under the Lease which would entitle Tenant to cancel the Lease, and agrees that, notwithstanding any provisions of the Lease to the contrary, no notice of cancellation thereof shall be effective unless Trustee shall have received notice of default giving rise to such cancellation and shall have failed within sixty (60) days after receipt of such notice to cure such default or, if such default cannot be cured within sixty (60) days, shall have failed within sixty (60) days after receipt of such notice to commence and thereafter diligently pursue any action necessary to cure such default. 7. Estoppel. Tenant hereby certifies and represents to Trustee -------- that as of the date of this Agreement: (a) the Lease is in full force and effect; (b) all requirements for the commencement and validity of the Lease have been satisfied and there are no unfulfilled conditions to Tenant's obligations under the Lease; (c) Tenant is not in default under the Lease and has not received any uncured notice of any default by Tenant under the Lease; to the best of Tenant's knowledge, Landlord is not in default under the Lease; no act, event or condition has occurred which with notice or the lapse of time, or both, would constitute a default by Tenant or Landlord under the Lease; no claim by Tenant of any nature exists against Landlord under the Lease; and all obligations of Landlord have been fully performed; (d) there are no defenses, counterclaims or setoffs against rents or charges due or which may become due under the Lease; (e) none of the rent which Tenant is required to pay under the Lease has been prepaid, or will in the future be prepaid, more than one (1) month in advance; (f) Tenant has no right or option contained in the Lease or in any other document to purchase all or any portion of the Leased Premises; (g) the Lease has not been modified or amended and constitutes the entire agreement between Landlord and Tenant relating to the Leased Premises; -4- (h) Tenant has not assigned, mortgaged, sublet, encumbered, conveyed or otherwise transferred any or all of its interest under the Lease; and (i) Tenant has full authority to enter into this Agreement, which has been duly authorized by all necessary action. 8. Notices. All notices or other written communications ------- hereunder shall be deemed to have been properly given (i) upon delivery, if delivered in person with receipt acknowledged by the recipient thereof, (ii) one (1) Business Day (hereinafter defined) after having been deposited for overnight delivery with any reputable overnight courier service, or (iii) three (3) Business Days after having been deposited in any post office or mail depository regularly maintained by the United States Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested, addressed to the receiving party at its address set forth above or addressed as such party may from time to time designate by written notice to the other parties. For purposes of this Section 8, the term "Business Day" shall mean any day other than --------- Saturday, Sunday or any other day on which banks are required or authorized to close in New York, New York. Either party by notice to the other may designate additional or different addresses for subsequent notices or communications. 9. Successors. The obligations and rights of the parties ---------- pursuant to this Agreement shall bind and inure to the benefit of the successors, assigns, heirs and legal representatives of the respective parties; provided, however, that in the event of the assignment or transfer of the - -------- ------- interest of Trustee, all obligations and liabilities of Trustee under this Agreement shall terminate, and thereupon all such obligations and liabilities shall be the responsibility of the party to whom Trustee's interest is assigned or transferred; and provided, further, that the interest of Tenant under this -------- ------- Agreement may not be assigned or transferred without the prior written consent of Trustee. In addition, Tenant acknowledges that all references herein to Landlord shall mean the owner of the landlord's interest in the Lease, even if said owner shall be different from the Landlord named in the Recitals. 10. Duplicate Original; Counterparts. This Agreement may be -------------------------------- executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Agreement. 11. Limitation of Trustee's Liability. (a) Trustee shall have --------------------------------- no obligations nor incur any liability with respect to any warranties of any nature whatsoever, whether pursuant to the Lease or otherwise, including, without limitation, any warranties respecting use, compliance with zoning, Landlord's title, Landlord's authority, habitability, fitness for purpose or possession. (b) In the event that Trustee shall acquire title to the Leased Premises or the Property, Trustee shall have no obligation, nor incur any liability, beyond Trustee's then equity interest, if any, in the Leased Premises, and Tenant shall look exclusively to such equity interest of Trustee, if any, in the Leased Premises for the payment and discharge of any obligations imposed upon Trustee hereunder or under the Lease, and Trustee is hereby released and relieved of any other obligations hereunder and under the Lease. 12. Modification in Writing. This Agreement may not be ----------------------- modified except by an agreement in writing signed by the parties hereto or their respective successors in interest. -5- 13. Lien of Security Instruments. Nothing contained in this ---------------------------- Agreement shall in any way impair or affect the lien created by the Security Instruments or the provisions thereof. 14. Compliance with Lease. Tenant agrees that in the event --------------------- there is any inconsistency between the terms and provisions hereof and the terms and provisions of the Lease, the terms and provisions hereof shall be controlling. 15. Governing Law; Severability. This Agreement shall be --------------------------- governed by the laws of the State of [ ]. If any term of this Agreement or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such terms to any person or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 16. Further Actions. Tenant agrees at its own expense to --------------- execute and deliver, at any time and from time to time upon the request of Trustee or any Acquiring Party, such documents and instruments (in recordable form, if requested) as may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to fully implement or to further evidence the understandings and agreements contained in this Agreement. Moreover, Tenant hereby irrevocably appoints and constitutes Trustee or any Acquiring Party as its true and lawful attorney-in-fact to execute and deliver any such documents or instruments which may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to implement or further evidence such understandings and agreements and which Tenant, after thirty (30) days' notice from Trustee or any Acquiring Party, has failed to execute and deliver. IN WITNESS WHEREOF, Trustee and Tenant have duly executed this Agreement as of the date first above written. ______________________________________, as Trustee By: __________________________________ Name: Title: ______________________________________, as Tenant By: __________________________________ Name: Title: The undersigned, as the Landlord named in the Recitals, having duly executed this Agreement as of the date first written above, and as mortgagor, pledgor, assignor or debtor under the Security Instruments, hereby accepts and agrees for itself and its successors and assigns, (i) to be bound by the provisions of Section 5 hereof, (ii) that nothing contained in the foregoing Agreement (x) shall in any way be deemed to constitute a waiver by Trustee of any of its rights or remedies under the Security Instruments or (y) shall in any way be deemed to release Landlord from its obligations to comply with the terms, provisions, conditions, covenants and agreements set forth in the Security Instruments and (iii) that the provisions of the Security Instruments remain in full force and effect and must be complied with by Landlord. _______________________________, a _______________________________ By: __________________________________ Name: Title: ACKNOWLEDGMENT State of __________) ) ss.: County of _________) [Local counsel to provide appropriate acknowledgment] SCHEDULE A to EXHIBIT 1 ----------------------- Description of Real Property ---------------------------- EX-4.15 45 dex415.txt MORTGAGE, ASSIGNMENT OF LEASES-BAYOU VISTA Exhibit 4.15 ================================================================================ MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING BY BAYOU VISTA TRUCK PLAZA AND CASINO, L.L.C., Mortgagor, TO WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee, Mortgagee Securing Principal Indebtedness of $125,000,000 Dated as of February 22, 2002 Relating to Premises in: St. Mary Parish, Louisiana ================================================================================ After recording, please return to: Athy A. Mobilia, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY10005 -----------------
TABLE OF CONTENTS Page ---- PREAMBLE .............................................................................. 1 RECITALS .............................................................................. 1 AGREEMENT ............................................................................. 2 ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions ........................................................... 2 SECTION 1.2 Interpretation ........................................................ 8 SECTION 1.3 Resolution of Drafting Ambiguities .................................... 8 ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Mortgaged Property ........................................... 8 SECTION 2.2 Assignment of Leases and Rents ........................................ 9 SECTION 2.3 Secured Obligations ................................................... 10 SECTION 2.4 Future Advances ....................................................... 10 SECTION 2.5 No Release ............................................................ 10 ARTICLE III REPRESENTATIONS AND WARRANTIES OF MORTGAGOR SECTION 3.1 Authority and Validity ................................................ 10 SECTION 3.2 Warranty of Title ..................................................... 11 SECTION 3.3 Condition of Mortgaged Property ....................................... 11 SECTION 3.4 Leases ................................................................ 13 SECTION 3.5 Insurance ............................................................. 13 SECTION 3.6 Charges ............................................................... 14 SECTION 3.7 Environmental ......................................................... 14 SECTION 3.8 No Conflicts, Consents, etc ........................................... 14 SECTION 3.9 Benefit to the Mortgagor .............................................. 15
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Page ---- ARTICLE IV CERTAIN COVENANTS OF MORTGAGOR SECTION 4.1 Preservation of Corporate Existence ................................... 15 SECTION 4.2 Title ................................................................. 15 SECTION 4.3 Maintenance and Use of Mortgaged Property; Alterations ................ 16 SECTION 4.4 Notices Regarding Certain Defaults .................................... 17 SECTION 4.5 Access to Mortgaged Property, Books and Records; Other Information .... 17 SECTION 4.6 Limitation on Liens; Transfer Restrictions ............................ 17 SECTION 4.7 Environmental ......................................................... 17 SECTION 4.8 Estoppel Certificates ................................................. 19 ARTICLE V LEASES SECTION 5.1 Mortgagor's Affirmative Covenants with Respect to Leases .............. 19 SECTION 5.2 Mortgagor's Negative Covenants with Respect to Leases ................. 19 SECTION 5.3 Additional Requirements with Respect to New Leases .................... 20 ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Mortgagor .......................... 20 SECTION 6.2 Collection of Rents by the Mortgagee .................................. 20 SECTION 6.3 No Release ............................................................ 21 SECTION 6.4 Irrevocable Interest .................................................. 21 SECTION 6.5 Amendment to Leases ................................................... 21 ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges .................................................... 21 SECTION 7.2 Escrow of Taxes ....................................................... 22 SECTION 7.3 Certain Statutory Liens ............................................... 22 SECTION 7.4 Stamp and Other Taxes ................................................. 22 SECTION 7.5 Certain Tax Law Changes ............................................... 22 SECTION 7.6 Proceeds of Tax Claim ................................................. 22 ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages ............................. 23
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Page ---- SECTION 8.2 Delivery After Foreclosure ............................................ 23 ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens ....................... 23 SECTION 9.2 Contesting of Insurance ............................................... 23 ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction ........................................................... 24 SECTION 10.2 Condemnation .......................................................... 24 ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default ..................................................... 24 SECTION 11.2 Remedies in Case of an Event of Default ............................... 24 SECTION 11.3 Sale of Mortgaged Property if Event of Default Occurs; Proceeds of Sale ................................................................ 25 SECTION 11.4 Additional Remedies in Case of an Event of Default .................... 26 SECTION 11.5 Legal Proceedings After an Event of Default ........................... 27 SECTION 11.6 Remedies Not Exclusive ................................................ 27 ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement .................................................... 30 SECTION 12.2 Fixture Filing ........................................................ 31 ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security ............................ 31 SECTION 13.2 Further Acts .......................................................... 31 SECTION 13.3 Additional Security ................................................... 32
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Page ---- ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Land ........................................ 32 SECTION 14.2 No Merger ............................................................. 32 SECTION 14.3 Concerning Mortgagee .................................................. 32 SECTION 14.4 Mortgagee May Perform; Mortgagee Appointed Attorney-in-Fact ........... 33 SECTION 14.5 Expenses .............................................................. 33 SECTION 14.6 Indemnity ............................................................. 34 SECTION 14.7 Continuing Security Interest; Assignment .............................. 34 SECTION 14.8 Termination; Release .................................................. 34 SECTION 14.9 Modification in Writing ............................................... 35 SECTION 14.10 Notices ............................................................... 35 SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL .............................................................. 35 SECTION 14.12 Severability of Provisions ............................................ 35 SECTION 14.13 Limitation on Interest Payable ........................................ 35 SECTION 14.14 Business Days ......................................................... 36 SECTION 14.15 Relationship .......................................................... 36 SECTION 14.16 Waiver of Stay ........................................................ 36 SECTION 14.17 No Credit for Payment of Taxes or Impositions ......................... 37 SECTION 14.18 No Claims Against the Mortgagee ....................................... 37 SECTION 14.19 Obligations Absolute .................................................. 37 SECTION 14.20 Last Dollars Secured .................................................. 37 SIGNATURE AND ACKNOWLEDGMENT SCHEDULE A Legal Description SCHEDULE B Prior Liens SCHEDULE C Leases Affecting the Mortgaged Property EXHIBIT 1 Form of Subordination, Non-Disturbance and Attornment Agreement
-iv- MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Mortgage"), dated as of February 22, 2002, made by BAYOU VISTA -------- TRUCK PLAZA AND CASINO, L.L.C., a Louisiana limited liability company having an office at 1829 Highway 90 West, Bayou Vista, Louisiana 70380, as mortgagor, assignor and debtor (in such capacities and together with any successors in such capacities, the "Mortgagor"), in favor of WELLS FARGO BANK MINNESOTA, NATIONAL --------- ASSOCIATION, a national banking association having an office at 213 Court Street, Suite 902, Middletown, CT 06457, in its capacity as collateral agent and trustee pursuant to the Indenture (as hereinafter defined), as mortgagee, assignee and secured party (in such capacities and together with any successors in such capacities, the "Mortgagee"). --------- R E C I T A L S: - - - - - - - - A. Gameco, Inc. (the "Issuer"), certain of its Subsidiaries (as ------ hereinafter defined), the Mortgagor and the Mortgagee have, in connection with the execution and delivery of this Mortgage, entered into that certain indenture, dated as of February 8, 2002 (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Indenture"), --------- pursuant to which the Issuer has issued its 11 7/8% senior secured notes due 2009 (the "Senior Secured Notes") in the aggregate principal amount of -------------------- $125,000,000. It is contemplated that the Issuer may, after the date hereof, issue Additional Notes (as defined in the Indenture) and Exchange Notes (as defined in the Indenture); the Exchange Notes, together with the Additional Notes and the Senior Secured Notes, the "Notes"), in each case, pursuant to the ----- provisions of the Indenture. B. The Issuer owns, directly or through its Subsidiaries, all of the issued and outstanding shares of the Mortgagor. C. The Mortgagor has, pursuant the Indenture, among other things, unconditionally guaranteed (the "Guarantee") the obligations of the Issuer under --------- the Indenture and the Notes. D. The Mortgagor will receive substantial benefits from the execution and delivery of, and the performance of the obligations under, the Indenture and the Notes, and is therefore willing to enter into this Mortgage. E. The Mortgagor is or will be the legal owner of the Mortgaged Property (as hereinafter defined). F. This Mortgage is given by the Mortgagor in favor of the Mortgagee for its benefit and for the benefit of the Holders of the Notes (collectively, the "Secured Parties") to secure the payment and performance of all of the --------------- Secured Obligations (as hereinafter defined). A G R E E M E N T: - - - - - - - - - NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Mortgagor hereby covenants and agrees with the Mortgagee as follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions. Capitalized terms used but not otherwise ----------- defined herein shall have the meanings assigned to such terms in the Indenture. The following terms used in this Mortgage shall have the following meanings: "ACM" shall have the meaning assigned to such term in Section 4.7(ii) --- --------------- hereof. "Affiliate" shall have the meaning assigned to such term in the --------- Indenture. "Alteration" shall mean any and all alterations, installations, ---------- improvements, additions, modifications or changes of a structural nature of or to the Premises. "Business Day" shall have the meaning assigned to such term in the ------------ Indenture. "Charges" shall mean any and all real estate, property and other ------- taxes, assessments and special assessments, levies, fees, all water and sewer rents and charges and all other governmental charges or Liens imposed upon or assessed against, and all claims (including, without limitation, landlords', carriers', mechanics', workmen's, repairmen's, laborers', materialmen's, suppliers' and warehousemen's Liens and other claims arising by operation of law) against, all or any portion of the Mortgaged Property. "Collateral Account" shall have the meaning assigned to such term in ------------------ the Indenture. "Collateral Documents" shall have the meaning assigned to such term in -------------------- the Indenture. "Contested Liens" shall mean, collectively, any Liens incurred in --------------- respect of any Charges to the extent that the amounts owing in respect thereof are not yet delinquent or are being contested and otherwise comply with the provisions of Section 9.1 hereof. ----------- "Contracts" shall mean, collectively, any and all right, title and --------- interest of the Mortgagor in and to any and all contracts, instruments, documents and other general intangibles, whether now existing or hereafter arising or entered into, relating to the Mortgaged Property (including, without limitation, all reciprocal easements and/or operating agreements, covenants, conditions and restrictions and similar agreements affecting all or any portion of the Mortgaged Property and any and all present or future options to sell or lease the Mortgaged Property or any interest therein) and all reserves, deferred payments, deposits or other security or advance payments (including, without limitation, those made by or on behalf of the Mortgagor to others with respect to (i) utility service regarding the Mortgaged Property, (ii) cleaning, maintenance, repair or similar services regarding the Mortgaged Property, (iii) refuse removal or sewage service regarding the Mortgaged Property, (iv) rentals of equipment, if any, used in the operation by or on behalf of Mortgagor regarding the Mortgaged Property, and/or (v) parking or similar services or rights regarding the Mortgaged Property), refunds, liens, security interests, guarantees, remedies and claims of every kind, nature or character relating thereto. "Default Rate" shall mean the rate per annum equal to the highest rate ------------ then payable under the Indenture. "Destruction" shall mean any and all damage to, or loss or destruction ----------- of, the Premises or any part thereof. "Environmental Law" shall mean any applicable federal, state, local or ----------------- municipal statute, law, rule, regulation, ordinance, code, policy or rule of common law and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment binding on the Mortgagor, relating to pollution or protection of the environment, or health or safety including, without limitation, any relating to the release or threatened release of any Hazardous Materials. "Event of Default" shall have the meaning assigned to such term in the ---------------- Indenture. "Fixture" shall mean all machinery, apparatus, equipment, fittings, ------- fixtures, improvements and articles of personal property of every kind, description and nature whatsoever now or hereafter attached or affixed to the Land or any other Improvement or used in connection with the use and enjoyment of the Land or any other Improvement or the maintenance or preservation thereof, which by the nature of their location thereon or attachment thereto are fixtures under the UCC or any other applicable law including, without limitation, all utility systems, fire sprinkler and security systems, drainage facilities, lighting facilities, all water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone and other utility equipment and facilities, pipes, fittings and other items of every kind and description now or hereafter attached to or located on the Land which by the nature of their location thereon or attachment thereto are real property under applicable law, HVAC equipment, boilers, electronic data processing, telecommunications or computer equipment, refrigeration, electronic monitoring, water or lighting systems, power, sanitation, waste removal, elevators, maintenance or other systems or equipment and all additions thereto and betterments, renewals, substitutions and replacements thereof. "GAAP" shall have the meaning assigned to such term in the Indenture. ---- "Governmental Authority" shall mean any federal, state, local, foreign ---------------------- or other governmental, quasi-governmental or administrative (including self-regulatory) body, instrumentality, department, agency, authority, board, bureau, commission, office of any nature whatsoever or other subdivision thereof, or any court, tribunal, administrative hearing body, arbitration panel or other similar dispute-resolving body, whether now or hereafter in existence, or any officer or official thereof, having jurisdiction over the Mortgagor or the Mortgaged Property or any portion thereof. "Guarantee" shall have the meaning assigned to such term in Recital C --------- hereof. "Guarantors" shall have the meaning assigned to such term in the ---------- Indenture. "Hazardous Materials" shall mean any substance, chemical, material, ------------------- pollutant, waste, contaminant or constituent, which is subject to regulation under or could give rise to liability under any Environmental Law. "Holder" shall have the meaning assigned to such term in the ------ Indenture. "Improvements" shall mean all buildings, structures and other ------------ improvements of every kind or description and any and all Alterations now or hereafter located, attached or erected on the Land including, without limitation (i) all Fixtures, (ii) all attachments, railroad tracks, foundations, sidewalks, drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer rights, parking areas, driveways, fences and walls and (iii) all materials now or hereafter located on the Land intended for the construction, reconstruction, repair, replacement, alteration, addition or improvement of or to such buildings, Fixtures, structures and improvements, all of which materials shall be deemed to be part of the Improvements immediately upon delivery thereof on the Land and to be part of the improvements immediately upon their incorporation therein. "Indemnified Liabilities" shall have the meaning assigned to such term ----------------------- in Section 14.6(i) hereof. --------------- "Indemnitees" shall have the meaning assigned to such term in Section ----------- ------- 14.6(i) hereof. - ------- "Indenture" shall have the meaning assigned to such term in Recital A --------- --------- hereof. "Insurance Policies" means the insurance policies and coverages ------------------ required to be maintained by the Mortgagor with respect to the Mortgaged Property pursuant to Section 4.19(b) of the Indenture and all renewals and extensions thereof. "Insurance Requirements" means, collectively, all provisions of the ---------------------- Insurance Policies, all requirements of the issuer of any of the Insurance Policies and all orders, rules, regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon the Mortgagor and applicable to the Mortgaged Property or any use or condition thereof. "Issuer" shall have the meaning assigned to such term in Recital A ------ --------- hereof. "Land" shall mean those certain tracts or parcels of land described in ---- Schedule A annexed to this Mortgage, together with all of the Mortgagor's - ---------- reversionary rights therein and all of the Mortgagor's rights in and to any and all easements, rights-of-way, strips and gores of land, waters, water courses, water rights, mineral, gas and oil rights and all power, air, light and other rights, estates, titles, interests, privileges, liberties, servitudes, licenses, tenements, hereditaments and appurtenances whatsoever, in any way belonging, relating or appertaining thereto, or any part thereof, or which hereafter shall in any way belong, relate or be appurtenant thereto. "Landlord" shall mean any landlord, lessor, franchisor, licensor or -------- grantor, as applicable. "Leases" shall mean, collectively, any and all right, title and ------ interests of the Mortgagor, as Landlord, in all leases and subleases of space, tenancies, franchise agreements, licenses, occupancy, rental, access or concession agreements and any other agreements pursuant to which any Person is granted a pos- sessory interest in or right to use or occupy all or any portion of the Mortgaged Property (including, without limitation, all of the Mortgagor's rights to enforce all such leases, subleases, tenancies or other agreements and to receive and enforce any rights that the Mortgagor may have to collect Rents thereunder), in each case whether now existing or hereafter entered into, whether or not of record, relating in any manner to the Premises or the use or occupancy thereof and any and all amendments, modifications, supplements, replacements, extensions, renewals and/or guarantees, if any thereof, whether now in effect or hereafter coming into effect. "Lien" shall have the meaning assigned to such term in the Indenture. ---- "Mortgage" shall have the meaning assigned to such term in the -------- Preamble hereof. "Mortgaged Property" shall have the meaning assigned to such term in ------------------ Section 2.1 hereof. - ----------- "Mortgagee" shall have the meaning assigned to such term in the --------- Preamble hereof. "Mortgagor" shall have the meaning assigned to such term in the --------- Preamble hereof. "Mortgagor's Interest" shall have the meaning assigned to such term in -------------------- Section 2.2 hereof. - ----------- "Net Loss Proceeds" shall have the meaning assigned to such term in ----------------- the Indenture. "Net Proceeds" shall have the meaning assigned to such term in the ------------ Indenture. "Notes" shall have the meaning assigned to such term in Recital A ----- --------- hereof. "Officers' Certificate" shall have the meaning assigned to such term --------------------- in the Indenture. "Permit" shall mean any and all permits, certificates, approvals, ------ authorizations, consents, licenses, variances, franchises or other instruments, however characterized, of any Governmental Authority (or any Person acting on behalf of a Governmental Authority) now or hereafter acquired or held, together with all amendments, modifications, extensions, renewals and replacements of any thereof issued or in any way furnished in connection with the Mortgaged Property including, without limitation, building permits, certificates of occupancy, environmental certificates, industrial permits or licenses and certificates of operation. "Permitted Collateral Liens" shall have the meaning assigned to such -------------------------- term in Section 4.6 hereof. ----------- "Permitted Liens" shall have the meaning assigned to such term in the --------------- Indenture. "Person" shall have the meaning assigned to such term in the ------ Indenture. "Premises" shall mean, collectively, the Land and the Improvements. -------- "Prior Liens" shall mean, collectively, the Liens identified in ----------- Schedule B annexed to this Mortgage. - ---------- "Proceeds" shall mean, collectively, any and all cash proceeds and -------- noncash proceeds derived or to be derived from the Mortgaged Property and shall include, without limitation, all (i) proceeds of the sale, transfer or conveyance of the Mortgaged Property or the conversion, voluntary or involuntary, of any of the Mortgaged Property or any portion thereof into cash or liquidated claims, (ii) proceeds of any insurance (except payments made to a Person, other than the Issuer or any Subsidiary thereof, that is not a party to this Mortgage), indemnity, warranty, guaranty or claim payable to the Mortgagee or to the Mortgagor from time to time with respect to any of the Mortgaged Property including, without limitation, all Net Loss Proceeds relating thereto, (iii) payments (in any form whatsoever) made or due and payable to the Mortgagor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any portion of the Mortgaged Property by any Governmental Authority (or any Person acting on behalf of a Governmental Authority) including, without limitation, all Net Loss Awards relating thereto, (iv) products of the Mortgaged Property, (v) other amounts from time to time paid or payable under or in connection with any of the Mortgaged Property including, without limitation, refunds of real estate taxes and assessments, including interest thereon and any unearned insurance premiums relating thereto and (vi) the right to enforce any and all rights that the Mortgagor has or may have to collect all such proceeds, including, without limitation, the Mortgagor's rights to commence any and all appropriate collection or enforcement actions incident thereto. "Property Material Adverse Effect" shall mean, as of any date of -------------------------------- determination and whether individually or in the aggregate (a) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the business or operations as presently conducted at the Mortgaged Property; (b) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the value or utility of the Mortgaged Property; and (c) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the legality, priority or enforceability of the Lien created by this Mortgage or the rights and remedies of the Mortgagee hereunder. "Prudent Operator" shall mean the standard of care taken by a prudent ---------------- operator of property similar in use and configuration to the Premises and located in the locality where the Premises are located. "Records" shall mean, collectively, any and all right, title and ------- interest of the Mortgagor in and to any and all drawings, plans, specifications, file materials, operating and maintenance records, catalogues, tenant lists, correspondence, advertising materials, operating manuals, warranties, guarantees, appraisals, studies and data relating to the Mortgaged Property or the construction of any Alteration or the maintenance of any Permit. "Rents" shall mean, collectively, any and all rents, additional rents, ----- royalties, issues, cash, guaranties, letters of credit, bonds, sureties or security deposited under any Lease to secure performance of the Tenant's obligations thereunder, revenues, earnings, profits, bonuses and income, advance rental payments, payments incident to assignment, sublease or surrender of a Lease, claims for forfeited deposits and claims for damages, now due or hereafter to become due, with respect to any Lease, any indemnification against, or reimbursement for, sums paid and costs and expenses incurred by the Mortgagor under any Lease or otherwise, and any award in the event of the bankruptcy of any Tenant under or guarantor of a Lease. "Requirements of Law" shall mean, collectively, any and all ------------------- requirements of any Governmental Authority including, without limitation, any and all orders, decrees, determinations, laws, treaties, ordinances, rules, regulations or similar statutes or case law. "Secured Obligations" shall mean all obligations (whether or not ------------------- constituting future advances, obligatory or otherwise) of the Issuer and any and all of the Guarantors from time to time arising under or in respect of this Mortgage, the Indenture, the Notes and the other Collateral Documents (including, without limitation, the obligations to pay principal, interest and all other charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Mortgage, the Indenture, the Notes and the other Collateral Documents), in each case whether (i) such obligations are direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due whether at stated maturity, by acceleration or otherwise, (ii) arising in the regular course of business or otherwise, (iii) for payment or performance and/or (iv) now existing or hereafter arising (including, without limitation, interest and other obligations arising or accruing after the commencement of any bankruptcy, insolvency, reorganization or similar proceeding with respect to the Issuer, any Guarantor or any other Person, or which would have arisen or accrued but for the commencement of such proceeding, even if such obligation or the claim therefor is not enforceable or allowable in such proceeding). "Secured Parties" shall have the meaning assigned to such term in --------------- Recital F hereof. - --------- "Senior Secured Notes" shall have the meaning assigned to such term in -------------------- Recital A hereof. - --------- "Subordination Agreement" shall mean a subordination, nondisturbance ----------------------- and attornment agreement substantially in the form of Exhibit 1 annexed to this --------- Mortgage. "Subsidiaries" shall have the meaning assigned to such term in the ------------ Indenture. "Taking" shall mean any taking of the Mortgaged Property or any part ------ thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, general or special, or by reason of the temporary requisition of the use or occupancy of the Mortgaged Property or any part thereof, by any Governmental Authority, civil or military. "Tax Escrow Fund" shall have the meaning assigned to such term in --------------- Section 7.2 hereof. - ----------- "Tenant" shall mean any tenant, lessee, sublessee, franchisee, ------ licensee, grantee or obligee, as applicable. "UCC" shall mean the Uniform Commercial Code as in effect on the date --- hereof in the jurisdiction in which the Premises are located; provided, however, -------- ------- that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any item or portion of the Mortgaged Property is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the jurisdiction in which the Premises are located, "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. SECTION 1.2 Interpretation. In this Mortgage, unless otherwise -------------- specified, (i) singular words include the plural and plural words include the singular, (ii) words importing any gender include the other gender, (iii) references to any Person include such Person's successors and assigns and in the case of an individual, the word "successors" includes such Person's heirs, devisees, legatees, executors, administrators and personal representatives, (iv) references to any statute or other law include all applicable rules, regulations and orders adopted or made thereunder and all statutes or other laws amending, consolidating or replacing the statute or law referred to, (v) the words "consent," "approve" and "agree," and derivations thereof or words of similar import, mean the prior written consent, approval or agreement of the Person in question not to be unreasonably withheld, (vi) the words "include" and "including," and words of similar import, shall be deemed to be followed by the words "without limitation," (vii) the words "hereto," "herein," "hereof" and "hereunder," and words of similar import, refer to this Mortgage in its entirety, (viii) references to Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are to the Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses hereof, (ix) the Schedules and Exhibits to this Mortgage, in each case as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof, are incorporated herein by reference, (x) the titles and headings of Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are inserted as a matter of convenience only and shall not affect the constructions of any provisions hereof and (xi) all obligations of the Mortgagor hereunder shall be satisfied by the Mortgagor at the Mortgagor's sole cost and expense. SECTION 1.3 Resolution of Drafting Ambiguities. The Mortgagor ---------------------------------- acknowledges and agrees that it was represented by counsel in connection with the execution and delivery hereof, that it and its counsel reviewed and participated in the preparation and negotiation hereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party (i.e., Mortgagee) shall not be employed in the interpretation --- hereof. ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Mortgaged Property. The Mortgagor hereby grants, --------------------------- mortgages, bargains, sells, assigns and conveys to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), and hereby grants to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), a security interest in and upon all of the Mortgagor's estate, right, title and interest in, to and under the following property, whether now owned or held or hereafter acquired from time to time (collectively, the "Mortgaged --------- Property"): - -------- (i) Land; (ii) Improvements; (iii) Leases; (iv) Rents; (v) Permits; (vi) Contracts; (vii) Records; and (viii) Proceeds. Notwithstanding the foregoing provisions of this Section 2.1, ----------- Mortgaged Property shall not include a grant of any of the Mortgagor's right, title or interest in (i) any Contract to which the Mortgagor is a party or any of its rights or interests thereunder (other than (x) the right to receive any payment of money (including without limitation accounts, general intangibles and payment intangibles (each as defined in the UCC) or any other rights referred to in Sections 9-406(f), 9-407(a) or 9-408(a) of the UCC and (y) any proceeds, substitutions or replacements thereof) to the extent, but only to the extent, that such a grant would, under the terms of such Contract, result in a breach or termination of the terms of, or constitute a default under or termination of such Contract and (ii) any Permit to the extent, but only to the extent that, such grant shall constitute or result in abandonment, invalidation or rendering unenforceable any right, title or interest of the Mortgagor therein; provided, -------- however, that at such time as any Contract or Permit described in clauses (i) - ------- and (ii) of this sentence is no longer subject to such restriction, such applicable Contract or Permit shall (without any act or delivery by any Person) constitute Mortgaged Property hereunder. TO HAVE AND TO HOLD the Mortgaged Property, together with all estate, right, title and interest of the Mortgagor and anyone claiming by, through or under the Mortgagor in and to the Mortgaged Property and all rights and appurtenances relating thereto, unto the Mortgagee, its successors and assigns, for the purpose of securing the payment and performance in full of all the Secured Obligations. SECTION 2.2 Collateral Assignment and Pledge of Mortgagor's Interest -------------------------------------------------------- as Additional Security. As additional collateral security for the prompt and - ---------------------- punctual payment and satisfaction of the Secured Obligations, and all additional advances that the Mortgagee may make on the Mortgagor's behalf pursuant to this Mortgage, together with interest thereon as provided herein, the Mortgagor hereby assigns, pledges and grants to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), a continuing security interest in and to all of the Mortgagor's estate, right, title, interest, claim and demand, as Landlord, under any and all of the Leases including, without limitation, the following (such assigned rights, the "Mortgagor's Interest"): -------------------- (i) the immediate and continuing right to receive and collect Rents payable by the Tenants pursuant to the Leases; (ii) all claims, rights, powers, privileges and remedies of the Mortgagor, whether provided for in the Leases or arising by statute or at law or in equity or otherwise, consequent on any failure on the part of the Tenants to perform or comply with any term of the Leases including damages or other amounts payable to the Mortgagor as a result of such failure; (iii) all rights to take all actions upon the happening of a default under the Leases as shall be permitted by the Leases or by law including, without limitation, the commencement, conduct and consummation of proceeding at law or in equity; and (iv) the full power and authority, in the name of the Mortgagor or otherwise, to enforce, collect, receive and receipt for any and all of the foregoing and to take all other actions whatsoever which the Mortgagor, as Landlord, is or may be entitled to take under the Leases. SECTION 2.3 Secured Obligations. This Mortgage secures, and the ------------------- Mortgaged Property is collateral security for, the payment and performance in full when due of the Secured Obligations. SECTION 2.4 Mortgage Securing Future Indebtedness. This Mortgage has ------------------------------------- been executed by Mortgagor pursuant to Article 3298 of the Louisiana Civil Code for the purpose of securing the Mortgagor's indebtedness (including, without limitation, the Secured Obligations) that may now be existing or that may arise in the future as provided herein and in the Indenture, with the preferences and priorities provided under applicable Louisiana law. This Mortgage shall be further entitled to the preferences and priorities as provided under the Louisiana Private Works Act (La. R.S. 9:4801, et seq.). However, nothing under this Mortgage shall be construed as limiting the duration of this Mortgage or the purpose or purposes for which the Mortgagor's indebtedness (including, without limitation, the Secured Obligations) may be requested or extended. The Mortgagor's additional indebtedness will automatically be secured by this Mortgage without the necessity that the Mortgagor agrees or consents to such a result at the time additional indebtedness is made and that the note or notes evidencing such additional indebtedness reference the fact that such notes are secured by this Mortgage. The Mortgagor understands that the Mortgagor may not subsequently have a change of mind and insist that the Mortgagor's additional indebtedness not be secured by this Mortgage unless the Mortgagee specifically agrees to such a request in writing. SECTION 2.5 No Release. Nothing set forth in this Mortgage shall ---------- relieve the Mortgagor from the performance of any term, covenant, condition or agreement on the Mortgagor's part to be performed or observed under or in respect of any of the Mortgaged Property or from any liability to any Person under or in respect of any of the Mortgaged Property or shall impose any obligation on the Mortgagee or any other Secured Party to perform or observe any such term, covenant, condition or agreement on the Mortgagor's part to be so performed or observed or shall impose any liability on the Mortgagee or any other Secured Party for any act or omission on the part of the Mortgagor relating thereto or for any breach of any representation or warranty on the part of the Mortgagor contained in this Mortgage, the Indenture, the Notes or the Collateral Documents, or under or in respect of the Mortgaged Property or made in connection herewith or therewith. The obligations of the Mortgagor contained in this Section 2.5 shall survive the termination hereof and the discharge of ----------- the Mortgagor's other obligations under this Mortgage and the Indenture, the Notes and the Collateral Documents. ARTICLE III REPRESENTATIONS AND WARRANTIES OF MORTGAGOR SECTION 3.1 Authority and Validity. ---------------------- The Mortgagor represents and warrants that as of the date hereof: (i) it is duly organized or formed, validly existing and, if applicable, in good standing under the laws of the jurisdiction of its organization; (ii) it is duly qualified to transact business and is in good standing in the state in which the Mortgaged Property is located; (iii) it has full corporate or other organizational power and lawful authority to execute and deliver this Mortgage and to mortgage and grant a Lien on and security interest in the Mortgaged Property and otherwise assign the Mortgagor's Interest and otherwise perform its obligations as contemplated herein, and all corporate and governmental actions, consents, authorizations and approvals necessary or required therefor have been duly and effectively taken or obtained; and (iv) this Mortgage is a legal, valid and binding obligation of the Mortgagor, enforceable against the Mortgagor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. SECTION 3.2 Warranty of Title. The Mortgagor represents and warrants ----------------- that: (i) it has good fee simple title to the Premises and the Landlord's interest and estate under or in respect of the Leases and good title to the interest it purports to own or hold in and to each of the Permits, the Contracts and the Records, in each case subject to no Liens, except for Permitted Collateral Liens; (ii) it has good title to the interest it purports to own or hold in and to all rights and appurtenances to or that constitute a portion of the Mortgaged Property, except for Permitted Collateral Liens; (iii) it is in compliance with each term, condition and provision of any obligation of the Mortgagor which is secured by the Mortgaged Property or the noncompliance with which would result in a Property Material Adverse Effect; and (iv) this Mortgage creates and constitutes a valid and enforceable first priority Lien on the Mortgaged Property subject to Permitted Collateral Liens, and, to the extent any of the Mortgaged Property shall consist of Fixtures, a first priority security interest in the Fixtures, which first priority Lien and first priority security interest are subject only to Permitted Collateral Liens. SECTION 3.3 Condition of Mortgaged Property. The Mortgagor represents ------------------------------- and warrants that: (i) there has been issued and there remains in full force and effect subject to no revocation, suspension, forfeiture or modification, each and every Permit necessary for the present use, operation and occupancy of the Premises by the Mortgagor and its Tenants and the conduct of their respective businesses and all required zoning, building code, land use, environmental and other similar Permits, except where the failure to be so issued and to be in full force and effect would not result in a Property Material Adverse Effect; (ii) the Premises and the present and contemplated use and occupancy thereof comply with all applicable zoning ordinances, building codes, land use laws, set back or other development and/or use requirements of Governmental Authorities except where such noncompliance would not result in a Property Material Adverse Effect; (iii) the Premises are served by all utilities (including, without limitation, water and sewer systems) necessary for the present use thereof, and all utility services are provided by public or private utilities and the Premises have accepted or are equipped to accept such utility services and the Mortgagor has not received notice of termination of such utility service, except where the failure to be so served would not result in a Property Material Adverse Effect; (iv) the Mortgagor has access to the Premises from roads sufficient to allow the Mortgagor and its Tenants and invitees to conduct their respective businesses at the Premises in accordance with sound commercial practices and the Mortgagor has not received notice of termination of such access, except where the failure to have such access would not result in a Property Material Adverse Effect; (v) the Mortgagor has not received notice of any Taking or the commencement or pendency of any action or proceeding therefor, other than such Takings as would not result in a Property Material Adverse Effect; (vi) there has not occurred any Destruction of the Premises or any portion thereof as a result of any fire or other casualty that, as of the date hereof, has not been repaired in all material respects, other than such Destruction as would not have a Property Material Adverse Effect; (vii) there are no disputes regarding boundary lines, location, encroachments or possession of any portions of the Mortgaged Property and no state of facts exists which could give rise to any such claim other than such disputes as would not result in a Property Material Adverse Effect; (viii) all liquid and solid waste disposal, septic and sewer systems located on the Premises are in a good and safe condition and repair and in compliance with all Requirements of Law, except where the failure to so comply would not result in a Property Material Adverse Effect; (ix) no portion of the Premises is located in an area identified by the Federal Emergency Management Agency or any successor thereto as an area having special flood hazards pursuant to the Flood Insurance Acts or, if any portion of the Premises is located within such area, the Mortgagor has obtained the insurance prescribed in Article VIII hereof; ------------ (x) the Premises are assessed for real estate tax purposes as one or more wholly independent tax lot or lots, separate from any adjoining land or improvements not constituting a portion of such lot or lots, and no other land or improvements are assessed and taxed together with the Premises or any portion thereof, other than such cases where the failure to be so assessed would not result in a Property Material Adverse Effect; and (xi) there are no options or rights of first refusal to purchase or acquire all or any portion of the Mortgaged Property, other than such options or rights of first refusal as would not result in a Property Material Adverse Effect. SECTION 3.4 Leases. The Mortgagor represents and warrants that as of ------ the date hereof: (i) the Leases identified in Schedule C attached hereto are the only Leases in existence on the date hereof relating to the Premises; (ii) true copies of such Leases have been previously delivered to the Mortgagee and there are no agreements with any Tenant under such Leases other than those agreements expressly set forth therein; (iii) the Mortgagor is the sole owner of all of the Mortgagor's Interest in such Leases; (iv) each of such Leases is in full force and effect, constitutes a legal, valid and binding obligation of the Mortgagor and the applicable Tenant thereunder, and is enforceable against the Mortgagor and such Tenant in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability; (v) there is no default under any of such Leases and there is existing no condition which with the giving of notice or passage of time or both would cause a default thereunder; (vi) all Rents due under such Leases have been paid in full; (vii) none of the Rents reserved under such Leases have been assigned or otherwise pledged or hypothecated except in favor of the Mortgagee pursuant to the provisions hereof; (viii) none of the Rents (other than any security deposit collected in accordance with the provisions of the applicable Lease) have been collected for more than one (1) month in advance; (ix) there exists no offsets or defenses to the payment of any portion of the Rents and the Mortgagor owes no monetary obligation to any Tenant under any such Lease; (x) the Mortgagor has received no notice from any Tenant challenging the validity or enforceability of any such Lease; (xi) no such Lease contains any option to purchase, right of first refusal to purchase, right of first refusal to relet, or any other similar provision; and (xii) each such Lease is subordinate to this Mortgage either pursuant to its terms or pursuant to a recordable Subordination Agreement. SECTION 3.5 Insurance. The Mortgagor represents and warrants that, --------- except where the failure of clauses (i), (ii) or (iii) hereof to be true would not have a Property Material Adverse Effect, (i) the Premises and the use, occupancy and operation thereof comply with all Insurance Requirements and there exists no default under any Insurance Requirement, (ii) all premiums due and payable with respect to the Insurance Policies have been paid, (iii) all Insurance Policies are in full force and effect and the Mortgagor has not received notice of violation or cancellation thereof and (iv) all insurance certificates required pursuant to the Indenture have been delivered to the Mortgagee. SECTION 3.6 Charges. The Mortgagor represents and warrants that all ------- Charges imposed upon or assessed against the Mortgaged Property have been paid and discharged except to the extent such Charges constitute a Lien not yet due and payable or to the extent such Charges are being contested in accordance with Section 9.1 hereof. - ----------- SECTION 3.7 Environmental. The Mortgagor represents and warrants that: ------------- (i) it has obtained all Permits which are necessary with respect to the ownership and operation of its business and the Mortgaged Property under any and all applicable Environmental Laws and is in compliance with all terms and conditions thereof, except where the failure so to obtain or to be in compliance would not result in a Property Material Adverse Effect; (ii) it is in compliance with any and all applicable Environmental Laws including, without limitation, all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws, except where the failure so to be in compliance would not result in a Property Material Adverse Effect; (iii) there is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice of demand letter pending or threatened against it or any Affiliate under the Environmental Laws which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect; and (iv) there are no past or present events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance with the Environmental Laws, or which may give rise to any common law or legal liability including, without limitation, liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any other Environmental Law or related common law theory or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing or notice of violation, study or investigation, based on or related to the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Materials which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect . SECTION 3.8 No Conflicts, Consents, etc. Neither the execution and --------------------------- delivery hereof by the Mortgagor nor the consummation of the transactions herein contemplated nor the fulfillment of the terms hereof (i) violates the terms of any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or other document to which the Mortgagor is a party, or by which it may be bound or to which any of its properties or assets may be subject, (ii) conflicts with any Requirement of Law applicable to the Mortgagor or its property or (iii) results in or requires the creation or imposition of any Lien (other than the Lien contemplated hereby) upon or with respect to any of the Mortgaged Property, except where such violation, conflict, creation or imposition would not have a Property Material Adverse Effect. No consent of any party (including, without limitation, equityholders or creditors of the Mortgagor) and no consent, authorization, approval, license or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person (other than with respect to any required Permits) is required for (i) the granting of a mortgage Lien on and security interest in the Mortgaged Property by the Mortgagor granted by it pursuant to this Mortgage or for the execution, delivery or performance hereof by the Mortgagor except for the filing of this Mortgage and the other filings contemplated hereby or (ii) the exercise by the Mortgagee of the remedies in respect of the Mortgaged Property pursuant to this Mortgage other than those required by law in connection with the exercise of the applicable remedy. SECTION 3.9 Benefit to the Mortgagor. The Mortgagor represents and ------------------------ warrants that it will receive substantial benefit as a result of the execution, delivery, and performance of the Indenture, the Notes and the Collateral Documents. ARTICLE IV CERTAIN COVENANTS OF MORTGAGOR SECTION 4.1 Preservation of Corporate Existence. The Mortgagor shall: ----------------------------------- (i) preserve and maintain in full force and effect its existence and good standing under the laws of the jurisdiction of its organization; (ii) preserve and maintain in full force and effect its qualification to transact business and good standing in the state in which the Mortgaged Property is located; and (iii) preserve and maintain in full force and effect all consents, authorizations and approvals necessary or required of any Governmental Authority or any other Person relating to the execution, delivery and performance hereof, except where the failure to do so would not result in a Property Material Adverse Effect. SECTION 4.2 Title. The Mortgagor shall: ----- (i) (A) keep in effect all material rights and appurtenances to or that constitute a part of the Mortgaged Property and (B) protect, preserve and defend its interest in the Mortgaged Property and title thereto, except against Permitted Collateral Liens (other than the Lien created by this Mortgage); (ii) (A) comply, in all material respects, with each of the terms, conditions and provisions of any obligation of the Mortgagor which is secured by the Mortgaged Property, except where the failure to so comply would not result in a Property Material Adverse Effect, or the non-compliance with which may result in the imposition of a Lien on the Mortgaged Property, (B) forever warrant and defend to the Mortgagee the Lien and security interests created and evidenced hereby and the validity and priority hereof in any action or proceeding against the claims of any and all Persons whomsoever affecting or purporting to affect the Mortgaged Property or any of the rights of the Mortgagee hereunder, except against Permitted Collateral Liens (other than the Lien of this Mortgage), and (C) maintain a valid and enforceable first priority Lien, except for Permitted Collateral Liens (other than the Lien of this Mortgage) on the Mortgaged Property and, to the extent any of the Mortgaged Property shall consist of Fixtures, a first priority security interest in the Mortgaged Property, which first priority Lien and security interest shall be subject only to Permitted Collateral Liens; and (iii) immediately upon obtaining knowledge of the pendency of any proceedings for the eviction of the Mortgagor from the Mortgaged Property or any part thereof by paramount title or otherwise questioning the Mortgagor's right, title and interest in, to and under the Mortgaged Property as warranted in this Mortgage, or of any condition that could give rise to any such proceedings, notify the Mortgagee thereof. The Mortgagee may participate in such proceedings and the Mortgagor will deliver or cause to be delivered to the Mortgagee all instruments requested by the Mortgagee to permit such participation. In any such proceedings, the Mortgagee may be represented by counsel reasonably satisfactory to the Mortgagee at the reasonable expense of the Mortgagor. If, upon the resolution of such proceedings, the Mortgagor shall suffer a loss of the Mortgaged Property or any part thereof or interest therein and title insurance proceeds shall be payable in connection therewith, such proceeds are hereby assigned to and shall be paid to the Mortgagee for deposit into the Collateral Account and shall be applied in the manner applicable to Net Loss Proceeds in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) of the Indenture. SECTION 4.3 Maintenance and Use of Mortgaged Property; Alterations. ------------------------------------------------------ (i) Maintenance. The Mortgagor shall cause the representations and ----------- warranties set forth in Section 3.3 hereof to continue to be true in each and ----------- every respect and shall pay or cause to be paid when due all Charges, costs and expenses relating thereto, other than such Charges being contested in accordance with Section 9.1 hereof. ----------- (ii) Maintenance of Premises. The Mortgagor shall not commit or ----------------------- suffer any waste on the Premises. The Mortgagor shall, at all times, maintain the Premises in good working order, condition and repair, reasonable wear and tear excepted, and shall use commercially reasonable efforts to make or cause to be made all repairs, structural or nonstructural, which are necessary or appropriate in the conduct of the Mortgagor's business. The Mortgagor shall not, except as permitted in Section 4.3(iii) hereof, alter the occupancy or use of ---------------- all or any portion of the Premises without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. Except to the extent permitted pursuant to the provisions of Section 4.3(iii) hereof, the ---------------- Mortgagor shall not remove, demolish or alter the structural character of any Improvement now or hereafter erected upon all or any portion of the Premises, or permit any such removal, demolition or alteration, without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. (iii) Alterations. The Mortgagor shall not, without the prior written ----------- consent of the Mortgagee, which consent shall not be unreasonably withheld, make any Alteration to the Premises except as permitted by Sections 10.04 and 10.06 of the Indenture. Whether or not the making of any Alteration shall require the consent of the Mortgagee pursuant to the immediately preceding sentence, the Mortgagor shall (A) complete each Alteration promptly, in a good and workmanlike manner and in compliance, in all material respects, with all applicable local laws, ordinances and requirements and (B) pay when due all claims for labor performed and materials furnished in connection with such Alteration, unless contested in accordance with the provisions of Article IX hereof. ---------- (iv) Permits. The Mortgagor shall maintain, or cause to be ------- maintained, in full force and effect all Permits contemplated by and subject to Section 3.3(i) hereof. Unless and to the extent contested by the Mortgagor in - -------------- accordance with the provisions of Article IX hereof, the Mortgagor shall comply, ---------- in all material respects, with all requirements set forth in the Permits and all Requirements of Law applicable to all or any portion of the Mortgaged Property or the condition, use or occupancy of all or any portion thereof or any portion thereof or any recorded deed of restriction, declaration, covenant running with the land or otherwise, now or hereafter in force, subject to the provisions of Section 3.3 hereof. ----------- (v) Zoning. The Mortgagor shall not initiate, join in, or consent to ------ any change in the zoning or any other permitted use classification of the Premises without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. SECTION 4.4 Notices Regarding Certain Defaults. The Mortgagor shall, ---------------------------------- promptly upon receipt of any written notice regarding (i) any default by the Mortgagor relating to the Mortgaged Property or any portion thereof or (ii) the failure to discharge any of Mortgagor's obligations with respect to the Mortgaged Property or any portion thereof described herein, furnish a copy of such notice to the Mortgagee. SECTION 4.5 Access to Mortgaged Property, Books and Records; Other ------------------------------------------------------ Information. - ----------- Upon request to the Mortgagor, the Mortgagee, its agents, accountants and attorneys shall have full and free access to visit and inspect, as applicable, during normal business hours and such other reasonable time as may be requested by the Mortgagee to all of the Mortgaged Property including, without limitation, all of the books, correspondence and records of the Mortgagor relating thereto. The Mortgagee and its representatives may examine the same, take extracts therefrom and make photocopies thereof. The Mortgagor shall, at any and all times, within a reasonable time after written request by the Mortgagee, furnish or cause to be furnished to the Mortgagee, in such manner and in such detail as may be reasonably requested by the Mortgagee, additional information with respect to the Mortgaged Property. SECTION 4.6 Limitation on Liens; Transfer Restrictions. The Mortgagor ------------------------------------------ may not, without the prior written consent of the Mortgagee, further mortgage, encumber, hypothecate, sell, convey or assign all or any part of the Mortgaged Property or suffer or allow any of the foregoing to occur by operation of law or otherwise; provided, however, that the Mortgagor shall have the right to (1) -------- ------- sell, convey or assign all or any portion of the Mortgaged Property in accordance with the provisions of the Indenture and (2) suffer to exist the following Liens in respect of the Mortgaged Property: (i) Prior Liens (but not extensions, amendments, supplements or replacements of Prior Liens unless (A) extended, amended, supplemented or replaced in a manner permitted by the Indenture or (B) consented to by the Mortgagee which consent shall not be unreasonably withheld), (ii) the Lien and security interest created by this Mortgage or any other Collateral Document, (iii) Contested Liens, (iv) Liens described in clause (9) of the definition of Permitted Liens (provided, however, -------- ------- that such Liens shall not extend to or cover any Mortgaged Property other than equipment subject to Capital Leases, Obligations or Purchase Money Obligations incurred in accordance with the provisions of the Indenture) or clause (4) of the definition of Permitted Liens, and (v) Leases to the extent permitted pursuant to the provisions of Article V hereof (the Liens described in clauses --------- (i) through (v) of this sentence, collectively, "Permitted Collateral Liens"). -------------------------- SECTION 4.7 Environmental. ------------- (i) Hazardous Materials. The Mortgagor shall (A) comply with any and ------------------- all present and future Environmental Laws applicable to the Mortgaged Property, (B) not release, store, treat, handle, generate, discharge or dispose of any Hazardous Materials at, on, under or from the Mortgaged Property in violation of or in a manner that could result in any material liability under any present and future Environmental Law and (C) take all necessary steps to initiate and expeditiously complete all remedial, corrective and other action to eliminate any such effect. In the event the Mortgagor fails to comply with the covenants in the preceding sentence, the Mortgagee may, in addition to any other remedies set forth herein, as agent for the Mortgagor and at the Mortgagor's sole cost and expense, cause any remediation, removal or response action relating to Hazardous Materials required by applicable Environmental Laws to be taken and the Mortgagor shall provide to the Mortgagee and its agents and employees access to the Mortgaged Property for such purpose. Any reasonable costs or expenses incurred by the Mortgagee for such purpose shall be immediately due and payable by the Mortgagor and shall bear interest at the Default Rate. The Mortgagee shall have the right at any time when an Event of Default shall have occurred and be continuing and at such other times when a potential violation of any present or future Environmental Law exists which in the Mortgagee's reasonable judgment could result in any material liability or obligation under such Environmental Law, at the sole cost and expense of the Mortgagor, to conduct an environmental audit of the Mortgaged Property by such persons or firms appointed by the Mortgagee, and the Mortgagor shall cooperate in all respects in the conduct of such environmental audit, including, without limitation, by providing access to the Mortgaged Property and to all records relating thereto. To the extent that any such environmental audit identifies conditions which in the Mortgagee's reasonable judgment would result in any material liability or obligation under any present or future Environmental Law, the Mortgagor agrees to expeditiously correct any such violation or respond to conditions giving rise to such liability or obligations in a manner which complies in all material respects with the Environmental Laws and mitigates associated health and environmental risks. The Mortgagor shall indemnify and hold the Mortgagee and each of the other Secured Parties harmless from and against all loss, cost, damage or reasonable expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Mortgagee or any other Secured Party may sustain by reason of the assertion against the Mortgagee or any Secured Party by any party of any claim relating to such Hazardous Materials on, under or from the Mortgaged Property or actions taken with respect thereto as authorized hereunder, except to the extent arising from the gross negligence or willful misconduct of the Mortgagee or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof; and (ii) Asbestos. The Mortgagor shall not install nor permit to be -------- installed in or removed from the Mortgaged Property, asbestos or any asbestos-containing material (collectively, "ACM") except in compliance, in all material respects, with all applicable Environmental Laws, and with respect to any ACM currently present in the Mortgaged Property, the Mortgagor shall promptly either (A) remove any ACM which such Environmental Laws require to be removed or (B) otherwise comply, in all material respects, with such Environmental Laws with respect to such ACM, all at the Mortgagor's sole cost and expense. If the Mortgagor shall fail so to remove any ACM or otherwise comply, in all material respects, with such laws or regulations, the Mortgagee may, in addition to any other remedies set forth herein, take reasonable or necessary steps to eliminate any ACM from the Mortgaged Property or otherwise comply, in all material respects, with applicable law, regulations or orders and the Mortgagor shall provide to the Mortgagee and its agents and employees access to the Mortgaged Property for such purpose. Any reasonable costs or expenses incurred by the Mortgagee for such purpose shall be immediately due and payable by the Mortgagor and bear interest at the Default Rate. The Mortgagor shall indemnify and hold the Mortgagee and the other Secured Parties harmless from and against all loss, cost, damage and expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Mortgagee or the other Secured Parties may sustain, as a result of the presence of any ACM and any removal thereof or compliance with all applicable Environmental Laws, except to the extent arising from the gross negligence or willful misconduct of the Mortgagee or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof. SECTION 4.8 Estoppel Certificates. The Mortgagor shall, from time to --------------------- time, upon thirty (30) days' prior written reasonable request of the Mortgagee, execute, acknowledge and deliver to the Mortgagee an Officers' Certificate stating that this Mortgage, the Indenture, the Notes and the Collateral Documents are unmodified and in full force and effect (or, if there have been modifications, that this Mortgage, the Indenture, the Notes and the Collateral Documents, as applicable, is or are in full force and effect as modified and setting forth such modifications) and stating the date to which principal and interest have been paid on the Notes. ARTICLE V LEASES SECTION 5.1 Mortgagor's Affirmative Covenants with Respect to Leases. -------------------------------------------------------- With respect to each Lease, the Mortgagor shall: (i) observe and perform, in all material respects, all the obligations imposed upon the Landlord under such Lease; (ii) promptly send copies to the Mortgagee of all notices of default which the Mortgagor shall send or receive thereunder; and (iii) enforce all of the terms, covenants and conditions contained in such Lease upon the part of the Tenant thereunder to be observed or performed to the extent it would be commercially reasonable to do so. SECTION 5.2 Mortgagor's Negative Covenants with Respect to Leases. ----------------------------------------------------- With respect to each Lease, the Mortgagor shall not, without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld: (i) receive or collect, or permit the receipt or collection of, any Rent under such Lease more than one (1) month in advance of the respective period in respect of which such Rent is to accrue, except: (A) in connection with the execution and delivery of such Lease (or of any amendment to such Lease), Rent thereunder may be collected and received in advance in an amount not in excess of one (1) month's Rent; (B) the amount held by Landlord as a reasonable security deposit thereunder; and (C) any amount received and collected for escalation and other charges in accordance with the terms of such Lease; (ii) assign, transfer or hypothecate (other than to the Mortgagee hereunder) any Rent under such Lease whether then due or to accrue in the future or the interest of the Mortgagor as Landlord under such Lease; (iii) enter into any amendment or modification of such Lease which would materially decrease the unexpired term thereof or decrease the amount of the Rents payable thereunder or materially impair the value or utility of the Mortgaged Property or the security provided by this Mortgage; (iv) terminate (whether by exercising any contractual right of the Mortgagor to recapture leased space or otherwise) or permit the termination of such Lease or accept surrender of all or any portion of the space demised under such Lease prior to the end of the term thereof or accept assignment of such Lease to the Mortgagor unless: (A) the Tenant under such Lease has not paid the equivalent of two (2) months' Rent and the Mortgagor has made reasonable efforts to collect such Rent; and (B) it would be commercially reasonable to terminate such Lease; or (v) waive, excuse, condone or in any manner discharge or release any Tenants of or from the material obligations of such Tenants under their respective Leases or guarantors of Tenants from any material obligations under any guarantees of the Leases except as the same would be done by a Prudent Operator with due regard for the security afforded the Mortgagee thereby. SECTION 5.3 Additional Requirements with Respect to New Leases. In -------------------------------------------------- addition to the requirements of Sections 5.1 and 5.2 hereof, the Mortgagor shall ------------ --- not enter into any Lease after the date hereof unless the Tenant under such Lease has entered into a Subordination Agreement and has otherwise complied with the provisions of Section 10.06 of the Indenture. ------------- ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Mortgagor. Section 2.2 -------------------------------------------- of this Mortgage constitutes a present, absolute, effective, irrevocable and complete assignment by the Mortgagor to the Mortgagee of the Leases and Rents and the right, subject to applicable law, to collect all sums payable to the Mortgagor thereunder and apply the same as the Mortgagee may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Mortgaged Property), which is not conditioned upon the Mortgagee being in possession of the Premises. The Mortgagee hereby grants to the Mortgagor, however, a license to collect and apply the Rents and to enforce the obligations of Tenants under the Leases. Immediately upon the occurrence of and during the continuance of any Event of Default or a Default, the license granted in the immediately preceding sentence shall cease and terminate, with or without any notice, action or proceeding or the intervention of a receiver appointed by a court. SECTION 6.2 Collection of Rents by the Mortgagee. ------------------------------------ (i) From and after the occurrence and during the continuance of an Event of Default or a Default, any Rents receivable by the Mortgagee hereunder, after payment of all proper costs and expenses as Mortgagee may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Mortgaged Property), shall be applied to the Secured Obligations or, at the option of the Mortgagee, shall be held by the Mortgagee as additional collateral to secure the performance by the Mortgagor of the Secured Obligations. The Mortgagee shall be accountable to the Mortgagor only for Rents actually received by the Mortgagee. The collection of such Rents and the application thereof shall not cure or waive any Event of Default or a Default or waive, modify or affect notice of Event of Default or a Default or invalidate any act done pursuant to such notice. (ii) The Mortgagor hereby irrevocably authorizes and directs Tenant under each Lease to rely upon and comply with any and all notices or demands from the Mortgagee for payment of Rents to the Mortgagee and the Mortgagor shall have no claim against Tenant for Rents paid by Tenant to the Mortgagee pursuant to such notice or demand. SECTION 6.3 No Release. Neither this Mortgage nor any action or ---------- inaction on the part of the Mortgagee shall release any Tenant under any Lease, any guarantor of any Lease or the Mortgagor from any of their respective obligations under such Leases or constitute an assumption of any such obligation on the part of the Mortgagee. No action or failure to act on the part of the Mortgagor shall adversely affect or limit the rights of the Mortgagee under this Mortgage or, through this Mortgage, under such Leases. Nothing contained herein shall operate or be construed to (i) obligate the Mortgagee to perform any of the terms, covenants or conditions contained in any Lease or otherwise to impose any obligation upon the Mortgagee with respect to such Lease (including, without limitation, any obligation arising out of any covenant of quiet enjoyment contained in such Lease in the event that Tenant under such Lease shall have been joined as a party defendant in any action by which the estate of such Tenant shall be terminated) or (ii) place upon the Mortgagee any obligation for the operation, control, care, management or repair of the Premises. SECTION 6.4 Irrevocable Interest. All rights, powers and privileges of -------------------- the Mortgagee herein set forth are coupled with an interest and are irrevocable, subject to the terms and conditions hereof, and the Mortgagor shall not take any action under the Leases or otherwise which is inconsistent with this Mortgage or any of the terms hereof and any such action inconsistent herewith or therewith shall be void. SECTION 6.5 Amendment to Leases. Each Lease, including, without ------------------- limitation, all amendments, modifications, supplements, replacements, extensions and renewals thereof, shall continue to be subject to the provisions hereof without the necessity of any further act by any of the parties hereto. ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges. Unless and to the extent contested by ------------------ the Mortgagor in accordance with the provisions of Article IX hereof, the ---------- Mortgagor shall pay and discharge, or cause to be paid and discharged, from time to time when the same shall become due (or within any applicable grace period) , all Charges subject to this Article VII. The Mortgagor shall, upon the ----------- Mortgagee's request, deliver to the Mortgagee receipts evidencing the payment of all such Charges. SECTION 7.2 Escrow of Taxes. From and after the occurrence and during --------------- the continuance of an Event of Default or a Default, at the option and upon the request of the Mortgagee, the Mortgagor shall deposit with the Mortgagee in an account maintained by the Mortgagee (the "Tax Escrow Fund"), on the first day of --------------- each month, an amount estimated by the Mortgagee to be equal to one-twelfth of the annual real property taxes and other annual Charges required to be discharged by the Mortgagor under Section 7.1 hereof. Such amounts shall be held ----------- by the Mortgagee without interest to the Mortgagor and applied to the payment of the obligations in respect of which such amounts were deposited, in such priority as the Mortgagee shall determine, on or before the respective dates on which such obligations or any part thereof would become delinquent. Nothing contained in this Article VII shall (i) affect any right or remedy of the ----------- Mortgagee under any provision hereof or of any statute or rule of law to pay any such amount as provided above from its own funds and to add the amount so paid, together with interest at the Default Rate during such time that any amount remains outstanding, to the Secured Obligations or (ii) relieve the Mortgagor of its obligations to make or provide for the payment of the annual real property taxes and other annual Charges required to be discharged by the Mortgagor under Section 7.1 hereof. - ----------- SECTION 7.3 Certain Statutory Liens. Unless and to the extent ----------------------- contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall timely pay, or cause to be paid, all lawful claims and demands of mechanics, materialmen, laborers, government agencies administering worker's compensation insurance, old age pensions and social security benefits and all other claims, judgments, demands or amounts of any nature which, if unpaid, would result in, or permit the creation of, a Lien on the Mortgaged Property or any part thereof, or which would result in forfeiture of all or any part of the Mortgaged Property. SECTION 7.4 Stamp and Other Taxes. Unless and to the extent contested --------------------- by the Mortgagor in accordance with the provisions of Article IX hereof, the ---------- Mortgagor shall pay any United States documentary stamp taxes, with interest and fines and penalties, and any mortgage recording taxes, with interest and fines and penalties, that may hereafter be levied, imposed or assessed under or upon or by reason hereof or the Secured Obligations or any instrument or transaction affecting or relating to either thereof and in default thereof the Mortgagee may advance the same and the amount so advanced shall be payable by the Mortgagor to the Mortgagee in accordance with the provisions of Section 14.5 hereof. ------------ SECTION 7.5 Certain Tax Law Changes. In the event of the passage ----------------------- after the date hereof of any law deducting from the value of real property, for the purpose of taxation, amounts in respect of any Lien thereon or changing in any way the laws for the taxation of mortgages or debts secured by mortgages for state or local purposes or the manner of the collection of any Charges, and imposing any Charges, either directly or indirectly, on this Mortgage, the Indenture or any other Collateral Document, the Mortgagor shall promptly pay to the Mortgagee such amount or amounts as may be necessary from time to time to pay any such Charges. SECTION 7.6 Proceeds of Tax Claim. In the event that the proceeds of --------------------- any tax claim are paid after the Mortgagee has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Mortgagee to satisfy any deficiency remaining after such foreclosure. The Mortgagee shall retain its interest in the proceeds of any tax claim during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Mortgagee shall in a prompt manner be released to the Mortgagor. ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages. The Mortgagor ----------------------------------------- shall maintain in respect of the Premises the insurance policies and coverages required under Section 4.19(b) of the Indenture. SECTION 8.2 Delivery After Foreclosure. In the event that the -------------------------- proceeds of any insurance claim are paid after the Mortgagee has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Mortgagee to satisfy any deficiency remaining after such foreclosure. Mortgagee shall retain its interest in the Insurance Policies required to be maintained pursuant to this Mortgage during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Mortgagee shall be released to the Mortgagor. ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens. The ----------------------------------------------- Mortgagor may at its own expense contest the validity, amount or applicability of any Charges as long as the contest thereof shall be conducted in accordance with, and permitted pursuant to the provisions of, the Indenture. Notwithstanding the foregoing provisions of this Section 9.1, (i) no contest of ----------- any such obligations may be pursued by the Mortgagor (A) if such contest would expose the Mortgagee or any Holder to any possible criminal liability or (B) unless the Mortgagor shall have furnished a bond or other security therefor reasonably satisfactory to the Mortgagee or such Holder, as the case may be, any additional civil liability for failure to comply with such obligations and (ii) if at any time payment or performance of any obligation contested by the Mortgagor pursuant to this Section 9.1 shall become necessary to prevent the ----------- imminent imposition of remedies because of non-payment, the Mortgagor shall pay or perform the same in sufficient time to prevent the imposition of remedies in respect of such default or prospective default. SECTION 9.2 Contesting of Insurance. The Mortgagor shall not take any ----------------------- action that would reasonably be expected to cause the termination, revocation or denial of any insurance coverage required to be maintained under this Mortgage or that would be the basis for a defense to any claim under any Insurance Policy maintained in respect of the Premises and the Mortgagor shall otherwise comply in all respects with all Insurance Requirements in respect of the Premises; provided, however, that the Mortgagor may, at its own expense and after written - -------- ------- notice to the Mortgagee, (i) contest the applicability or enforceability of any such Insurance Requirements by appropriate legal proceedings, prosecution of which does not constitute a basis for cancellation or revocation of any insurance coverage required under Article VIII hereof or (ii) cause the ------------ Insurance Policy containing any such Insurance Requirement to be replaced by a new policy complying with the provisions of Article VIII hereof. ------------ ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction. If there shall occur any Destruction, ----------- individually or in the aggregate, in excess of $100,000, the Mortgagor shall promptly send to the Mortgagee a written notice setting forth the nature and extent of such Destruction. The proceeds of any insurance payable in respect of such Destruction are hereby assigned and shall be paid to the Mortgagee. The Net Loss Proceeds arising out of such Destruction, shall be applied in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) the Indenture. SECTION 10.2 Condemnation. If there shall occur any Taking or the ------------ commencement of any proceeding thereof, the Mortgagor shall immediately notify the Mortgagee upon receiving notice of such Taking or commencement of proceedings therefor. The Mortgagee may, at its option, participate in any proceedings or negotiations which might result in any Taking, and the Mortgagor shall deliver or cause to be delivered to the Mortgagee all instruments requested by it to permit such participation. The Mortgagee may be represented by counsel reasonably satisfactory to it at the reasonable expense of the Mortgagor in connection with any such participation. The Mortgagor shall pay all reasonable fees, costs and expenses incurred by the Mortgagee in connection with any Taking and in seeking and obtaining any award or payment on account thereof. Any proceeds, award or payment in respect of any Taking are hereby assigned and shall be paid to the Mortgagee. The Mortgagor shall take all steps necessary to notify the condemning authority of such assignment. The Net Loss Proceeds arising out of such Taking shall be applied in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) the Indenture. ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default. It shall be an Event of Default ----------------- hereunder if there shall have occurred and be continuing an Event of Default under the Indenture. SECTION 11.2 Remedies in Case of an Event of Default. If any Event of --------------------------------------- Default shall have occurred and be continuing, the Mortgagee may at its option, in addition to any other action permitted under this Mortgage or the Indenture or by law, statute or in equity, take one or more of the following actions to the greatest extent permitted by local law: (i) by written notice to the Issuer and the Mortgagor, declare the entire unpaid amount of the Secured Obligations to be due and payable immediately; (ii) personally, or by its agents or attorneys, (A) enter into and upon and take possession of all or any part of the Premises together with the books, records and accounts of the Mortgagor relating thereto and, exclude the Mortgagor, its agents and servants wholly therefrom, (B) use, operate, manage and control the Premises and conduct the business thereof, (C) maintain and restore the Premises, (D) make all necessary or proper repairs, renewals and replacements and such useful Alterations thereto and thereon as the Mortgagee may deem advisable, (E) manage, lease and operate the Premises and carry on the business thereof and exercise all rights and powers of the Mort- gagor with respect thereto either in the name of the Mortgagor or otherwise or (F) collect and receive all Rents. The Mortgagee shall be under no liability for or by reason of any such taking of possession, entry, removal or holding, operation or management except that any amounts so received by the Mortgagee shall be applied in accordance with the provisions of the Indenture; (iii) with or without entry, personally or by its agents or attorneys, (A) sell the Mortgaged Property and all estate, right, title and interest, claim and demand therein at one or more sales in one or more parcels, in accordance with the provisions of Section 11.3 or (B) institute ------------ and prosecute proceedings for the complete or partial foreclosure of the Lien and security interests created and evidenced hereby; or (iv) take such steps to protect and enforce its rights whether by action, suit or proceeding at law or in equity for the specific performance of any covenant, condition or agreement in the Indenture, the Notes and the Collateral Documents, or in aid of the execution of any power granted in this Mortgage, or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy or otherwise as the Mortgagee shall elect. SECTION 11.3 Sale of Mortgaged Property if Event of Default Occurs; ------------------------------------------------------ Proceeds of Sale. - ---------------- (i) If any Event of Default shall have occurred and be continuing, the Mortgagee may institute an action to foreclose this Mortgage or take such other action as may be permitted and available to the Mortgagee at law or in equity for the enforcement of the Indenture and the Notes and realization on the Mortgaged Property and proceeds thereon through power of sale or to final judgment and execution thereof for the Secured Obligations, and in furtherance thereof the Mortgagee may sell the Mortgaged Property at one or more sales, as an entirety or in parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law or statute or in equity. The Mortgagee may execute and deliver to the purchaser at such sale a conveyance of the Mortgaged Property in fee simple and an assignment or conveyance of all the Mortgagor's Interest in the Leases and the Mortgaged Property, each of which conveyances and assignments shall contain recitals as to the Event of Default upon which the execution of the power of sale herein granted depends, and the Mortgagor hereby constitutes and appoints the Mortgagee the true and lawful attorney in fact of the Mortgagor to make any such recitals, sale, assignment and conveyance, and all of the acts of the Mortgagee as such attorney in fact are hereby ratified and confirmed. The Mortgagor agrees that such recitals shall be binding and conclusive upon the Mortgagor and that any assignment or conveyance to be made by the Mortgagee shall divest the Mortgagor of all right, title, interest, equity and right of redemption, including any statutory redemption, in and to the Mortgaged Property. The power and agency hereby granted are coupled with an interest and are irrevocable by death or dissolution, or otherwise, and are in addition to any and all other remedies which the Mortgagee may have hereunder, at law or in equity. So long as the Secured Obligations, or any part thereof, remain unpaid, the Mortgagor agrees that possession of the Mortgaged Property by the Mortgagor, or any person claiming under the Mortgagor, shall be as tenant, and, in case of a sale under power or upon foreclosure as provided in this Mortgage, the Mortgagor and any person in possession under the Mortgagor, as to whose interest such sale was not made subject, shall, at the option of the purchaser at such sale, then become and be tenants holding over, and shall forthwith deliver possession to such purchaser, or be summarily dispossessed in accordance with the laws applicable to tenants holding over. In case of any sale under this Mortgage by virtue of the exercise of the powers herein granted, or pursuant to any order in any judicial proceeding or otherwise, the Mortgaged Property may be sold as an entirety or in separate parcels in such manner or order as the Mortgagee in its sole discretion may elect. One or more exercises of powers herein granted shall not extinguish or exhaust such powers, until the entire Mortgaged Property is sold or all amounts secured hereby are paid in full. (ii) In the event of any sale made under or by virtue of this Article ------- XI, the entire principal of, and interest in respect of the Secured - -- Obligations, if not previously due and payable, shall, at the option of the Mortgagee, immediately become due and payable, anything in this Mortgage to the contrary notwithstanding. (iii) The proceeds of any sale made under or by virtue of this Article ------- XI, together with any other sums which then may be held by the Mortgagee - -- under this Mortgage, whether under the provisions of this Article XI or ---------- otherwise, shall be applied in accordance with the provisions of the Indenture; (iv) The Mortgagee may bid for and acquire the Mortgaged Property or any part thereof at any sale made under or by virtue of this Article XI and, in ---------- lieu of paying cash therefor, may make settlement for the purchase price by crediting against the purchase price the unpaid amounts (whether or not then due and owing) in respect of the Secured Obligations, after deducting from the sales price the expense of the sale and the reasonable costs of the action or proceedings and any other sums that the Mortgagee is authorized to deduct under this Mortgage. (v) The Mortgagee may adjourn from time to time any sale by it to be made under or by virtue hereof by announcement at the time and place appointed for such sale or for such adjourned sale or sales, and, the Mortgagee, without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned. (vi) If the Premises is comprised of more than one parcel of land, the Mortgagee may take any of the actions authorized by this Section 11.3 in ------------ respect of any or a number of individual parcels. SECTION 11.4 Additional Remedies in Case of an Event of Default. -------------------------------------------------- (i) The Mortgagee shall be entitled to recover judgment as aforesaid either before, after or during the pendency of any proceedings for the enforcement of the provisions hereof, and the right of the Mortgagee to recover such judgment shall not be affected by any entry or sale hereunder, or by the exercise of any other right, power or remedy for the enforcement of the provisions hereof, or the foreclosure of, or absolute conveyance pursuant to, this Mortgage. In case of proceedings against the Mortgagor in insolvency or bankruptcy or any proceedings for its reorganization or involving the liquidation of its assets, the Mortgagee shall be entitled to prove the whole amount of principal and interest and other payments, charges and costs due in respect of the Secured Obligations to the full amount thereof without deducting therefrom any proceeds obtained from the sale of the whole or any part of the Mortgaged Property; provided, however, that in no case shall the Mortgagee -------- ------- receive a greater amount than the aggregate of such principal, interest and such other payments, charges and costs (with interest at the Default Rate) from the proceeds of the sale of the Mortgaged Property and the distribution from the estate of the Mortgagor. (ii) Any recovery of any judgment by the Mortgagee and any levy of any execution under any judgment upon the Mortgaged Property shall not affect in any manner or to any extent the Lien and security interests created and evidenced hereby upon the Mortgaged Property or any part thereof, or any conveyances, powers, rights and remedies of the Mortgagee hereunder, but such conveyances, powers, rights and remedies shall continue unimpaired as before. (iii) Any monies collected by the Mortgagee under this Section 11.4 ------------ shall be applied in accordance with the provisions of Section 11.3(iii). ----------------- SECTION 11.5 Legal Proceedings After an Event of Default. ------------------------------------------- (i) After the occurrence and during the continuance of any Event of Default and immediately upon the commencement of any action, suit or legal proceedings to obtain judgment for the Secured Obligations or any part thereof, or of any proceedings to foreclose the Lien and security interest created and evidenced hereby or otherwise enforce the provisions hereof or of any other proceedings in aid of the enforcement hereof, the Mortgagor shall enter its voluntary appearance in such action, suit or proceeding. (ii) Upon the occurrence and during the continuance of an Event of Default, the Mortgagee shall be entitled forthwith as a matter of right, concurrently or independently of any other right or remedy hereunder either before or after declaring the Secured Obligations or any part thereof to be due and payable, to the appointment of a receiver without giving notice to any party and without regard to the adequacy or inadequacy of any security for the Secured Obligations or the solvency or insolvency of any person or entity then legally or equitably liable for the Secured Obligations or any portion thereof. The Mortgagor hereby consents to the appointment of such receiver. Notwithstanding the appointment of any receiver, the Mortgagee shall be entitled as pledgee to the possession and control of any cash, deposits or instruments at the time held by or payable or deliverable under the terms of the Indenture to the Mortgagee. (iii) The Mortgagor shall not (A) at any time insist upon, or plead, or in any manner whatsoever claim or take any benefit or advantage of any stay or extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance hereof, (B) claim, take or insist on any benefit or advantage of any law now or hereafter in force providing for the valuation or appraisal of the Mortgaged Property, or any part thereof, prior to any sale or sales of the Mortgaged Property which may be made pursuant to this Mortgage, or pursuant to any decree, judgment or order of any court of competent jurisdiction or (C) after any such sale or sales, claim or exercise any right under any statute heretofore or hereafter enacted to redeem the property so sold or any part thereof. To the extent permitted by applicable law, the Mortgagor hereby expressly (A) waives all benefit or advantage of any such law or laws, including, without limitation, any statute of limitations applicable to this Mortgage, (B) waives all rights to have the Mortgaged Property marshalled on any foreclosure of this Mortgage, (C) waives any and all rights to trial by jury in any action or proceeding related to the enforcement hereof, (D) waives any objection which it may now or hereafter have to the laying of venue of any action, suit or proceeding brought in connection with this Mortgage and further waives and agrees not to plead that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum and (E) covenants not to hinder, delay or impede the execution of any power granted or delegated to the Mortgagee by this Mortgage but to suffer and permit the execution of every such power as though no such law or laws had been made or enacted. The Mortgagee shall not be liable for any incorrect or improper payment made pursuant to this Article XI in the absence of ---------- gross negligence or willful misconduct. SECTION 11.6 Remedies Not Exclusive. No remedy conferred upon or ---------------------- reserved to the Mortgagee by this Mortgage is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Mortgage or now or hereafter existing at law or in equity. Any delay or omission of the Mortgagee to exercise any right or power accruing on any Event of Default shall not impair any such right or power and shall not be construed to be a waiver of or acquiescence in any such Event of Default. Every power and remedy given by this Mortgage may be exercised from time to time concurrently or independently, when and as often as may be deemed expedient by the Mortgagee in such order and manner as the Mortgagee, in its sole discretion, may elect. If the Mortgagee accepts any monies required to be paid by the Mortgagor under this Mortgage after the same become due, such acceptance shall not constitute a waiver of the right either to require prompt payment, when due, of all other sums secured by this Mortgage or to declare an Event of Default with regard to subsequent defaults. If the Mortgagee accepts any monies required to be paid by the Mortgagor under this Mortgage in an amount less than the sum then due, such acceptance shall be deemed an acceptance on account only and on the condition that it shall not constitute a waiver of the obligation of the Mortgagor to pay the entire sum then due, and the Mortgagor's failure to pay the entire sum then due shall be and continue to be a default hereunder notwithstanding acceptance of such amount on account. SECTION 11.7 Special Louisiana Provisions. ---------------------------- (i) Without limiting the generality of the foregoing, should one or more Events of Default occur or exist and be continuing under this Mortgage, as provided above, the Mortgagee, at its option, may exercise any one or more of this following rights and remedies, in addition to any other rights and remedies provided by law and under this Mortgage to the greatest extent permitted by applicable Louisiana law. Nothing contained herein shall be construed as constituting the Mortgagee as mortgagee in possession in absence of the actual taking of possession of the Premises by the Mortgagee. (ii) The Mortgagee shall have the right, at its sole option, to accelerate the maturity and demand immediate payment in full of any and all of the Secured Obligations. The Mortgagee shall then have the right to commence appropriate foreclosure proceedings against the Mortgaged Property and against the Mortgagor's rights as provided in this Mortgage. (iii) In the event that the Mortgagee elects to commence appropriate Louisiana foreclosure proceedings under this Mortgage, the Mortgagee may cause the Mortgaged Property, or any part or parts thereof, to be immediately seized and sold, whether in term of court or in vacation, under ordinary or executory process, in accordance with applicable Louisiana law, to the highest bidder for cash, with or without appraisement, and without the necessity of making additional demand upon or notifying the Mortgagor or placing the Mortgagor in default, all of which are expressly waived. (iv) For purposes of foreclosure under Louisiana executory process procedures, the Mortgagor confesses judgment and acknowledges to be indebted to the Mortgagee, up to the full amount of the indebtedness in principal, interest, costs, expenses, reasonable attorney's fees and other fees and charges and amounts contemplated hereunder. The Mortgagor further confesses judgment and acknowledges to be indebted unto and in favor of the Mortgagee in the amount of all future advances that the Mortgagee may make on the Mortgagor's behalf pursuant to this Mortgage, together with interest thereon. To the extent permitted under applicable Louisiana law, the Mortgagor additionally waives: (1) the benefit of appraisal as provided in Articles 2332, 2336, 2723, and 2724 of the Louisiana Code of Civil Procedure, and all other laws with regard to appraisal upon judicial sale; (2) the demand and three (3) days' delay provided under Articles 22639 and 2721 of the Louisiana Code of Civil Procedure; (3) the notice of seizure as provided under Articles 2293 and 2721 of the Louisiana Code of Civil Procedure; (4) the three (3) days' delay provided under Articles 2331, 2722 and 2723 of the Louisiana Code of Civil Procedure and all other Articles not specifically mentioned above. The Mortgagor further agrees that any declaration of fact made by authentic act before a Notary Public and two witnesses, by a Person declaring that such facts are within his or her knowledge, shall constitute authentic evidence of such facts for purposes of foreclosure under applicable Louisiana law and for purposes of La, R.S. 9:3504(D)(6) and La. R.S. 10:9-508, to the extent applicable. (v) Should any or all of the Mortgaged Property be seized as an incident to an action for the recognition or enforcement of this Mortgage, by executory process, sequestration, attachment, writ of fieri facias or otherwise, the Mortgagor hereby agrees that the court issuing any such order shall, if requested by the Mortgagee, appoint the Mortgagee, or any agent designated by the Mortgagee or any Person named by the Mortgagee at the time such seizure is requested, or any time thereafter, as Keeper of the Mortgaged Property as provided under La. R.S. 9:5136, et seq. Such a Keeper shall be entitled to reasonable compensation. The Mortgagor agrees to pay the reasonable fees of such Keeper which compensation to the Keeper shall also be secured by this Mortgage in the form of an future advances as provided in this Mortgage. (vi) Should it become necessary for the Mortgagee to foreclose under this Mortgage, all declarations of fact, which are made under an authentic act before a Notary Public in the presence of two witnesses, by a person declaring such facts to lie within his or her knowledge, shall constitute authentic evidence for purposes of executory process and also for purposes of La. R.S. 9:3509.1, La. R.S. 9:3504(D)(6) and La. R.S. 10:9-508, where applicable. (vii) Should one or more Events of Default occur or exist under this Mortgage, the Mortgagee shall have the additional right, at its sole option, to separately sell the aforesaid rights, or any part of parts thereof, at private or public compensation, or on credit, or for future delivery, without the assumption of any credit risk. The sale of the aforesaid rights may be without appraisement, the benefit of which is also expressly waived by the Mortgagor. The Mortgagee may exercise any other remedies with regard to the Mortgagor's rights as may be authorized under the Louisiana Commercial Laws (La. R.S. 10:9-101, et seq.). (viii) To the extent provided by law, and in the event of foreclosure under this Mortgage, or other transfer of title or assignment of the Mortgaged Property, or any part or parts thereof, in lieu of payment of the Secured Obligations, whether in whole or in part, all policies of insurance and other rights applicable to the foreclosed Mortgaged Property upon transfer of the Mortgaged Property shall automatically inure to the benefit of and shall pass to the purchaser(s) or transferee(s) thereof, subject to the rights of the purchaser(s) or transferee(s) to reject such insurance coverage and/or rights at its or their sole option and election. (ix) The Mortgagee may, in addition to or in lieu of the foregoing remedies, in the Mortgagee's sole discretion, commence an appropriate action against the Mortgagor seeking specific performance of any covenant contained in this Mortgage or in aid of the execution or enforcement of any power in this Mortgage granted. (x) Except as may be prohibited by applicable law, all of the Mortgagee's rights and remedies, whether evidenced by this Mortgage or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by the Mortgagee to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of the Mortgagor under this Mortgage, after the Mortgagor's failure to perform shall not affect the Mortgagee's right to declare a default and exercise its remedies. Nothing under this Mortgage or otherwise shall be construed so as to limit or restrict the rights and remedies available to the Mortgagee following an Event of Default, or in any way to limit or restrict the rights and abilities of the Mortgagee to proceed directly against Mortgagor and/or against any other co-maker, guarantor, surety or endorser of the Secured Obligations, and/or to proceed against any other collateral directly or indirectly securing the Secured Obligations. ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement. ------------------ (i) This Mortgage shall constitute a Security Agreement as defined in the Louisiana Commercial Laws, La. R.S.ss.10:101 et seg., and shall create and evidence a security interest in all the equipment and in all the other items of Mortgaged Property in which a security interest may be granted pursuant to the Louisiana Commercial Laws (collectively, "Personal Property"). (ii) The remedies for any violation of the covenants, terms and conditions of the agreements herein contained shall be as prescribed herein or by general Louisiana law or, as to such part of the security which is also reflected in any Financing Statement filed to perfect the security interest herein created, by the specific statutory provisions now or hereinafter enacted and specified in the Louisiana Commercial Laws, all at Mortgagee's sole election. The mention in any financing statement of (1) the rights in or the proceeds of any fire or hazard insurance policy, or (2) any award in eminent domain proceedings for a taking or for loss of value, or (3) Mortgagor's interest as lessor in any present or future lease or rights to income growing out of the use or occupancy of the Mortgaged Property whether pursuant to lease or otherwise, shall never be construed as in any way altering any of the rights of Mortgagee under this Mortgage or impugning the priority of the Mortgagee's lien granted hereby or by any other recorded document. Rather, such mention in the financing statement is declared to be for the protection of the Mortgagee in the event any court or judge shall at any time hold with respect to (1), (2) and (3) above, that notice of Mortgagee's priority of interest to be effective against a particular class of persons, including, but not limited to, the Federal Government and any subdivisions or entity of the Federal Government, must be filed with the clerk of court of any parish (or St. Mary Parish Recorder of Mortgages) pursuant to Section 9-401 of the Louisiana Commercial Laws. SECTION 12.2 Fixture Filing. From the date of its recording, this -------------- Mortgage shall be effective as a fixture financing statement with respect to all goods constituting part of the Mortgaged Property which are to become fixtures related to the Land. For this purpose, the following information is set forth: (a) Name and Address of Debtor: Bayou Vista Truck Plaza and Casino, L.L.C., 1829 Highway 90 West Bayou Vista, Louisiana 70380 TIN 72-1460460 and (b) Name and Address of Secured Party: Wells Fargo Bank Minnesota, National Association Corporate Trust Services 213 Court Street, Suite 902 Middletown, Connecticut 06457 (c) This document covers goods which are to become fixtures. All items that are fixtures on the date of this Mortgage shall be subject to the mortgage Lien granted hereunder. ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security. The Mortgagor ------------------------------------------ shall, forthwith after the execution and delivery hereof and thereafter, from time to time, cause this Mortgage and any financing statement, continuation statement or similar instrument relating to any thereof or to any property intended to be subject to the Lien hereof to be filed, registered and recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the validity and priority thereof or the Lien hereof purported to be created upon the Mortgaged Property and the interest and rights of the Mortgagee therein. The Mortgagor shall pay or cause to be paid all taxes and fees incident to such filing, registration and recording, and all reasonable expenses incident to the preparation, execution and acknowledgment thereof, and of any instrument of further assurance, and all Federal or state stamp taxes or other taxes, duties and charges arising out of or in connection with the execution and delivery of such instruments. SECTION 13.2 Further Acts. The Mortgagor shall, at the sole cost and ------------ expense of the Mortgagor, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers, financing statements, continuation statements, instruments and assurances as the Mortgagee shall from time to time reasonably request, which may be necessary in the judgment of the Mortgagee from time to time to assure, perfect, convey, assign, mortgage, transfer and confirm unto the Mortgagee, the property and rights hereby conveyed or assigned or which the Mortgagor may be or may hereafter become bound to convey or assign to the Mortgagee or for carrying out the intention or facilitating the performance of the terms hereof or the filing, registering or recording hereof. Without limiting the generality of the foregoing, in the event that the Mortgagee desires to exercise any remedies, consensual rights or attorney-in-fact powers set forth in this Mortgage and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other Person therefor, then, upon the reasonable request of the Mortgagee, the Mortgagor agrees to use its reasonable efforts to assist and aid the Mortgagee to obtain as soon as practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers. In the event the Mortgagor shall fail (i) within ten (10) Business Days after demand, to execute or take any action required to be executed or taken by the Mortgagor under this Section 13.2 to the extent same ------------ is necessary to maintain perfection of the Lien granted to Mortgagee hereunder or (ii) such failure shall constitute an Event of Default, to execute or take any action required to be executed or taken by the Mortgagor under this Section ------- 13.2 (other than the type described in clause (i) of this sentence) then, in - ---- each of the cases described in clauses (i) and (ii) of this sentence, the Mortgagee may execute or take the same as the attorney-in-fact for the Mortgagor, such power of attorney being coupled with an interest and is irrevocable. SECTION 13.3 Additional Security. Without notice to or consent of the ------------------- Mortgagor and without impairment of the Lien and rights created by this Mortgage, the Mortgagee may accept (but the Mortgagor shall not be obligated to furnish) from the Mortgagor or from any other Person, additional security for the Secured Obligations. Neither the giving hereof nor the acceptance of any such additional security shall prevent the Mortgagee from resorting, first, to such additional security, and, second, to the security created by this Mortgage without affecting the Mortgagee's Lien and rights under this Mortgage. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Land. All of the grants, ------------------------------ covenants, terms, provisions and conditions in this Mortgage shall run with the Land and shall apply to, and bind the successors and assigns of, the Mortgagor. If there shall be more than one mortgagor with respect to the Mortgaged Property, the covenants and warranties hereof shall be joint and several. SECTION 14.2 No Merger. The rights and estate created by this Mortgage --------- shall not, under any circumstances, be held to have merged into any other estate or interest now owned or hereafter acquired by the Mortgagee unless the Mortgagee shall have consented to such merger in writing, such consent not to be unreasonably withheld. SECTION 14.3 Concerning Mortgagee. -------------------- (i) The Mortgagee has been appointed as trustee pursuant to the Indenture. The actions of the Mortgagee hereunder are subject to the provisions of the Indenture. The Mortgagee shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of the Mortgaged Property), in accordance with this Mortgage and the Indenture. The Mortgagee may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. The Mortgagee may resign and a successor Mortgagee may be appointed in the manner provided in the Indenture. Upon the acceptance of any appointment as the Mortgagee by a successor Mortgagee, that successor Mortgagee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Mortgagee under this Mortgage, and the retiring Mortgagee shall thereupon be discharged from its duties and obligations under this Mortgage. After any retiring Mortgagee's resignation, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it under this Mortgage while it was the Mortgagee. (ii) The Mortgagee shall be deemed to have exercised reasonable care in the custody and preservation of the Mortgaged Property in its possession if such Mortgaged Property is accorded treatment substantially equivalent to that which the Mortgagee, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Mortgagee nor any of the Secured Parties shall have responsibility for taking any necessary steps to preserve rights against any Person with respect to any Mortgaged Property. (iii) The Mortgagee shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person, and, with respect to all matters pertaining to this Mortgage and its duties hereunder, upon advice of counsel selected by it. (iv) If any portion of the Mortgaged Property also constitutes collateral granted to the Mortgagee under any other deed of trust, mortgage, security agreement, pledge or instrument of any type, in the event of any conflict between the provisions hereof and the provisions of such other deed of trust, mortgage, security agreement, pledge or instrument of any type in respect of such collateral, the Mortgagee, in its sole discretion, shall select which provision or provisions shall control. SECTION 14.4 Mortgagee May Perform; Mortgagee Appointed ------------------------------------------ Attorney-in-Fact. If the Mortgagor shall fail to perform any covenants contained - ---------------- in this Mortgage, subject to any applicable grace periods or contest rights permitted pursuant to Article IX hereof or as otherwise permitted by any ---------- Collateral Document (including, without limitation, the Mortgagor's covenants to (i) pay the premiums in respect of all required insurance policies hereunder, (ii) pay Charges, (iii) make repairs, (iv) discharge Liens or (v) pay or perform any obligations of the Mortgagor under any Mortgaged Property) or if any warranty on the part of the Mortgagor contained herein shall be breached, the Mortgagee may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose; provided, -------- however, that the Mortgagee shall in no event be bound to inquire into the - ------- validity of any tax, Lien, imposition or other obligation which the Mortgagor fails to pay or perform as and when required hereby and which the Mortgagor does not contest in accordance with the provisions of Article IX hereof. Any and all ---------- amounts reasonably so expended by the Mortgagee shall be paid by the Mortgagor in accordance with the provisions of Section 14.5 hereof. Neither the provisions ------------ of this Section 14.4 nor any action taken by the Mortgagee pursuant to the ------------ provisions of this Section 14.4 shall prevent any such failure to observe any ------------ covenant contained in this Mortgage nor any breach of warranty from constituting an Event of Default. Upon the occurrence and during the continuance of an Event of Default the Mortgagor hereby appoints the Mortgagee its attorney-in-fact, with full authority in the place and stead of the Mortgagor and in the name of the Mortgagor to take any action and to execute any instrument consistent with the terms hereof and the other Collateral Documents which the Mortgagee may deem necessary or advisable to accomplish the purposes hereof. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. The Mortgagor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. SECTION 14.5 Expenses. The Mortgagor will upon demand pay to the -------- Mortgagee the amount of any and all reasonable costs and expenses, including the reasonable fees and expenses of its counsel and the reasonable fees and expenses of any experts and agents which the Mortgagee may incur in connection with (i) any action, suit or other proceeding affecting the Mortgaged Property or any part thereof commenced, in which action, suit or proceeding the Mortgagee is made a party or participates or in which the right to use the Mortgaged Property or any part thereof is threatened, or in which it becomes necessary in the judgment of the Mortgagee to defend or uphold the Lien hereof (including, without limitation, any action, suit or proceeding to establish or uphold the compliance of the Mortgaged Property with any Requirements of Law), (ii) the collection of the Secured Obligations, (iii) the enforcement and administration hereof, (iv) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Mortgaged Property, (v) the exercise or enforcement of any of the rights of the Mortgagee or any Secured Party hereunder or (vi) the failure by the Mortgagor to perform or observe any of the provisions hereof. All amounts expended by the Mortgagee and payable by the Mortgagor under this Section 14.5 shall be due upon demand therefor (together with interest ------------ thereon accruing at the Default Rate during the period from and including the date on which such funds were so expended to the date of repayment) and shall be part of the Secured Obligations. The Mortgagor's obligations under this Section 14.5 shall survive the termination hereof and the discharge of the - ------------ Mortgagor's other obligations under this Mortgage. SECTION 14.6 Indemnity. --------- (i) The Mortgagor agrees to indemnify, pay and hold harmless the Mortgagee and each of the other Secured Parties and the officers, directors, employees, agents and Affiliates of the Mortgagee and each of the other Secured Parties (collectively, the "Indemnitees") from and against any and all other ----------- liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs (including, without limitation, settlement costs), expenses or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, commenced or threatened, whether or not such Indemnitee shall be designated a party thereto), which may be imposed on, incurred by or asserted against that Indemnitee, in any manner relating to or arising out hereof, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (including, without limitation, any misrepresentation by the Mortgagor in this Mortgage, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (the "Indemnified Liabilities"); provided, however, that the Mortgagor shall have no ----------------------- -------- ------- obligation to an Indemnitee hereunder with respect to Indemnified Liabilities to the extent it has been determined by a final decision (after all appeals and the expiration of time to appeal) by a court of competent jurisdiction that such Indemnified Liabilities arose from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Mortgagor shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. (ii) Survival. The obligations of the Mortgagor contained in this -------- Section 14.6 shall survive the termination hereof and the discharge of the - ------------ Mortgagor's other obligations under this Mortgage, the Indenture and the other Collateral Documents. (iii) Reimbursement. Any amount paid by any Indemnitee as to which ------------- such Indemnitee has the right to reimbursement shall constitute Secured Obligations secured by the Mortgaged Property. SECTION 14.7 Continuing Security Interest; Assignment. This Mortgage ---------------------------------------- shall create a continuing Lien on and security interest in the Mortgaged Property and shall (i) be binding upon the Mortgagor, its respective successors and assigns and (ii) inure, together with the rights and remedies of the Mortgagee hereunder, to the benefit of the Mortgagee and the other Secured Parties and each of their respective successors, transferees and assigns. No other Persons (including, without limitation, any other creditor of Mortgagor) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (ii), any Holder of the Notes may assign or otherwise transfer any indebtedness held by it secured by this Mortgage to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Holder, herein or otherwise, subject however, to the provisions of the Indenture. SECTION 14.8 Termination; Release. The Mortgaged Property shall be -------------------- released from the Lien of this Mortgage in accordance with the provisions of Article 10 the Indenture. - ---------- SECTION 14.9 Modification in Writing. No amendment, modification, ----------------------- supplement, termination or waiver of or to any provision hereof, nor consent to any departure by the Mortgagor therefrom, shall be effective unless the same shall be done in accordance with the terms of the Indenture and unless in writing and signed by the Mortgagee and Mortgagor. Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by the Mortgagor from the terms of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Mortgage or any other Collateral Document, no notice to or demand on the Mortgagor in any case shall entitle the Mortgagor to any other or further notice or demand in similar or other circumstances. SECTION 14.10 Notices. Unless otherwise provided herein or in the ------- Indenture, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Indenture, if to the Mortgagor, addressed to it at the address of the Issuer set forth in the Indenture, and as to the Mortgagee, addressed to it at its address set forth in the Indenture, or in each case at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 14.10. ------------- SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL. ------------------------------------------------------- THIS MORTGAGE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR ITEM OR TYPE OF MORTGAGED PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. THE MORTGAGOR AGREES THAT SERVICE OF PROCESS IN ANY PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE ISSUER AT ITS ADDRESS SET FORTH IN THE INDENTURE OR AT SUCH OTHER ADDRESS OF WHICH THE MORTGAGEE SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. IF ANY AGENT APPOINTED BY THE MORTGAGOR REFUSES TO ACCEPT SERVICE, THE MORTGAGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE MORTGAGEE TO BRING PROCEEDINGS AGAINST THE MORTGAGOR IN THE COURTS OF ANY OTHER JURISDICTION. THE MORTGAGOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 14.12 Severability of Provisions. Any provision hereof which -------------------------- is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 14.13 Limitation on Interest Payable. It is the intention of ------------------------------ the parties to conform strictly to the usury laws, whether state or Federal, that are applicable to the transaction of which this Mortgage is a part. All agreements between the Mortgagor and the Mortgagee, whether now existing or hereafter arising and whether oral or written, are hereby expressly limited so that in no contingency or event whatsoever shall the amount paid or agreed to be paid by the Mortgagor for the use, forbearance or detention of the money to be loaned or advanced under the Indenture or any related document or for the payment or performance of any covenant or obligation contained herein or in the Indenture or any related document exceed the maximum amount permissible under applicable Federal or state usury laws. If under any circumstances whatsoever fulfillment of any such provision, at the time performance of such provision shall be due, shall involve exceeding the limit of validity prescribed by law, then the obligation to be fulfilled shall be reduced to the limit of such validity. If under any circumstances the Mortgagor shall have paid an amount deemed interest by applicable law, which would exceed the highest lawful rate, such amount that would be excessive interest under applicable usury laws shall be applied to the reduction of the principal amount owing in respect of the Secured Obligations and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal and any other amounts due hereunder, the excess shall be refunded to the Mortgagor. All sums paid or agreed to be paid for the use, forbearance or detention of the principal under any extension of credit by the Mortgagee shall, to the extent permitted by applicable law, and to the extent necessary to preclude exceeding the limit of validity prescribed by law, be amortized, prorated, allocated and spread from the date hereof until payment in full of the Secured Obligations so that the actual rate of interest on account of such principal amounts is uniform throughout the term hereof. SECTION 14.14 Business Days. In the event any time period or any date ------------- provided in this Mortgage ends or falls on a day other than a Business Day, then such time period shall be deemed to end and such date shall be deemed to fall on the next succeeding Business Day, and performance herein may be made on such Business Day, with the same force and effect as if made on such other day. SECTION 14.15 Relationship. The relationship of the Mortgagee to the ------------ Mortgagor hereunder is strictly and solely that of lender and borrower and mortgagor and mortgagee and nothing contained in the Indenture, the Notes, this Mortgage or any other document or instrument now existing and delivered in connection therewith or otherwise in connection with the Secured Obligations is intended to create, or shall in any event or under any circumstance be construed as creating a partnership, joint venture, tenancy-in-common, joint tenancy or other relationship of any nature whatsoever between the Mortgagee and the Mortgagor other than as lender and borrower and mortgagor and mortgagee. SECTION 14.16 Waiver of Stay. -------------- (i) The Mortgagor agrees that in the event that the Mortgagor or any property or assets of the Mortgagor shall hereafter become the subject of a voluntary or involuntary proceeding under the Bankruptcy Code or the Mortgagor shall otherwise be a party to any Federal or state bankruptcy, insolvency, moratorium or similar proceeding to which the provisions relating to the automatic stay under Section 362 of the Bankruptcy Code or any similar provision in any such law is applicable, then, in any such case, whether or not the Mortgagee has commenced foreclosure proceedings under this Mortgage, the Mortgagee shall be entitled to relief from any such automatic stay as it relates to the exercise of any of the rights and remedies (including, without limitation, any foreclosure proceedings) available to the Mortgagee as provided in this Mortgage, in any other Collateral Document or any other document evidencing the Secured Obligations. (ii) The Mortgagee shall have the right to petition or move any court having jurisdiction over any proceeding described in Section 14.16(i) ---------------- hereof for the purposes provided therein, and the Mortgagor agrees (i) not to oppose any such petition or motion and (ii) at the Mortgagor's sole cost and expense, to assist and cooperate with the Mortgagee, as may be requested by the Mortgagee from time to time, in obtaining any relief requested by the Mortgagee, including, without limitation, by filing any such petitions, supplemental petitions, requests for relief, documents, instruments or other items from time to time requested by the Mortgagee or any such court. SECTION 14.17 No Credit for Payment of Taxes or Impositions. The --------------------------------------------- Mortgagor shall not be entitled to any credit against the principal, premium, if any, or interest payable under the Indenture or the Notes, and the Mortgagor shall not be entitled to any credit against any other sums which may become payable under the terms thereof or hereof, by reason of the payment of any Charge on the Mortgaged Property or any part thereof. SECTION 14.18 No Claims Against the Mortgagee. Nothing contained in ------------------------------- this Mortgage shall constitute any consent or request by the Mortgagee, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Premises or any part thereof, nor as giving the Mortgagor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the Mortgagee in respect thereof or any claim that any Lien based on the performance of such labor or services or the furnishing of any such materials or other property is prior to the Lien hereof. SECTION 14.19 Obligations Absolute. All obligations of the Mortgagor -------------------- hereunder shall be absolute and unconditional irrespective of: (i) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Mortgagor, the Issuer or any other Guarantor; (ii) any lack of validity or enforceability of the Indenture, the Notes or any other agreement or instrument relating thereto; (iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Indenture, the Notes or any other agreement or instrument relating thereto; (iv) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations; (v) any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect hereof, the Indenture, the Notes or any agreement or instrument relating thereto except as specifically set forth in a waiver granted pursuant to the provisions of Section 14.9 hereof; or ------------ (vi) any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Mortgagor. SECTION 14.20 Last Dollars Secured. This Mortgage secures only a -------------------- portion of the Indebtedness owing or which may become owing by the Mortgagor. The parties agree that any payments or repayments of such Indebtedness by the Mortgagor shall be and be deemed to be applied first to the portion of the Indebtedness that is not secured hereby, it being the parties' intent that the portion of the Indebtedness last remaining unpaid shall be secured hereby. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] THUS DONE AND PASSED, on the day, month and year first written above, effective as of the Effective Date, in the State and Parish aforesaid, by the undersigned Mortgagor in the presence of the undersigned Notary and the undersigned competent witnesses, who hereunto sign their names with Mortgagor after reading of the whole. WITNESSES: MORTGAGOR: BAYOU VISTA TRUCK PLAZA AND CASINO, L.L.C., a Louisiana limited liability company /s/ Douglas A. Blackshear /s/ Ian M. Stewart ___________________________________ By: _________________________________ Ian M. Stewart Douglas A. Blackshear Authorized Officer Printed Name: _____________________ /s/ Sterling W. Dale, Jr. ___________________________________ Sterling W. Dale, Jr. Printed Name: _____________________ /s/ Perryann P. Whitehurst _______________________________________ Notary Public Schedule A ---------- Legal Description [to come from title policy] Schedule B ---------- Prior Liens ----------- 1. Each of the liens and other encumbrances excepted as being prior to the Lien hereof as set forth in Schedule B to the marked title insurance commitment issued by Lawyers Title Insurance Corporation, dated as of the date hereof and delivered to the Trustee on the date hereof, bearing Lawyers Title Insurance Corporation reference number 37638REV relating to the real property described in Schedule A attached hereto. 2. Zoning and building ordinances and regulations, to the extent they constitute Permitted Liens of the type described in clause (4) of the definition thereof. Schedule C ---------- Leases Affecting the Mortgaged Property NONE Exhibit 1 --------- FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the "Agreement") is made and entered into as of the ____ day of _______, ____ by and between ________________________________, as trustee, having an office at _________________ (in such capacity, "Trustee"), and _____________________, having an office at __________________________ ("Tenant"). R E C I T A L S: - - - - - - - - A. Tenant is the tenant under a certain lease dated _____________, ____ between ________________________________, as landlord ("Landlord"), and Tenant, as tenant (as amended through the date hereof, the "Lease"), pursuant to which Tenant leased a portion (the "Leased Premises") of the property known as _____________________________, located at _____________________________, as more particularly described in Schedule A attached hereto (the "Property"). B. Landlord has or will grant a mortgage lien on and security interest in the Property to Trustee (for its benefit and for the benefit of the holders of certain senior secured notes and notes issued in exchange therefor pursuant to that certain indenture dated as of [________ ___, 2002]) pursuant to one or more mortgages, deeds of trust, deeds to secure debt or similar security instruments (collectively, the "Security Instruments"). C. Tenant has agreed to subordinate the Lease to the Security Instruments and to the lien thereof and Trustee has agreed not to disturb Tenant's possessory rights in the Leased Premises under the Lease on the terms and conditions hereinafter set forth. A G R E E M E N T: - - - - - - - - - NOW, THEREFORE, the parties hereto mutually agree as follows: 1. Subordination. Notwithstanding anything to the contrary set forth ------------- in the Lease, the Lease and the leasehold estate created thereby and all of Tenant's rights thereunder are and shall at all times be subject and subordinate in all respects to the Security Instruments and the lien thereof, and to all rights of Trustee thereunder, and to any and all advances to be made thereunder, and to all renewals, modifications, consolidations, replacements and extensions thereof. 2. Nondisturbance. So long as Tenant complies with the provisions of -------------- this Agreement, pays all rents and other charges as specified in the Lease and is not otherwise in default (beyond applicable notice and cure periods) of any of its obligations and covenants pursuant to the Lease, Trustee agrees for itself and its successors in interest and for any other person acquiring title to the Property through a foreclosure (an "Acquiring Party"), that Tenant's possession of the Leased Premises as described in the Lease will not be disturbed during the term of the Lease by reason of a foreclosure. For purposes of this Agreement, a "foreclosure" shall include (but not be limited to) a sheriff's or trustee's sale under the power of sale con- -2- tained in the Security Instruments, the termination of any superior lease of the Property and any other transfer of the Landlord's interest in the Property under peril of foreclosure, including, without limitation to the generality of the foregoing, an assignment or sale in lieu of foreclosure. 3. Attornment. Tenant agrees to attorn to, accept and recognize any ---------- Acquiring Party as the landlord under the Lease pursuant to the provisions expressly set forth therein for the then remaining balance of the term of the Lease, and any extensions thereof as made pursuant to the Lease. The foregoing provision shall be self-operative and shall not require the execution of any further instrument or agreement by Tenant as a condition to its effectiveness. 4. No Liability. Notwithstanding anything to the contrary contained ------------ herein or in the Lease, it is specifically understood and agreed that neither the Trustee, any receiver nor any Acquiring Party shall be: (a) liable for any act, omission, negligence or default of any prior landlord (including Landlord); or (b) liable for any failure of any prior landlord (including Landlord) to construct any improvements or bound by any covenant to construct any improvement either at the commencement of the term of the Lease or upon any renewal or extension thereof or upon the addition of additional space pursuant to any expansion right contained in the Lease; or (c) subject to any offsets, credits, claims or defenses which Tenant might have against any prior landlord (including Landlord); or (d) bound by any rent or additional rent which is payable on a monthly basis and which Tenant might have paid for more than one (1) month in advance to any prior landlord (including Landlord) or by any security deposit or other prepaid charge which Tenant might have paid in advance to any prior landlord (including Landlord); or (e) liable to Tenant hereunder or under the terms of the Lease beyond its interest in the Property; or (f) bound by any assignment, subletting, renewal, extension or any other agreement or modification of the Lease made without the written consent of Trustee; or (g) bound by any consensual or negotiated surrender, cancellation or termination of the Lease, in whole or in part, agreed upon between Landlord and Tenant unless effected unilaterally by Tenant pursuant to the express terms of the Lease. Notwithstanding the foregoing, Tenant reserves its right to any and all claims or causes of action (i) against such prior landlord for prior losses or damages and (ii) against the successor landlord for all losses or damages arising from and after the date that such successor landlord takes title to the Property. 5. Certain Acknowledgments and Agreements by Tenant. (a) Tenant has ------------------------------------------------ notice that the Lease and the rents and all other sums due thereunder have been assigned to Trustee as security for the notes secured by the Security Instruments. In the event Trustee notifies Tenant of the occurrence of a de- -3- fault under the Security Instruments and demands that Tenant pay its rents and all other sums due or to become due under the Lease directly to Trustee, Tenant shall honor such demand and pay its rent and all other sums due under the Lease directly to Trustee or as otherwise authorized in writing by Trustee. Landlord irrevocably authorizes Tenant to make the foregoing payments to Trustee upon such notice and demand. (b) Tenant shall send a copy of any and all notices or statements under the Lease to Trustee at the same time such notices or statements are sent to Landlord. (c) This Agreement satisfies any and all conditions or requirements in the Lease relating to the granting of a non-disturbance agreement. 6. Trustee to Receive Default Notices. Tenant shall notify Trustee of ---------------------------------- any default by Landlord under the Lease which would entitle Tenant to cancel the Lease, and agrees that, notwithstanding any provisions of the Lease to the contrary, no notice of cancellation thereof shall be effective unless Trustee shall have received notice of default giving rise to such cancellation and shall have failed within sixty (60) days after receipt of such notice to cure such default or, if such default cannot be cured within sixty (60) days, shall have failed within sixty (60) days after receipt of such notice to commence and thereafter diligently pursue any action necessary to cure such default. 7. Estoppel. Tenant hereby certifies and represents to Trustee that as -------- of the date of this Agreement: (a) the Lease is in full force and effect; (b) all requirements for the commencement and validity of the Lease have been satisfied and there are no unfulfilled conditions to Tenant's obligations under the Lease; (c) Tenant is not in default under the Lease and has not received any uncured notice of any default by Tenant under the Lease; to the best of Tenant's knowledge, Landlord is not in default under the Lease; no act, event or condition has occurred which with notice or the lapse of time, or both, would constitute a default by Tenant or Landlord under the Lease; no claim by Tenant of any nature exists against Landlord under the Lease; and all obligations of Landlord have been fully performed; (d) there are no defenses, counterclaims or setoffs against rents or charges due or which may become due under the Lease; (e) none of the rent which Tenant is required to pay under the Lease has been prepaid, or will in the future be prepaid, more than one (1) month in advance; (f) Tenant has no right or option contained in the Lease or in any other document to purchase all or any portion of the Leased Premises; (g) the Lease has not been modified or amended and constitutes the entire agreement between Landlord and Tenant relating to the Leased Premises; -4- (h) Tenant has not assigned, mortgaged, sublet, encumbered, conveyed or otherwise transferred any or all of its interest under the Lease; and (i) Tenant has full authority to enter into this Agreement, which has been duly authorized by all necessary action. 8. Notices. All notices or other written communications hereunder ------- shall be deemed to have been properly given (i) upon delivery, if delivered in person with receipt acknowledged by the recipient thereof, (ii) one (1) Business Day (hereinafter defined) after having been deposited for overnight delivery with any reputable overnight courier service, or (iii) three (3) Business Days after having been deposited in any post office or mail depository regularly maintained by the United States Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested, addressed to the receiving party at its address set forth above or addressed as such party may from time to time designate by written notice to the other parties. For purposes of this Section 8, the term "Business Day" shall mean any day other than --------- Saturday, Sunday or any other day on which banks are required or authorized to close in New York, New York. Either party by notice to the other may designate additional or different addresses for subsequent notices or communications. 9. Successors. The obligations and rights of the parties pursuant to ---------- this Agreement shall bind and inure to the benefit of the successors, assigns, heirs and legal representatives of the respective parties; provided, however, -------- ------- that in the event of the assignment or transfer of the interest of Trustee, all obligations and liabilities of Trustee under this Agreement shall terminate, and thereupon all such obligations and liabilities shall be the responsibility of the party to whom Trustee's interest is assigned or transferred; and provided, -------- further, that the interest of Tenant under this Agreement may not be assigned or - ------- transferred without the prior written consent of Trustee. In addition, Tenant acknowledges that all references herein to Landlord shall mean the owner of the landlord's interest in the Lease, even if said owner shall be different from the Landlord named in the Recitals. 10. Duplicate Original; Counterparts. This Agreement may be executed -------------------------------- in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Agreement. 11. Limitation of Trustee's Liability. (a) Trustee shall have no --------------------------------- obligations nor incur any liability with respect to any warranties of any nature whatsoever, whether pursuant to the Lease or otherwise, including, without limitation, any warranties respecting use, compliance with zoning, Landlord's title, Landlord's authority, habitability, fitness for purpose or possession. (b) In the event that Trustee shall acquire title to the Leased Premises or the Property, Trustee shall have no obligation, nor incur any liability, beyond Trustee's then equity interest, if any, in the Leased Premises, and Tenant shall look exclusively to such equity interest of Trustee, if any, in the Leased Premises for the payment and discharge of any obligations imposed upon Trustee hereunder or under the Lease, and Trustee is hereby released and relieved of any other obligations hereunder and under the Lease. 12. Modification in Writing. This Agreement may not be modified except ----------------------- by an agreement in writing signed by the parties hereto or their respective successors in interest. -5- 13. Lien of Security Instruments. Nothing contained in this Agreement ---------------------------- shall in any way impair or affect the lien created by the Security Instruments or the provisions thereof. 14. Compliance with Lease. Tenant agrees that in the event there is --------------------- any inconsistency between the terms and provisions hereof and the terms and provisions of the Lease, the terms and provisions hereof shall be controlling. 15. Governing Law; Severability. This Agreement shall be governed by --------------------------- the laws of the State of [ ]. If any term of this Agreement or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such terms to any person or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 16. Further Actions. Tenant agrees at its own expense to execute and --------------- deliver, at any time and from time to time upon the request of Trustee or any Acquiring Party, such documents and instruments (in recordable form, if requested) as may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to fully implement or to further evidence the understandings and agreements contained in this Agreement. Moreover, Tenant hereby irrevocably appoints and constitutes Trustee or any Acquiring Party as its true and lawful attorney-in-fact to execute and deliver any such documents or instruments which may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to implement or further evidence such understandings and agreements and which Tenant, after thirty (30) days' notice from Trustee or any Acquiring Party, has failed to execute and deliver. IN WITNESS WHEREOF, Trustee and Tenant have duly executed this Agreement as of the date first above written. _______________________________________, as Trustee By: ____________________________________ Name: Title: _______________________________________, as Tenant By: ____________________________________ Name: Title: The undersigned, as the Landlord named in the Recitals, having duly executed this Agreement as of the date first written above, and as mortgagor, pledgor, assignor or debtor under the Security Instruments, hereby accepts and agrees for itself and its successors and assigns, (i) to be bound by the provisions of Section 5 hereof, (ii) that nothing contained in the foregoing Agreement (x) shall in any way be deemed to constitute a waiver by Trustee of any of its rights or remedies under the Security Instruments or (y) shall in any way be deemed to release Landlord from its obligations to comply with the terms, provisions, conditions, covenants and agreements set forth in the Security Instruments and (iii) that the provisions of the Security Instruments remain in full force and effect and must be complied with by Landlord. ________________________________, a ________________________________ By: ____________________________________ Name: Title: ACKNOWLEDGMENT State of __________) ) ss.: County of _________) [Local counsel to provide appropriate acknowledgment] SCHEDULE A to EXHIBIT 1 ----------------------- Description of Real Property ---------------------------- EX-4.16 46 dex416.txt MORTGAGE, ASSIGNMENT OF LEASES-LUCKY MAGNOLIA Exhibit 4.16 ================================================================================ MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING BY LUCKY MAGNOLIA TRUCK PLAZA AND CASINO, L.L.C., Mortgagor, TO WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee, Mortgagee Securing Principal Indebtedness of $125,000,000 Dated as of February 22 , 2002 Relating to Premises in: St. Helena Parish, Louisiana ================================================================================ After recording, please return to: Athy A. Mobilia, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 ------------------- TABLE OF CONTENTS
Page ---- PREAMBLE .................................................................. 1 RECITALS .................................................................. 1 AGREEMENT ................................................................. 2 ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions ................................................ 2 SECTION 1.2 Interpretation ............................................. 8 SECTION 1.3 Resolution of Drafting Ambiguities ......................... 8 ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Mortgaged Property ................................ 8 SECTION 2.2 Assignment of Leases and Rents ............................. 9 SECTION 2.3 Secured Obligations ........................................ 10 SECTION 2.4 Future Advances ............................................ 10 SECTION 2.5 No Release ................................................. 10 ARTICLE III REPRESENTATIONS AND WARRANTIES OF MORTGAGOR SECTION 3.1 Authority and Validity ..................................... 10 SECTION 3.2 Warranty of Title .......................................... 11 SECTION 3.3 Condition of Mortgaged Property ............................ 11 SECTION 3.4 Leases ..................................................... 13 SECTION 3.5 Insurance .................................................. 13 SECTION 3.6 Charges .................................................... 14 SECTION 3.7 Environmental .............................................. 14 SECTION 3.8 No Conflicts, Consents, etc ................................ 14 SECTION 3.9 Benefit to the Mortgagor ................................... 15
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Page ---- ARTICLE IV CERTAIN COVENANTS OF MORTGAGOR SECTION 4.1 Preservation of Corporate Existence ........................ 15 SECTION 4.2 Title ...................................................... 15 SECTION 4.3 Maintenance and Use of Mortgaged Property; Alterations ..... 16 SECTION 4.4 Notices Regarding Certain Defaults ......................... 17 SECTION 4.5 Access to Mortgaged Property, Books and Records; Other Information .............................................. 17 SECTION 4.6 Limitation on Liens; Transfer Restrictions ................. 17 SECTION 4.7 Environmental .............................................. 17 SECTION 4.8 Estoppel Certificates ...................................... 19 ARTICLE V LEASES SECTION 5.1 Mortgagor's Affirmative Covenants with Respect to Leases ... 19 SECTION 5.2 Mortgagor's Negative Covenants with Respect to Leases ...... 19 SECTION 5.3 Additional Requirements with Respect to New Leases ......... 20 ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Mortgagor ............... 20 SECTION 6.2 Collection of Rents by the Mortgagee ....................... 20 SECTION 6.3 No Release ................................................. 21 SECTION 6.4 Irrevocable Interest ....................................... 21 SECTION 6.5 Amendment to Leases ........................................ 21 ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges ......................................... 21 SECTION 7.2 Escrow of Taxes ............................................ 22 SECTION 7.3 Certain Statutory Liens .................................... 22 SECTION 7.4 Stamp and Other Taxes ...................................... 22 SECTION 7.5 Certain Tax Law Changes .................................... 22 SECTION 7.6 Proceeds of Tax Claim ...................................... 22 ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages .................. 23
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Page ---- SECTION 8.2 Delivery After Foreclosure ................................. 23 ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens ............ 23 SECTION 9.2 Contesting of Insurance .................................... 23 ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction ................................................ 24 SECTION 10.2 Condemnation ............................................... 24 ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default .......................................... 24 SECTION 11.2 Remedies in Case of an Event of Default .................... 24 SECTION 11.3 Sale of Mortgaged Property if Event of Default Occurs; Proceeds of Sale ........................................... 25 SECTION 11.4 Additional Remedies in Case of an Event of Default ......... 26 SECTION 11.5 Legal Proceedings After an Event of Default ................ 27 SECTION 11.6 Remedies Not Exclusive ..................................... 27 ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement ......................................... 30 SECTION 12.2 Fixture Filing ............................................. 31 ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security ................. 31 SECTION 13.2 Further Acts ............................................... 31 SECTION 13.3 Additional Security ........................................ 32
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Page ---- ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Land ............................. 32 SECTION 14.2 No Merger .................................................. 32 SECTION 14.3 Concerning Mortgagee ....................................... 32 SECTION 14.4 Mortgagee May Perform; Mortgagee Appointed Attorney-in-Fact ........................................ 33 SECTION 14.5 Expenses ................................................... 33 SECTION 14.6 Indemnity .................................................. 34 SECTION 14.7 Continuing Security Interest; Assignment ................... 34 SECTION 14.8 Termination; Release ....................................... 34 SECTION 14.9 Modification in Writing .................................... 35 SECTION 14.10 Notices .................................................... 35 SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL ................................................... 35 SECTION 14.12 Severability of Provisions ................................. 35 SECTION 14.13 Limitation on Interest Payable ............................. 35 SECTION 14.14 Business Days .............................................. 36 SECTION 14.15 Relationship ............................................... 36 SECTION 14.16 Waiver of Stay ............................................. 36 SECTION 14.17 No Credit for Payment of Taxes or Impositions .............. 37 SECTION 14.18 No Claims Against the Mortgagee ............................ 37 SECTION 14.19 Obligations Absolute ....................................... 37 SECTION 14.20 Last Dollars Secured ....................................... 37
SIGNATURE AND ACKNOWLEDGMENT SCHEDULE A Legal Description SCHEDULE B Prior Liens SCHEDULE C Leases Affecting the Mortgaged Property EXHIBIT 1 Form of Subordination, Non-Disturbance and Attornment Agreement -iv- MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Mortgage"), dated as of February 22, 2002, made by LUCKY MAGNOLIA -------- TRUCK STOP AND CASINO, L.L.C., a Louisiana limited liability company having an office at 40235 Highway 16, Denham Springs, Louisiana 70706, as mortgagor, assignor and debtor (in such capacities and together with any successors in such capacities, the "Mortgagor"), in favor of WELLS FARGO BANK MINNESOTA, NATIONAL --------- ASSOCIATION, a national banking association having an office at 213 Court Street, Suite 902, Middletown, CT 06457, in its capacity as collateral agent and trustee pursuant to the Indenture (as hereinafter defined), as mortgagee, assignee and secured party (in such capacities and together with any successors in such capacities, the "Mortgagee"). --------- R E C I T A L S : - - - - - - - - A. Gameco, Inc. (the "Issuer"), certain of its Subsidiaries (as ------ hereinafter defined), the Mortgagor and the Mortgagee have, in connection with the execution and delivery of this Mortgage, entered into that certain indenture, dated as of February 8, 2002 (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Indenture"), --------- pursuant to which the Issuer has issued its 11 7/8% senior secured notes due 2009 (the "Senior Secured Notes") in the aggregate principal amount of -------------------- $125,000,000. It is contemplated that the Issuer may, after the date hereof, issue Additional Notes (as defined in the Indenture) and Exchange Notes (as defined in the Indenture); the Exchange Notes, together with the Additional Notes and the Senior Secured Notes, the "Notes"), in each case, pursuant to the ----- provisions of the Indenture. B. The Issuer owns, directly or through its Subsidiaries, all of the issued and outstanding shares of the Mortgagor. C. The Mortgagor has, pursuant the Indenture, among other things, unconditionally guaranteed (the "Guarantee") the obligations of the Issuer under --------- the Indenture and the Notes. D. The Mortgagor will receive substantial benefits from the execution and delivery of, and the performance of the obligations under, the Indenture and the Notes, and is therefore willing to enter into this Mortgage. E. The Mortgagor is or will be the legal owner of the Mortgaged Property (as hereinafter defined). F. This Mortgage is given by the Mortgagor in favor of the Mortgagee for its benefit and for the benefit of the Holders of the Notes (collectively, the "Secured Parties") to secure the payment and performance of all of the --------------- Secured Obligations (as hereinafter defined). A G R E E M E N T: - - - - - - - - - NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Mortgagor hereby covenants and agrees with the Mortgagee as follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions. Capitalized terms used but not otherwise ----------- defined herein shall have the meanings assigned to such terms in the Indenture. The following terms used in this Mortgage shall have the following meanings: "ACM" shall have the meaning assigned to such term in Section 4.7(ii) --- --------------- hereof. "Affiliate" shall have the meaning assigned to such term in the --------- Indenture. "Alteration" shall mean any and all alterations, installations, ---------- improvements, additions, modifications or changes of a structural nature of or to the Premises. "Business Day" shall have the meaning assigned to such term in the ------------ Indenture. "Charges" shall mean any and all real estate, property and other ------- taxes, assessments and special assessments, levies, fees, all water and sewer rents and charges and all other governmental charges or Liens imposed upon or assessed against, and all claims (including, without limitation, landlords', carriers', mechanics', workmen's, repairmen's, laborers', materialmen's, suppliers' and warehousemen's Liens and other claims arising by operation of law) against, all or any portion of the Mortgaged Property. "Collateral Account" shall have the meaning assigned to such term in ------------------ the Indenture. "Collateral Documents" shall have the meaning assigned to such term in -------------------- the Indenture. "Contested Liens" shall mean, collectively, any Liens incurred in --------------- respect of any Charges to the extent that the amounts owing in respect thereof are not yet delinquent or are being contested and otherwise comply with the provisions of Section 9.1 hereof. ----------- "Contracts" shall mean, collectively, any and all right, title and --------- interest of the Mortgagor in and to any and all contracts, instruments, documents and other general intangibles, whether now existing or hereafter arising or entered into, relating to the Mortgaged Property (including, without limitation, all reciprocal easements and/or operating agreements, covenants, conditions and restrictions and similar agreements affecting all or any portion of the Mortgaged Property and any and all present or future options to sell or lease the Mortgaged Property or any interest therein) and all reserves, deferred payments, deposits or other security or advance payments (including, without limitation, those made by or on behalf of the Mortgagor to others with respect to (i) utility service regarding the Mortgaged Property, (ii) cleaning, maintenance, repair or similar services regarding the Mortgaged Property, (iii) refuse removal or sewage service regarding the Mortgaged Property, (iv) rentals of equipment, if any, used in the operation by or on behalf of Mortgagor regarding the Mortgaged Property, and/or (v) parking or similar services or rights regarding the Mortgaged Property), refunds, liens, security interests, guarantees, remedies and claims of every kind, nature or character relating thereto. "Default Rate" shall mean the rate per annum equal to the highest rate ------------ then payable under the Indenture. "Destruction" shall mean any and all damage to, or loss or destruction ----------- of, the Premises or any part thereof. "Environmental Law" shall mean any applicable federal, state, local or ----------------- municipal statute, law, rule, regulation, ordinance, code, policy or rule of common law and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment binding on the Mortgagor, relating to pollution or protection of the environment, or health or safety including, without limitation, any relating to the release or threatened release of any Hazardous Materials. "Event of Default" shall have the meaning assigned to such term in the ---------------- Indenture. "Fixture" shall mean all machinery, apparatus, equipment, fittings, ------- fixtures, improvements and articles of personal property of every kind, description and nature whatsoever now or hereafter attached or affixed to the Land or any other Improvement or used in connection with the use and enjoyment of the Land or any other Improvement or the maintenance or preservation thereof, which by the nature of their location thereon or attachment thereto are fixtures under the UCC or any other applicable law including, without limitation, all utility systems, fire sprinkler and security systems, drainage facilities, lighting facilities, all water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone and other utility equipment and facilities, pipes, fittings and other items of every kind and description now or hereafter attached to or located on the Land which by the nature of their location thereon or attachment thereto are real property under applicable law, HVAC equipment, boilers, electronic data processing, telecommunications or computer equipment, refrigeration, electronic monitoring, water or lighting systems, power, sanitation, waste removal, elevators, maintenance or other systems or equipment and all additions thereto and betterments, renewals, substitutions and replacements thereof. "GAAP" shall have the meaning assigned to such term in the Indenture. ---- "Governmental Authority" shall mean any federal, state, local, foreign ---------------------- or other governmental, quasi-governmental or administrative (including self-regulatory) body, instrumentality, department, agency, authority, board, bureau, commission, office of any nature whatsoever or other subdivision thereof, or any court, tribunal, administrative hearing body, arbitration panel or other similar dispute-resolving body, whether now or hereafter in existence, or any officer or official thereof, having jurisdiction over the Mortgagor or the Mortgaged Property or any portion thereof. "Guarantee" shall have the meaning assigned to such term in Recital C --------- --------- hereof. "Guarantors" shall have the meaning assigned to such term in the ---------- Indenture. "Hazardous Materials" shall mean any substance, chemical, material, ------------------- pollutant, waste, contaminant or constituent, which is subject to regulation under or could give rise to liability under any Environmental Law. "Holder" shall have the meaning assigned to such term in the ------ Indenture. "Improvements" shall mean all buildings, structures and other ------------ improvements of every kind or description and any and all Alterations now or hereafter located, attached or erected on the Land including, without limitation (i) all Fixtures, (ii) all attachments, railroad tracks, foundations, sidewalks, drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer rights, parking areas, driveways, fences and walls and (iii) all materials now or hereafter located on the Land intended for the construction, reconstruction, repair, replacement, alteration, addition or improvement of or to such buildings, Fixtures, structures and improvements, all of which materials shall be deemed to be part of the Improvements immediately upon delivery thereof on the Land and to be part of the improvements immediately upon their incorporation therein. "Indemnified Liabilities" shall have the meaning assigned to such term ----------------------- in Section 14.6(i) hereof. --------------- "Indemnitees" shall have the meaning assigned to such term in Section ----------- ------- 14.6(i) hereof. - ------- "Indenture" shall have the meaning assigned to such term in Recital A --------- --------- hereof. "Insurance Policies" means the insurance policies and coverages ------------------ required to be maintained by the Mortgagor with respect to the Mortgaged Property pursuant to Section 4.19(b) of the Indenture and all renewals and extensions thereof. "Insurance Requirements" means, collectively, all provisions of the ---------------------- Insurance Policies, all requirements of the issuer of any of the Insurance Policies and all orders, rules, regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon the Mortgagor and applicable to the Mortgaged Property or any use or condition thereof. "Issuer" shall have the meaning assigned to such term in Recital A ------ --------- hereof. "Land" shall mean those certain tracts or parcels of land described in ---- Schedule A annexed to this Mortgage, together with all of the Mortgagor's - ---------- reversionary rights therein and all of the Mortgagor's rights in and to any and all easements, rights-of-way, strips and gores of land, waters, water courses, water rights, mineral, gas and oil rights and all power, air, light and other rights, estates, titles, interests, privileges, liberties, servitudes, licenses, tenements, hereditaments and appurtenances whatsoever, in any way belonging, relating or appertaining thereto, or any part thereof, or which hereafter shall in any way belong, relate or be appurtenant thereto. "Landlord" shall mean any landlord, lessor, franchisor, licensor or -------- grantor, as applicable. "Leases" shall mean, collectively, any and all right, title and ------ interests of the Mortgagor, as Landlord, in all leases and subleases of space, tenancies, franchise agreements, licenses, occupancy, rental, access or concession agreements and any other agreements pursuant to which any Person is granted a pos- sessory interest in or right to use or occupy all or any portion of the Mortgaged Property (including, without limitation, all of the Mortgagor's rights to enforce all such leases, subleases, tenancies or other agreements and to receive and enforce any rights that the Mortgagor may have to collect Rents thereunder), in each case whether now existing or hereafter entered into, whether or not of record, relating in any manner to the Premises or the use or occupancy thereof and any and all amendments, modifications, supplements, replacements, extensions, renewals and/or guarantees, if any thereof, whether now in effect or hereafter coming into effect. "Lien" shall have the meaning assigned to such term in the Indenture. ---- "Mortgage" shall have the meaning assigned to such term in the -------- Preamble hereof. "Mortgaged Property" shall have the meaning assigned to such term in ------------------ Section 2.1 hereof. - ----------- "Mortgagee" shall have the meaning assigned to such term in the --------- Preamble hereof. "Mortgagor" shall have the meaning assigned to such term in the --------- Preamble hereof. "Mortgagor's Interest" shall have the meaning assigned to such term in -------------------- Section 2.2 hereof. - ----------- "Net Loss Proceeds" shall have the meaning assigned to such term in ----------------- the Indenture. "Net Proceeds" shall have the meaning assigned to such term in the ------------ Indenture. "Notes" shall have the meaning assigned to such term in Recital A ----- --------- hereof. "Officers' Certificate" shall have the meaning assigned to such term --------------------- in the Indenture. "Permit" shall mean any and all permits, certificates, approvals, ------ authorizations, consents, licenses, variances, franchises or other instruments, however characterized, of any Governmental Authority (or any Person acting on behalf of a Governmental Authority) now or hereafter acquired or held, together with all amendments, modifications, extensions, renewals and replacements of any thereof issued or in any way furnished in connection with the Mortgaged Property including, without limitation, building permits, certificates of occupancy, environmental certificates, industrial permits or licenses and certificates of operation. "Permitted Collateral Liens" shall have the meaning assigned to such -------------------------- term in Section 4.6 hereof. ----------- "Permitted Liens" shall have the meaning assigned to such term in the --------------- Indenture. "Person" shall have the meaning assigned to such term in the ------ Indenture. "Premises" shall mean, collectively, the Land and the Improvements. -------- "Prior Liens" shall mean, collectively, the Liens identified in ----------- Schedule B annexed to this Mortgage. - ---------- "Proceeds" shall mean, collectively, any and all cash proceeds and -------- noncash proceeds derived or to be derived from the Mortgaged Property and shall include, without limitation, all (i) proceeds of the sale, transfer or conveyance of the Mortgaged Property or the conversion, voluntary or involuntary, of any of the Mortgaged Property or any portion thereof into cash or liquidated claims, (ii) proceeds of any insurance (except payments made to a Person, other than the Issuer or any Subsidiary thereof, that is not a party to this Mortgage), indemnity, warranty, guaranty or claim payable to the Mortgagee or to the Mortgagor from time to time with respect to any of the Mortgaged Property including, without limitation, all Net Loss Proceeds relating thereto, (iii) payments (in any form whatsoever) made or due and payable to the Mortgagor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any portion of the Mortgaged Property by any Governmental Authority (or any Person acting on behalf of a Governmental Authority) including, without limitation, all Net Loss Awards relating thereto, (iv) products of the Mortgaged Property, (v) other amounts from time to time paid or payable under or in connection with any of the Mortgaged Property including, without limitation, refunds of real estate taxes and assessments, including interest thereon and any unearned insurance premiums relating thereto and (vi) the right to enforce any and all rights that the Mortgagor has or may have to collect all such proceeds, including, without limitation, the Mortgagor's rights to commence any and all appropriate collection or enforcement actions incident thereto. "Property Material Adverse Effect" shall mean, as of any date of -------------------------------- determination and whether individually or in the aggregate (a) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the business or operations as presently conducted at the Mortgaged Property; (b) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the value or utility of the Mortgaged Property; and (c) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the legality, priority or enforceability of the Lien created by this Mortgage or the rights and remedies of the Mortgagee hereunder. "Prudent Operator" shall mean the standard of care taken by a prudent ---------------- operator of property similar in use and configuration to the Premises and located in the locality where the Premises are located. "Records" shall mean, collectively, any and all right, title and ------- interest of the Mortgagor in and to any and all drawings, plans, specifications, file materials, operating and maintenance records, catalogues, tenant lists, correspondence, advertising materials, operating manuals, warranties, guarantees, appraisals, studies and data relating to the Mortgaged Property or the construction of any Alteration or the maintenance of any Permit. "Rents" shall mean, collectively, any and all rents, additional rents, ----- royalties, issues, cash, guaranties, letters of credit, bonds, sureties or security deposited under any Lease to secure performance of the Tenant's obligations thereunder, revenues, earnings, profits, bonuses and income, advance rental payments, payments incident to assignment, sublease or surrender of a Lease, claims for forfeited deposits and claims for damages, now due or hereafter to become due, with respect to any Lease, any indemnification against, or reimbursement for, sums paid and costs and expenses incurred by the Mortgagor under any Lease or otherwise, and any award in the event of the bankruptcy of any Tenant under or guarantor of a Lease. "Requirements of Law" shall mean, collectively, any and all ------------------- requirements of any Governmental Authority including, without limitation, any and all orders, decrees, determinations, laws, treaties, ordinances, rules, regulations or similar statutes or case law. "Secured Obligations" shall mean all obligations (whether or not ------------------- constituting future advances, obligatory or otherwise) of the Issuer and any and all of the Guarantors from time to time arising under or in respect of this Mortgage, the Indenture, the Notes and the other Collateral Documents (including, without limitation, the obligations to pay principal, interest and all other charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Mortgage, the Indenture, the Notes and the other Collateral Documents), in each case whether (i) such obligations are direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due whether at stated maturity, by acceleration or otherwise, (ii) arising in the regular course of business or otherwise, (iii) for payment or performance and/or (iv) now existing or hereafter arising (including, without limitation, interest and other obligations arising or accruing after the commencement of any bankruptcy, insolvency, reorganization or similar proceeding with respect to the Issuer, any Guarantor or any other Person, or which would have arisen or accrued but for the commencement of such proceeding, even if such obligation or the claim therefor is not enforceable or allowable in such proceeding). "Secured Parties" shall have the meaning assigned to such term in --------------- Recital F hereof. - --------- "Senior Secured Notes" shall have the meaning assigned to such term in -------------------- Recital A hereof. - --------- "Subordination Agreement" shall mean a subordination, nondisturbance ----------------------- and attornment agreement substantially in the form of Exhibit 1 annexed to this --------- Mortgage. "Subsidiaries" shall have the meaning assigned to such term in the ------------ Indenture. "Taking" shall mean any taking of the Mortgaged Property or any part ------ thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, general or special, or by reason of the temporary requisition of the use or occupancy of the Mortgaged Property or any part thereof, by any Governmental Authority, civil or military. "Tax Escrow Fund" shall have the meaning assigned to such term in --------------- Section 7.2 hereof. - ----------- "Tenant" shall mean any tenant, lessee, sublessee, franchisee, ------ licensee, grantee or obligee, as applicable. "UCC" shall mean the Uniform Commercial Code as in effect on the date --- hereof in the jurisdiction in which the Premises are located; provided, however, -------- ------- that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any item or portion of the Mortgaged Property is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the jurisdiction in which the Premises are located, "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. SECTION 1.2 Interpretation. In this Mortgage, unless otherwise -------------- specified, (i) singular words include the plural and plural words include the singular, (ii) words importing any gender include the other gender, (iii) references to any Person include such Person's successors and assigns and in the case of an individual, the word "successors" includes such Person's heirs, devisees, legatees, executors, administrators and personal representatives, (iv) references to any statute or other law include all applicable rules, regulations and orders adopted or made thereunder and all statutes or other laws amending, consolidating or replacing the statute or law referred to, (v) the words "consent," "approve" and "agree," and derivations thereof or words of similar import, mean the prior written consent, approval or agreement of the Person in question not to be unreasonably withheld, (vi) the words "include" and "including," and words of similar import, shall be deemed to be followed by the words "without limitation," (vii) the words "hereto," "herein," "hereof" and "hereunder," and words of similar import, refer to this Mortgage in its entirety, (viii) references to Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are to the Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses hereof, (ix) the Schedules and Exhibits to this Mortgage, in each case as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof, are incorporated herein by reference, (x) the titles and headings of Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are inserted as a matter of convenience only and shall not affect the constructions of any provisions hereof and (xi) all obligations of the Mortgagor hereunder shall be satisfied by the Mortgagor at the Mortgagor's sole cost and expense. SECTION 1.3 Resolution of Drafting Ambiguities. The Mortgagor ---------------------------------- acknowledges and agrees that it was represented by counsel in connection with the execution and delivery hereof, that it and its counsel reviewed and participated in the preparation and negotiation hereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party (i.e., Mortgagee) shall not be employed in the interpretation hereof. ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Mortgaged Property. The Mortgagor hereby grants, --------------------------- mortgages, bargains, sells, assigns and conveys to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), and hereby grants to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), a security interest in and upon all of the Mortgagor's estate, right, title and interest in, to and under the following property, whether now owned or held or hereafter acquired from time to time (collectively, the "Mortgaged Property"): (i) Land; (ii) Improvements; (iii) Leases; (iv) Rents; (v) Permits; (vi) Contracts; (vii) Records; and (viii) Proceeds. Notwithstanding the foregoing provisions of this Section 2.1, ----------- Mortgaged Property shall not include a grant of any of the Mortgagor's right, title or interest in (i) any Contract to which the Mortgagor is a party or any of its rights or interests thereunder (other than (x) the right to receive any payment of money (including without limitation accounts, general intangibles and payment intangibles (each as defined in the UCC) or any other rights referred to in Sections 9-406(f), 9-407(a) or 9-408(a) of the UCC and (y) any proceeds, substitutions or replacements thereof) to the extent, but only to the extent, that such a grant would, under the terms of such Contract, result in a breach or termination of the terms of, or constitute a default under or termination of such Contract and (ii) any Permit to the extent, but only to the extent that, such grant shall constitute or result in abandonment, invalidation or rendering unenforceable any right, title or interest of the Mortgagor therein; provided, -------- however, that at such time as any Contract or Permit described in clauses (i) - ------- and (ii) of this sentence is no longer subject to such restriction, such applicable Contract or Permit shall (without any act or delivery by any Person) constitute Mortgaged Property hereunder. TO HAVE AND TO HOLD the Mortgaged Property, together with all estate, right, title and interest of the Mortgagor and anyone claiming by, through or under the Mortgagor in and to the Mortgaged Property and all rights and appurtenances relating thereto, unto the Mortgagee, its successors and assigns, for the purpose of securing the payment and performance in full of all the Secured Obligations. SECTION 2.2 Collateral Assignment and Pledge of Mortgagor's Interest -------------------------------------------------------- as Additional Security. As additional collateral security for the prompt and - ---------------------- punctual payment and satisfaction of the Secured Obligations, and all additional advances that the Mortgagee may make on the Mortgagor's behalf pursuant to this Mortgage, together with interest thereon as provided herein, the Mortgagor hereby assigns, pledges and grants to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), a continuing security interest in and to all of the Mortgagor's estate, right, title, interest, claim and demand, as Landlord, under any and all of the Leases including, without limitation, the following (such assigned rights, the "Mortgagor's Interest"): -------------------- (i) the immediate and continuing right to receive and collect Rents payable by the Tenants pursuant to the Leases; (ii) all claims, rights, powers, privileges and remedies of the Mortgagor, whether provided for in the Leases or arising by statute or at law or in equity or otherwise, consequent on any failure on the part of the Tenants to perform or comply with any term of the Leases including damages or other amounts payable to the Mortgagor as a result of such failure; (iii) all rights to take all actions upon the happening of a default under the Leases as shall be permitted by the Leases or by law including, without limitation, the commencement, conduct and consummation of proceeding at law or in equity; and (iv) the full power and authority, in the name of the Mortgagor or otherwise, to enforce, collect, receive and receipt for any and all of the foregoing and to take all other actions whatsoever which the Mortgagor, as Landlord, is or may be entitled to take under the Leases. SECTION 2.3 Secured Obligations. This Mortgage secures, and the ------------------- Mortgaged Property is collateral security for, the payment and performance in full when due of the Secured Obligations. SECTION 2.4 Mortgage Securing Future Indebtedness. This Mortgage has ------------------------------------- been executed by Mortgagor pursuant to Article 3298 of the Louisiana Civil Code for the purpose of securing the Mortgagor's indebtedness (including, without limitation, the Secured Obligations) that may now be existing or that may arise in the future as provided herein and in the Indenture, with the preferences and priorities provided under applicable Louisiana law. This Mortgage shall be further entitled to the preferences and priorities as provided under the Louisiana Private Works Act (La. R.S. 9:4801, et seq.). However, nothing under this Mortgage shall be construed as limiting the duration of this Mortgage or the purpose or purposes for which the Mortgagor's indebtedness (including, without limitation, the Secured Obligations) may be requested or extended. The Mortgagor's additional indebtedness will automatically be secured by this Mortgage without the necessity that the Mortgagor agrees or consents to such a result at the time additional indebtedness is made and that the note or notes evidencing such additional indebtedness reference the fact that such notes are secured by this Mortgage. The Mortgagor understands that the Mortgagor may not subsequently have a change of mind and insist that the Mortgagor's additional indebtedness not be secured by this Mortgage unless the Mortgagee specifically agrees to such a request in writing. SECTION 2.5 No Release. Nothing set forth in this Mortgage shall ---------- relieve the Mortgagor from the performance of any term, covenant, condition or agreement on the Mortgagor's part to be performed or observed under or in respect of any of the Mortgaged Property or from any liability to any Person under or in respect of any of the Mortgaged Property or shall impose any obligation on the Mortgagee or any other Secured Party to perform or observe any such term, covenant, condition or agreement on the Mortgagor's part to be so performed or observed or shall impose any liability on the Mortgagee or any other Secured Party for any act or omission on the part of the Mortgagor relating thereto or for any breach of any representation or warranty on the part of the Mortgagor contained in this Mortgage, the Indenture, the Notes or the Collateral Documents, or under or in respect of the Mortgaged Property or made in connection herewith or therewith. The obligations of the Mortgagor contained in this Section 2.5 shall survive the termination hereof and the discharge of ----------- the Mortgagor's other obligations under this Mortgage and the Indenture, the Notes and the Collateral Documents. ARTICLE III REPRESENTATIONS AND WARRANTIES OF MORTGAGOR SECTION 3.1 Authority and Validity. ---------------------- The Mortgagor represents and warrants that as of the date hereof: (i) it is duly organized or formed, validly existing and, if applicable, in good standing under the laws of the jurisdiction of its organization; (ii) it is duly qualified to transact business and is in good standing in the state in which the Mortgaged Property is located; (iii) it has full corporate or other organizational power and lawful authority to execute and deliver this Mortgage and to mortgage and grant a Lien on and security interest in the Mortgaged Property and otherwise assign the Mortgagor's Interest and otherwise perform its obligations as contemplated herein, and all corporate and governmental actions, consents, authorizations and approvals necessary or required therefor have been duly and effectively taken or obtained; and (iv) this Mortgage is a legal, valid and binding obligation of the Mortgagor, enforceable against the Mortgagor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. SECTION 3.2 Warranty of Title. The Mortgagor represents and ----------------- warrants that: (i) it has good fee simple title to the Premises and the Landlord's interest and estate under or in respect of the Leases and good title to the interest it purports to own or hold in and to each of the Permits, the Contracts and the Records, in each case subject to no Liens, except for Permitted Collateral Liens; (ii) it has good title to the interest it purports to own or hold in and to all rights and appurtenances to or that constitute a portion of the Mortgaged Property, except for Permitted Collateral Liens; (iii) it is in compliance with each term, condition and provision of any obligation of the Mortgagor which is secured by the Mortgaged Property or the noncompliance with which would result in a Property Material Adverse Effect; and (iv) this Mortgage creates and constitutes a valid and enforceable first priority Lien on the Mortgaged Property subject to Permitted Collateral Liens, and, to the extent any of the Mortgaged Property shall consist of Fixtures, a first priority security interest in the Fixtures, which first priority Lien and first priority security interest are subject only to Permitted Collateral Liens. SECTION 3.3 Condition of Mortgaged Property. The Mortgagor ------------------------------- represents and warrants that: (i) there has been issued and there remains in full force and effect subject to no revocation, suspension, forfeiture or modification, each and every Permit necessary for the present use, operation and occupancy of the Premises by the Mortgagor and its Tenants and the conduct of their respective businesses and all required zoning, building code, land use, environmental and other similar Permits, except where the failure to be so issued and to be in full force and effect would not result in a Property Material Adverse Effect; (ii) the Premises and the present and contemplated use and occupancy thereof comply with all applicable zoning ordinances, building codes, land use laws, set back or other development and/or use requirements of Governmental Authorities except where such noncompliance would not result in a Property Material Adverse Effect; (iii) the Premises are served by all utilities (including, without limitation, water and sewer systems) necessary for the present use thereof, and all utility services are provided by public or private utilities and the Premises have accepted or are equipped to accept such utility services and the Mortgagor has not received notice of termination of such utility service, except where the failure to be so served would not result in a Property Material Adverse Effect; (iv) the Mortgagor has access to the Premises from roads sufficient to allow the Mortgagor and its Tenants and invitees to conduct their respective businesses at the Premises in accordance with sound commercial practices and the Mortgagor has not received notice of termination of such access, except where the failure to have such access would not result in a Property Material Adverse Effect; (v) the Mortgagor has not received notice of any Taking or the commencement or pendency of any action or proceeding therefor, other than such Takings as would not result in a Property Material Adverse Effect; (vi) there has not occurred any Destruction of the Premises or any portion thereof as a result of any fire or other casualty that, as of the date hereof, has not been repaired in all material respects, other than such Destruction as would not have a Property Material Adverse Effect; (vii) there are no disputes regarding boundary lines, location, encroachments or possession of any portions of the Mortgaged Property and no state of facts exists which could give rise to any such claim other than such disputes as would not result in a Property Material Adverse Effect; (viii) all liquid and solid waste disposal, septic and sewer systems located on the Premises are in a good and safe condition and repair and in compliance with all Requirements of Law, except where the failure to so comply would not result in a Property Material Adverse Effect; (ix) no portion of the Premises is located in an area identified by the Federal Emergency Management Agency or any successor thereto as an area having special flood hazards pursuant to the Flood Insurance Acts or, if any portion of the Premises is located within such area, the Mortgagor has obtained the insurance prescribed in Article VIII hereof; ------------ (x) the Premises are assessed for real estate tax purposes as one or more wholly independent tax lot or lots, separate from any adjoining land or improvements not constituting a portion of such lot or lots, and no other land or improvements are assessed and taxed together with the Premises or any portion thereof, other than such cases where the failure to be so assessed would not result in a Property Material Adverse Effect; and (xi) there are no options or rights of first refusal to purchase or acquire all or any portion of the Mortgaged Property, other than such options or rights of first refusal as would not result in a Property Material Adverse Effect. SECTION 3.4 Leases. The Mortgagor represents and warrants that ------ as of the date hereof: (i) the Leases identified in Schedule C attached hereto are the only Leases in existence on the date hereof relating to the Premises; (ii) true copies of such Leases have been previously delivered to the Mortgagee and there are no agreements with any Tenant under such Leases other than those agreements expressly set forth therein; (iii) the Mortgagor is the sole owner of all of the Mortgagor's Interest in such Leases; (iv) each of such Leases is in full force and effect, constitutes a legal, valid and binding obligation of the Mortgagor and the applicable Tenant thereunder, and is enforceable against the Mortgagor and such Tenant in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability; (v) there is no default under any of such Leases and there is existing no condition which with the giving of notice or passage of time or both would cause a default thereunder; (vi) all Rents due under such Leases have been paid in full; (vii) none of the Rents reserved under such Leases have been assigned or otherwise pledged or hypothecated except in favor of the Mortgagee pursuant to the provisions hereof; (viii) none of the Rents (other than any security deposit collected in accordance with the provisions of the applicable Lease) have been collected for more than one (1) month in advance; (ix) there exists no offsets or defenses to the payment of any portion of the Rents and the Mortgagor owes no monetary obligation to any Tenant under any such Lease; (x) the Mortgagor has received no notice from any Tenant challenging the validity or enforceability of any such Lease; (xi) no such Lease contains any option to purchase, right of first refusal to purchase, right of first refusal to relet, or any other similar provision; and (xii) each such Lease is subordinate to this Mortgage either pursuant to its terms or pursuant to a recordable Subordination Agreement. SECTION 3.5 Insurance. The Mortgagor represents and warrants --------- that, except where the failure of clauses (i), (ii) or (iii) hereof to be true would not have a Property Material Adverse Effect, (i) the Premises and the use, occupancy and operation thereof comply with all Insurance Requirements and there exists no default under any Insurance Requirement, (ii) all premiums due and payable with respect to the Insurance Policies have been paid, (iii) all Insurance Policies are in full force and effect and the Mortgagor has not received notice of violation or cancellation thereof and (iv) all insurance certificates required pursuant to the Indenture have been delivered to the Mortgagee. SECTION 3.6 Charges. The Mortgagor represents and warrants that ------- all Charges imposed upon or assessed against the Mortgaged Property have been paid and discharged except to the extent such Charges constitute a Lien not yet due and payable or to the extent such Charges are being contested in accordance with Section 9.1 hereof. ----------- SECTION 3.7 Environmental. The Mortgagor represents and ------------- warrants that: (i) it has obtained all Permits which are necessary with respect to the ownership and operation of its business and the Mortgaged Property under any and all applicable Environmental Laws and is in compliance with all terms and conditions thereof, except where the failure so to obtain or to be in compliance would not result in a Property Material Adverse Effect; (ii) it is in compliance with any and all applicable Environmental Laws including, without limitation, all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws, except where the failure so to be in compliance would not result in a Property Material Adverse Effect; (iii) there is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice of demand letter pending or threatened against it or any Affiliate under the Environmental Laws which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect; and (iv) there are no past or present events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance with the Environmental Laws, or which may give rise to any common law or legal liability including, without limitation, liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any other Environmental Law or related common law theory or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing or notice of violation, study or investigation, based on or related to the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Materials which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect. SECTION 3.8 No Conflicts, Consents, etc. Neither the execution --------------------------- and delivery hereof by the Mortgagor nor the consummation of the transactions herein contemplated nor the fulfillment of the terms hereof (i) violates the terms of any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or other document to which the Mortgagor is a party, or by which it may be bound or to which any of its properties or assets may be subject, (ii) conflicts with any Requirement of Law applicable to the Mortgagor or its property or (iii) results in or requires the creation or imposition of any Lien (other than the Lien contemplated hereby) upon or with respect to any of the Mortgaged Property, except where such violation, conflict, creation or imposition would not have a Property Material Adverse Effect. No consent of any party (including, without limitation, equityholders or creditors of the Mortgagor) and no consent, authorization, approval, license or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person (other than with respect to any required Permits) is required for (i) the granting of a mortgage Lien on and security interest in the Mortgaged Property by the Mortgagor granted by it pursuant to this Mortgage or for the execution, delivery or performance hereof by the Mortgagor except for the filing of this Mortgage and the other filings contemplated hereby or (ii) the exercise by the Mortgagee of the remedies in respect of the Mortgaged Property pursuant to this Mortgage other than those required by law in connection with the exercise of the applicable remedy. SECTION 3.9 Benefit to the Mortgagor. The Mortgagor represents ------------------------ and warrants that it will receive substantial benefit as a result of the execution, delivery, and performance of the Indenture, the Notes and the Collateral Documents. ARTICLE IV CERTAIN COVENANTS OF MORTGAGOR SECTION 4.1 Preservation of Corporate Existence. The Mortgagor ----------------------------------- shall: (i) preserve and maintain in full force and effect its existence and good standing under the laws of the jurisdiction of its organization; (ii) preserve and maintain in full force and effect its qualification to transact business and good standing in the state in which the Mortgaged Property is located; and (iii) preserve and maintain in full force and effect all consents, authorizations and approvals necessary or required of any Governmental Authority or any other Person relating to the execution, delivery and performance hereof, except where the failure to do so would not result in a Property Material Adverse Effect. SECTION 4.2 Title. The Mortgagor shall: ----- (i) (A) keep in effect all material rights and appurtenances to or that constitute a part of the Mortgaged Property and (B) protect, preserve and defend its interest in the Mortgaged Property and title thereto, except against Permitted Collateral Liens (other than the Lien created by this Mortgage); (ii) (A) comply, in all material respects, with each of the terms, conditions and provisions of any obligation of the Mortgagor which is secured by the Mortgaged Property, except where the failure to so comply would not result in a Property Material Adverse Effect, or the non-compliance with which may result in the imposition of a Lien on the Mortgaged Property, (B) forever warrant and defend to the Mortgagee the Lien and security interests created and evidenced hereby and the validity and priority hereof in any action or proceeding against the claims of any and all Persons whomsoever affecting or purporting to affect the Mortgaged Property or any of the rights of the Mortgagee hereunder, except against Permitted Collateral Liens (other than the Lien of this Mortgage), and (C) maintain a valid and enforceable first priority Lien, except for Permitted Collateral Liens (other than the Lien of this Mortgage) on the Mortgaged Property and, to the extent any of the Mortgaged Property shall consist of Fixtures, a first priority security interest in the Mortgaged Property, which first priority Lien and security interest shall be subject only to Permitted Collateral Liens; and (iii) immediately upon obtaining knowledge of the pendency of any proceedings for the eviction of the Mortgagor from the Mortgaged Property or any part thereof by paramount title or otherwise questioning the Mortgagor's right, title and interest in, to and under the Mortgaged Property as warranted in this Mortgage, or of any condition that could give rise to any such proceedings, notify the Mortgagee thereof. The Mortgagee may participate in such proceedings and the Mortgagor will deliver or cause to be delivered to the Mortgagee all instruments requested by the Mortgagee to permit such participation. In any such proceedings, the Mortgagee may be represented by counsel reasonably satisfactory to the Mortgagee at the reasonable expense of the Mortgagor. If, upon the resolution of such proceedings, the Mortgagor shall suffer a loss of the Mortgaged Property or any part thereof or interest therein and title insurance proceeds shall be payable in connection therewith, such proceeds are hereby assigned to and shall be paid to the Mortgagee for deposit into the Collateral Account and shall be applied in the manner applicable to Net Loss Proceeds in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) of the Indenture. SECTION 4.3 Maintenance and Use of Mortgaged Property; ----------------------------------------- Alterations. - ----------- (i) Maintenance. The Mortgagor shall cause the representations and ----------- warranties set forth in Section 3.3 hereof to continue to be true in each and ----------- every respect and shall pay or cause to be paid when due all Charges, costs and expenses relating thereto, other than such Charges being contested in accordance with Section 9.1 hereof. ----------- (ii) Maintenance of Premises. The Mortgagor shall not commit or ----------------------- suffer any waste on the Premises. The Mortgagor shall, at all times, maintain the Premises in good working order, condition and repair, reasonable wear and tear excepted, and shall use commercially reasonable efforts to make or cause to be made all repairs, structural or nonstructural, which are necessary or appropriate in the conduct of the Mortgagor's business. The Mortgagor shall not, except as permitted in Section 4.3(iii) hereof, alter the occupancy or use of ---------------- all or any portion of the Premises without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. Except to the extent permitted pursuant to the provisions of Section 4.3(iii) hereof, the ---------------- Mortgagor shall not remove, demolish or alter the structural character of any Improvement now or hereafter erected upon all or any portion of the Premises, or permit any such removal, demolition or alteration, without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. (iii) Alterations. The Mortgagor shall not, without the prior written ----------- consent of the Mortgagee, which consent shall not be unreasonably withheld, make any Alteration to the Premises except as permitted by Sections 10.04 and 10.06 of the Indenture. Whether or not the making of any Alteration shall require the consent of the Mortgagee pursuant to the immediately preceding sentence, the Mortgagor shall (A) complete each Alteration promptly, in a good and workmanlike manner and in compliance, in all material respects, with all applicable local laws, ordinances and requirements and (B) pay when due all claims for labor performed and materials furnished in connection with such Alteration, unless contested in accordance with the provisions of Article IX hereof. ---------- (iv) Permits. The Mortgagor shall maintain, or cause to be ------- maintained, in full force and effect all Permits contemplated by and subject to Section 3.3(i) hereof. Unless and to the extent contested by the Mortgagor in - -------------- accordance with the provisions of Article IX hereof, the Mortgagor shall comply, ---------- in all material respects, with all requirements set forth in the Permits and all Requirements of Law applicable to all or any portion of the Mortgaged Property or the condition, use or occupancy of all or any portion thereof or any recorded deed of restriction, declaration, covenant running with the land or otherwise, now or hereafter in force, subject to the provisions of Section ------- 3.3 hereof. - --- (v) Zoning. The Mortgagor shall not initiate, join in, or consent ------ to any change in the zoning or any other permitted use classification of the Premises without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. SECTION 4.4 Notices Regarding Certain Defaults. The Mortgagor ---------------------------------- shall, promptly upon receipt of any written notice regarding (i) any default by the Mortgagor relating to the Mortgaged Property or any portion thereof or (ii) the failure to discharge any of Mortgagor's obligations with respect to the Mortgaged Property or any portion thereof described herein, furnish a copy of such notice to the Mortgagee. SECTION 4.5 Access to Mortgaged Property, Books and Records; ----------------------------------------------- Other Information. Upon request to the Mortgagor, the Mortgagee, its agents, - ----------------- accountants and attorneys shall have full and free access to visit and inspect, as applicable, during normal business hours and such other reasonable time as may be requested by the Mortgagee to all of the Mortgaged Property including, without limitation, all of the books, correspondence and records of the Mortgagor relating thereto. The Mortgagee and its representatives may examine the same, take extracts therefrom and make photocopies thereof. The Mortgagor shall, at any and all times, within a reasonable time after written request by the Mortgagee, furnish or cause to be furnished to the Mortgagee, in such manner and in such detail as may be reasonably requested by the Mortgagee, additional information with respect to the Mortgaged Property. SECTION 4.6 Limitation on Liens; Transfer Restrictions. The ------------------------------------------ Mortgagor may not, without the prior written consent of the Mortgagee, further mortgage, encumber, hypothecate, sell, convey or assign all or any part of the Mortgaged Property or suffer or allow any of the foregoing to occur by operation of law or otherwise; provided, however, that the Mortgagor shall have the right -------- ------- to (1) sell, convey or assign all or any portion of the Mortgaged Property in accordance with the provisions of the Indenture and (2) suffer to exist the following Liens in respect of the Mortgaged Property: (i) Prior Liens (but not extensions, amendments, supplements or replacements of Prior Liens unless (A) extended, amended, supplemented or replaced in a manner permitted by the Indenture or (B) consented to by the Mortgagee which consent shall not be unreasonably withheld), (ii) the Lien and security interest created by this Mortgage or any other Collateral Document, (iii) Contested Liens, (iv) Liens described in clause (9) of the definition of Permitted Liens (provided, however, -------- ------- that such Liens shall not extend to or cover any Mortgaged Property other than equipment subject to Capital Leases, Obligations or Purchase Money Obligations incurred in accordance with the provisions of the Indenture) or clause (4) of the definition of Permitted Liens, and (v) Leases to the extent permitted pursuant to the provisions of Article V hereof (the Liens described in clauses --------- (i) through (v) of this sentence, collectively, "Permitted Collateral Liens"). -------------------------- SECTION 4.7 Environmental. ------------- (i) Hazardous Materials. The Mortgagor shall (A) comply with any ------------------- and all present and future Environmental Laws applicable to the Mortgaged Property, (B) not release, store, treat, handle, generate, discharge or dispose of any Hazardous Materials at, on, under or from the Mortgaged Property in violation of or in a manner that could result in any material liability under any present and future Environmental Law and (C) take all necessary steps to initiate and expeditiously complete all remedial, corrective and other action to eliminate any such effect. In the event the Mortgagor fails to comply with the covenants in the preceding sentence, the Mortgagee may, in addition to any other remedies set forth herein, as agent for the Mortgagor and at the Mortgagor's sole cost and expense, cause any remediation, removal or response action relating to Hazardous Materials required by applicable Environmental Laws to be taken and the Mortgagor shall provide to the Mortgagee and its agents and employees access to the Mortgaged Property for such purpose. Any reasonable costs or expenses incurred by the Mortgagee for such purpose shall be immediately due and payable by the Mortgagor and shall bear interest at the Default Rate. The Mortgagee shall have the right at any time when an Event of Default shall have occurred and be continuing and at such other times when a potential violation of any present or future Environmental Law exists which in the Mortgagee's reasonable judgment could result in any material liability or obligation under such Environmental Law, at the sole cost and expense of the Mortgagor, to conduct an environmental audit of the Mortgaged Property by such persons or firms appointed by the Mortgagee, and the Mortgagor shall cooperate in all respects in the conduct of such environmental audit, including, without limitation, by providing access to the Mortgaged Property and to all records relating thereto. To the extent that any such environmental audit identifies conditions which in the Mortgagee's reasonable judgment would result in any material liability or obligation under any present or future Environmental Law, the Mortgagor agrees to expeditiously correct any such violation or respond to conditions giving rise to such liability or obligations in a manner which complies in all material respects with the Environmental Laws and mitigates associated health and environmental risks. The Mortgagor shall indemnify and hold the Mortgagee and each of the other Secured Parties harmless from and against all loss, cost, damage or reasonable expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Mortgagee or any other Secured Party may sustain by reason of the assertion against the Mortgagee or any Secured Party by any party of any claim relating to such Hazardous Materials on, under or from the Mortgaged Property or actions taken with respect thereto as authorized hereunder, except to the extent arising from the gross negligence or willful misconduct of the Mortgagee or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof; and (ii) Asbestos. The Mortgagor shall not install nor permit to be -------- installed in or removed from the Mortgaged Property, asbestos or any asbestos-containing material (collectively, "ACM") except in compliance, in all --- material respects, with all applicable Environmental Laws, and with respect to any ACM currently present in the Mortgaged Property, the Mortgagor shall promptly either (A) remove any ACM which such Environmental Laws require to be removed or (B) otherwise comply, in all material respects, with such Environmental Laws with respect to such ACM, all at the Mortgagor's sole cost and expense. If the Mortgagor shall fail so to remove any ACM or otherwise comply, in all material respects, with such laws or regulations, the Mortgagee may, in addition to any other remedies set forth herein, take reasonable or necessary steps to eliminate any ACM from the Mortgaged Property or otherwise comply, in all material respects, with applicable law, regulations or orders and the Mortgagor shall provide to the Mortgagee and its agents and employees access to the Mortgaged Property for such purpose. Any reasonable costs or expenses incurred by the Mortgagee for such purpose shall be immediately due and payable by the Mortgagor and bear interest at the Default Rate. The Mortgagor shall indemnify and hold the Mortgagee and the other Secured Parties harmless from and against all loss, cost, damage and expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Mortgagee or the other Secured Parties may sustain, as a result of the presence of any ACM and any removal thereof or compliance with all applicable Environmental Laws, except to the extent arising from the gross negligence or willful misconduct of the Mortgagee or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof. SECTION 4.8 Estoppel Certificates. The Mortgagor shall, from time --------------------- to time, upon thirty (30) days' prior written reasonable request of the Mortgagee, execute, acknowledge and deliver to the Mortgagee an Officers' Certificate stating that this Mortgage, the Indenture, the Notes and the Collateral Documents are unmodified and in full force and effect (or, if there have been modifications, that this Mortgage, the Indenture, the Notes and the Collateral Documents, as applicable, is or are in full force and effect as modified and setting forth such modifications) and stating the date to which principal and interest have been paid on the Notes. ARTICLE V LEASES SECTION 5.1 Mortgagor's Affirmative Covenants with Respect to ------------------------------------------------- Leases. With respect to each Lease, the Mortgagor shall: - ------ (i) observe and perform, in all material respects, all the obligations imposed upon the Landlord under such Lease; (ii) promptly send copies to the Mortgagee of all notices of default which the Mortgagor shall send or receive thereunder; and (iii) enforce all of the terms, covenants and conditions contained in such Lease upon the part of the Tenant thereunder to be observed or performed to the extent it would be commercially reasonable to do so. SECTION 5.2 Mortgagor's Negative Covenants with Respect to ---------------------------------------------- Leases. With respect to each Lease, the Mortgagor shall not, without the prior - ------ written consent of the Mortgagee, which consent shall not be unreasonably withheld: (i) receive or collect, or permit the receipt or collection of, any Rent under such Lease more than one (1) month in advance of the respective period in respect of which such Rent is to accrue, except: (A) in connection with the execution and delivery of such Lease (or of any amendment to such Lease), Rent thereunder may be collected and received in advance in an amount not in excess of one (1) month's Rent; (B) the amount held by Landlord as a reasonable security deposit thereunder; and (C) any amount received and collected for escalation and other charges in accordance with the terms of such Lease; (ii) assign, transfer or hypothecate (other than to the Mortgagee hereunder) any Rent under such Lease whether then due or to accrue in the future or the interest of the Mortgagor as Landlord under such Lease; (iii) enter into any amendment or modification of such Lease which would materially decrease the unexpired term thereof or decrease the amount of the Rents payable thereunder or materially impair the value or utility of the Mortgaged Property or the security provided by this Mortgage; (iv) terminate (whether by exercising any contractual right of the Mortgagor to recapture leased space or otherwise) or permit the termination of such Lease or accept surrender of all or any portion of the space demised under such Lease prior to the end of the term thereof or accept assignment of such Lease to the Mortgagor unless: (A) the Tenant under such Lease has not paid the equivalent of two (2) months' Rent and the Mortgagor has made reasonable efforts to collect such Rent; and (B) it would be commercially reasonable to terminate such Lease; or (v) waive, excuse, condone or in any manner discharge or release any Tenants of or from the material obligations of such Tenants under their respective Leases or guarantors of Tenants from any material obligations under any guarantees of the Leases except as the same would be done by a Prudent Operator with due regard for the security afforded the Mortgagee thereby. SECTION 5.3 Additional Requirements with Respect to New Leases. -------------------------------------------------- In addition to the requirements of Sections 5.1 and 5.2 hereof, the Mortgagor ------------ --- shall not enter into any Lease after the date hereof unless the Tenant under such Lease has entered into a Subordination Agreement and has otherwise complied with the provisions of Section 10.06 of the Indenture. ------------- ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Mortgagor. -------------------------------------------- Section 2.2 of this Mortgage constitutes a present, absolute, effective, irrevocable and complete assignment by the Mortgagor to the Mortgagee of the Leases and Rents and the right, subject to applicable law, to collect all sums payable to the Mortgagor thereunder and apply the same as the Mortgagee may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Mortgaged Property), which is not conditioned upon the Mortgagee being in possession of the Premises. The Mortgagee hereby grants to the Mortgagor, however, a license to collect and apply the Rents and to enforce the obligations of Tenants under the Leases. Immediately upon the occurrence of and during the continuance of any Event of Default or a Default, the license granted in the immediately preceding sentence shall cease and terminate, with or without any notice, action or proceeding or the intervention of a receiver appointed by a court. SECTION 6.2 Collection of Rents by the Mortgagee. ------------------------------------ (i) From and after the occurrence and during the continuance of an Event of Default or a Default, any Rents receivable by the Mortgagee hereunder, after payment of all proper costs and expenses as Mortgagee may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Mortgaged Property), shall be applied to the Secured Obligations or, at the option of the Mortgagee, shall be held by the Mortgagee as additional collateral to secure the performance by the Mortgagor of the Secured Obligations. The Mortgagee shall be accountable to the Mortgagor only for Rents actually received by the Mortgagee. The collection of such Rents and the application thereof shall not cure or waive any Event of Default or a Default or waive, modify or affect notice of Event of Default or a Default or invalidate any act done pursuant to such notice. (ii) The Mortgagor hereby irrevocably authorizes and directs Tenant under each Lease to rely upon and comply with any and all notices or demands from the Mortgagee for payment of Rents to the Mortgagee and the Mortgagor shall have no claim against Tenant for Rents paid by Tenant to the Mortgagee pursuant to such notice or demand. SECTION 6.3 No Release. Neither this Mortgage nor any action or ---------- inaction on the part of the Mortgagee shall release any Tenant under any Lease, any guarantor of any Lease or the Mortgagor from any of their respective obligations under such Leases or constitute an assumption of any such obligation on the part of the Mortgagee. No action or failure to act on the part of the Mortgagor shall adversely affect or limit the rights of the Mortgagee under this Mortgage or, through this Mortgage, under such Leases. Nothing contained herein shall operate or be construed to (i) obligate the Mortgagee to perform any of the terms, covenants or conditions contained in any Lease or otherwise to impose any obligation upon the Mortgagee with respect to such Lease (including, without limitation, any obligation arising out of any covenant of quiet enjoyment contained in such Lease in the event that Tenant under such Lease shall have been joined as a party defendant in any action by which the estate of such Tenant shall be terminated) or (ii) place upon the Mortgagee any obligation for the operation, control, care, management or repair of the Premises. SECTION 6.4 Irrevocable Interest. All rights, powers and -------------------- privileges of the Mortgagee herein set forth are coupled with an interest and are irrevocable, subject to the terms and conditions hereof, and the Mortgagor shall not take any action under the Leases or otherwise which is inconsistent with this Mortgage or any of the terms hereof and any such action inconsistent herewith or therewith shall be void. SECTION 6.5 Amendment to Leases. Each Lease, including, without ------------------- limitation, all amendments, modifications, supplements, replacements, extensions and renewals thereof, shall continue to be subject to the provisions hereof without the necessity of any further act by any of the parties hereto. ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges. Unless and to the extent ------------------ contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall pay and discharge, or cause to be paid and discharged, from time to time when the same shall become due (or within any applicable grace period), all Charges subject to this Article VII. The ----------- Mortgagor shall, upon the Mortgagee's request, deliver to the Mortgagee receipts evidencing the payment of all such Charges. SECTION 7.2 Escrow of Taxes. From and after the occurrence and --------------- during the continuance of an Event of Default or a Default, at the option and upon the request of the Mortgagee, the Mortgagor shall deposit with the Mortgagee in an account maintained by the Mortgagee (the "Tax Escrow Fund"), on --------------- the first day of each month, an amount estimated by the Mortgagee to be equal to one-twelfth of the annual real property taxes and other annual Charges required to be discharged by the Mortgagor under Section 7.1 hereof. Such amounts shall ----------- be held by the Mortgagee without interest to the Mortgagor and applied to the payment of the obligations in respect of which such amounts were deposited, in such priority as the Mortgagee shall determine, on or before the respective dates on which such obligations or any part thereof would become delinquent. Nothing contained in this Article VII shall (i) affect any right or remedy of ----------- the Mortgagee under any provision hereof or of any statute or rule of law to pay any such amount as provided above from its own funds and to add the amount so paid, together with interest at the Default Rate during such time that any amount remains outstanding, to the Secured Obligations or (ii) relieve the Mortgagor of its obligations to make or provide for the payment of the annual real property taxes and other annual Charges required to be discharged by the Mortgagor under Section 7.1 hereof. ----------- SECTION 7.3 Certain Statutory Liens. Unless and to the extent ----------------------- contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall timely pay, or cause to be paid, all lawful claims and demands of mechanics, materialmen, laborers, government agencies administering worker's compensation insurance, old age pensions and social security benefits and all other claims, judgments, demands or amounts of any nature which, if unpaid, would result in, or permit the creation of, a Lien on the Mortgaged Property or any part thereof, or which would result in forfeiture of all or any part of the Mortgaged Property. SECTION 7.4 Stamp and Other Taxes. Unless and to the extent --------------------- contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall pay any United States documentary stamp taxes, with interest and fines and penalties, and any mortgage recording taxes, with interest and fines and penalties, that may hereafter be levied, imposed or assessed under or upon or by reason hereof or the Secured Obligations or any instrument or transaction affecting or relating to either thereof and in default thereof the Mortgagee may advance the same and the amount so advanced shall be payable by the Mortgagor to the Mortgagee in accordance with the provisions of Section 14.5 hereof. - ------------ SECTION 7.5 Certain Tax Law Changes. In the event of the ----------------------- passage after the date hereof of any law deducting from the value of real property, for the purpose of taxation, amounts in respect of any Lien thereon or changing in any way the laws for the taxation of mortgages or debts secured by mortgages for state or local purposes or the manner of the collection of any Charges, and imposing any Charges, either directly or indirectly, on this Mortgage, the Indenture or any other Collateral Document, the Mortgagor shall promptly pay to the Mortgagee such amount or amounts as may be necessary from time to time to pay any such Charges. SECTION 7.6 Proceeds of Tax Claim. In the event that the --------------------- proceeds of any tax claim are paid after the Mortgagee has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Mortgagee to satisfy any deficiency remaining after such foreclosure. The Mortgagee shall retain its interest in the proceeds of any tax claim during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Mortgagee shall in a prompt manner be released to the Mortgagor. ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages. The ----------------------------------------- Mortgagor shall maintain in respect of the Premises the insurance policies and coverages required under Section 4.19(b) of the Indenture. SECTION 8.2 Delivery After Foreclosure. In the event that the -------------------------- proceeds of any insurance claim are paid after the Mortgagee has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Mortgagee to satisfy any deficiency remaining after such foreclosure. Mortgagee shall retain its interest in the Insurance Policies required to be maintained pursuant to this Mortgage during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Mortgagee shall be released to the Mortgagor. ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens. ----------------------------------------------- The Mortgagor may at its own expense contest the validity, amount or applicability of any Charges as long as the contest thereof shall be conducted in accordance with, and permitted pursuant to the provisions of, the Indenture. Notwithstanding the foregoing provisions of this Section 9.1, (i) no contest of ----------- any such obligations may be pursued by the Mortgagor (A) if such contest would expose the Mortgagee or any Holder to any possible criminal liability or (B) unless the Mortgagor shall have furnished a bond or other security therefor reasonably satisfactory to the Mortgagee or such Holder, as the case may be, any additional civil liability for failure to comply with such obligations and (ii) if at any time payment or performance of any obligation contested by the Mortgagor pursuant to this Section 9.1 shall become necessary to prevent the ----------- imminent imposition of remedies because of non-payment, the Mortgagor shall pay or perform the same in sufficient time to prevent the imposition of remedies in respect of such default or prospective default. SECTION 9.2 Contesting of Insurance. The Mortgagor shall not ----------------------- take any action that would reasonably be expected to cause the termination, revocation or denial of any insurance coverage required to be maintained under this Mortgage or that would be the basis for a defense to any claim under any Insurance Policy maintained in respect of the Premises and the Mortgagor shall otherwise comply in all respects with all Insurance Requirements in respect of the Premises; provided, however, that the Mortgagor may, at its own expense and -------- ------- after written notice to the Mortgagee, (i) contest the applicability or enforceability of any such Insurance Requirements by appropriate legal proceedings, prosecution of which does not constitute a basis for cancellation or revocation of any insurance coverage required under Article VIII hereof or ------------ (ii) cause the Insurance Policy containing any such Insurance Requirement to be replaced by a new policy complying with the provisions of Article VIII hereof. ------------ ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction. If there shall occur any Destruction, ----------- individually or in the aggregate, in excess of $100,000, the Mortgagor shall promptly send to the Mortgagee a written notice setting forth the nature and extent of such Destruction. The proceeds of any insurance payable in respect of such Destruction are hereby assigned and shall be paid to the Mortgagee. The Net Loss Proceeds arising out of such Destruction, shall be applied in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) the Indenture. SECTION 10.2 Condemnation. If there shall occur any Taking or ------------ the commencement of any proceeding thereof, the Mortgagor shall immediately notify the Mortgagee upon receiving notice of such Taking or commencement of proceedings therefor. The Mortgagee may, at its option, participate in any proceedings or negotiations which might result in any Taking, and the Mortgagor shall deliver or cause to be delivered to the Mortgagee all instruments requested by it to permit such participation. The Mortgagee may be represented by counsel reasonably satisfactory to it at the reasonable expense of the Mortgagor in connection with any such participation. The Mortgagor shall pay all reasonable fees, costs and expenses incurred by the Mortgagee in connection with any Taking and in seeking and obtaining any award or payment on account thereof. Any proceeds, award or payment in respect of any Taking are hereby assigned and shall be paid to the Mortgagee. The Mortgagor shall take all steps necessary to notify the condemning authority of such assignment. The Net Loss Proceeds arising out of such Taking shall be applied in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) the Indenture. ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default. It shall be an Event of Default ----------------- hereunder if there shall have occurred and be continuing an Event of Default under the Indenture. SECTION 11.2 Remedies in Case of an Event of Default. If any --------------------------------------- Event of Default shall have occurred and be continuing, the Mortgagee may at its option, in addition to any other action permitted under this Mortgage or the Indenture or by law, statute or in equity, take one or more of the following actions to the greatest extent permitted by local law: (i) by written notice to the Issuer and the Mortgagor, declare the entire unpaid amount of the Secured Obligations to be due and payable immediately; (ii) personally, or by its agents or attorneys, (A) enter into and upon and take possession of all or any part of the Premises together with the books, records and accounts of the Mortgagor relating thereto and, exclude the Mortgagor, its agents and servants wholly therefrom, (B) use, operate, manage and control the Premises and conduct the business thereof, (C) maintain and restore the Premises, (D) make all necessary or proper repairs, renewals and replacements and such useful Alterations thereto and thereon as the Mortgagee may deem advisable, (E) manage, lease and operate the Premises and carry on the business thereof and exercise all rights and powers of the Mortgagor with respect thereto either in the name of the Mort- gagor or otherwise or (F) collect and receive all Rents. The Mortgagee shall be under no liability for or by reason of any such taking of possession, entry, removal or holding, operation or management except that any amounts so received by the Mortgagee shall be applied in accordance with the provisions of the Indenture; (iii) with or without entry, personally or by its agents or attorneys, (A) sell the Mortgaged Property and all estate, right, title and interest, claim and demand therein at one or more sales in one or more parcels, in accordance with the provisions of Section 11.3 or (B) ------------ institute and prosecute proceedings for the complete or partial foreclosure of the Lien and security interests created and evidenced hereby; or (iv) take such steps to protect and enforce its rights whether by action, suit or proceeding at law or in equity for the specific performance of any covenant, condition or agreement in the Indenture, the Notes and the Collateral Documents, or in aid of the execution of any power granted in this Mortgage, or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy or otherwise as the Mortgagee shall elect. SECTION 11.3 Sale of Mortgaged Property if Event of Default ---------------------------------------------- Occurs; Proceeds of Sale. - ------------------------ (i) If any Event of Default shall have occurred and be continuing, the Mortgagee may institute an action to foreclose this Mortgage or take such other action as may be permitted and available to the Mortgagee at law or in equity for the enforcement of the Indenture and the Notes and realization on the Mortgaged Property and proceeds thereon through power of sale or to final judgment and execution thereof for the Secured Obligations, and in furtherance thereof the Mortgagee may sell the Mortgaged Property at one or more sales, as an entirety or in parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law or statute or in equity. The Mortgagee may execute and deliver to the purchaser at such sale a conveyance of the Mortgaged Property in fee simple and an assignment or conveyance of all the Mortgagor's Interest in the Leases and the Mortgaged Property, each of which conveyances and assignments shall contain recitals as to the Event of Default upon which the execution of the power of sale herein granted depends, and the Mortgagor hereby constitutes and appoints the Mortgagee the true and lawful attorney in fact of the Mortgagor to make any such recitals, sale, assignment and conveyance, and all of the acts of the Mortgagee as such attorney in fact are hereby ratified and confirmed. The Mortgagor agrees that such recitals shall be binding and conclusive upon the Mortgagor and that any assignment or conveyance to be made by the Mortgagee shall divest the Mortgagor of all right, title, interest, equity and right of redemption, including any statutory redemption, in and to the Mortgaged Property. The power and agency hereby granted are coupled with an interest and are irrevocable by death or dissolution, or otherwise, and are in addition to any and all other remedies which the Mortgagee may have hereunder, at law or in equity. So long as the Secured Obligations, or any part thereof, remain unpaid, the Mortgagor agrees that possession of the Mortgaged Property by the Mortgagor, or any person claiming under the Mortgagor, shall be as tenant, and, in case of a sale under power or upon foreclosure as provided in this Mortgage, the Mortgagor and any person in possession under the Mortgagor, as to whose interest such sale was not made subject, shall, at the option of the purchaser at such sale, then become and be tenants holding over, and shall forthwith deliver possession to such purchaser, or be summarily dispossessed in accordance with the laws applicable to tenants holding over. In case of any sale under this Mortgage by virtue of the exercise of the powers herein granted, or pursuant to any order in any judicial proceeding or otherwise, the Mortgaged Property may be sold as an entirety or in separate parcels in such manner or order as the Mortgagee in its sole discretion may elect. One or more exercises of powers herein granted shall not extinguish or exhaust such powers, until the entire Mortgaged Property is sold or all amounts secured hereby are paid in full. (ii) In the event of any sale made under or by virtue of this Article ------- XI, the entire principal of, and interest in respect of the Secured Obligations, - -- if not previously due and payable, shall, at the option of the Mortgagee, immediately become due and payable, anything in this Mortgage to the contrary notwithstanding. (iii) The proceeds of any sale made under or by virtue of this Article ------- XI, together with any other sums which then may be held by the Mortgagee under - -- this Mortgage, whether under the provisions of this Article XI or otherwise, ---------- shall be applied in accordance with the provisions of the Indenture; (iv) The Mortgagee may bid for and acquire the Mortgaged Property or any part thereof at any sale made under or by virtue of this Article XI and, in ---------- lieu of paying cash therefor, may make settlement for the purchase price by crediting against the purchase price the unpaid amounts (whether or not then due and owing) in respect of the Secured Obligations, after deducting from the sales price the expense of the sale and the reasonable costs of the action or proceedings and any other sums that the Mortgagee is authorized to deduct under this Mortgage. (v) The Mortgagee may adjourn from time to time any sale by it to be made under or by virtue hereof by announcement at the time and place appointed for such sale or for such adjourned sale or sales, and, the Mortgagee, without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned. (vi) If the Premises is comprised of more than one parcel of land, the Mortgagee may take any of the actions authorized by this Section 11.3 in ------------ respect of any or a number of individual parcels. SECTION 11.4 Additional Remedies in Case of an Event of Default. -------------------------------------------------- (i) The Mortgagee shall be entitled to recover judgment as aforesaid either before, after or during the pendency of any proceedings for the enforcement of the provisions hereof, and the right of the Mortgagee to recover such judgment shall not be affected by any entry or sale hereunder, or by the exercise of any other right, power or remedy for the enforcement of the provisions hereof, or the foreclosure of, or absolute conveyance pursuant to, this Mortgage. In case of proceedings against the Mortgagor in insolvency or bankruptcy or any proceedings for its reorganization or involving the liquidation of its assets, the Mortgagee shall be entitled to prove the whole amount of principal and interest and other payments, charges and costs due in respect of the Secured Obligations to the full amount thereof without deducting therefrom any proceeds obtained from the sale of the whole or any part of the Mortgaged Property; provided, however, that in no case shall the Mortgagee -------- ------- receive a greater amount than the aggregate of such principal, interest and such other payments, charges and costs (with interest at the Default Rate) from the proceeds of the sale of the Mortgaged Property and the distribution from the estate of the Mortgagor. (ii) Any recovery of any judgment by the Mortgagee and any levy of any execution under any judgment upon the Mortgaged Property shall not affect in any manner or to any extent the Lien and security interests created and evidenced hereby upon the Mortgaged Property or any part thereof, or any conveyances, powers, rights and remedies of the Mortgagee hereunder, but such conveyances, powers, rights and remedies shall continue unimpaired as before. (iii) Any monies collected by the Mortgagee under this Section 11.4 ------------ shall be applied in accordance with the provisions of Section 11.3(iii). ---------------- SECTION 11.5 Legal Proceedings After an Event of Default. ------------------------------------------- (i) After the occurrence and during the continuance of any Event of Default and immediately upon the commencement of any action, suit or legal proceedings to obtain judgment for the Secured Obligations or any part thereof, or of any proceedings to foreclose the Lien and security interest created and evidenced hereby or otherwise enforce the provisions hereof or of any other proceedings in aid of the enforcement hereof, the Mortgagor shall enter its voluntary appearance in such action, suit or proceeding. (ii) Upon the occurrence and during the continuance of an Event of Default, the Mortgagee shall be entitled forthwith as a matter of right, concurrently or independently of any other right or remedy hereunder either before or after declaring the Secured Obligations or any part thereof to be due and payable, to the appointment of a receiver without giving notice to any party and without regard to the adequacy or inadequacy of any security for the Secured Obligations or the solvency or insolvency of any person or entity then legally or equitably liable for the Secured Obligations or any portion thereof. The Mortgagor hereby consents to the appointment of such receiver. Notwithstanding the appointment of any receiver, the Mortgagee shall be entitled as pledgee to the possession and control of any cash, deposits or instruments at the time held by or payable or deliverable under the terms of the Indenture to the Mortgagee. (iii) The Mortgagor shall not (A) at any time insist upon, or plead, or in any manner whatsoever claim or take any benefit or advantage of any stay or extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance hereof, (B) claim, take or insist on any benefit or advantage of any law now or hereafter in force providing for the valuation or appraisal of the Mortgaged Property, or any part thereof, prior to any sale or sales of the Mortgaged Property which may be made pursuant to this Mortgage, or pursuant to any decree, judgment or order of any court of competent jurisdiction or (C) after any such sale or sales, claim or exercise any right under any statute heretofore or hereafter enacted to redeem the property so sold or any part thereof. To the extent permitted by applicable law, the Mortgagor hereby expressly (A) waives all benefit or advantage of any such law or laws, including, without limitation, any statute of limitations applicable to this Mortgage, (B) waives all rights to have the Mortgaged Property marshalled on any foreclosure of this Mortgage, (C) waives any and all rights to trial by jury in any action or proceeding related to the enforcement hereof, (D) waives any objection which it may now or hereafter have to the laying of venue of any action, suit or proceeding brought in connection with this Mortgage and further waives and agrees not to plead that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum and (E) covenants not to hinder, delay or impede the execution of any power granted or delegated to the Mortgagee by this Mortgage but to suffer and permit the execution of every such power as though no such law or laws had been made or enacted. The Mortgagee shall not be liable for any incorrect or improper payment made pursuant to this Article XI in the absence of ---------- gross negligence or willful misconduct. SECTION 11.6 Remedies Not Exclusive. No remedy conferred upon or ---------------------- reserved to the Mortgagee by this Mortgage is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Mortgage or now or hereafter existing at law or in equity. Any delay or omission of the Mortgagee to exercise any right or power accruing on any Event of Default shall not impair any such right or power and shall not be construed to be a waiver of or acquiescence in any such Event of Default. Every power and remedy given by this Mortgage may be exercised from time to time concurrently or independently, when and as often as may be deemed expedient by the Mortgagee in such order and manner as the Mortgagee, in its sole discretion, may elect. If the Mortgagee accepts any monies required to be paid by the Mortgagor under this Mortgage after the same become due, such acceptance shall not constitute a waiver of the right either to require prompt payment, when due, of all other sums secured by this Mortgage or to declare an Event of Default with regard to subsequent defaults. If the Mortgagee accepts any monies required to be paid by the Mortgagor under this Mortgage in an amount less than the sum then due, such acceptance shall be deemed an acceptance on account only and on the condition that it shall not constitute a waiver of the obligation of the Mortgagor to pay the entire sum then due, and the Mortgagor's failure to pay the entire sum then due shall be and continue to be a default hereunder notwithstanding acceptance of such amount on account. SECTION 11.7 Special Louisiana Provisions. ---------------------------- (i) Without limiting the generality of the foregoing, should one or more Events of Default occur or exist and be continuing under this Mortgage, as provided above, the Mortgagee, at its option, may exercise any one or more of this following rights and remedies, in addition to any other rights and remedies provided by law and under this Mortgage to the greatest extent permitted by applicable Louisiana law. Nothing contained herein shall be construed as constituting the Mortgagee as mortgagee in possession in absence of the actual taking of possession of the Premises by the Mortgagee. (ii) The Mortgagee shall have the right, at its sole option, to accelerate the maturity and demand immediate payment in full of any and all of the Secured Obligations. The Mortgagee shall then have the right to commence appropriate foreclosure proceedings against the Mortgaged Property and against the Mortgagor's rights as provided in this Mortgage. (iii) In the event that the Mortgagee elects to commence appropriate Louisiana foreclosure proceedings under this Mortgage, the Mortgagee may cause the Mortgaged Property, or any part or parts thereof, to be immediately seized and sold, whether in term of court or in vacation, under ordinary or executory process, in accordance with applicable Louisiana law, to the highest bidder for cash, with or without appraisement, and without the necessity of making additional demand upon or notifying the Mortgagor or placing the Mortgagor in default, all of which are expressly waived. (iv) For purposes of foreclosure under Louisiana executory process procedures, the Mortgagor confesses judgment and acknowledges to be indebted to the Mortgagee, up to the full amount of the indebtedness in principal, interest, costs, expenses, reasonable attorney's fees and other fees and charges and amounts contemplated hereunder. The Mortgagor further confesses judgment and acknowledges to be indebted unto and in favor of the Mortgagee in the amount of all future advances that the Mortgagee may make on the Mortgagor's behalf pursuant to this Mortgage, together with interest thereon. To the extent permitted under applicable Louisiana law, the Mortgagor additionally waives: (1) the benefit of appraisal as provided in Articles 2332, 2336, 2723, and 2724 of the Louisiana Code of Civil Procedure, and all other laws with regard to appraisal upon judicial sale; (2) the demand and three (3) days' delay provided under Articles 22639 and 2721 of the Louisiana Code of Civil Procedure; (3) the notice of seizure as provided under Articles 2293 and 2721 of the Louisiana Code of Civil Procedure; (4) the three (3) days' delay provided under Articles 2331, 2722 and 2723 of the Louisiana Code of Civil Procedure and all other Articles not specifically mentioned above. The Mortgagor further agrees that any declaration of fact made by authentic act before a Notary Public and two witnesses, by a Person declaring that such facts are within his or her knowledge, shall constitute authentic evidence of such facts for purposes of foreclosure under applicable Louisiana law and for purposes of La, R.S. 9:3504(D)(6) and La. R.S. 10:9-508, to the extent applicable. (v) Should any or all of the Mortgaged Property be seized as an incident to an action for the recognition or enforcement of this Mortgage, by executory process, sequestration, attachment, writ of fieri facias or otherwise, the Mortgagor hereby agrees that the court issuing any such order shall, if requested by the Mortgagee, appoint the Mortgagee, or any agent designated by the Mortgagee or any Person named by the Mortgagee at the time such seizure is requested, or any time thereafter, as Keeper of the Mortgaged Property as provided under La. R.S. 9:5136, et seq. Such a Keeper shall be entitled to reasonable compensation. The Mortgagor agrees to pay the reasonable fees of such Keeper which compensation to the Keeper shall also be secured by this Mortgage in the form of an future advances as provided in this Mortgage. (vi) Should it become necessary for the Mortgagee to foreclose under this Mortgage, all declarations of fact, which are made under an authentic act before a Notary Public in the presence of two witnesses, by a person declaring such facts to lie within his or her knowledge, shall constitute authentic evidence for purposes of executory process and also for purposes of La. R.S. 9:3509.1, La. R.S. 9:3504(D)(6) and La. R.S. 10:9-508, where applicable. (vii) Should one or more Events of Default occur or exist under this Mortgage, the Mortgagee shall have the additional right, at its sole option, to separately sell the aforesaid rights, or any part of parts thereof, at private or public compensation, or on credit, or for future delivery, without the assumption of any credit risk. The sale of the aforesaid rights may be without appraisement, the benefit of which is also expressly waived by the Mortgagor. The Mortgagee may exercise any other remedies with regard to the Mortgagor's rights as may be authorized under the Louisiana Commercial Laws (La. R.S. 10:9-101, et seq.). (viii) To the extent provided by law, and in the event of foreclosure under this Mortgage, or other transfer of title or assignment of the Mortgaged Property, or any part or parts thereof, in lieu of payment of the Secured Obligations, whether in whole or in part, all policies of insurance and other rights applicable to the foreclosed Mortgaged Property upon transfer of the Mortgaged Property shall automatically inure to the benefit of and shall pass to the purchaser(s) or transferee(s) thereof, subject to the rights of the purchaser(s) or transferee(s) to reject such insurance coverage and/or rights at its or their sole option and election. (ix) The Mortgagee may, in addition to or in lieu of the foregoing remedies, in the Mortgagee's sole discretion, commence an appropriate action against the Mortgagor seeking specific performance of any covenant contained in this Mortgage or in aid of the execution or enforcement of any power in this Mortgage granted. (x) Except as may be prohibited by applicable law, all of the Mortgagee's rights and remedies, whether evidenced by this Mortgage or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by the Mortgagee to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of the Mortgagor under this Mortgage, after the Mortgagor's failure to perform shall not affect the Mortgagee's right to declare a default and exercise its remedies. Nothing under this Mortgage or otherwise shall be construed so as to limit or restrict the rights and remedies available to the Mortgagee following an Event of Default, or in any way to limit or restrict the rights and abilities of the Mortgagee to proceed directly against Mortgagor and/or against any other co-maker, guarantor, surety or endorser of the Secured Obligations, and/or to proceed against any other collateral directly or indirectly securing the Secured Obligations. ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement. ------------------ (i) This Mortgage shall constitute a Security Agreement as defined in the Louisiana Commercial Laws, La. R.S. (S) 10:101 et seg., and shall create and evidence a security interest in all the equipment and in all the other items of Mortgaged Property in which a security interest may be granted pursuant to the Louisiana Commercial Laws (collectively, "Personal Property"). (ii) The remedies for any violation of the covenants, terms and conditions of the agreements herein contained shall be as prescribed herein or by general Louisiana law or, as to such part of the security which is also reflected in any Financing Statement filed to perfect the security interest herein created, by the specific statutory provisions now or hereinafter enacted and specified in the Louisiana Commercial Laws, all at Mortgagee's sole election. The mention in any financing statement of (1) the rights in or the proceeds of any fire or hazard insurance policy, or (2) any award in eminent domain proceedings for a taking or for loss of value, or (3) Mortgagor's interest as lessor in any present or future lease or rights to income growing out of the use or occupancy of the Mortgaged Property whether pursuant to lease or otherwise, shall never be construed as in any way altering any of the rights of Mortgagee under this Mortgage or impugning the priority of the Mortgagee's lien granted hereby or by any other recorded document. Rather, such mention in the financing statement is declared to be for the protection of the Mortgagee in the event any court or judge shall at any time hold with respect to (1), (2) and (3) above, that notice of Mortgagee's priority of interest to be effective against a particular class of persons, including, but not limited to, the Federal Government and any subdivisions or entity of the Federal Government, must be filed with the clerk of court of any parish (or St, Helena Parish Recorder of Mortgages) pursuant to Section 9-401 of the Lou-isiana Commercial Laws. SECTION 12.2 Fixture Filing. From the date of its recording, this -------------- Mortgage shall be effective as a fixture financing statement with respect to all goods constituting part of the Mortgaged Property which are to become fixtures related to the Land. For this purpose, the following information is set forth: (a) Name and Address of Debtor: Lucky Magnolia Truck Stop and Casino, L.L.C., 40235 Highway 16 Denham Springs, Louisiana 70706 TIN 72-1268240 and (b) Name and Address of Secured Party: Wells Fargo Bank Minnesota, National Association Corporate Trust Services 213 Court Street, Suite 902 Middletown, Connecticut 06457 (c) This document covers goods which are to become fixtures. All items that are fixtures on the date of this Mortgage shall be subject to the mortgage Lien granted hereunder. ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security. The Mortgagor ------------------------------------------ shall, forthwith after the execution and delivery hereof and thereafter, from time to time, cause this Mortgage and any financing statement, continuation statement or similar instrument relating to any thereof or to any property intended to be subject to the Lien hereof to be filed, registered and recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the validity and priority thereof or the Lien hereof purported to be created upon the Mortgaged Property and the interest and rights of the Mortgagee therein. The Mortgagor shall pay or cause to be paid all taxes and fees incident to such filing, registration and recording, and all reasonable expenses incident to the preparation, execution and acknowledgment thereof, and of any instrument of further assurance, and all Federal or state stamp taxes or other taxes, duties and charges arising out of or in connection with the execution and delivery of such instruments. SECTION 13.2 Further Acts. The Mortgagor shall, at the sole cost and ------------ expense of the Mortgagor, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers, financing statements, continuation statements, instruments and assurances as the Mortgagee shall from time to time reasonably request, which may be necessary in the judgment of the Mortgagee from time to time to assure, perfect, convey, assign, mortgage, transfer and confirm unto the Mortgagee, the property and rights hereby conveyed or assigned or which the Mortgagor may be or may hereafter become bound to convey or assign to the Mortgagee or for carrying out the intention or facilitating the performance of the terms hereof or the filing, registering or recording hereof. Without limiting the generality of the foregoing, in the event that the Mortgagee desires to exercise any remedies, consensual rights or attorney-in-fact powers set forth in this Mortgage and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other Person therefor, then, upon the reasonable request of the Mortgagee, the Mortgagor agrees to use its reasonable efforts to assist and aid the Mortgagee to obtain as soon as practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers. In the event the Mortgagor shall fail (i) within ten (10) Business Days after demand, to execute or take any action required to be executed or taken by the Mortgagor under this Section 13.2 to the extent same ------------ is necessary to maintain perfection of the Lien granted to Mortgagee hereunder or (ii) such failure shall constitute an Event of Default, to execute or take any action required to be executed or taken by the Mortgagor under this Section ------- 13.2 (other than the type described in clause (i) of this sentence) then, in - ---- each of the cases described in clauses (i) and (ii) of this sentence, the Mortgagee may execute or take the same as the attorney-in-fact for the Mortgagor, such power of attorney being coupled with an interest and is irrevocable. SECTION 13.3 Additional Security. Without notice to or consent of the ------------------- Mortgagor and without impairment of the Lien and rights created by this Mortgage, the Mortgagee may accept (but the Mortgagor shall not be obligated to furnish) from the Mortgagor or from any other Person, additional security for the Secured Obligations. Neither the giving hereof nor the acceptance of any such additional security shall prevent the Mortgagee from resorting, first, to such additional security, and, second, to the security created by this Mortgage without affecting the Mortgagee's Lien and rights under this Mortgage. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Land. All of the grants, ------------------------------ covenants, terms, provisions and conditions in this Mortgage shall run with the Land and shall apply to, and bind the successors and assigns of, the Mortgagor. If there shall be more than one mortgagor with respect to the Mortgaged Property, the covenants and warranties hereof shall be joint and several. SECTION 14.2 No Merger. The rights and estate created by this Mortgage --------- shall not, under any circumstances, be held to have merged into any other estate or interest now owned or hereafter acquired by the Mortgagee unless the Mortgagee shall have consented to such merger in writing, such consent not to be unreasonably withheld. SECTION 14.3 Concerning Mortgagee. -------------------- (i) The Mortgagee has been appointed as trustee pursuant to the Indenture. The actions of the Mortgagee hereunder are subject to the provisions of the Indenture. The Mortgagee shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of the Mortgaged Property), in accordance with this Mortgage and the Indenture. The Mortgagee may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. The Mortgagee may resign and a successor Mortgagee may be appointed in the manner provided in the Indenture. Upon the acceptance of any appointment as the Mortgagee by a successor Mortgagee, that successor Mortgagee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Mortgagee under this Mortgage, and the retiring Mortgagee shall thereupon be discharged from its duties and obligations under this Mortgage. After any retiring Mortgagee's resignation, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it under this Mortgage while it was the Mortgagee. (ii) The Mortgagee shall be deemed to have exercised reasonable care in the custody and preservation of the Mortgaged Property in its possession if such Mortgaged Property is accorded treatment substantially equivalent to that which the Mortgagee, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Mortgagee nor any of the Secured Parties shall have responsibility for taking any necessary steps to preserve rights against any Person with respect to any Mortgaged Property. (iii) The Mortgagee shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person, and, with respect to all matters pertaining to this Mortgage and its duties hereunder, upon advice of counsel selected by it. (iv) If any portion of the Mortgaged Property also constitutes collateral granted to the Mortgagee under any other deed of trust, mortgage, security agreement, pledge or instrument of any type, in the event of any conflict between the provisions hereof and the provisions of such other deed of trust, mortgage, security agreement, pledge or instrument of any type in respect of such collateral, the Mortgagee, in its sole discretion, shall select which provision or provisions shall control. SECTION 14.4 Mortgagee May Perform; Mortgagee Appointed ------------------------------------------ Attorney-in-Fact. If the Mortgagor shall fail to perform any covenants contained - ---------------- in this Mortgage, subject to any applicable grace periods or contest rights permitted pursuant to Article IX hereof or as otherwise permitted by any ---------- Collateral Document (including, without limitation, the Mortgagor's covenants to (i) pay the premiums in respect of all required insurance policies hereunder, (ii) pay Charges, (iii) make repairs, (iv) discharge Liens or (v) pay or perform any obligations of the Mortgagor under any Mortgaged Property) or if any warranty on the part of the Mortgagor contained herein shall be breached, the Mortgagee may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose; provided, -------- however, that the Mortgagee shall in no event be bound to inquire into the - ------- validity of any tax, Lien, imposition or other obligation which the Mortgagor fails to pay or perform as and when required hereby and which the Mortgagor does not contest in accordance with the provisions of Article IX hereof. Any and all ---------- amounts reasonably so expended by the Mortgagee shall be paid by the Mortgagor in accordance with the provisions of Section 14.5 hereof. Neither the provisions ------------ of this Section 14.4 nor any action taken by the Mortgagee pursuant to the ------------ provisions of this Section 14.4 shall prevent any such failure to observe any ------------ covenant contained in this Mortgage nor any breach of warranty from constituting an Event of Default. Upon the occurrence and during the continuance of an Event of Default the Mortgagor hereby appoints the Mortgagee its attorney-in-fact, with full authority in the place and stead of the Mortgagor and in the name of the Mortgagor to take any action and to execute any instrument consistent with the terms hereof and the other Collateral Documents which the Mortgagee may deem necessary or advisable to accomplish the purposes hereof. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. The Mortgagor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. SECTION 14.5 Expenses The Mortgagor will upon demand pay to the -------- Mortgagee the amount of any and all reasonable costs and expenses, including the reasonable fees and expenses of its counsel and the reasonable fees and expenses of any experts and agents which the Mortgagee may incur in connection with (i) any action, suit or other proceeding affecting the Mortgaged Property or any part thereof commenced, in which action, suit or proceeding the Mortgagee is made a party or participates or in which the right to use the Mortgaged Property or any part thereof is threatened, or in which it becomes necessary in the judgment of the Mortgagee to defend or uphold the Lien hereof (including, without limitation, any action, suit or proceeding to establish or uphold the compliance of the Mortgaged Property with any Requirements of Law), (ii) the collection of the Secured Obligations, (iii) the enforcement and administration hereof, (iv) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Mortgaged Property, (v) the exercise or enforcement of any of the rights of the Mortgagee or any Secured Party hereunder or (vi) the failure by the Mortgagor to perform or observe any of the provisions hereof. All amounts expended by the Mortgagee and payable by the Mortgagor under this Section 14.5 shall be due upon demand therefor (together with interest ------------ thereon accruing at the Default Rate during the period from and including the date on which such funds were so expended to the date of repayment) and shall be part of the Secured Obligations. The Mortgagor's obligations under this Section 14.5 shall survive the termination hereof and the discharge of the Mortgagor's other obligations under this Mortgage. SECTION 14.6 Indemnity. --------- (i) The Mortgagor agrees to indemnify, pay and hold harmless the Mortgagee and each of the other Secured Parties and the officers, directors, employees, agents and Affiliates of the Mortgagee and each of the other Secured Parties (collectively, the "Indemnitees") from and against any and all other ----------- liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs (including, without limitation, settlement costs), expenses or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, commenced or threatened, whether or not such Indemnitee shall be designated a party thereto), which may be imposed on, incurred by or asserted against that Indemnitee, in any manner relating to or arising out hereof, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (including, without limitation, any misrepresentation by the Mortgagor in this Mortgage, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (the "Indemnified Liabilities"); provided, however, that the Mortgagor shall have no ----------------------- -------- ------- obligation to an Indemnitee hereunder with respect to Indemnified Liabilities to the extent it has been determined by a final decision (after all appeals and the expiration of time to appeal) by a court of competent jurisdiction that such Indemnified Liabilities arose from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Mortgagor shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. (ii) Survival. The obligations of the Mortgagor contained in this -------- Section 14.6 shall survive the termination hereof and the discharge of the Mortgagor's other obligations under this Mortgage, the Indenture and the other Collateral Documents. (iii) Reimbursement. Any amount paid by any Indemnitee as to which ------------- such Indemnitee has the right to reimbursement shall constitute Secured Obligations secured by the Mortgaged Property. SECTION 14.7 Continuing Security Interest; Assignment. This Mortgage ---------------------------------------- shall create a continuing Lien on and security interest in the Mortgaged Property and shall (i) be binding upon the Mortgagor, its respective successors and assigns and (ii) inure, together with the rights and remedies of the Mortgagee hereunder, to the benefit of the Mortgagee and the other Secured Parties and each of their respective successors, transferees and assigns. No other Persons (including, without limitation, any other creditor of Mortgagor) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (ii), any Holder of the Notes may assign or otherwise transfer any indebtedness held by it secured by this Mortgage to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Holder, herein or otherwise, subject however, to the provisions of the Indenture. SECTION 14.8 Termination; Release. The Mortgaged Property shall be -------------------- released from the Lien of this Mortgage in accordance with the provisions of Article 10 the Indenture. - ---------- SECTION 14.9 Modification in Writing. No amendment, modification, ----------------------- supplement, termination or waiver of or to any provision hereof, nor consent to any departure by the Mortgagor therefrom, shall be effective unless the same shall be done in accordance with the terms of the Indenture and unless in writing and signed by the Mortgagee and Mortgagor. Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by the Mortgagor from the terms of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Mortgage or any other Collateral Document, no notice to or demand on the Mortgagor in any case shall entitle the Mortgagor to any other or further notice or demand in similar or other circumstances. SECTION 14.10 Notices. Unless otherwise provided herein or in the ------- Indenture, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Indenture, if to the Mortgagor, addressed to it at the address of the Issuer set forth in the Indenture, and as to the Mortgagee, addressed to it at its address set forth in the Indenture, or in each case at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 14.10. ------------- SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL. ------------------------------------------------------- THIS MORTGAGE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR ITEM OR TYPE OF MORTGAGED PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. THE MORTGAGOR AGREES THAT SERVICE OF PROCESS IN ANY PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE ISSUER AT ITS ADDRESS SET FORTH IN THE INDENTURE OR AT SUCH OTHER ADDRESS OF WHICH THE MORTGAGEE SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. IF ANY AGENT APPOINTED BY THE MORTGAGOR REFUSES TO ACCEPT SERVICE, THE MORTGAGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE MORTGAGEE TO BRING PROCEEDINGS AGAINST THE MORTGAGOR IN THE COURTS OF ANY OTHER JURISDICTION. THE MORTGAGOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 14.12 Severability of Provisions. Any provision hereof which -------------------------- is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 14.13 Limitation on Interest Payable. It is the intention of ------------------------------ the parties to conform strictly to the usury laws, whether state or Federal, that are applicable to the transaction of which this Mortgage is a part. All agreements between the Mortgagor and the Mortgagee, whether now existing or hereafter arising and whether oral or written, are hereby expressly limited so that in no contingency or event whatsoever shall the amount paid or agreed to be paid by the Mortgagor for the use, forbearance or detention of the money to be loaned or advanced under the Indenture or any related document or for the payment or performance of any covenant or obligation contained herein or in the Indenture or any related document exceed the maximum amount permissible under applicable Federal or state usury laws. If under any circumstances whatsoever fulfillment of any such provision, at the time performance of such provision shall be due, shall involve exceeding the limit of validity prescribed by law, then the obligation to be fulfilled shall be reduced to the limit of such validity. If under any circumstances the Mortgagor shall have paid an amount deemed interest by applicable law, which would exceed the highest lawful rate, such amount that would be excessive interest under applicable usury laws shall be applied to the reduction of the principal amount owing in respect of the Secured Obligations and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal and any other amounts due hereunder, the excess shall be refunded to the Mortgagor. All sums paid or agreed to be paid for the use, forbearance or detention of the principal under any extension of credit by the Mortgagee shall, to the extent permitted by applicable law, and to the extent necessary to preclude exceeding the limit of validity prescribed by law, be amortized, prorated, allocated and spread from the date hereof until payment in full of the Secured Obligations so that the actual rate of interest on account of such principal amounts is uniform throughout the term hereof. SECTION 14.14 Business Days. In the event any time period or any date ------------- provided in this Mortgage ends or falls on a day other than a Business Day, then such time period shall be deemed to end and such date shall be deemed to fall on the next succeeding Business Day, and performance herein may be made on such Business Day, with the same force and effect as if made on such other day. SECTION 14.15 Relationship. The relationship of the Mortgagee to the ------------ Mortgagor hereunder is strictly and solely that of lender and borrower and mortgagor and mortgagee and nothing contained in the Indenture, the Notes, this Mortgage or any other document or instrument now existing and delivered in connection therewith or otherwise in connection with the Secured Obligations is intended to create, or shall in any event or under any circumstance be construed as creating a partnership, joint venture, tenancy-in-common, joint tenancy or other relationship of any nature whatsoever between the Mortgagee and the Mortgagor other than as lender and borrower and mortgagor and mortgagee. SECTION 14.16 Waiver of Stay. -------------- (i) The Mortgagor agrees that in the event that the Mortgagor or any property or assets of the Mortgagor shall hereafter become the subject of a voluntary or involuntary proceeding under the Bankruptcy Code or the Mortgagor shall otherwise be a party to any Federal or state bankruptcy, insolvency, moratorium or similar proceeding to which the provisions relating to the automatic stay under Section 362 of the Bankruptcy Code or any similar provision in any such law is applicable, then, in any such case, whether or not the Mortgagee has commenced foreclosure proceedings under this Mortgage, the Mortgagee shall be entitled to relief from any such automatic stay as it relates to the exercise of any of the rights and remedies (including, without limitation, any foreclosure proceedings) available to the Mortgagee as provided in this Mortgage, in any other Collateral Document or any other document evidencing the Secured Obligations. (ii) The Mortgagee shall have the right to petition or move any court having jurisdiction over any proceeding described in Section 14.16(i) hereof for ---------------- the purposes provided therein, and the Mortgagor agrees (i) not to oppose any such petition or motion and (ii) at the Mortgagor's sole cost and expense, to assist and cooperate with the Mortgagee, as may be requested by the Mortgagee from time to time, in obtaining any relief requested by the Mortgagee, including, without limitation, by filing any such petitions, supplemental petitions, requests for relief, documents, instruments or other items from time to time requested by the Mortgagee or any such court. SECTION 14.17 No Credit for Payment of Taxes or Impositions. The --------------------------------------------- Mortgagor shall not be entitled to any credit against the principal, premium, if any, or interest payable under the Indenture or the Notes, and the Mortgagor shall not be entitled to any credit against any other sums which may become payable under the terms thereof or hereof, by reason of the payment of any Charge on the Mortgaged Property or any part thereof. SECTION 14.18 No Claims Against the Mortgagee. Nothing contained in ------------------------------- this Mortgage shall constitute any consent or request by the Mortgagee, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Premises or any part thereof, nor as giving the Mortgagor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the Mortgagee in respect thereof or any claim that any Lien based on the performance of such labor or services or the furnishing of any such materials or other property is prior to the Lien hereof. SECTION 14.19 Obligations Absolute. All obligations of the Mortgagor -------------------- hereunder shall be absolute and unconditional irrespective of: (i) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Mortgagor, the Issuer or any other Guarantor; (ii) any lack of validity or enforceability of the Indenture, the Notes or any other agreement or instrument relating thereto; (iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Indenture, the Notes or any other agreement or instrument relating thereto; (iv) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations; (v) any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect hereof, the Indenture, the Notes or any agreement or instrument relating thereto except as specifically set forth in a waiver granted pursuant to the provisions of Section 14.9 hereof; or ------------ (vi) any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Mortgagor. SECTION 14.20 Last Dollars Secured. This Mortgage secures only a -------------------- portion of the Indebtedness owing or which may become owing by the Mortgagor. The parties agree that any payments or repayments of such Indebtedness by the Mortgagor shall be and be deemed to be applied first to the portion of the Indebtedness that is not secured hereby, it being the parties' intent that the portion of the Indebtedness last remaining unpaid shall be secured hereby. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] THUS DONE AND PASSED, on the day, month and year first written above, effective as of the Effective Date, in the State and Parish aforesaid, by the undersigned Mortgagor in the presence of the undersigned Notary and the undersigned competent witnesses, who hereunto sign their names with Mortgagor after reading of the whole. WITNESSES: MORTGAGOR: LUCKY MAGNOLIA TRUCK STOP AND CASINO, L.L.C., a Louisiana limited liability company /s/ Douglas A. Blackshear /s/ Ian M. Stewart ___________________________________ By: _________________________________ Ian M. Stewart Douglas A. Blackshear Authorized Officer Printed Name: _____________________ /s/ Sterling W. Dale, Jr. ___________________________________ Sterling W. Dale, Jr. Printed Name: _____________________ /s/ Perryann P. Whitehurst _______________________________ Notary Public Schedule A ---------- Legal Description [to come from title policy] Schedule B ---------- Prior Liens ----------- 1. Each of the liens and other encumbrances excepted as being prior to the Lien hereof as set forth in Schedule B to the marked title insurance commitment issued by Lawyers Title Insurance Corporation, dated as of the date hereof and delivered to the Trustee on the date hereof, bearing Lawyers Title Insurance Corporation reference number 37639REV relating to the real property described in Schedule A attached hereto. 2. Zoning and building ordinances and regulations, to the extent they constitute Permitted Liens of the type described in clause (4) of the definition thereof. Schedule C ---------- Leases Affecting the Mortgaged Property NONE Exhibit 1 --------- FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the "Agreement") is made and entered into as of the ____ day of _______, ____ by and between ________________________________, as trustee, having an office at _________________ (in such capacity, "Trustee"), and _____________________, having an office at __________________________ ("Tenant"). R E C I T A L S: - - - - - - - - A. Tenant is the tenant under a certain lease dated _____________, ____ between ________________________________, as landlord ("Landlord"), and Tenant, as tenant (as amended through the date hereof, the "Lease"), pursuant to which Tenant leased a portion (the "Leased Premises") of the property known as _____________________________, located at _____________________________, as more particularly described in Schedule A attached hereto (the "Property"). B. Landlord has or will grant a mortgage lien on and security interest in the Property to Trustee (for its benefit and for the benefit of the holders of certain senior secured notes and notes issued in exchange therefor pursuant to that certain indenture dated as of [________ ___, 2002]) pursuant to one or more mortgages, deeds of trust, deeds to secure debt or similar security instruments (collectively, the "Security Instruments"). C. Tenant has agreed to subordinate the Lease to the Security Instruments and to the lien thereof and Trustee has agreed not to disturb Tenant's possessory rights in the Leased Premises under the Lease on the terms and conditions hereinafter set forth. A G R E E M E N T: - - - - - - - - - NOW, THEREFORE, the parties hereto mutually agree as follows: 1. Subordination. Notwithstanding anything to the contrary set ------------- forth in the Lease, the Lease and the leasehold estate created thereby and all of Tenant's rights thereunder are and shall at all times be subject and subordinate in all respects to the Security Instruments and the lien thereof, and to all rights of Trustee thereunder, and to any and all advances to be made thereunder, and to all renewals, modifications, consolidations, replacements and extensions thereof. 2. Nondisturbance. So long as Tenant complies with the provisions -------------- of this Agreement, pays all rents and other charges as specified in the Lease and is not otherwise in default (beyond applicable notice and cure periods) of any of its obligations and covenants pursuant to the Lease, Trustee agrees for itself and its successors in interest and for any other person acquiring title to the Property through a foreclosure (an "Acquiring Party"), that Tenant's possession of the Leased Premises as described in the Lease will not be disturbed during the term of the Lease by reason of a foreclosure. For purposes of this Agreement, a "foreclosure" shall include (but not be limited to) a sheriff's or trustee's sale under the power of sale con- -2- tained in the Security Instruments, the termination of any superior lease of the Property and any other transfer of the Landlord's interest in the Property under peril of foreclosure, including, without limitation to the generality of the foregoing, an assignment or sale in lieu of foreclosure. 3. Attornment. Tenant agrees to attorn to, accept and recognize ---------- any Acquiring Party as the landlord under the Lease pursuant to the provisions expressly set forth therein for the then remaining balance of the term of the Lease, and any extensions thereof as made pursuant to the Lease. The foregoing provision shall be self-operative and shall not require the execution of any further instrument or agreement by Tenant as a condition to its effectiveness. 4. No Liability. Notwithstanding anything to the contrary ------------ contained herein or in the Lease, it is specifically understood and agreed that neither the Trustee, any receiver nor any Acquiring Party shall be: (a) liable for any act, omission, negligence or default of any prior landlord (including Landlord); or (b) liable for any failure of any prior landlord (including Landlord) to construct any improvements or bound by any covenant to construct any improvement either at the commencement of the term of the Lease or upon any renewal or extension thereof or upon the addition of additional space pursuant to any expansion right contained in the Lease; or (c) subject to any offsets, credits, claims or defenses which Tenant might have against any prior landlord (including Landlord); or (d) bound by any rent or additional rent which is payable on a monthly basis and which Tenant might have paid for more than one (1) month in advance to any prior landlord (including Landlord) or by any security deposit or other prepaid charge which Tenant might have paid in advance to any prior landlord (including Landlord); or (e) liable to Tenant hereunder or under the terms of the Lease beyond its interest in the Property; or (f) bound by any assignment, subletting, renewal, extension or any other agreement or modification of the Lease made without the written consent of Trustee; or (g) bound by any consensual or negotiated surrender, cancellation or termination of the Lease, in whole or in part, agreed upon between Landlord and Tenant unless effected unilaterally by Tenant pursuant to the express terms of the Lease. Notwithstanding the foregoing, Tenant reserves its right to any and all claims or causes of action (i) against such prior landlord for prior losses or damages and (ii) against the successor landlord for all losses or damages arising from and after the date that such successor landlord takes title to the Property. 5. Certain Acknowledgments and Agreements by Tenant. (a) Tenant ------------------------------------------------ has notice that the Lease and the rents and all other sums due thereunder have been assigned to Trustee as security for the notes secured by the Security Instruments. In the event Trustee notifies Tenant of the occurrence of a de- -3- fault under the Security Instruments and demands that Tenant pay its rents and all other sums due or to become due under the Lease directly to Trustee, Tenant shall honor such demand and pay its rent and all other sums due under the Lease directly to Trustee or as otherwise authorized in writing by Trustee. Landlord irrevocably authorizes Tenant to make the foregoing payments to Trustee upon such notice and demand. (b) Tenant shall send a copy of any and all notices or statements under the Lease to Trustee at the same time such notices or statements are sent to Landlord. (c) This Agreement satisfies any and all conditions or requirements in the Lease relating to the granting of a non-disturbance agreement. 6. Trustee to Receive Default Notices. Tenant shall notify ---------------------------------- Trustee of any default by Landlord under the Lease which would entitle Tenant to cancel the Lease, and agrees that, notwithstanding any provisions of the Lease to the contrary, no notice of cancellation thereof shall be effective unless Trustee shall have received notice of default giving rise to such cancellation and shall have failed within sixty (60) days after receipt of such notice to cure such default or, if such default cannot be cured within sixty (60) days, shall have failed within sixty (60) days after receipt of such notice to commence and thereafter diligently pursue any action necessary to cure such default. 7. Estoppel. Tenant hereby certifies and represents to Trustee -------- that as of the date of this Agreement: (a) the Lease is in full force and effect; (b) all requirements for the commencement and validity of the Lease have been satisfied and there are no unfulfilled conditions to Tenant's obligations under the Lease; (c) Tenant is not in default under the Lease and has not received any uncured notice of any default by Tenant under the Lease; to the best of Tenant's knowledge, Landlord is not in default under the Lease; no act, event or condition has occurred which with notice or the lapse of time, or both, would constitute a default by Tenant or Landlord under the Lease; no claim by Tenant of any nature exists against Landlord under the Lease; and all obligations of Landlord have been fully performed; (d) there are no defenses, counterclaims or setoffs against rents or charges due or which may become due under the Lease; (e) none of the rent which Tenant is required to pay under the Lease has been prepaid, or will in the future be prepaid, more than one (1) month in advance; (f) Tenant has no right or option contained in the Lease or in any other document to purchase all or any portion of the Leased Premises; (g) the Lease has not been modified or amended and constitutes the entire agreement between Landlord and Tenant relating to the Leased Premises; -4- (h) Tenant has not assigned, mortgaged, sublet, encumbered, conveyed or otherwise transferred any or all of its interest under the Lease; and (i) Tenant has full authority to enter into this Agreement, which has been duly authorized by all necessary action. 8. Notices. All notices or other written communications hereunder ------- shall be deemed to have been properly given (i) upon delivery, if delivered in person with receipt acknowledged by the recipient thereof, (ii) one (1) Business Day (hereinafter defined) after having been deposited for overnight delivery with any reputable overnight courier service, or (iii) three (3) Business Days after having been deposited in any post office or mail depository regularly maintained by the United States Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested, addressed to the receiving party at its address set forth above or addressed as such party may from time to time designate by written notice to the other parties. For purposes of this Section 8, the term "Business Day" shall mean any day other than --------- Saturday, Sunday or any other day on which banks are required or authorized to close in New York, New York. Either party by notice to the other may designate additional or different addresses for subsequent notices or communications. 9. Successors. The obligations and rights of the parties pursuant to ---------- this Agreement shall bind and inure to the benefit of the successors, assigns, heirs and legal representatives of the respective parties; provided, however, -------- ------- that in the event of the assignment or transfer of the interest of Trustee, all obligations and liabilities of Trustee under this Agreement shall terminate, and thereupon all such obligations and liabilities shall be the responsibility of the party to whom Trustee's interest is assigned or transferred; and provided, -------- further, that the interest of Tenant under this Agreement may not be assigned or - ------- transferred without the prior written consent of Trustee. In addition, Tenant acknowledges that all references herein to Landlord shall mean the owner of the landlord's interest in the Lease, even if said owner shall be different from the Landlord named in the Recitals. 10. Duplicate Original; Counterparts. This Agreement may be executed -------------------------------- in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Agreement. 11. Limitation of Trustee's Liability. (a) Trustee shall have no --------------------------------- obligations nor incur any liability with respect to any warranties of any nature whatsoever, whether pursuant to the Lease or otherwise, including, without limitation, any warranties respecting use, compliance with zoning, Landlord's title, Landlord's authority, habitability, fitness for purpose or possession. (b) In the event that Trustee shall acquire title to the Leased Premises or the Property, Trustee shall have no obligation, nor incur any liability, beyond Trustee's then equity interest, if any, in the Leased Premises, and Tenant shall look exclusively to such equity interest of Trustee, if any, in the Leased Premises for the payment and discharge of any obligations imposed upon Trustee hereunder or under the Lease, and Trustee is hereby released and relieved of any other obligations hereunder and under the Lease. 12. Modification in Writing. This Agreement may not be modified except ----------------------- by an agreement in writing signed by the parties hereto or their respective successors in interest. -5- 13. Lien of Security Instruments. Nothing contained in this Agreement ---------------------------- shall in any way impair or affect the lien created by the Security Instruments or the provisions thereof. 14. Compliance with Lease. Tenant agrees that in the event there is --------------------- any inconsistency between the terms and provisions hereof and the terms and provisions of the Lease, the terms and provisions hereof shall be controlling. 15. Governing Law; Severability. This Agreement shall be governed by ------------- the laws of the State of [ ]. If any term of this Agreement or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such terms to any person or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 16. Further Actions. Tenant agrees at its own expense to execute and --------------- deliver, at any time and from time to time upon the request of Trustee or any Acquiring Party, such documents and instruments (in recordable form, if requested) as may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to fully implement or to further evidence the understandings and agreements contained in this Agreement. Moreover, Tenant hereby irrevocably appoints and constitutes Trustee or any Acquiring Party as its true and lawful attorney-in-fact to execute and deliver any such documents or instruments which may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to implement or further evidence such understandings and agreements and which Tenant, after thirty (30) days' notice from Trustee or any Acquiring Party, has failed to execute and deliver. IN WITNESS WHEREOF, Trustee and Tenant have duly executed this Agreement as of the date first above written. __________________________________, as Trustee By: ______________________________ Name: Title: __________________________________, as Tenant By: ______________________________ Name: Title: The undersigned, as the Landlord named in the Recitals, having duly executed this Agreement as of the date first written above, and as mortgagor, pledgor, assignor or debtor under the Security Instruments, hereby accepts and agrees for itself and its successors and assigns, (i) to be bound by the provisions of Section 5 hereof, (ii) that nothing contained in the foregoing Agreement (x) shall in any way be deemed to constitute a waiver by Trustee of any of its rights or remedies under the Security Instruments or (y) shall in any way be deemed to release Landlord from its obligations to comply with the terms, provisions, conditions, covenants and agreements set forth in the Security Instruments and (iii) that the provisions of the Security Instruments remain in full force and effect and must be complied with by Landlord. ______________________________, a ______________________________ By: ______________________________ Name: Title: ACKNOWLEDGMENT State of __________) ) ss.: County of _________) [Local counsel to provide appropriate acknowledgment] SCHEDULE A to EXHIBIT 1 ----------------------- Description of Real Property ---------------------------- EX-4.17 47 dex417.txt MORTGAGE, ASSIGNMENT OF LEASES-JACE, INC. Exhibit 4.17 ================================================================================ MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING BY JACE, INC., Mortgagor, TO WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee, Mortgagee Securing Principal Indebtedness of $125,000,000 Dated as of February 22, 2002 Relating to Premises in: Terrebonne Parish, Louisiana ================================================================================ After recording, please return to: Athy A. Mobilia, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 ------------------ TABLE OF CONTENTS
Page ---- PREAMBLE ............................................................... 1 RECITALS ............................................................... 1 AGREEMENT .............................................................. 2 ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions .............................................. 2 SECTION 1.2 Interpretation ........................................... 8 SECTION 1.3 Resolution of Drafting Ambiguities ....................... 8 ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Mortgaged Property .............................. 8 SECTION 2.2 Assignment of Leases and Rents ........................... 9 SECTION 2.3 Secured Obligations ...................................... 10 SECTION 2.4 Future Advances .......................................... 10 SECTION 2.5 No Release ............................................... 10 ARTICLE III REPRESENTATIONS AND WARRANTIES OF MORTGAGOR SECTION 3.1 Authority and Validity ................................... 10 SECTION 3.2 Warranty of Title ........................................ 11 SECTION 3.3 Condition of Mortgaged Property .......................... 11 SECTION 3.4 Leases ................................................... 13 SECTION 3.5 Insurance ................................................ 13 SECTION 3.6 Charges .................................................. 14 SECTION 3.7 Environmental ............................................ 14 SECTION 3.8 No Conflicts, Consents, etc .............................. 14 SECTION 3.9 Benefit to the Mortgagor ................................. 15
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Page ---- ARTICLE IV CERTAIN COVENANTS OF MORTGAGOR SECTION 4.1 Preservation of Corporate Existence .................................. 15 SECTION 4.2 Title ................................................................ 15 SECTION 4.3 Maintenance and Use of Mortgaged Property; Alterations ............... 16 SECTION 4.4 Notices Regarding Certain Defaults ................................... 17 SECTION 4.5 Access to Mortgaged Property, Books and Records; Other Information ... 17 SECTION 4.6 Limitation on Liens; Transfer Restrictions ........................... 17 SECTION 4.7 Environmental ........................................................ 17 SECTION 4.8 Estoppel Certificates ................................................ 19 ARTICLE V LEASES SECTION 5.1 Mortgagor's Affirmative Covenants with Respect to Leases ............. 19 SECTION 5.2 Mortgagor's Negative Covenants with Respect to Leases ................ 19 SECTION 5.3 Additional Requirements with Respect to New Leases ................... 20 ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Mortgagor ......................... 20 SECTION 6.2 Collection of Rents by the Mortgagee ................................. 20 SECTION 6.3 No Release ........................................................... 21 SECTION 6.4 Irrevocable Interest ................................................. 21 SECTION 6.5 Amendment to Leases .................................................. 21 ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges ................................................... 21 SECTION 7.2 Escrow of Taxes ...................................................... 22 SECTION 7.3 Certain Statutory Liens .............................................. 22 SECTION 7.4 Stamp and Other Taxes ................................................ 22 SECTION 7.5 Certain Tax Law Changes .............................................. 22 SECTION 7.6 Proceeds of Tax Claim ................................................ 22 ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages ............................ 23
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Page ---- SECTION 8.2 Delivery After Foreclosure ................................................ 23 ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens ........................... 23 SECTION 9.2 Contesting of Insurance ................................................... 23 ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction ............................................................... 24 SECTION 10.2 Condemnation .............................................................. 24 ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default ......................................................... 24 SECTION 11.2 Remedies in Case of an Event of Default ................................... 24 SECTION 11.3 Sale of Mortgaged Property if Event of Default Occurs; Proceeds of Sale ... 25 SECTION 11.4 Additional Remedies in Case of an Event of Default ........................ 26 SECTION 11.5 Legal Proceedings After an Event of Default ............................... 27 SECTION 11.6 Remedies Not Exclusive .................................................... 27 ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement ........................................................ 30 SECTION 12.2 Fixture Filing ............................................................ 31 ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security ................................ 31 SECTION 13.2 Further Acts .............................................................. 31 SECTION 13.3 Additional Security ....................................................... 32
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Page ---- ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Land ................................... 32 SECTION 14.2 No Merger ........................................................ 32 SECTION 14.3 Concerning Mortgagee ............................................. 32 SECTION 14.4 Mortgagee May Perform; Mortgagee Appointed Attorney-in-Fact ...... 33 SECTION 14.5 Expenses ......................................................... 33 SECTION 14.6 Indemnity ........................................................ 34 SECTION 14.7 Continuing Security Interest; Assignment ......................... 34 SECTION 14.8 Termination; Release ............................................. 34 SECTION 14.9 Modification in Writing .......................................... 35 SECTION 14.10 Notices .......................................................... 35 SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY TRIAL .......... 35 SECTION 14.12 Severability of Provisions ....................................... 35 SECTION 14.13 Limitation on Interest Payable ................................... 35 SECTION 14.14 Business Days .................................................... 36 SECTION 14.15 Relationship ..................................................... 36 SECTION 14.16 Waiver of Stay ................................................... 36 SECTION 14.17 No Credit for Payment of Taxes or Impositions .................... 37 SECTION 14.18 No Claims Against the Mortgagee .................................. 37 SECTION 14.19 Obligations Absolute ............................................. 37 SECTION 14.20 Last Dollars Secured ............................................. 37 SIGNATURE AND ACKNOWLEDGMENT SCHEDULE A Legal Description SCHEDULE B Prior Liens SCHEDULE C Leases Affecting the Mortgaged Property EXHIBIT 1 Form of Subordination, Non-Disturbance and Attornment Agreement
-iv- MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Mortgage"), dated as of February 22, 2002, made by JACE, INC., a -------- Louisiana corporation having an office at 213 West Park Avenue, Thibodaux, Louisiana 70301, as mortgagor, assignor and debtor (in such capacities and together with any successors in such capacities, the "Mortgagor"), in favor of --------- WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association having an office at 213 Court Street, Suite 902, Middletown, CT 06457, in its capacity as collateral agent and trustee pursuant to the Indenture (as hereinafter defined), as mortgagee, assignee and secured party (in such capacities and together with any successors in such capacities, the "Mortgagee"). --------- R E C I T A L S: - - - - - - - - A. Gameco, Inc. (the "Issuer"), certain of its Subsidiaries (as ------ hereinafter defined), the Mortgagor and the Mortgagee have, in connection with the execution and delivery of this Mortgage, entered into that certain indenture, dated as of February 8, 2002 (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Indenture"), --------- pursuant to which the Issuer has issued its 11 7/8% senior secured notes due 2009 (the "Senior Secured Notes") in the aggregate principal amount of -------------------- $125,000,000. It is contemplated that the Issuer may, after the date hereof, issue Additional Notes (as defined in the Indenture) and Exchange Notes (as defined in the Indenture); the Exchange Notes, together with the Additional Notes and the Senior Secured Notes, the "Notes"), in each case, pursuant to the ----- provisions of the Indenture. B. The Issuer owns, directly or through its Subsidiaries, all of the issued and outstanding shares of the Mortgagor. C. The Mortgagor has, pursuant the Indenture, among other things, unconditionally guaranteed (the "Guarantee") the obligations of the Issuer under --------- the Indenture and the Notes. D. The Mortgagor will receive substantial benefits from the execution and delivery of, and the performance of the obligations under, the Indenture and the Notes, and is therefore willing to enter into this Mortgage. E. The Mortgagor is or will be the legal owner of the Mortgaged Property (as hereinafter defined). F. This Mortgage is given by the Mortgagor in favor of the Mortgagee for its benefit and for the benefit of the Holders of the Notes (collectively, the "Secured Parties") to secure the payment and performance of all of the --------------- Secured Obligations (as hereinafter defined). A G R E E M E N T: - - - - - - - - - NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Mortgagor hereby covenants and agrees with the Mortgagee as follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions. Capitalized terms used but not otherwise ----------- defined herein shall have the meanings assigned to such terms in the Indenture. The following terms used in this Mortgage shall have the following meanings: "ACM" shall have the meaning assigned to such term in Section 4.7(ii) --- --------------- hereof. "Affiliate" shall have the meaning assigned to such term in the --------- Indenture. "Alteration" shall mean any and all alterations, installations, ---------- improvements, additions, modifications or changes of a structural nature of or to the Premises. "Business Day" shall have the meaning assigned to such term in the ------------ Indenture. "Charges" shall mean any and all real estate, property and other ------- taxes, assessments and special assessments, levies, fees, all water and sewer rents and charges and all other governmental charges or Liens imposed upon or assessed against, and all claims (including, without limitation, landlords', carriers', mechanics', workmen's, repairmen's, laborers', materialmen's, suppliers' and warehousemen's Liens and other claims arising by operation of law) against, all or any portion of the Mortgaged Property. "Collateral Account" shall have the meaning assigned to such term in ------------------ the Indenture. "Collateral Documents" shall have the meaning assigned to such term in -------------------- the Indenture. "Contested Liens" shall mean, collectively, any Liens incurred in --------------- respect of any Charges to the extent that the amounts owing in respect thereof are not yet delinquent or are being contested and otherwise comply with the provisions of Section 9.1 hereof. ----------- "Contracts" shall mean, collectively, any and all right, title and --------- interest of the Mortgagor in and to any and all contracts, instruments, documents and other general intangibles, whether now existing or hereafter arising or entered into, relating to the Mortgaged Property (including, without limitation, all reciprocal easements and/or operating agreements, covenants, conditions and restrictions and similar agreements affecting all or any portion of the Mortgaged Property and any and all present or future options to sell or lease the Mortgaged Property or any interest therein) and all reserves, deferred payments, deposits or other security or advance payments (including, without limitation, those made by or on behalf of the Mortgagor to others with respect to (i) utility service regarding the Mortgaged Property, (ii) cleaning, maintenance, repair or similar services regarding the Mortgaged Property, (iii) refuse removal or sewage service regarding the Mortgaged Property, (iv) rentals of equipment, if any, used in the operation by or on behalf of Mortgagor regarding the Mortgaged Property, and/or (v) parking or similar services or rights regarding the Mortgaged Property), refunds, liens, security interests, guarantees, remedies and claims of every kind, nature or character relating thereto. "Default Rate" shall mean the rate per annum equal to the highest rate ------------ then payable under the Indenture. "Destruction" shall mean any and all damage to, or loss or destruction ----------- of, the Premises or any part thereof. "Environmental Law" shall mean any applicable federal, state, local or ----------------- municipal statute, law, rule, regulation, ordinance, code, policy or rule of common law and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment binding on the Mortgagor, relating to pollution or protection of the environment, or health or safety including, without limitation, any relating to the release or threatened release of any Hazardous Materials. "Event of Default" shall have the meaning assigned to such term in the ---------------- Indenture. "Fixture" shall mean all machinery, apparatus, equipment, fittings, ------- fixtures, improvements and articles of personal property of every kind, description and nature whatsoever now or hereafter attached or affixed to the Land or any other Improvement or used in connection with the use and enjoyment of the Land or any other Improvement or the maintenance or preservation thereof, which by the nature of their location thereon or attachment thereto are fixtures under the UCC or any other applicable law including, without limitation, all utility systems, fire sprinkler and security systems, drainage facilities, lighting facilities, all water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone and other utility equipment and facilities, pipes, fittings and other items of every kind and description now or hereafter attached to or located on the Land which by the nature of their location thereon or attachment thereto are real property under applicable law, HVAC equipment, boilers, electronic data processing, telecommunications or computer equipment, refrigeration, electronic monitoring, water or lighting systems, power, sanitation, waste removal, elevators, maintenance or other systems or equipment and all additions thereto and betterments, renewals, substitutions and replacements thereof. "GAAP" shall have the meaning assigned to such term in the Indenture. ---- "Governmental Authority" shall mean any federal, state, local, foreign ---------------------- or other governmental, quasi-governmental or administrative (including self-regulatory) body, instrumentality, department, agency, authority, board, bureau, commission, office of any nature whatsoever or other subdivision thereof, or any court, tribunal, administrative hearing body, arbitration panel or other similar dispute-resolving body, whether now or hereafter in existence, or any officer or official thereof, having jurisdiction over the Mortgagor or the Mortgaged Property or any portion thereof. "Guarantee" shall have the meaning assigned to such term in Recital C --------- --------- hereof. "Guarantors" shall have the meaning assigned to such term in the ---------- Indenture. "Hazardous Materials" shall mean any substance, chemical, material, ------------------- pollutant, waste, contaminant or constituent, which is subject to regulation under or could give rise to liability under any Environmental Law. "Holder" shall have the meaning assigned to such term in the ------ Indenture. "Improvements" shall mean all buildings, structures and other ------------ improvements of every kind or description and any and all Alterations now or hereafter located, attached or erected on the Land including, without limitation (i) all Fixtures, (ii) all attachments, railroad tracks, foundations, sidewalks, drives, roads, curbs, streets, ways, alleys, passages, passageways, sewer rights, parking areas, driveways, fences and walls and (iii) all materials now or hereafter located on the Land intended for the construction, reconstruction, repair, replacement, alteration, addition or improvement of or to such buildings, Fixtures, structures and improvements, all of which materials shall be deemed to be part of the Improvements immediately upon delivery thereof on the Land and to be part of the improvements immediately upon their incorporation therein. "Indemnified Liabilities" shall have the meaning assigned to such term ----------------------- in Section 14.6(i) hereof. --------------- "Indemnitees" shall have the meaning assigned to such term in Section ----------- ------- 14.6(i) hereof. - ------- "Indenture" shall have the meaning assigned to such term in Recital A --------- --------- hereof. "Insurance Policies" means the insurance policies and coverages ------------------ required to be maintained by the Mortgagor with respect to the Mortgaged Property pursuant to Section 4.19(b) of the Indenture and all renewals and extensions thereof. "Insurance Requirements" means, collectively, all provisions of the ---------------------- Insurance Policies, all requirements of the issuer of any of the Insurance Policies and all orders, rules, regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon the Mortgagor and applicable to the Mortgaged Property or any use or condition thereof. "Issuer" shall have the meaning assigned to such term in Recital A ------ hereof. "Land" shall mean those certain tracts or parcels of land described in ---- Schedule A annexed to this Mortgage, together with all of the Mortgagor's - ---------- reversionary rights therein and all of the Mortgagor's rights in and to any and all easements, rights-of-way, strips and gores of land, waters, water courses, water rights, mineral, gas and oil rights and all power, air, light and other rights, estates, titles, interests, privileges, liberties, servitudes, licenses, tenements, hereditaments and appurtenances whatsoever, in any way belonging, relating or appertaining thereto, or any part thereof, or which hereafter shall in any way belong, relate or be appurtenant thereto. "Landlord" shall mean any landlord, lessor, franchisor, licensor or -------- grantor, as applicable. "Leases" shall mean, collectively, any and all right, title and ------ interests of the Mortgagor, as Landlord, in all leases and subleases of space, tenancies, franchise agreements, licenses, occupancy, rental, access or concession agreements and any other agreements pursuant to which any Person is granted a pos- sessory interest in or right to use or occupy all or any portion of the Mortgaged Property (including, without limitation, all of the Mortgagor's rights to enforce all such leases, subleases, tenancies or other agreements and to receive and enforce any rights that the Mortgagor may have to collect Rents thereunder), in each case whether now existing or hereafter entered into, whether or not of record, relating in any manner to the Premises or the use or occupancy thereof and any and all amendments, modifications, supplements, replacements, extensions, renewals and/or guarantees, if any thereof, whether now in effect or hereafter coming into effect. "Lien" shall have the meaning assigned to such term in the Indenture. ---- "Mortgage" shall have the meaning assigned to such term in the -------- Preamble hereof. "Mortgaged Property" shall have the meaning assigned to such term in ------------------ Section 2.1 hereof. - ------------------ "Mortgagee" shall have the meaning assigned to such term in the --------- Preamble hereof. "Mortgagor" shall have the meaning assigned to such term in the --------- Preamble hereof. "Mortgagor's Interest" shall have the meaning assigned to such term in -------------------- Section 2.2 hereof. - ----------- "Net Loss Proceeds" shall have the meaning assigned to such term in ----------------- the Indenture. "Net Proceeds" shall have the meaning assigned to such term in the ------------ Indenture. "Notes" shall have the meaning assigned to such term in Recital A ----- --------- hereof. "Officers' Certificate" shall have the meaning assigned to such term --------------------- in the Indenture. "Permit" shall mean any and all permits, certificates, approvals, ------ authorizations, consents, licenses, variances, franchises or other instruments, however characterized, of any Governmental Authority (or any Person acting on behalf of a Governmental Authority) now or hereafter acquired or held, together with all amendments, modifications, extensions, renewals and replacements of any thereof issued or in any way furnished in connection with the Mortgaged Property including, without limitation, building permits, certificates of occupancy, environmental certificates, industrial permits or licenses and certificates of operation. "Permitted Collateral Liens" shall have the meaning assigned to such -------------------------- term in Section 4.6 hereof. ----------- "Permitted Liens" shall have the meaning assigned to such term in the --------------- Indenture. "Person" shall have the meaning assigned to such term in the ------ Indenture. "Premises" shall mean, collectively, the Land and the Improvements. -------- "Prior Liens" shall mean, collectively, the Liens identified in ----------- Schedule B annexed to this Mortgage. - ---------- "Proceeds" shall mean, collectively, any and all cash proceeds and -------- noncash proceeds derived or to be derived from the Mortgaged Property and shall include, without limitation, all (i) proceeds of the sale, transfer or conveyance of the Mortgaged Property or the conversion, voluntary or involuntary, of any of the Mortgaged Property or any portion thereof into cash or liquidated claims, (ii) proceeds of any insurance (except payments made to a Person, other than the Issuer or any Subsidiary thereof, that is not a party to this Mortgage), indemnity, warranty, guaranty or claim payable to the Mortgagee or to the Mortgagor from time to time with respect to any of the Mortgaged Property including, without limitation, all Net Loss Proceeds relating thereto, (iii) payments (in any form whatsoever) made or due and payable to the Mortgagor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any portion of the Mortgaged Property by any Governmental Authority (or any Person acting on behalf of a Governmental Authority) including, without limitation, all Net Loss Awards relating thereto, (iv) products of the Mortgaged Property, (v) other amounts from time to time paid or payable under or in connection with any of the Mortgaged Property including, without limitation, refunds of real estate taxes and assessments, including interest thereon and any unearned insurance premiums relating thereto and (vi) the right to enforce any and all rights that the Mortgagor has or may have to collect all such proceeds, including, without limitation, the Mortgagor's rights to commence any and all appropriate collection or enforcement actions incident thereto. "Property Material Adverse Effect" shall mean, as of any date of -------------------------------- determination and whether individually or in the aggregate (a) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the business or operations as presently conducted at the Mortgaged Property; (b) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the value or utility of the Mortgaged Property; and (c) any event, circumstance, occurrence or condition which has caused or resulted in (or would reasonably be expected to cause or result in) a material adverse effect on the legality, priority or enforceability of the Lien created by this Mortgage or the rights and remedies of the Mortgagee hereunder. "Prudent Operator" shall mean the standard of care taken by a prudent ---------------- operator of property similar in use and configuration to the Premises and located in the locality where the Premises are located. "Records" shall mean, collectively, any and all right, title and ------- interest of the Mortgagor in and to any and all drawings, plans, specifications, file materials, operating and maintenance records, catalogues, tenant lists, correspondence, advertising materials, operating manuals, warranties, guarantees, appraisals, studies and data relating to the Mortgaged Property or the construction of any Alteration or the maintenance of any Permit. "Rents" shall mean, collectively, any and all rents, additional rents, ----- royalties, issues, cash, guaranties, letters of credit, bonds, sureties or security deposited under any Lease to secure performance of the Tenant's obligations thereunder, revenues, earnings, profits, bonuses and income, advance rental payments, payments incident to assignment, sublease or surrender of a Lease, claims for forfeited deposits and claims for damages, now due or hereafter to become due, with respect to any Lease, any indemnification against, or reimbursement for, sums paid and costs and expenses incurred by the Mortgagor under any Lease or otherwise, and any award in the event of the bankruptcy of any Tenant under or guarantor of a Lease. "Requirements of Law" shall mean, collectively, any and all ------------------- requirements of any Governmental Authority including, without limitation, any and all orders, decrees, determinations, laws, treaties, ordinances, rules, regulations or similar statutes or case law. "Secured Obligations" shall mean all obligations (whether or not ------------------- constituting future advances, obligatory or otherwise) of the Issuer and any and all of the Guarantors from time to time arising under or in respect of this Mortgage, the Indenture, the Notes and the other Collateral Documents (including, without limitation, the obligations to pay principal, interest and all other charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Mortgage, the Indenture, the Notes and the other Collateral Documents), in each case whether (i) such obligations are direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due whether at stated maturity, by acceleration or otherwise, (ii) arising in the regular course of business or otherwise, (iii) for payment or performance and/or (iv) now existing or hereafter arising (including, without limitation, interest and other obligations arising or accruing after the commencement of any bankruptcy, insolvency, reorganization or similar proceeding with respect to the Issuer, any Guarantor or any other Person, or which would have arisen or accrued but for the commencement of such proceeding, even if such obligation or the claim therefor is not enforceable or allowable in such proceeding). "Secured Parties" shall have the meaning assigned to such term in --------------- Recital F hereof. - --------- "Senior Secured Notes" shall have the meaning assigned to such term in -------------------- Recital A hereof. - --------- "Subordination Agreement" shall mean a subordination, nondisturbance ----------------------- and attornment agreement substantially in the form of Exhibit 1 annexed to this --------- Mortgage. "Subsidiaries" shall have the meaning assigned to such term in the ------------ Indenture. "Taking" shall mean any taking of the Mortgaged Property or any part ------ thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, general or special, or by reason of the temporary requisition of the use or occupancy of the Mortgaged Property or any part thereof, by any Governmental Authority, civil or military. "Tax Escrow Fund" shall have the meaning assigned to such term in --------------- Section 7.2 hereof. - ----------- "Tenant" shall mean any tenant, lessee, sublessee, franchisee, ------ licensee, grantee or obligee, as applicable. "UCC" shall mean the Uniform Commercial Code as in effect on the date --- hereof in the jurisdiction in which the Premises are located; provided, however, -------- ------- that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any item or portion of the Mortgaged Property is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the jurisdiction in which the Premises are located, "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. SECTION 1.2 Interpretation. In this Mortgage, unless otherwise -------------- specified, (i) singular words include the plural and plural words include the singular, (ii) words importing any gender include the other gender, (iii) references to any Person include such Person's successors and assigns and in the case of an individual, the word "successors" includes such Person's heirs, devisees, legatees, executors, administrators and personal representatives, (iv) references to any statute or other law include all applicable rules, regulations and orders adopted or made thereunder and all statutes or other laws amending, consolidating or replacing the statute or law referred to, (v) the words "consent," "approve" and "agree," and derivations thereof or words of similar import, mean the prior written consent, approval or agreement of the Person in question not to be unreasonably withheld, (vi) the words "include" and "including," and words of similar import, shall be deemed to be followed by the words "without limitation," (vii) the words "hereto," "herein," "hereof" and "hereunder," and words of similar import, refer to this Mortgage in its entirety, (viii) references to Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are to the Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses hereof, (ix) the Schedules and Exhibits to this Mortgage, in each case as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof, are incorporated herein by reference, (x) the titles and headings of Articles, Sections, Schedules, Exhibits, subsections, paragraphs and clauses are inserted as a matter of convenience only and shall not affect the constructions of any provisions hereof and (xi) all obligations of the Mortgagor hereunder shall be satisfied by the Mortgagor at the Mortgagor's sole cost and expense. SECTION 1.3 Resolution of Drafting Ambiguities. The Mortgagor ---------------------------------- acknowledges and agrees that it was represented by counsel in connection with the execution and delivery hereof, that it and its counsel reviewed and participated in the preparation and negotiation hereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party (i.e., Mortgagee) shall not be employed in the interpretation hereof. ARTICLE II GRANTS AND SECURED OBLIGATIONS SECTION 2.1 Grant of Mortgaged Property. The Mortgagor hereby grants, --------------------------- mortgages, bargains, sells, assigns and conveys to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), and hereby grants to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), a security interest in and upon all of the Mortgagor's estate, right, title and interest in, to and under the following property, whether now owned or held or hereafter acquired from time to time (collectively, the "Mortgaged --------- Property"): - -------- (i) Land; (ii) Improvements; (iii) Leases; (iv) Rents; (v) Permits; (vi) Contracts; (vii) Records; and (viii) Proceeds. Notwithstanding the foregoing provisions of this Section 2.1, ----------- Mortgaged Property shall not include a grant of any of the Mortgagor's right, title or interest in (i) any Contract to which the Mortgagor is a party or any of its rights or interests thereunder (other than (x) the right to receive any payment of money (including without limitation accounts, general intangibles and payment intangibles (each as defined in the UCC) or any other rights referred to in Sections 9-406(f), 9-407(a) or 9-408(a) of the UCC and (y) any proceeds, substitutions or replacements thereof) to the extent, but only to the extent, that such a grant would, under the terms of such Contract, result in a breach or termination of the terms of, or constitute a default under or termination of such Contract and (ii) any Permit to the extent, but only to the extent that, such grant shall constitute or result in abandonment, invalidation or rendering unenforceable any right, title or interest of the Mortgagor therein; provided, -------- however, that at such time as any Contract or Permit described in clauses (i) - ------- and (ii) of this sentence is no longer subject to such restriction, such applicable Contract or Permit shall (without any act or delivery by any Person) constitute Mortgaged Property hereunder. TO HAVE AND TO HOLD the Mortgaged Property, together with all estate, right, title and interest of the Mortgagor and anyone claiming by, through or under the Mortgagor in and to the Mortgaged Property and all rights and appurtenances relating thereto, unto the Mortgagee, its successors and assigns, for the purpose of securing the payment and performance in full of all the Secured Obligations. SECTION 2.2 Collateral Assignment and Pledge of Mortgagor's Interest -------------------------------------------------------- as Additional Security. As additional collateral security for the prompt and - ---------------------- punctual payment and satisfaction of the Secured Obligations, and all additional advances that the Mortgagee may make on the Mortgagor's behalf pursuant to this Mortgage, together with interest thereon as provided herein, the Mortgagor hereby assigns, pledges and grants to the Mortgagee (for its benefit and for the benefit of the other Secured Parties), a continuing security interest in and to all of the Mortgagor's estate, right, title, interest, claim and demand, as Landlord, under any and all of the Leases including, without limitation, the following (such assigned rights, the "Mortgagor's Interest"): -------------------- (i) the immediate and continuing right to receive and collect Rents payable by the Tenants pursuant to the Leases; (ii) all claims, rights, powers, privileges and remedies of the Mortgagor, whether provided for in the Leases or arising by statute or at law or in equity or otherwise, consequent on any failure on the part of the Tenants to perform or comply with any term of the Leases including damages or other amounts payable to the Mortgagor as a result of such failure; (iii) all rights to take all actions upon the happening of a default under the Leases as shall be permitted by the Leases or by law including, without limitation, the commencement, conduct and consummation of proceeding at law or in equity; and (iv) the full power and authority, in the name of the Mortgagor or otherwise, to enforce, collect, receive and receipt for any and all of the foregoing and to take all other actions whatsoever which the Mortgagor, as Landlord, is or may be entitled to take under the Leases. SECTION 2.3 Secured Obligations. This Mortgage secures, and the ------------------- Mortgaged Property is collateral security for, the payment and performance in full when due of the Secured Obligations. SECTION 2.4 Mortgage Securing Future Indebtedness. This Mortgage has ------------------------------------- been executed by Mortgagor pursuant to Article 3298 of the Louisiana Civil Code for the purpose of securing the Mortgagor's indebtedness (including, without limitation, the Secured Obligations) that may now be existing or that may arise in the future as provided herein and in the Indenture, with the preferences and priorities provided under applicable Louisiana law. This Mortgage shall be further entitled to the preferences and priorities as provided under the Louisiana Private Works Act (La. R.S. 9:4801, et seq.). However, nothing under this Mortgage shall be construed as limiting the duration of this Mortgage or the purpose or purposes for which the Mortgagor's indebtedness (including, without limitation, the Secured Obligations) may be requested or extended. The Mortgagor's additional indebtedness will automatically be secured by this Mortgage without the necessity that the Mortgagor agrees or consents to such a result at the time additional indebtedness is made and that the note or notes evidencing such additional indebtedness reference the fact that such notes are secured by this Mortgage. The Mortgagor understands that the Mortgagor may not subsequently have a change of mind and insist that the Mortgagor's additional indebtedness not be secured by this Mortgage unless the Mortgagee specifically agrees to such a request in writing. SECTION 2.5 No Release. Nothing set forth in this Mortgage shall ---------- relieve the Mortgagor from the performance of any term, covenant, condition or agreement on the Mortgagor's part to be performed or observed under or in respect of any of the Mortgaged Property or from any liability to any Person under or in respect of any of the Mortgaged Property or shall impose any obligation on the Mortgagee or any other Secured Party to perform or observe any such term, covenant, condition or agreement on the Mortgagor's part to be so performed or observed or shall impose any liability on the Mortgagee or any other Secured Party for any act or omission on the part of the Mortgagor relating thereto or for any breach of any representation or warranty on the part of the Mortgagor contained in this Mortgage, the Indenture, the Notes or the Collateral Documents, or under or in respect of the Mortgaged Property or made in connection herewith or therewith. The obligations of the Mortgagor contained in this Section 2.5 shall survive the termination hereof and the discharge of ----------- the Mortgagor's other obligations under this Mortgage and the Indenture, the Notes and the Collateral Documents. ARTICLE III REPRESENTATIONS AND WARRANTIES OF MORTGAGOR SECTION 3.1 Authority and Validity. ---------------------- The Mortgagor represents and warrants that as of the date hereof: (i) it is duly organized or formed, validly existing and, if applicable, in good standing under the laws of the jurisdiction of its organization; (ii) it is duly qualified to transact business and is in good standing in the state in which the Mortgaged Property is located; (iii) it has full corporate or other organizational power and lawful authority to execute and deliver this Mortgage and to mortgage and grant a Lien on and security interest in the Mortgaged Property and otherwise assign the Mortgagor's Interest and otherwise perform its obligations as contemplated herein, and all corporate and governmental actions, consents, authorizations and approvals necessary or required therefor have been duly and effectively taken or obtained; and (iv) this Mortgage is a legal, valid and binding obligation of the Mortgagor, enforceable against the Mortgagor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. SECTION 3.2 Warranty of Title. The Mortgagor represents and warrants ----------------- that: (i) it has good fee simple title to the Premises and the Landlord's interest and estate under or in respect of the Leases and good title to the interest it purports to own or hold in and to each of the Permits, the Contracts and the Records, in each case subject to no Liens, except for Permitted Collateral Liens; (ii) it has good title to the interest it purports to own or hold in and to all rights and appurtenances to or that constitute a portion of the Mortgaged Property, except for Permitted Collateral Liens; (iii) it is in compliance with each term, condition and provision of any obligation of the Mortgagor which is secured by the Mortgaged Property or the noncompliance with which would result in a Property Material Adverse Effect; and (iv) this Mortgage creates and constitutes a valid and enforceable first priority Lien on the Mortgaged Property subject to Permitted Collateral Liens, and, to the extent any of the Mortgaged Property shall consist of Fixtures, a first priority security interest in the Fixtures, which first priority Lien and first priority security interest are subject only to Permitted Collateral Liens. SECTION 3.3 Condition of Mortgaged Property. The Mortgagor represents ------------------------------- and warrants that: (i) there has been issued and there remains in full force and effect subject to no revocation, suspension, forfeiture or modification, each and every Permit necessary for the present use, operation and occupancy of the Premises by the Mortgagor and its Tenants and the conduct of their respective businesses and all required zoning, building code, land use, environmental and other similar Permits, except where the failure to be so issued and to be in full force and effect would not result in a Property Material Adverse Effect; (ii) the Premises and the present and contemplated use and occupancy thereof comply with all applicable zoning ordinances, building codes, land use laws, set back or other development and/or use requirements of Governmental Authorities except where such noncompliance would not result in a Property Material Adverse Effect; (iii) the Premises are served by all utilities (including, without limitation, water and sewer systems) necessary for the present use thereof, and all utility services are provided by public or private utilities and the Premises have accepted or are equipped to accept such utility services and the Mortgagor has not received notice of termination of such utility service, except where the failure to be so served would not result in a Property Material Adverse Effect; (iv) the Mortgagor has access to the Premises from roads sufficient to allow the Mortgagor and its Tenants and invitees to conduct their respective businesses at the Premises in accordance with sound commercial practices and the Mortgagor has not received notice of termination of such access, except where the failure to have such access would not result in a Property Material Adverse Effect; (v) the Mortgagor has not received notice of any Taking or the commencement or pendency of any action or proceeding therefor, other than such Takings as would not result in a Property Material Adverse Effect; (vi) there has not occurred any Destruction of the Premises or any portion thereof as a result of any fire or other casualty that, as of the date hereof, has not been repaired in all material respects, other than such Destruction as would not have a Property Material Adverse Effect; (vii) there are no disputes regarding boundary lines, location, encroachments or possession of any portions of the Mortgaged Property and no state of facts exists which could give rise to any such claim other than such disputes as would not result in a Property Material Adverse Effect; (viii) all liquid and solid waste disposal, septic and sewer systems located on the Premises are in a good and safe condition and repair and in compliance with all Requirements of Law, except where the failure to so comply would not result in a Property Material Adverse Effect; (ix) no portion of the Premises is located in an area identified by the Federal Emergency Management Agency or any successor thereto as an area having special flood hazards pursuant to the Flood Insurance Acts or, if any portion of the Premises is located within such area, the Mortgagor has obtained the insurance prescribed in Article VIII hereof; ------------ (x) the Premises are assessed for real estate tax purposes as one or more wholly independent tax lot or lots, separate from any adjoining land or improvements not constituting a portion of such lot or lots, and no other land or improvements are assessed and taxed together with the Premises or any portion thereof, other than such cases where the failure to be so assessed would not result in a Property Material Adverse Effect; and (xi) there are no options or rights of first refusal to purchase or acquire all or any portion of the Mortgaged Property, other than such options or rights of first refusal as would not result in a Property Material Adverse Effect. SECTION 3.4 Leases. The Mortgagor represents and warrants that ------ as of the date hereof: (i) the Leases identified in Schedule C attached hereto are the only Leases in existence on the date hereof relating to the Premises; (ii) true copies of such Leases have been previously delivered to the Mortgagee and there are no agreements with any Tenant under such Leases other than those agreements expressly set forth therein; (iii) the Mortgagor is the sole owner of all of the Mortgagor's Interest in such Leases; (iv) each of such Leases is in full force and effect, constitutes a legal, valid and binding obligation of the Mortgagor and the applicable Tenant thereunder, and is enforceable against the Mortgagor and such Tenant in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar law affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability; (v) there is no default under any of such Leases and there is existing no condition which with the giving of notice or passage of time or both would cause a default thereunder; (vi) all Rents due under such Leases have been paid in full; (vii) none of the Rents reserved under such Leases have been assigned or otherwise pledged or hypothecated except in favor of the Mortgagee pursuant to the provisions hereof; (viii) none of the Rents (other than any security deposit collected in accordance with the provisions of the applicable Lease) have been collected for more than one (1) month in advance; (ix) there exists no offsets or defenses to the payment of any portion of the Rents and the Mortgagor owes no monetary obligation to any Tenant under any such Lease; (x) the Mortgagor has received no notice from any Tenant challenging the validity or enforceability of any such Lease; (xi) no such Lease contains any option to purchase, right of first refusal to purchase, right of first refusal to relet, or any other similar provision; and (xii) each such Lease is subordinate to this Mortgage either pursuant to its terms or pursuant to a recordable Subordination Agreement. SECTION 3.5 Insurance. The Mortgagor represents and warrants --------- that, except where the failure of clauses (i), (ii) or (iii) hereof to be true would not have a Property Material Adverse Effect, (i) the Premises and the use, occupancy and operation thereof comply with all Insurance Requirements and there exists no default under any Insurance Requirement, (ii) all premiums due and payable with respect to the Insurance Policies have been paid, (iii) all Insurance Policies are in full force and effect and the Mortgagor has not received notice of violation or cancellation thereof and (iv) all insurance certificates required pursuant to the Indenture have been delivered to the Mortgagee. SECTION 3.6 Charges. The Mortgagor represents and warrants that ------- all Charges imposed upon or assessed against the Mortgaged Property have been paid and discharged except to the extent such Charges constitute a Lien not yet due and payable or to the extent such Charges are being contested in accordance with Section 9.1 hereof. SECTION 3.7 Environmental. The Mortgagor represents and ------------- warrants that: (i) it has obtained all Permits which are necessary with respect to the ownership and operation of its business and the Mortgaged Property under any and all applicable Environmental Laws and is in compliance with all terms and conditions thereof, except where the failure so to obtain or to be in compliance would not result in a Property Material Adverse Effect; (ii) it is in compliance with any and all applicable Environmental Laws including, without limitation, all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws, except where the failure so to be in compliance would not result in a Property Material Adverse Effect; (iii) there is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice of demand letter pending or threatened against it or any Affiliate under the Environmental Laws which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect; and (iv) there are no past or present events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance with the Environmental Laws, or which may give rise to any common law or legal liability including, without limitation, liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any other Environmental Law or related common law theory or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing or notice of violation, study or investigation, based on or related to the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Materials which would result in a fine, penalty or other cost or expense other than such instances that would not result in a Property Material Adverse Effect . SECTION 3.8 No Conflicts, Consents, etc. Neither the execution --------------------------- and delivery hereof by the Mortgagor nor the consummation of the transactions herein contemplated nor the fulfillment of the terms hereof (i) violates the terms of any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or other document to which the Mortgagor is a party, or by which it may be bound or to which any of its properties or assets may be subject, (ii) conflicts with any Requirement of Law applicable to the Mortgagor or its property or (iii) results in or requires the creation or imposition of any Lien (other than the Lien contemplated hereby) upon or with respect to any of the Mortgaged Property, except where such violation, conflict, creation or imposition would not have a Property Material Adverse Effect. No consent of any party (including, without limitation, equityholders or creditors of the Mortgagor) and no consent, authorization, approval, license or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person (other than with respect to any required Permits) is required for (i) the granting of a mortgage Lien on and security interest in the Mortgaged Property by the Mortgagor granted by it pursuant to this Mortgage or for the execution, delivery or performance hereof by the Mortgagor except for the filing of this Mortgage and the other filings contemplated hereby or (ii) the exercise by the Mortgagee of the remedies in respect of the Mortgaged Property pursuant to this Mortgage other than those required by law in connection with the exercise of the applicable remedy. SECTION 3.9 Benefit to the Mortgagor. The Mortgagor represents ------------------------ and warrants that it will receive substantial benefit as a result of the execution, delivery, and performance of the Indenture, the Notes and the Collateral Documents. ARTICLE IV CERTAIN COVENANTS OF MORTGAGOR SECTION 4.1 Preservation of Corporate Existence. The Mortgagor ----------------------------------- shall: (i) preserve and maintain in full force and effect its existence and good standing under the laws of the jurisdiction of its organization; (ii) preserve and maintain in full force and effect its qualification to transact business and good standing in the state in which the Mortgaged Property is located; and (iii) preserve and maintain in full force and effect all consents, authorizations and approvals necessary or required of any Governmental Authority or any other Person relating to the execution, delivery and performance hereof, except where the failure to do so would not result in a Property Material Adverse Effect. SECTION 4.2 Title. The Mortgagor shall: ----- (i) (A) keep in effect all material rights and appurtenances to or that constitute a part of the Mortgaged Property and (B) protect, preserve and defend its interest in the Mortgaged Property and title thereto, except against Permitted Collateral Liens (other than the Lien created by this Mortgage); (ii) (A) comply, in all material respects, with each of the terms, conditions and provisions of any obligation of the Mortgagor which is secured by the Mortgaged Property, except where the failure to so comply would not result in a Property Material Adverse Effect, or the non-compliance with which may result in the imposition of a Lien on the Mortgaged Property, (B) forever warrant and defend to the Mortgagee the Lien and security interests created and evidenced hereby and the validity and priority hereof in any action or proceeding against the claims of any and all Persons whomsoever affecting or purporting to affect the Mortgaged Property or any of the rights of the Mortgagee hereunder, except against Permitted Collateral Liens (other than the Lien of this Mortgage), and (C) maintain a valid and enforceable first priority Lien, except for Permitted Collateral Liens (other than the Lien of this Mortgage) on the Mortgaged Property and, to the extent any of the Mortgaged Property shall consist of Fixtures, a first priority security interest in the Mortgaged Property, which first priority Lien and security interest shall be subject only to Permitted Collateral Liens; and (iii) immediately upon obtaining knowledge of the pendency of any proceedings for the eviction of the Mortgagor from the Mortgaged Property or any part thereof by paramount title or otherwise questioning the Mortgagor's right, title and interest in, to and under the Mortgaged Property as warranted in this Mortgage, or of any condition that could give rise to any such proceedings, notify the Mortgagee thereof. The Mortgagee may participate in such proceedings and the Mortgagor will deliver or cause to be delivered to the Mortgagee all instruments requested by the Mortgagee to permit such participation. In any such proceedings, the Mortgagee may be represented by counsel reasonably satisfactory to the Mortgagee at the reasonable expense of the Mortgagor. If, upon the resolution of such proceedings, the Mortgagor shall suffer a loss of the Mortgaged Property or any part thereof or interest therein and title insurance proceeds shall be payable in connection therewith, such proceeds are hereby assigned to and shall be paid to the Mortgagee for deposit into the Collateral Account and shall be applied in the manner applicable to Net Loss Proceeds in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) of the Indenture. SECTION 4.3 Maintenance and Use of Mortgaged Property; ----------------------------------------- Alterations. ----------- (i) Maintenance. The Mortgagor shall cause the representations ----------- and warranties set forth in Section 3.3 hereof to continue to be true in each ----------- and every respect and shall pay or cause to be paid when due all Charges, costs and expenses relating thereto, other than such Charges being contested in accordance with Section 9.1 hereof. ----------- (ii) Maintenance of Premises. The Mortgagor shall not commit or ----------------------- suffer any waste on the Premises. The Mortgagor shall, at all times, maintain the Premises in good working order, condition and repair, reasonable wear and tear excepted, and shall use commercially reasonable efforts to make or cause to be made all repairs, structural or nonstructural, which are necessary or appropriate in the conduct of the Mortgagor's business. The Mortgagor shall not, except as permitted in Section 4.3(iii) hereof, alter the occupancy or use of ---------------- all or any portion of the Premises without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. Except to the extent permitted pursuant to the provisions of Section 4.3(iii) hereof, the ---------------- Mortgagor shall not remove, demolish or alter the structural character of any Improvement now or hereafter erected upon all or any portion of the Premises, or permit any such removal, demolition or alteration, without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. (iii) Alterations. The Mortgagor shall not, without the prior ----------- written consent of the Mortgagee, which consent shall not be unreasonably withheld, make any Alteration to the Premises except as permitted by Sections 10.04 and 10.06 of the Indenture. Whether or not the making of any Alteration shall require the consent of the Mortgagee pursuant to the immediately preceding sentence, the Mortgagor shall (A) complete each Alteration promptly, in a good and workmanlike manner and in compliance, in all material respects, with all applicable local laws, ordinances and requirements and (B) pay when due all claims for labor performed and materials furnished in connection with such Alteration, unless contested in accordance with the provisions of Article IX ---------- hereof. (iv) Permits. The Mortgagor shall maintain, or cause to be ------- maintained, in full force and effect all Permits contemplated by and subject to Section 3.3(i) hereof. Unless and to the extent contested by the Mortgagor in - -------------- accordance with the provisions of Article IX hereof, the Mortgagor shall comply, ---------- in all material respects, with all requirements set forth in the Permits and all Requirements of Law applicable to all or any portion of the Mortgaged Property or the condition, use or occupancy of all or any portion thereof or any recorded deed of restriction, declaration, covenant running with the land or otherwise, now or hereafter in force, subject to the provisions of Section ------- 3.3 hereof. - --- (v) Zoning. The Mortgagor shall not initiate, join in, or ------ consent to any change in the zoning or any other permitted use classification of the Premises without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld. SECTION 4.4 Notices Regarding Certain Defaults. The Mortgagor ---------------------------------- shall, promptly upon receipt of any written notice regarding (i) any default by the Mortgagor relating to the Mortgaged Property or any portion thereof or (ii) the failure to discharge any of Mortgagor's obligations with respect to the Mortgaged Property or any portion thereof described herein, furnish a copy of such notice to the Mortgagee. SECTION 4.5 Access to Mortgaged Property, Books and Records; ----------------------------------------------- Other Information. Upon request to the Mortgagor, the Mortgagee, its agents, - ----------------- accountants and attorneys shall have full and free access to visit and inspect, as applicable, during normal business hours and such other reasonable time as may be requested by the Mortgagee to all of the Mortgaged Property including, without limitation, all of the books, correspondence and records of the Mortgagor relating thereto. The Mortgagee and its representatives may examine the same, take extracts therefrom and make photocopies thereof. The Mortgagor shall, at any and all times, within a reasonable time after written request by the Mortgagee, furnish or cause to be furnished to the Mortgagee, in such manner and in such detail as may be reasonably requested by the Mortgagee, additional information with respect to the Mortgaged Property. SECTION 4.6 Limitation on Liens; Transfer Restrictions. The ------------------------------------------ Mortgagor may not, without the prior written consent of the Mortgagee, further mortgage, encumber, hypothecate, sell, convey or assign all or any part of the Mortgaged Property or suffer or allow any of the foregoing to occur by operation of law or otherwise; provided, however, that the Mortgagor shall have the right -------- ------- to (1) sell, convey or assign all or any portion of the Mortgaged Property in accordance with the provisions of the Indenture and (2) suffer to exist the following Liens in respect of the Mortgaged Property: (i) Prior Liens (but not extensions, amendments, supplements or replacements of Prior Liens unless (A) extended, amended, supplemented or replaced in a manner permitted by the Indenture or (B) consented to by the Mortgagee which consent shall not be unreasonably withheld), (ii) the Lien and security interest created by this Mortgage or any other Collateral Document, (iii) Contested Liens, (iv) Liens described in clause (9) of the definition of Permitted Liens (provided, however, -------- ------- that such Liens shall not extend to or cover any Mortgaged Property other than equipment subject to Capital Leases, Obligations or Purchase Money Obligations incurred in accordance with the provisions of the Indenture) or clause (4) of the definition of Permitted Liens, and (v) Leases to the extent permitted pursuant to the provisions of Article V hereof (the Liens described in clauses --------- (i) through (v) of this sentence, collectively, "Permitted Collateral Liens"). -------------------------- SECTION 4.7 Environmental. ------------- (i) Hazardous Materials. The Mortgagor shall (A) comply with ------------------- any and all present and future Environmental Laws applicable to the Mortgaged Property, (B) not release, store, treat, handle, generate, discharge or dispose of any Hazardous Materials at, on, under or from the Mortgaged Property in violation of or in a manner that could result in any material liability under any present and future Environmental Law and (C) take all necessary steps to initiate and expeditiously complete all remedial, corrective and other action to eliminate any such effect. In the event the Mortgagor fails to comply with the covenants in the preceding sentence, the Mortgagee may, in addition to any other remedies set forth herein, as agent for the Mortgagor and at the Mortgagor's sole cost and expense, cause any remediation, removal or response action relating to Hazardous Materials required by applicable Environmental Laws to be taken and the Mortgagor shall provide to the Mortgagee and its agents and employees access to the Mortgaged Property for such purpose. Any reasonable costs or expenses incurred by the Mortgagee for such purpose shall be immediately due and payable by the Mortgagor and shall bear interest at the Default Rate. The Mortgagee shall have the right at any time when an Event of Default shall have occurred and be continuing and at such other times when a potential violation of any present or future Environmental Law exists which in the Mortgagee's reasonable judgment could result in any material liability or obligation under such Environmental Law, at the sole cost and expense of the Mortgagor, to conduct an environmental audit of the Mortgaged Property by such persons or firms appointed by the Mortgagee, and the Mortgagor shall cooperate in all respects in the conduct of such environmental audit, including, without limitation, by providing access to the Mortgaged Property and to all records relating thereto. To the extent that any such environmental audit identifies conditions which in the Mortgagee's reasonable judgment would result in any material liability or obligation under any present or future Environmental Law, the Mortgagor agrees to expeditiously correct any such violation or respond to conditions giving rise to such liability or obligations in a manner which complies in all material respects with the Environmental Laws and mitigates associated health and environmental risks. The Mortgagor shall indemnify and hold the Mortgagee and each of the other Secured Parties harmless from and against all loss, cost, damage or reasonable expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Mortgagee or any other Secured Party may sustain by reason of the assertion against the Mortgagee or any Secured Party by any party of any claim relating to such Hazardous Materials on, under or from the Mortgaged Property or actions taken with respect thereto as authorized hereunder, except to the extent arising from the gross negligence or willful misconduct of the Mortgagee or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof; and (ii) Asbestos. The Mortgagor shall not install nor permit to be -------- installed in or removed from the Mortgaged Property, asbestos or any asbestos-containing material (collectively, "ACM") except in compliance, in all material respects, with all applicable Environmental Laws, and with respect to any ACM currently present in the Mortgaged Property, the Mortgagor shall promptly either (A) remove any ACM which such Environmental Laws require to be removed or (B) otherwise comply, in all material respects, with such Environmental Laws with respect to such ACM, all at the Mortgagor's sole cost and expense. If the Mortgagor shall fail so to remove any ACM or otherwise comply, in all material respects, with such laws or regulations, the Mortgagee may, in addition to any other remedies set forth herein, take reasonable or necessary steps to eliminate any ACM from the Mortgaged Property or otherwise comply, in all material respects, with applicable law, regulations or orders and the Mortgagor shall provide to the Mortgagee and its agents and employees access to the Mortgaged Property for such purpose. Any reasonable costs or expenses incurred by the Mortgagee for such purpose shall be immediately due and payable by the Mortgagor and bear interest at the Default Rate. The Mortgagor shall indemnify and hold the Mortgagee and the other Secured Parties harmless from and against all loss, cost, damage and expense (including, without limitation, reasonable attorneys' and consultants' fees and disbursements) that the Mortgagee or the other Secured Parties may sustain, as a result of the presence of any ACM and any removal thereof or compliance with all applicable Environmental Laws, except to the extent arising from the gross negligence or willful misconduct of the Mortgagee or any other Secured Party. The foregoing indemnification shall survive repayment of all Secured Obligations and any release or assignment hereof. SECTION 4.8 Estoppel Certificates. The Mortgagor shall, from time to --------------------- time, upon thirty (30) days' prior written reasonable request of the Mortgagee, execute, acknowledge and deliver to the Mortgagee an Officers' Certificate stating that this Mortgage, the Indenture, the Notes and the Collateral Documents are unmodified and in full force and effect (or, if there have been modifications, that this Mortgage, the Indenture, the Notes and the Collateral Documents, as applicable, is or are in full force and effect as modified and setting forth such modifications) and stating the date to which principal and interest have been paid on the Notes. ARTICLE V LEASES SECTION 5.1 Mortgagor's Affirmative Covenants with Respect to Leases. -------------------------------------------------------- With respect to each Lease, the Mortgagor shall: (i) observe and perform, in all material respects, all the obligations imposed upon the Landlord under such Lease; (ii) promptly send copies to the Mortgagee of all notices of default which the Mortgagor shall send or receive thereunder; and (iii) enforce all of the terms, covenants and conditions contained in such Lease upon the part of the Tenant thereunder to be observed or performed to the extent it would be commercially reasonable to do so. SECTION 5.2 Mortgagor's Negative Covenants with Respect to Leases. ----------------------------------------------------- With respect to each Lease, the Mortgagor shall not, without the prior written consent of the Mortgagee, which consent shall not be unreasonably withheld: (i) receive or collect, or permit the receipt or collection of, any Rent under such Lease more than one (1) month in advance of the respective period in respect of which such Rent is to accrue, except: (A) in connection with the execution and delivery of such Lease (or of any amendment to such Lease), Rent thereunder may be collected and received in advance in an amount not in excess of one (1) month's Rent; (B) the amount held by Landlord as a reasonable security deposit thereunder; and (C) any amount received and collected for escalation and other charges in accordance with the terms of such Lease; (ii) assign, transfer or hypothecate (other than to the Mortgagee hereunder) any Rent under such Lease whether then due or to accrue in the future or the interest of the Mortgagor as Landlord under such Lease; (iii) enter into any amendment or modification of such Lease which would materially decrease the unexpired term thereof or decrease the amount of the Rents payable thereunder or materially impair the value or utility of the Mortgaged Property or the security provided by this Mortgage; (iv) terminate (whether by exercising any contractual right of the Mortgagor to recapture leased space or otherwise) or permit the termination of such Lease or accept surrender of all or any portion of the space demised under such Lease prior to the end of the term thereof or accept assignment of such Lease to the Mortgagor unless: (A) the Tenant under such Lease has not paid the equivalent of two (2) months' Rent and the Mortgagor has made reasonable efforts to collect such Rent; and (B) it would be commercially reasonable to terminate such Lease; or (v) waive, excuse, condone or in any manner discharge or release any Tenants of or from the material obligations of such Tenants under their respective Leases or guarantors of Tenants from any material obligations under any guarantees of the Leases except as the same would be done by a Prudent Operator with due regard for the security afforded the Mortgagee thereby. SECTION 5.3 Additional Requirements with Respect to New Leases. -------------------------------------------------- In addition to the requirements of Sections 5.1 and 5.2 hereof, the Mortgagor ------------ --- shall not enter into any Lease after the date hereof unless the Tenant under such Lease has entered into a Subordination Agreement and has otherwise complied with the provisions of Section 10.06 of the Indenture. ------------- ARTICLE VI CONCERNING ASSIGNMENT OF LEASES AND RENTS SECTION 6.1 Present Assignment; License to the Mortgagor. -------------------------------------------- Section 2.2 of this Mortgage constitutes a present, absolute, effective, irrevocable and complete assignment by the Mortgagor to the Mortgagee of the Leases and Rents and the right, subject to applicable law, to collect all sums payable to the Mortgagor thereunder and apply the same as the Mortgagee may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Mortgaged Property), which is not conditioned upon the Mortgagee being in possession of the Premises. The Mortgagee hereby grants to the Mortgagor, however, a license to collect and apply the Rents and to enforce the obligations of Tenants under the Leases. Immediately upon the occurrence of and during the continuance of any Event of Default or a Default, the license granted in the immediately preceding sentence shall cease and terminate, with or without any notice, action or proceeding or the intervention of a receiver appointed by a court. SECTION 6.2 Collection of Rents by the Mortgagee. ------------------------------------ (i) From and after the occurrence and during the continuance of an Event of Default or a Default, any Rents receivable by the Mortgagee hereunder, after payment of all proper costs and expenses as Mortgagee may, in its sole discretion, determine to be appropriate (including the payment of reasonable costs and expenses in connection with the maintenance, operation, improvement, insurance, taxes and upkeep of the Mortgaged Property), shall be applied to the Secured Obligations or, at the option of the Mortgagee, shall be held by the Mortgagee as additional collateral to secure the performance by the Mortgagor of the Secured Obligations. The Mortgagee shall be accountable to the Mortgagor only for Rents actually received by the Mortgagee. The collection of such Rents and the application thereof shall not cure or waive any Event of Default or a Default or waive, modify or affect notice of Event of Default or a Default or invalidate any act done pursuant to such notice. (ii) The Mortgagor hereby irrevocably authorizes and directs Tenant under each Lease to rely upon and comply with any and all notices or demands from the Mortgagee for payment of Rents to the Mortgagee and the Mortgagor shall have no claim against Tenant for Rents paid by Tenant to the Mortgagee pursuant to such notice or demand. SECTION 6.3 No Release. Neither this Mortgage nor any action or ---------- inaction on the part of the Mortgagee shall release any Tenant under any Lease, any guarantor of any Lease or the Mortgagor from any of their respective obligations under such Leases or constitute an assumption of any such obligation on the part of the Mortgagee. No action or failure to act on the part of the Mortgagor shall adversely affect or limit the rights of the Mortgagee under this Mortgage or, through this Mortgage, under such Leases. Nothing contained herein shall operate or be construed to (i) obligate the Mortgagee to perform any of the terms, covenants or conditions contained in any Lease or otherwise to impose any obligation upon the Mortgagee with respect to such Lease (including, without limitation, any obligation arising out of any covenant of quiet enjoyment contained in such Lease in the event that Tenant under such Lease shall have been joined as a party defendant in any action by which the estate of such Tenant shall be terminated) or (ii) place upon the Mortgagee any obligation for the operation, control, care, management or repair of the Premises. SECTION 6.4 Irrevocable Interest. All rights, powers and -------------------- privileges of the Mortgagee herein set forth are coupled with an interest and are irrevocable, subject to the terms and conditions hereof, and the Mortgagor shall not take any action under the Leases or otherwise which is inconsistent with this Mortgage or any of the terms hereof and any such action inconsistent herewith or therewith shall be void. SECTION 6.5 Amendment to Leases. Each Lease, including, without ------------------- limitation, all amendments, modifications, supplements, replacements, extensions and renewals thereof, shall continue to be subject to the provisions hereof without the necessity of any further act by any of the parties hereto. ARTICLE VII TAXES AND CERTAIN STATUTORY LIENS SECTION 7.1 Payment of Charges. Unless and to the extent ------------------ contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall pay and discharge, or cause to be paid and discharged, from time to time when the same shall become due (or within any applicable grace period) , all Charges subject to this Article VII. The ----------- Mortgagor shall, upon the Mortgagee's request, deliver to the Mortgagee receipts evidencing the payment of all such Charges. SECTION 7.2 Escrow of Taxes. From and after the occurrence and --------------- during the continuance of an Event of Default or a Default, at the option and upon the request of the Mortgagee, the Mortgagor shall deposit with the Mortgagee in an account maintained by the Mortgagee (the "Tax Escrow Fund"), on --------------- the first day of each month, an amount estimated by the Mortgagee to be equal to one-twelfth of the annual real property taxes and other annual Charges required to be discharged by the Mortgagor under Section 7.1 hereof. Such amounts shall ----------- be held by the Mortgagee without interest to the Mortgagor and applied to the payment of the obligations in respect of which such amounts were deposited, in such priority as the Mortgagee shall determine, on or before the respective dates on which such obligations or any part thereof would become delinquent. Nothing contained in this Article VII shall (i) affect any right or remedy of ----------- the Mortgagee under any provision hereof or of any statute or rule of law to pay any such amount as provided above from its own funds and to add the amount so paid, together with interest at the Default Rate during such time that any amount remains outstanding, to the Secured Obligations or (ii) relieve the Mortgagor of its obligations to make or provide for the payment of the annual real property taxes and other annual Charges required to be discharged by the Mortgagor under Section 7.1 hereof. ----------- SECTION 7.3 Certain Statutory Liens. Unless and to the extent ----------------------- contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall timely pay, or cause to be paid, all lawful claims and demands of mechanics, materialmen, laborers, government agencies administering worker's compensation insurance, old age pensions and social security benefits and all other claims, judgments, demands or amounts of any nature which, if unpaid, would result in, or permit the creation of, a Lien on the Mortgaged Property or any part thereof, or which would result in forfeiture of all or any part of the Mortgaged Property. SECTION 7.4 Stamp and Other Taxes. Unless and to the extent --------------------- contested by the Mortgagor in accordance with the provisions of Article IX ---------- hereof, the Mortgagor shall pay any United States documentary stamp taxes, with interest and fines and penalties, and any mortgage recording taxes, with interest and fines and penalties, that may hereafter be levied, imposed or assessed under or upon or by reason hereof or the Secured Obligations or any instrument or transaction affecting or relating to either thereof and in default thereof the Mortgagee may advance the same and the amount so advanced shall be payable by the Mortgagor to the Mortgagee in accordance with the provisions of Section 14.5 hereof. - ------------ SECTION 7.5 Certain Tax Law Changes. In the event of the ----------------------- passage after the date hereof of any law deducting from the value of real property, for the purpose of taxation, amounts in respect of any Lien thereon or changing in any way the laws for the taxation of mortgages or debts secured by mortgages for state or local purposes or the manner of the collection of any Charges, and imposing any Charges, either directly or indirectly, on this Mortgage, the Indenture or any other Collateral Document, the Mortgagor shall promptly pay to the Mortgagee such amount or amounts as may be necessary from time to time to pay any such Charges. SECTION 7.6 Proceeds of Tax Claim. In the event that the --------------------- proceeds of any tax claim are paid after the Mortgagee has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Mortgagee to satisfy any deficiency remaining after such foreclosure. The Mortgagee shall retain its interest in the proceeds of any tax claim during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Mortgagee shall in a prompt manner be released to the Mortgagor. ARTICLE VIII INSURANCE SECTION 8.1 Required Insurance Policies and Coverages. The ----------------------------------------- Mortgagor shall maintain in respect of the Premises the insurance policies and coverages required under Section 4.19(b) of the Indenture. SECTION 8.2 Delivery After Foreclosure. In the event that the -------------------------- proceeds of any insurance claim are paid after the Mortgagee has exercised its right to foreclose the Lien hereof, such proceeds shall be paid to the Mortgagee to satisfy any deficiency remaining after such foreclosure. Mortgagee shall retain its interest in the Insurance Policies required to be maintained pursuant to this Mortgage during any redemption period. The amount of any such proceeds in excess of any deficiency claim of the Mortgagee shall be released to the Mortgagor. ARTICLE IX CONTESTING OF PAYMENTS SECTION 9.1 Contesting of Taxes and Certain Statutory Liens. ----------------------------------------------- The Mortgagor may at its own expense contest the validity, amount or applicability of any Charges as long as the contest thereof shall be conducted in accordance with, and permitted pursuant to the provisions of, the Indenture. Notwithstanding the foregoing provisions of this Section 9.1, (i) no contest of ----------- any such obligations may be pursued by the Mortgagor (A) if such contest would expose the Mortgagee or any Holder to any possible criminal liability or (B) unless the Mortgagor shall have furnished a bond or other security therefor reasonably satisfactory to the Mortgagee or such Holder, as the case may be, any additional civil liability for failure to comply with such obligations and (ii) if at any time payment or performance of any obligation contested by the Mortgagor pursuant to this Section 9.1 shall become necessary to prevent the ----------- imminent imposition of remedies because of non-payment, the Mortgagor shall pay or perform the same in sufficient time to prevent the imposition of remedies in respect of such default or prospective default. SECTION 9.2 Contesting of Insurance. The Mortgagor shall not ----------------------- take any action that would reasonably be expected to cause the termination, revocation or denial of any insurance coverage required to be maintained under this Mortgage or that would be the basis for a defense to any claim under any Insurance Policy maintained in respect of the Premises and the Mortgagor shall otherwise comply in all respects with all Insurance Requirements in respect of the Premises; provided, however, that the Mortgagor may, at its own expense and -------- ------- after written notice to the Mortgagee, (i) contest the applicability or enforceability of any such Insurance Requirements by appropriate legal proceedings, prosecution of which does not constitute a basis for cancellation or revocation of any insurance coverage required under Article VIII hereof or ------------ (ii) cause the Insurance Policy containing any such Insurance Requirement to be replaced by a new policy complying with the provisions of Article VIII hereof. ------------ ARTICLE X DESTRUCTION, CONDEMNATION AND RESTORATION SECTION 10.1 Destruction. If there shall occur any Destruction, ----------- individually or in the aggregate, in excess of $100,000, the Mortgagor shall promptly send to the Mortgagee a written notice setting forth the nature and extent of such Destruction. The proceeds of any insurance payable in respect of such Destruction are hereby assigned and shall be paid to the Mortgagee. The Net Loss Proceeds arising out of such Destruction, shall be applied in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) the Indenture. SECTION 10.2 Condemnation. If there shall occur any Taking or ------------ the commencement of any proceeding thereof, the Mortgagor shall immediately notify the Mortgagee upon receiving notice of such Taking or commencement of proceedings therefor. The Mortgagee may, at its option, participate in any proceedings or negotiations which might result in any Taking, and the Mortgagor shall deliver or cause to be delivered to the Mortgagee all instruments requested by it to permit such participation. The Mortgagee may be represented by counsel reasonably satisfactory to it at the reasonable expense of the Mortgagor in connection with any such participation. The Mortgagor shall pay all reasonable fees, costs and expenses incurred by the Mortgagee in connection with any Taking and in seeking and obtaining any award or payment on account thereof. Any proceeds, award or payment in respect of any Taking are hereby assigned and shall be paid to the Mortgagee. The Mortgagor shall take all steps necessary to notify the condemning authority of such assignment. The Net Loss Proceeds arising out of such Taking shall be applied in accordance with the provisions of Sections 4.16, 11.02, and 10.05(c) the Indenture. ARTICLE XI EVENTS OF DEFAULT AND REMEDIES SECTION 11.1 Events of Default. It shall be an Event of Default ----------------- hereunder if there shall have occurred and be continuing an Event of Default under the Indenture. SECTION 11.2 Remedies in Case of an Event of Default. If any --------------------------------------- Event of Default shall have occurred and be continuing, the Mortgagee may at its option, in addition to any other action permitted under this Mortgage or the Indenture or by law, statute or in equity, take one or more of the following actions to the greatest extent permitted by local law: (i) by written notice to the Issuer and the Mortgagor, declare the entire unpaid amount of the Secured Obligations to be due and ` payable immediately; (ii) personally, or by its agents or attorneys, (A) enter into and upon and take possession of all or any part of the Premises together with the books, records and accounts of the Mortgagor relating thereto and, exclude the Mortgagor, its agents and servants wholly therefrom, (B) use, operate, manage and control the Premises and conduct the business thereof, (C) maintain and restore the Premises, (D) make all necessary or proper repairs, renewals and replacements and such useful Alterations thereto and thereon as the Mortgagee may deem advisable, (E) manage, lease and operate the Premises and carry on the business thereof and exercise all rights and powers of the Mort- gagor with respect thereto either in the name of the Mortgagor or otherwise or (F) collect and receive all Rents. The Mortgagee shall be under no liability for or by reason of any such taking of possession, entry, removal or holding, operation or management except that any amounts so received by the Mortgagee shall be applied in accordance with the provisions of the Indenture; (iii) with or without entry, personally or by its agents or attorneys, (A) sell the Mortgaged Property and all estate, right, title and interest, claim and demand therein at one or more sales in one or more parcels, in accordance with the provisions of Section 11.3 or (B) ------------ institute and prosecute proceedings for the complete or partial foreclosure of the Lien and security interests created and evidenced hereby; or (iv) take such steps to protect and enforce its rights whether by action, suit or proceeding at law or in equity for the specific performance of any covenant, condition or agreement in the Indenture, the Notes and the Collateral Documents, or in aid of the execution of any power granted in this Mortgage, or for any foreclosure hereunder, or for the enforcement of any other appropriate legal or equitable remedy or otherwise as the Mortgagee shall elect. SECTION 11.3 Sale of Mortgaged Property if Event of Default ---------------------------------------------- Occurs; Proceeds of Sale. - ------------------------ (i) If any Event of Default shall have occurred and be continuing, the Mortgagee may institute an action to foreclose this Mortgage or take such other action as may be permitted and available to the Mortgagee at law or in equity for the enforcement of the Indenture and the Notes and realization on the Mortgaged Property and proceeds thereon through power of sale or to final judgment and execution thereof for the Secured Obligations, and in furtherance thereof the Mortgagee may sell the Mortgaged Property at one or more sales, as an entirety or in parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law or statute or in equity. The Mortgagee may execute and deliver to the purchaser at such sale a conveyance of the Mortgaged Property in fee simple and an assignment or conveyance of all the Mortgagor's Interest in the Leases and the Mortgaged Property, each of which conveyances and assignments shall contain recitals as to the Event of Default upon which the execution of the power of sale herein granted depends, and the Mortgagor hereby constitutes and appoints the Mortgagee the true and lawful attorney in fact of the Mortgagor to make any such recitals, sale, assignment and conveyance, and all of the acts of the Mortgagee as such attorney in fact are hereby ratified and confirmed. The Mortgagor agrees that such recitals shall be binding and conclusive upon the Mortgagor and that any assignment or conveyance to be made by the Mortgagee shall divest the Mortgagor of all right, title, interest, equity and right of redemption, including any statutory redemption, in and to the Mortgaged Property. The power and agency hereby granted are coupled with an interest and are irrevocable by death or dissolution, or otherwise, and are in addition to any and all other remedies which the Mortgagee may have hereunder, at law or in equity. So long as the Secured Obligations, or any part thereof, remain unpaid, the Mortgagor agrees that possession of the Mortgaged Property by the Mortgagor, or any person claiming under the Mortgagor, shall be as tenant, and, in case of a sale under power or upon foreclosure as provided in this Mortgage, the Mortgagor and any person in possession under the Mortgagor, as to whose interest such sale was not made subject, shall, at the option of the purchaser at such sale, then become and be tenants holding over, and shall forthwith deliver possession to such purchaser, or be summarily dispossessed in accordance with the laws applicable to tenants holding over. In case of any sale under this Mortgage by virtue of the exercise of the powers herein granted, or pursuant to any order in any judicial proceeding or otherwise, the Mortgaged Property may be sold as an entirety or in separate parcels in such manner or order as the Mortgagee in its sole discretion may elect. One or more exercises of powers herein granted shall not extinguish or exhaust such powers, until the entire Mortgaged Property is sold or all amounts secured hereby are paid in full. (ii) In the event of any sale made under or by virtue of this Article XI, the entire principal of, and interest in respect of the Secured - ---------- Obligations, if not previously due and payable, shall, at the option of the Mortgagee, immediately become due and payable, anything in this Mortgage to the contrary notwithstanding. (iii) The proceeds of any sale made under or by virtue of this Article XI, together with any other sums which then may be held by the Mortgagee - ---------- under this Mortgage, whether under the provisions of this Article XI or ---------- otherwise, shall be applied in accordance with the provisions of the Indenture; (iv) The Mortgagee may bid for and acquire the Mortgaged Property or any part thereof at any sale made under or by virtue of this Article ------- XI and, in lieu of paying cash therefor, may make settlement for the purchase - -- price by crediting against the purchase price the unpaid amounts (whether or not then due and owing) in respect of the Secured Obligations, after deducting from the sales price the expense of the sale and the reasonable costs of the action or proceedings and any other sums that the Mortgagee is authorized to deduct under this Mortgage. (v) The Mortgagee may adjourn from time to time any sale by it to be made under or by virtue hereof by announcement at the time and place appointed for such sale or for such adjourned sale or sales, and, the Mortgagee, without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned. (vi) If the Premises is comprised of more than one parcel of land, the Mortgagee may take any of the actions authorized by this Section 11.3 ------------ in respect of any or a number of individual parcels. SECTION 11.4 Additional Remedies in Case of an Event of Default. -------------------------------------------------- (i) The Mortgagee shall be entitled to recover judgment as aforesaid either before, after or during the pendency of any proceedings for the enforcement of the provisions hereof, and the right of the Mortgagee to recover such judgment shall not be affected by any entry or sale hereunder, or by the exercise of any other right, power or remedy for the enforcement of the provisions hereof, or the foreclosure of, or absolute conveyance pursuant to, this Mortgage. In case of proceedings against the Mortgagor in insolvency or bankruptcy or any proceedings for its reorganization or involving the liquidation of its assets, the Mortgagee shall be entitled to prove the whole amount of principal and interest and other payments, charges and costs due in respect of the Secured Obligations to the full amount thereof without deducting therefrom any proceeds obtained from the sale of the whole or any part of the Mortgaged Property; provided, however, that in no case shall the Mortgagee -------- ------- receive a greater amount than the aggregate of such principal, interest and such other payments, charges and costs (with interest at the Default Rate) from the proceeds of the sale of the Mortgaged Property and the distribution from the estate of the Mortgagor. (ii) Any recovery of any judgment by the Mortgagee and any levy of any execution under any judgment upon the Mortgaged Property shall not affect in any manner or to any extent the Lien and security interests created and evidenced hereby upon the Mortgaged Property or any part thereof, or any conveyances, powers, rights and remedies of the Mortgagee hereunder, but such conveyances, powers, rights and remedies shall continue unimpaired as before. (iii) Any monies collected by the Mortgagee under this Section ------- 11.4 shall be applied in accordance with the provisions of Section 11.3(iii). - ---- ----------------- SECTION 11.5 Legal Proceedings After an Event of Default. ------------------------------------------- (i) After the occurrence and during the continuance of any Event of Default and immediately upon the commencement of any action, suit or legal proceedings to obtain judgment for the Secured Obligations or any part thereof, or of any proceedings to foreclose the Lien and security interest created and evidenced hereby or otherwise enforce the provisions hereof or of any other proceedings in aid of the enforcement hereof, the Mortgagor shall enter its voluntary appearance in such action, suit or proceeding. (ii) Upon the occurrence and during the continuance of an Event of Default, the Mortgagee shall be entitled forthwith as a matter of right, concurrently or independently of any other right or remedy hereunder either before or after declaring the Secured Obligations or any part thereof to be due and payable, to the appointment of a receiver without giving notice to any party and without regard to the adequacy or inadequacy of any security for the Secured Obligations or the solvency or insolvency of any person or entity then legally or equitably liable for the Secured Obligations or any portion thereof. The Mortgagor hereby consents to the appointment of such receiver. Notwithstanding the appointment of any receiver, the Mortgagee shall be entitled as pledgee to the possession and control of any cash, deposits or instruments at the time held by or payable or deliverable under the terms of the Indenture to the Mortgagee. (iii) The Mortgagor shall not (A) at any time insist upon, or plead, or in any manner whatsoever claim or take any benefit or advantage of any stay or extension or moratorium law, any exemption from execution or sale of the Mortgaged Property or any part thereof, wherever enacted, now or at any time hereafter in force, which may affect the covenants and terms of performance hereof, (B) claim, take or insist on any benefit or advantage of any law now or hereafter in force providing for the valuation or appraisal of the Mortgaged Property, or any part thereof, prior to any sale or sales of the Mortgaged Property which may be made pursuant to this Mortgage, or pursuant to any decree, judgment or order of any court of competent jurisdiction or (C) after any such sale or sales, claim or exercise any right under any statute heretofore or hereafter enacted to redeem the property so sold or any part thereof. To the extent permitted by applicable law, the Mortgagor hereby expressly (A) waives all benefit or advantage of any such law or laws, including, without limitation, any statute of limitations applicable to this Mortgage, (B) waives all rights to have the Mortgaged Property marshalled on any foreclosure of this Mortgage, (C) waives any and all rights to trial by jury in any action or proceeding related to the enforcement hereof, (D) waives any objection which it may now or hereafter have to the laying of venue of any action, suit or proceeding brought in connection with this Mortgage and further waives and agrees not to plead that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum and (E) covenants not to hinder, delay or impede the execution of any power granted or delegated to the Mortgagee by this Mortgage but to suffer and permit the execution of every such power as though no such law or laws had been made or enacted. The Mortgagee shall not be liable for any incorrect or improper payment made pursuant to this Article XI in the absence of ---------- gross negligence or willful misconduct. SECTION 11.6 Remedies Not Exclusive. No remedy conferred upon ---------------------- or reserved to the Mortgagee by this Mortgage is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Mortgage or now or hereafter existing at law or in equity. Any delay or omission of the Mortgagee to exercise any right or power accruing on any Event of Default shall not impair any such right or power and shall not be construed to be a waiver of or acquiescence in any such Event of Default. Every power and remedy given by this Mortgage may be exercised from time to time concurrently or independently, when and as often as may be deemed expedient by the Mortgagee in such order and manner as the Mortgagee, in its sole discretion, may elect. If the Mortgagee accepts any monies required to be paid by the Mortgagor under this Mortgage after the same become due, such acceptance shall not constitute a waiver of the right either to require prompt payment, when due, of all other sums secured by this Mortgage or to declare an Event of Default with regard to subsequent defaults. If the Mortgagee accepts any monies required to be paid by the Mortgagor under this Mortgage in an amount less than the sum then due, such acceptance shall be deemed an acceptance on account only and on the condition that it shall not constitute a waiver of the obligation of the Mortgagor to pay the entire sum then due, and the Mortgagor's failure to pay the entire sum then due shall be and continue to be a default hereunder notwithstanding acceptance of such amount on account. SECTION 11.7 Special Louisiana Provisions. ---------------------------- (i) Without limiting the generality of the foregoing, should one or more Events of Default occur or exist and be continuing under this Mortgage, as provided above, the Mortgagee, at its option, may exercise any one or more of this following rights and remedies, in addition to any other rights and remedies provided by law and under this Mortgage to the greatest extent permitted by applicable Louisiana law. Nothing contained herein shall be construed as constituting the Mortgagee as mortgagee in possession in absence of the actual taking of possession of the Premises by the Mortgagee. (ii) The Mortgagee shall have the right, at its sole option, to accelerate the maturity and demand immediate payment in full of any and all of the Secured Obligations. The Mortgagee shall then have the right to commence appropriate foreclosure proceedings against the Mortgaged Property and against the Mortgagor's rights as provided in this Mortgage. (iii) In the event that the Mortgagee elects to commence appropriate Louisiana foreclosure proceedings under this Mortgage, the Mortgagee may cause the Mortgaged Property, or any part or parts thereof, to be immediately seized and sold, whether in term of court or in vacation, under ordinary or executory process, in accordance with applicable Louisiana law, to the highest bidder for cash, with or without appraisement, and without the necessity of making additional demand upon or notifying the Mortgagor or placing the Mortgagor in default, all of which are expressly waived. (iv) For purposes of foreclosure under Louisiana executory process procedures, the Mortgagor confesses judgment and acknowledges to be indebted to the Mortgagee, up to the full amount of the indebtedness in principal, interest, costs, expenses, reasonable attorney's fees and other fees and charges and amounts contemplated hereunder. The Mortgagor further confesses judgment and acknowledges to be indebted unto and in favor of the Mortgagee in the amount of all future advances that the Mortgagee may make on the Mortgagor's behalf pursuant to this Mortgage, together with interest thereon. To the extent permitted under applicable Louisiana law, the Mortgagor additionally waives: (1) the benefit of appraisal as provided in Articles 2332, 2336, 2723, and 2724 of the Louisiana Code of Civil Procedure, and all other laws with regard to appraisal upon judicial sale; (2) the demand and three (3) days' delay provided under Articles 22639 and 2721 of the Louisiana Code of Civil Procedure; (3) the notice of seizure as provided under Articles 2293 and 2721 of the Louisiana Code of Civil Procedure; (4) the three (3) days' delay provided under Articles 2331, 2722 and 2723 of the Louisiana Code of Civil Procedure and all other Articles not specifically mentioned above. The Mortgagor further agrees that any declaration of fact made by authentic act before a Notary Public and two witnesses, by a Person declaring that such facts are within his or her knowledge, shall constitute authentic evidence of such facts for purposes of foreclosure under applicable Louisiana law and for purposes of La, R.S. 9:3504(D)(6) and La. R.S. 10:9-508, to the extent applicable. (v) Should any or all of the Mortgaged Property be seized as an incident to an action for the recognition or enforcement of this Mortgage, by executory process, sequestration, attachment, writ of fieri facias or otherwise, the Mortgagor hereby agrees that the court issuing any such order shall, if requested by the Mortgagee, appoint the Mortgagee, or any agent designated by the Mortgagee or any Person named by the Mortgagee at the time such seizure is requested, or any time thereafter, as Keeper of the Mortgaged Property as provided under La. R.S. 9:5136, et seq. Such a Keeper shall be entitled to reasonable compensation. The Mortgagor agrees to pay the reasonable fees of such Keeper which compensation to the Keeper shall also be secured by this Mortgage in the form of an future advances as provided in this Mortgage. (vi) Should it become necessary for the Mortgagee to foreclose under this Mortgage, all declarations of fact, which are made under an authentic act before a Notary Public in the presence of two witnesses, by a person declaring such facts to lie within his or her knowledge, shall constitute authentic evidence for purposes of executory process and also for purposes of La. R.S. 9:3509.1, La. R.S. 9:3504(D)(6) and La. R.S. 10:9-508, where applicable. (vii) Should one or more Events of Default occur or exist under this Mortgage, the Mortgagee shall have the additional right, at its sole option, to separately sell the aforesaid rights, or any part of parts thereof, at private or public compensation, or on credit, or for future delivery, without the assumption of any credit risk. The sale of the aforesaid rights may be without appraisement, the benefit of which is also expressly waived by the Mortgagor. The Mortgagee may exercise any other remedies with regard to the Mortgagor's rights as may be authorized under the Louisiana Commercial Laws (La. R.S. 10:9-101, et seq.). (viii) To the extent provided by law, and in the event of foreclosure under this Mortgage, or other transfer of title or assignment of the Mortgaged Property, or any part or parts thereof, in lieu of payment of the Secured Obligations, whether in whole or in part, all policies of insurance and other rights applicable to the foreclosed Mortgaged Property upon transfer of the Mortgaged Property shall automatically inure to the benefit of and shall pass to the purchaser(s) or transferee(s) thereof, subject to the rights of the purchaser(s) or transferee(s) to reject such insurance coverage and/or rights at its or their sole option and election. (ix) The Mortgagee may, in addition to or in lieu of the foregoing remedies, in the Mortgagee's sole discretion, commence an appropriate action against the Mortgagor seeking specific performance of any covenant contained in this Mortgage or in aid of the execution or enforcement of any power in this Mortgage granted. (x) Except as may be prohibited by applicable law, all of the Mortgagee's rights and remedies, whether evidenced by this Mortgage or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by the Mortgagee to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of the Mortgagor under this Mortgage, after the Mortgagor's failure to perform shall not affect the Mortgagee's right to declare a default and exercise its remedies. Nothing under this Mortgage or otherwise shall be construed so as to limit or restrict the rights and remedies available to the Mortgagee following an Event of Default, or in any way to limit or restrict the rights and abilities of the Mortgagee to proceed directly against Mortgagor and/or against any other co-maker, guarantor, surety or endorser of the Secured Obligations, and/or to proceed against any other collateral directly or indirectly securing the Secured Obligations. ARTICLE XII SECURITY AGREEMENT AND FIXTURE FILING SECTION 12.1 Security Agreement. ------------------ (i) This Mortgage shall constitute a Security Agreement as defined in the Louisiana Commercial Laws, La. R.S.ss. 10:101 et seg., and shall create and evidence a security interest in all the equipment and in all the other items of Mortgaged Property in which a security interest may be granted pursuant to the Louisiana Commercial Laws (collectively, "Personal Property"). (ii) The remedies for any violation of the covenants, terms and conditions of the agreements herein contained shall be as prescribed herein or by general Louisiana law or, as to such part of the security which is also reflected in any Financing Statement filed to perfect the security interest herein created, by the specific statutory provisions now or hereinafter enacted and specified in the Louisiana Commercial Laws, all at Mortgagee's sole election. The mention in any financing statement of (1) the rights in or the proceeds of any fire or hazard insurance policy, or (2) any award in eminent domain proceedings for a taking or for loss of value, or (3) Mortgagor's interest as lessor in any present or future lease or rights to income growing out of the use or occupancy of the Mortgaged Property whether pursuant to lease or otherwise, shall never be construed as in any way altering any of the rights of Mortgagee under this Mortgage or impugning the priority of the Mortgagee's lien granted hereby or by any other recorded document. Rather, such mention in the financing statement is declared to be for the protection of the Mortgagee in the event any court or judge shall at any time hold with respect to (1), (2) and (3) above, that notice of Mortgagee's priority of interest to be effective against a particular class of persons, including, but not limited to, the Federal Government and any subdivisions or entity of the Federal Government, must be filed with the clerk of court of any parish (or Terrebonne Parish Recorder of Mortgages) pursuant to Section 9-401 of the Lou-isiana Commercial Laws. SECTION 12.2 Fixture Filing. From the date of its recording, -------------- this Mortgage shall be effective as a fixture financing statement with respect to all goods constituting part of the Mortgaged Property which are to become fixtures related to the Land. For this purpose, the following information is set forth: (a) Name and Address of Debtor: JACE, Inc., 213 West Park Avenue Thibodaux, Louisiana 70301 TIN 72-1221055 and (b) Name and Address of Secured Party: Wells Fargo Bank Minnesota, National Association Corporate Trust Services 213 Court Street, Suite 902 Middletown, Connecticut 06457 (c) This document covers goods which are to become fixtures. All items that are fixtures on the date of this Mortgage shall be subject to the mortgage Lien granted hereunder. ARTICLE XIII FURTHER ASSURANCES SECTION 13.1 Recording Documentation To Assure Security. The ------------------------------------------ Mortgagor shall, forthwith after the execution and delivery hereof and thereafter, from time to time, cause this Mortgage and any financing statement, continuation statement or similar instrument relating to any thereof or to any property intended to be subject to the Lien hereof to be filed, registered and recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the validity and priority thereof or the Lien hereof purported to be created upon the Mortgaged Property and the interest and rights of the Mortgagee therein. The Mortgagor shall pay or cause to be paid all taxes and fees incident to such filing, registration and recording, and all reasonable expenses incident to the preparation, execution and acknowledgment thereof, and of any instrument of further assurance, and all Federal or state stamp taxes or other taxes, duties and charges arising out of or in connection with the execution and delivery of such instruments. SECTION 13.2 Further Acts. The Mortgagor shall, at the sole cost ------------ and expense of the Mortgagor, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers, financing statements, continuation statements, instruments and assurances as the Mortgagee shall from time to time reasonably request, which may be necessary in the judgment of the Mortgagee from time to time to assure, perfect, convey, assign, mortgage, transfer and confirm unto the Mortgagee, the property and rights hereby conveyed or assigned or which the Mortgagor may be or may hereafter become bound to convey or assign to the Mortgagee or for carrying out the intention or facilitating the performance of the terms hereof or the filing, registering or recording hereof. Without limiting the generality of the foregoing, in the event that the Mortgagee desires to exercise any remedies, consensual rights or attorney-in-fact powers set forth in this Mortgage and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other Person therefor, then, upon the reasonable request of the Mortgagee, the Mortgagor agrees to use its reasonable efforts to assist and aid the Mortgagee to obtain as soon as practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers. In the event the Mortgagor shall fail (i) within ten (10) Business Days after demand, to execute or take any action required to be executed or taken by the Mortgagor under this Section 13.2 to the extent same ------------ is necessary to maintain perfection of the Lien granted to Mortgagee hereunder or (ii) such failure shall constitute an Event of Default, to execute or take any action required to be executed or taken by the Mortgagor under this Section ------- 13.2 (other than the type described in clause (i) of this sentence) then, in - ---- each of the cases described in clauses (i) and (ii) of this sentence, the Mortgagee may execute or take the same as the attorney-in-fact for the Mortgagor, such power of attorney being coupled with an interest and is irrevocable. SECTION 13.3 Additional Security. Without notice to or consent of ------------------- the Mortgagor and without impairment of the Lien and rights created by this Mortgage, the Mortgagee may accept (but the Mortgagor shall not be obligated to furnish) from the Mortgagor or from any other Person, additional security for the Secured Obligations. Neither the giving hereof nor the acceptance of any such additional security shall prevent the Mortgagee from resorting, first, to such additional security, and, second, to the security created by this Mortgage without affecting the Mortgagee's Lien and rights under this Mortgage. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Covenants To Run with the Land. All of the grants, ------------------------------ covenants, terms, provisions and conditions in this Mortgage shall run with the Land and shall apply to, and bind the successors and assigns of, the Mortgagor. If there shall be more than one mortgagor with respect to the Mortgaged Property, the covenants and warranties hereof shall be joint and several. SECTION 14.2 No Merger. The rights and estate created by this --------- Mortgage shall not, under any circumstances, be held to have merged into any other estate or interest now owned or hereafter acquired by the Mortgagee unless the Mortgagee shall have consented to such merger in writing, such consent not to be unreasonably withheld. SECTION 14.3 Concerning Mortgagee. -------------------- (i) The Mortgagee has been appointed as trustee pursuant to the Indenture. The actions of the Mortgagee hereunder are subject to the provisions of the Indenture. The Mortgagee shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of the Mortgaged Property), in accordance with this Mortgage and the Indenture. The Mortgagee may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. The Mortgagee may resign and a successor Mortgagee may be appointed in the manner provided in the Indenture. Upon the acceptance of any appointment as the Mortgagee by a successor Mortgagee, that successor Mortgagee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Mortgagee under this Mortgage, and the retiring Mortgagee shall thereupon be discharged from its duties and obligations under this Mortgage. After any retiring Mortgagee's resignation, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it under this Mortgage while it was the Mortgagee. (ii) The Mortgagee shall be deemed to have exercised reasonable care in the custody and preservation of the Mortgaged Property in its possession if such Mortgaged Property is accorded treatment substantially equivalent to that which the Mortgagee, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Mortgagee nor any of the Secured Parties shall have responsibility for taking any necessary steps to preserve rights against any Person with respect to any Mortgaged Property. (iii) The Mortgagee shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person, and, with respect to all matters pertaining to this Mortgage and its duties hereunder, upon advice of counsel selected by it. (iv) If any portion of the Mortgaged Property also constitutes collateral granted to the Mortgagee under any other deed of trust, mortgage, security agreement, pledge or instrument of any type, in the event of any conflict between the provisions hereof and the provisions of such other deed of trust, mortgage, security agreement, pledge or instrument of any type in respect of such collateral, the Mortgagee, in its sole discretion, shall select which provision or provisions shall control. SECTION 14.4 Mortgagee May Perform; Mortgagee Appointed ------------------------------------------ Attorney-in-Fact. If the Mortgagor shall fail to perform any covenants contained - ---------------- in this Mortgage, subject to any applicable grace periods or contest rights permitted pursuant to Article IX hereof or as otherwise permitted by any Collateral Document (including, without limitation, the Mortgagor's covenants to (i) pay the premiums in respect of all required insurance policies hereunder, (ii) pay Charges, (iii) make repairs, (iv) discharge Liens or (v) pay or perform any obligations of the Mortgagor under any Mortgaged Property) or if any warranty on the part of the Mortgagor contained herein shall be breached, the Mortgagee may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose; provided, -------- however, that the Mortgagee shall in no event be bound to inquire into the - ------- validity of any tax, Lien, imposition or other obligation which the Mortgagor fails to pay or perform as and when required hereby and which the Mortgagor does not contest in accordance with the provisions of Article IX hereof. Any and all ---------- amounts reasonably so expended by the Mortgagee shall be paid by the Mortgagor in accordance with the provisions of Section 14.5 hereof. Neither the provisions ------------ of this Section 14.4 nor any action taken by the Mortgagee pursuant to the ------------ provisions of this Section 14.4 shall prevent any such failure to observe any ------------ covenant contained in this Mortgage nor any breach of warranty from constituting an Event of Default. Upon the occurrence and during the continuance of an Event of Default the Mortgagor hereby appoints the Mortgagee its attorney-in-fact, with full authority in the place and stead of the Mortgagor and in the name of the Mortgagor to take any action and to execute any instrument consistent with the terms hereof and the other Collateral Documents which the Mortgagee may deem necessary or advisable to accomplish the purposes hereof. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. The Mortgagor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. SECTION 14.5 Expenses The Mortgagor will upon demand pay to the -------- Mortgagee the amount of any and all reasonable costs and expenses, including the reasonable fees and expenses of its counsel and the reasonable fees and expenses of any experts and agents which the Mortgagee may incur in connection with (i) any action, suit or other proceeding affecting the Mortgaged Property or any part thereof commenced, in which action, suit or proceeding the Mortgagee is made a party or participates or in which the right to use the Mortgaged Property or any part thereof is threatened, or in which it becomes necessary in the judgment of the Mortgagee to defend or uphold the Lien hereof (including, without limitation, any action, suit or proceeding to establish or uphold the compliance of the Mortgaged Property with any Requirements of Law), (ii) the collection of the Secured Obligations, (iii) the enforcement and administration hereof, (iv) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Mortgaged Property, (v) the exercise or enforcement of any of the rights of the Mortgagee or any Secured Party hereunder or (vi) the failure by the Mortgagor to perform or observe any of the provisions hereof. All amounts expended by the Mortgagee and payable by the Mortgagor under this Section 14.5 shall be due upon demand therefor (together with interest ------------ thereon accruing at the Default Rate during the period from and including the date on which such funds were so expended to the date of repayment) and shall be part of the Secured Obligations. The Mortgagor's obligations under this Section 14.5 shall survive the termination hereof and the discharge of the - ------------ Mortgagor's other obligations under this Mortgage. SECTION 14.6 Indemnity. --------- (i) The Mortgagor agrees to indemnify, pay and hold harmless the Mortgagee and each of the other Secured Parties and the officers, directors, employees, agents and Affiliates of the Mortgagee and each of the other Secured Parties (collectively, the "Indemnitees") from and against any and all other ----------- liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs (including, without limitation, settlement costs), expenses or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding, commenced or threatened, whether or not such Indemnitee shall be designated a party thereto), which may be imposed on, incurred by or asserted against that Indemnitee, in any manner relating to or arising out hereof, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (including, without limitation, any misrepresentation by the Mortgagor in this Mortgage, the Indenture, the Notes, any other Collateral Document or any other document evidencing the Secured Obligations (the "Indemnified Liabilities"); provided, however, that the Mortgagor shall have no ----------------------- -------- ------- obligation to an Indemnitee hereunder with respect to Indemnified Liabilities to the extent it has been determined by a final decision (after all appeals and the expiration of time to appeal) by a court of competent jurisdiction that such Indemnified Liabilities arose from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Mortgagor shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. (ii) Survival. The obligations of the Mortgagor contained in this -------- Section 14.6 shall survive the termination hereof and the discharge of the Mortgagor's other obligations under this Mortgage, the Indenture and the other Collateral Documents. (iii) Reimbursement. Any amount paid by any Indemnitee as to which ------------- such Indemnitee has the right to reimbursement shall constitute Secured Obligations secured by the Mortgaged Property. SECTION 14.7 Continuing Security Interest; Assignment. This ---------------------------------------- Mortgage shall create a continuing Lien on and security interest in the Mortgaged Property and shall (i) be binding upon the Mortgagor, its respective successors and assigns and (ii) inure, together with the rights and remedies of the Mortgagee hereunder, to the benefit of the Mortgagee and the other Secured Parties and each of their respective successors, transferees and assigns. No other Persons (including, without limitation, any other creditor of Mortgagor) shall have any interest herein or any right or benefit with respect hereto. Without limiting the generality of the foregoing clause (ii), any Holder of the Notes may assign or otherwise transfer any indebtedness held by it secured by this Mortgage to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Holder, herein or otherwise, subject however, to the provisions of the Indenture. SECTION 14.8 Termination; Release. The Mortgaged Property shall be -------------------- released from the Lien of this Mortgage in accordance with the provisions of Article 10 the Indenture. - ---------- SECTION 14.9 Modification in Writing. No amendment, modification, ----------------------- supplement, termination or waiver of or to any provision hereof, nor consent to any departure by the Mortgagor therefrom, shall be effective unless the same shall be done in accordance with the terms of the Indenture and unless in writing and signed by the Mortgagee and Mortgagor. Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by the Mortgagor from the terms of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Mortgage or any other Collateral Document, no notice to or demand on the Mortgagor in any case shall entitle the Mortgagor to any other or further notice or demand in similar or other circumstances. SECTION 14.10 Notices. Unless otherwise provided herein or in the ------- Indenture, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Indenture, if to the Mortgagor, addressed to it at the address of the Issuer set forth in the Indenture, and as to the Mortgagee, addressed to it at its address set forth in the Indenture, or in each case at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 14.10. ------------- SECTION 14.11 GOVERNING LAW; SERVICE OF PROCESS; WAIVER OF JURY ------------------------------------------------- TRIAL. THIS MORTGAGE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED - ----- IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR ITEM OR TYPE OF MORTGAGED PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. THE MORTGAGOR AGREES THAT SERVICE OF PROCESS IN ANY PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE ISSUER AT ITS ADDRESS SET FORTH IN THE INDENTURE OR AT SUCH OTHER ADDRESS OF WHICH THE MORTGAGEE SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. IF ANY AGENT APPOINTED BY THE MORTGAGOR REFUSES TO ACCEPT SERVICE, THE MORTGAGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE MORTGAGEE TO BRING PROCEEDINGS AGAINST THE MORTGAGOR IN THE COURTS OF ANY OTHER JURISDICTION. THE MORTGAGOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 14.12 Severability of Provisions. Any provision hereof -------------------------- which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 14.13 Limitation on Interest Payable. It is the intention ------------------------------ of the parties to conform strictly to the usury laws, whether state or Federal, that are applicable to the transaction of which this Mortgage is a part. All agreements between the Mortgagor and the Mortgagee, whether now existing or hereafter arising and whether oral or written, are hereby expressly limited so that in no contingency or event whatsoever shall the amount paid or agreed to be paid by the Mortgagor for the use, forbearance or detention of the money to be loaned or advanced under the Indenture or any related document or for the payment or performance of any covenant or obligation contained herein or in the Indenture or any related document exceed the maximum amount permissible under applicable Federal or state usury laws. If under any circumstances whatsoever fulfillment of any such provision, at the time performance of such provision shall be due, shall involve exceeding the limit of validity prescribed by law, then the obligation to be fulfilled shall be reduced to the limit of such validity. If under any circumstances the Mortgagor shall have paid an amount deemed interest by applicable law, which would exceed the highest lawful rate, such amount that would be excessive interest under applicable usury laws shall be applied to the reduction of the principal amount owing in respect of the Secured Obligations and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal and any other amounts due hereunder, the excess shall be refunded to the Mortgagor. All sums paid or agreed to be paid for the use, forbearance or detention of the principal under any extension of credit by the Mortgagee shall, to the extent permitted by applicable law, and to the extent necessary to preclude exceeding the limit of validity prescribed by law, be amortized, prorated, allocated and spread from the date hereof until payment in full of the Secured Obligations so that the actual rate of interest on account of such principal amounts is uniform throughout the term hereof. SECTION 14.14 Business Days. In the event any time period or any ------------- date provided in this Mortgage ends or falls on a day other than a Business Day, then such time period shall be deemed to end and such date shall be deemed to fall on the next succeeding Business Day, and performance herein may be made on such Business Day, with the same force and effect as if made on such other day. SECTION 14.15 Relationship. The relationship of the Mortgagee to ------------ the Mortgagor hereunder is strictly and solely that of lender and borrower and mortgagor and mortgagee and nothing contained in the Indenture, the Notes, this Mortgage or any other document or instrument now existing and delivered in connection therewith or otherwise in connection with the Secured Obligations is intended to create, or shall in any event or under any circumstance be construed as creating a partnership, joint venture, tenancy-in-common, joint tenancy or other relationship of any nature whatsoever between the Mortgagee and the Mortgagor other than as lender and borrower and mortgagor and mortgagee. SECTION 14.16 Waiver of Stay. -------------- (i) The Mortgagor agrees that in the event that the Mortgagor or any property or assets of the Mortgagor shall hereafter become the subject of a voluntary or involuntary proceeding under the Bankruptcy Code or the Mortgagor shall otherwise be a party to any Federal or state bankruptcy, insolvency, moratorium or similar proceeding to which the provisions relating to the automatic stay under Section 362 of the Bankruptcy Code or any similar provision in any such law is applicable, then, in any such case, whether or not the Mortgagee has commenced foreclosure proceedings under this Mortgage, the Mortgagee shall be entitled to relief from any such automatic stay as it relates to the exercise of any of the rights and remedies (including, without limitation, any foreclosure proceedings) available to the Mortgagee as provided in this Mortgage, in any other Collateral Document or any other document evidencing the Secured Obligations. (ii) The Mortgagee shall have the right to petition or move any court having jurisdiction over any proceeding described in Section 14.16(i) ---------------- hereof for the purposes provided therein, and the Mortgagor agrees (i) not to oppose any such petition or motion and (ii) at the Mortgagor's sole cost and expense, to assist and cooperate with the Mortgagee, as may be requested by the Mortgagee from time to time, in obtaining any relief requested by the Mortgagee, including, without limitation, by filing any such petitions, supplemental petitions, requests for relief, documents, instruments or other items from time to time requested by the Mortgagee or any such court. SECTION 14.17 No Credit for Payment of Taxes or Impositions. The --------------------------------------------- Mortgagor shall not be entitled to any credit against the principal, premium, if any, or interest payable under the Indenture or the Notes, and the Mortgagor shall not be entitled to any credit against any other sums which may become payable under the terms thereof or hereof, by reason of the payment of any Charge on the Mortgaged Property or any part thereof. SECTION 14.18 No Claims Against the Mortgagee. Nothing contained ------------------------------- in this Mortgage shall constitute any consent or request by the Mortgagee, express or implied, for the performance of any labor or services or the furnishing of any materials or other property in respect of the Premises or any part thereof, nor as giving the Mortgagor any right, power or authority to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the Mortgagee in respect thereof or any claim that any Lien based on the performance of such labor or services or the furnishing of any such materials or other property is prior to the Lien hereof. SECTION 14.19 Obligations Absolute. All obligations of the -------------------- Mortgagor hereunder shall be absolute and unconditional irrespective of: (i) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Mortgagor, the Issuer or any other Guarantor; (ii) any lack of validity or enforceability of the Indenture, the Notes or any other agreement or instrument relating thereto; (iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Indenture, the Notes or any other agreement or instrument relating thereto; (iv) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations; (v) any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect hereof, the Indenture, the Notes or any agreement or instrument relating thereto except as specifically set forth in a waiver granted pursuant to the provisions of Section 14.9 hereof; or ------------ (vi) any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Mortgagor. SECTION 14.20 Last Dollars Secured. This Mortgage secures only -------------------- a portion of the Indebtedness owing or which may become owing by the Mortgagor. The parties agree that any payments or repayments of such Indebtedness by the Mortgagor shall be and be deemed to be applied first to the portion of the Indebtedness that is not secured hereby, it being the parties' intent that the portion of the Indebtedness last remaining unpaid shall be secured hereby. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] THUS DONE AND PASSED, on the day, month and year first written above, effective as of the Effective Date, in the State and Parish aforesaid, by the undersigned Mortgagor in the presence of the undersigned Notary and the undersigned competent witnesses, who hereunto sign their names with Mortgagor after reading of the whole. WITNESSES: MORTGAGOR: JACE, Inc., a Louisiana corporation /s/ Douglas A. Blackshear /s/ Ian M. Stewart ___________________________________ By: _________________________________ Ian M. Stewart Douglas A. Blackshear Authorized Officer Printed Name: _____________________ /s/ Sterling W. Dale, Jr. ___________________________________ Sterling W. Dale, Jr. Printed Name: _____________________ /s/ Perryann P. Whitehurst _______________________________________ Notary Public Schedule A ---------- Legal Description [to come from title policy] Schedule B ---------- Prior Liens ----------- 1. Each of the liens and other encumbrances excepted as being prior to the Lien hereof as set forth in Schedule B to the marked title insurance commitment issued by Lawyers Title Insurance Corporation, dated as of the date hereof and delivered to the Trustee on the date hereof, bearing Lawyers Title Insurance Corporation reference number 37637REV relating to the real property described in Schedule A attached hereto. 2. Zoning and building ordinances and regulations, to the extent they constitute Permitted Liens of the type described in clause (4) of the definition thereof. Schedule C ---------- Leases Affecting the Mortgaged Property NONE Exhibit 1 --------- FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the "Agreement") is made and entered into as of the ____ day of _______, ____ by and between ________________________________, as trustee, having an office at _________________ (in such capacity, "Trustee"), and _____________________, having an office at __________________________ ("Tenant"). R E C I T A L S: - - - - - - - - A. Tenant is the tenant under a certain lease dated _____________, ____ between ________________________________, as landlord ("Landlord"), and Tenant, as tenant (as amended through the date hereof, the "Lease"), pursuant to which Tenant leased a portion (the "Leased Premises") of the property known as _____________________________, located at _____________________________, as more particularly described in Schedule A attached hereto (the "Property"). B. Landlord has or will grant a mortgage lien on and security interest in the Property to Trustee (for its benefit and for the benefit of the holders of certain senior secured notes and notes issued in exchange therefor pursuant to that certain indenture dated as of [________ ___, 2002]) pursuant to one or more mortgages, deeds of trust, deeds to secure debt or similar security instruments (collectively, the "Security Instruments"). C. Tenant has agreed to subordinate the Lease to the Security Instruments and to the lien thereof and Trustee has agreed not to disturb Tenant's possessory rights in the Leased Premises under the Lease on the terms and conditions hereinafter set forth. A G R E E M E N T: - - - - - - - - - NOW, THEREFORE, the parties hereto mutually agree as follows: 1. Subordination. Notwithstanding anything to the contrary set forth in ------------- the Lease, the Lease and the leasehold estate created thereby and all of Tenant's rights thereunder are and shall at all times be subject and subordinate in all respects to the Security Instruments and the lien thereof, and to all rights of Trustee thereunder, and to any and all advances to be made thereunder, and to all renewals, modifications, consolidations, replacements and extensions thereof. 2. Nondisturbance. So long as Tenant complies with the provisions of -------------- this Agreement, pays all rents and other charges as specified in the Lease and is not otherwise in default (beyond applicable notice and cure periods) of any of its obligations and covenants pursuant to the Lease, Trustee agrees for itself and its successors in interest and for any other person acquiring title to the Property through a foreclosure (an "Acquiring Party"), that Tenant's possession of the Leased Premises as described in the Lease will not be disturbed during the term of the Lease by reason of a foreclosure. For purposes of this Agreement, a "foreclosure" shall include (but not be limited to) a sheriff's or trustee's sale under the power of sale con- -2- tained in the Security Instruments, the termination of any superior lease of the Property and any other transfer of the Landlord's interest in the Property under peril of foreclosure, including, without limitation to the generality of the foregoing, an assignment or sale in lieu of foreclosure. 3. Attornment. Tenant agrees to attorn to, accept and recognize any ---------- Acquiring Party as the landlord under the Lease pursuant to the provisions expressly set forth therein for the then remaining balance of the term of the Lease, and any extensions thereof as made pursuant to the Lease. The foregoing provision shall be self-operative and shall not require the execution of any further instrument or agreement by Tenant as a condition to its effectiveness. 4. No Liability. Notwithstanding anything to the contrary contained ------------ herein or in the Lease, it is specifically understood and agreed that neither the Trustee, any receiver nor any Acquiring Party shall be: (a) liable for any act, omission, negligence or default of any prior landlord (including Landlord); or (b) liable for any failure of any prior landlord (including Landlord) to construct any improvements or bound by any covenant to construct any improvement either at the commencement of the term of the Lease or upon any renewal or extension thereof or upon the addition of additional space pursuant to any expansion right contained in the Lease; or (c) subject to any offsets, credits, claims or defenses which Tenant might have against any prior landlord (including Landlord); or (d) bound by any rent or additional rent which is payable on a monthly basis and which Tenant might have paid for more than one (1) month in advance to any prior landlord (including Landlord) or by any security deposit or other prepaid charge which Tenant might have paid in advance to any prior landlord (including Landlord); or (e) liable to Tenant hereunder or under the terms of the Lease beyond its interest in the Property; or (f) bound by any assignment, subletting, renewal, extension or any other agreement or modification of the Lease made without the written consent of Trustee; or (g) bound by any consensual or negotiated surrender, cancellation or termination of the Lease, in whole or in part, agreed upon between Landlord and Tenant unless effected unilaterally by Tenant pursuant to the express terms of the Lease. Notwithstanding the foregoing, Tenant reserves its right to any and all claims or causes of action (i) against such prior landlord for prior losses or damages and (ii) against the successor landlord for all losses or damages arising from and after the date that such successor landlord takes title to the Property. 5. Certain Acknowledgments and Agreements by Tenant. (a) Tenant has ------------------------------------------------ notice that the Lease and the rents and all other sums due thereunder have been assigned to Trustee as security for the notes secured by the Security Instruments. In the event Trustee notifies Tenant of the occurrence of a de- -3- fault under the Security Instruments and demands that Tenant pay its rents and all other sums due or to become due under the Lease directly to Trustee, Tenant shall honor such demand and pay its rent and all other sums due under the Lease directly to Trustee or as otherwise authorized in writing by Trustee. Landlord irrevocably authorizes Tenant to make the foregoing payments to Trustee upon such notice and demand. (b) Tenant shall send a copy of any and all notices or statements under the Lease to Trustee at the same time such notices or statements are sent to Landlord. (c) This Agreement satisfies any and all conditions or requirements in the Lease relating to the granting of a non-disturbance agreement. 6. Trustee to Receive Default Notices. Tenant shall notify Trustee ---------------------------------- of any default by Landlord under the Lease which would entitle Tenant to cancel the Lease, and agrees that, notwithstanding any provisions of the Lease to the contrary, no notice of cancellation thereof shall be effective unless Trustee shall have received notice of default giving rise to such cancellation and shall have failed within sixty (60) days after receipt of such notice to cure such default or, if such default cannot be cured within sixty (60) days, shall have failed within sixty (60) days after receipt of such notice to commence and thereafter diligently pursue any action necessary to cure such default. 7. Estoppel. Tenant hereby certifies and represents to Trustee -------- that as of the date of this Agreement: (a) the Lease is in full force and effect; (b) all requirements for the commencement and validity of the Lease have been satisfied and there are no unfulfilled conditions to Tenant's obligations under the Lease; (c) Tenant is not in default under the Lease and has not received any uncured notice of any default by Tenant under the Lease; to the best of Tenant's knowledge, Landlord is not in default under the Lease; no act, event or condition has occurred which with notice or the lapse of time, or both, would constitute a default by Tenant or Landlord under the Lease; no claim by Tenant of any nature exists against Landlord under the Lease; and all obligations of Landlord have been fully performed; (d) there are no defenses, counterclaims or setoffs against rents or charges due or which may become due under the Lease; (e) none of the rent which Tenant is required to pay under the Lease has been prepaid, or will in the future be prepaid, more than one (1) month in advance; (f) Tenant has no right or option contained in the Lease or in any other document to purchase all or any portion of the Leased Premises; (g) the Lease has not been modified or amended and constitutes the entire agreement between Landlord and Tenant relating to the Leased Premises; -4- (h) Tenant has not assigned, mortgaged, sublet, encumbered, conveyed or otherwise transferred any or all of its interest under the Lease; and (i) Tenant has full authority to enter into this Agreement, which has been duly authorized by all necessary action. 8. Notices. All notices or other written communications hereunder ------- shall be deemed to have been properly given (i) upon delivery, if delivered in person with receipt acknowledged by the recipient thereof, (ii) one (1) Business Day (hereinafter defined) after having been deposited for overnight delivery with any reputable overnight courier service, or (iii) three (3) Business Days after having been deposited in any post office or mail depository regularly maintained by the United States Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested, addressed to the receiving party at its address set forth above or addressed as such party may from time to time designate by written notice to the other parties. For purposes of this Section 8, the term "Business Day" shall mean any day other than --------- Saturday, Sunday or any other day on which banks are required or authorized to close in New York, New York. Either party by notice to the other may designate additional or different addresses for subsequent notices or communications. 9. Successors. The obligations and rights of the parties pursuant ---------- to this Agreement shall bind and inure to the benefit of the successors, assigns, heirs and legal representatives of the respective parties; provided, -------- however, that in the event of the assignment or transfer of the interest of - ------- Trustee, all obligations and liabilities of Trustee under this Agreement shall terminate, and thereupon all such obligations and liabilities shall be the responsibility of the party to whom Trustee's interest is assigned or transferred; and provided, further, that the interest of Tenant under this -------- ------- Agreement may not be assigned or transferred without the prior written consent of Trustee. In addition, Tenant acknowledges that all references herein to Landlord shall mean the owner of the landlord's interest in the Lease, even if said owner shall be different from the Landlord named in the Recitals. 10. Duplicate Original; Counterparts. This Agreement may be -------------------------------- executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Agreement. 11. Limitation of Trustee's Liability. (a) Trustee shall have no --------------------------------- obligations nor incur any liability with respect to any warranties of any nature whatsoever, whether pursuant to the Lease or otherwise, including, without limitation, any warranties respecting use, compliance with zoning, Landlord's title, Landlord's authority, habitability, fitness for purpose or possession. (b) In the event that Trustee shall acquire title to the Leased Premises or the Property, Trustee shall have no obligation, nor incur any liability, beyond Trustee's then equity interest, if any, in the Leased Premises, and Tenant shall look exclusively to such equity interest of Trustee, if any, in the Leased Premises for the payment and discharge of any obligations imposed upon Trustee hereunder or under the Lease, and Trustee is hereby released and relieved of any other obligations hereunder and under the Lease. 12. Modification in Writing. This Agreement may not be modified ----------------------- except by an agreement in writing signed by the parties hereto or their respective successors in interest. -5- 13. Lien of Security Instruments. Nothing contained in this ---------------------------- Agreement shall in any way impair or affect the lien created by the Security Instruments or the provisions thereof. 14. Compliance with Lease. Tenant agrees that in the event there --------------------- is any inconsistency between the terms and provisions hereof and the terms and provisions of the Lease, the terms and provisions hereof shall be controlling. 15. Governing Law; Severability. This Agreement shall be governed --------------------------- by the laws of the State of [ ]. If any term of this Agreement or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Agreement or the application of such terms to any person or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby, and each term of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 16. Further Actions. Tenant agrees at its own expense to execute --------------- and deliver, at any time and from time to time upon the request of Trustee or any Acquiring Party, such documents and instruments (in recordable form, if requested) as may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to fully implement or to further evidence the understandings and agreements contained in this Agreement. Moreover, Tenant hereby irrevocably appoints and constitutes Trustee or any Acquiring Party as its true and lawful attorney-in-fact to execute and deliver any such documents or instruments which may be necessary or appropriate, in the opinion of Trustee or any Acquiring Party, to implement or further evidence such understandings and agreements and which Tenant, after thirty (30) days' notice from Trustee or any Acquiring Party, has failed to execute and deliver. IN WITNESS WHEREOF, Trustee and Tenant have duly executed this Agreement as of the date first above written. __________________________________________, as Trustee By: ______________________________________ Name: Title: __________________________________________, as Tenant By: ______________________________________ Name: Title: The undersigned, as the Landlord named in the Recitals, having duly executed this Agreement as of the date first written above, and as mortgagor, pledgor, assignor or debtor under the Security Instruments, hereby accepts and agrees for itself and its successors and assigns, (i) to be bound by the provisions of Section 5 hereof, (ii) that nothing contained in the foregoing Agreement (x) shall in any way be deemed to constitute a waiver by Trustee of any of its rights or remedies under the Security Instruments or (y) shall in any way be deemed to release Landlord from its obligations to comply with the terms, provisions, conditions, covenants and agreements set forth in the Security Instruments and (iii) that the provisions of the Security Instruments remain in full force and effect and must be complied with by Landlord. ________________________________, a ________________________________ By: ______________________________________ Name: Title: ACKNOWLEDGMENT State of ___________) ) ss.: County of __________) [Local counsel to provide appropriate acknowledgment] SCHEDULE A to EXHIBIT 1 ----------------------- Description of Real Property ---------------------------- EX-4.18 48 dex418.txt COLLATERAL ASSIGNMENT OF DEEDS OF TRUST Exhibit 4.18 County: New Kent Premises: - -------------------------------------------------------------------------------- Date As of February 22, 2002 COLLATERAL ASSIGNMENT OF DEEDS OF TRUST, ASSIGNMENTS OF RENTS AND LEASES, SECURITY AGREEMENTS AND FIXTURE FILINGS AND OTHER LOAN DOCUMENTS BY GAMECO, INC., as Assignor TO WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee After recording, please return to: Athy A. Mobilia, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 - -------------------------------------------------------------------------------- COLLATERAL ASSIGNMENT OF DEEDS OF TRUST, ASSIGNMENTS OF RENTS AND LEASES, SECURITY AGREEMENTS AND FIXTURE FILINGS AND OTHER LOAN DOCUMENTS This COLLATERAL ASSIGNMENT OF DEEDS OF TRUST, ASSIGNMENTS OF RENTS AND LEASES, SECURITY AGREEMENTS AND FIXTURE FILINGS AND OTHER LOAN DOCUMENTS (this "Assignment"), is dated as of February 22, 2002, by GAMECO, INC., a Delaware ---------- corporation, having an address at 1001 North U.S. Highway One, #710, Jupiter, FL 33477, (the "Assignor") to WELLS FARGO BANK MINNESOTA NATIONAL ASSOCIATION, a -------- national banking association having an office at 213 Court Street, Suite 902, Middletown, CT 06457, in its capacity as trustee (in such capacity, the "Trustee") under that certain Indenture, dated as of February 8, 2002 (as ------- amended, amended and restated, supplemented or otherwise modified from time to time, the "Indenture"), pursuant to which Gameco, Inc. (the "Issuer") has issued --------- ------ its 11-7/8% senior secured notes due 2009 (the "Senior Secured Notes": the -------------------- Senior Secured Notes, together with the Additional Notes and Exchange Notes (each as defined in the Indenture), the "Notes") in the aggregate principal ----- amount of $125,000,000, as assignee and secured party (in such capacities, the "Assignee"). -------- RECITALS: -------- A. In connection with the execution and delivery of the Indenture, the Assignor, certain subsidiaries of the Assignor party thereto and the Trustee entered into that certain Security Agreement dated as of February 8, 2002 (the "Original Security Agreement"), pursuant to which the Assignor has, among other --------------------------- things, granted to the Assignee a security interest in the Pledged Collateral (as defined in the Original Security Agreement). B. Contemporaneously with the execution and delivery of this Agreement, (i) there have occurred the closings under those certain Acquisition Documents (as defined in the Original Security Agreement) including that certain Agreement and Plan of Merger dated June 11, 2001, as amended on November 16, 2001, among Colonial Holdings, Inc., a Virginia corporation (previously known as Colonial Downs Holdings, Inc.; herein "Colonial Holdings" refers to both Colonial ----------------- Holdings, Inc. and its predecessor, Colonial Downs Holdings, Inc.), Gameco Acquisition, Inc., a Virginia corporation, and the Assignor, pursuant to which Gameco Acquisition, Inc. has merged with and into Colonial Holdings and the Assignor has acquired, by operation of law, all of the outstanding stock of Colonial Holdings, and (ii) the Assignor, certain subsidiaries of the Assignor party thereto and the Trustee are entering into that certain Amendment No. 1 to Security Agreement (the "First Amendment"; the Original Security Agreement, as amended by the First Amendment, and as further amended, amended and restated, supplemented or otherwise modified from time to time the "Security Agreement"; capitalized terms used but not otherwise defined herein shall have the meanings assigned thereto in the Security Agreement), pursuant to which the Assignor, among other things, has confirmed the attachment of the Lien created by the Security Agreement on and in -2- respect of the assets acquired by the Assignor pursuant to the Acquisition Documents including, without limitation, all intercompany notes and Supporting Obligations with respect thereto. C. In connection with the Merger, the Assignor has become the holder or beneficiary of (i) an Amended and Restated Term Note dated February 22, 2002, in the principal amount of $10,000,000 made by Colonial Downs, L.P., a Virginia limited partnership ("Colonial Downs"), (ii) an Amended and Restated Credit Line -------------- Note dated February 22, 2002, in the principal amount of $5,700,000 made by Colonial HOldings (the notes described in clauses (i) and (ii) of this Recital C, as each may be amended, amended and restated, supplemented or otherwise modified from time to time, the "Intercompany Notes"), (iii) a Deed of Trust and ------------------ Security Agreement dated as of June 26, 1997 by Colonial Downs and Colonial Holdings in favor of Lawyers Title Realty Services, Inc., trustee for the benefit of PNC Bank, National Association, recorded in the Office of the Clerk of the Circuit Court of the County of New Kent, Virginia (the "Clerk's Office") -------------- on July 31, 1997 in Deed Book 247, page 25, and assigned to CD Entertainment Ltd. by Certificate of Transfer dated August 30, 2000 and recorded in the Clerk's Office on September 1, 2000, in Deed Book 301, page 436, as amended by an Amendment to Deed of Trust dated as of February 22, 2002, by and among Colonial Holdings and Colonial Downs in favor of Lawyers Title Realty Services, Inc., trustee for the benefit of Gameco, Inc., and further assigned to Assignor by Certificate of Transfer dated February 22, 2002 (the "First Deed of Trust"), ------------------- and (iv) a Second Deed of Trust dated March 21, 1997, by Colonial Holdings in favor of David F. Belkowitz and James W. Theobald, Trustees, for the benefit of CD Entertainment Ltd., recorded in the Clerk's Office on April 7, 1997 in Deed Book 242, page 277, as amended by an Amendment to Second Deed of Trust dated as of February 22, 2002, by and among Colonial Holdings in favor of David F. Belkowitz and James W. Theobald, Trustees, for the benefit of Gameco, Inc., and further assigned to Assignor by Certificate of Transfer dated February 22, 2002 (the "Second Deed of Trust"; together with the First Deed of Trust, as amended, -------------------- amended and restated, supplemented or otherwise modified from time to time, the "Intercompany Deeds of Trust") encumbering certain real property commonly known --------------------------- as Colonial Downs Racetrack and more particularly described on Schedule A ---------- annexed hereto; the above-referenced Amendments to the First and Second Deeds of Trust, and Certificates of Transfer being recorded on the date hereof. D. As additional collateral for the obligations evidenced by the Intercompany Notes, the Assignor has received: (i) an Amended and Restated Loan Agreement, dated August 30, 2000, among Colonial Downs, Colonial Holdings, and CD Entertainment Ltd., an Ohio limited liability company ("CD Entertainment"), as amended as of February 22, 2002 and transferred to Assignor by CD Entertainment; (ii) Guaranty Agreement, dated June 26, 1997, from Colonial Holdings in favor of PNC Bank, National Association, transferred to CD Entertainment by Assignment dated August 30, 2000 and transferred to Assignor; (iii) Guaranty Agreement, dated June 26, 1997, from Stansley Racing Corp. in favor of PNC -3- Bank, National Association, transferred to CD Entertainment by Assignment dated August 30, 2000 and transferred to Assignor; (iv) Pledge Agreement, dated as of June 27, 1997, by Colonial Holdings with respect to, among other things, the limited partnership interests in Colonial Downs and the stock of Stansley Racing Corp. in favor of PNC Bank, National Association, transferred to CD Entertainment by Assignment dated August 30, 2000 and transferred to Assignor; (v) Pledge Agreement, dated as of June 26, 1997, by Stansley Racing Corp. with respect to, among other things, the general partnership interest in Colonial Downs in favor of PNC Bank, National Association, transferred to CD Entertainment by Assignment dated August 30, 2000 and transferred to Assignor; (vi) Hazaradous Materials Certificate and Indemnity Agreement, dated June 26, 1997, by Colonial Holdings and Colonial Downs in favor of PNC Bank, National Association, transferred to CD Entertainment by Assignment dated August 30, 2000 and transferred to Assignor; and (vii) UCC-1 financing statements numbered 0000916-0000918 in favor of PNC Bank, National Association, transferred to CD Entertainment by Assignment dated August 30, 2000 and transferred to Assignor (collectively, the "Intercompany Loan Documents," and together with the --------------------------- Intercompany Notes and the Intercompany Deeds of Trust, the "Intercompany ------------ Collateral Documents"). - -------------------- E. In furtherance of the provisions set forth in the Indenture and the Security Agreement, the Assignor is giving this Agreement in favor of the Assignee for (i) its benefit and (ii) the benefit of the Holders of the Notes (collectively, the "Secured Parties") to secure the payment and performance of --------------- the Secured Obligations. ASSIGNMENT: ---------- In consideration of Ten Dollars ($10.00) and other good and valuable consideration, the adequacy and receipt of which is hereby acknowledged, as collateral security for the payment and performance in full of all the Secured Obligations, the Assignor does hereby sell, deliver, set over, grant, convey, assign and transfer, pledge and grant to the Assignee for its benefit and for the benefit of the Secured Parties, all beneficial interest under the Intercompany Deeds of Trust and the Intercompany Loan Documents, subject to the terms and conditions hereof. TOGETHER WITH all right, title and interest in the Intercompany Notes or other obligations secured thereby, the money due and to become due thereon, and all rights accrued or to accrue thereunder, subject to the terms and conditions hereof. TOGETHER WITH all rights, remedies, collateral instruments or other documents made or granted in favor of the Assignor in connection with the loans secured by such Intercompany Deeds of Trust (the "Loans"), including, without ----- limitation; (i) all guaranties, pledges, security interests, mortgages, deeds of trust, or other rights, interests of other collateral securing or guaranteeing payment of such Loan; (ii) all other rights and remedies of the undersigned in connection with the Loan, whether provided by contract or otherwise available -4- under applicable law or in equity, including without limitation all rights and remedies provided under any loan agreements, indemnities or to other instruments or documents made, issued or delivered to or in favor of the Assignor or its predecessors in interest in connection with the Loans (other than guarantees that have been terminated or expired, including but not limited to guarantees made by Jeffrey P. Jacobs and Richard E. Jacobs), all as the same may have been amended from time to time. This Assignment shall (i) remain in full force and effect until indefeasible payment or satisfaction in full of the Secured Obligations, (ii) be binding upon the Assignor, its permitted transferees, representatives, successors and assigns, and (iii) inure, together with the rights and remedies of the Assignee hereunder, to the benefit of the Assignee and its permitted transferees, representatives, successors and assigns. Upon satisfaction of the conditions of Section 11.6 of the Security Agreement, this Assignment shall terminate and the Assignee shall, upon the request and at the sole cost and expense of the Assignor, execute and deliver to the Assignor such instruments or documents in recordable form (without recourse or warranty by the Assignee) as may be necessary or appropriate to evidence such termination. This Assignment is being executed and delivered to the Assignee as security for the Secured Obligations, and the rights of the Assignee with respect to the enforcement hereof are subject to the terms of the Indenture, the Security Agreement and the Escrow Agreement, dated as of February 22, 2002, among the Assignor and the Assignee. Assignor has caused this Agreement to be duly executed as of the date first written above. ASSIGNOR: GAMECO, INC., a Delaware corporation By: /s/ Jeffrey P. Jacobs --------------------------------- Name: Jeffrey P. Jacobs Title: President ------------------------------------------------ State of Florida ) LINDA B. BOSCHEN ) ss.: [SEAL] MY COMMISSION # CC 951130 County of Palm Beach ) EXPIRES: Jun 28, 2004 1-800-3-NOTARY FL Notary Service & Bonding, Inc. ------------------------------------------------ On the 18th day of February in the year 2002 before me, the undersigned, personally appeared Jeffrey P. Jacobs, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument. /s/ Linda B. Boschen - -------------------------------------- Signature and Office of individual taking acknowledgment 275 AFFIDAVIT STATEMENT TO BE ATTACHED TO ASSIGNMENT OF DEED OF TRUST ------------------------------------------------ State of Florida ) LINDA B. BOSCHEN ) ss.: [SEAL] MY COMMISSION # CC 951130 County of Palm Beach ) EXPIRES: Jun 28, 2004 1-800-3-NOTARY FL Notary Service & Bonding, Inc. ------------------------------------------------ I, Jeffrey P. Jacobs, being duly sworn, deposes and says: 1. That I am President of Gameco, Inc., a Delaware corporation, which is the holder of the deeds of trust being assigned; and as such, am fully familiar with pertinent facts in connection with the transaction involved in the assignment to which this affidavit is attached. 2. The assignee set forth on the assignment of deeds of trust to which this affidavit is attached is not acting as a nominee of the trustor and the deed of trust being assigned continues to secure a bona fide obligation. /s/ Jeffrey P. Jacobs ---------------------------------- Name: Jeffrey P. Jacobs Sworn to before me this 18th day of February, 2002 /s/ Linda B. Boschen - ------------------------------------ Notary Public Schedule A ---------- Legal Description All that certain tract or parcel of land lying and being in Cumberland District, New Kent County, Virginia, containing 345.000 acres, more or less, as depicted on "Plat of a Parcel of Land Lying South of I-64, Cumberland District, New Kent County," dated 3/18/97, made by Resource International, Ltd., signed by Howard B. Weatherford, III, Land Surveyor, a true copy of which is attached hereto and recorded herewith, and which is incorporated herein by reference for a complete and accurate description of the land conveyed hereby. Together with a perpetual non-exclusive easement of right of way typically 60 feet in width over, under and across the "60' Ingress/Egress Easement" as depicted on the aforesaid plat for the purposes of ingress from the subject land and State Route 155, as well as the placement of utilities to serve the subject land. Being the same real estate conveyed to Colonial Downs Holdings, Inc. by Deed from Chesapeake Forest Products Company, dated March 19, 1997, recorded March 30, 1997 in the Clerk's Office of the Circuit Court of New Kent County, Virginia in Deed Book 241 at page 453. EX-4.19 49 dex419.txt ESCROW AGREEMENT Exhibit 4.19 ESCROW AGREEMENT ---------------- THIS ESCROW AGREEMENT (this "Agreement"), is entered into as of this 22nd --------- day of February, 2002, between GAMECO, INC., a Delaware corporation ("Gameco") ------ and WELLS FARGO BANK MINNESOTA, a national banking association (the "Trustee"). ------- RECITALS -------- A. In connection with the execution and delivery of the Indenture, Gameco, certain subsidiaries of Gameco party thereto and the Trustee entered into that certain Security Agreement dated as of February 8, 2002 (the "Original Security ----------------- Agreement"), pursuant to which Gameco has, among other things, granted to - --------- Trustee a security interest in the Pledged Collateral (as defined in the Original Security Agreement). B. Contemporaneously with the execution and delivery of this Agreement, (i) there have occurred the closings under those certain Acquisition Documents (as defined in the Original Security Agreement) including that certain Agreement and Plan of Merger dated June 11, 2001, as amended on November 16, 2001, among Colonial Holdings, Inc., a Virginia corporation (previously known as Colonial Downs Holdings, Inc.; herein, "Colonial Holdings" refers to both Colonial ----------------- Holdings, Inc. and its predecessor, Colonial Downs Holdings, Inc.), Gameco Acquisition, Inc., a Virginia corporation and Gameco, pursuant to which Gameco Acquisition, Inc. has merged with and into Colonial Holdings, Inc. and Gameco has acquired, by operation of law, all of the assets of Colonial Holdings, Inc. and (ii) Gameco, certain subsidiaries of Gameco party thereto and the Trustee are entering into that certain Amendment No. 1 to Security Agreement (the "First Amendment"; the Original Security Agreement, as amended by the First --------------- Amendment, and as further amended, amended and restated, supplemented or otherwise modified from time to time, the "Security Agreement"; capitalized ------------------ terms used but not otherwise defined herein shall have the meanings assigned thereto in the Security Agreement), pursuant to which Gameco, among other things has confirmed the attachment of the Lien created by the Security Agreement on and in respect of the assets acquired by Gameco pursuant to the Acquisition Documents including, without limitation, all intercompany notes and Supporting Obligations with respect thereto. C. In connection with the Merger, the Assignor has become the holder or beneficiary of (i) an Amended and Restated Term Note dated February 22, 2002, in the principal amount of $10,000,000 made by Colonial Downs, L.P., a Virginia limited partnership ("Colonial Downs"), (ii) an Amended and Restated Credit Line -------------- Note dated February 22, 2002, in the principal amount of $5,700,000 made by Colonial Holdings (the notes described in clauses (i) and (ii) of this Recital C, as each may be amended and rested, supplemented or otherwise modified from time to time, the "Intercompany Notes"), (iii) a Deed of Trust and Security ------------------ Agreement dated as of June 26, 1997 by Colonial Downs and Colonial Holdings in favor of Lawyers Title Realty Services, Inc., trustee for the benefit of PNC Bank, National Association, recorded in the Office of the Clerk of the Circuit Court of the County of New Kent, Virginia (the "Clerk's Office") on July 31, -------------- 1997 in Deed Book 247, page 25, and assigned to CD Entertainment Ltd. by Certificate of Transfer dated August 30, 2000 and recorded in the Clerk's Office on September 1, 2000, in Deed Book 301, page 436, as amended by an Amendment to Deed of Trust dated as of February 22, 2002, by and among Colonial Holdings and Colonial Downs in favor of Lawyers Title Realty Services, Inc., trustee for the benefit of Gameco, Inc., and further assigned to Assignor by Certificate of Transfer dated February 22, 2002 (the "First Deed of Trust"), and (iv) a Second Deed of Trust dated March 21, ------------------- 1997, by Colonial Holdings in favor of David F. Belkowitz and James W. Theobald, Trustees, for the benefit of CD Entertainment Ltd., recorded in the Clerk's Office on April 7, 1997 in Deed Book 242, page 277, as amended by an Amendment to Second Deed of Trust dated as of February 22, 2002, by and among Colonial Holdings in favor of David F. Belkowitz and James W. Theobald, Trustees, for the benefit of Gameco, Inc., and further assigned to Assignor by Certificate of Transfer dated February 22, 2002 (the "Second Deed of Trust"; together with the -------------------- First Deed of Trust, as amended, amended and restated, supplemented or otherwise modified from time to time, the "Intercompany Deeds of Trust") encumbering --------------------------- certain real property commonly known as Colonial Downs Racetrack and more particularly described on Schedule A annexed hereto; the above-referenced ---------- Amendments to the First and Second Deeds of Trust and Certificates of Transfer being recorded as of the date hereof. D. As additional collateral for the obligations evidenced by the Intercompany Notes, Gameco has received: (i) an Amended and Restated Loan Agreement, dated August 30, 2000, among Colonial Downs, Colonial Holdings, and CD Entertainment Ltd., an Ohio limited liability company ("CD Entertainment"), ---------------- as amended as of February 22, 2002 and transferred to Gameco by CD Entertainment; (ii) Guaranty Agreement, dated June 26, 1997, from Colonial Holdings in favor of PNC Bank, National Association, transferred to CD Entertainment by Assignment dated August 30, 2000, and transferred to Gameco; (iii) Guaranty Agreement, dated June 26, 1997, from Stansley Racing Corp. in favor of PNC Bank, National Association, transferred to CD Entertainment by Assignment dated August 30, 2000, and transferred to Gameco; (iv) Pledge Agreement, dated as of June 27, 1997, by Colonial Holdings with respect to, among other things, the limited partnership interest in Colonial Downs and the stock of Stansley Racing Corp. in favor of PNC Bank, National Association, transferred to CD Entertainment by Assignment dated August 30, 2000, and transferred to Gameco; (v) Pledge Agreement, dated as of June 27, 1997, by Stansley Racing Corp. with respect to, among other things, the general partnership interest in Colonial Downs in favor of PNC Bank, National Association, transferred to CD Entertainment by Assignment dated August 30, 2000, and transferred to Gameco; (vi) Hazardous Materials Certificate and Indemnity Agreement, dated June 27, 1997, by Colonial Holdings and Colonial Downs in favor of PNC Bank, National Association, transferred to CD Entertainment by Assignment dated August 30, 2000, and transferred to Gameco; and (vii) filed UCC-1 financing statements numbered 0000916-0000918 in favor of PNC Bank, National Association, transferred to CD Entertainment and transferred to Gameco (collectively, the "Intercompany ------------ Loan Documents," and together with the Intercompany Notes and the Intercompany -------------- Deeds of Trust, the "Intercompany Collateral Documents"). - --------------------------------- -2- E. Contemporaneously with the execution and delivery of this Agreement, there is occurring the execution and delivery of a Collateral Assignment of Deeds of Trust, Assignments of Rents and Leases, Security Agreements, Fixture Filings and other Loan Documents, dated as of the date hereof, between Gameco and Trustee (the "Collateral Assignment") pursuant to which the Intercompany --------------------- collateral Documents have been assigned to the Trustee to be held in escrow pursuant to the terms of this Agreement. F. In furtherance of the provisions set forth in the Indenture and the Security Agreement, Gameco and Trustee are entering into this Agreement to provide for the terms and conditions upon which the Intercompany Collateral Documents assigned to the Trustee pursuant to the Collateral Assignment are to be released from escrow. NOW, THEREFORE, in consideration of the agreements set forth in the Indenture, the Security Agreement, and the Collateral Assignment and the mutual covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Trustee acknowledges receipt of the Intercompany Collateral Documents. Trustee agrees to hold the Intercompany Collateral Documents in escrow pursuant to this Agreement. 2. Gameco hereby irrevocably instructs the Trustee: (i) to hold the Intercompany Collateral Documents in escrow for the benefit of the Secured Parties and (ii) to deliver the Intercompany Collateral Documents out of escrow, record and/or file the Intercompany Collateral Documents and take all other actions necessary or appropriate to perfect, protect and maintain a first priority security interest in the Intercompany Collateral Documents and to enforce and all rights and remedies available under the Intercompany Collateral Documents, the Security Agreement and/or the Indenture with respect thereto at such time as an Event of Default has occurred under the Indenture. 3. Trustee acknowledges that: (a) Notwithstanding Trustee's receipt of the assigned Intercompany Notes, applicable gaming law restricts Trustee's entitlement to enjoy the benefits, or exercise any of the rights and remedies, inuring to it as the holder of the Intercompany Notes unless the assignment pursuant to the Collateral Assignment is approved by the Virginia Racing Commission (the "VRC"); --- and (b) Notwithstanding the Trustee's receipt of the Intercompany Mortgages and the Intercompany Loan Documents, applicable gaming law restricts Trustee's entitlement to (i) perfect, protect or maintain a security interest in the Intercompany Collateral Documents or to enjoy the benefits inuring to it as the secured party unless the assignment pursuant to the Collateral Assignment is approved by the VRC and -3- (ii) exercise the remedy of foreclosure or any other remedies unless the VRC approves the exercise of such remedies. 4. This Agreement shall remain in full force and effect until indefeasible payment or satisfaction in full of the Secured Obligations. 5. Upon satisfaction of the conditions of Section 11.6 of the Security Agreement, this Agreement shall terminate and the Trustee shall, upon the request and at the sole cost and expense of Gameco, return the Collateral Documents to Gameco and shall execute and deliver to Gameco such instruments or documents as may be necessary or appropriate to evidence such termination. 6. The Trustee's responsibility and liability under this Agreement shall be limited as follows: (a) The Trustee shall have no responsibility or liability under this Agreement to Gameco or to the Holders of the Notes as a consequence of performance or non-performance by the Trustee hereunder, except for any negligence, bad faith or willful misconduct of the Trustee. (b) In no event shall the Trustee be liable (i) for acting in accordance with or relying upon any instruction, deemed notice, notice, demand, certificate or document from Gameco or any entity acting on behalf of Gameco, or (ii) for any consequential, indirect, punitive or special damages, except for its own negligence or willful misconduct. (c) No implied covenants or obligations shall be inferred from this Agreement against the Trustee, nor shall the Trustee be bound by the provisions of any agreement beyond the specific terms hereof. Gameco shall indemnify, hold harmless and defend the Trustee and the Trustee and their directors, officers, agents, employees and controlling persons, from and against any and all claims, actions, obligations, liabilities and expenses, including defense costs, investigative fees and costs, legal fees and expenses, and claims for damages, arising from the Trustee's performance, acceptance or administration of its duties under this Agreement, except to the extent that such liability, expense or claim is directly attributable to the negligence, bad faith or willful misconduct of any of the foregoing persons or the Secured Parties. (d) Upon demand and subject to applicable gaming law, Gameco will execute and deliver to the Trustee such instruments and documents as are necessary or advisable to confirm or perfect the rights of the Trustee under this Agreement and the Trustee's interest in the Collateral. The Trustee shall be entitled but not obligated to take all necessary action to preserve and protect the security interest created hereby as a Lien and encumbrance upon the Collateral. Gameco will pay all costs and expenses incurred in connection with any of the foregoing. -4- (e) Upon an Event of Default and for so long as such Event of Default continues and subject to applicable gaming law, Gameco hereby appoints the Trustee as its attorney-in-fact with full power of substitution to do any act which Gameco is obligated hereunder to do, and the Trustee may, but shall not be required to, exercise such rights as Gameco might exercise with respect to the Intercompany Collateral Documents and take any action in Gameco's name to protect the Trustee's security interest and Lien granted thereunder. In addition to the rights provided under Section 6(b) hereof, upon an Event of Default and for so long as such Event of Default continues and subject to applicable gaming law, the Trustee may, but shall not be required to exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party under the UCC or other applicable law, and the Trustee may also upon obtaining possession of the collateral as set forth in the Intercompany Collateral Documents, without notice to Gameco except as specified below, sell such collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of the Trustee's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Trustee may deem commercially reasonable. Gameco agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to Gameco of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Trustee shall not be obligated to make any sale regardless of notice of sale having been given. The Trustee may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The provisions of this Section shall survive any termination, satisfaction or discharge of this Agreement as well as the resignation or removal of the Trustee. 7. All notices and other communications required or permitted to be given or made under this Agreement shall be in writing and shall be deemed conclusively to have been duly given: (a) on the day of the hand delivery; (b) when transmitted by telecopy with verbal confirmation of receipt by the telecopy operator to the telecopy number set forth below; and (c) one Business Day following the day timely delivered to a next-day air courier addresses as set forth below: Gameco: Gameco, Inc. 240 Main Street Black Hawk, CO 80422 Attn: President Telephone No.: (303)582-1117 Telecopier No.: (303)582-0239 -5- With a copy to: Baker & Hostetler LLP 1900 East 9th Street 3200 National City Center Cleveland, OH 44114 Attn: Robert Weible, Esq. Telephone No.: (216) 861-7553 Telecopier No.: (216) 696-0740 Trustee: Wells Fargo Bank Minnesota, National Association 213 Court Street, Suite 902 Middletown, CT 06457 Attn: Corporate Trust Administration Telephone No.: (860) 704-6216 Telecopier No.: (860) 704-6219 With a copy to: Cahill Gorden & Reindel 80 Pine Street New York, NY 10005 Attn: Athy A. Mobilia, Esq. Telephone No.: (212) 701-3000 Telecopier No.: (212) 269-5420 Any notice or other communication given as hereinabove provided shall be deemed effectively given or received on the date of delivery, if delivered by hand or by overnight courier, or otherwise on the third (3rd) business day following the postmark date of such notice or other communication. 8. This Agreement, the Indenture, and the Collateral Assignment contain the entire agreement among the parties with respect to the subject matter hereof and supersede any and all prior agreements, understandings and commitments, whether oral or written. This Agreement may be amended only in accordance with Article Nine of the Indenture and further by a writing signed by a duly authorized representative of each party hereto. This Agreement is governed by and is to be construed under the laws of the State of New York, and may be executed in several counterparts, each of which shall be deemed an original, and all such counterparts together shall constitute one and the same instrument. REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK. -6- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. GAMECO: GAMECO, INC., a Delaware corporation By: /s/ Jeffrey P. Jacobs -------------------------- Name: Jeffrey P. Jacobs Title: President TRUSTEE: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: -------------------------- Name: Title: IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. GAMECO: GAMECO, INC., a Delaware corporation By: -------------------------- Name: Jeffrey P. Jacobs Title: President TRUSTEE: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: /s/ Joseph P. O'Donnell -------------------------- Name: JOSEPH P. O'DONNELL Title: Corporate Trust Officer EX-5.1 50 dex51.txt OPINION OF BAKER & HOSTETLER LLP Exhibit 5.1 OPINION OF BAKER & HOSTETLER LLP **To be Filed by Amendment** EX-10.1 51 dex101.txt CONSULTING AGREEMENT DATED 1/1/2001 Exhibit 10.1 INDEPENDENT CONTRACTOR AGREEMENT This Independent Contractor Agreement ("Agreement") is entered into and made effective as of January 1, 2001 ("Agreement Date"), by and between DIVERSIFIED OPPORTUNITIES GROUP LTD., an Ohio limited liability company, having an address at 1231 Main Avenue, Cleveland, Ohio 44113 ("Diversified"), and IAN M. STEWART, having an address at 9258 Hunt Club Lane, Mechanicsville, Virginia 23111 ("Contractor"). RECITALS A. Contractor has special skills, training, experience, knowledge and ability to locate, evaluate, negotiate and complete the acquisition of various truck stop facilities within the State of Louisiana ("Consulting Services") and Diversified desires Contractor to provide such Consulting Services; and B. Contractor seeks to be retained by Diversified and Diversified seeks to retain Contractor under the terms and conditions set forth below. NOW, THEREFORE, in consideration of the mutual promises and agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Incorporation. The foregoing recitals are incorporated herein as if fully rewritten herein. 2. Independent Contractor. At all times during the Term (as hereinafter defined) of this Agreement, Contractor shall perform the duties and responsibilities identified in this Agreement as an independent contractor and not as an employee of Diversified. Diversified shall not withhold any federal or state taxes, social security, unemployment compensation or other payments from the Commission (as hereinafter defined) paid to Contractor. Contractor shall pay all federal and state income taxes, social security contributions and all other taxes and charges levied or assessed with respect to the Commission received by Contractor pursuant to this Agreement. Contractor agrees to abide by all applicable federal, state and local laws, ordinances, rules and regulations in performing the duties and responsibilities required of him hereunder. In addition, Contractor agrees and does herewith indemnify, defend and hold Diversified harmless from any claims, losses, liabilities or expenses it or its affiliates or subsidiaries may suffer, including reasonable attorney's fees, arising as a result of Contractor's failure to pay all withholding obligations and tax liabilities associated with the Commission(s). At all times under this Agreement the Contractor is acting and performing as an independent contractor and shall not be considered an employee or agent of Diversified. 3. Term and Termination. This Agreement shall be deemed to have commenced on the Agreement Date and shall continue thereafter until 5:00 p.m. E.S.T. on the day of the final closing of the Second Traunche (as hereinafter defined), unless terminated prior to such date as hereinafter provided (the Term"). The Term may be mutually extended by a written agreement executed by both parties hereto. a. Prior to expiration of this Agreement as set forth above, either party shall have the right to terminate this Agreement, with or without justifiable cause, upon sixty (60) days' prior written notice to the other party. Notwithstanding the foregoing, this Agreement shall terminate immediately upon the occurrence of any of the following events: (i) Contractor's death; or (ii) Contractor being convicted of a felony or act of moral turpitude, or (iii) Contractor's taking any action, in Diversified's reasonable judgment, that is likely to adversely affect the reputation, operation or business of Diversified or its affiliates or subsidiaries. b. Diversified and Contractor acknowledge and agree that no provision contained in this Agreement offers, guarantees or otherwise obligates Diversified to continue to retain Contractor following the termination of this Agreement. Following the termination of this Agreement for any reason, Diversified shall promptly pay Contractor (or Contractor's estate) the Commission for services rendered to the effective date of the termination as outlined below. Contractor acknowledges and agrees that no other compensation, of any nature or type, shall be payable hereunder following the termination of this Agreement. 4. Duties and Responsibilities of Contractor. During the Term, Contractor agrees to be available to the agents and employees of Diversified, on an as needed basis, to provide the Consulting Services as Diversified may reasonably request, upon reasonable advance notice, in connection with Diversified's gaming and other business and financing operations in the State of Louisiana. Contractor further agrees during the Term to be available, upon reasonable notice and at reasonable times, at Diversified's operations in the States of Ohio, Virginia and Louisiana. Contractor agrees to conduct himself, at all times while rendering services hereunder, in a professional manner and shall use his best efforts to make decisions and recommendations hereunder for the purpose of benefiting the financial success of Diversified. Contractor agrees not to accept any engagement during the Term that would violate, or would be likely to result in a violation of, Section 6(b) hereof. Nothing contained in this Agreement is intended to, nor shall it be construed to, grant Contractor any exclusive rights to provide the services and duties described herein. 5. Compensation. Prior to the expiration or termination of this Agreement, pursuant to Section 3 hereof, Diversified will make the following payments to Contractor as and for full and complete consideration and payment for any and all services rendered under this Agreement, whether rendered prior to, on, or after the Agreement Date ("Commission"): a. One Hundred Eighty-Seven Thousand Five Hundred and 00/100 Dollars ($187,500.00) to be paid as follows: One Hundred Thousand Dollars ($100,000.00) to be paid on July 16, 2001 with the remaining balance to be paid in four (4) equal monthly payments commencing on the first day of August, 2001 and continuing on the first day of each of the next three (3) calendar months thereafter; b. at the final closing the Second Traunche, provided such final closing occurs within the Term or within one (1) year following the end of the Term (the "Acquisition Period"), One Hundred Eighty-Seven Thousand Five Hundred Dollars and 00/100 Dollars ($187,500.00). The Second Traunche shall mean the completion of the purchase, by Diversified or any of its affiliates or subsidiaries, of all of the following truck stops: (i) Plantation, L.L.P.; (ii) Raceland Truck Plaza and Casino, LLC (iii) Lucky Magnolia Truck Stop and Casino, LLC; (iv) Bayou Vista Truck Plaza & Casino LLC; and (v) Jace, Inc. In the event less than all of the five (5) truck stops identified in this Section 5(b) are purchased during the Term within the Acquisition Period, Contractor shall be paid Thirty-Seven Thousand Five Hundred and 00/100 Dollars ($37,500.00) for each such truck stop so purchased with payment of the foregoing sum to be paid upon the closing of the acquisition of each truck stop. c. In addition to the foregoing, should Diversified or any of its affiliates or subsidiaries purchase, during the Acquisition Period, either of the two truck stop facilities owned by Shawn Scott or his wholly owned subsidiaries located in St. Martin Parish, Louisiana, one of which is referred to as the "Amoco" truck stop and the other as the "Texaco" truck stop, Contractor shall be paid Thirty-Seven Thousand Five Hundred and 00/100 Dollars ($37,500.00) for each such truck stop so purchased with payment of the foregoing sum to be paid upon the closing of the acquisition of each truck stop; provided, however, regardless of the total number of truck stop facilities purchased by Diversified or its affiliates or subsidiaries during the Acquisition Period in no event shall Contractor be entitled to payment for more than five (5) total truck stops whether purchased from the Second Traunche, Shawn Scott or any other source. d. Notwithstanding anything contained in this Agreement to contrary, in no event shall the Contractor's combined Commission arising under Section 5(b) and (c) exceed the sum of One Hundred Eighty-Seven Thousand Five Hundred Dollars (187,500.00). [Execution Copy] e. If any truck stop is purchased by Diversified or any of its affiliates or subsidiaries after the Acquisition Period, including any truck stop which is a part of the Second Traunche, Stewart shall have no right to any Commission upon the closing of such truck stop(s) and does herewith release and waive any right, title or interest in or to such Commission(s). 6. Diversified's Proprietary Interest in Trade Secrets AND Non-Compete. a. Contractor acknowledges that he has had and expects to continue to have access to and become familiar with the records, documents, files, policies, business plans, strategies, customers, financial information, employees, officers, agents, unique data and the like regarding Diversified and its affiliates and subsidiaries and their businesses and operations (collectively referred to herein as "Trade Secrets"). Contractor acknowledges that the Trade Secrets are special, valuable and unique assets of Diversified and its affiliates and subsidiaries and that Diversified and/or its affiliates and subsidiaries would suffer great loss and damage if, during or after the Term, Contractor were to disclose, reveal, divulge or make available, either directly or indirectly, to any person, firm, partnership, corporation, association or other entity, the Trade Secrets. Accordingly, Contractor agrees that the Trade Secrets, in their entirety or any portion thereof, shall not be disclosed, revealed, divulged, or made available to any person, firm, partnership, corporation, association or other entity, either directly or indirectly, during or after the Term, unless Contractor is authorized to do so in writing by Diversified. Contractor agrees that, upon termination of this Agreement for any reason, Contractor shall immediately return to Diversified all Trade Secrets previously held by, retained or under the control of Contractor (including, but not limited to, any analyses, compilations, studies or documents prepared during the review of Trade Secrets by Contractor or his agents), and Contractor agrees not to make and/or retain any copies of any Trade Secrets. b. In consideration of the fees, payments, promises and benefits accruing hereunder, Contractor agrees during the Term and for a period of two (2) years following the expiration of the Term or an earlier termination of this Agreement (hereinafter the "Non-Compete Period") not to, directly or indirectly, own (in any form in whole or in part), operate, manage, control, be employed by, participate in, provide advice, financial aid or other assistance to any aspect of a business, or conduct, carry on or engage in any activity, any of which directly or indirectly compete with any aspect of the operations of JALOU L.L.C., a Louisiana limited liability company, JALOU II INC., a Louisiana corporation or any of their affiliates or subsidiaries whether created before or during the Term or the Acquisition Period (collectively "JALOU"). In addition to the foregoing, Contractor agrees, during the Non-Compete Period, not to induce any of JALOU's employees to leave their employment, nor to employ either directly or 4 indirectly any of JALOU's employees. Further, Contractor agrees he shall not solicit any customers, suppliers, sponsors, or advertisers of, or other third-parties doing business with, JALOU for the purpose of inducing, directly or indirectly, the termination of such entity's or individual's relationship with JALOU. c. Contractor acknowlegdes that the restrictions and covenants contained in Sections 6(a) and (b) are reasonably necessary to protect the investments and business of Diversified and are a material inducement to Diversified to enter into this Agreement. Contractor further acknowledges that monetary damages alone would be inadequate compensation for the breach of the covenants and agreements contained in this Section and, therefore, any court may award Diversified injunctive and/or other equitable relief for any breaches of the foregoing, such remedies shall be in addition to any and all other remedies Diversified may otherwise have. d. The parties agree that in the event a court of competent jurisdiction shall determine that any aspect of the covenants and agreements contained herein shall be unenforceable for any reason, such court may modify the covenant or agreement to render such covenant or agreement enforceable. e. Contractor has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon Diversified and its affiliates and subsidiaries under this Section 6. Contractor further acknowledges and agrees that the remedies, rights and restrictions contained in Section 6:(i) are reasonable in time and territory; (ii) are designed to eliminate competition which otherwise would be unfair to Diversified, its affiliates and subsidiaries; (iii) do not stifle the inherent skill and experience of the Contractor; (iv) would not operate as a bar to Contractor's sole means of support; (v) are fully required to protect the legitimate interests of Diversified and its affiliates and subsidiaries; and (vi) do not confer a benefit upon Diversified or its affiliates or subsidiaries disproportionate to the detriment to the Contractor. 7. Notice. Notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered in person or by a recognized overnight delivery service or upon receipt of a confirmed facsimile transmission or when mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the last known address of the respective parties, provided that all notices to Diversified shall be directed to the attention of the ChIef Executive Officer, or to such other address as either party may have furnished to the other in writing in accordance herewith, expect that notices of change of address shall be effective only upon receipt. At least initially, notices to Contractor shall be addressed or transmitted a follows: Ian M. Stewart, 9258 Hunt Club Land, Mechanicsville, Virginia 23111. 8. Payments. Any payments to Contractor hereunder shall be made in U.S. same-day funds wire-transferred to Contractor's account as follows: To the Account of Ian M. Stewart Bank -------------------------- Routing No.: Account No.: Contractor shall notify Diversified in writing of any change in such wire transfer instructions. 9. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio without giving effect to the conflicts of law principles thereof. The parties agree that they shall be estopped from raising any defenses or claims regarding venue, including any conflicts of law provisions to which any parties would be otherwise entitled. 10. Validity. The invalidity or unenforceability of any one or more provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 11. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 12. Jurisdiction. In the event of any dispute or controversy arising under or in connection with this Agreement, Contractor and Diversified hereby irrevocably consent to the jurisdiction of the United States District COurt for the Northern District of Ohio. 13. Waiver of Jury Trial. DIVERSIFIED AND CONTRACTOR EACH HEREBY -------------------- KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND ALL RIGHTS THAT THEY MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (ORAL OR WRITTEN), OR ACTIONS OF DIVERSIFIED OR CONTRACTOR. THIS PROVISION IS A MATERIAL (Execution Copy) INDUCEMENT FOR DIVERSIFIED AND CONTRACTOR ENTERING INTO THIS AGREEMENT. 14. Entire Agreement. This Agreement constitutes the entire agreement between Contractor and Diversified with respect to the subject matter hereof and no agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by any party that are not set forth expressly in this Agreement. No provisions of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in writing signed by Contractor and such officer as may be specifically designated by Diversified. No waiver by any party at any time of any breach by another party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. The parties further acknowledge and agree that this Agreement and the terms contained herein supersede all previous contracts and agreements between the parties with respect to the subject matter hereof, except as expressly set forth herein. 15. Indemnification. Contractor shall indemnify and hold harmless Diversified and its officers, members, managers, employees, agents, contractors, sublicensees, affiliates, subsidiaries, successors and assigns from and against any and all damages, liabilities, costs, expenses, claims and/or judgments, including, without limitation, reasonable attorneys' fees and disbursements (collectively the "Claims") which any of them may suffer from or incur and which arise or result primarily from (i) any gross negligence or willful misconduct of Contractor arising from or connected with Contractor's carrying out of his duties under this Agreement, or (ii) the breach by Contractor of any of his obligations, agreements or duties under this Agreement. Diversified shall indemnify and hold harmless Contractor from and against all Claims which he may suffer from or incur and which arise or result primarily from (x) the operation by Diversified or its affiliates or subsidiaries of their businesses, (y) the breach or alleged breach by Diversified or its affiliates or subsidiaries of, or their failure or alleged failure to perform under, any agreement to which any one of them is a party, including, without limitation, any agreement relating to the acquisition of any truck stop or other business or assets, or (Z) the breach by Diversified of any of its obligations, agreements or duties under this Agreement; provided, however, none of the foregoing result from or arise out of the actions or inactions of Contractor. 16. Compliance with Law. Both parties hereto agree that if the manner of payment to the Contractor, or payment by Diversified to the Contractor or any other provision of this Agreement, becomes violative of any law, including, but not limited to, federal or state taxation laws, rules or regulations, the parties shall negotiate a revision in the terms of the Agreement such that the purpose for the Agreement and the benefits contemplated to be obtained by each shall be preserved to the greatest extent practicable. The parties further agree that in the event that compliance with the law substantially precludes the purposes for 7 (Execution Copy) which this Agreement has been made, then this Agreement may be terminated upon written notice given by either party. 17. Duties as an officer of JALOU. Both parties acknowledge and agree that the Consulting Services rendered by Contractor hereunder are in addition to, are distinct from and shall not conflict with the duties of the Contractor in his position as an officer and manager of JALOU. 18. Miscellaneous. Negation of Agency. Nothing herein contained shall be deemed to create an agency, joint venture or partnership relation between the parties hereto and it is acknowledged that the parties hereto have only a relationship of employer/independent contractor. Construction. The language of this Agreement and of each and every article, paragraph, section, term and/or provision of this Agreement, shall in all cases, for any and all purposes and in any and all circumstances, be construed as a whole according to its meaning and not strictly for or against Diversified or Contractor, without regard whatsoever to the identity or status of any person or persons who drafted all or any portion of this Agreement. Headings. The section headings used in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. Authority to Make Agreement. This Agreement is not valid or binding until and unless executed by the Manager or duly authorized party of both Diversified and Contractor. Counterpart signatures. This Agreement may be executed in more than one counterpart each of which when taken together shall constitute one and the same original. Assignment. This Agreement and the rights, duties and obligations hereunder may not be assigned by either party. Notwithstanding the foregoing. Diversified may assign all of its interests, rights and obligations hereunder to any of its parent entities, affiliates and/or subsidiaries or any other entity which is the surviving entity following a merger with Diversified. [The remainder of this page is left intentionally blank.] 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Agreement Date, intending to be bound by its terms and conditions. DIVERSIFIED: DIVERSIFIED OPPORTUNITIES GROUP LTD., an Ohio limited liability company By: JACOBS ENTERTAINMENT, LTD., an Ohio limited liability company, its manager /s/ JEFFREY P. JACOBS By:_________________________________________ Jeffrey P. Jacobs, Manager CONTRACTOR: /s/ IAN M. STEWART By:_________________________________________ Ian M. Stewart EX-10.2 52 dex102.txt EXECUTIVE EMPLOYMENT AGREEMENT-JEFFREY P. JACOBS Exhibit 10.2 EXECUTIVE EMPLOYMENT AGREEMENT JEFFREY P. JACOBS EXECUTIVE EMPLOYMENT AGREEMENT ("AGREEMENT") EXECUTIVE EMPLOYMENT AGREEMENT, effective February 22, 2002 ("Effective Date"), by and between Gameco, Inc., a Delaware corporation (the "Company"), and Jeffrey P. Jacobs (the "Executive"). WHEREAS, the Company desires to employ the Executive and the Executive desires to be so employed by the Company from and after the date of this Agreement, it being specifically acknowledged by each party hereto that upon execution and delivery of this Agreement the employment agreement dated January 1, 2000, between the Executive and Black Hawk Gaming & Development Company, Inc. (a subsidiary of the Company) shall be terminated and superseded by this Agreement. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows: ARTICLE I EMPLOYMENT DUTIES AND BENEFITS SECTION 1.1 EMPLOYMENT. The Company hereby employs the Executive as Chief Executive Officer, President, Secretary, Treasurer and Chairman of the Board of the Company. The Executive accepts such employment and agrees to perform the duties and responsibilities assigned to him under this Agreement. SECTION 1.2 DUTIES AND RESPONSIBILITIES. During the period of employment, the Executive agrees to serve the Company as Chief Executive Officer, President, Secretary, Treasurer and Chairman of the Board of the Company and in such other offices and directorships of the Company and of its subsidiaries and related companies (collectively, "Affiliates") to which he may be elected or appointed, and to perform the duties commensurate with such positions and such other reasonable and appropriate duties as may be requested of him by the board of directors of the Company (the "Board of Directors") and of the Affiliates, as applicable, in accordance with this Agreement and in compliance with all applicable laws and regulations. Excluding periods of vacation and sick leave to which the Executive is entitled, the Executive shall devote such time, energy, and skill to the business and affairs of the Company and its Affiliates and to the promotion of their interests as is necessary to perform the duties required of him by this Agreement. SECTION 1.3 WORKING FACILITIES. The Executive shall be furnished with facilities and services suitable to his position and adequate for the performance of his duties under this Agreement. SECTION 1.4 VACATIONS. The Executive shall be entitled each year during the Term, as defined below, to a vacation with full salary and benefits, for the number of weeks established by the Board of Directors. SECTION 1.5 EXPENSES. The Executive is authorized to incur reasonable expenses for promoting the business of the Company, including expenses for entertainment, travel and similar items. The Company will promptly reimburse the Executive for all such expenses upon the presentation by the Executive, from time to time, of an itemized account of such expenditures. Section 1.6 BENEFIT PLANS. From the effective date of this Agreement, the Executive shall be entitled to participate in benefit plans provided to employees of the Company. Such participation shall be based upon the policies established by the Board of Directors. ARTICLE II COMPENSATION SECTION 2.1 BASE SALARY. During the Term, the Company shall pay to the Executive a base salary at the rate of $500,000 per year. SECTION 2.2 BONUS AND BONUS PLAN PARTICIPATION. The Executive will be entitled to an annual bonus for each year ended December 31 during the Term of up to 33% of the Executive's base salary. The amount of the percentage within that limit shall be determined in the sole discretion of the Board of Directors and shall be based on written objectives defined by the Board of Directors. ARTICLE III TERM OF EMPLOYMENT AND TERMINATION SECTION 3.1 TERM. This Agreement shall be for a period of three years commencing on February 22, 2002; subject, however, to termination during such period as provided in this Article (the "Term"). SECTION 3.2 TERMINATION BY THE COMPANY WITH CAUSE. The Company may terminate the Executive's employment, at any time, for cause upon ten days' written notice and opportunity for the Executive to remedy any non-compliance with the terms of this Agreement (if such non-compliance can be remedied). Grounds for termination "for cause" shall be any of the following: (i) intentional and material breach of his duty of loyalty or care to the Company, (ii) gross negligence or willful misconduct in performance of his duties during the course of his employment, (iii) persistent failure to abide by the corporate policies and procedures established by the Board of Directors; (iv) persistent failure to execute the reasonable and lawful instructions of the Board of Directors relating to the operation of the Company's business, and (v) conviction of any felony or loss of the Executive's necessary gaming licenses or other regulatory approval. Upon the date of termination of the Executive's employment pursuant to this Section 3.2, the Company's obligation to pay any compensation (including bonuses) shall terminate, at which time the Company shall be responsible for compensating the Executive for any unpaid salary and vacation time not taken. Subject to this exception and the obligation of the Company to compensate the Executive through the notice period, no other 2 compensation shall be payable to the Executive should this Agreement be terminated pursuant to this Section 3.2. SECTION 3.3 TERMINATION OR CESSATION OF EMPLOYMENT WITHOUT CAUSE. If the Executive's employment is terminated or ceased without cause, all compensation shall cease, but the Company shall be obligated to compensate the Executive with a lump sum severance payment equal to the present value of his salary otherwise payable during the remaining Term of this Agreement. In the event the Executive's employment is terminated pursuant to this Section 3.3, the Executive shall be entitled to participate in the bonus payable pursuant to Section 2.2, with respect to the year in which his employment is terminated, prorated for the year based on the number of full months employed during such year compared to 12. In addition, the covenant in Section 4.1(b) below shall be automatically terminated on the effective date of any termination of Executive's employment without cause. SECTION 3.4 TERMINATION UPON DEATH OF THE EXECUTIVE. In addition to any other provision relating to termination, this Agreement shall terminate upon the Executive's death. In such event, all earned and unpaid compensation, compensation for vacation time not taken by the Executive and all expense reimbursements due to the Executive shall be paid to the Executive's estate. In the event the Executive's employment is terminated pursuant to this Section 3.4, the Executive's estate also shall be entitled to a death benefit equal to six months' salary and to participate in the bonus payable pursuant to Section 2.2 with respect to the year in which his employment is terminated, prorated for the year based on the number of full months worked during such year compared to 12. SECTION 3.5 TERMINATION UPON SALE. (a) If during the Term, the Company: (i) is merged into another company; (ii) sells all or substantially all of its assets to another company or person; (iii) experiences a change in ownership of 50% or more of its common stock; or (iv) issues shares in excess of 50% of its then outstanding stock to another company or person and the Executive is not offered, by the acquiring company or person, an employment position, or not offered an employment position satisfactory to him (in his sole discretion), he shall be deemed Terminated Without Cause and shall be entitled to a severance payment in an amount equal to one year's Base Salary, which shall be in addition to amounts payable to the Executive under Section 3.3 above. (b) The foregoing subsection 3.5(a) shall not apply if the Executive is an equity participant in any of the transactions described in subsection 3.5(a)(i)-(iv) above. 3 ARTICLE IV CONFIDENTIALITY AND COMPETITION SECTION 4.1 FURTHER OBLIGATIONS OF THE EXECUTIVE DURING AND AFTER EMPLOYMENT. (a) The Executive realizes that during the course of his employment, the Executive will have produced and/or have access to confidential plans, information, business opportunity records, notebooks, data, specifications, trade secrets, customer lists and account lists of the Company and its affiliates ("Confidential Information"). Therefore, during and subsequent to his employment by the Company, or by an affiliate, the Executive agrees to hold in confidence and not to directly or indirectly disclose or use or copy or make lists of any such Confidential Information, except on behalf of the Company or to the extent authorized by the Company in writing. All records, files, business plans, documents, equipment and the like, or copies thereof, relating to Company's business, or the business of any Affiliate, which the Executive shall prepare, or use, or come into contact with, shall remain the sole property of the Company, or of any Affiliate, and shall not be removed from the Company's or the Affiliate's premises without its written consent, and shall be promptly returned to the Company upon termination or resignation of employment with the Company or Affiliates. (b) Because of his employment by the Company, the Executive will have access to trade secrets and confidential information about the Company, its business plans, its business accounts, its business opportunities, its expansion plans into other geographic areas and its methods of doing business. The Executive agrees that for the Term of this Agreement and an additional period of one year he will not take any actions which are calculated to persuade any employee, vendor or supplier of the Company to terminate or modify in any adverse manner their association with the Company. (c) In the event a court of competent jurisdiction finds any provision of this Section 4.1 to be so overbroad as to be unenforceable, then such provision shall be reduced in scope by the court, to the extent deemed necessary by the court to render the provision reasonable and enforceable. The Executive acknowledges and agrees that any breach of this Agreement by the Executive would cause immediate irreparable harm to the Company. The Executive agrees that should he violate any of the terms and conditions of this Article IV, the Company, in its sole discretion, shall be entitled to seek and obtain immediate injunctive relief and enjoin further and future violations of this Article IV. ARTICLE V DISABILITY AND ILLNESS SECTION 5.1 DISABILITY AND SALARY CONTINUATION. (a) Definition of Total Disability. For purposes of this Agreement, ------------------------------ the terms "totally disabled" and "total disability" shall mean disability as defined in any total disability insurance policy or policies, if any, in effect with respect to the Executive. If 4 no insurance policy is in effect, "total disability" shall mean a medically determinable physical or mental condition which, in the opinion of two physicians chosen by the mutual consent of the parties, renders the Executive unable to perform substantially all of the duties required pursuant to this Agreement. Total disability shall be deemed to have occurred on the date of the disabling injury or onset of the disabling illness, as determined by the two independent physicians. In the event that the two independent physicians are unable to agree as to the date of the disabling injury or onset of the disabling illness, such date shall be deemed to be the later of the two dates determined by the physicians chosen pursuant to this Section 5.1(a). (b) Salary Continuation. If the Executive becomes totally disabled ------------------- during the term of this Agreement, his full salary shall be continued for 90 days from the date of the disabling injury or onset of the disabling illness as determined in accordance with the provisions of Section 5.1(a) above, and thereafter the Executive's employment may be terminated in accordance with the provisions of Section 3.3. SECTION 5.2 ILLNESS. If the Executive is unable to perform the services required under this Agreement by reason of illness or physical injury not amounting to total disability, also as determined in this Article, the compensation otherwise payable to the Executive under this Agreement shall be continued for a period of six months and he shall be entitled to participate in the bonus payable in Section 2.2 with respect to the year in which the illness occurred, prorated for the year based on the number of months worked during such year compared to 12, after which the Executive's employment may be terminated and the Company shall have no further obligation to the Executive. ARTICLE VI GENERAL MATTERS SECTION 6.1 GOVERNING LAW. This Agreement shall be governed by the laws of the State of Colorado and shall be construed in accordance therewith. SECTION 6.2 NO WAIVER. No provision of this Agreement may be waived except by an agreement in writing signed by the waiving party. A waiver of any term or provision shall not be construed as a waiver of any other term or provision. SECTION 6.3 AMENDMENT. This Agreement may be amended, altered or revoked at any time, in whole or in part, by filing with this Agreement a written instrument setting forth such changes, signed by each of the parties. SECTION 6.4 BENEFIT. This Agreement shall be binding upon the Executive and the Company, and shall not be assignable by either party without the other party's written consent. SECTION 6.5 SEVERABILITY. If any provision of this Agreement is declared by any court of competent jurisdiction to be invalid for any reason, such invalidity shall not affect the remaining provisions. On the contrary, such remaining provisions shall be fully severable, and this Agreement shall be construed and enforced as if such invalid provisions had not been included in the Agreement. 5 SECTION 6.6 EFFECTIVE DATE. The effective date of this Agreement shall be February 22, 2002. SECTION 6.7 ARBITRATION. The Company and the Executive expressly agree that except for matters arising under Article IV of this Agreement all disputes arising out of this Agreement shall be resolved by arbitration in accordance with the following provisions. Either party must demand in writing such arbitration within ten days after the controversy arises by sending a notice to arbitrate to both the other party and to the American Arbitration Association (hereinafter referred to as "AAA"). The controversy shall then be arbitrated pursuant to the rules promulgated by the AAA at the AAA's offices located in Denver, Colorado. The parties will select by mutual agreement the arbitrator or arbitrators (hereinafter collectively referred to as "arbitrator") to hear and resolve the controversy. The arbitrator shall be governed by the express terms of this Agreement and the laws of the State of Colorado. The arbitrator's decision shall be final and binding on the parties and shall bar any suit, action, or proceeding instituted in any federal, state, or local court or administrative tribunal. Notwithstanding the preceding sentence, the arbitrator's judgment may be entered in any court of competent jurisdiction. These arbitration provisions shall survive the termination of this Agreement. GAMECO, INC. By: /s/ Jeffrey P. Jacobs --------------------------------------------- Jeffrey P. Jacobs, Chief Executive Officer EXECUTIVE: /s/ Jeffrey P. Jacobs ------------------------------------------- Jeffrey P. Jacobs 6 EX-10.3 53 dex103.txt EXECUTIVE EMPLOYMENT AGREEMENT-RICHARD E. JACOBS Exhibit 10.3 EXECUTIVE EMPLOYMENT AGREEMENT RICHARD E. JACOBS EXECUTIVE EMPLOYMENT AGREEMENT ("AGREEMENT") EXECUTIVE EMPLOYMENT AGREEMENT, effective February 22, 2002 ("Effective Date"), by and between Gameco, Inc., a Delaware corporation (the "Company"), and Richard E. Jacobs (the "Executive"). WHEREAS, the Company desires to employ the Executive and the Executive desires to be so employed by the Company from and after the date of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows: ARTICLE I EMPLOYMENT DUTIES AND BENEFITS SECTION 1.1 EMPLOYMENT. The Company hereby employs the Executive as a Director of the Company. The Executive accepts such employment and agrees to perform the duties and responsibilities assigned to him under this Agreement. SECTION 1.2 DUTIES AND RESPONSIBILITIES. During the period of employment, the Executive agrees to serve the Company as Director of the Company and in such other offices and directorships of the Company and of its subsidiaries and related companies (collectively, "Affiliates") to which he may be elected or appointed, and to perform the duties commensurate with such positions and such other reasonable and appropriate duties as may be requested of him by the board of directors of the Company (the "Board of Directors") and of the Affiliates, as applicable, in accordance with this Agreement and in compliance with all applicable laws and regulations. Excluding periods of vacation and sick leave to which the Executive is entitled, the Executive shall devote such time, energy, and skill to the business and affairs of the Company and its Affiliates and to the promotion of their interests as is necessary to perform the duties required of him by this Agreement. SECTION 1.3 WORKING FACILITIES. The Executive shall be furnished with facilities and services suitable to his position and adequate for the performance oIf his duties under this Agreement. SECTION 1.4 VACATIONS. The Executive shall be entitled each year during the Term, as defined below, to a vacation with full salary and benefits, for the number of weeks established by the Board of Directors. SECTION 1.5 EXPENSES. The Executive is authorized to incur reasonable expenses for promoting the business of the Company, including expenses for entertainment, travel and similar items. The Company will promptly reimburse the Executive for all such expenses upon the presentation by the Executive, from time to time, of an itemized account of such expenditures. SECTION 1.6 BENEFIT PLANS. From the effective date of this Agreement, the Executive shall be entitled to participate in benefit plans provided to employees of the Company. Such participation shall be based upon the policies established by the Board of Directors. ARTICLE II COMPENSATION SECTION 2.1 BASE SALARY. During the Term, the Company shall pay to the Executive a base salary at the rate of $250,000 per year. SECTION 2.2 BONUS AND BONUS PLAN PARTICIPATION. The Executive will be entitled to an annual bonus for each year ended December 31 during the Term of up to 33% of the Executive's base salary. The amount of the percentage within that limit shall be determined in the sole discretion of the Board of Directors and shall be based on written objectives defined by the Board of Directors. ARTICLE III TERM OF EMPLOYNMENT AND TERMINATION SECTION 3.1 TERM. This Agreement shall be for a period of three years commencing on February 22, 2002; subject, however, to termination during such period as provided in this Article (the "Term"). SECTION 3.2 TERMINATION BY THE COMPANY WITH CAUSE. The Company may terminate the Executive's employment, at any time, for cause upon ten days' written notice and opportunity for the Executive to remedy any non-compliance with the terms of this Agreement (if such non-compliance can be remedied). Grounds for termination "for cause" shall be any of the following: (i) intentional and material breach of his duty of loyalty or care to the Company, (ii) gross negligence or willful misconduct in performance of his duties during the course of his employment, (iii) persistent failure to abide by the corporate policies and procedures established by the Board of Directors; (iv) persistent failure to execute the reasonable and lawful instructions of the Board of Directors relating to the operation of the Company's business, and (v) conviction of any felony or loss of the Executive's necessary gaming licenses or other regulatory approval. Upon the date of termination of the Executive's employment pursuant to this Section 3.2, the Company's obligation to pay any compensation (including bonuses) shall terminate, at which time the Company shall be responsible for compensating the Executive for any unpaid salary and vacation time not taken. Subject to this exception and the obligation of the Company to compensate the Executive through the notice period, no other compensation shall be payable to the Executive should this Agreement be terminated pursuant to this Section 3.2. SECTION 3.3 TERMINATION OR CESSATION OF EMPLOYMENT WITHOUT CAUSE. If the Executive's employment is terminated or ceased without cause, all compensation 2 shall cease, but the Company shall be obligated to compensate the Executive with a lump sum severance payment equal to the present value of his salary otherwise payable during the remaining Term of this Agreement. In the event the Executive's employment is terminated pursuant to this Section 3.3, the Executive shall be entitled to participate in the bonus payable pursuant to Section 2.2, with respect to the year in which his employment is terminated, prorated for the year based on the number of full months employed during such year compared to 12. In addition, the covenant in Section 4.1(b) below shall be automatically terminated on the effective date of any termination of Executive's employment without cause. SECTION 3.4 TERMINATION UPON DEATH OF THE EXECUTIVE. In addition to any other provision relating to termination, this Agreement shall terminate upon the Executive's death. In such event, all earned and unpaid compensation, compensation for vacation time not taken by the Executive and all expense reimbursements due to the Executive shall be paid to the Executive's estate. In the event the Executive's employment is terminated pursuant to this Section 3.4, the Executive's estate also shall be entitled to a death benefit equal to six months' salary and to participate in the bonus payable pursuant to Section 2.2 with respect to the year in which his employment is terminated, prorated for the year based on the number of full months worked during such year compared to 12. SECTION 3.5 TERMINATION UPON SALE. (a) If during the Term, the Company: (i) is merged into another company; (ii) sells all or substantially all of its assets to another company or person; (iii) experiences a change in ownership of 50% or more of its common stock; or (iv) issues shares in excess of 50% of its then outstanding stock to another company or person and the Executive is not offered, by the acquiring company or person, an employment position, or not offered an employment position satisfactory to him (in his sole discretion), he shall be deemed Terminated Without Cause and shall be entitled to a severance payment in an amount equal to one year's Base Salary, which shall be in addition to amounts payable to the Executive under Section 3.3 above. (b) The foregoing subsection 3.5(a) shall not apply if the Executive is an equity participant in any of the transactions described in subsection 3.5(a)(i)-(iv) above. 3 ARTICLE IV CONFIDENTIALITY AND COMPETITION SECTION 4.1 FURTHER OBLIGATIONS OF THE EXECUTIVE DURING AND AFTER EMPLOYMENT. (a) The Executive realizes that during the course of his employment, the Executive will have produced and/or have access to confidential plans, information, business opportunity records, notebooks, data, specifications, trade secrets, customer lists and account lists of the Company and its affiliates ("Confidential Information"). Therefore, during and subsequent to his employment by the Company, or by an affiliate, the Executive agrees to hold in confidence and not to directly or indirectly disclose or use or copy or make lists of any such Confidential Information, except on behalf of the Company or to the extent authorized by the Company in writing. All records, files, business plans, documents, equipment and the like, or copies thereof, relating to Company's business, or the business of any Affiliate, which the Executive shall prepare, or use, or come into contact with, shall remain the sole property of the Company, or of any Affiliate, and shall not be removed from the Company's or the Affiliate's premises without its written consent, and shall be promptly returned to the Company upon termination or resignation of employment with the Company or Affiliates. (b) Because of his employment by the Company, the Executive will have access to trade secrets and confidential information about the Company, its business plans, its business accounts, its business opportunities, its expansion plans into other geographic areas and its methods of doing business. The Executive agrees that for the Term of this Agreement and an additional period of one year he will not take any actions which are calculated to persuade any employee, vendor or supplier of the Company to terminate or modify in any adverse manner their association with the Company. (c) In the event a court of competent jurisdiction finds any provision of this Section 4.1 to be so overbroad as to be unenforceable, then such provision shall be reduced in scope by the court, to the extent deemed necessary by the court to render the provision reasonable and enforceable. The Executive acknowledges and agrees that any breach of this Agreement by the Executive would cause immediate irreparable harm to the Company. The Executive agrees that should he violate any of the terms and conditions of this Article IV, the Company, in its sole discretion, shall be entitled to seek and obtain immediate injunctive relief and enjoin further and future violations of this Article IV. ARTICLE V DISABILITY AND ILLNESS SECTION 5.1 DISABILITY AND SALARY CONTINUATION. (a) Definition of Total Disability. For purposes of this Agreement, the ------------------------------ terms "totally disabled" and "total disability" shall mean disability as defined in any total disability insurance policy or policies, if any, in effect with respect to the Executive. If no insurance policy is in effect, "total disability" shall mean a medically determinable physical or mental condition which, in the opinion of two physicians chosen by the mutual consent of the parties, renders the Executive unable to perform substantially all of the duties required pursuant to this Agreement. Total disability shall be deemed to have occurred on the date of the disabling injury or onset of the disabling illness, as determined by the two independent physicians. In the event that the two independent physicians are unable to agree as to the date of the disabling injury or onset of the disabling illness, such date shall be deemed to be the later of the two dates determined by the physicians chosen pursuant to this Section 5.1(a). (b) Salary Continuation. If the Executive becomes totally disabled ------------------- during the term of this Agreement, his full salary shall be continued for 90 days from the date of the disabling injury or onset of the disabling illness as determined in accordance with the provisions of Section 5.1(a) above, and thereafter the Executive's employment may be terminated in accordance with the provisions of Section 3.3. SECTION 5.2 ILLNESS. If the Executive is unable to perform the services required under this Agreement by reason of illness or physical injury not amounting to total disability, also as determined in this Article, the compensation otherwise payable to the Executive under this Agreement shall be continued for a period of six months and he shall be entitled to participate in the bonus payable in Section 2.2 with respect to the year in which the illness occurred, prorated for the year based on the number of months worked during such year compared to 12, after which the Executive's employment may be terminated and the Company shall have no further obligation to the Executive. ARTICLE VI GENERAL MATTERS SECTION 6.1 GOVERNING LAW. This Agreement shall be governed by the laws of the State of Ohio and shall be construed in accordance therewith. SECTION 6.2 NO WAIVER. No provision of this Agreement may be waived except by an agreement in writing signed by the waiving party. A waiver of any term or provision shall not be construed as a waiver of any other term or provision. SECTION 6.3 AMENDMENT. This Agreement may be amended, altered or revoked at any time, in whole or in part, by filing with this Agreement a written instrument setting forth such changes, signed by each of the parties. SECTION 6.4 BENEFIT. This Agreement shall be binding upon the Executive and the Company, and shall not be assignable by either party without the other party's written consent. SECTION 6.5 SEVERABILITY. If any provision of this Agreement is declared by any court of competent jurisdiction to be invalid for any reason, such invalidity shall not affect the remaining provisions. On the contrary, such remaining provisions shall be fully severable, and 5 this Agreement shall be construed and enforced as if such invalid provisions had not been included in the Agreement. SECTION 6.6 EFFECTIVE DATE. The effective date of this Agreement shall be February 22, 2002. SECTION 6.7 ARBITRATION. The Company and the Executive expressly agree that all disputes arising out of this Agreement shall be resolved by arbitration in accordance with the following provisions. Either party must demand in writing such arbitration within ten days after the controversy arises by sending a notice to arbitrate to both the other party and to the American Arbitration Association (hereinafter referred to as "AAA"). The controversy shall then be arbitrated pursuant to the rules promulgated by the AAA at the AAA's offices located in Cuyahoga County, Ohio. The parties will select by mutual agreement the arbitrator or arbitrators (hereinafter collectively referred to as "arbitrator") to hear and resolve the controversy. The arbitrator shall be governed by the express terms of this Agreement and the laws of the State of Ohio. The arbitrator's decision shall be final and binding on the parties and shall bar any suit, action, or proceeding instituted in any federal, state, or local court or administrative tribunal. Notwithstanding the preceding sentence, the arbitrator's judgment may be entered in any court of competent jurisdiction. These arbitration provisions shall survive the termination of this Agreement. GAMECO, INC. By: ____________________________________ Jeffrey P. Jacobs, Chief Executive Officer EXECUTIVE: ____________________________________ Richard E. Jacobs 6 EX-10.4 54 dex104.txt EXECUTIVE EMPLOYMENT AGREEMENT-STEPHEN R. ROARK Exhibit 10.4 EXECUTIVE EMPLOYMENT AGREEMENT STEPHEN R. ROARK EXECUTIVE EMPLOYMENT AGREEMENT ("AGREEMENT") EXECUTIVE EMPLOYMENT AGREEMENT, effective February 22, 2002 ("Effective Date"), by and between Gameco, Inc., a Delaware corporation (the "Company"), and Stephen R. Roark (the "Executive"). WHEREAS, the Company desires to employ the Executive and the Executive desires to be so employed by the Company from and after the date of this Agreement, it being specifically acknowledged by each party hereto that upon execution and delivery of this Agreement, the employment agreement dated May 1, 1999, and amended as of January 1, 2000 between the Executive and Black Hawk Gaming & Development Company, Inc. (a subsidiary of the Company) shall be terminated and superseded by this Agreement. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows: ARTICLE I EMPLOYMENT DUTIES AND BENEFITS SECTION 1.1 EMPLOYMENT. The Company hereby employs the Executive as Chief Financial Officer and President of Casino Operations of the Company. The Executive accepts such employment and agrees to perform the duties and responsibilities assigned to him under this Agreement. SECTION 1.2 DUTIES AND RESPONSIBILITIES. During the period of employment, the Executive agrees to serve the Company as Chief Financial Officer and President of Casino Operations of the Company and in such other offices and directorships of the Company and of its subsidiaries and related companies (collectively, "Affiliates") to which he may be elected or appointed, and to perform the duties commensurate with such positions and such other reasonable and appropriate duties as may be requested of him by the board of directors of the Company (the "Board of Directors") and of the Affiliates, as applicable, in accordance with this Agreement and in compliance with all applicable laws and regulations. Excluding periods of vacation and sick leave to which the Executive is entitled, the Executive shall devote such time, energy, and skill to the business and affairs of the Company and its Affiliates and to the promotion of their interests as is necessary to perform the duties required of him by this Agreement. WORKING FACILITIES; LOCATION. The Executive shall be furnished with facilities and services suitable to his position and adequate for the performance of his duties under this Agreement. The principal place of performance by the Executive of his duties hereunder shall be in Black Hawk, Colorado, or at such other location as he may reasonably be required to travel in the performance of his responsibilities. SECTION 1.4 VACATIONS. The Executive shall be entitled each year during the Term, as defined below, to a vacation with full salary and benefits, for the number of weeks established by the Board of Directors. SECTION 1.5 EXPENSES. The Executive is authorized to incur reasonable expenses for promoting the business of the Company, including expenses for entertainment, travel and similar items. The Company will promptly reimburse the Executive for all such expenses upon the presentation by the Executive, from time to time, of an itemized account of such expenditures. SECTION 1.6 VEHICLE ALLOWANCE. The Executive shall be paid a vehicle allowance of $500 per month or, at his election, the Company shall lease for not more than $500 per month a vehicle for the use of the Executive, the make and model of which shall be mutually agreeable to the Company and the Executive. SECTION 1.7 BENEFIT PLANS. From the effective date of this Agreement, the Executive shall be entitled to participate in benefit plans provided to employees of the Company or Affiliates. Such participation shall be based upon the policies established by the Board of Directors as applicable to the Executive. ARTICLE II COMPENSATION SECTION 2.1 BASE SALARY. During the Term, the Company shall pay to the Executive a base salary at the rate of $300,000 per year. SECTION 2.2 BONUS AND BONUS PLAN PARTICIPATION. The Executive will be entitled to an annual bonus for each year ended December 31 during the Term of up to 33% of the Executive's base salary. The amount of the percentage within that limit shall be determined in the sole discretion of the Board of Directors and shall be based on written objectives defined by the Board of Directors. ARTICLE III TERM OF EMPLOYMENT AND TERMINATION SECTION 3.1 TERM. This Agreement shall be for a period of two years commencing on February 22, 2002; subject, however, to termination during such period as provided in this Article (the "Term"). SECTION 3.2 TERMINATION BY THE COMPANY WITH CAUSE. The Company may terminate the Executive's employment, at any time, for cause upon ten days' written notice and opportunity for the Executive to remedy any non-compliance with the terms of this Agreement (if such non-compliance can be remedied). Grounds for termination "for cause" shall be any of the following: (i) intentional and material breach of his duty of loyalty or care to the 2 Company, (ii) gross negligence or willful misconduct in performance of his duties during the course of his employment, (iii) persistent failure to abide by the corporate policies and procedures established by the Board of Directors; (iv) persistent failure to execute the reasonable and lawful instructions of the Board of Directors relating to the operation of the Company's business, and (v) conviction of any felony or loss of the Executive's necessary gaming licenses or other regulatory approval. Upon the date of termination of the Executive's employment pursuant to this Section 3.2, the Company's obligation to pay any compensation (including bonuses) shall terminate, at which time the Company shall be responsible for compensating the Executive for any unpaid salary and vacation time not taken. Subject to this exception and the obligation of the Company to compensate the Executive through the notice period, no other compensation shall be payable to the Executive should this Agreement be terminated pursuant to this Section 3.2. SECTION 3.3 TERMINATION OR CESSATION OF EMPLOYMENT WITHOUT CAUSE. If the Executive's employment is terminated or ceased without cause, all compensation shall cease, but the Company shall be obligated to compensate the Executive with a lump sum severance payment equal to the present value of his salary otherwise payable during the remaining Term of this Agreement. In the event the Executive's employment is terminated pursuant to this Section 3.3, the Executive shall be entitled to participate in the bonus payable pursuant to SECTION 2.2, with respect to the year in which his employment is terminated, prorated for the year based on the number of full months employed during such year compared to 12. In addition, the non-competition covenant in Section 4.1(c) below shall be automatically terminated on the effective date of any termination of Executive's employment without cause. SECTION 3.4 TERMINATION UPON DEATH OF THE EXECUTIVE. In addition to any other provision relating to termination, this Agreement shall terminate upon the Executive's death. In such event, all unpaid compensation, compensation for vacation time not taken by the Executive and all expense reimbursements due to the Executive shall be paid to the Executive's estate. In the event the Executive's employment is terminated pursuant to this SECTION 3.4, the Executive's estate also shall be entitled to a death benefit equal to six months salary and to participate in the bonus payable pursuant to SECTION 2.2 with respect to the year in which his employment is terminated, prorated for the year based on the number of full months worked during such year compared to 12. SECTION 3.5 TERMINATION UPON SALE. (a) If during the Term, the Company: (i) is merged into another company; (ii) sells all or substantially all of its assets to another company or person; (iii) experiences a change in ownership of 50% or more of its common stock; or (iv) issues shares in excess of 50% of its then outstanding stock to another company or person 3 and the Executive is not offered, by the acquiring company or person, an employment position, or not offered an employment position satisfactory to him, he shall be deemed Terminated Without Cause and shall be entitled to a severance payment in an amount equal to one year's Base Salary, which shall be in addition to amounts payable to the Executive under Section 3.3 above. (b) The foregoing subsection 3.5(a) shall not apply if the Executive is an equity participant in any of the transactions described in subSECTION 3.5(a)(i)-(iv) above. ARTICLE IV CONFIDENTIALITY AND COMPETITION SECTION 4.1 FURTHER OBLIGATIONS OF THE EXECUTIVE DURING AND AFTER EMPLOYMENT. (a) The Executive agrees that during the term of his employment under this Agreement and for an additional period of one year, he will engage in no business activities which are or may be competitive with, or which might place him in a competing position to that of, the Company or any Affiliate except as authorized by the Company's Board of Directors. (b) The Executive realizes that during the course of his employment, the Executive will have produced and/or have access to confidential plans, information, business opportunity records, notebooks, data, specifications, trade secrets, customer lists and account lists of the Company and its Affiliates ("Confidential Information"). Therefore, during and subsequent to his employment by the Company, or by an Affiliate, the Executive agrees to hold in confidence and not to directly or indirectly disclose or use or copy or make lists of any such Confidential Information, except to the extent authorized by the Company in writing. All records, files, business plans, documents, equipment and the like, or copies thereof, relating to Company's business, or the business of any Affiliate, which the Executive shall prepare, or use, or come into contact with, shall remain the sole property of the Company, or of the Affiliate, and shall not be removed from the Company's or the Affiliate's premises without its written consent, and shall be promptly returned to the Company upon termination or resignation of employment with the Company or its Affiliates. (c) Because of his employment by the Company, the Executive will have access to trade secrets and confidential information about the Company, its business plans, its business accounts, its business opportunities, its expansion plans into other geographic areas and its methods of doing business. The Executive agrees that for the Term of this Agreement and an additional period of one year he will not take any actions which are calculated to persuade any employee, vendor or supplier of the Company to terminate or modify in any adverse manner his or its association with the Company. (d) In the event a court of competent jurisdiction finds any provision of this Section 4.1 to be so overbroad as to be unenforceable, then such provision shall be 4 reduced in scope by the court, to the extent deemed necessary by the court to render the provision reasonable and enforceable. The Executive acknowledges and agrees that any breach of this Agreement by the Executive would cause immediate irreparable harm to the Company. The Executive agrees that should he violate any of the terms and conditions of this Agreement, the Company, at its sole discretion, shall be entitled to seek and obtain immediate injunctive relief and enjoin further and future violations of this Agreement. ARTICLE V DISABILITY AND ILLNESS SECTION 5.1 DISABILITY AND SALARY CONTINUATION. (a) Definition of Total Disability. For purposes of this Agreement, ------------------------------ the terms "totally disabled" and "total disability" shall mean disability as defined in any total disability insurance policy or policies, if any, in effect with respect to the Executive. If no insurance policy is in effect, "total disability" shall mean a medically determinable physical or mental condition which, in the opinion of two physicians chosen by the mutual consent of the parties, renders the Executive unable to perform substantially all of the duties required pursuant to this Agreement. Total disability shall be deemed to have occurred on the date of the disabling injury or onset of the disabling illness, as determined by the two independent physicians. In the event that the two independent physicians are unable to agree as to the date of the disabling injury or onset of the disabling illness, such date shall be deemed to be the later of the two dates determined by the physicians chosen pursuant to this Section 5.1(a). (b) Salary Continuation. If the Executive becomes totally disabled ------------------- during the term of this Agreement, his full salary shall be continued for 90 days from the date of the disabling injury or onset of the disabling illness as determined in accordance with the provisions of SECTION 5.1(a) above, and thereafter the Executive's employment may be terminated in accordance with the provisions of Section 3.3. SECTION 5.2 ILLNESS. If the Executive is unable to perform the services required under this Agreement by reason of illness or physical injury not amounting to total disability, also as determined in this Article, the compensation otherwise payable to the Executive under this Agreement shall be continued for a period of six months and he shall be entitled to participate in the bonus payable in Section 2.2 with respect to the year in which the illness occurred, prorated for the year based on the number of months worked during such year compared to 12, after which the Executive's employment may be terminated and the Company shall have no further obligation to the Executive. ARTICLE VI GENERAL MATTERS SECTION 6.1 GOVERNING LAW. This Agreement shall be governed by the laws of the State of Colorado and shall be construed in accordance therewith. 5 SECTION 6.2 NO WAIVER. No provision of this Agreement may be waived except by an agreement in writing signed by the waiving party. A waiver of any term or provision shall not be construed as a waiver of any other term or provision. SECTION 6.3 AMENDMENT. This Agreement may be amended, altered or revoked at any time, in whole or in part, by filing with this Agreement a written instrument setting forth such changes, signed by each of the parties. SECTION 6.4 BENEFIT. This Agreement shall be binding upon the Executive and the Company, and shall not be assignable by either party without the other party's written consent. SECTION 6.5 SEVERABILITY. If any provision of this Agreement is declared by any court of competent jurisdiction to be invalid for any reason, such invalidity shall not affect the remaining provisions. On the contrary, such remaining provisions shall be fully severable, and this Agreement shall be construed and enforced as if such invalid provisions had not been included in the Agreement. SECTION 6.6 EFFECTIVE DATE. The effective date of this Agreement shall be February 22, 2002. SECTION 6.7 ARBITRATION. The Company and the Executive expressly agree that all disputes arising out of this Agreement shall be resolved by arbitration in accordance with the following provisions. Either party must demand in writing such arbitration within ten days after the controversy arises by sending a notice to arbitrate to both the other party and to the American Arbitration Association (hereinafter referred to as "AAA"). The controversy shall then be arbitrated pursuant to the rules promulgated by the AAA at the AAA's offices located in Denver, Colorado. The parties will select by mutual agreement the arbitrator or arbitrators (hereinafter collectively referred to as "arbitrator") to hear and resolve the controversy. The arbitrator shall be governed by the express terms of this Agreement and the laws of the State of Colarado. The arbitrator's decision shall be final and binding on the parties and shall bar any suit, action, or proceeding instituted in any federal, state, or local court or administrative tribunal. Notwithstanding the preceding sentence, the arbitrator's judgment may be entered in any court of competent jurisdiction. These arbitration provisions shall survive the termination of this Agreement. GAMECO, INC. By: /s/ Jeffrey P. Jacobs ------------------------------------------ Jeffrey P. Jacobs, Chief Executive Officer EXECUTIVE: /s/ Stephen R. Roark ------------------------------------------ Stephen R. Roark 6 EX-10.5 55 dex105.txt EXECUTIVE EMPLOYMENT AGREEMENT-IAN M. STEWART Exhibit 10.5 EXECUTIVE EMPLOYMENT AGREEMENT IAN M. STEWART EXECUTIVE EMPLOYMENT AGREEMENT ("AGREEMENT") EXECUTIVE EMPLOYMENT AGREEMENT, effective February 22, 2002 ("Effective Date"), by and between Gameco, Inc., a Delaware corporation (the "Company"), and Ian M. Stewart (the "Executive"). WHEREAS, the Company desires to employ the Executive and the Executive desires to be so employed by the Company from and after the date of this Agreement, it being specifically acknowledged by each party hereto that upon execution and delivery of this Agreement, the employment agreement dated June 23, 1999, between the Executive and Colonial Holdings, Inc. (a subsidiary of the Company) shall be terminated and superseded by this Agreement. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows: ARTICLE I EMPLOYMENT DUTIES AND BENEFITS SECTION 1.1 EMPLOYMENT. The Company hereby employs the Executive as President of Pari-Mutuel Wagering and Video Poker Operations of the Company. The Executive accepts such employment and agrees to perform the duties and responsibilities assigned to him under this Agreement. SECTION 1.2 DUTIES AND RESPONSIBILITIES. During the period of employment, the Executive agrees to serve the Company as President of Pari-Mutuel Wagering and Video Poker Operations and in such other offices and directorships of the Company and of its subsidiaries and related companies (collectively, "Affiliates") to which he may be elected or appointed, and to perform the duties commensurate with such positions and such other reasonable and appropriate duties as may be requested of him by the board of directors of the Company (the "Board of Directors") and of the Affiliates, as applicable, in accordance with this Agreement and in compliance with all applicable laws and regulations. Excluding periods of vacation and sick leave to which the Executive is entitled, Executive shall devote such time, energy, and skill to the business and affairs of the Company and its Affiliates and to the promotion of their interests as is necessary to perform the duties required of him by this Agreement. SECTION 1.3 WORKING FACILITIES; LOCATION. The Executive shall be furnished with facilities and services suitable to his position and adequate for the performance of his duties under this Agreement. The principal place of performance by the Executive of his duties hereunder shall be in New Kent County, Virginia, or at such other location as he may reasonably be required to travel in the performance of his responsibilities. 1 SECTION 1.4 VACATIONS. The Executive shall be entitled each year during the Term, as defined below, to a vacation with full salary and benefits, for the number of weeks established by the Board of Directors. SECTION 1.5 EXPENSES. The Executive is authorized to incur reasonable expenses for promoting the business of the Company, including expenses for entertainment, travel and similar items. The Company will promptly reimburse the Executive for all such expenses upon the presentation by the Executive, from time to time, of an itemized account of such expenditures. SECTION 1.6 VEHICLE ALLOWANCE. The Executive shall be paid a vehicle allowance of $500 per month or, at his election, the Company shall lease for not more than $500 per month a vehicle for the use of the Executive, the make and model of which shall be mutually agreeable to the Company and the Executive. SECTION 1.7 BENEFIT PLANS. From the effective date of this Agreement, the Executive shall be entitled to participate in benefit plans provided to employees of the Company or Affiliates. Such participation shall be based upon the policies established by the Board of Directors as applicable to the Executive. ARTICLE II COMPENSATION SECTION 2.1 BASE SALARY. During the Term, the Company shall pay to the Executive a base salary at the rate of $200,000 per annum for the period February 22, 2002 through February 21, 2003 and at the rate of $215,000 per annum for the period February 22, 2003 through February 22, 2004. SECTION 2.2 BONUS AND BONUS PLAN PARTICIPATION. The Executive will be entitled to an annual bonus for each year during the Term of up to 33% of the Executive's base salary. The amount of the percentage within that limit shall be determined in the sole discretion of the Board of Directors and shall be based on written objectives defined by the Board of Directors. ARTICLE III TERM OF EMPLOYMENT AND TERMINATION SECTION 3.1 TERM. This Agreement shall be for a period of two years commencing on February 22, 2002; subject, however, to termination during such period as provided in this Article (the "Term"). SECTION 3.2 TERMINATION BY THE COMPANY WITH CAUSE. The Company may terminate the Executive's employment, at any time, for cause upon ten days' written notice and opportunity for the Executive to remedy any non-compliance with the terms of this Agreement (if such non-compliance can be remedied). Grounds for termination "for cause" shall be any of the following: (i) intentional and material breach of his duty of loyalty or care to the Company, (ii) gross negligence or willful misconduct in performance of his duties during the 2 course of his employment, (iii) persistent failure to abide by the corporate policies and procedures established by the Board of Directors; (iv) persistent failure to execute the reasonable and lawful instructions of the Board of Directors relating to the operation of the Company's business, and (v) conviction of any felony or loss of the Executive's necessary gaming licenses or other regulatory approval. Upon the date of termination of the Executive's employment pursuant to this Section 3.2, the Company's obligation to pay any compensation (including bonuses) shall terminate, at which time the Company shall be responsible for compensating the Executive for any unpaid salary and vacation time not taken. Subject to this exception and the obligation of the Company to compensate the Executive through the notice period, no other compensation shall be payable to the Executive should this Agreement be terminated pursuant to this Section 3.2. SECTION 3.3 TERMINATION OR CESSATION OF EMPLOYMENT WITHOUT CAUSE. If the Executive's employment is terminated or ceased without cause, all compensation shall cease, but the Company shall be obligated to compensate the Executive with a lump sum severance payment equal to the present value of his salary otherwise payable during the remaining Term of this Agreement. In the event the Executive's employment is terminated pursuant to this section 3.3, the Executive shall be entitled to participate in the bonus payable pursuant to SECTION 2.2, with respect to the year in which his employment is terminated, prorated for the year based on the number of full months employed during such year compared to 12. In addition, the non-competition covenant in SECTION 4.1(c) below shall be automatically terminated on the effective date of any termination of Executive's employment without cause. SECTION 3.4 TERMINATION UPON DEATH OF THE EXECUTIVE. In addition to any other provision relating to termination, this Agreement shall terminate upon the Executive's death. In such event, all unpaid compensation, compensation for vacation time not taken by the Executive and all expense reimbursements due to the Executive shall be paid to the Executive's estate. In the event the Executive's employment is terminated pursuant to this Section 3.4, the Executive's estate also shall be entitled to a death benefit equal to six months' salary and to participate, in the bonus payable pursuant to SECTION 2.2 with respect to the year in which his employment is terminated, prorated for the year based on the number of full months worked during such year compared to 12. SECTION 3.5 TERMINATION UPON SALE. (a) If during the Term, the Company: (i) is merged into another company; (ii) sells all or substantially all of its assets to another company or person; (iii) experiences a change in ownership of 50% or more of its common stock; or (iv) issues shares in excess of 50% of its then outstanding stock to another company or person 3 and the Executive is not offered, by the acquiring company or person, an employment position, or not offered an employment position satisfactory to him, he shall be deemed Terminated Without Cause and shall be entitled to a severance payment in an amount equal to one year's Base Salary, which shall be in addition to amounts payable to the Executive under Section 3.3 above. (b) The foregoing subsection 3.5(a) shall not apply if the Executive is an equity participant in any of the transactions described in subsection 3.5(a)(i)-(iv) above. ARTICLE IV CONFIDENTIALITY AND COMPETITION SECTION 4.1 FURTHER OBLIGATIONS OF THE EXECUTIVE DURING AND AFTER EMPLOYMENT. (a) The Executive agrees that during the term of his employment under this Agreement and for an additional period of one year, he will engage in no business activities which are or may be competitive with, or which might place him in a competing position to that of, the Company or any Affiliate except as authorized by the Company's Board of Directors. (b) The Executive realizes that during the course of his employment, the Executive will have produced and/or have access to confidential plans, information, business opportunity records, notebooks, data, specifications, trade secrets, customer lists and account lists of the Company and its Affiliates ("Confidential Information"). Therefore, during and subsequent to his employment by the Company, or by an Affiliate, the Executive agrees to hold in confidence and not to directly or indirectly disclose or use or copy or make lists of any such Confidential Information, except to the extent authorized by the Company in writing. All records, files, business plans, documents, equipment and the like, or copies thereof, relating to Company's business, or the business of an Affiliate, which the Executive shall prepare, or use, or come into contact with, shall remain the sole property of the Company, or of the Affiliate, and shall not be removed from the Company's or the Affiliate's premises without its written consent, and shall be promptly returned to the Company upon termination or resignation of employment with the Company or its Affiliates. (c) Because of his employment by the Company, the Executive will have access to trade secrets and confidential information about the Company, its business plans, its business accounts, its business opportunities, its expansion plans into other geographic areas and its methods of doing business. The Executive agrees that for the Term of this Agreement and an additional period of one year he will not take any actions which are calculated to persuade any employee, vendor or supplier of the Company to terminate or modify in any adverse manner his or its association with the Company. (d) In the event a court of competent jurisdiction finds any provision of this Section 4.1 to be so overbroad as to be unenforceable, then such provision shall be 4 reduced in scope by the court, to the extent deemed necessary by the court to render the provision reasonable and enforceable. The Executive acknowledges and agrees that any breach of this Agreement by the Executive would cause immediate irreparable harm to the Company. The Executive agrees that should he violate any of the terms and conditions of this Agreement, the Company, at its sole discretion, shall be entitled to seek and obtain immediate injunctive relief and enjoin further and future violations of this Agreement. ARTICLE V DISABILITY AND ILLNESS SECTION 5.1 DISABILITY AND SALARY CONTINUATION. (a) Definition of Total Disability. For purposes of this Agreement, ------------------------------ the terms "totally disabled" and "total disability" shall mean disability as defined in any total disability insurance policy or policies, if any, in effect with respect to the Executive. If no insurance policy is in effect, "total disability" shall mean a medically determinable physical or mental condition which, in the opinion of two physicians chosen by the mutual consent of the parties, renders the Executive unable to perform substantially all of the duties required pursuant to this Agreement. Total disability shall be deemed to have occurred on the date of the disabling injury or onset of the disabling illness, as determined by the two independent physicians. In the event that the two independent physicians are unable to agree as to the date of the disabling injury or onset of the disabling illness, such date shall be deemed to be the later of the two dates determined by the physicians chosen pursuant to this Section 5.1(a). (b) Salary Continuation. If the Executive becomes totally disabled ------------------- during the term of this Agreement, his full salary shall be continued for 90 days from the date of the disabling injury or onset of the disabling illness as determined in accordance with the provisions of SECTION 5.1(a) above, and thereafter the Executive's employment may be terminated in accordance with the provisions of SECTION 3.3. SECTION 5.2 Illness. If the Executive is unable to perform the services required under this Agreement by reason of illness or physical injury not amounting to total disability, also as determined in this Article, the compensation otherwise payable to the Executive under this Agreement shall be continued for a period of six months and he shall be entitled to participate in the bonus payable in Section 2.2 with respect to the year in which the illness occurred, prorated for the year based on the number of months worked during such year compared to 12, after which the Executive's employment may be terminated and the Company shall have no further obligation to the Executive. ARTICLE VI GENERAL MATTERS SECTION 6.1 GOVERNING LAW. This Agreement shall be governed by the laws of the State of Virginia and shall be construed in accordance therewith. 5 SECTION 6.2 NO WAIVER. No provision of this Agreement may be waived except by an agreement in writing signed by the waiving party. A waiver of any term or provision shall not be construed as a waiver of any other term or provision. SECTION 6.3 AMENDMENT. This Agreement may be amended, altered or revoked at any time, in whole or in part, by filing with this Agreement a written instrument setting forth such changes, signed by each of the parties. SECTION 6.4 BENEFIT. This Agreement shall be binding upon the Executive and the Company, and shall not be assignable by either party without the other party's written consent. SECTION 6.5 SEVERABILITY. If any provision of this Agreement is declared by any court of competent jurisdiction to be invalid for any reason, such invalidity shall not affect the remaining provisions. On the contrary, such remaining provisions shall be fully severable, and this Agreement shall be construed and enforced as if such invalid provisions had not been included in the Agreement. SECTION 6.6 EFFECTIVE DATE. The effective date of this Agreement shall be February 22, 2002. SECTION 6.7 ARBITRATION. The Company and the Executive expressly agree that except for matters arising under Article IV of this Agreement, all disputes arising out of this Agreement shall be resolved by arbitration in accordance with the following provisions. Either party must demand in writing such arbitration within ten days after the controversy arises by sending a notice to arbitrate to both the other party and to the American Arbitration Association (hereinafter referred to as "AAA"). The controversy shall then be arbitrated pursuant to the rules promulgated by the AAA at the AAA's offices located in Denver, Colorado. The parties will select by mutual agreement the arbitrator or arbitrators (hereinafter collectively referred to as "arbitrator") to hear and resolve the controversy. The arbitrator shall be governed by the express terms of this Agreement and the laws of the State of Virginia. The arbitrator's decision shall be final and binding on the parties and shall bar any suit, action, or proceeding instituted in any federal, state, or local court or administrative tribunal. Notwithstanding the preceding sentence, the arbitrator's judgment may be entered in any court of competent jurisdiction. These arbitration provisions shall survive the termination of this Agreement. GAMECO, INC. By: __________________________________________ Jeffrey P. Jacobs, Chief Executive Officer EXECUTIVE: __________________________________________ Ian M. Stewart 6 EX-10.6 56 dex106.txt EXECUTIVE EMPLOYMENT AGREEMENT-THOMAS WITHEROW Exhibit 10.6 EXECUTIVE EMPLOYMENT AGREEMENT THOMAS LEE WITHEROW EXECUTIVE EMPLOYMENT AGREEMENT ("AGREEMENT") EXECUTIVE EMPLOYMENT AGREEMENT, effective February 22, 2002 ("Effective Date"), by and between Gameco, Inc., a Delaware corporation (the "Company"), and Thomas Lee Witherow (the "Executive"). WHEREAS, the Company desires to employ the Executive and the Executive desires to be so employed by the Company from and after the date of this Agreement, it being specifically acknowledged by each party hereto that upon execution and delivery of this Agreement, the employment agreement dated August 6, 2001, between the Executive and Black Hawk Gaming & Development Company, Inc. shall be terminated and superseded by this Agreement. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows: ARTICLE I EMPLOYMENT DUTIES AND BENEFITS SECTION 1.1 EMPLOYMENT. The Company hereby employs the Executive as Chief Operating Officer of Casino Operations of the Company. The Executive accepts such employment and agrees to perform the duties and responsibilities assigned to him under this Agreement. SECTION 1.2 DUTIES AND RESPONSIBILITIES. During the period of employment, the Executive agrees to serve the Company as Chief Operating Officer of Casino Operations of the Company and in such other offices and directorships of the Company and of its subsidiaries and related companies (collectively, "Affiliates") to which he may be elected or appointed, and to perform the duties commensurate with such positions and such other reasonable and appropriate duties as may be requested of him by the board of directors of the Company (the "Board of Directors") and of the Affiliates, as applicable, in accordance with this Agreement and in compliance with all applicable laws and regulations. Excluding periods of vacation and sick leave to which the Executive is entitled, the Executive shall devote such time, energy, and skill to the business and affairs of the Company and its Affiliates and to the promotion of their interests as is necessary to perform the duties required of him by this Agreement. SECTION 1.3 WORKING FACILITIES; LOCATION. The Executive shall be furnished with facilities and services suitable to his position and adequate for the performance of his duties under this Agreement. The principal place of performance by the Executive of his duties hereunder shall be in Black Hawk, Colorado, or at such other location as he may reasonably be required to travel in the performance of his responsibilities. 1 SECTION 1.4 VACATIONS. The Executive shall be entitled each year during the Term, as defined below, to a vacation with full salary and benefits, for the number of weeks established by the Board of Directors. SECTION 1.5 EXPENSES. The Executive is authorized to incur reasonable expenses for promoting the business of the Company, including expenses for entertainment, travel and similar items. The Company will promptly reimburse the Executive for all such expenses upon the presentation by the Executive, from time to time, of an itemized account of such expenditures. SECTION 1.6 VEHICLE ALLOWANCE. The Executive shall be paid a vehicle allowance of $500 per month or, at his election, the Company shall lease for not more than $500 per month a vehicle for the use of the Executive, the make and model of which shall be mutually agreeable to the Company and the Executive. SECTION 1.7 BENEFIT PLANS. From the effective date of this Agreement, the Executive shall be entitled to participate in benefit plans provided to employees of the Company or Affiliates. Such participation shall be based upon the policies established ;by the Board of Directors as applicable to the Executive. ARTICLE II COMPENSATION SECTION 2.1 BASE SALARY. During the Term, the Company shall pay to the Executive a base salary at the rate of $225,000 per year. SECTION 2.2 BONUS AND BONUS PLAN PARTICIPATION. The Executive will be entitled to an annual bonus for each year ended December 31 during the Term of up to 33% of the Executive's base salary. The amount of the percentage within that limit shall be determined in the sole discretion of the Board of Directors and shall be based on written objectives defined by the Board of Directors. ARTICLE III TERM OF EMPLOYMENT AND TERMINATION SECTION 3.1 TERM. This Agreement shall be for a period commencing on February 22, 2002 and expiring on July 31, 2004; subject, however, to termination during such period as provided in this Article (the "Term"). SECTION 3.2 TERMINATION BY THE COMPANY WITH CAUSE. The Company may terminate the Executive's employment, at any time, for cause upon ten days' written notice and opportunity for the Executive to remedy any non-compliance with the terms of this Agreement (if such non-compliance can be remedied). Grounds for termination "for cause" shall be any of the following: (i) intentional and material breach of his duty of loyalty or care to the Company, (ii) gross negligence or willful misconduct in performance of his duties during the course of his employment, (iii) persistent failure to abide by the corporate policies and procedures established by the Board of Directors; (iv) persistent failure to execute the reasonable 2 and lawful instructions of the Board of Directors relating to the operation of the Company's business, and (v) conviction of any felony or loss of the Executive's necessary gaming licenses or other regulatory approval. Upon the date of termination of the Executive's employment pursuant to this Section 3.2, the Company's obligation to pay any compensation (including bonuses) shall terminate, at which time the Company shall be responsible for compensating the Executive for any unpaid salary and vacation time not taken. Subject to this exception and the obligation of the Company to compensate the Executive through the notice period, no other compensation shall be payable to the Executive should this Agreement be terminated pursuant to this Section 3.2. SECTION 3.3 TERMINATION OR CESSATION OF EMPLOYMENT WITHOUT CAUSE. If the Executive's employment is terminated or ceased without cause, all compensation shall cease, but the Company shall be obligated to compensate the Executive with a lump sum severance payment equal to the present value of his salary otherwise payable during the remaining Term of this Agreement. In the event the Executive's employment is terminated pursuant to this Section 3.3, the Executive shall be entitled to participate in the bonus payable pursuant to Section 2.2, with respect to the year in which his employment is terminated, prorated for the year based on the number of full months employed during such year compared to 12. In addition, the non-competition covenant in Section 4.1(c) below shall be automatically terminated on the effective date of any termination of Executive's employment without cause. SECTION 3.4 TERMINATION UPON DEATH OF THE EXECUTIVE. In addition to any other provision relating to termination, this Agreement shall terminate upon the Executive's death. In such event, all unpaid compensation, compensation for vacation time not taken by the Executive and all expense reimbursements due to the Executive shall be paid to the Executive's estate. In the event the Executive's employment is terminated pursuant to this Section 3.4, the Executive's estate also shall be entitled to a death benefit equal to six months salary and to participate in the bonus payable pursuant to Section 2.2 with respect to the year in which his employment is terminated, prorated for the year based on the number of full months worked during such year compared to 12. SECTION 3.5 TERMINATION UPON SALE. (a) If during the Term, the Company: (i) is merged into another company; (ii) sells all or substantially all of its assets to another company or person; (iii) experiences a change in ownership of 50% or more of its common stock; or (iv) issues shares in excess of 50% of its then outstanding stock to another company or person and the Executive is not offered, by the acquiring company or person, an employment position, or not offered an employment position satisfactory to him (in his sole discretion), he shall be deemed Terminated Without Cause and shall be entitled to a 3 severance payment in an amount equal to one year's Base Salary, which shall be in addition to amounts payable to the Executive under Section 3.3 above. (b) The foregoing subsection 3.5(a) shall not apply if the Executive is an equity participant in any of the transactions described in subsection 3.5(a)(i)-(iv) above. ARTICLE IV CONFIDENTIALITY AND COMPETITION SECTION 4.1 FURTHER OBLIGATIONS OF THE EXECUTIVE DURING AND AFTER EMPLOYMENT. (a) The Executive agrees that during the term of his employment under this Agreement and for an additional period of one year, he will engage in no business activities which are or may be competitive with, or which might place him in a competing position to that of, the Company or any Affiliate except as authorized by the Company's Board of Directors. (b) The Executive realizes that during the course of his employment, the Executive will have produced and/or have access to confidential plans, information, business opportunity records, notebooks, data, specifications, trade secrets, customer lists and account lists of the Company and its Affiliates ("Confidential Information"). Therefore, during and subsequent to his employment by the Company, or by an Affiliate, the Executive agrees to hold in confidence and not to directly or indirectly disclose or use or copy or make lists of any such Confidential Information, except to the extent authorized by the Company in writing. All records, files, business plans, documents, equipment and the like, or copies thereof, relating to Company's business, or the business of an Affiliate, which the Executive shall prepare, or use, or come into contact with, shall remain the sole property of the Company, or of the Affiliate, and shall not be removed from the Company's or the Affiliate's premises without its written consent, and shall be promptly returned to the Company upon termination or resignation of employment with the Company or Affiliates. (c) Because of his employment by the Company, the Executive will have access to trade secrets and confidential information about the Company, its business plans, its business accounts, its business opportunities, its expansion plans into other geographic areas and its methods of doing business. The Executive agrees that for the Term of this Agreement and an additional period of one year he will not take any actions which are calculated to persuade any employee, vendor or supplier of the Company to terminate or modify in any adverse manner his or its association with the Company. (d) In the event a court of competent jurisdiction finds any provision of this Section 4.1 to be so overbroad as to be unenforceable, then such provision shall be reduced in scope by the court, to the extent deemed necessary by the court to render the provision reasonable and enforceable. The Executive acknowledges and agrees that any breach of this Agreement by the Executive would cause immediate irreparable harm to 4 the Company. The Executive agrees that should he violate any of the terms and conditions of this Agreement, the Company, at its sole discretion, shall be entitled to seek and obtain immediate injunctive relief and enjoin further and future violations of this Agreement. ARTICLE V DISABILITY AND ILLNESS SECTION 5.1 DISABILITY AND SALARY CONTINUATION. (a) Definition of Total Disability. For purposes of this Agreement, ------------------------------ the terms "totally disabled" and "total - disability" shall mean disability as defined in any total disability insurance policy or policies, if any, in effect with respect to the Executive. If no insurance policy is in effect, "total disability" shall mean a medically determinable physical or mental condition which, in the opinion of two physicians chosen by the mutual consent of the parties, renders the Executive unable to perform substantially all of the duties required pursuant to this Agreement. Total disability shall be deemed to have occurred on the date of the disabling injury or onset of the disabling illness, as determined by the two independent physicians. In the event that the two independent physicians are unable to agree as to the date of the disabling injury or onset of the disabling illness, such date shall be deemed to be the later of the two dates determined by the physicians chosen pursuant to this SECTION 5.1(a). (b) Salary Continuation. If the Executive becomes totally disabled ------------------- during the term of this Agreement, his full salary shall be continued for 90 days from the date of the disabling injury or onset of the disabling illness as determined in accordance with the provisions of SECTION 5.1(a) above, and thereafter the Executive's employment may be terminated in accordance with the provisions of SECTION 3.3. SECTION 5.2 ILLNESS. If the Executive is unable to perform the services required under this Agreement by reason of illness or physical injury not amounting to total disability, also as determined in this Article, the compensation otherwise payable to the Executive under this Agreement shall be continued for a period of six months and he shall be entitled to participate in the bonus payable in SECTION 2.2 with respect to the year in which the illness occurred, prorated for the year based on the number of months worked during such year compared to 12, after which the Executive's employment may be terminated and the Company shall have no further obligation to the Executive. ARTICLE VI GENERAL MATTERS SECTION 6.1 GOVERNING LAW. This Agreement shall be governed by the laws of the State of Colorado and shall be construed in accordance therewith. SECTION 6.2 NO WAIVER. No provision of this Agreement may be waived except by an agreement in writing signed by the waiving party. A waiver of any term or provision shall not be construed as a waiver of any other term or provision. 5 SECTION 6.3 AMENDMENT. This Agreement may be amended, altered or revoked at any time, in whole or in part, by filing with this Agreement a written instrument setting forth such changes, signed by each of the parties. SECTION 6.4 BENEFIT. This Agreement shall be binding upon the Executive and the Company, and shall not be assignable by either party without the other party's written consent. SECTION 6.5 SEVERABILITY. If any provision of this Agreement is declared by any court of competent jurisdiction to be invalid for any reason, such invalidity shall not affect the remaining provisions. On the contrary, such remaining provisions shall be fully severable, and this Agreement shall be construed and enforced as if such invalid provisions had not been included in the Agreement. SECTION 6.6 EFFECTIVE DATE. The effective date of this Agreement shall be February 22, 2002. SECTION 6.7 Arbitration. The Company and the Executive expressly agree that all disputes arising out of this Agreement shall be resolved by arbitration in accordance with the following provisions. Either party must demand in writing such arbitration within ten days after the controversy arises by sending a notice to arbitrate to both the other party and to the American Arbitration Association (hereinafter referred to as "AAA"). The controversy shall then be arbitrated pursuant to the rules promulgated by the AAA at the AAA's offices located in Denver, Colorado. The parties will select by mutual agreement the arbitrator or arbitrators (hereinafter collectively referred to as "arbitrator") to hear and resolve the controversy. The arbitrator shall be governed by the express terms of this Agreement and the laws of the State of Colorado. The arbitrator's decision shall be final and binding on the parties and shall bar any suit, action, or proceeding instituted in any federal, state, or local court or administrative tribunal. Notwithstanding the preceding sentence, the arbitrator's judgment may be entered in any court of competent jurisdiction. These arbitration provisions shall survive the termination of this Agreement. GAMECO, INC. By:__________________________________________ Jeffrey P. Jacobs, Chief Executive Officer EXECUTIVE: __________________________________________ Thomas Lee Witherow 6 Schedule to Exhibit 10.3 ------------------------ Omitted Documents ----------------- Document Party - -------- ----- Joinder Agreement Gold Dust West Casino, Inc. Joinder Agreement Black Hawk/Jacobs Entertainment, LLC Joinder Agreement Gilpin Hotel Venture Joinder Agreement Gilpin Ventures, Inc. Joinder Agreement Jalou II Inc. Joinder Agreement Winner's Choice Casino, Inc. Joinder Agreement Diversified Opportunities Group Ltd. Joinder Agreement Jalou L.L.C. Joinder Agreement Houma Truck Plaza & Casino, L.L.C. Joinder Agreement Jalou-Cash's L.L.C Joinder Agreement JACE, Inc. Joinder Agreement Lucky Magnolia Truck Stop and Casino L.L.C. Joinder Agreement Bayou Vista Truck Plaza and Casino, L.L.C. Joinder Agreement Raceland Truck Plaza and Casino, L.L.C. EX-10.7 57 dex107.txt STANDARDBRED HORSEMEN'S CONTRACT Exhibit 10.7 STANDARDBRED HORSEMEN'S CONTRACT BETWEEN COLONIAL DOWNS, L.P. AND STANSLEY RACING CORP. AND THE VIRGINIA HARNESS HORSE ASSOCIATION Effective January 1, 2002 TABLE OF CONTENTS -----------------
PAGE ---- 1. TERM OF AGREEMENT .................................................................................. 2 2. SCOPE OF AGREEMENT ................................................................................. 2 3. EXCLUSIVE REPRESENTATION ........................................................................... 3 4. PAYMENTS TO STANDARDBRED ACCOUNTS .................................................................. 3 A. Payments to Standardbred Horsemen's Purse Account .............................................. 3 B. Payments to Standardbred Partner Account ....................................................... 3 (1) From Wagering on Simulcast Broadcasts of Out-of-State Standardbred Races .................. 4 (2) From Out-of-State Simulcast Wagering on Live Standardbred Races Held at the Racetrack ..... 4 (3) From Intrastate Intertrack Pari-Mutuel Wagering ........................................... 5 C. Other Legalized Wagering ....................................................................... 5 D. Telephone Account or Other Electronic Media Wagering ........................................... 6 5. STANDARDBRED PARTNER ACCOUNT AND STANDARDBRED HORSEMEN'S PURSE ACCOUNT ............................. 6 A. Standardbred Partner Account ................................................................... 6 (1) Maintenance and Payments .................................................................. 6 (2) Payments from Account ..................................................................... 6 (3) Balance of Account ........................................................................ 7 (4) Interest and Earnings ..................................................................... 7 B. Standardbred Horsemen's Purse Account .......................................................... 7 (1) Maintenance and Payments .................................................................. 7 (2) Payments from Account ..................................................................... 7 (3) Balance of Account ........................................................................ 8 (4) Interest and Earnings ..................................................................... 8 C. Terms Applicable to Both Accounts .............................................................. 8 (1) Right to Inspect .......................................................................... 8 (2) Status of Accounts ........................................................................ 8 (3) Accountings ............................................................................... 9 6. DISTRIBUTION OF PURSES ............................................................................. 9 A. Purse Schedules and Condition Sheets ........................................................... 9 B. Overpayment of Purses .......................................................................... 10 C. Underpayment of Purses ......................................................................... 10 D. Minimum Daily Purses ........................................................................... 10 E. Purses for Stakes Races ........................................................................ 10 F. Purse Notices .................................................................................. 11 7. LIVE STANDARDBRED RACE MEETINGS AT THE RACETRACK ................................................... 11 A. At the Racetrack ............................................................................... 11
i (1) Living Racing Days .......................................................... 11 (2) Details of Race Meeting ..................................................... 11 B. At the Oak Ridge Race Course ..................................................... 12 (1) Details of Race Meeting ..................................................... 12 (2) Use of the Standardbred Partner Account ..................................... 12 C. Promotion of the Colonial Downs Meet ............................................. 12 8. VIRGINIA-BRED RACES ................................................................... 12 9. PROGRAMS FOR STANDARDBRED RACES ....................................................... 13 10. STALLS AND TRACK FACILITIES ........................................................... 13 A. Availability of Stalls and Track Facilities Before, During and After Standardbred Race Meetings at the Racetrack ................................................... 13 B. Vendors .......................................................................... 14 C. Stall Applications ............................................................... 14 11. EXPENSE DISBURSEMENTS FROM STANDARDBRED PARTNER ACCOUNT ............................... 15 A. Disbursement to the VHHA ......................................................... 15 B. Disbursement to Colonial Downs ................................................... 15 12. STANDARDBRED RACING COMMITTEE ......................................................... 16 13. REPRESENTATIONS AND WARRANTIES ........................................................ 16 A. VHHA ............................................................................. 16 B. Colonial Downs ................................................................... 17 14. VHHA OFFICE ........................................................................... 18 15. RACING OFFICIALS ...................................................................... 18 16. GOVERNMENTAL APPROVAL ................................................................. 19 17. AUTHORIZATION FOR OUT-OF-STATE SIMULCASTING ........................................... 19 18. COPIES OF DOCUMENTS ................................................................... 19 19. RACING BENEVOLENCE FUND ............................................................... 19 20. SPONSORSHIPS .......................................................................... 20 21. INDEMNIFICATION ....................................................................... 20 22. FURTHER ASSURANCES .................................................................... 20 23. CONSENTS, APPROVALS, AGREEMENTS OR ASSURANCES ......................................... 20 24. COUNTERPARTS .......................................................................... 21
ii 25. NOTICES ............................................................................... 21 26. WAIVERS ............................................................................... 22 27. APPLICABLE LAW; VENUE ................................................................. 22 28. HEADINGS .............................................................................. 23 29. SEVERABILITY .......................................................................... 23 30. ENTIRE AGREEMENT; MODIFICATION ........................................................ 23 31. RIGHT TO TERMINATE .................................................................... 23 32. EFFECTIVE DATE ........................................................................ 24
iii STANDARDBRED HORSEMEN'S AGREEMENT THIS AGREEMENT is entered into this 16/th/ day of January, 2002, effective January 1, 2002, by and between COLONIAL DOWNS, L.P., a Virginia limited partnership, STANSLEY RACING CORP., a Virginia corporation that is the General Partner of Colonial Downs, L.P. (collectively, "Colonial Downs"), and the VIRGINIA HARNESS HORSE ASSOCIATION (the "VHHA"), a Virginia not-for-profit corporation (collectively, the "parties"). WHEREAS, Colonial Downs and its General Partner, Stanley Racing Corp., have been granted licenses by the Virginia Racing Commission (the "Commission") to own and operate, respectively, (i) a pari-mutuel horse racing facility in New Kent County, Virginia, known as the Colonial Downs racetrack (the "Racetrack"), and (ii) satellite wagering facilities in the cities of Chesapeake, Hampton and Richmond, Virginia, and in Brunswick County, Virginia; and WHEREAS, current Virginia law permits Colonial Downs and Stanley Racing Corp. to apply for licenses to own and operate two (2) additional satellite wagering facilities in Virginia (collectively, the "SWFs," to include all of Colonial Downs' current and future satellite wagering facilities); and WHEREAS, the VHHA is a trade organization composed of owners, trainers, drivers, grooms, breeders, owner-trainers, or any other combination thereof (the "Members") of standardbred race horses; and WHEREAS, the VHHA develops and provides programs and other services for its Members, their employees and others who will engage in live standardbred racing at the Racetrack; and WHEREAS, the parties hereto desire to continue and enhance a close and understanding relationship among breeders, owners, trainers, drivers and grooms of standardbred race horses (the "Horsemen"), including VHHA Members, the VHHA, Colonial Downs, and the public; and WHEREAS, Colonial Downs and the VHHA have agreed on the allocation not otherwise prescribed by law between Colonial Downs and the VHHA of certain revenues received by Colonial Downs on pari-mutuel wagering (i) on live standardbred races at the Racetrack, (ii) on simulcast broadcasts of live standardbred races at the Racetrack to the SWFs and to jurisdictions outside the Commonwealth of Virginia, and (iii) on simulcast broadcasts of out-of-state standardbred horse races to the Racetrack and to the SWFs, and now desire to set forth their agreement herein; and WHEREAS, Colonial Downs and the VHHA have reached agreement as to certain matters regarding live standardbred race meetings at the Racetrack; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties, desiring to be legally bound by this Agreement, agree as follows: 1. Term of Agreement and Effective Date. Unless modified or terminated as ------------------------------------ provided herein, this Agreement shall become effective as of 12:01 a.m. on January 1, 2002, and shall remain in effect through December 31, 2002 (the "Term"). The Term shall automatically renew for periods of one (1) year on January 1 of each year thereafter, unless either Colonial Downs or the VHHA gives notice in writing to the other party not later than November 1 of the prior year that it elects not to renew the Agreement. 2. Scope of Agreement. This Agreement shall be applicable to (i) revenues ------------------ generated from pari-mutuel wagering on live standardbred races at the Racetrack and on all simulcast standardbred races, including simulcast broadcasts of live standardbred races held at the Racetrack, broadcast to the Racetrack and to all SWFs owned and operated by Colonial 2 Downs in Virginia, to (ii) revenues generated by simulcast broadcasts to locations outside the Commonwealth of Virginia of live standardbred races held at the Racetrack, and to (iii) the live standardbred race meetings conducted at the Racetrack, during the Term of this Agreement. 3. Exclusive Representation. During the Term of this Agreement, the VHHA ------------------------ shall be the exclusive representative of its Members and the Horsemen with respect to the matters set forth herein. The VHHA hereby warrants and represents that to the best of its knowledge and information, as of the date hereof, it represents and is the representative of the majority of Horsemen expected to race at the Racetrack, and Colonial Downs hereby recognizes it as such. In the event it is hereafter determined by the Commission or a Virginia court having jurisdiction that the VHHA no longer is the representative of the majority of the Horsemen, Colonial Downs shall have the right to terminate this Agreement without further obligation to the VHHA. 4. Payments to Standardbred Accounts: --------------------------------- A. Payments to Standardbred Horsemen's Purse Account. On pari-mutuel ------------------------------------------------- pools generated by wagering at the Racetrack and at each of Colonial Downs' SWFs on live standardbred horse racing held at the Racetrack, Colonial Downs shall pay and deposit into the Standardbred Horsemen's Purse Account (as described in Section 5 below) (i) eight percent (8%) of such pools generated by win, place and show wagering, and (ii) nine percent (9%) of such pools generated by wagering other than win, place and show wagering. B. Payments to Standardbred Partner Account. Colonial Downs shall ---------------------------------------- pay and deposit into the Standardbred Partner Account (as described in Section 5 below) the following amounts, which, with the exceptions set forth in Section 11 below, shall be utilized as purses and prizes for Horsemen whose horses race at the Racetrack and at such other venues as contemplated in this Agreement: 3 (1) From Wagering on Simulcast Broadcasts of Out-of-State ----------------------------------------------------- Standardbred Races. On pari-mutuel pools generated by wagering at the Racetrack - ------------------ and at each of Colonial Downs' SWFs on simulcast standardbred horse racing transmitted from jurisdictions outside the Commonwealth of Virginia, (i) five percent (5%) of the first $75,000,000 of the total cumulative amount of such pools generated each calendar year at the Racetrack and Colonial Downs' SWFs, (ii) six percent (6%) of the total cumulative amount of such pools generated each calendar year in excess of $75,000,000 but less than $150,000,000, and (iii) seven percent (7%) of the total cumulative amount of such pools generated each calendar year in excess of $150,000,000. (2) From Out-of-State Simulcast Wagering on Live Standardbred --------------------------------------------------------- Races Held at the Racetrack. If Colonial Downs shall receive any net revenues - --------------------------- from simulcast wagering in jurisdictions outside the Commonwealth of Virginia on live standardbred races run at the Racetrack, forty-seven and one-half percent (47.5%) of such net revenues shall be shared among the Horsemen as determined by the VHHA, five percent (5%) shall be contributed to the Virginia Breeders' Fund, and the remaining forty-seven and one-half percent (47.5%) shall be retained by Colonial Downs. Colonial Downs shall pay and deposit into the Standardbred Partner Account such portion of the amount to be shared among the Horsemen as is determined by the VHHA. Rights to transmit signals of Colonial Downs' live standardbred races to out-of-state facilities shall be subject to Section 17 of this Agreement. For purposes of this paragraph, "net revenues" shall mean gross income received by Colonial Downs from simulcast wagering conducted in jurisdictions outside the Commonwealth of Virginia on live standardbred races run at the Racetrack less the cost of all expenses (including overhead) associated with the broadcast of such live races to such out-of-state locations, up to a maximum of $2,100.00 in such expenses per day of live standardbred racing at the Racetrack. 4 (3) From Intrastate Intertrack Pari-Mutuel Wagering. If Colonial ----------------------------------------------- Downs shall contract with another racing association conducting live standardbred racing in the Commonwealth of Virginia for the purpose of that other racing association accepting pari-mutuel wagers on a standardbred race held at the Racetrack, or for the purpose of Colonial Downs' accepting at the Racetrack and/or at its SWFs pari-mutuel wagers on a race held at such other racing association's facility, then, for the purposes of determining the amount of revenues received by Colonial Downs generated by such wagering that shall be payable to and deposited into the Standardbred Partner Account, (i) the revenues generated from the sale by Colonial Downs of its simulcast signal for standardbred horse races held at the Racetrack to that other racing association shall be governed by paragraph (2) of this subsection B, and (ii) the pari-mutuel pools generated at the Racetrack and at Colonial Downs' SWFs by wagering on simulcast standardbred horse races transmitted from that other racing association's facility shall be added to the pari-mutuel pools described in paragraph (1) of this subsection B. C. Other Legalized Wagering. In the event that wagers other than on ------------------------ standardbred horse racing, including, but not limited to, the sale of lottery tickets and/or participation in other wagering enterprises, are authorized at the Racetrack and/or at Colonial Downs' SWFs by legislative action and a portion of the proceeds is provided by that legislation for standardbred racing, the parties shall be bound by the allocations in that legislation. In the event that the allocation of revenues is not addressed by such legislative action, the parties shall negotiate in good faith a written agreement governing the allocation between them of the revenues to be received for standardbred racing from that legislative action. D. Telephone Account or Other Electronic Media Wagering. In the ---------------------------------------------------- event a telephone account wager or other electronic media wager is expressly authorized by legislative or regulatory action and a portion of the proceeds is provided by that legislation or regulation 5 for standardbred racing, the parties shall be bound by the allocations in that legislation or regulation. In the event that the allocation of revenues is not addressed by such legislative or regulatory action, the parties shall negotiate in good faith a written agreement governing the allocation between them of the revenues to be received for standardbred racing from that legislative or regulatory action. 5. Standardbred Partner Account and Standardbred Horsemen's Purse Account: ---------------------------------------------------------------------- A. Standardbred Partner Account: ---------------------------- (1) Maintenance and Payments. Colonial Downs shall continue to ------------------------ maintain the separate bank account denominated the "Standardbred Partner Account." Amounts payable to the Standardbred Partner Account pursuant to Section 4(B) above (and any interest generated thereon) shall be paid into the Standardbred Partner Account within five (5) days (Sundays and holidays excluded) of such wagers being made at the Racetrack or at Colonial Downs' SWFs, as the case may be. All withdrawals, deposits or pledges of the sums deposited into or credited to the Standardbred Partner Account and all other transactions with respect to the Standardbred Partner Account shall require two (2) signatures, one on behalf of the VHHA by one of such persons as the VHHA shall authorize in writing and one on behalf of Colonial Downs by one of such persons as Colonial Downs shall authorize in writing. (2) Payments from Account. During the conduct of a live --------------------- standardbred race meeting at the Racetrack, at such intervals as the parties shall agree, there shall be transferred from the Standardbred Partner Account to the Standardbred Horsemen's Purse Account (the account from which purses shall be directly paid) an amount equal to the required purses for that live standardbred race meeting less amounts deposited or to be deposited into the Standardbred Horsemen's Purse Account pursuant to Section 4(A) above. 6 (3) Balance of Account. Any amount remaining in the Standardbred ------------------ Partner Account after satisfying the payment requirements set forth in this Agreement shall be available for purses for racing at other venues. (4) Interest and Earnings. All interest or earnings whatsoever --------------------- on the amounts paid or deposited into the Standardbred Partner Account shall accrue solely to the benefit of Colonial Downs. All funds paid or deposited into the Standardbred Partner Account shall be invested in an interest bearing account that provides market rates of return, or government or bank securities, and Colonial Downs shall provide all reasonable assurances of the security of the investments made. B. Standardbred Horsemen's Purse Account: ------------------------------------- (1) Maintenance and Payments. Colonial Downs shall continue to ------------------------ maintain the separate bank account denominated the "Standardbred Horsemen's Purse Account." Amounts payable to the Standardbred Horsemen's Account pursuant to Section 4(A) above shall be paid into the Standardbred Horsemen's Purse Account as required by law and in any event not less often than every five (5) days. (2) Payments from Account. The appropriate portions of purse --------------------- money shall be made available to the earners thereof within seventy-two (72) hours (dark days and Sundays excluded) after the result of the race in which such portions were earned has been declared official; provided that, in the event of any dispute as to the result of a race due to a drug test or other regulatory inquiry, the purse money shall not be made available to the earners thereof until final resolution of the matter by the judges, the Commission, or the courts, as the case may be. No portion of such money payable as purses to any earner thereof (other than driver fees and amounts owed for nomination, starting, entry, and similar fees) shall be deducted by Colonial Downs unless requested in writing by the person to whom such portion is payable or 7 that person's duly authorized representative or as required by order of the judges, the Commission, or a court. (3) Balance of Account. Any funds representing unclaimed ------------------ Horsemen's purses or prizes and any other amounts remaining in the Standardbred Horsemen's Purse Account after satisfying the payment requirements set forth in this Agreement shall be retained in the Standardbred Horsemen's Purse Account. (4) Interest and Earnings. The Standardbred Horsemen's Purse --------------------- Account shall not be an interest bearing account. C. Terms Applicable to Both Accounts: --------------------------------- (1) Right to Inspect. The Standardbred Partner Account and the ---------------- Standardbred Horsemen's Purse Account (collectively, the "Accounts") and the investment and deposit schedules for the Accounts shall be subject to examination at any reasonable time by the President of the VHHA or the President's designee. (2) Status of Accounts. Colonial Downs agrees and acknowledges ------------------ that the payments and/or deposits into the Accounts pursuant to Sections 4(A) and 4(B)(1) above are mandated by state law or by a contract pursuant to state law and that Colonial Downs has no legal, equitable or beneficial title, ownership interest or claim to any amounts so paid and/or deposited. Colonial Downs and the VHHA shall take all reasonable actions necessary to protect the Accounts from the claims of Colonial Downs' creditors, including the continuation of the Trust Agreement currently in effect between the parties with regard to the Standardbred Partner Account. (3) Accountings. Upon request, Colonial Downs shall provide to ----------- the VHHA (i) within forty-eight (48) hours of the close of each business day (Saturdays, Sundays and national holidays excluded) of operation, daily statistics respecting wagering on 8 standardbred racing, and the amounts deposited into or credited to the Standardbred Partner Account and the Standardbred Horsemen's Purse Account, at the Racetrack and at each of Colonial Downs' SWFs then in operation (the "Daily Operations"); (ii) within forty-five (45) days of the end of each calendar quarter, a report of the Daily Operations for the previous calendar quarter, certified by the chief financial officer or other appropriate official of Colonial Downs; and (iii) within ninety (90) days of the end of each calendar year, a report of the Daily Operations for that calendar year, certified by the chief financial officer or other appropriate official of Colonial Downs. Any other reports or information provided to the VHHA by Colonial Downs from time to time regarding the Daily Operations shall, if requested by the VHHA, be certified by the chief financial officer or other appropriate official of Colonial Downs. 6. Distribution of Purses: ---------------------- A. Purse Schedules and Condition Sheets. Colonial Downs shall use ------------------------------------ its reasonable judgment to estimate attendance, pari-mutuel handle, and breakage for standardbred racing. Using that information and after consultation with a designated representative of the VHHA, Colonial Downs shall establish a tentative average daily overnight purse schedule and a tentative stakes purse schedule for each standardbred race meeting at the Racetrack. Nomination, sustaining, starting, and entry fees paid by standardbred Horsemen, and funds provided by the Virginia Breeders Fund or by race sponsors shall not be considered to be portions of the purses paid by Colonial Downs. Colonial Downs shall exercise reasonable care to try to avoid significant underpayments or overpayments of purses at each standardbred race meeting. Colonial Downs shall send to the VHHA before each standardbred race meeting at the Racetrack its first condition sheet and proposed purse schedules. B. Overpayment of Purses. Colonial Downs and the VHHA shall --------------------- cooperate to the fullest extent possible to avoid overpayment of purses to Horsemen as of the end of any 9 year during the Term of this Agreement. If Colonial Downs makes an overpayment in purses, the overpayment shall be repaid to Colonial Downs from funds accruing to the Standardbred Partner Account commencing on January 1 of the following year on a "first dollar in first dollar out" basis. C. Underpayment of Purses. During any standardbred race meeting at ---------------------- the Racetrack, Colonial Downs shall increase purses as reasonable and appropriate to minimize the possibility of underpayment of purses to the Horsemen. If, at the end of any given standardbred race meeting during the Term of this Agreement, there exists an underpayment of purses, the underpayment shall be distributed as additional purses during the next succeeding standardbred race meeting at the Racetrack. D. Minimum Daily Purses. Standardbred races shall be conducted -------------------- during a standardbred race meeting at the Racetrack during the Term of this Agreement such that the average daily purses measured over the course of the race meeting are no less than the minimum average daily purses agreed upon by Colonial Downs and the VHHA for that race meeting. E. Purses for Stakes Races. The percentage of the amounts payable as ----------------------- purses under subsections A, B, C, and D of Section 4 above to Horsemen participating in standardbred stakes races held at the Racetrack shall be limited to eight percent (8%) of the total purses paid. The parties agree that the foregoing eight-percent (8%) limit may be increased by one dollar for every one dollar that Colonial Downs secures for additional purse monies from sponsors of live standardbred races at the Racetrack, up to a total of twelve percent (12%) of total purses paid; provided, however, that not more than ten percent (10%) of the amounts payable as purses under subsections A, B, C, and D of Section 4 above shall be used for purses for stakes races. Notwithstanding the foregoing, a higher percentage may be agreed upon by the parties in good 10 faith negotiations. For purposes of this subsection, the term "stakes races" shall not include early or late closure races or Virginia Standardbred Breeder's Fund stakes. F. Purse Notices. The pari-mutuel handle, pari-mutuel handle ------------- commission and purse distribution figures, as well as the percentage figures that represent the relationship between purses and the total of standardbred pari-mutuel revenues shall be posted on the bulletin board in the Office of the Racing Secretary each day of a standardbred race meeting at the Racetrack. 7. Live Standardbred Race Meetings: ------------------------------- A. At the Racetrack. ---------------- (1) Living Racing Days. For calendar year 2002, Colonial Downs ------------------ shall conduct a live standardbred race meeting at the Racetrack that shall consist of a minimum of seventeen (17) days of live standardbred racing commencing no sooner than October 11, 2002 and ending no later than November 6, 2002, over four weeks, consisting of four days per week for three weeks and five days per week for one week (the "Colonial Downs Meet"), or such lesser number of live racing days as agreed to by Colonial Downs and the VHHA and approved by the Commission in the event that sufficient purse money is not available to support seventeen (17) days of live standardbred racing at the purse levels to which the parties agree. 11 (2) Details of Race Meeting. If in calendar year 2002, Colonial ----------------------- Downs and the VHHA are unable to agree on (i) the days of the week on which live standardbred racing shall be conducted for the Colonial Downs Meet, or (ii) post times for that racing, Colonial Downs and the VHHA each shall submit their requests with regard to these matters to the Commission for its decision B. At the Oak Ridge Race Course: ---------------------------- (1) Details of Race Meeting. During calendar year 2002, Colonial ----------------------- Downs will cooperate with the management of Oak Ridge Race Course ("Oak Ridge") in staging a standardbred race meeting at Oak Ridge of a maximum of fourteen (14) race days (the "Oak Ridge Meet") to be held on dates in September and October 2002 that are mutually agreeable to Colonial Downs, the VHHA, and the management of the Oak Ridge and that are approved by the Commission. (2) Use of the Standardbred Partner Account. After the allotment --------------------------------------- of $850,000 of purse funds in the Standardbred Partner Account for the 2002 standardbred race meeting at the Racetrack, funds in the Standardbred Partner Account as of December 31, 2001 and funds deposited in the Standardbred Partner Account in 2002 (the "Purse Funds") shall be available for purses for the Oak Ridge Meet, which Meet shall take place prior to the standardbred race meeting at the Racetrack, and any excess Purse Funds shall be available for purses for racing at other venues as approved by the Commission. C. Promotion of the Colonial Downs Meet. Colonial Downs shall ------------------------------------ provide $25,000 for the marketing and promotion of the Colonial Downs Meet. Additionally, Colonial Downs shall provide up to an additional $25,000 if the VHHA is successful in securing $15,000 from the Virginia Breeders' Fund or from other sources for promoting Virginia-bred live racing at Colonial Downs during the Colonial Downs Meet. 12 8. Virginia-Bred Races. Colonial Downs shall include on its condition ------------------- sheets a minimum of one (1) race per day devoted to Virginia-bred standardbred horses (as defined in the Commission's regulations regarding the operation and maintenance of the Standardbred Breeders' Fund) for each day of live standardbred racing conducted at the Racetrack, unless sufficient horses are not available therefor, in accordance with the requirements of the Commission's regulations set forth in 11 VAC 10-130-70. A race devoted to Virginia-bred standardbred horses shall be run on each day of a standardbred race meeting at the Racetrack if six (6) or more betting interests have been entered therein. 9. Programs for Standardbred Races. Colonial Downs hereby agrees to ------------------------------- continue to: (i) place in the front portion of each standardbred horse race program distributed at the Racetrack and its SWFs (the "Program") an information section entitled "How to Read a Harness Program"; (ii) include driver and trainer rankings in the Program; (iii) provide comparative speed ratings of every standardbred track listed in the Program; and (iv) carry a minimum of two standardbred race signals at all times at each SWF, provided at least two such signals are available. 10. Stalls and Track Facilities: --------------------------- A. Availability of Stalls and Track Facilities Before, During and -------------------------------------------------------------- After Standardbred Race Meetings at the Racetrack. Colonial Downs shall make - ------------------------------------------------- available at least one-thousand (l,000) stalls to Horsemen during each standardbred race meeting at the Racetrack. Access to the racing strip, barns, track kitchen facilities, dormitories, and related backstretch facilities at the Racetrack (collectively, the "Backstretch Facilities") necessary for training purposes shall be made available by Colonial Downs without charge to Horsemen who have horses training for the immediately upcoming live standardbred race meeting at the Racetrack for at least ten (10) days prior to the opening of each such standardbred race meeting. The 13 Backstretch Facilities also shall be made available by Colonial Downs without charge to Horsemen who have raced at the Racetrack during that meeting for at least ten (10) days following the last day of each standardbred race meeting. Notwithstanding the foregoing, such periods may be shortened if the Backstretch Facilities are needed for a live thoroughbred race meeting, and Colonial Downs shall provide advance notice to Horsemen of any such need. During all periods when the Backstretch Facilities are made available to the Horsemen, Colonial Downs shall, at its own expense, make water and electricity available to each barn in use and keep the racing surfaces at the Racetrack properly harrowed and watered. B. Vendors. Colonial Downs shall not impose upon the Horsemen any ------- exclusive arrangement with regard to farriers, feedmen, tack supplies, or any other suppliers or providers of services customarily used by Horsemen; provided, however, that if Colonial Downs permits the use of bedding material other than straw, it may require the use of an exclusive supplier in order to facilitate removal of such used material. Colonial Downs shall use its reasonable best efforts to keep unlicensed persons in the above categories off its premises. C. Stall Applications. Prior to each standardbred race meeting, ------------------ Colonial Downs shall establish a cut-off date for the submission of stall applications. Colonial Downs shall, in the exercise of its sole business judgment, determine the terms, consistent with industry standards applicable to comparable racetracks that conduct standardbred racing, for and approve or disapprove applications for stalls. Colonial Downs may consider, among other things, the following criteria in allocating stalls to Horsemen for use during standardbred race meetings: (1) The overall quality of the horses listed on the stall application; (2) The quality of the racetracks where the horses listed on the stall application have previously raced; 14 (3) The number of starts a trainer listed on the application has made at past Colonial Downs standardbred race meetings, where applicable; (4) The financial and professional integrity of the trainer listed on the stall application; (5) The total number of stalls requested by a trainer in relation to the number of available stalls; and (6) The best interests of Colonial Downs and standardbred racing. Each Horsemen accepting a stall at the Racetrack shall be required to use his or her best efforts to race his or her horses at the Racetrack during the standardbred race meeting consistent with the horses' physical condition and fitness, and race conditions. 11. Expense Disbursements from Standardbred Partner Account. Colonial ------------------------------------------------------- Downs is hereby authorized and directed by the VHHA on behalf of itself, its Members, and the Horsemen, and Colonial Downs agrees, to make the following expense disbursements each calendar year from the Standardbred Partner Account: A. Disbursement to the VHHA. For services rendered by the VHHA to ------------------------ the Horsemen, Colonial Downs shall disburse each calendar year to the VHHA an amount (the "Horsemen's Contribution") equal to two percent (2%) of the total amount deposited into the Standardbred Partner Account and two percent (2%) of the total amount deposited pursuant to Section 4(A) above into the Standardbred Horsemen's Purse Account that calendar year. The Horsemen's Contribution shall be disbursed monthly each calendar year beginning on January 31 of each year. A final accounting of this disbursement shall be made by January 31 of each year for the prior calendar year. B. Disbursement to Colonial Downs. To help defray the costs of ------------------------------ maintaining the Standardbred Partner Account and the Standardbred Horsemen's Purse Account, including 15 but not limited to the cost of the Horsemen's bookkeeper, and of providing year-round office space to the VHHA, Colonial Downs shall disburse to itself $7,500 each calendar year, to be disbursed on the last business day of each month in the amount of $625 per month. A final accounting of this disbursement shall be made on January 31 of each year for the prior calendar year. 12. Standardbred Racing Committee. Colonial Downs and the VHHA have ----------------------------- organized and shall maintain a joint committee to be known as the Standardbred Racing Committee (the "Committee"). The VHHA and Colonial Downs shall each continue to appoint not more than four (4) representatives to the Committee. The Committee shall (i) meet at the request of either Colonial Downs or the VHHA on at least five (5) days notice to the other party, and (ii) may consider such matters as the stable area, barns, tack rooms, dormitories, promotion, publicity, track conditions (bad weather closing), racing-related programs, reserved seats and passes for Horsemen, number of races, purse schedules, track kitchen, other matters related to attendance, pari-mutuel handle or the quality of racing, and health benefit programs, death benefits, substance abuse programs, and any other program that will aid and assist the standardbred racing industry in Virginia in hiring, retaining, and caring for its personnel at the highest level. 13. Representations and Warranties: ------------------------------ A. VHHA. In addition to the representations and warranties contained ---- elsewhere in this Agreement, the VHHA warrants, represents to, and covenants with Colonial Downs that during the Term of the Agreement: (1) This Agreement has been approved by the Board of Directors of the VHHA as authorized by the Bylaws of the VHHA; 16 (2) This Agreement is valid and enforceable against the VHHA according to its terms; (3) Each VHHA officer, director and other official shall utilize all of his or her powers of persuasion and shall take all reasonable action within their power, including all legal means at their disposal, to ensure that all VHHA Members, their employees, other related personnel, and other backstretch personnel comply with the terms of this Agreement; (4) The VHHA shall seek to alter its share of the amounts described in Section 4 above only through good faith negotiations with Colonial Downs and shall not engage in or support, directly or indirectly, any action to influence the Commission, the Governor of Virginia or the General Assembly of Virginia to increase its share of the amounts described in Section 4 above or contained in any applicable provision of the Code of Virginia or the Commission's regulations by rule, regulation, order, executive order, statute, amendment of statute, or otherwise; (5) The VHHA shall use its best efforts to ensure that the backstretch area of the Racetrack is maintained in a safe, clean, and orderly condition; and (6) This Agreement shall be made available for review by VHHA Members and all other Horsemen, employees, and backstretch personnel at the VHHA office. B. Colonial Downs. In addition to the representations and -------------- warranties contained elsewhere in this Agreement, Colonial Downs warrants, represents to and covenants with the VHHA that during the Term in this Agreement: (1) This Agreement has been approved by its General Partner; (2) This Agreement is valid and enforceable against Colonial Downs according to its terms; 17 (3) Colonial Downs and its officers, directors and other officials shall take all reasonable action within their power, including all legal means at their disposal, to ensure that Colonial Downs and its partners, officers, directors, employees and other related personnel comply with the terms of this Agreement; (4) Colonial Downs shall seek to alter the VHHA's share of the amounts described in Section 4 above only through good faith negotiations with the VHHA and shall not engage in or support, directly or indirectly, any action to influence the Commission, the Governor of Virginia or the General Assembly of Virginia to decrease the VHHA's share of the amounts described in Section 4 above or contained in any applicable provision of the Code of Virginia or the Commission's regulations by rule, regulation, order, executive order, statute, amendment of statute, or otherwise; (5) Colonial Downs shall use its reasonable best efforts to keep the backstretch facilities in a safe, clean, and orderly condition when in use; and (6) Colonial Downs shall use its reasonable best efforts to assist the VHHA in developing health and welfare programs for backstretch personnel; provided that, this paragraph imposes no obligation on either party to fund any such program. 14. VHHA Office. Colonial Downs shall provide the VHHA on a year-round ----------- basis, without charge, a suitable office located on the grounds of the Racetrack; provided, however, that during any thoroughbred race meeting conducted at the Racetrack and for a reasonable time before and after any such meeting, the recognized thoroughbred horsemen's group shall have use of and priority in the use of that office. Colonial Downs shall furnish the office with appropriate office furniture and telephone lines. The VHHA shall pay the applicable charges for use of such telephone lines. 18 15. Racing Officials. Colonial Downs shall send to the President of the ---------------- VHHA a written list of the persons whom it is requesting the Commission to approve as racing officials for each standardbred race meeting at the Racetrack at the same time as that list is submitted to the Commission in accordance with the Commission's regulations. 16. Governmental Approval. Nothing contained in this Agreement shall be --------------------- construed as requiring either party to perform any term or terms when such performance is contrary to law or requires prior governmental approval; provided, however, both parties shall use their best efforts to obtain governmental approval if such is required. 17. Authorization for Out-of-State Simulcasting. During the Term of this ------------------------------------------- Agreement, the VHHA, for and on behalf of its Members and as the authorized representative of the standardbred Horsemen for interstate simulcasting purposes, hereby consents and authorizes Colonial Downs to negotiate and contract with simulcast and receiving facilities, and off-track wagering facilities outside the Commonwealth of Virginia, for the conduct of off-track wagering at the Racetrack and its SWFs, including off-track wagering on live standardbred races held at the Racetrack, pursuant to the Interstate Horse Racing Act of 1978, Public Law 95-515 (the "Interstate Horse Racing Act"). The foregoing consent and authorization shall constitute all consents required from the VHHA for simulcast wagering under the Interstate Horse Racing Act, and all simulcast wagering shall conform to that Act. 18. Copies of Documents. Colonial Downs shall send a copy of its stall ------------------- application form, stakes purse program, and condition sheet for each standardbred race meeting to the VHHA on or before the first day they are distributed to the Horsemen. 19. Racing Benevolence Fund. Colonial Downs and the VHHA both acknowledge ----------------------- that pursuant to (S) 59.1-392(T)(2) of the Code of Virginia, Colonial Downs is required to deposit thirty percent (30%) of the legitimate breakage from each pari-mutuel pool for both live racing 19 and simulcast horse racing conducted at the Racetrack and at Colonial Downs' SWFs into the Racing Benevolence Fund (the "Fund). Colonial Downs and the VHHA hereby agree to comply with the provisions of (S) 59.1-392 (T)(2) as well as with any rules or regulations properly adopted by the Commission in relation thereto, including any provisions thereof dealing with the administration of the Fund. 20. Sponsorships. Colonial Downs agrees to use commercially reasonable ------------ efforts to secure sponsorships for major stakes races. The VHHA agrees to provide such assistance to Colonial Downs' efforts as Colonial Downs may reasonably request and to use its best efforts to secure sponsorships for smaller stakes races. 21. Indemnification. Each party shall indemnify and save harmless the other --------------- party, its respective Board of Directors or General Partners, and its respective agents, representatives, employees, officers, directors, and stockholders, their successors and assigns, and all persons acting by, through, under or in concert with any of them, from and against any and all demands, liabilities, losses, costs, damages or expenses of whatever nature or kind, including fees of attorneys and all other expenses, arising out of or in any way related to or occasioned by any theft, embezzlement, loss or misuse of funds deposited by Colonial Downs in the Standardbred Horsemen's Purse Account or paid by Colonial Downs to the Standardbred Partner Account or the Standardbred Horsemen's Purse Account or to the VHHA, arising from the willful or negligent act or omission of such party, or its employees or authorized agents. 22. Further Assurances. The VHHA and Colonial Downs shall execute such ------------------ instruments and documents, and shall give such further assurances, as may be necessary to accomplish the purpose and intent of this Agreement. 23. Consents, Approvals, Agreements or Assurances. Wherever this Agreement --------------------------------------------- requires the consent, approval, agreement, or assurance of Colonial Downs and/or the VHHA, (i) 20 a request for such consent, approval, agreement, or assurance from one party shall be responded to by the other party in a timely and business-like manner, and (ii) such consent, approval, agreement, or assurance shall not be unreasonably withheld, delayed or conditioned unless otherwise specifically provided in this Agreement. 24. Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument. 25. Notices. All notices, requests, demands or other communications as may ------- be required by this Agreement shall be in writing, shall be signed by an authorized representative of the party providing the communication, shall be sent to each of the persons listed below, may be sent by certified mail, return receipt requested, or by telephone facsimile, and shall be deemed to have been given or made when received by personal delivery or otherwise. A courtesy hard copy of any communication that is sent by telephone facsimile also shall be sent by certified mail, return receipt requested. The current addresses of persons to whom communications are to be sent are as follows: Colonial Downs: Mr. Jeffrey P. Jacobs Chairman & CEO Colonial Downs, L.P. 10515 Colonial Downs Parkway New Kent, Virginia 23124 Mr. Ian M. Stewart President Colonial Downs L.P. 10515 Colonial Downs Parkway New Kent, Virginia 23124 21 Copy to: James L. Weinberg, Esq. Hirschler Fleischer The Federal Reserve Bank Building 701 East Byrd Street P.O. Box 500 Richmond, Virginia 23219 Mr. John E. Mooney, President Maryland-Virginia Racing Circuit, Inc. 10515 Colonial Downs Parkway New Kent, Virginia 23124 H. Lane Kneedler, Esq. Reed Smith Hazel & Thomas LLP Riverfront Plaza - West Tower 901 East Byrd Street, Suite 1700 Richmond, Virginia 23219-4069 VHHA: R. C. Dunavant, Jr., D.V.M., President Virginia Harness Horse Association c/o Lunenburg Animal Hospital Highway 40 Kenbridge, Virginia 23944 Copy to: John B. Mumford, Jr., Esquire Crews & Hancock, P.L.C. Seven Hundred Building, Suite 1015 700 East Main Street Richmond, Virginia 23219 26. Waivers. No waiver by a party to this Agreement of any breach of this ------- Agreement or any of its terms shall be effective unless, and only to the extent, such waiver is claimed in writing signed by the party providing or making such waiver and delivered to the other party as provided in Section 25 above. No waiver of any breach shall be deemed to be a waiver of any other or any subsequent breach. 27. Applicable Law; Venue. This Agreement is being executed and delivered --------------------- in the Commonwealth of Virginia and shall be construed and enforced in accordance with the law of Virginia without regard to its conflict of laws rules and provisions. In all court proceedings brought in connection with this Agreement, the parties hereto irrevocably consent to exclusive 22 personal jurisdiction by, and venue in, the Circuit Court for the City of Richmond or the United States District Court for the Eastern District of Virginia, Richmond Division. 28. Headings. Any headings preceding the text of the several sections, -------- subsections, paragraphs and subparagraphs hereof are inserted solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction, or effect. 29. Severability. If any provision of this Agreement is declared invalid by ------------ any tribunal, or becomes invalid or inoperative by operation of law, the remaining provisions of this Agreement shall not be affected thereby and shall remain in full force and effect. 30. Entire Agreement; Modification. This Agreement contains the entire ------------------------------ agreement between the parties and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement. No modification, variation, or amendment of this Agreement or of any schedule, exhibit or attachment to this Agreement shall be effective unless such modification, variation, or amendment is in writing and has been signed by the parties to this Agreement. 31. Right to Terminate. Either party may terminate this Agreement upon the ------------------ other party's failure to substantially perform as required under this Agreement and such failure continues for thirty (30) days following the date when a written notice of default detailing the perceived failure to perform is sent to and received by the defaulting party in accordance with Section 25 above. Such termination shall not constitute an election of remedy, nor shall it constitute a waiver of a party's other remedies at law or in equity. This Agreement shall terminate automatically and the VHHA shall have no cause of action for breach of contract based on such termination if Colonial Downs ceases to operate the Racetrack and all of its SWFs and either (i) Colonial Downs surrenders to the Commission all of its licenses to own and operate the 23 Racetrack and all of its SWFs or (ii) the Commission revokes all of those licenses. The parties agree that subsection C of Section 5 above shall survive the termination of this Agreement. 32. Approval by the Commission. The parties acknowledge that this Agreement -------------------------- is subject to the approval of the Commission. Upon such approval, this Agreement shall be effective as of January 1, 2002, regardless of the date of the Commission's approval. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first stated above. VIRGINIA HARNESS HORSE COLONIAL DOWNS, L.P. ASSOCIATION By: Stansley Racing Corp., its General Partner By: /s/ R. C. Dunavant, Jr. By: /s/ Ian M. Stewart -------------------------------------- ------------------------- R. C. Dunavant, Jr., D.V.M., President Ian M. Stewart, President STANSLEY RACING CORP. By: /s/ Ian M. Stewart ------------------------- Ian M. Stewart, President 24 Schedule to Exhibit 10.4 ------------------------ Omitted Documents ----------------- Document Party - -------- ----- Subsidiary Guarantee Gold Dust West Casino, Inc. Subsidiary Guarantee Black Hawk/Jacobs Entertainment, LLC Subsidiary Guarantee Gilpin Hotel Venture Subsidiary Guarantee Gilpin Ventures, Inc. Subsidiary Guarantee Jalou II Inc. Subsidiary Guarantee Winner's Choice Casino, Inc. Subsidiary Guarantee Diversified Opportunities Group Ltd. Subsidiary Guarantee Jalou L.L.C. Subsidiary Guarantee Houma Truck Plaza & Casino, L.L.C. Subsidiary Guarantee Jalou-Cash's L.L.C Subsidiary Guarantee JACE, Inc. Subsidiary Guarantee Lucky Magnolia Truck Stop and Casino L.L.C. Subsidiary Guarantee Bayou Vista Truck Plaza and Casino, L.L.C. Subsidiary Guarantee Raceland Truck Plaza and Casino, L.L.C. EX-10.8 58 dex108.txt THOROUGHBRED HORSEMEN'S AGREEMENT Exhibit 10.8 THOROUGHBRED HORSEMEN'S AGREEMENT --------------------------------- THIS AGREEMENT is entered into this 20/th/ day of February, 2002, effective as of January 1, 2002, by and among COLONIAL DOWNS, L.P., a Virginia limited partnership, STANSLEY RACING CORP., a Virginia corporation (collectively, "Colonial Downs"), and the VIRGINIA HORSEMEN'S BENEVOLENT AND PROTECTIVE ASSOCIATION, INC., a Virginia not-for-profit corporation (the "VHBPA"). WHEREAS, Colonial Downs owns and operates in New Kent County, Virginia, the facility known as the Colonial Downs racetrack (the "Racetrack") and four satellite wagering facilities located in Brunswick, Chesapeake, Hampton and Richmond, Virginia (the "SWFs"); WHEREAS, the VHBPA is a trade organization composed of owners, trainers, owner-trainers, and owner-breeders of thoroughbred race horses (its "Members"); WHEREAS, the VHBPA provides benevolence programs and other services for its Members and their employees and other participants in thoroughbred horse racing who are and will be engaged in live racing at the Racetrack; and WHEREAS, the parties hereto desire to continue and enhance a close and understanding relationship among owners and trainers of thoroughbred race horses (the "Horsemen"), including VHBPA Members, the VHBPA, Colonial Downs, and the public; 1 NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties desiring to be legally bound agree as follows: 1. Effective Date and Term of Agreement. This Agreement shall become ------------------------------------ effective as of 12:01 a.m. on January 1, 2002, and shall remain in effect through midnight on December 31, 2002 (the "Term"), unless otherwise terminated as provided herein. 2. Exclusive Representation. During the Term of this Agreement, the ------------------------ VHBPA shall be the exclusive representative of its Members with respect to the matters set forth herein. The VHBPA hereby warrants and represents that it is the Horsemen's organization representing a majority of the Horsemen racing at the Racetrack, and Colonial Downs hereby recognizes it as such. 3. Accounts. -------- A. Thoroughbred Partners' Account. Colonial Downs and the VHBPA ------------------------------ currently maintain an account at the Charlottesville, Virginia branch of the Virginia National Bank (the "Thoroughbred Partners' Account" or the "Account"). The parties agree that the financial institution(s) at which the Thoroughbred Partners' Account is maintained may be changed at any time by agreement of the parties. Colonial Downs and the VHBPA agree that all funds maintained in the Thoroughbred Partners' Account are funds that are to be maintained in trust on behalf of and for the benefit of Horsemen and distributed according to regulations promulgated by the Virginia Racing Commission (the "Commission") from time to time and by agreement between the parties to this 2 Agreement. In furtherance of such purpose, the parties hereto have executed the trust agreement attached as Exhibit A and have had the Thoroughbred Partners' Account designated a trust account by the financial institution at which the Thoroughbred Partners' Account is maintained. The parties shall take similar steps to have the Thoroughbred Partners' Account designated as a trust account by any other financial institution(s) to which the Account is moved. In addition, either party may elect upon written notice to the other party to have a third-party trustee, acceptable to both parties, appointed as trustee of the Account. All interest and other earnings whatsoever on the amounts paid or deposited into the Thoroughbred Partners' Account shall accrue solely to the benefit of the Thoroughbred Partners' Account. All funds paid or deposited into the Thoroughbred Partners' Account (i) shall be invested in an interest-bearing account that provides market rates of return, or government or bank securities, and (ii) shall be used for purses and for such other purposes as the parties may agree and the Commission may approve. B. Horsemen's Account. Monies payable to Horsemen as purses under ------------------ this Agreement shall be deposited from the Thoroughbred Partners' Account into a separate account (the "Horsemen's Account) as needed to pay purses. The appropriate portions of purse money shall be made available to the earners thereof within seventy-two (72) hours (dark days and Sundays excluded) after the result of the race in which such money was earned has been declared official; provided, that in the event of any dispute as to the result of a race due to a drug test or other regulatory inquiry, the purse money shall not be made available until final resolution of the dispute by the stewards, the Commission or the courts, as the case 3 may be. No portion of such money payable as purses to any earner thereof (other than jockey and gate fees) shall be deducted by Colonial Downs unless requested in writing by the person to whom such monies are payable or his duly authorized representative or as required by order of the stewards or a court. C. Availability of Information on Accounts. The Thoroughbred --------------------------------------- Partners' Account and the Horsemen's Account and the investment or deposit schedules of Colonial Downs with respect to such accounts during any Race Meeting shall be subject to examination at any reasonable time by the President of the VHBPA or his or her designee. D. Distribution of Interest and Other Earnings on Accounts. Interest ------------------------------------------------------- and any other earnings on the Thoroughbred Partners' Account and Horsemen's Account shall be distributed fifty percent (50%) thereof to each of (a) Colonial Downs, to help defray the costs of maintaining such accounts, including, but not limited to, the Horsemen's bookkeeper and any third-party trustee fees; and (b) the VHBPA for the benefit of Horsemen in its sole and absolute discretion. 4. Purse Amounts. ------------- A. Amounts To Be Deposited. Colonial Downs shall deposit into the ----------------------- Thoroughbred Partners' Account the amounts specified in paragraph 13 of ss. 59.1-369 of the Code of Virginia and shall deposit into the Horsemen's Account the amounts specified for purses in subsections D(1) and G(1) of (S) 59.1-392 of the Code of Virginia. Colonial Downs also shall deposit into the Thoroughbred Partners' Account fifty percent (50%) of all revenues it receives 4 from the sale of its live thoroughbred race signal to entities outside Virginia in excess of Three-Hundred Fifty-Five Thousand Nine-Hundred Thirty-Two and No/100 Dollars ($355,932.00) less twenty-one percent (21%) of such excess amount to cover Colonial Downs' direct operational costs associated with that sale. Revenues from signal sales shall be based on information provided by Colonial Downs to the VHBPA using accounting practices generally accepted in the horse racing industry. Further, Colonial Downs shall not enter into an agreement, without the prior written consent of the VHBPA, which consent shall not be unreasonably withheld, delayed or conditioned, regarding telephone account or other electronic media wagering systems pursuant to which Colonial Downs would receive any fee from Television Games Network or any other telephone or other electronic media account wagering entities for the right to accept wagers from account holders located in Virginia on thoroughbred races simulcast from within or outside of Virginia. The foregoing sentence shall not apply to Colonial Downs' existing and future agreements for the sale of its live thoroughbred racing signals to simulcast venues to which the VHBPA's consent is governed by Section 15 of this Agreement. B. Virginia Derby. Colonial Downs agrees that the amount of purses -------------- to be paid for the Virginia Derby shall be fixed with the consent of the VHBPA, which consent shall not be unreasonably withheld, delayed or conditioned. 5 Colonial Downs also agrees, subject to the approval of the Maryland-Virginia Racing Circuit, Inc. ("MVRC"), a subsidiary of the Maryland Jockey Club that manages Colonial Downs' Racetrack and SWFs pursuant to an Amended and Restated Management and Consulting Agreement, effective January 15, 1999, as amended, between Colonial Downs and MVRC, that any funds generated by sponsorship(s) or promotional fees paid to Colonial Downs with respect to the Virginia Derby, from whatever source derived, shall be paid in their entirety to the Thoroughbred Partners' Account in addition to the amounts specified in subsection A of this Section unless the parties to this Agreement and MVRC agree otherwise. Colonial Downs shall endeavor in good faith to secure MVRC's consent to the foregoing. C. National Thoroughbred Racing Association ("NTRA") Dues. The VHBPA ------------------------------------------------------ may, in its discretion, designate a portion of total purse monies to be paid as the VHBPA dues payable to the NTRA. If so designated, those dues to be paid from the total purse monies available shall be paid as directed by the VHBPA. D. Stakes Race Purses. The percentage of the purse monies under ------------------ subsections A and B above, excluding promotional fees and sponsorships, to be paid to Horsemen participating in stakes races held at the Racetrack shall be limited to twenty percent (20%) of the total purses paid unless the VHBPA in its sole and absolute discretion consents to a higher percentage. Such consent shall be granted by the VHBPA as necessary to assist Colonial Downs in its attempts to achieve graded status for the Virginia Derby. 6 E. Administrative Fee. The administrative fee paid to the VHBPA for ------------------ services rendered to Horsemen as the majority Horsemen's group shall be as provided in subsection S of (S)59.1-392 of the Code of Virginia. For 2002, that amount shall include the authorized percentage of all monies paid into the Thoroughbred Partners' Account without consideration of any amounts repaid in 2002 as advances against purses in prior years. The parties shall agree on advance payments of the administrative fee between live thoroughbred Race Meetings at the Racetrack in recognition of the VHBPA's year round service to Horsemen, obligations with respect to Horsemen's interests before the Commission, and the VHBPA's efforts to assist Colonial Downs on legislative issues. F. Other Legalized Wagering. Except as otherwise specifically ------------------------ provided herein, in the event that wagers other than on thoroughbred horse racing, including, but not limited to, the sale of lottery tickets and/or participation in other wagering enterprises at the Racetrack and/or the SWFs, are authorized by legislative action and a portion of the proceeds is provided by that legislation for thoroughbred racing, the parties shall be bound by the allocations in such legislation. In the event the allocation of revenues is not addressed by such legislative action, the parties shall negotiate in good faith a written agreement governing the allocation between them of the revenues to be received for thoroughbred racing from that legislative action. 5. Purse Mechanics. --------------- A. Purse Schedules and Condition Books. Colonial Downs shall use its ----------------------------------- reasonable judgment to estimate attendance, pari-mutuel handle and breakage 7 for thoroughbred racing. Using that information and after consultation with a designated representative of the VHBPA, Colonial Downs shall establish a tentative average daily overnight purse schedule and a tentative stakes purse schedule for each Race Meeting in accordance with the terms of this Agreement. Colonial Downs shall exercise reasonable care to avoid significant underpayments or overpayments of purses at all Race Meetings. Colonial Downs shall send to the VHBPA its first condition book and proposed purse schedules for each Race Meeting before they are sent to the printer. B. Funding of Purses. Colonial Downs shall arrange for an advance to ----------------- the Thoroughbred Partners' Account of up to $2,000,000 as may be necessary to pay the purse amounts for the days of live thoroughbred racing in each calendar year during the Term of this Agreement, as determined in Section 6 below, if there is a temporary shortfall in that Account. Any such advance shall be repaid to the party or parties providing such advance from funds accruing to the Thoroughbred Partners' Account for the remainder of the calendar year in which the advance is made on a "first dollar in first dollar out" basis and, if there is any advance that has not yet been repaid by the end of that calendar year, from funds accruing to the Thoroughbred Partners' Account commencing on January 1 of the following calendar year on a "first dollar in first dollar out" basis. Any such advance shall bear interest, payable from the Thoroughbred Partners' Account, at a rate mutually acceptable to the party or parties advancing the funds, Colonial Downs and the VHBPA. 8 C. Overpayment of Purses. Colonial Downs and the VHBPA shall --------------------- cooperate to the fullest extent possible to avoid overpayment of purses to Horsemen as of the end of any year during the Term of this Agreement. If Colonial Downs makes an overpayment in excess of the amount computed under Section 4 above, the overpayment shall be repaid to Colonial Downs from funds accruing to the Thoroughbred Partners' Account commencing on January 1 of the following calendar year on a "first dollar in first dollar out" basis. D. Underpayment of Purses. During any Race Meeting, Colonial Downs ---------------------- shall increase purses as reasonable and appropriate to minimize the possibility of underpayment of purses to Horsemen. Colonial Downs shall use its reasonable best efforts to help assure that there are no underpayments of purses at any Race Meeting. E. Purse Notices. The pari-mutuel handle, pari-mutuel handle ------------- commission, and purse distribution figures, as well as the percentage figures that represent the relationship between purses and the total of pari-mutuel income and breakage shall be posted on the bulletin board in the Racing Secretary's office each day of a Race Meeting. F. Collection of Nomination, Starter and Similar Fees. Colonial Downs -------------------------------------------------- shall use its commercially reasonable efforts to collect promptly all nomination, starter and similar fees that are, or prior to 2002 were, incurred by participants. By April 1, 2002, Colonial Downs shall provide to the VHBPA an invoicing schedule for current and anticipated obligations of Horsemen, and the VHBPA shall use its commercially reasonable efforts to assist Colonial Downs in 9 the collection of such fees. If, however, despite the efforts of the parties, such fees attributable to the 2002 Race Meeting remain unpaid six months after the conclusion of that Race Meeting, then Colonial Downs shall be entitled to assign the accounts receivable for such fees to the VHBPA for collection and to be reimbursed from the Thoroughbred Partners' Account for the aggregate amount of such fees; provided, however, that fees arising from nominations or entries which the parties agree, acting reasonably and in good faith, were accepted by the Racing Secretary for promotional or marketing purposes shall not be included in the amounts for which reimbursement is sought and shall not be assigned to the VHBPA. 6. Number of Days of, and Dates and Average Daily Purses for, Live --------------------------------------------------------------- Thoroughbred Racing. Not less than fifteen (15) days prior to the deadline for - ------------------- submission to the Commission, Colonial Downs and the VHBPA shall make reasonable efforts to agree upon the number of days of, and the dates and average daily purses for, live thoroughbred racing at the Racetrack for the following calendar year, and shall then present such agreed upon schedule and average daily purses to the Commission for approval. If the parties are unable to agree upon a particular number of days of, dates for and/or average daily purses for live thoroughbred racing for any such calendar year, Colonial Downs shall submit to the Commission its requested number of days of, dates for and/or average daily purses for live thoroughbred racing for that calendar year, and the VHBPA shall also simultaneously convey to the Commission its requested number of days of, dates for and/or average daily purses for live thoroughbred racing for that calendar year. Pursuant to the Commission's Order, dated November 30, 2001, 26 days of 10 thoroughbred racing from June 21 to July 23, 2002, shall be conducted at the Racetrack, unless the parties otherwise agree and the Commission approves those other agreed upon dates. 7. Races and Awards for Virginia-Bred, Virginia-Owned and Virginia-Sired --------------------------------------------------------------------- Horses. Colonial Downs shall include in its condition book opportunities to race - ------ for Virginia-bred, Virginia-owned and Virginia-sired thoroughbred horses, including those that typically race for lower purses as well as those that typically race for higher purses. To the extent reasonably possible, in filling races, Colonial Downs shall give preference to Virginia-bred and Virginia-sired horses that are stabled at the Racetrack or elsewhere in Virginia. Awards from the Virginia Breeders Fund for Virginia-bred, Virginia-owned and Virginia-sired horses shall continue to be distributed according to guidelines approved by the Commission. 8. Satellite Wagering Facility Expansion. Colonial Downs and the VHBPA ------------------------------------- agree that a greater dollar volume in annual handle is necessary to increase the number of days of quality racing in Virginia, and that increased handle will most likely occur by opening additional satellite wagering facilities ("SWFs"). With SWF expansion as a goal, the parties agree to establish a five-person SWF Committee to study such matters as the feasibility of particular sites for additional SWFs and proposed business plans detailing, among other things, financing, ownership, and target dates for opening additional SWFs. Colonial Downs, with the input of the Maryland-Virginia Racing Circuit, Inc., shall appoint two Committee members; the VHBPA shall appoint two Committee members; and the fifth member shall be appointed by agreement of the other four members. The SWF Committee 11 shall begin its work no later than April 1, 2002, which shall be financed in part by $20,000 from the VHBPA's share of the signal sale, referenced in subsection A of Section 4 above, and by such additional funds from Colonial Downs as may be provided for carrying out the Committee's work. 9. Stalls and Track Facilities. --------------------------- A. Availability of Stalls and Track Facilities Before, During and -------------------------------------------------------------- After Race Meetings. Colonial Downs shall make available at least one thousand - ------------------- (1,000) stalls to Horsemen during each Race Meeting. Access to the racing strip, barns, track kitchen facilities, dormitories, and related backside facilities at the Racetrack (collectively, the "Backside Facilities") necessary for training purposes shall be made available by Colonial Downs without charge (i) prior to each live Race Meeting, to Horsemen who have horses training for that live Race Meeting, and (ii) following each live Race Meeting, to Horsemen who have raced at the Racetrack during that Race Meeting. The Backside Facilities shall be made available by Colonial Downs prior to and following each Race Meeting for an aggregate total of 20 days, the exact number of days before and number of days after each Race Meeting to be agreed upon each year by Colonial Downs and the VHBPA. Notwithstanding the foregoing, such periods may be shortened if the Backside Facilities are then needed for a live standardbred race meeting, and Colonial Downs shall provide advance notice to the Horsemen in any such event. During the aforesaid periods, Colonial Downs shall, at its own expense, make water and electricity available to each barn in use and keep the racing surfaces properly harrowed and watered. 12 B. Vendors. Except as expressly provided elsewhere in this ------- Agreement, Colonial Downs shall not impose upon Horsemen any exclusive arrangement concerning farriers, feedmen, tack supplies, or any other suppliers or providers of services customarily used by owners and trainers; provided, however, that if Colonial Downs permits the use of bedding material other than straw, it may require the use of an exclusive supplier in order to facilitate removal of such used material. Notwithstanding the foregoing, Colonial Downs reserves the right to impose reasonable non-discriminatory requirements for security, safety and environmental reasons. Colonial Downs shall use its reasonable best efforts to keep unlicensed persons in the above categories off its premises. C. Stall Applications. Prior to each Race Meeting, Colonial Downs ------------------ shall establish a cut-off date for the submission of stall applications. Colonial Downs shall use its commercially reasonable best efforts to ensure that each completed application contains the name, permanent address, telephone number and electronic mail (e-mail) address of the owner and trainer of each horse expected to be stabled on the grounds of the Racetrack during that Race Meeting. Colonial Downs shall, in the exercise of its sole business judgment, determine the terms for and approve or disapprove applications for stalls, but to the extent reasonably possible, preference shall be given to stall applications for Virginia-bred, Virginia-owned and Virginia-sired horses. Colonial Downs may consider, among other things, the following criteria in allocating stalls to Horsemen for use during Race Meetings: (1) The overall quality of the horses listed on the stall application; 13 (2) The quality of the racetrack(s) where the horses listed on the stall applications have previously raced; (3) The number of starts a trainer listed on the application has made at past Colonial Downs Race Meetings, where applicable; (4) The financial and professional integrity of the trainer listed on the stall application; (5) The total number of stalls requested by a trainer in relation to the number of available stalls; and (6) The best interests of Colonial Downs and thoroughbred racing. Each Horsemen accepting a stall at the Racetrack shall be required to use his or her best efforts to run his or her horses at the Racetrack during the Race Meeting consistent with the horses' physical condition and fitness, and race conditions. D. Racetrack Kitchen. Colonial Downs shall provide a Racetrack ----------------- kitchen for use by Horsemen and others, with the terms, conditions and provisions thereof to be mutually agreed upon on an annual basis by the VHBPA and Colonial Downs. Joint approval of Colonial Downs and the VHBPA shall be required concerning, but not limited to, management of the facility, cleanliness of the facility, palatability and cost of food, adequacy of hours of operation, and adequacy of premises insurance coverage. E. Temporary Building. On or before April 1, 2002, Colonial Downs ------------------ shall (i) designate a suitable location on the backstretch for the placement of a temporary building, currently anticipated to be a double-wide office trailer to be used 14 during the 2002 Race Meeting for a classroom facility, an office for the chaplaincy program, a counseling office, a chapel, recreation, and a secure storage facility for VHBPA supplies, and (ii) obtain a written estimate for the cost of the installation and connection of adequate electricity for the lighting and air conditioning of the temporary building. Within ten (10) business days of the receipt of the foregoing designation and written estimate, the VHBPA shall notify Colonial Downs of its intention to proceed with the acquisition and installation of the temporary building and electrical service. Colonial Downs shall promptly seek and obtain all required permits for the temporary building, and the VHBPA shall promptly pay directly or reimburse Colonial Downs for all permit fees. The VHBPA shall remove the temporary building within a reasonable time following the close of the 2002 Race Meeting, and Colonial Downs shall permit the electrical service to remain to accommodate its use in a similar manner in subsequent years. The VHBPA shall save and hold harmless and shall indemnify Colonial Downs against any expenses, costs, claims, or demands, including attorney's fees, arising out of the installation, use, or removal of the temporary building and electrical service. 10. Racing Committee. Colonial Downs and the VHBPA have organized and shall ---------------- maintain a joint committee to be known as the "Racing Committee." The VHBPA and Colonial Downs shall each continue to appoint not more than four (4) representatives to the Racing Committee. The Racing Committee (i) shall meet at the request of either Colonial Downs or the VHBPA on at least five (5) days notice to the other party, and (ii) may consider such matters as the stable area, barns, tack rooms, dormitories, promotion, publicity, track conditions (bad weather closing), 15 racing-related programs, reserved seats and passes for Horsemen, number of races, purse schedules, track kitchen, other matters related to attendance, pari-mutuel handle or the quality of racing, and health benefit programs, death benefits, drug and alcohol abuse programs, and any other program that will aid and assist the racing industry in Virginia in hiring, retaining and caring for its personnel at the highest level. 11. Representations and Warranties. ------------------------------ A. VHBPA. In addition to the representations and warranties ----- contained elsewhere in this Agreement, the VHBPA warrants, represents to and covenants with Colonial Downs that during the Term of this Agreement: (l) This Agreement has been approved by the Board of Directors of the VHBPA; (2) This Agreement is valid and enforceable against the VHBPA according to its terms; (3) Except as provided in Section 15 below, the VHBPA and its officials shall not acquiesce or actively participate in any attempt to delay, interrupt, or bring about the temporary or permanent cessation or suspension of racing or other activities at the Racetrack, including simulcasting, or activities at the SWFs at any time during the Term of this Agreement; (4) Each VHBPA official shall utilize all of his or her powers of persuasion and shall take all reasonable action within his or her power, including all legal means at his or her disposal, to ensure that all VHBPA Members, their 16 employees, other related personnel, and other backside personnel comply with the terms of this Agreement; (5) This Agreement shall be made available for review and copying by Members of the VHBPA and all other licensed owners, trainers, employees and backside personnel at the VHBPA office; and (6) The VHBPA shall use its reasonable best efforts to ensure that the backside area of the Racetrack is maintained in a safe, clean, and orderly condition when in use. B. Colonial Downs. In addition to the representations and --------------- warranties contained elsewhere in this Agreement, Colonial Downs warrants, represents to and covenants with the VHBPA that during the Term of this Agreement: (1) This Agreement has been approved by its General Partner; (2) This Agreement is valid and enforceable against Colonial Downs according to its terms; (3) Colonial Downs shall use its reasonable best efforts to ensure that the backside area of the Racetrack is maintained in a safe, clean and orderly condition when in use; and (4) Colonial Downs shall use its reasonable best efforts to assist the VHBPA in developing health and welfare programs for backstretch personnel; provided that, this Section imposes no obligation on either party to fund any such program. 17 12. VHBPA Office. Colonial Downs shall provide the VHBPA, without ------------ charge, a suitable private office located on the grounds of the Racetrack. Colonial Downs shall furnish said office with appropriate office furniture and telephone lines. The VHBPA shall pay the applicable charges for the installation and use of such telephone lines. 13. Racing Officials. Colonial Downs shall send to the President of the ---------------- VHBPA a written list of the persons whom Colonial Downs has requested the Commission to approve as racing officials for each Race Meeting at the same time it submits that list to the Commission in accordance with the Commission's regulations. 14. Governmental Approval. Nothing contained in this Agreement shall be --------------------- construed as requiring either party to perform any term when such performance is contrary to law or requires prior governmental approval; provided, however, both parties shall use their best efforts to obtain governmental approval if such is required. 15. Authorization for Out-of-State Simulcasting. During the Term of ------------------------------------------- this Agreement, the VHBPA as the authorized representative of the Horsemen for interstate simulcasting purposes, hereby consents and authorizes Colonial Downs to negotiate and contract with simulcast and receiving facilities, including off-track wagering facilities outside the Commonwealth of Virginia, for (i) the conduct of off-track wagering at the Racetrack and the SWFs, and (ii) off-track wagering on live thoroughbred races emanating from the Racetrack, pursuant to the Interstate Horse Racing Act of 1978, P.L. 95-515 (the "Interstate Horse Racing Act"). This 18 Agreement constitutes the contract required by Section 3004(a) of the Interstate Horse Racing Act. Colonial Downs shall consider the best interests of live racing when simulcasting. To the extent required by law, out-of-state simulcasting for all of Colonial Downs' races at the Racetrack shall be subject to the consent of the VHBPA, which consent shall not be unreasonably withheld, delayed or conditioned. In the event consent is withheld, the VHBPA shall set forth its reasons for withholding its consent within a reasonable time after notice from Colonial Downs in advance of the intended simulcast. 16. Copies of Documents; Database. Colonial Downs shall send a copy of ----------------------------- its stall application form, stakes purse program, and condition book for each Race Meeting to the VHBPA on or before the first day they are distributed to Horsemen. Additionally, Colonial Downs shall provide the VHBPA copies of all filings, if any, it makes with the U. S. Securities and Exchange Commission promptly after such filings are made. Colonial Downs shall share with and coordinate all information and data on Horsemen racing at the track with the VHBPA. The parties shall work jointly to develop and maintain an effective database of Horsemen racing in Virginia. Not later than thirty (30) days following the close of each Race Meeting, Colonial Downs shall provide the VHBPA a list of all owners and trainers who participated in that Race Meeting, including addresses, telephone numbers, and e-mail addresses to the extent collected by Colonial Downs. 17. Horsemen's Backstretch Improvements and Programs. Colonial Downs ------------------------------------------------ and the VHBPA agree to expend for the benefit of Horsemen certain funds during calendar year 2002 for the improvement of backstretch working and living 19 conditions and for educational, recreational, and counseling programs. Colonial Downs shall provide $50,000 for capital improvements, with $25,000 to be provided by no later than June 1, 2002, and the remaining $25,000 to be provided by no later than July 15, 2002, the VHBPA shall provide at least $50,000 from its share of the signal sale (see subsection A of Section 4 above), $50,000 of which is to be provided from the first $50,000 available to the VHBPA from its share of the signal sale, and both the VHBPA and Colonial Downs shall use their best efforts to ensure that at least $150,000 is provided from the legitimate breakage deposited into the Racing Benevolence Fund pursuant to (S) 59.1-392(T)(2) of the Code of Virginia. Regarding the latter Fund, the VHBPA and Colonial Downs agree to use their best efforts to obtain any necessary authorization to use part of the legitimate breakage for such improvements and programs. All of the above funds shall be deposited into the Backstretch Improvement Escrow Account, which shall be established at a financial institution mutually acceptable to both Colonial Downs and the VHBPA, and shall be expended as mutually agreed by Colonial Downs and the VHBPA and subject to Commission approval pursuant to Section 30 below. To the extent funds are available, the improvements and programs for calendar year 2002 shall include the following: (1) implementation of the Groom Elite Program, which is a formal program developed in cooperation with Texas A & M University, to train grooms in equine science concepts and practices; (2) chaplaincy and counseling, including health and drug abuse programs; (3) participation in the national Kids To The Cup program to encourage young people to learn about the horse industry by participation in backstretch activities; (4) after work recreational programs for 20 backstretch personnel, such as picnics, evening television and videos, etc.; (5) expansion and improvement of the Racetrack kitchen to better serve the nutritional and health needs of backstretch personnel; (6) out of VHBPA and Colonial Downs funds, upgrading of electrical service to the Racetrack dormitories and barns to handle air conditioning and cooling for grooms and horses as well as providing electrical service for temporary classroom, chaplaincy, and recreational facilities; and (7) out of VHBPA and Colonial Downs funds, implementation of a plan to eliminate from all barns the water runoff problem that in the past has resulted in standing water, which plan shall include appropriate landscaping and pesticide spraying. At the conclusion of the 2002 Race Meeting, Colonial Downs shall within sixty (60) days provide the VHBPA with an accounting of all expenditures made pursuant to this Section. 18. Right to Terminate. Either party may terminate this Agreement upon ------------------ the other party's failure to substantially perform as required under this Agreement and such failure continues for thirty (30) days following the date written notice of default detailing the perceived failure to perform is sent to and received by the allegedly defaulting party in accordance with Section 24 below. Such termination shall not constitute an election of remedy, nor shall it constitute a waiver of a party's other remedies at law or in equity. Additionally, Colonial Downs may terminate this Agreement upon written notice to the VHBPA if the Racetrack and all the SWFs are closed for ninety (90) continuous days. 19. Indemnification. The VHBPA shall indemnify and save harmless --------------- Colonial Downs, its agents, representatives, employees, officers, directors and 21 stockholders, their respective successors and assigns, and all persons acting by, through, under, or in concert with any of them, from and against any and all demands, liabilities, loss, costs, damages, or expenses of whatever nature or kind, including fees of attorneys and all other expenses, arising out of or in any way related to or occasioned by Colonial Downs' performance under subsection E of Section 4 above (Administrative Fee). 20. Mediation; Arbitration. In the event of any disputes or differences ---------------------- arising out of this Agreement, which the parties have been unable to resolve after reasonable efforts to do so, either party may refer the dispute or difference to a mediator mutually acceptable to the parties. In the event such mediation is unsuccessful, or the parties are unable to agree on a mediator, either party may refer the dispute or difference for final settlement to arbitration in accordance with the following procedures: A. By the Commission. The party so desiring to refer the matter to ----------------- arbitration shall request the Commission to arbitrate the dispute or difference by a panel comprised of either one (1) or three (3) of its members, as its Chairman shall designate, in accordance with such rules as the Chairman of the Commission determines, including, but not limited to, the Commercial Arbitration Rules of the American Arbitration Association (the "AAA") in effect on the date of this Agreement unless the parties agree otherwise. B. By Another Arbitrator. If the Commission declines to arbitrate the --------------------- dispute or difference, the arbitration shall be conducted by a single arbitrator designated by the Chairman of the Commission; and if the Chairman declines to 22 designate an arbitrator, the arbitration shall be conducted by a single arbitrator selected by Colonial Downs and the VHBPA in accordance with the rules of the AAA. C. General. The arbitration shall take place in Richmond, Virginia, ------- unless the parties otherwise mutually agree, and shall be governed by the substantive contract law of the Commonwealth of Virginia, without regard to its conflict of laws rules or provisions, and the arbitration rules as determined pursuant to subsection A of this Section. The arbitration award shall be final, binding and conclusive on the parties, and not subject to any appeal. Except as may be required by the Commission, neither the participants, nor their counsel, nor the arbitrator shall disclose the content or substance of the arbitration proceedings until the arbitrator has issued his award. Judgment upon the award rendered may be entered in any court having jurisdiction, or application may be made to such court for judicial recognition of the award or any order of enforcement thereof, as the case may be. This subsection shall not be construed to limit the right of either party to apply to a court of competent jurisdiction for other equitable relief to preserve the status quo or prevent irreparable harm. The costs of the arbitration incurred by the parties for hearing reporting fees, rental of a hearing room and all AAA fees, costs and services charges and of the arbitrator shall be paid by Colonial Downs, except that hearing postponement or cancellation fees or charges by the AAA or the arbitrator shall be borne exclusively by the canceling or postponing party. Conversely, with respect to all other matters, unless the arbitrator otherwise so determines and provides in the arbitration award, each party shall bear its own costs and expenses incurred by that party in connection with arbitration, including 23 without limitation each party's own travel expenses, hearing witness expenses and attorney's fees. 21. Further Assurances. The VHBPA and Colonial Downs shall execute such ------------------ instruments and documents, and shall give such further assurances, as may be necessary to accomplish the purpose and intent of this Agreement. Additionally, upon execution of this Agreement, the VHBPA immediately shall notify its national affiliate that it has entered into this Agreement. 22. Consents, Approvals, Agreements or Assurances. Wherever this Agreement --------------------------------------------- requires the consent, approval, agreement, or assurance of Colonial Downs and/or the VHBPA, (1) a request for such consent, approval, agreement, or assurance from one party shall be responded to by the other party in a timely and business-like manner, and (ii) such consent, approval, agreement, or assurance shall not be unreasonably withheld, delayed or conditioned unless otherwise specifically provided in this Agreement. 23. Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 24. Notices. All notices, requests, demands or other communications as may ------- be required by this Agreement shall be in writing, shall be signed by an authorized representative of the party providing the communication, shall be sent to each of the persons listed below, may be sent by certified mail, return receipt requested, or by telephone facsimile, and shall be deemed to have been given or made when received by personal delivery or otherwise. A courtesy hard copy of any 24 communication that is sent by telephone facsimile also shall be sent by certified mail, return receipt requested. The current addresses of persons to whom communications are to be sent are as follows: Colonial Downs: Mr. Jeffrey P. Jacobs Chairman & CEO Colonial Downs, L.P. 10515 Colonial Downs Parkway New Kent, VA 23124 Mr. Ian M. Stewart President Colonial Holdings, Inc. 10515 Colonial Downs Parkway New Kent, VA 23124 Copy to: James L. Weinberg, Esq. Hirschler Fleischer The Federal Reserve Bank Building P. O. Box 500 701 E. Byrd Street, 15th floor Richmond, VA 23219 Mr. John E. Mooney President Maryland-Virginia Racing Circuit, Inc. 10515 Colonial Downs Parkway New Kent, VA 23124 H. Lane Kneedler, Esq. Reed Smith LLP 901 East Byrd Street, Suite 1700 Richmond, Virginia 23219-4069 VHBPA: Ms. Althea D. Richards President Virginia Horsemen's Benevolent and Protective Association, Inc. P. O. Box 273 Millwood, VA 22646 Copy to: Peter C. Burnett, Esq. 25 Burnett & Williams, P.C. 105 Loudoun Street, S.E. Leesburg, Virginia 20175 25. Waivers. No waiver by a party to this Agreement of any breach of this ------- Agreement or any of its terms shall be effective unless, and only to the extent, such waiver is in writing signed by the party providing or making such waiver and delivered to the other party as provided in Section 24 above. No waiver of any breach shall be deemed to be a waiver of any other or any subsequent breach. 26. Applicable Law; Venue. This Agreement is being executed and delivered --------------------- in the Commonwealth of Virginia and shall be construed and enforced in accordance with the law of Virginia without regard to its conflict of laws rules and provisions. In all court proceedings brought in connection with this Agreement, the parties hereto irrevocably consent to exclusive personal jurisdiction by, and venue in, the Circuit Court for the City of Richmond, Virginia, or the United States District Court for the Eastern District of Virginia, Richmond Division. 27. Headings. Any headings preceding the text of the several sections, -------- subsections, paragraphs and subparagraphs hereof are inserted solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction, or effect. 28. Severability. If any provision of this Agreement is declared invalid ------------ by any tribunal, or becomes invalid or inoperative by operation of law, the remaining provisions of this Agreement shall not be affected thereby and shall remain in full force and effect. 26 29. Entire Agreement: Modification. This Agreement contains the entire ------------------------------ Agreement between the parties and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement. No modification, variation or amendment of this Agreement or of any attachment or exhibit to this Agreement shall be effective unless such modification, variation or amendment is in writing and has been signed by the parties to this Agreement. 30. Approval by the Commission. The parties acknowledge that this -------------------------- Agreement and the expenditures from the Racing Benevolence Fund detailed in Section 17 above are subject to the approval of the Commission. If this Agreement and such expenditures are not approved by the Commission, this Agreement shall be null and void. Upon such approvals, this Agreement shall be effective as of January 1, 2002, regardless of the date of the Commission's approvals. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first stated above. VIRGINIA HORSEMEN'S COLONIAL DOWNS, L.P. BENEVOLENT AND PROTECTIVE ASSOCIATION, INC. By: Stansley Racing Corp., its General Partner By: /s/ Althea D. Richards By: /s/ Ian M. Stewart ------------------------------ ----------------------------- Althea D. Richards, President Ian M. Stewart, President STANSLEY RACING CORP. By: /s/ Ian M. Stewart ------------------------- Ian M. Stewart, President 27 28 EXHIBIT A FORM OF TRUST AGREEMENT THIS TRUST AGREEMENT is entered into this 20th day of February 2002, by and between COLONIAL DOWNS, L.P., a Virginia limited partnership (the "Trustee"), and VIRGINIA HORSEMEN'S BENEVOLENT AND PROTECTIVE ASSOCIATION, INC., a not-for-profit corporation ("VHBPA"), on behalf of the thoroughbred horsemen engaging in thoroughbred racing at Colonial Downs' racetrack (the "Track") (collectively, the "Beneficiaries"). W I T N E S S E T H: WHEREAS, pursuant to prior agreements that have expired and an Agreement, dated as of February ___, 2002 ("Horsemen's Agreement"), relating to live thoroughbred racing at Colonial Downs, among other matters, the Trustee has and will make deposits into an account currently maintained at Virginia National Bank, Charlottesville branch (the "Thoroughbred Partners' Account") which will be used to fund purses and related payments to the Beneficiaries participating in racing at the Track during the 2002 thoroughbred racing season and other years governed by the Horsemen's Agreement; NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. The Account. The Trustee shall maintain the Thoroughbred Partners' ----------- Account at a financial institution mutually acceptable to the parties and that is insured by an agency of the United States government. 2. Deposits. The Trustee shall deposit all funds required by the -------- Horsemen's Agreement into the Thoroughbred Partners' Account. The funds so deposited into the Thoroughbred Partners' Account, exclusive of interest earned thereon, are hereinafter referred to as the "Trust Account Funds." Except as provided in Section 5.B. of the Horsemen's Agreement, no other funds shall be deposited into the Thoroughbred Partners' Account, and the Trustee shall not commingle any other funds with the Trust Account Funds. 3. Withdrawals. The VHBPA, on behalf of the Beneficiaries, grants the ----------- Trustee the authority to withdraw funds from the Thoroughbred Partners' Account to make payments required to be made pursuant to the terms and provisions of the Horsemen's Agreement, including, without limitation, to provide for the payment of purses and related awards to the Beneficiaries. 4. Title to Funds in the Account. The Trustee shall hold only legal ----------------------------- title to the Trust Account Funds and shall not have any equitable or beneficial interest in such Funds. Accordingly, the Trust Account Funds are excluded from the Trustee's estate for purposes of 11 U.S.C.ss. 541(d), as amended. 5. Interest. The Trustee understands and accepts that interest, if -------- any, earned on the Funds will be reported under its employer identification number, that such reporting is done as a matter of convenience for the administration of the Thoroughbred Partners' Account and that the receipt of such interest does not affect the beneficial and equitable title that the parties have to such interest and is not in derogation of the rights and entitlements of the parties as set forth herein and in the Horsemen's Agreement. 6. Trustee's Duties. The duties of the Trustee under this Agreement ---------------- shall be limited to the safekeeping and disbursement of the Trust Account Funds and documents under the terms and conditions of this Agreement. The Trustee shall be entitled to rely on and may assume the genuineness and authenticity of any signatures purported to be made by the parties hereto, their lawful representatives, and successors or assigns. Upon election of either party hereto, an independent third party may be appointed trustee of the Thoroughbred Partners' Account and the Trustee hereunder may be relieved of its duties as trustee but shall be bound by the other provisions of this Agreement. 7. Limitation on Liability. The Trustee shall not be liable for any ----------------------- claims, damages, liabilities, losses, costs, or expenses arising from the Trustee's acts or omissions with respect to the Trust Account Funds or its performance hereunder, unless such actions or omissions result from the Trustee's negligence or willful misconduct. 8. Reimbursement of Expenses. The Trustee shall be reimbursed in the ------------------------- form of one-half of the interest accruing on the Trust Account Funds for all costs and expenses reasonably incurred by it in connection with the administration of the Account, including payment of any trustee fees to a third-party trustee. 9. Termination. This Agreement shall terminate on the date on which ----------- all payments under the Horsemen's Agreement have been made and the Horsemen's Agreement is no longer in effect. 10. Notices. All notices, approvals, and other communications ------- authorized or required to be given between the parties hereto shall be validly given or made if in writing and sent in accordance with the terms and conditions of the Horsemen's Agreement. 2 11. Governing Law. This Agreement shall be governed, construed, and ------------- enforced in accordance with the laws of the Commonwealth of Virginia, without regard to any conflicts of law provisions thereof. 12. Miscellaneous. Any action, suit, or proceeding in respect of or ------------- arising out of this Agreement may be prosecuted as to any party hereto in Richmond, Virginia. Each party hereto consents to the exercise of jurisdiction over its person by any court situated in Richmond, Virginia and having jurisdiction over the subject matter of any such action, suit, or proceeding. The invalidity or unenforceability of any provision of this Agreement in any particular respect shall not affect the validity and enforceability of any other provision of this Agreement or of the same provision in any other respect. This Agreement and the Horsemen's Agreement set forth the entire understanding of the parties to this Agreement with respect to the operation of the trust for the Thoroughbred Partners' Account and may not be amended except by a written instrument executed by all parties hereto. Other than the Horsemen's Agreement, any previous agreements or understandings among the parties hereto regarding the subject matter hereof are merged into and superseded by this Agreement. All of the covenants, stipulations, terms, and conditions of this Agreement shall extend to and be binding upon the respective successors and assigns of the parties hereto, but this Agreement shall not be assigned by the Trustee without the prior written consent of the Beneficiaries. This Agreement or any amendment hereto may be executed in two or more counterparts, each of which shall constitute an original, and all of which together shall constitute one and the same Agreement. VIRGINIA HORSEMEN'S COLONIAL DOWNS, L.P. BENEVOLENT AND PROTECTIVE ASSOCIATION, INC. By: Stansley Racing Corp., its General Partner By: /s/ Althea D. Richards By: /s/ Ian M. Stewart ------------------------------- --------------------------- Althea D. Richards, President Ian M. Stewart, President 3 EX-12.1 59 dex121.txt STATEMENT REGARDING COMPUTATION OF RATIOS Exhibit 12.1 Statement Regarding Computations of Ratios For the purpose of determining the ratio of earnings to fixed charges, "earnings" consist of earnings before income tax expense plus fixed charges. "Fixed charges" consist of interest expense, including amortization of deferred financing costs, plus estimated interest on rental expense, and are computed as follows:
Pro Forma Ratio (1) Black Hawk 1997 1998 1999 2000 2001 2001 - ---------- ------ ------- ------- ------- ------- --------- Earnings: Pre-tax income from continuing operations......................... $ (122) $ 4,518 $10,120 $10,496 $ 9,316 $ 9,316 Add: Fixed charges................................................ 566 4,297 5,221 4,212 6,280 8,362 Add: Amortization of capitalized interest......................... 9 35 58 58 58 58 Add: Distributed income of equity investment...................... 1,259 1,168 -- -- -- -- Less: Interest capitalized........................................ (548) (1,333) -- -- -- -- ------ ------- ------- ------- ------- ------- Total earnings....................................................... $1,164 $ 8,685 $15,399 $14,766 $15,654 $17,736 ====== ======= ======= ======= ======= ======= Fixed Charges: Interest expense.................................................. $ -- $ 2,743 $ 4,586 $ 3,424 $ 5,271 $ 7,354 Interest capitalized.............................................. 548 1,333 -- -- -- -- Amortization of capitalized expenses related to indebtedness...... -- 202 617 770 709 709 Estimated interest on rental expense.............................. 18 18 18 18 300 300 ------ ------- ------- ------- ------- ------- Total fixed charges.................................................. $ 566 $ 4,298 $ 5,221 $ 4,212 $ 6,280 $ 8,363 ====== ======= ======= ======= ======= ======= Ratio of earnings to fixed charges................................ 2.06 2.02 2.95 3.51 2.49 2.12
- -------- (1) The pro forma ratio assumes interest expense based on $58,800,000 of Black Hawk Gaming debt at the interest rate applicable under the terms of the New Notes (11 7/8%) Diversified
1997 1998 1999 2000 2001 ------- ------ ------ ------ ------ Earnings: Pre-tax income from continuing operations.......................... $ 92 $1,276 $3,813 $2,455 $3,537 Add: Fixed charges................................................. 1,638 3,890 3,925 3,937 4,005 Add: Amortization of capitalized interest.......................... 10 12 32 32 32 Add: Distributed income of equity investment Less: Interest capitalized......................................... (1,068) (147) ------- ------ ------ ------ ------ Total earnings......................................................... $ 672 $5,031 $7,770 $6,424 $7,574 ======= ====== ====== ====== ====== Fixed Charges: Interest expense................................................... $ 278 $2,929 $3,161 $3,250 $3,452 Interest capitalized............................................... 1,068 147 Amortization of capitalized expenses related to indebtedness....... 145 159 28 5 Estimated interest on rental expense............................... 292 669 605 659 548 ------- ------ ------ ------ ------ Total fixed charges.................................................... $ 1,638 $3,890 $3,925 $3,937 $4,005 ======= ====== ====== ====== ====== Ratio of Earnings to fixed charges..................................... .41x 1.30x 1.98x 1.63x 1.89x
EX-21.1 60 dex211.txt SUBSIDIARIES OF GAMECO, INC. Exhibit 21.1 Gameco, Inc. Subsidiaries Black Hawk Gaming & Development Company, Inc., a Colorado corporation Gold Dust West Casino, Inc., a Nevada corporation Black Hawk/Jacobs Entertainment, LLC, a Colorado limited liability company Gilpin Hotel Venture, a Colorado partnership Gilpin Ventures, Inc., a Colorado corporation Jalou II Inc., a Louisiana corporation Winner's Choice Casino, Inc., a Louisiana corporation Diversified Opportunities Group Ltd., an Ohio limited liability company Jalou L.L.C., a Louisiana limited liability company Houma Truck Plaza & Casino, L.L.C., a Louisiana limited liability company Jalou-Cash's L.L.C., a Louisiana limited liability company JACE, Inc., a Louisiana corporation Lucky Magnolia Truck Stop and Casino L.L.C., a Louisiana limited liability company Bayou Vista Truck Plaza and Casino, L.L.C., a Louisiana limited liability company Raceland Truck Plaza and Casino, L.L.C., a Louisiana limited liability company Colonial Holdings, Inc., a Virginia corporation Colonial Downs, L.P., a Virginia limited partnership Colonial Holdings Management, Inc., a Virginia corporation Stansley Racing Corp., a Virginia corporation EX-23.1 61 dex231.txt CONSENT OF DELOITTE & TOUCHE LLP Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement of Gameco, Inc. on Form S-4 of our report dated May 10, 2002, (which report expresses an unqualified opinion and includes an explanatory paragraph to describe the issuance of debt on February 8, 2002 and certain acquisitions occurring on February 22, 2002) appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ DELOITTE & TOUCHE LLP Denver, Colorado May 14, 2002 EX-23.3 62 dex233.txt CONSENT OF BDO SEIMAN LLP Exhibit 23.3 Consent of Independent Certified Public Accountants Board of Directors Gameco, Inc. We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated March 22, 2002, relating to the consolidated financial statements of Colonial Holdings, Inc., which is contained in that Prospectus. We also consent to the reference to us under the captions "Selected Consolidated Historical Financial and Operating Data" and "Experts" in the Prospectus. /s/ BDO Seidman, LLP Richmond, Virginia May 14, 2002 EX-23.4 63 dex234.txt CONSENT OF DELOITTE & TOUCHE LLP Exhibit 23.4 INDEPENDENT AUDITOR'S CONSENT We consent to the use in this Registration Statement of Gameco, Inc. on Form S-4 of our report on Black Hawk Gaming & Development Company, Inc. and subsidiaries, dated March 22, 2002 (which report expresses an unqualified opinion and includes explanatory paragraphs on the adoption of SFAS No. 133 "Accounting For Derivative Instruments and Hedging Activities" and the acquisition of the Company on February 22, 2002) appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Selected Consolidated Historical Financial and Operating Data" and "Experts" in such Prospectus. /s/ DELOITTE & TOUCHE LLP Denver, Colorado May 14, 2002 EX-23.5 64 dex235.txt CONSENT OF BDO SEIMAN LLP FOR DIVERSIFIED Exhibit 23.5 Consent of Independent Certified Public Accountants Board of Directors Gameco, Inc. We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated April 12, 2002, relating to the consolidated financial statements of Diversified Opportunities Group Ltd., which is contained in that Prospectus. We also consent to the reference to us under the captions "Selected Consolidated Historical Financial and Operating Data" and "Experts" in the Prospectus. /s/ BDO Seidman, LLP Richmond, Virginia May 14, 2002 EX-23.6 65 dex236.txt CONSENT OF BDO SEIMAN LLP FOR JALOU L.L.C. Exhibit 23.6 Consent of Independent Certified Public Accountants Board of Directors Gameco, Inc. We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated March 29, 2002, relating to the combined financial statements of Jalou, which is contained in that Prospectus. We also consent to the reference to us under the caption "Experts" in the Prospectus. /s/ BDO Seidman, LLP Richmond, Virginia May 14, 2002 EX-23.7 66 dex237.txt CONSENT OF BDO SEIMAN LLP FOR JALOU II INC. Exhibit 23.7 Consent of Independent Certified Public Accountants Board of Directors Gameco, Inc. We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated March 28, 2002, relating to the consolidated financial statements of Jalou II Inc., which is contained in that Prospectus. We also consent to the reference to us under the caption "Experts" in the Prospectus. /s/ BDO Seidman, LLP Richmond, Virginia May 14, 2002 EX-25.1 67 dex251.txt STATEMENT OF ELIGIBILITY OF TRUSTEE ON FORM T-1 Exhibit 25.1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________ FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE _____________________________ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b) (2) WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) A U.S. National Banking Association 41-1592157 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national Identification No.) bank) Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 (Address of principal executive offices) (Zip code) Stanley S. Stroup, General Counsel WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 (612) 667-1234 (Agent for Service) _____________________________ GAMECO, INC. (Exact name of obligor as specified in its charter) Delaware 34-1959351 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 240 Main Street Black Hawk, Colorado 80422 Address of principal executive offices) (Zip code) _______________________________ 11 7/8% Senior Secured Notes due 2009 (Title of the indenture securities) ================================================================================ Item 1. General Information. Furnish the following information as to the ------------------- trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency Treasury Department Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. The Board of Governors of the Federal Reserve System Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. Item 2. Affiliations with Obligor. If the obligor is an affiliate of the ------------------------- trustee, describe each such affiliation. None with respect to the trustee. No responses are included for Items 3-14 of this Form T-1 because the obligor is not in default as provided under Item 13. Item 15. Foreign Trustee. Not applicable. --------------- Item 16. List of Exhibits. List below all exhibits filed as a part of this ---------------- Statement of Eligibility. Wells Fargo Bank incorporates by reference into this Form T-1 the exhibits attached hereto. Exhibit 1. a. A copy of the Articles of Association of the trustee now in effect.*** Exhibit 2. a. A copy of the certificate of authority of the trustee to commence business issued June 28, 1872, by the Comptroller of the Currency to The Northwestern National Bank of Minneapolis.* b. A copy of the certificate of the Comptroller of the Currency dated January 2, 1934, approving the consolidation of The Northwestern National Bank of Minneapolis and The Minnesota Loan and Trust Company of Minneapolis, with the surviving entity being titled Northwestern National Bank and Trust Company of Minneapolis.* c. A copy of the certificate of the Acting Comptroller of the Currency dated January 12, 1943, as to change of corporate title of Northwestern National Bank and Trust Company of Minneapolis to Northwestern National Bank of Minneapolis.* d. A copy of the letter dated May 12, 1983 from the Regional Counsel, Comptroller of the Currency, acknowledging receipt of notice of name change effective May 1, 1983 from Northwestern National Bank of Minneapolis to Norwest Bank Minneapolis, National Association.* e. A copy of the letter dated January 4, 1988 from the Administrator of National Banks for the Comptroller of the Currency certifying approval of consolidation and merger effective January 1, 1988 of Norwest Bank Minneapolis, National Association with various other banks under the title of "Norwest Bank Minnesota, National Association."* f. A copy of the letter dated July 10, 2000 from the Administrator of National Banks for the Comptroller of the Currency certifying approval of consolidation effective July 8, 2000 of Norwest Bank Minnesota, National Association with various other banks under the title of "Wells Fargo Bank Minnesota, National Association."**** Exhibit 3. A copy of the authorization of the trustee to exercise corporate trust powers issued January 2, 1934, by the Federal Reserve Board.* Exhibit 4. Copy of By-laws of the trustee as now in effect.*** Exhibit 5. Not applicable. Exhibit 6. The consent of the trustee required by Section 321(b) of the Act. Exhibit 7. Incorporated by reference to filing reference number 333-64954 Exhibit 8. Not applicable. Exhibit 9. Not applicable. * Incorporated by reference to exhibit number 25 filed with registration statement number 33-66026. *** Incorporated by reference to exhibit T3G filed with registration statement number 022-22473. **** Incorporated by reference to exhibit number 25.1 filed with registration statement number 001-15891. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wells Fargo Bank Minnesota, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Minneapolis and State of Minnesota on the 16th day of April, 2002. WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION /s/ Robert L. Reynolds ------------------------- Robert L. Reynolds Vice President April 16, 2002 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, the undersigned hereby consents that reports of examination of the undersigned made by Federal, State, Territorial, or District authorities authorized to make such examination may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION /s/ Robert L. Reynolds ------------------------ Robert L. Reynolds Vice President EXHIBIT 6 April 16, 2002 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, the undersigned hereby consents that reports of examination of the undersigned made by Federal, State, Territorial, or District authorities authorized to make such examination may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION /S/: Robert L. Reynolds ----------------------------- Robert L. Reynolds Vice President EX-99.1 68 dex991.txt LETTER OF TRANSMITTAL Exhibit 99.1 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________, 2002, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE. - -------------------------------------------------------------------------------- GAMECO, INC. LETTER OF TRANSMITTAL 11 7/8% SENIOR SECURED NOTES DUE 2009 TO: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, THE EXCHANGE AGENT BY REGISTERED OR CERTIFIED MAIL: BY OVERNIGHT COURIER AND BY HAND AFTER - --------------------------------- --------------------------------------- (Registered or certified mail 4:30 P.M. recommended) --------- Wells Fargo Bank Minnesota Wells Fargo Bank Minnesota 213 Court Street, Suite 902 213 Court Street, Suite 902 Middletown, CT 06457 Middletown, CT 06457 Attention: Robert Reynolds, Vice Attention: Robert Reynolds, Vice President President By FACSIMILE: (860) 704-8214 - ------------ CONFIRM BY TELEPHONE: (860) 704-8216 - -------------------- DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR EXISTING NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. The undersigned acknowledges receipt of the Prospectus dated _____________ ___, 2002 (the "Prospectus") of GAMECO, INC. (the "Company") and this Letter of Transmittal (the "Letter of Transmittal"), which together constitute the Company's Offer to Exchange (the "Exchange Offer") $1,000 principal amount of its 11 7/8% Senior Secured Notes Due 2009 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which the Prospectus is a part, for each $1,000 principal amount of its outstanding 11 7/8% Senior Secured Notes Due 2009 (the "Old Notes"), of which $125,000,000 principal amount is outstanding, upon the terms and conditions set forth in the Prospectus. Other capitalized terms used but not defined herein have the meaning given to them in the Prospectus. The holder of each Old Note accepted for exchange, will receive a New Note having a principal amount equal to that of the surrendered Old Note. Interest on the New Notes will accrue from the last interest payment date on which interest was paid on the Old Notes surrendered in exchange therefor or, if no interest has been paid on the Old Notes, from the date of original issue of the Old Notes. Holders of Old Notes accepted for exchange will be deemed to have waived the right to receive any other payments or accrued interest on the Old Notes. The Company reserves the right, at any time or from time to time, to extend the Exchange Offer at its discretion, in which event the term "Expiration Date" shall mean the latest time and date to which the Exchange Offer is extended. The Company shall notify holders of the Old Notes of any extension by means of a press release or other public announcement prior to 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. This Letter of Transmittal is to be used by Holders if: (i) certificates representing Old Notes are to be physically delivered to the Exchange Agent herewith by Holders; (ii) tender of Old Notes is to be made by book-entry transfer to the Exchange Agent's account at The Depository Trust Company ("DTC"), pursuant to the procedures set forth in the Prospectus under "The Exchange Offer--Procedures for Tendering" by any financial institution that is a participant in DTC and whose name appears on a security position listing as the owner of Old Notes; or (iii) tender of Old Notes is to be made according to the guaranteed delivery procedures set forth in the prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The term "Holder" with respect to the Exchange Offer means any person: (i) in whose name Old Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered Holder; or (ii) whose Old Notes are held of record by DTC who desires to deliver such Old Notes by book-entry transfer at DTC. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. The instructions included with this Letter of Transmittal must be followed. Questions and requests for assistance or for additional copies of the Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Exchange Agent. See Instruction 11 herein. HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE CHECKING ANY BOX BELOW. - ------------------------------------------------------------------------------- Page 2 - -------------------------------------------------------------------------------- BOX 1 - DESCRIPTION OF 11 7/8% SENIOR SECURED NOTES DUE 2009 (OLD NOTES) - --------------------------------------------------------------------------------
Aggregate Principal Principal Amount Name(s) and Address(es) of Registered Holder(s) Certificate Registered by Tendered (Please fill in, if blank) Number(s)* Certificate(s) (If less than all)** - ------------------------------------------------------ ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- Total - --------------------------------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer. ** Unless indicated in the column labeled "Principal Amount Tendered," any tendering Holder of Old Notes will be deemed to have tendered the entire aggregate principal amount represented by the column labeled "Aggregate Principal Amount Represented by Certificate(s)." If the space provided above is inadequate, list the certificate numbers and principal amounts on a separate signed schedule and affix the list to this Letter of Transmittal. The minimum permitted tender is $1,000 in principal amount of Old Notes. All other tenders must be integral multiples of $1,000. - ------------------------------------------------------------------------------- Page 3
- --------------------------------------------------------- ----------------------------------------------------- BOX 2 BOX 3 SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 4, 5 AND 6) (SEE INSTRUCTIONS 4, 5 AND 6) To be completed ONLY if certificates for Old To be accepted ONLY if certificates for Notes in a principal amount not tendered or not accepted Old Notes in a principal amount not tendered or for exchange, or New Notes issued in exchange for Old not accepted for exchange, are to be sent to Notes accepted for exchange, are to be issued in the someone other than the undersigned, or to the name of someone other than the undersigned, or if the undersigned at an address other than that shown Old Notes tendered by book-entry transfer that are not above. accepted for exchange are to be credited to an account maintained by DTC. Issue certificate(s) to: Return mail to: Name:____________________________________________________ Name:____________________________________________ (Please Print) (Please Print) Address:_________________________________________________ Address:_________________________________________ _________________________________________________________ _________________________________________________ (Include Zip Code) (Include Zip Code) _________________________________________________________ _________________________________________________ (Tax Identification or Social Security No.) (Tax Identification or Social Security No.) - ----------------------------------------------------------------------------------------------------------------- CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution:______________________________________________________ DTC Book-Entry Account:_____________________________________________________________ Transaction Code No.:_______________________________________________________________ - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s):____________________________________________________ Window Ticket Number (if any):______________________________________________________ Date of Execution of Notice of Guaranteed Delivery:_________________________________ IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING: Account Number:_______________________ Transaction Code Number:_________________ - -----------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Page 4 - -------------------------------------------------------------------------------- CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name:________________________________ Address:_____________________________ ________________________________ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CHECK HERE IF YOU ARE A BROKER-DEALER AND ARE RECEIVING NEW NOTES FOR YOUR OWN ACCOUNT IN EXCHANGE FOR OLD NOTES THAT WERE ACQUIRED AS A RESULT OF MARKET MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES. Name:________________________________ Address:_____________________________ ________________________________ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Page 5 Ladies and Gentlemen: Subject to the terms and conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount of Old Notes indicated above. Subject to and effective upon the acceptance for exchange of the principal amount of Old Notes tendered in accordance with this Letter of Transmittal, the undersigned sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to the Old Notes tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent its agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Company and as Trustee under the Indenture for the Old Notes and New Notes) with respect to the tendered Old Notes with full power of substitution to (i) deliver certificates for such Old Notes to the Company, or transfer ownership of such Old Notes on the account books maintained by DTC and deliver all accompanying evidence of transfer and authenticity to, or upon the order of, the Company and (ii) present such Old Notes for transfer on the books of the Company and receive all benefits and otherwise exercise all rights of beneficial ownership of such Old Notes, all in accordance with the terms and subject to the conditions of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed irrevocable and coupled with an interest. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Notes tendered hereby and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim, when the same are acquired by the Company. The undersigned hereby further represents that any New Notes acquired in exchange for Old Notes tendered hereby will have been acquired in the ordinary course of business of the Holder receiving such New Notes, whether or not such person is the Holder, that neither the Holder nor any such other person has any arrangement or understanding with any person to participate in the distribution of such New Notes and that neither the Holder nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company or any of its subsidiaries. The undersigned also acknowledges that this Exchange Offer is being made based on certain interpretations issued by the staff of the Securities and Exchange Commission (the "Commission") to third parties in unrelated transactions. Based on those interpretations, the Company believes that the New Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangements or understandings with any person to participate in the distribution of such New Notes. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the assignment, transfer and purchase of the Old Notes tendered hereby. All authority conferred or agreed to be conferred by this Letter of Transmittal shall survive the death, incapacity or dissolution of the undersigned and every obligation of the undersigned under this Letter of Transmittal shall be binding upon the undersigned's heirs, personal representatives, successors and assigns, trustees in bankruptcy or other legal representatives of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer--Withdrawal of Tenders" section of the Prospectus. - ------------------------------------------------------------------------------- Page 6 For purposes of the Exchange Offer, the Company shall be deemed to have accepted validly tendered Old Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. If any tendered Old Notes are not accepted for exchange pursuant to the Exchange Offer for any reason, certificates for any such unaccepted Old Notes will be returned (except as noted below with respect to tenders through DTC), without expense, to the undersigned as promptly as practicable after the Expiration Date at the address shown below or at a different address as may be indicated under "Special Delivery Instructions." The undersigned acknowledges that tenders of Old Notes pursuant to the procedures described under the caption "The Exchange Offer--Procedures for Tendering" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. Unless otherwise indicated under "Special Payment Instructions," please issue the certificates representing the New Notes issued in exchange for the Old Notes accepted for exchange and return any Old Notes not tendered or not exchanged in the name(s) of the undersigned (or in either such event in the case of the Old Notes tendered through DTC, by credit to the undersigned's account at DTC). Similarly, unless otherwise indicated under "Special Delivery Instructions," please send the certificates representing the New Notes issued in exchange for the Old Notes accepted for exchange and any certificates for Old Notes not tendered or not exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s), unless, in either event, tender is being made through DTC. In the event that both "Special Payment Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the New Notes issued in exchange for the Old Notes accepted for exchange and return any Old Notes not tendered or not exchanged in the name(s) of, and send said certificates to, the person(s) so indicated. The Company has no obligation pursuant to the "Special Payment Instructions" and "Special Delivery Instructions" to transfer any Old Notes from the name of the registered Holder(s) thereof if the Company does not accept for exchange any of the Old Notes so tendered. Holders of Old Notes who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, this Letter of Transmittal or any other documents required hereby to the Exchange Agent, or cannot complete the procedure for book-entry transfer, prior to the Expiration Date, may tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 1 regarding the completion of the Letter of Transmittal printed below. - -------------------------------------------------------------------------------- Page 7 - -------------------------------------------------------------------------------- PLEASE SIGN HERE WHETHER OR NOT OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY X_____________________________________________________ Date________________ X_____________________________________________________ Date________________ Signature(s) of Registered Holder(s) Or Authorized Signatory Area Code and Telephone Number ______________________ The above lines must be signed by the registered Holder(s) of Old Notes as their name(s) appear(s) on the Old Notes or, if the Old Notes are tendered by a participant in DTC, as such participant's name appears on a security position listing as the owner of Old Notes, or by person(s) authorized to become registered Holder(s) by a properly completed bond power from the registered Holder(s), a copy of which must be transmitted with this Letter of Transmittal. If Old Notes to which this Letter of Transmittal relates are held of record by two or more joint Holders, then all such holders must sign this Letter of Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person must (i) set forth his or her full title below and (ii) unless waived by the Company, submit evidence satisfactory to the Company of such person's authority to act. See Instruction 4 regarding the completion of this Letter of Transmittal printed below. Name:___________________________________________________________________________ (Please Print) Capacity:_______________________________________________________________________ Address:________________________________________________________________________ (Include Zip Code) Signature(s) Guaranteed by an Eligible Institution: (If required by Instruction 4) ________________________________________________________________________________ (Authorized Signature) ________________________________________________________________________________ (Title) ________________________________________________________________________________ (Name of Firm) Dated:__________________________________________________________________________ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Page 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. Delivery of this Letter of Transmittal and Old Notes; Guaranteed Delivery Procedures. This Letter of Transmittal is to be completed by noteholders, either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer--Procedures for Tendering" section of the Prospectus. Certificates for all physically tendered Old Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile hereof) and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Old Notes tendered hereby must be in denominations of principal amount of maturity of $1,000 and any integral multiple thereof. Holders whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution (as defined in Instruction 4 below), (ii) prior to the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Old Notes, or a Book-Entry Confirmation, and any other documents required by this Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or Book-Entry confirmation, as the case may be, and all other documents required by this Letter of Transmittal, are received by the Exchange Agent within three NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. The method of delivery of this Letter of Transmittal, the Old Notes and all other required documents is at the election and risk of the tendering holder, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent or deemed received under the ATOP Procedures. If Old Notes are sent by mail, it is suggested that the mailing be made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 p.m. New York City time, on the Expiration Date. See "The Exchange Offer" section in the Prospectus. 2. Tender by Holder. Only a holder of Old Notes may tender such Old Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not the registered holder and who wishes to tender should arrange with the registered holder to execute and deliver this Letter of Transmittal on his or her behalf or must, prior to completing and executing this Letter of Transmittal and delivering his or her Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such holder's name or obtain a properly completed bond power from the registered holder. 3. Partial Tenders. Tenders of Old Notes will be accepted only in integral multiples of $1,000. If less than the entire principal amount of any Old Notes is tendered, the tendering holder should fill in the principal amount tendered in the fourth column of the box entitled "Description of 11 7/8% Senior Secured Notes Due 2009 (Old Notes)" above. The entire principal amount of Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of all Old Notes is not tendered, then Old Notes for the principal amount of Old Notes - -------------------------------------------------------------------------------- Page 9 not tendered and a certificate or certificates representing New Notes issued in exchange for any Old Notes accepted will be sent to the Holder at his or her registered address, unless a different address is provided in the appropriate box on this Letter of Transmittal promptly after the Old Notes are accepted for exchange. 4. Signatures on this Letter of Transmittal; Powers of Attorney and Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed by the registered holder of the Old Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without any change whatsoever. If any tendered Old Notes are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of certificates. When this Letter of Transmittal is signed by the registered holder or holders of the Old Notes specified herein and tendered hereby, no endorsements of certificates or separate powers of attorney are required. If, however, the New Notes are to be issued, or any untendered Old Notes are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate powers of attorney are required. Signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate powers of attorney, in either case signed exactly as the names on the registered holder or holders appear(s) on the certificate(s) and signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificates or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. Endorsements on certificates for Old Notes or signatures on powers of attorney required by this Instruction 4 must be guaranteed by a firm which is a participant in a recognized signature guarantee medallion program ("Eligible Institutions"). Signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution unless the Old Notes are tendered (i) by a registered holder of Old Notes (which term, for purposes of the Exchange Offer, includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the holder of such Old Notes) who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on this Letter of Transmittal, or (ii) for the account of an Eligible Institution. 5. Special Payment And Delivery Instructions. Tendering holders should indicate, in the applicable box or boxes, the name and address to which New Notes or substitute Old Notes for principal amounts not tendered or not accepted for exchange are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal (or in the case of tender of Old Notes through DTC, if different from DTC). In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. Noteholders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at - -------------------------------------------------------------------------------- Page 10 the Book-Entry Transfer Facility as such noteholder may designate hereon. If no such instructions are given, such Old Notes not exchanged will be returned to the name and address of the person signing this Letter of Transmittal. 6. Tax Identification Number. Federal income tax law requires that a holder whose offered Old Notes are accepted for exchange must provide the Company (as payer) with his, her or its correct Taxpayer Identification Number ("TIN"), which, in the case of an exchanging holder who is an individual, is his or her social security number. If the Company is not provided with the correct TIN or an adequate basis for exemption, such holder may be subject to a $50 penalty imposed by the Internal Revenue Service (the "IRS"), and payments made with respect to Old Notes purchased pursuant to the Exchange Offer may be subject to backup withholding at a 30.5% rate. The backup withholding rate is being reduced gradually through 2006. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9." To prevent backup withholding, each exchanging holder must provide his, her or its correct TIN by completing the Substitute Form W-9 enclosed herewith, certifying that the TIN provided is correct (or that such Holder is awaiting a TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder has not been notified by the IRS that he, she or it is subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified the holder that he, she or it is no longer subject to backup withholding. In order to satisfy the Exchange Agent that a foreign individual qualifies as an exempt recipient, such holder must submit a statement signed under penalty of perjury attesting to such exempt status. Such statements may be obtained from the Exchange Agent. If the Old Notes are in more than one name or are not in the name of the actual owner, consult the Substitute Form W-9 for information on which TIN to report. If you do not provide your TIN to the Company within 60 days, backup withholding will begin and continue until you furnish your TIN to the Company. 7. Transfer Taxes. The Company will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates representing New Notes or Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Exchange Offer, then any such transfer taxes (whether imposed on the registered holder or on any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 7, it will not be necessary for transfer tax stamps to be affixed to the Old Notes listed in this letter. 8. Waiver of Conditions. The Company reserves the absolute right to amend, waive or modify specified conditions in the Exchange Offer in the case of any Old Notes tendered. 9. No Conditional Transfers. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this Letter of Transmittal or by tendering Old Notes via ATOP, shall waive any right to receive notice of the acceptance of their Old Notes for exchange. Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Existing Notes nor shall any of them incur any liability for failure to give any such notice. - -------------------------------------------------------------------------------- Page 11 10. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated herein for further instructions. 11. Requests for Assistance or Additional Copies. Questions and requests for assistance for additional copies of the Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Exchange Agent at the address specified in the Prospectus. (Do Not Write in The Space Below) Certificate Old Notes Old Notes Surrendered Tendered Accepted - ------------------------- ------------------------- ------------------------- - ------------------------- ------------------------- ------------------------- - ------------------------- ------------------------- ------------------------- - ------------------------- ------------------------- ------------------------- Delivery Prepared by: ________________________Checked By ________________________Date - -------------------------------------------------------------------------------- Page 12 - ------------------------------------------------------------------------------- PAYER'S NAME: GAMECO, INC. - -------------------------------------------------------------------------------- Name (if joint names, list first and circle the name of the person or entity whose number you enter in Part I below. See instructions if your name has changed.) ________________________________________________________________________________ Address_________________________________________________________________________ City, State and ZIP Code________________________________________________________ List account number(s) here (optional)__________________________________________ - -------------------------------------------------------------------------------- SUBSTITUTE PART 1--PLEASE PROVIDE YOUR Form W-9 TAXPAYER IDENTIFICATION OR TIN NUMBER ("TIN") IN THE BOX AT RIGHT _____________________________ AND CERTIFY BY SIGNING AND DATING ____ BELOW. Social security number or TIN Department of the Treasury Internal Revenue Service Payer's Request for Taxpayer Identification Number (TIN) -------------------------------------- ------------------------------------- PART 2--Check the box if you are Part 3-- NOT subject to backup withholding under the provisions of section Awaiting TIN 3408(a)(1)(C) of the Internal Revenue Code because (1) you have not been notified that you are subject to backup withholding as a result of failure to report all interest or dividends or (2) the Internal Revenue Service has notified you that you are no longer subject to backup withholding. -------------------------------------- ------------------------------------- Certification--Under the penalties of perjury, I certify that the information provided on this form is true, correct and complete. Signature ___________________ Date____________________________ - ---------------------------------------- --------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 30.5% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER OF SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. - -------------------------------------------------------------------------------- Page 13 EX-99.2 69 dex992.txt NOTICE OF GUARANTEED DELIVERY Exhibit 99.2 GAMECO, INC. NOTICE OF GUARANTEED DELIVERY FOR 11 7/8% SENIOR SECURED NOTES DUE 2009 As set forth in the Prospectus dated ___________, 2002 (the "Prospectus") of GAMECO, INC., a Delaware corporation (the "Company"), and in the accompanying Letter of Transmittal and instructions thereto (the "Letter of Transmittal"), this form or one substantially equivalent hereto must be used to accept the Company's offer to exchange (the "Exchange Offer") all of its outstanding 11 7/8% Senior Secured Notes Due 2009 (the "Old Notes") for its 11 7/8% Senior Notes Due 2004, which have been registered under the Securities Act of 1933, as amended (the "New Notes"), if certificates for the Old Notes are not immediately available or if the Old Notes, the Letter of Transmittal or any other documents required thereby cannot be delivered to the Exchange Agent, or the procedure for book-entry transfer cannot be completed, prior to 5:00 P.M., New York City time, on the Expiration Date (as defined in the Prospectus). This form may be delivered by an Eligible Institution (as defined in the Prospectus), by hand or transmitted by facsimile transmission, overnight courier or mail to the Exchange Agent as set forth below. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ____________, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE. TO: _____________________________________ THE EXCHANGE AGENT BY REGISTERED OR CERTIFIED MAIL: BY OVERNIGHT COURIER AND BY HAND (Registered or certified mail Wells Fargo Bank Minnesota recommended) 213 Court Street, Suite 902 Wells Fargo Bank Minnesota Middletown, CT 06457 213 Court Street, Suite 902 Attention: Robert Reynolds, Middletown, CT 06457 Vice President Attention: Robert Reynolds, Vice President By Facsimile: (860) 704-8219 Confirm By Telephone: (860) 704-8216 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal to be used to tender Old Notes is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to GAMECO, INC., a Delaware corporation (the "Company"), upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal (which together constitute the "Exchange Offer"), receipt of which is hereby acknowledged, $_______________ principal amount of Old Notes pursuant to the guaranteed delivery procedures set forth in Instruction 1 of the Letter of Transmittal. The undersigned acknowledges that tenders of Old Notes will be accepted only in principal amounts equal to $1,000 or integral multiples thereof. The undersigned acknowledges that tenders of Old Notes pursuant to the Exchange Offer may not be withdrawn after 5:00 p.m., New York City time, on the Expiration Date. All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death, incapacity or dissolution of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. - -------------------------------------------------------------------------------- Page 2 NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW. Certificate No(s). for Old Notes (if Name(s) of Record Holder(s) available___________________________ ____________________________________ ____________________________________ ____________________________________ _____________________________ _____________________ PLEASE PRINT OR TYPE Principal Amount of Old Notes_______________________________ Address_____________________________ ____________________________________ ____________________________________ ___________________________________. _____________________ Area Code and Tel. No.______________ Signature(s): x___________________________________ x___________________________________ Dated:______________________________ If Old Notes will be delivered by book-entry transfer at the Depository Trust Company, Depository Account No. This Notice of Guaranteed Delivery must be signed by the registered holder(s) of Old Notes exactly as its (their) name(s) appear on certificates for Old Notes or on a security position listing as the owner of Old Notes, or by person(s) authorized to become registered holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information: PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s):__________________________________________________ Capacity:_________________________________________________ Address(es):______________________________________________ GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a) represents that the above named person(s) "own(s)" the Old Notes tendered hereby within the meaning of Rule 14e-4 under the Exchange Act, (b) represents that such tender of Old Notes complies with Rule 14e-4 under the Exchange Act and (c) guarantees that delivery to the Exchange Agent of certificates for - -------------------------------------------------------------------------------- Page 3 the Old Notes tendered hereby, in proper form for transfer (or confirmation of the book-entry transfer of such Old Notes into the Exchange Agent's Account at the Depository Trust Company, pursuant to the procedures for book-entry transfer set forth in the Prospectus), with delivery of a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signatures and any other required documents, will be received by the Exchange Agent at one of its addresses set forth above within three New York Stock Exchange ("NYSE") trading days after the execution of this Notice of Guaranteed Delivery. THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD SET FORTH AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE UNDERSIGNED. Name of Firm_______________________________________________________ __________________________________ Authorized Signature Address___________________________ Name______________________________ __________________________________ (Please Print or Type) __________________________________ _____ Title_____________________________ Area Code and Tel. No.__________________ Dated:______________ , 2002 NOTE: DO NOT SEND OLD NOTES WITH THIS FORM; OLD NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE AGENT WITHIN FIVE NYSE TRADING DAYS AFTER THE EXECUTION OF THIS NOTICE OF GUARANTEED DELIVERY. - -------------------------------------------------------------------------------- Page 4 -----END PRIVACY-ENHANCED MESSAGE-----