10-K
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1994
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from NOT APPLICABLE
Commission file number 1-7123
SHOWBOAT, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0090766
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
2800 FREMONT STREET, LAS VEGAS, NEVADA 89104
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(702) 385-9141
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE
9 1/4% FIRST MORTGAGE BONDS DUE 2008 NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (SECTION 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K [ ].
The aggregate market value of voting stock held by non
affiliates of the registrant, based on the closing price of
registrant's common stock on the New York Stock Exchange on
March 15, 1995, was approximately $192,436,701.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13, or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No
___________
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of March 15, 1995:
15,399,655.
DOCUMENTS INCORPORATED BY REFERENCE
All relevant information contained herein is set forth in
full and no documents are incorporated by reference into this
Form 10-K.
PART I
ITEM 1. BUSINESS.
General
The Company owns and operates two hotel, casino and bowling
centers, the Showboat Hotel, Casino and Bowling Center in Las
Vegas, Nevada ("Las Vegas Showboat") and the Showboat Casino
Hotel in Atlantic City, New Jersey ("Atlantic City Showboat")
through its respective Nevada and New Jersey subsidiaries. The
Company's wholly-owned Nevada subsidiaries include Showboat
Operating Company and Showboat Development Company. Showboat
Development Company's wholly owned subsidiaries include Showboat
Indiana, Inc., Showboat Missouri, Inc., Lake Pontchartrain
Showboat, Inc. and Showboat Louisiana, Inc. Showboat Indiana
Investment L.P. is a subsidiary of which 99% is owned by Showboat
Operating Company and 1% is owned by Showboat Indiana, Inc.
Showboat Indiana Investment L.P. owns a 55% partnership interest
in Showboat Marina Partnership. Showboat Marina Partnership is
the sole applicant for a riverboat gaming license in East
Chicago, Indiana. Showboat Australia Pty Limited ("SAPL") is a
subsidiary owned 50% by Showboat Development Company and 50% by
the Company. SAPL owns 26.3% of Sydney Harbour Casino Holdings
Limited, the holding company of the licensee awarded a 99 year
casino license to operate the first full-service casino in
Sydney, New South Wales, Australia.
The Company commenced operations on September 9, 1954, as a
partnership and was incorporated under the laws of the State of
Nevada in 1960. The Company became a registered public company
on December 19, 1968. It was listed on the American Stock
Exchange on February 1973 and was listed on the New York Stock
Exchange on May 30, 1984. The Company operated only the Las
Vegas Showboat until March 30, 1987 when the Atlantic City
Showboat commenced operations. The Company's New Jersey
subsidiaries include its wholly-owned subsidiary Ocean Showboat,
Inc. ("OSI"), and OSI's wholly-owned subsidiaries Atlantic City
Showboat, Inc. ("ACSI") and Ocean Showboat Finance Corporation
("OSFC"). Unless the context otherwise requires, the "Company"
or "SBO," as applicable, refers to Showboat, Inc. and its
subsidiaries. The Company's executive offices are located at
2800 Fremont Street, Las Vegas, Nevada 89104, and its telephone
number is (702) 385-9141.
Through its subsidiary, Showboat Louisiana, Inc., the
Company owned an equity interest in Showboat Star Partnership, a
Louisiana general partnership. Showboat Star Partnership owned a
riverboat casino named the "Star Casino," which had been
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operating on Lake Pontchartrain in New Orleans, Louisiana since
November 8, 1993 until March 9, 1995 when it permenantly closed the
casino. Another subsidiary of the Company, Lake Pontchartrain Showboat, Inc.
("LPSI"), received a management fee of 5% of gaming revenues, net of gaming
taxes and regulatory boarding fees, in exchange for managing the Star Casino's
operations pursuant to a management contract. On March 3, 1995, Showboat
Louisiana, Inc. and LPSI acquired all of the partnership interests
not previously owned by Showboat Louisiana, Inc. for $25.0 million
subject to adjustment. SBO had previously acquired a 30% equity
interest in 1993 for $18.6 million and had acquired an additional 20%
equity interest in the Showboat Star Partnership in March 1994 from a
partner in exchange for $9.0 million.
The Company, through its subsidiary Showboat Indiana
Investment Limited Partnership, owns a 55% interest in the
Showboat Marina Partnership (the "Indiana Partnership") which is
the only applicant for the sole riverboat gaming license
allocated by statute to East Chicago, Indiana. The riverboat
will be located approximately 20 minutes from downtown Chicago,
Illinois and approximately three miles from the Chicago city
limits. The Company anticipates that licensing hearings for the
Indiana Partnership will begin in late 1995 and in the event the
Indiana Partnership is granted a license, it is anticipated that
gaming will first commence at temporary facilities and gaming
vessel while the permanent facilities and gaming vessel are being
constructed.
Sydney Harbour Casino Pty Limited, a subsidiary of Sydney
Harbour Casino Holdings Limited ("SHCL") a corporation in which
the Company owns 26.3% of the outstanding capital, was, in
December 1994, awarded the single full-service casino license for
Sydney, New South Wales, Australia, which is exclusive in the
State of New South Wales for 12 years from the commencement of
operations at the temporary casino. SHCL has commenced
construction of both temporary and permanent facilities. The
Company anticipates that the temporary facility, containing 150
table games and 500 slot machines, will commence operations in
September 1995 and the permanent facility, containing 200 table
games and 1,500 slot machines, will commence operations in early
1998.
The Company's marketing and operating strategy is to develop
a high volume of traffic through its casinos, emphasizing slot
machine play which accounted for 83.0%, 73.6% and 75.3% of the
casino revenues of the Las Vegas Showboat, the Atlantic City
Showboat, and the Star Casino, respectively, in 1994. Customers
are attracted to the Las Vegas Showboat by competitive slot
machines, bingo, moderately priced food and accommodations, a
friendly "locals" atmosphere and a 106-lane bowling center. The
Atlantic City Showboat targets the drive-in customer by providing
competitive games and excellent service in an attractive
convenient facility. The Star Casino, like the Las Vegas
Showboat, targeted "locals"
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with its excellent service, attractive and convenient facility
and accessible location.
Fiscal Year 1994 Developments
Sydney, Australia
On December 14, 1994, the New South Wales Casino Control
Authority ("NSWCCA") selected Sydney Harbour Casino Pty Limited
("SHCP"), a subsidiary of SHCL, as the single full-service casino
licensee in Sydney, New South Wales. An unsuccessful applicant
for the casino license has initiated legal proceedings in New
South Wales against SHCP, the NSWCCA and others, alleging, among
other things, that the NSWCCA was not justified in issuing the
casino license to SHCP. The proceedings seek the revocation of
the casino license awarded to SHCP. The Company believes that
the proceedings are meritless and intends to vigorously defend
the allegations. For a more detailed discussion of the legal
proceedings see "PART I, ITEM 3: LEGAL PROCEEDINGS." The casino
license has a term, subject to earlier termination, of 99 years,
and provides to SHCP the exclusive right to operate a full-
service casino in New South Wales for twelve years commencing
upon the opening of the temporary casino. SAPL owns 26.3% of the
outstanding equity of SHCL. Slot machines are currently
permitted in approximately 1,500 non-profit private clubs in New
South Wales, most of which contain less than 25 slot machines.
The Sydney Harbour Casino will begin operations in a
temporary casino, which will be located at Pyrmont Bay on Wharves
12 and 13 in an existing building which is being renovated to
permit the operation of a casino. The temporary casino is
anticipated to open in September 1995, and is expected to contain
approximately 500 slot machines, and 150 table games. Additional
amenities are expected to include cocktail lounges, specialty
restaurants, retail shops and on-site parking for over 400
vehicles.
The permanent Sydney Harbour Casino is expected to be open
in early 1998. The Sydney Harbour Casino will be located less
than one mile from the Sydney central business district on an
eight-acre waterfront site on Pyrmont Bay next to Darling
Harbour. The Sydney Harbour Casino will feature approximately
136,000 square feet of casino space, including an approximately
20,000 square foot private gaming area to be located on a
separate level which will target a premium clientele. The Sydney
Harbour Casino will have approximately 1,500 slot machines and
200 table games. The Sydney Harbour Casino has been designed to
capture Australia's natural beauty and diverse geography and will
contain cascading water fountains. The Sydney Harbour Casino
will also contain 14 themed restaurants, 12 cocktail lounges, a
deluxe 2,000 seat lyric theatre, a 700 seat cabaret style theatre
and extensive public areas which include
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landscaped gardens. The Sydney Harbour Casino complex will
include a 352 room hotel tower and an adjacent condominium tower
containing 139 privately owned luxury units with full hotel
services. The complex will also include extensive retail
facilities, a station for Sydney's proposed light rail system, a
bus terminal, docking facilities for commuter ferries and
underground parking for approximately 2,500 cars.
Public Offering of 13% Senior Subordinated Notes due 2009
On August 10, 1994 the Company issued $120 million of 13%
Senior Subordinated Notes due 2009 ("Notes"). The Notes are
unsecured general obligations of the Company, subordinated in
right of payment to all senior indebtedness of the Company. The
Notes are jointly and severally guaranteed on an unsecured,
senior subordinated basis by OSI, ACSI and Showboat Operating
Company. Pursuant to the indenture for the Notes (the "Note
Indenture") among the Company, OSI, ACSI, Showboat Operating
Company and Marine Midland Bank, as trustee. The Note Indenture
provides for the issuance of an additional $30 million of the
Notes. The Notes are not redeemable by the Company prior to
August 1, 2001 unless otherwise permitted pursuant to the terms
of the Note Indenture. On or after August 1, 2001, the Notes are
redeemable at the option of the Company, in whole or in part, at
redemption prices provided for in the Note Indenture, together with
accrued and unpaid interest, if any, to the redemption date. The
Company is not required to make mandatory redemption or sinking
fund payments with respect to the Notes.
The proceeds from the sale of the Notes (Note Offering) were
$116.5 million, net of underwriting discounts and commissions.
Proceeds were reserved for or used to (i) invest approximately
$100.0 million to purchase 135 million ordinary shares of SHCL,
and (ii) renovate the Las Vegas Showboat in order to upgrade the
facility to current building codes and replace the existing power
plant facility at an aggregate cost of approximately $18.5
million.
In connection with providing certain financial services, the
Company issued as of May 6, 1994, warrants to purchase 150,000
shares of common stock, $1.00 par value, of the Company, issuable
at an exercise price per share equal to $15.50 to DLJ Bridge
Finance, Inc., an affiliate of Donaldson, Lufkin & Jenrette
Securities Corporation, the underwriter of the Note Offering.
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Amendment of Indenture governing 9 1/4% First
Mortgage Bonds due 2008
On July 1, 1994, the Company obtained consents to amend
("Amendments") its indenture ("Bond Indenture") governing its 9
1/4% First Mortgage Bonds due 2008 ("Bonds"). The Bond
Indenture, as amended, places significant restrictions on SBO and its
subsidiaries, includingrestrictions on making loans and advances by SBO to
subsidiaries which are Non-Recourse Subsidiaries or subsidiaries in which SBO
owns less than 50% of the equity. The Company received consents
from the holders of approximately $260 million or 94% of the
Bonds approving the Amendments. In consideration, the consenting
bond holders received 2% of the face value of the Bonds. On July
28, 1994, the Company paid approximately $5.2 million to the
consenting bond holders, this amount is shown as a discount on
the Bonds and is being amortized as an adjustment to yield over
the remaining life of the Bonds using the effective interest
method. For a description of the restrictions contained in the
Bond Indenture, as amended, see "PART II, ITEM 7: MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES."
Atlantic City Showboat Expansion
During 1994, the Company completed the construction of a
three-part $97 million expansion project which has made the
Atlantic City Showboat one of the largest casinos in Atlantic
City. The first stage of the expansion was completed in May 1993
and added Jake's Betting Parlor, Atlantic City's first horse race
simulcasting facility. Approximately 4,500 square feet of casino
space was added in 1993 and 15,500 square feet more was added in
1994, yielding a total of 95,000 square feet of casino space.
Along with the additional casino space, the Company added
approximately 340 slot machines and 28 table games in 1993 and
approximately 609 slot machines and 10 table games in 1994 for a
total of approximately 3,000 slot machines and 116 table games.
The final stage of the expansion was the addition of the new
seventeen story 284-room hotel tower, which opened in November
1994, three months ahead of the original schedule. As a result
of the expansion, the Company will receive $8.7 million in
credits from the Casino Reinvestment Development Authority, which
are currently being redistributed to Showboat in the form of
cash.
Star Casino
The Star Casino, a riverboat casino located on the south
shore of Lake Pontchartrain in New Orleans, Louisiana is owned
by the Showboat Star Partnership, a Louisiana general partnership
formed in July 1993 between the Company and Star Casino, Inc., a
Louisiana corporation. Until March 1, 1994, Showboat Louisiana,
Inc. owned 30% of the partnership and Star Casino, Inc. was the
managing partner. Effective March 1, 1994, Showboat Louisiana,
Inc. purchased from Star Casino, Inc. an additional 20% equity
interest in the partnership for $9.0 million. Effective March 3,
1995 Showboat Louisiana, Inc. and LPSI
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purchased the remaining 50% of the equity of the partnership not
owned by Showboat Louisiana, Inc. for $25.0 million, subject to
certain adjustments. Showboat Louisiana, Inc. and LPSI anticipate
selling their partnership interests to subsidiaries of Players
International, Inc. for $52 million, subject to adjustment, on
March 31, 1995.
On December 5, 1994, the operations of the Star Casino were
suspended by the Louisiana State Police, Riverboat Gaming
Division, who alleged that the Star Casino was not permitted to
operate dockside gaming. The Showboat Star Partnership obtained
a restraining order the next day and recommenced dockside gaming
operations pending an administrative hearing. The administrative
hearing occurred on December 21 and 22, 1994. On December 28,
1994, the administrative law judge, a retired Louisiana Supreme
Court Justice, ruled that the Star Casino was operating in
compliance with the Louisiana Riverboat Gaming Act.
On January 17, 1995, the Showboat Star Partnership elected
to cease gaming operations as a result of the receipt of
information that the District Attorney of Orleans Parish
("District Attorney") would charge the Showboat Star Partnership
with a misdemeanor if the Star Casino did not cease dockside
gaming activities. A temporary restraining order was obtained
against the District Attorney which prevented the District
Attorney from filing charges against the Showboat Star
Partnership on January 26, 1995 and the Star Casino was reopened
on January 27, 1995.
The District Attorney requested first the Fourth Circuit
Court of Appeals, and upon its denial, the Louisiana Supreme
Court to suspend the temporary restraining order. On March 9,
1995, the Louisiana Supreme Court ruled that a civil district
court cannot, except in exigent circumstances, restrict a
district attorney from investigating or filing charges, and, as a
result of that ruling, suspended the temporary restraining order
obtained by the Showboat Star Partnership. Rather than risk
criminal indictment, which could jeopardize the Company's current
licenses and pending and future applications in other
jurisdictions, Showboat Star Partnership permanently ceased
operations on March 9, 1995.
On February 24, 1995, Showboat Star Partnership (i) assigned
its leases with the Orleans Levee Board for leased land, parking
areas and docking facilities; (ii) sold the terminal building and
other improvements it constructed on the leased land; and (iii) sold
certain personal property used at the terminal building, for $6
million to Belle of Orleans, L.L.C. The Company recognized a pre-tax
loss of approximately $2.7 million upon the consummation of the sale
of the terminal facilities. The net proceeds of the transactions with
Player's International, Inc. and Belle of Orleans, L.L.C. approximate
the Company's cumulative investment in Showboat Star Partnership.
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East Chicago, Indiana
On February 2, 1994, the Indiana Partnership, consisting of
Showboat Indiana Investment Limited Partnership, a wholly-owned
limited partnership ("SII"), and Waterfront Entertainment and
Development, Inc., an unrelated Indiana corporation
("Waterfront"), filed Part I of its gaming application with the
Indiana Riverboat Gaming Commission to operate a riverboat casino
on Lake Michigan in East Chicago, Indiana. The Indiana
Partnership filed Part II of its gaming application on April 12,
1994. The Indiana Partnership is the sole applicant for the only
license allocated to East Chicago by Indiana statute and which is
for a berth located approximately 20 minutes from downtown
Chicago and approximately three miles from the Chicago city
limits. The Indiana Partnership is owned 55% by SII and 45% by
Waterfront. Subject to available financial resources, the
Company expects to invest approximately $28 million in the
Indiana Partnership and will help the partnership obtain
approximately $90 million in debt financing. Under the current
partnership agreement, the Company would receive a 12% preferred
return on its investment prior to additional partnership
distributions. The Indiana Partnership anticipates that
licensing hearings for the Indiana Partnership will begin in late
1995 and in the event the Indiana Partnership is granted a
license, will first commence gaming operations in a temporary
vessel and facilities while a permanent larger vessel and
facilities are being constructed.
Randolph, Missouri
As of January 25, 1995, Showboat Missouri, Inc. entered into
definitive agreements with Randolph Riverboat Company, Inc.
("Randolph") to design, develop, construct and operate a
riverboat casino ("Randolph Riverboat"), which is intended to
contain approximately 26,000 square feet, and related dockside
improvements to be located on the Missouri River in or near
Randolph, Missouri ("Randolph Project"). Randolph Missouri, Inc.
and Randolph formed a limited liability company with the name
Randolph Riverboat Company, L.L.C. ("RLLC"), of which 35% will be
owned by Showboat Missouri, Inc. and 65% will be owned by
Randolph. The total cost of the Randolph Project is estimated to
be approximately $100 million. Showboat Missouri, Inc.
contributed $13 million into escrow as its capital contribution
to RLLC, of which amount $4 million may be used after Randolph
has expended $10 million of its own funds toward the Randolph
Project. The remaining $9 million of Showboat Missouri, Inc.'s
capital contribution shall be available for use by RLLC at
Showboat Missouri, Inc.'s discretion or upon the closing of the
high yield debt financing for the Randolph Project.
Randolph has entered into an agreement with underwriter Bear
Stearns & Co. to obtain financing of approximately $80 million
through high yield
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debt and capital leases, for construction of the Randolph
Project. Additional capital contributions, if needed, shall be
made by the partners of RLLC pro rata with their respective
interest.
The Company or an affiliate of the Company shall provide
management services to the Randolph Project until the Company no
longer has an equity position in RLLC, in exchange for a
management fee of 4% of the net gaming revenues of the Randolph
Project and an additional incentive fee of 20% of all earnings
before interest expense, income taxes, property taxes, ground
lease rent, capital lease rent, depreciation and amortization
("EBITDA") in excess of $20 million.
Rockingham Park, New Hampshire
In January 1995, the Company and Rockingham Venture, Inc., a
New Hampshire corporation and the operator of Rockingham Park, a
thoroughbred racetrack in Salem, New Hampshire, entered into
negotiations to finalize an agreement to develop and manage any
additional gaming which may be authorized by the State of New
Hampshire and the Town of Salem. In December 1994, the Company
loaned $8.85 million to Rockingham Venture, Inc. which loan is
secured by a second mortgage on Rockingham Park. If gaming is
legalized by the appropriate and necessary authorities, the
Company and Rockingham Venture, Inc. shall form a joint venture,
partially capitalized through conversion of the Company's loan
into equity, to develop a gaming and entertainment facility at
Rockingham Park. The horse racing activities will continue to be
operated by Rockingham Venture, Inc. No assurance can be given
that the proposed agreements will be consummated or that any
operation by the Company of gaming at Rockingham Park will take
place at any time in the future.
St. Regis Mohawk Reservation, New York
In April 1994, the Company, through a subsidiary entered
into agreements with the St. Regis Mohawk Tribe ("Tribe") and
Native American Gaming Consultants, a corporation formed under
tribal law ("NAGC"), to develop, construct, manage and operate a
casino containing Class III games in Hogansburg, New York. The
agreements were subsequently submitted by the Tribe to the
National Indian Gaming Commission ("NIGC") for NIGC's approval.
In July 1994, the St. Regis Mohawk Tribe withdrew all gaming
contracts submitted to the NIGC, including the agreements with
the Company; subsequently, the Company terminated its
relationship with the Tribe.
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Narrative Description of Business
Current Las Vegas Operations
The Las Vegas Showboat includes an approximately 78,000
square foot casino centrally located in a 453-room 18-story
hotel, featuring a 106-lane bowling center, a buffet, a coffee
shop, a 1,300-seat bingo parlor garden, a showroom and two
specialty restaurants. In addition, 8,300 square feet of meeting
room area is available with a seating capacity of 1,000 persons.
The Company also owns and operates a 33-room motel directly
across from the hotel. The Las Vegas Showboat covers
approximately twenty-six acres and is approximately two and one-
half miles from the hotel casinos located in downtown Las Vegas
or on the "Strip."
At the Las Vegas Showboat, the Company sponsors a variety of
special events designed to produce a high volume of traffic
through its casino. The Las Vegas Showboat sponsors such events
as the Professional Bowlers Association tour and Superstar Bingo,
a high-stakes bingo game, and is the site of the annual High
Rollers Million Dollar Bowling Tournament. The Las Vegas
Showboat also regularly hosts small conventions and groups. In
addition, the Las Vegas Showboat provides a slot club, the
Officer's Club, which is designed to attract and reward frequent
slot players at the Las Vegas Showboat.
Las Vegas Competition
The Las Vegas Showboat competes generally with approximately
130 casinos in Clark County, Nevada, which includes the cities of
Las Vegas, Henderson, Laughlin and Mesquite. Competition among
casinos in Clark County is intense and the Company expects it to
remain so in the future. The Company has experienced increased
competition from new and existing Las Vegas hotel casinos which
have also sought to attract slot machine players and Las Vegas-
area residents. The Company anticipates continuing increased
competition for these customers.
As a result of increased competition for slot machine
players and Las Vegas-area residents, and particularly due to the
opening of new hotel casinos and the expansion of existing hotel
casinos, including the expansion of Sam's Town Hotel and Casino,
completed in 1994, and the opening of Boulder Station also in
1994 (each of which are located on Boulder Highway near the Las
Vegas Showboat), the Company has experienced declines in revenues
and net income. The Company has expanded marketing and customer
service programs but nevertheless anticipates results at the Las
Vegas Showboat will be negatively impacted until the excess
casino capacity on the Boulder Strip is absorbed by the Las Vegas
market. In addition, the Company will commence a major
renovation
of the Las Vegas Showboat in 1995 which will
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significantly improve the quality of the casino space and which
the Company believes will improve its competitive position.
Approximately 30,000 square feet or 40% of the casino space will
be closed for a portion of 1995 due to the renovation, which
closure will cause a significant disruption in operations and
earnings at the Las Vegas Showboat. There can be no assurance
that the expanded marketing activities, the improved casino area
and the implementation of other alternatives being considered by
the Company will successfully result in the maintenance or
expansion of the Las Vegas Showboat's customer base.
The Company believes the legalization of casino gaming in
Colorado, Connecticut, Illinois, Iowa, Indiana, Louisiana,
Mississippi, Missouri, New Jersey, and South Dakota, and on
various Native American reservations, has not had a material
adverse impact on its business in Las Vegas because of the
Company's customer base of local area residents. The
legalization and commencement of casino gaming in states close to
Nevada, particularly California, could have a material adverse
effect on the Company's Las Vegas operations.
Las Vegas Employees and Labor Relations
As of March 1, 1995, the Company's Las Vegas operations
employed approximately 1,450 persons, of which approximately 834
or 57.5% of the employees were represented by collective
bargaining agreements. The Company considers its current labor
relations to be satisfactory. The Company is currently
negotiating with the Culinary Workers Local No. 226 ("Culinary
Union"), which represents approximately 700 or 78% of the Las
Vegas Showboat employees represented by collective bargaining
agreements, to reach a new collective bargaining agreement with
those workers.
Atlantic City Operations
Since March 30, 1987, the Company, through its New Jersey
subsidiaries, has operated the Atlantic City Showboat fronting
the Boardwalk in Atlantic City, New Jersey. The Atlantic City
Showboat is located at the eastern end of the Atlantic City
Boardwalk on approximately 13 acres. Access to the Atlantic City
Showboat's four-story podium, which houses the casino and the 20-
story hotel tower, is provided by two main entrances, one on the
Boardwalk and one on Pacific Avenue, which runs parallel to the
Boardwalk. Adjacent to the casino, is the newly constructed 17-
story hotel tower containing 284 hotel rooms. The Atlantic City
Showboat has been designed to promote ease of customer access to
the casino and all other public areas of the casino hotel.
The Atlantic City Showboat contains two public levels. Two
pairs of large escalators directly accessible from the two ground
level entrances and six
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elevators provide easy access to the second level. Public areas
located on the ground level, in addition to the approximately
95,000 square feet of gaming space, include a show lounge, five
restaurants, two cocktail lounges, a pizza snack bar, an ice
cream parlor, and two shops. Public areas located on the second
level include a buffet, a coffee shop, a private Players Club, a
beauty salon, a health spa, approximately 2,000 square feet of
space for video games, approximately 27,000 square feet of
meeting rooms, convention, board room and exhibition space and
the 60-lane bowling center, including a snack bar and cocktail
lounge. The Atlantic City Showboat leases to independent
operators the two shops located on the ground level and the
beauty salon on the second level.
At December 31, 1994, the casino featured approximately
3,000 slot machines, 116 table games, a horse race simulcast
facility, and a keno facility. The 20-story hotel tower features
516 guest rooms and the adjacent 17-story hotel tower features
284 guest rooms. Many of the guest rooms in both towers have a
view of the ocean. Included in the number of guest rooms are 59
suites, 40 of which have ocean-front decks. The nine-story
parking garage is located on-site at the Pacific Avenue entrance.
The facility provides self-parking for approximately 2,000 cars
and a 14-bus depot integrated with the casino podium. In
addition, on-site underground parking accommodates valet parking
for approximately 500 cars. This design permits Atlantic City
Showboat's customers to enter the casino hotel protected from the
weather. Two stories of the four story podium are occupied by
kitchens, storage for food and other perishables, surveillance
and security equipment and personnel, an employee cafeteria,
computer equipment and executive and administrative offices.
Adjacent to the Atlantic Showboat is the Taj Mahal Casino
Hotel ("Taj Mahal"). The Taj Mahal is the largest casino in
Atlantic City and is connected to both the Atlantic City Showboat
and Merv Griffin's Resorts International Casino Hotel by
pedestrian passageways. These three properties form an "uptown
casino complex" in which patrons can pass from property to
property, either on the ocean-front Boardwalk or through the
pedestrian connectors.
Atlantic City Competition
The Atlantic City Showboat competes with 11 other casino
hotels in Atlantic City containing, in the aggregate,
approximately 833,000 square feet of gaming space, and 8,900
rooms and with Foxwood's High Stakes Bingo and Casino on the
Mashantucket Pequot Indian Reservation in Connecticut. There are
several sites on the Boardwalk and in the Marina Area of Atlantic
City on which casino hotel facilities could be built in the
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future. However, no new casino hotel facilities are currently
being constructed.
The Atlantic City Showboat targets drive-in slot customers
by emphasizing its frequent player's slot club. Competition
among the casinos in Atlantic City is intense and the Company
expects that it will remain so in the future. Casino hotels in
Atlantic City generally compete on the basis of promotional
allowances, entertainment, advertising, service provided to
patrons, caliber of personnel, attractiveness of the hotel and
casino areas and related amenities.
Casino hotels in Atlantic City also face competition, to
some extent, from casinos located in Nevada and other states of
the United States and from casinos in the Commonwealth of Puerto
Rico, the Bahamas and other locations outside the United States,
and from other forms of wagering such as pari-mutuel racing, jai
alai, card parlors, riverboat gaming, lottery games and other
legalized gaming activities. Legislation permitting casino
gaming has been approved in Colorado, Connecticut, Illinois,
Indiana, Iowa, Louisiana, Mississippi, Missouri and South Dakota,
and on various Native American reservations. With the exception
of Indiana, casinos are in operation in each of those states. In
addition, Class III gaming is permitted on Native American
reservations in the following states: Arizona, Colorado,
Connecticut, Iowa, Louisiana, Michigan, Minnesota, Mississippi,
Montana, Nevada, New York, North Dakota, Oregon, South Dakota,
Washington and Wisconsin. The legalization and commencement of
casino and other gaming ventures in states close to New Jersey,
particularly, Delaware, Maryland, New York or Pennsylvania, could
have an adverse effect on the Company's Atlantic City operations.
Atlantic City Employees and Labor Relations
At March 1, 1995, the Atlantic City Showboat employed
approximately 3,290 persons on a full-time basis and
approximately 364 persons on a part-time basis. Approximately
1,125 or 34% of the Atlantic City Showboat's full-time employees
are covered by collective bargaining agreements. The number of
employees at the Atlantic City Showboat is expected to fluctuate,
with the highest number during the summer months and the lowest
number during the winter months. All employees of the Atlantic
City Showboat whose responsibilities involve or relate to the
casino or the simulcast area must be licensed by or registered
with the applicable New Jersey regulatory authority before
commencing work at the Atlantic City Showboat.
14
Louisiana Operations
In July 1993, a subsidiary of the Company, Showboat
Louisiana, Inc., and Star Casino, Inc., a Louisiana corporation,
formed Showboat Star Partnership, a Louisiana general
partnership, to own and operate a riverboat casino, the "Star
Casino." At December 31, 1993, Showboat Louisiana, Inc. owned a
30% equity interest in Showboat Star Partnership. Effective
March 1, 1994, Showboat Louisiana, Inc. purchased an additional
20% equity interest in the Showboat Star Partnership from its
partner, Star Casino, Inc. On March 3, 1995, Showboat Louisiana,
Inc. and LPSI purchased the remaining 50% equity interest in the
Showboat Star Partnership for $25.0 million, subject to certain
adjustments. The Company intends to sell all of its partnership
interests to subsidiaries of Players International, Inc. for
$52.0 million, subject to adjustment, on March 31, 1995.
Throughout 1994, LPSI managed and operated the gaming areas
at the Star Casino on behalf of the Showboat Star Partnership.
LPSI received, as a management fee, 5% of Star Casino's gaming
revenue, net of gaming taxes of 18.5% and boarding fees totalling
up to $5.00 per passenger boarding the vessel. Louisiana
Riverboat Services, Inc., a non-affiliate of the Company,
performed the marine services for the Star Casino, including
those services related to the crew, operations and maintenance of
the riverboat. Louisiana Riverboat Services, Inc. received a
monthly management fee equal to its costs plus a surcharge of 15%
of such costs.
The Star Casino commenced gaming operations on November 8,
1993 and permanently closed gaming operations on March 9, 1995.
The Star Casino was located on the south shore of Lake
Pontchartrain in New Orleans, Louisiana, approximately seven
miles from New Orleans' "French Quarter." The vessel, which
measured 265 feet long and 78 feet wide, was built to resemble a
traditional paddle-wheel riverboat. As of December 31, 1994, the
riverboat contained an aggregate of 21,900 square feet of gaming
space on three levels, with 778 slot machines and 42 table games.
A cocktail lounge was located on each of the three public levels
of the riverboat casino.
On-shore facilities included a 34,000 square foot terminal
building, which contained a restaurant, a cocktail lounge and
administrative offices. The on-shore facility provided parking
for 1,150 cars. The terminal facilities were designed so that
Star Casino passengers must pass through the terminal area in
order to board the riverboat. Due to either inclement weather or
underwater obstructions, the Star Casino had been principally
restricted to mock cruises since commencement of operations and
dockside gaming since June 22, 1994.
On February 24, 1995, Showboat Star Partnership (i) assigned
its leases with the Orleans Levee Board for leased land, parking
areas and docking facilities; (ii) sold the terminal building and
other improvements it constructed on the leased land; and (iii) sold
certain personal property used at the terminal building, for $6
million to
15
Belle of Orleans, L.L.C. The Company recognized a pre-tax loss of
approximately $2.7 million upon consummation of the sale of the
terminal facilities and the assignment of the leases with the
Orleans Levee Board. The net proceeds of the transactions with
Players International, Inc. and Belle of Orleans, L.L.C. approximate
the Company's cumulative investment in Showboat Star Partnership.
On December 5, 1994, the operations of the Star Casino were
suspended by the Louisiana State Police, Riverboat Gaming
Division, who alleged that the Star Casino was not permitted to
operate dockside gaming. The Showboat Star Partnership obtained
a restraining order the next day and recommenced dockside gaming
operations pending an administrative hearing. The administrative
hearing occurred on December 21 and 22, 1994. On December 28,
1994, the administrative law judge, a retired Louisiana Supreme
Court Justice, ruled that the Star Casino was operating in
compliance with the Louisiana Riverboat Gaming Act.
On January 17, 1995, the Showboat Star Partnership elected
to cease gaming operations as a result of the receipt of
information that the District Attorney of Orleans Parish
("District Attorney") would charge the Showboat Star Partnership
with a misdemeanor if the Star Casino did not cease dockside
gaming activities. A temporary restraining order was obtained
against the District Attorney which prevented the District
Attorney from filing charges against the Showboat Star
Partnership on January 26, 1995 and the Star Casino was reopened
on January 27, 1995.
The District Attorney requested first the Fourth Circuit
Court of Appeals, and upon its denial, the Louisiana Supreme
Court to suspend the temporary restraining order. On March 9,
1995, the Louisiana Supreme Court ruled that a civil district
court cannot, except in exigent circumstances, restrict a
district attorney from investigating or filing charges, and, as a
result of that ruling, suspended the temporary restraining order
obtained by the Showboat Star Partnership. Rather than risk
criminal indictment, which could jeopardize the Company's current
licenses and pending and future applications in other
jurisdictions, Showboat Star Partnership permanently ceased
operations on March 9, 1995.
Louisiana Competition
The Star Casino experienced intense direct competition in
its primary market area which competition increased significantly
during 1994. As of December 31, 1994, there were 4 riverboat
casinos operating in the New Orleans area.
The Company competed with other forms of gaming, including
land-based casinos, bingo and pulltab games, card clubs,
parimutuel betting on horse racing and dog racing, state-
sponsored lotteries, video lottery, video bingo and video poker
terminals, as well as other forms of entertainment. Louisiana
had authorized video lottery terminals at various types of
facilities in the state, including bars, truckstops and
racetracks.
16
Louisiana Employees and Labor Relations
As of December 31, 1994, the Showboat Star Partnership
employed approximately 962 persons on a full-time basis and
approximately 50 on a part-time basis. LPSI, which manages and
operates the gaming areas at the Star Casino, employed 8 persons
on a full-time basis as of December 31, 1994. In addition,
Louisiana Riverboat Services, Inc., which operated the riverboat,
employed approximately 45 persons on a full-time basis and 10
persons on a part-time basis. All Showboat Star Partnership and
LPSI employees associated with gaming had to be approved by the
Riverboat Gaming Enforcement Division of the Louisiana State
Police prior to commencing work in gaming-related areas.
Sydney, Australia Operations
On December 14, 1994, the NSWCCA selected SHCP, a subsidiary
of SHCL, as the single full-service casino licensee in Sydney,
New South Wales. An unsuccessful applicant for the casino license
has initiated legal proceedings in New South Wales against SHCP, the
NSWCCA and others, alleging, among other things, that the NSWCCA was
not justified in issuing the casino license to SHCP. The proceedings
seek the revocation of the casino license awarded to SHCP. The
Company believes that the proceedings are meritless and intends to
vigorously defend the allegations. For a more detailed discussion
of the legal proceedings, see PART I, ITEM 3; "LEGAL PROCEEDINGS."
The casino license has a term, subject to earlier termination, of
99 years and provides to SHCP the exclusive right to operate a casino
in New South Wales for 12 years commencing upon the opening of the
temporary casino. Showboat Australia Pty Limited, a wholly-owned
Australian subsidiary of the Company, owns 26.3% of the equity of SHCL.
Slot machines are currently permitted in approximately 1,500 non-
profit private clubs in New South Wales, most of which contain
less than 25 slot machines.
The Sydney Harbour Casino will begin operations in a
temporary casino, which will be located at Pyrmont Bay on Wharves
12 and 13 in an existing building which is being renovated to
permit the operation of a casino. The temporary casino is
anticipated to open in September 1995, and is expected to contain
approximately 500 slot machines, and 150 table games (30 of which
are expected to be located in a private gaming room). Additional
amenities are expected to include five cocktail lounges, four
specialty restaurants, retail shops and on-site parking for more
than 400 vehicles.
The permanent Sydney Harbour Casino is expected to be open
in early 1998. The Sydney Harbour Casino will be located less
than one mile from the Sydney central business district on an
eight-acre waterfront site on Pyrmont Bay next to Darling
Harbour. The Sydney Harbour Casino will feature approximately
136,000 square feet of casino space, including an approximately
20,000 square foot private gaming area to be located on a
separate level which will target a premium clientele. The Sydney
Harbour Casino will have approximately 1,500 slot machines and
200 table games, including 20 slot machines and 30 table games in
the private gaming area. The Sydney Harbour Casino will be
decorated to capture Australia's natural beauty and diverse
geography and will contain cascading water fountains. Passage
through the casino will allow patrons to experience Australia's
indigenous landscape from wall surfaces of brilliant oranges and
reds representing the cliffs and ranges of Australia's central
desert to an Australian rain forest
17
under a glass canopy and a Great Barrier Reef room with a large
aquarium of tropical fish. The Sydney Harbour Casino will also
contain 14 themed restaurants, 12 cocktail lounges, a deluxe
2,000 seat lyric theatre, a 700 seat cabaret style theatre and
extensive public areas which include landscaped gardens. The
Sydney Harbour Casino complex will include a 352 room hotel tower
and an adjacent condominium tower containing 139 privately owned
luxury units with full hotel services. The complex will also
include extensive retail facilities, a station for Sydney's
proposed light rail system, a bus terminal, docking facilities
for commuter ferries and underground parking for approximately
2,500 vehicles.
Leighton Contractors Pty Limited will construct the Sydney
Harbour Casino (including the temporary casino) for A$691.0
million under the direction of Leighton Properties Pty Limited
("Leighton Properties") as developer on behalf of the Sydney
Harbour Casino Group. (As used in this Form 10-K, amounts in
Australian dollars are denoted as "A$"). Under the terms of the
construction contract, the temporary casino must be completed
nine months, and the permanent casino must be completed within 38
months, of December 1994, the date of issuance of the casino
license. In the event that the permanent Sydney Harbour Casino
is not completed within such time period, the construction
contract provides for the payment of liquidated damages of not
more than A $150,000 per day to an aggregate maximum amount of
A$30 million. Additionally, SHCL is indemnified against any loss
arising from the contractor's failure to perform its obligations
under the construction contract.
The cost of the Sydney Harbour Casino, including licensing
fees, is anticipated to be approximately A$1.2 billion. SAPL and
its consortium partner, Leighton Properties, invested A$135.0
million and A$25.0 million respectively, in SHCL for equity
stakes of 26.3% and 4.8%, respectively. Leighton Properties
subsequently placed its shareholdings and other interests in the
Sydney Harbour Casino development in trust appointing National
Mutual Trustees Limited, an independent Australian public trustee
company, as trustee. In addition, SAPL has an option to purchase
an additional 7% of the fully diluted equity of SHCL at an option
exercise price of A$1.15 per share. The option may be exercised
no earlier than July 1, 1998 and expires June 30, 2000. Prior to
the exercise of any outstanding options, SHCL had 505,000,000
shares outstanding, consisting of 160,000,000 ordinary shares,
135,000,000 of which are owned by SAPL, and 345,000,000 preferred
ordinary shares purchased by certain institutional investors at a
purchase price of A$1.00 per share. The preferred ordinary
shares are entitled to a cumulative dividend of A$.05 per share
per annum for the three fiscal years ended June 30, 1997, 1998
and 1999. After June 30, 1999, the preferred ordinary shares
have the same rights and preferences as the ordinary shares.
SHCL is expected to become a publicly listed company on the
Australian Stock Exchange approximately six months of receiving
the casino license. The shares offered to the public shall
include a number of the shares subscribed for by institutional
investors but not the shares subscribed to by Leighton Properties
or SAPL or those who held Class A options
18
issued by SHCL. The number of shares offered to the public shall
not exceed one-third of the total number of shares allotted to
those parties.
SHCL has entered into a loan agreement (the "Facility
Agreement") with the Commonwealth Bank of Australia ("CBA") in
the amount of A$500.0 million to finance a portion of the
development and construction of the Sydney Harbour Casino. SHCL
has also obtained from CBA a working capital facility in the
amount of A$50.0 million for working capital purposes. The
Facility Agreement will convert to a seven-year term loan upon
completion of the Sydney Harbour Casino. The term loan will be
amortized by mandatory repayments specified in the Facility
Agreement. The Facility Agreement also requires that SAPL remain
the beneficial owner of not less than 10% of the issued ordinary
shares of SHCL for a period of not less than five years after
completion of the permanent Sydney Harbour Casino and remain the
beneficial owner of not less than 5% of the issued ordinary
shares of SHCL for an additional two years thereafter. The
Facility Agreement further restricts SHCL's ability to declare or
pay any dividend (other than a permitted preferred ordinary
dividend) or make distributions to stockholders, except under
certain conditions as specified in the Facility Agreement. The
Facility Agreement contains additional customary financial
covenants. In connection with the Facility Agreement, CBA will
receive options to acquire 17,250,000 preferred ordinary shares
at an exercise price of A$1.10 per share. CBA's options may be
exercised no earlier than July 1, 1998 and the options expire
five years from the date of the agreement granting such options.
SHCL granted options to purchase an aggregate of 20,200,000
shares of SHCL. Of these Options, options to (i) purchase
7,575,000 preferred ordinary shares at an exercise price of
A$1.00 have been exercised by the holders thereof, (ii) purchase
7,575,000 preferred ordinary shares at an exercise price of
A$1.00 have expired, (iii) purchase 5,050,000 ordinary shares at
an exercise price of A$1.15 per share are exercisable between
June 1, 1998 and June 30, 2000.
Sydney Harbour Casino Management Pty Limited (the
"Manager"), a company which is 85% owned by SAPL and 15% owned by
National Mutual Trustees Limited in trust for Leighton
Properties, will manage the temporary casino and the permanent
Sydney Harbour Casino pursuant to a 99-year management agreement
(the "Management Agreement"). The terms of the Management
Agreement require the Manager to advise SHCP or Sydney Harbour
Casino Properties Pty Limited, wholly owned subsidiaries of SHCL,
as to the casino design and configuration and the placement of
all gaming equipment. The Manager also has agreed to train all
employees of the Sydney Harbour Casino and to manage a high
quality international class casino in accordance with the
operating standards required by the NSWCCA. The
19
NSWCCA requires a service audit to be conducted yearly by a third
party so that areas of non-compliance can be identified and
remedied by the Manager. The Manager will be paid a management
fee equal to the sum of (i) 1 1/2% of casino revenue, (ii) 6% of
casino gross operating profit, (iii) 3 1/2% of total non-casino
revenue, and (iv) 10% of total gross non-casino operating profit,
for each fiscal year for services rendered by the Manager
pursuant to the Management Agreement. Under certain conditions,
the Manager has agreed to forego management fees in an amount
with a present value of approximately A$19.0 million. Gaming
revenue from the Sydney Harbour Casino will be taxed at a rate of
(i) 22.5% of slot machine revenue and (ii) 20% of the first
A$200.0 million of table game revenue, increasing 1% for each
additional A$5.0 million of table game revenue, up to a maximum
rate of 45%, and will also be subject to a community benefit levy
of 2% of gross gaming revenue.
Competition
Sydney Harbour Casino, when operating, will generally
compete with casinos in Australia and other casinos located
within the Pacific Rim. Currently, 12 casinos operate in
Australia. Other than the non-profit private slot clubs, most of
which contain 25 or fewer slot machines, Sydney Harbour Casino
shall be the only casino in the State of New South Wales for 12
years following commencement of gaming operations in the
temporary casino. Sydney Harbour Casino expects to compete with
the local slot clubs and with the casinos throughout Australia
and the Pacific Rim by offering excellent service and an
attractive facility containing hotel operations, bars and
restaurants, sports and recreation facilities, entertainment
centres, car parking, theatres, convention facilities and retail
shopping.
Financial Information about the Company
The primary source of revenue and income to the Company is
its casinos, although the hotels, restaurants, bars, buffets,
shops, bowling, sports and other special events and services are
important adjuncts to the casinos. At December 31, 1994, the
Company's casinos featured the following slot machines and table
games:
Las Atlantic Star
Vegas City Casino
Showboat Showboat
Slot Machines 1,888 3,027 778
"21" Tables 19 61 32
Poker Tables 6 18 N/A
"Craps" Tables 2 14 6
Roulette Tables 2 11 4
Caribbean Stud Poker 1 2 N/A
Pai Gow Poker Tables 1 2 N/A
Baccarat Tables N/A 2 N/A
Mini-Baccarat Tables N/A 2 N/A
Red Dog Table N/A 1 N/A
Big Six Wheel N/A 2 N/A
Sic Bo N/A 1 N/A
20
The Las Vegas Showboat also contains a race and sports book,
a 1,300-seat bingo parlor and a keno area. The Atlantic City
Showboat also contains a horse racing simulcast room and a keno
facility.
At the Las Vegas Showboat, slot machines accounted for 83.0%
of casino revenues for the year ended December 31, 1994, 84.2% of
casino revenues for the year ended December 31, 1993, and 84.5%
of casino revenues for the year ended December 31, 1992. At the
Atlantic City Showboat, slot machines accounted for 73.6% of
casino revenues for the year ended December 31, 1994, 73.2% of
casino revenues for the year ended December 31, 1993, and 71.5%
of casino revenues for the year ended December 31, 1992. At the
Star Casino, slot machines accounted for 75.3% of casino revenues
for the year ended December 31, 1994 and 68.6% of casino revenues
for the period from the commencement of operations to
December 31, 1993. The Las Vegas Showboat operations and the
Atlantic City Showboat operations are conducted 24 hours a day,
every day of the year. The Star Casino was operated 24 hours a
day, every day of the year prior to permanently closing the Star
Casino on March 9, 1995.
The following table sets forth the contribution to total net
revenues on a dollar and percentage basis of the Company's major
activities at the Las Vegas Showboat and the Atlantic City Show
boat for the years ended December 31, 1994, 1993 and 1992. Net
revenues for the Star Casino are not included in the table since
the Company accounts for its investment in the Showboat Star
Partnership under the equity method of accounting. The Company's
equity in the income or loss of Showboat Star Partnership, net of
intercompany elimination, was $12,828,000 and a loss of $850,000
in 1994 and 1993, respectively. For other financial information,
see the Company's financial statements contained in Item 8.
Financial Statements and Supplementary Data.
21
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1994 1993 1992
(dollar amounts in thousands)
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
Revenues:
Casino(1) $351,436 87.6 $329,522 87.7 $313,247 88.2
Food and 50,624 12.6 48,669 12.9 44,511 12.5
beverage
Rooms 20,587 5.1 19,355 5.2 17,280 4.9
Sports and 4,168 1.0 4,251 1.1 4,443 1.2
special
events
Other(2) 7,799 2.0 5,982 1.6 4,932 1.4
Total gross 434,614 108.3 407,779 108.5 384,413 108.2
revenues(3)
Less compli- 33,281 8.3 32,052 8.5 29,177 8.2
mentaries
(1)
Total net $401,333 100.0 $375,727 100.0 $355,236 100.0
revenues(3)
_______________
(1)Casino revenues are the net difference between the sums
received as winnings and the sums paid as losses.
Complimentaries consist primarily of rooms, food and
beverages furnished gratuitously to customers. The sales
value of such services is included in the respective revenue
classifications and is then deducted as complimentaries.
Complimentary rates are periodically reviewed and adjusted
by management. See Note 1 of Notes to Consolidated
Financial Statements in Item 8. Financial Statements and
Supplementary Data.
(2)Includes management fee revenues, net of intercompany
elimination, in the amount of $1.9 million and $.4 million
paid to LPSI from Showboat Star Partnership in 1994 and
1993, respectively.
(3)Does not include interest income.
The Atlantic City Showboat offers complimentary meals,
drinks and room accommodations to a larger percentage of
customers than does the Las Vegas Showboat or the Star Casino.
Such promotional allowances (complimentary services) at the
Atlantic City Showboat were 8.8% of total net revenues for the
year ended December 31, 1994, 9.3% of total net revenues for the
year ended December 31, 1993, and 8.8% of total net revenues for
the year ended December 31, 1992. Such promotional allowances
(complimentary services) at the Las Vegas Showboat were 6.5% of
total net revenues for the year ended December 31, 1994, 5.9% of
total net revenues for the year ended December 31, 1993, and 6.0%
of total net revenues for the year ended December 31, 1992. At
the Star Casino, such complimentary services
22
were 3.3% of total net revenues for the year ended December 31,
1994.
Gaming Credit Policy
A minimal dollar amount of credit is extended to a limited
number of gaming customers at the Las Vegas Showboat and the Star
Casino. The Atlantic City Showboat, however, offers
substantially more credit to a greater number of customers. The
Atlantic City Showboat's gaming credit, as a percentage of total
gaming revenues, is at a level which is consistent with that of
the average credit levels for all other casino hotels in Atlantic
City. Overall, the Company's gaming receivables were
approximately $7.0 million at December 31, 1994, before deducting
allowance for doubtful accounts of approximately $2.2 million.
In comparison, the Company's gaming receivables were
approximately $6.8 million at December 31, 1993, before deducting
allowance for doubtful accounts of approximately $2.8 million.
At the Atlantic City Showboat, gaming receivables were
approximately $6.9 million at December 31, 1994, before deducting
allowance for doubtful accounts of approximately $2.2 million.
In comparison, gaming receivables at the Atlantic City Showboat
were approximately $6.7 million at December 31, 1993, before
deducting allowance for doubtful accounts of approximately $2.8
million.
The non-collectibility of gaming receivables can have a
material adverse effect on results of operations, depending upon
the amount of credit extended and the size of uncollected
amounts. Nevada, Louisiana and New Jersey casino gaming debts
are required to be evidenced by properly accomplished credit
instruments to be legally enforceable in Nevada, Louisiana and
New Jersey, respectively. Nevada, Louisiana and New Jersey
judgments enforcing such instruments are enforceable in most
other states of the United States and certain foreign countries.
Annual gaming bad debt expense at the Las Vegas Showboat has been
approximately .2% of casino revenues for the year ended December
31, 1994, as compared to approximately .1% of casino revenues for
the year ended December 31, 1993. Annual gaming bad debt expense
at the Atlantic City Showboat was approximately .2% of casino
revenues for the year ended December 31, 1994, as compared to
approximately .4% for the year ended December 31, 1993. At the
Star Casino, annual gaming bad debt expense has been
approximately .03% of casino revenues for the year ended December
31, 1994.
Control Procedures
In connection with its gaming activities, the Company
follows a policy of stringent internal controls, cross-checks and
recording of all receipts and disbursements in accordance with
industry practice. The audit and cash controls developed and
utilized by the
23
Company include locked cash boxes, independent counters, checkers
and observers to perform the daily cash and coin counts, floor
observation of the gaming areas, closed-circuit television
observation of certain areas, daily computer tabulation of
receipts and disbursements for each slot machine, table and other
games, and the rapid identification, analysis and resolution of
discrepancies or deviations from normal performance. All dealers
and other personnel are internally trained by the Company,
however, dealers in New Jersey must also obtain certification
from an independent dealer's school in order to meet licensing
requirements. The Company presently intends to promote qualified
employees to supervisory and management levels. However,
staffing requirements for the Company's casino hotels and for the
Company's Gaming Development Division have required that certain
supervisory and management personnel be hired from other casino
hotels. Gaming operations are subject to risk of loss as a
result of employee or customer dishonesty due to the large amount
of cash and gaming chips handled. However, the Company has not
experienced significant losses related to employee dishonesty.
Seasonal Factors
The Company does not believe that gaming and hotel revenues
are significantly seasonal in Las Vegas, Nevada or New Orleans,
Louisiana. In contrast, the Company believes that gaming and
hotel revenues are seasonal in Atlantic City due to the harsher
weather in Atlantic City during winter months.
Regulation and Licensing
Nevada Gaming
The ownership and operation of casino gaming facilities in
Nevada are subject to: (i) the Nevada Gaming Control Act and the
regulations promulgated thereunder (collectively "Nevada Act");
and (ii) various local regulations. The Company's gaming
operations are subject to the licensing and regulatory control of
the Nevada Gaming Commission ("Nevada Commission"), the Nevada
State Gaming Control Board ("Nevada Board"), and the City Council
of the City of Las Vegas ("City Board"). The Nevada Commission,
the Nevada Board, and the City Board are collectively referred to
as the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the
Nevada Gaming Authorities are based upon declarations of public
policy which are concerned with, among other things: (i) the
prevention of unsavory or unsuitable persons from having a direct
or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible
accounting
24
practices and procedures; (iii) the maintenance of effective
controls over the financial practices of licensees, including the
establishment of minimum procedures for internal fiscal affairs
and the safeguarding of assets and revenues, providing reliable
record keeping and requiring the filing of periodic reports with
the Nevada Gaming Authorities; (iv) the prevention of cheating
and fraudulent practices; and (v) to provide a source of state
and local revenues through taxation and licensing fees. Change
in such laws, regulations and procedures could have an adverse
effect on the Company's gaming operations.
Showboat Operating Company, which operates the Las Vegas
Showboat, is required to be licensed by the Nevada Gaming
Authorities. The gaming license requires the periodic payment of
fees and taxes and is not transferrable. The Company is
registered by the Nevada Commission as a publicly traded
corporation ("Registered Corporation") and as such, it is
required periodically to submit detailed financial and operating
reports to the Nevada Commission and furnish any other
information which the Nevada Commission may require. No person
may become a shareholder of, or receive any percentage of profits
from, Showboat Operating Company without first obtaining licenses
and approvals from the Nevada Gaming Authorities. The Company
and Showboat Operating Company have obtained from the Nevada
Gaming Authorities the various registrations, approvals, permits
and licenses required in order to engage in gaming activities in
Nevada.
The Nevada Gaming Authorities may investigate any individual
who has a material relationship to, or material involvement with,
the Company or Showboat Operating Company in order to determine
whether such individual is suitable or should be licensed as a
business associate of a gaming licensee. Officers, directors and
certain key employees of Showboat Operating Company must file
applications with the Nevada Gaming Authorities and may be
required to be licensed or found suitable by the Nevada Gaming
Authorities. Officers, directors and key employees of the
Company who are actively and directly involved in gaming
activities of Showboat Operating Company may be required to be
licensed or found suitable by the Nevada Gaming Authorities. The
Nevada Gaming Authorities may deny an application for licensing
for any cause which they deem reasonable. A finding of
suitability is comparable to licensing, and both require
submission of detailed personal and financial information
followed by a thorough investigation. The applicant for
licensing or a finding of suitability must pay all the costs of
the investigation. Changes in licensed positions must be
reported to the Nevada Gaming Authorities and in addition to
their authority to deny an application for a finding of
suitability or licensure, the Nevada Gaming Authorities have
jurisdiction to disapprove a change in a corporate position.
25
If the Nevada Gaming Authorities were to find an officer,
director or key employee unsuitable for licensing or unsuitable
to continue having a relationship with the Company or Showboat
Operating Company, the companies involved would have to sever all
relationships with such person. In addition, the Nevada
Commission may require the Company or Showboat Operating Company
to terminate the employment of any person who refuses to file
appropriate applications. Determinations of suitability or of
questions pertaining to licensing are not subject to judicial
review in Nevada.
The Company and Showboat Operating Company are required to
submit detailed financial and operating reports to the Nevada
Commission. Substantially all material loans, leases, sales of
securities and similar financing transactions by Showboat
Operating Company must be reported to, or approved by, the Nevada
Commission.
If it were determined that the Nevada Act was violated by
Showboat Operating Company the gaming licenses it holds could be
limited, conditioned, suspended or revoked, subject to compliance
with certain statutory and regulatory procedures. In addition,
Showboat Operating Company, the Company, and the persons involved
could be subject to substantial fines for each separate violation
of the Nevada Act at the discretion of the Nevada Commission. In
addition, a supervisor could be appointed by the Nevada
Commission to operate the Company's gaming properties and, under
certain circumstances, earnings generated during the supervisor's
appointment (except for the reasonable rental value of the
Company's gaming properties) could be forfeited to the state of
Nevada. Limitation, conditioning or suspension of any gaming
license or the appointment of a supervisor could (and revocation
of any gaming license would) materially adversely affect the
Company's gaming operations.
Any beneficial holder of the Company's voting securities,
regardless of the number of shares owned, may be required to file
an application, be investigated, and have his suitability as a
beneficial holder of the Company's voting securities determined
if the Nevada Commission has reason to believe that such
ownership would otherwise be inconsistent with the declared
policies of the state of Nevada. The applicant must pay all
costs of investigation incurred by the Nevada Gaming Authorities
in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5%
of the Company's voting securities to report the acquisition to
the Nevada Commission. The Nevada Act requires that beneficial
owners of more than 10% of the Company's voting securities apply
to the Nevada Commission for a finding of suitability within
thirty days after the Chairman of the Nevada Board mails the
written notice requiring such filing. Under certain
26
circumstances, an "institutional investor," as defined in the
Nevada Act, which acquires more than 10%, but not more than 15%,
of the Company's voting securities may apply to the Nevada
Commission for a waiver of such finding of suitability if such
institutional investor holds the voting securities for investment
purposes only. An institutional investor shall not be deemed to
hold voting securities for investment purposes unless the voting
securities were acquired and are held in the ordinary course of
business as an institutional investor and not for the purpose of
causing, directly or indirectly, the election of a majority of
the members of the board of directors of the Company, any change
in the Company's corporate charter, bylaws, management, policies
or operations of the Company, or any of its gaming affiliates, or
any other action which the Nevada Commission finds to be
inconsistent with holding the Company's voting securities for
investment purposes only. Activities which are not deemed to be
inconsistent with holding voting securities for investment
purposes only include: (i) voting on all matters voted on by
stockholders; (ii) making financial and other inquiries of
management of the type normally made by securities analysts for
informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other
activities as the Nevada Commission may determine to be
consistent with such investment intent. If the beneficial holder
of voting securities who must be found suitable is a corporation,
partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The
applicant is required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days after being ordered to do
so by the Nevada Commission, or the Chairman of the Nevada Board,
may be found unsuitable. The same restrictions apply to a record
owner if the record owner, after request, fails to identify the
beneficial owner. Any shareholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the
Common Stock beyond such period of time as may be prescribed by
the Nevada Commission may be guilty of a criminal offense. The
Company is subject to disciplinary action if, after it receives
notice that a person is unsuitable to be a shareholder or to have
any other relationship with the Company or Showboat Operating
Company, the Company (i) pays that person any dividend or
interest upon voting securities of the Company, (ii) allows that
person to exercise, directly or indirectly, any voting right
conferred through securities held by that person, (iii) pays
remuneration in any form to that person for services rendered or
otherwise, or (iv) fails to pursue all lawful efforts to require
such unsuitable person to relinquish his voting securities for
cash at fair market value.
The Nevada Commission may, in its discretion, require the
holder of any debt security of a corporation registered under the
Nevada Gaming Control Act to file applications, be investigated
and be found suitable to
27
own the debt security of a registered corporation. If the Nevada
Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered
Corporation can be sanctioned, including the loss of its
approvals, if without the prior approval of the Nevada
Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever, (ii) recognizes any
voting right by such unsuitable person in connection with such
securities, (iii) pays the unsuitable person remuneration in any
form, or (iv) makes any payment to the unsuitable person by way
of principal, redemption, conversion, exchange, liquidation, or
similar transaction.
The Company is required to maintain a current stock ledger
in Nevada which may be examined by the Nevada Gaming Authorities
at any time. If any securities are held in trust by an agent or
by a nominee, the record holder may be required to disclose the
identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds
for finding the record holder unsuitable. The Company is also
required to render maximum assistance in determining the identity
of the beneficial owner. The Nevada Commission has the power at
any time to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada
Gaming Control Act and the regulation of the Nevada Commission.
However, to date, the Nevada Commission has not imposed such a
requirement.
The Company may not make a public offering of its 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
retire or extend obligations incurred for such purposes. Such
approval, if given, will not constitute a finding, recommendation
or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of the prospectus or the investment
merits of the securities. Any representation to the contrary is
unlawful.
Changes in control of the Company through merger,
consolidation, stock or asset acquisitions, management or
consulting agreements, or any act or conduct by a person whereby
he obtains control, may not occur without the prior approval of
the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada
Commission in a variety of stringent standards prior to assuming
control of such Registered Corporation. The Nevada Commission
may also require controlling stockholders, officers, directors
and other persons having a material relationship or involvement
with the entity proposing to acquire control, to be investigated
and licensed as part of the approval process relating to the
transaction.
28
The Nevada legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting
securities and corporate defense tactics affecting Nevada gaming
licensees, and Registered Corporations that are affiliated with
those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a
regulatory scheme to ameliorate the potentially adverse effects
of these business practices upon Nevada's gaming industry and to
further Nevada's policy to (i) assure the financial stability of
corporate gaming operators and their affiliates; (ii) preserve
the beneficial aspects of conducting business in the corporate
form; and (iii) promote a neutral environment for the orderly
governance of corporate affairs. Approvals are, in certain
circumstances, required from the Nevada Commission before the
Company can make exceptional repurchases of voting securities
above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada
Act also requires prior approval by the Nevada Commission of a
plan of recapitalization proposed by the Company's Board of
Directors in response to a tender offer made directly to its
shareholders for the purpose of acquiring control of the Company.
The sale of alcoholic beverages by the casino is subject to
licensing, control and regulation by the applicable local
authorities. All licenses are revocable and are not
transferable. The agencies involved have full power to limit,
condition, suspend or revoke any such license, and any such
disciplinary action could (and revocation would) have a material
adverse affect upon the operations of the casino.
License fees and taxes, computed in various ways depending
on the type of gaming or activity involved, are payable to the
state of Nevada and to the counties and cities in which the
Nevada licensee's respective operations are conducted. Depending
upon the particular fee or tax involved, these fees and taxes are
payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received;
(ii) the number of gaming devices operated; or (iii) the number
of table games operated. A casino entertainment tax is also paid
by casino operations where entertainment is furnished in
connection with the selling of food or refreshments. Nevada
licensees that hold a license as an operator of a slot route, or
a manufacturer's or distributor's license, also pay certain fees
and taxes to the State of Nevada.
Any person who is licensed, required to be licensed,
registered, required to be registered, or is under common control
with such persons (collectively, "Licensees"), and who proposes
to become involved in a gaming venture outside of Nevada is
required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation of
29
the Nevada Board of their participation in such foreign gaming.
The revolving fund is subject to increase or decrease in the
discretion of the Nevada Commission. Thereafter, Licensees are
required to comply with certain reporting requirements imposed by
the Nevada Act. Licensees are also subject to disciplinary
action by the Nevada Commission if it knowingly violates any laws
of the foreign jurisdiction pertaining to the foreign gaming
operation, fails to conduct the foreign gaming operation in
accordance with the standards of honesty and integrity required
of Nevada gaming operations, engages in activities that are
harmful to the state of Nevada or its ability to collect gaming
taxes and fees, or employs a person in the foreign operation who
has been denied a license or finding of suitability in Nevada on
the ground of personal unsuitability.
New Jersey Gaming
Casino gaming activities in Atlantic City are subject to the
New Jersey Casino Control Act ("New Jersey Act") and the
regulations of the New Jersey Commission. No casino may operate
unless the required licenses and approvals are obtained from the
New Jersey Commission. The New Jersey Commission is authorized
under the New Jersey Act to adopt regulations covering a broad
spectrum of gaming, gaming-related activities and non-gaming-
related activities and to prescribe the methods and forms of
applications for licenses. The New Jersey Commission: (i)
approves license applications; (ii) regulates the design of
casino facilities and determines the allowable amount of casino
space based upon the number of hotel rooms; (iii) monitors
operating methods and financial accounting practices of
licensees; and (iv) determines and imposes sanctions for
violations of the New Jersey Act and the New Jersey Commission
regulations. The New Jersey Act also establishes a Division of
Gaming Enforcement ("Division") which is a branch of the New
Jersey Attorney General's office. The Division investigates all
applications for the granting and renewal of licenses, enforces
the provisions of the New Jersey Act and prosecutes before the
New Jersey Commission proceedings for violations of the New
Jersey Act. The Division conducts audits and continuing reviews
of all casino operations.
The New Jersey Commission has extremely broad discretion
with regard to the issuance, renewal and revocation or suspension
of licenses. A casino license is not transferable and must be
renewed by the licensee at certain intervals. The first two
license renewal periods are one year. Thereafter, the casino
licenses may be renewed for up to four years, subject to the New
Jersey Commission's authority to reconsider license eligibility
during any term. A casino license may be revoked or suspended at
any time by the New Jersey Commission upon a finding of disquali
fication or noncompliance. The holder of a casino license must
also obtain an operation certificate which may be revoked or
30
suspended at any time by the New Jersey Commission upon a finding
of noncompliance.
In order to obtain or renew a casino license, an applicant
must demonstrate to the New Jersey Commission: (i) its financial
stability, integrity and responsibility; (ii) its business
ability and casino experience; (iii) its good character, honesty
and integrity; and (iv) the qualification of all its financial
sources, security holders and holding and intermediate companies.
Moreover, each officer, director, principal employee, lender or
person directly or indirectly holding any beneficial interest or
ownership of the securities of the corporate licensee, and any
person deemed by the New Jersey Commission as having the ability
to control the corporate licensee or elect a majority of the
board of directors of the corporate licensee or other person
deemed appropriate by the New Jersey Commission must be found
qualified. ACSI's casino license was granted on March 27, 1987,
effective April 2, 1987. ACSI's casino license was renewed on
January 25, 1995 for the period commencing January 31, 1995 and
ending January 31, 1997. In connection therewith, SBO and OSI
were required to satisfy the licensure standards set forth above.
The New Jersey Commission imposes certain restrictions upon
the ownership of securities issued by a corporation which holds a
casino license or is a holding company of a corporate casino
licensee. Among other restrictions, the sale, assignment,
transfer, pledge or other disposition of any security issued by a
corporation which holds a casino license is subject to approval
by the New Jersey Commission. If the New Jersey Commission finds
an individual owner or holder of any security of a corporate
casino licensee or any of its holding companies or a "financial
source," or any of its security holders to be disqualified, the
New Jersey Commission may take any necessary remedial action,
including requiring divestiture by the disqualified security
holder. If disqualified security holders of either the corporate
licensee or the holding company fail to divest themselves of such
security interests, the New Jersey Commission may revoke or
suspend ACSI's casino license. Disqualified security holders are
prohibited from: (i) receiving any dividends or interest on their
securities; (ii) exercising, directly or through any trustee or
nominee, any rights conferred by such securities; and (iii)
receiving any remuneration in any form from the corporate
licensee for services rendered or otherwise. The corporate
licensee and its non-publicly traded holding companies are
required to include in their charter or articles of incorporation
a provision establishing the right of prior approval by the New
Jersey Commission with regard to transfers of securities, shares
and other interests in the corporation. The corporate licensees'
publicly traded holding companies are required to provide in
their charter or articles of incorporation a provision that any
securities of the corporation are held subject to the condition
that if a holder thereof is
31
disqualified, such holder shall dispose of his interest. SBO and
OSI are holding companies of a New Jersey casino licensee. SBO,
OSI and ACSI have charters or articles of incorporation that
comply with these regulatory requirements.
The New Jersey Commission regulations include detailed
provisions concerning, among others: (i) the rules of games,
including minimum and maximum wagers, and methods of supervision
of games and of selling and redeeming gaming chips; (ii) the
granting and duration of credit, the operation of junkets, and
the extension of and accounting for complimentary services;
(iii) the manufacture, distribution and sale of gaming equipment;
(iv) the security standards, management control procedures,
accounting and cash control methods and the reporting of such
matters to gaming authorities; (v) casino advertising; (vi) the
deposit of checks from patrons of casinos; (vii) the reporting of
currency transactions with patrons in amounts exceeding $10,000
to the Division; and (viii) the standards for entertainment and
distribution of alcoholic beverages in casino hotels.
All contracts and leases entered into by a casino licensee
are subject to the review of the New Jersey Commission and, if
reviewed and found unacceptable, may be voided. All enterprises
providing gaming-related equipment or services to a casino
licensee must be licensed or good cause must be shown for a
waiver of such licensing requirements. All other enterprises
dealing with a casino licensee must register with the New Jersey
Commission, which may require that they be licensed if they
regularly engage in business with casino licensees.
The New Jersey Commission could appoint a conservator upon
the revocation of or failure to renew a casino license. A
conservator would be vested with title to the casino hotel of the
former or suspended licensee, subject to valid liens and
encumbrances. The conservator would act subject to the general
supervision of the New Jersey Commission and would be charged
with the duty of conserving, preserving and continuing the
operation of the casino hotel. During the period of any such
conservatorship, the conservator may not make any distributions
of net earnings without the prior approval of the New Jersey
Commission. The New Jersey Commission may direct that all or a
portion of such net earnings be paid to the Casino Revenue Fund,
provided, however, that a suspended or former licensee is
entitled to a fair rate of return out of net earnings, if any.
Except during the pendency of a suspension or during any appeal
from any action precipitating the appointment of a conservator,
and after appropriate consultations with the former licensee, a
conservator, subject to the prior approval of the New Jersey
Commission, would be authorized to sell, assign, convey or
otherwise dispose of the casino hotel of a former licensee
subject to all valid liens, claims and encumbrances, and to remit
the net proceeds to the former licensee.
32
After completion of its first full year of operation, and
continuing for thirty years thereafter, a casino licensee is
subject to a New Jersey investment obligation. To satisfy this
obligation, the Company may either: (i) pay an investment
alternative tax equal to 2 1/2% of its annual gross revenues from
gaming operations; or (ii) purchase bonds issued by, or invest in
other development projects approved by, the Casino Reinvestment
Development Authority, a state agency, in an amount equal to 1
1/4% of its annual gross revenues from gaming operations.
All corporations doing business in New Jersey are subject to
a corporate franchise tax, based on allocated net income, at a 9%
annual rate. Interest on indebtedness is deductible under New
Jersey law. There is also an 8% tax on the gross win revenues of
New Jersey casinos, in addition to an annual $500 fee for each
slot machine.
Atlantic City imposes a real property tax and a luxury tax
applicable to certain sales, including, but not limited to, the
sale of alcoholic beverages, tickets to entertainment events and
rental of hotel rooms. In 1992, the New Jersey legislature
adopted laws imposing a fee of $2.00 per occupied casino hotel
room per day ($1.00 for non-casino hotel rooms). These fees are
dedicated exclusively to a fund to market Atlantic City as a
tourist destination and resort. In addition, the state of New
Jersey, effective July 1, 1993, imposed a $1.50/day fee for each
patron's car that is parked at an Atlantic City casino. ACSI has
elected to absorb the parking fee as a marketing expense, and not
to collect the fee from patrons as do the majority of Atlantic
City casinos. For 1994, the total parking fees paid by ACSI were
approximately $1.8 million, while in 1993, total parking fees
paid by ACSI were $0.8 million.
From time to time new laws and regulations, as well as
amendments to existing laws and regulations, relating to gaming
activities in New Jersey are proposed or adopted.
In addition, the New Jersey casino regulatory authorities
from time to time may change their laws, regulations or
procedures, including their procedures for renewing licenses.
The Company cannot predict what effect, if any, new or amended
laws, regulations or procedures would have on the Company.
Changes in such laws, regulations or procedures could have an
adverse effect on the Company.
The Company is subject to various other federal, state and
local laws and regulations and, on a periodic basis, has to
obtain various licenses and permits, including those required to
sell alcoholic beverages. In particular, the United States
Department of the Treasury has adopted regulations pursuant to
which a casino is required to file a report of each deposit,
withdrawal or
33
exchange of currency or other payment or transfer by, through or
to a casino which involves a transaction in currency of more than
a predetermined amount ($10,000 for 1994) per gaming day. Such
reports are required to be made on forms prescribed by the Secre
tary of the Treasury and must be filed with the Commissioner of
the Internal Revenue Service. In addition, a casino is required
to maintain detailed records (including the names, addresses,
social security numbers or other information with respect to its
customers) dealing with, among other items, a customer's deposit
and withdrawal of funds and the maintenance of a line of credit.
The parent company of OSI is SBO and through a wholly-owned
Nevada subsidiary, SBO conducts casino gaming operations in Las
Vegas, Nevada. SBO is not required to obtain the prior approval
of the Nevada Gaming Authorities to conduct casino gaming
operations outside Nevada. However, SBO must submit quarterly
reports to the Nevada Board regarding (i) any changes in
ownership or control of any interest in ACSI or OSI; (ii) any
changes in officers, directors or key employees of ASCI or OSI;
(iii) all complaints, disputes, orders to show cause and
disciplinary actions, related to gaming, instituted or presided
over by an entity of the United States, a state or any other
governmental jurisdiction concerning ASCI or OSI; (iv) any arrest
of an employee of ASCI or OSI involving cheating or theft related
to gaming in New Jersey; and (v) any arrest or conviction of an
officer, director, key employee or equity owner of ASCI or OSI
for certain offenses. SBO, through its New Jersey subsidiaries,
must provide to the Nevada Board all documents filed with the
state of New Jersey relating to the Atlantic City Showboat, the
systems of accounting and internal control utilized in connection
with the Atlantic City Showboat, and annual operational and
regulatory reports describing compliance with regulations,
procedures for audit, and procedures for surveillance relating to
the Atlantic City Showboat. SBO must also comply with any
additional reporting requirements which may be imposed by the
Nevada Board. New laws and regulations as well as amendments to
existing laws and regulations pertaining to gaming activities in
Nevada from time to time are proposed or adopted. Changes in
such laws, regulations and procedures could have an adverse
effect on the Company.
Louisiana Gaming
The operation and management of riverboat casino facilities
in Louisiana are subject to extensive state regulation. The
Louisiana Riverboat Economic Development and Gaming Control Act
(the "Louisiana Act") became effective on July 18, 1991 and
authorized the formation of the Louisiana Riverboat Gaming
Commission (the "Louisiana Gaming Commission") and the Riverboat
Gaming Enforcement Division of the Louisiana State Police (the
"Louisiana Enforcement Division"). Both the Louisiana Gaming
Commission and the Louisiana Enforcement Division
34
have promulgated extensive regulations which control riverboat
gaming in Louisiana. The Louisiana Act states, among other
things, that certain of the policies of the state of Louisiana
are to develop a historic riverboat industry that will assist in
the growth of the tourism market, to license and supervise the
riverboat industry from the period of construction through actual
operations, to regulate the operators, manufacturers, suppliers,
and distributors of gaming devices and to license all entities
involved in the riverboat gaming industry. The Louisiana Act
makes it clear, however, that no holder of a license or permit
possesses any vested interest in such license or permit and that
the license or permit may be revoked at any time. Changes in the
Louisiana laws or regulations or in the interpretation of the
laws or regulations could materially affect the types of
riverboat gaming activities in Louisiana and could have an
adverse effect on the Showboat Star Partnership.
The Louisiana Act approved the conduct of riverboat gaming
activities, in accordance with the Louisiana Act, on twelve
separate waterways in Louisiana. The Louisiana Act allows the
Louisiana Enforcement Division to issue up to 15 licenses to
operate riverboat gaming projects within the state with no more
than six in any one parish (county). The Louisiana Act requires
that the riverboats be of new construction. No gaming is allowed
while a riverboat is docked unless the vessel is docked for less
than 45 minutes between excursions, or unless the riverboat is
docked for reason of adverse water or weather conditions. All
cruises are required to be at least three hours in duration.
Each applicant which desires to operate a riverboat casino
in Louisiana is required to file an application for a Certificate
of Preliminary Approval ("Preliminary Certificate") with the
Louisiana Gaming Commission. The applicant is required to submit
various information to the Louisiana Gaming Commission including
ownership information, details concerning financing, proposed
location, preliminary riverboat construction plans, statements of
local support or opposition and proposed excursion routes. The
issuance of the Preliminary Certificate must be approved by a
majority vote of the Louisiana Gaming Commission. Issuance is
subject to the discretion of the Commission exercised in
accordance with certain criteria outlined in the regulations of
the Louisiana Riverboat Gaming Commission. After the Preliminary
Certificate is issued, construction of the riverboat, as approved
by the Louisiana Gaming Commission, may commence.
In addition to the Preliminary Certificate, an applicant is
required to apply with the Louisiana Enforcement Division for the
necessary gaming license. Specifically, the operator, certain of
its shareholders and directors and officers are required to
submit to thorough background investigations by the Louisiana
Enforcement Division. Persons, including shareholders, who hold
a 5% or greater economic interest in an entity
35
holding a Louisiana gaming license are subject to suitability
investigations. Additionally, the Louisiana Enforcement Division
may require any person or entity which it believes has control or
influence over an applicant or license holder to submit to an
investigation by the Louisiana Enforcement Division. The
Louisiana Enforcement Division can deny any application for a
gaming license on any findings of nonsuitability and any
applicant who is denied a gaming license is not allowed to own or
operate any gaming equipment in the state of Louisiana.
After an applicant and its operator (and all others required
by the Louisiana Enforcement Division) have been approved for the
issuance of their license by the Louisiana Enforcement Division,
the project must receive a Certificate of Final Approval ("Final
Certificate") from the Louisiana Gaming Commission. A Final
Certificate will not be issued without all necessary and proper
certificates from all regulatory agencies, including the U.S.
Coast Guard, the Army Corps, local port authorities and local
levee authorities.
All certificates and licenses may be issued with certain
conditions attached to them. The conditions become requirements
of the certificates and licenses and failure to adhere to these
conditions will result in revocation of the certificates or
licenses. Licenses are issued for an initial period of five
years and permits for an initial period of one year. Renewal
terms are for one year for both licenses and certificates.
Application fees for licenses are $50,000 and for certificates
are $25,000.
On October 24, 1993, a final certificate was issued to the
Showboat Star Partnership.
The Company and certain of its directors and officers and
certain key personnel must be found suitable by the Louisiana
Enforcement Division, and applications for these persons were
submitted to the Louisiana Enforcement Division. Employees
associated with gaming must also be approved by the Louisiana
Enforcement Division prior to working in gaming related areas.
These approvals may be immediately revoked for a number of causes
as determined by the Louisiana Enforcement Division. The
Louisiana Enforcement Division may deny any application for a
certificate, permit or license for any cause found to be
reasonable by the Louisiana Enforcement Division. The Louisiana
Enforcement Division has the authority to require the Company to
sever its relationships with any persons for any cause deemed
reasonable by the Louisiana Enforcement Division or for failure
of that person to file necessary applications with the Louisiana
Enforcement Division.
Both the Louisiana Enforcement Division and the Louisiana
Gaming Commission regulatory schemes are intended to maintain
regulatory supervision over control
36
of licensees. Certain changes in ownership or control of a
licensee through merger, consolidation, acquisition, management
or consulting agreements or any form of takeover may be
conditioned upon approval of the Louisiana State Police riverboat
Gaming Enforcement Division. The Louisiana Act specifically
provides that the sale, assignment, transfer, pledge or
disposition of a security or securities representing 5% or more
of total outstanding shares issued by a corporation holding a
license must be approved by the Division. Moreover, acquisition
of 5% or more of the total outstanding shares of a licensee or a
5% or more economic interest in a licensee requires Division
approval. Additionally, all securities issued by a licensed
corporation are required to bear, on both sides, a statement of
the restrictions imposed by the Louisiana Act.
At any time after a license has been issued, the Louisiana
Enforcement Division may investigate and require the finding of
suitability of any beneficial shareholder of the Company. The
Louisiana Enforcement Division requires all holders of more than
5% of the license holder to submit to suitability requirements.
Additionally, if a shareholder who must be found suitable is a
corporate or partnership entity, then the shareholders or
partners of that entity must also submit to investigation. The
sale or transfer of more than a 5% interest in any riverboat
project is subject to Louisiana Enforcement Division approval.
Annual fees are charged to each riverboat project as
follows: (1) $50,000 per year for the first year and $100,000 for
each year thereafter; and (2) 18.5% of the net gaming proceeds.
Additionally, the Star Casino must pay the City of New Orleans a
boarding fee of $2.50 per patron and an additional fee of $2.50
per patron to the Orleans Levee District.
Any violation of the Louisiana Act or the rules promulgated
by the Louisiana Gaming Commission or the Louisiana Enforcement
Division could result in substantial fines, penalties and
criminal actions. Any material and knowing violation of the
Louisiana Act (including the making of a material false statement
in any application) may be a criminal offense. Violation of the
regulations of either the Louisiana Enforcement Division or the
Louisiana Gaming Commission may result in civil penalties and
disciplinary action including suspension of a license or
certificate. Additionally, certificates issued by the Louisiana
Gaming Commission or licenses issued by the Louisiana Enforcement
Division are revocable privileges and may be revoked at any time.
In the event that the Louisiana Enforcement Division
determines that an individual owner or holder of a security of a
corporate licensee or any person or persons with an economic
interest in a licensee is not qualified and suitable, the
Division may disqualify that person from receiving dividends or
interest on the licensee's
37
corporate securities, from exercising rights conferred by those
securities, from receiving any remuneration or economic benefit
from the licensee and may prohibit the continuation of the
ownership, economic interest or management participation. These
conditions may be imposed as a condition to the licensee
retaining its license.
Missouri Gaming
Gaming was originally authorized in the State of Missouri in November
1992. On April 29, 1993, new legislation (the "Missouri Act") was enacted
which replaced the 1992 legislation. In January 1994 the Missouri Supreme
court handed down a decision which held that the operation of certain games
of chance such as traditional slot machines was prohibited by the
constitution of the state of Missouri. On November 8, 1994, the people of
Missouri voted in favor of an amendment to the Missouri constitution to
allow slot machine gaming in the state. The Missouri Act provides for the
licensing and regulation of riverboat and dockside gaming operations on the
Mississippi and Missouri Rivers in the State of Missouri and the licensing
and regulation of persons who distribute gaming equipment and supplies to
gaming licensees. The Missouri Act limits the loss per individual on each
excursion to $500, but does not otherwise limit the amount which may be
wagered on any bet or the amount of space in the vessel which may be
utilized for gaming.
The Missouri Act is to be implemented and enforced by a five-member
Missouri Gaming Commission. This Commission is empowered to issue such
number of riverboat gaming licenses as it determines to be appropriate. A
gaming license cannot be granted to any gaming operator unless the voters
in such operator's "home dock" city or county have authorized gaming
activities on gaming riverboats. No assurance can be given that RLLC
will obtain a gaming license in a timely fashion or at all.
Gaming boats in Missouri must generally resemble boats from Missouri's
riverboat history and must contain nongaming areas, food service and a
Missouri theme gift shop. The boats must cruise unless public safety
requires continuous docking. Annual license fees will be set by the
Missouri Gaming Commission but may not be less than $25,000. Each licensee
also must post a bond or other form of surety (in an amount determined by
the Missouri Gaming Commission) to secure performance of its obligations
under the Missouri Act and the regulations of the Missouri Gaming
Commission.
On September 1, 1993, the Missouri Gaming Commission adopted rules and
regulations (the "Missouri Regulations") governing the licensing, operation
and administration of riverboat gaming in the state of Missouri and the
form of application for such licensure. RLLC has submitted its gaming
application. There can be
38
no assurance that RLLC will be selected for investigation for licensing or
if so selected that a Missouri gaming license will be issued.
In addition, the Missouri Regulations remain subject to amendment and
interpretation, and may further limit or otherwise adversely affect the
Company and its Missouri gaming operations.
Directors and certain officers and key persons of the Company and RLLC
must file personal disclosure forms with the gaming license application and
must be found suitable by the Missouri Gaming Commission. Further, the
Missouri Regulations require that all employees of RLLC who are involved in
gaming operations must file applications for and receive Missouri gaming
occupational licenses. The Missouri Regulations require disclosure by the
Company and RLLC of any person or entity holding any direct or indirect
ownership interest in RLLC. RLLC is also required to disclose the names of
the holders of all of RLLC's debt including a description of the nature and
terms of such debt. The Missouri Gaming Commission may, in its sole
discretion, request additional information with respect to such holders.
Missouri gaming licenses must be renewed annually during the first two
years of an entity's licensure and renewed every two years thereafter.
Under Missouri law, gaming licenses are not transferable, and under
the Missouri Regulations the transfer of (i) any ownership interest in a
privately held business entity or (ii) a 5% or greater interest in a
publicly traded company directly or indirectly holding a Missouri gaming
license is prohibited without the approval of the Missouri Gaming
Commission. Further, without the prior approval of the Missouri Gaming
Commission, the Missouri Regulations prohibit withdrawals of capital,
loans, advances or distribution of any assets in excess of 5% of
accumulated earnings by a license holder to anyone with an ownership
interest in the license holder.
The Missouri Regulations specifically provide that any action of the
Missouri Gaming Commission shall not indicate or suggest that the
Commission has considered or passed in any way on the marketability of the
applicant or licensee's securities, or on any other matter, other than the
applicant or licensee's suitability for licensure under Missouri law. A
Missouri gaming license holder can be disciplined in Missouri for gaming
related acts occurring in another jurisdiction which results in
disciplinary action in the other jurisdiction.
In addition to any other taxes or fees payable to state and local
governmental authorities, gaming licensure in the State of Missouri will
subject RLLC to a 20% Adjusted Gross Receipts tax. Adjusted Gross Receipts
is generally defined as gross receipts from gaming less payouts to
customers as winnings. Also, a $2.00 admission is payable to the Missouri
Gaming Commission for each person admitted to the riverboat.
39
The Missouri Gaming Commission has broad powers to require additional
disclosure by an applicant during the processing of a gaming application,
to deny gaming licensure and to administratively fine or suspend or revoke
a gaming license for failure to comply with or for violation of the
Missouri Act or Missouri Regulations. Further, in certain situations, the
Missouri Gaming Commission can appoint a supervisor to continue the
operations of a license holder after lapse, suspension or revocation of a
gaming license.
The supervisor may operate and sell the facility with earnings or
proceeds being paid to the former owners only after deduction of the costs
and expenses of the supervisorship and establishment of reserves.
Sydney, Australia Gaming
The NSWCCA was created pursuant to the Casino Control Act 1992 (NSW)
("Casino Act") to maintain and administer systems for licensing,
supervision and control of a casino.
In considering an application for a casino license, Section 11 of the
Casino Act requires the NSWCCA to have regard to the following matters:
(i) the suitability of applicants and "close associates" of applicants;
(ii) the standard and nature of the proposed casino, and the facilities to
be provided in, or in conjunction with, the proposed casino; (iii) the
likely impact of the use of the premises concerned as a casino on tourism,
employment and economic development generally in the place or region in
which the premises are located; (iv) the expertise of the applicant, having
regard to the obligations of the holder of a casino license under the
Casino Act; and (v) such other matters as the NSWCCA considers relevant.
The term "close associate" is broadly defined in the Casino Act. It
includes a person who:
(a) holds or will hold any Relevant Financial Interest,or is or
will be entitled to exercise any Relevant Power (whether in his
or her own right or on behalf of any other person), in the casino
business of the license applicant or holder, and by virtue of
that interest or power is or will be able (in the opinion of the
NSWCCA) to exercise a significant influence over or with respect
to the management or operation of that casino business; or
(b) holds or will hold any Relevant Position, whether in his or
her own right or on behalf of any other person, in the casino
business of the license applicant or holder.
The Casino Act defines "Relevant Financial Interest" as meaning any
share in the capital of the business or
40
any entitlement to receive any income derived from the business, whether
the entitlement arises at law, equity or otherwise.
"Relevant Position" is defined as the position of director, manager,
secretary and other executive positions.
The Casino Act defines "Relevant Power" as any power, exercisable by
voting or otherwise and whether exercisable alone or in association with
others to participate in a directional managerial or executive decision or
to elect or appoint any person to any Relevant Position.
The NSWCCA is to determine an application by either granting a casino
license to the applicant or declining to grant a casino license. The
casino license may be granted subject to such conditions as the NSWCCA
thinks fit and is granted for the location specified in the casino license.
A casino license confers no right of property and cannot be assigned
or mortgaged, charged or otherwise encumbered.
The conditions of a casino license may be amended by being
substituted, varied, revoked or added to by the NSWCCA subject to the right
of the licensee to make submissions to the NSWCCA in regard to any such
proposal. The NSWCCA may also cancel or suspend, or amend the terms or
conditions, of a casino license where there are grounds for disciplinary
action, including: (i) the casino license being improperly obtained;
(ii) the casino operator, a person in charge of the casino, an agent of the
casino operator or a casino employee contravening a provision of the Casino
Act or a condition of the license; (iii) the casino premises no longer
being suitable for the conduct of the casino operations; (iv) the licensee
being considered to be no longer a suitable person to give effect to the
casino license and the Casino Act; and (v) the public interest that the
casino license should no longer remain in force.
No right of compensation against the government arises for the
cancellation, suspension or variation of the terms and conditions of the
casino license.
The NSWCCA must not grant an application for a casino license unless
it is satisfied that the applicant and each close associate is a suitable
person to be concerned in or associated with the management and operation
of a casino. In making the determination as to the suitability of the
applicant, the NSWCCA must consider whether: (a) the applicant and each
close associate are of good repute, having regard to character, honesty and
integrity; (b) the applicant and each close associate is of sound and
stable financial background; (c) in the case of an applicant that is not a
natural person, the applicant has or has arranged a satisfactory ownership,
trust or corporate structure; (d) the applicant has or is able to obtain
financial resources that are both suitable and adequate for insuring the
financial viability of the proposed casino; (e) the
41
applicant has or is able to obtain the services of persons who have
sufficient experience in the management and operation of a casino; (f) the
applicant has sufficient business ability to establish and maintain a
successful casino; (g) the applicant or any close associate who has any
business association with any person, body or association who, in the
opinion of the NSWCCA is not of good repute, having regard to character,
honesty and integrity or has undesirable or unsatisfactory financial
sources; and (h) each director, partner, trustee, executive officer and
secretary and any other officer or person determined by the NSWCCA to be
associated or connected with the ownership, administration or management of
the operations or business of the applicant or a close associate of the
applicant is a suitable person to act in that capacity.
On receiving an application for a casino license, the NSWCCA may carry
out all such investigations and inquiries as it deems necessary. The costs
of the investigation by the NSWCCA are payable to the NSWCCA by the
applicant unless the NSWCCA determines otherwise.
The NSWCCA may give written direction to a casino operator as to the
conduct, supervision or control of operations of the casino.
The NSWCCA may investigate a casino from time to time at the
discretion of the NSWCCA. Not later than three years after the grant of
the casino license, and thereafter in intervals not exceeding three years,
the NSWCCA must investigate and form an opinion as to whether or not the
casino operator is a suitable person to continue to give effect to the
casino license and determine that it is in the public interest the casino
license should continue in force.
A casino operator must not enter into a controlled contract without
first notifying the NSWCCA. A controlled contract is a contract that
relates wholly or partly to the supply of goods or services to a casino,
but does not include a contract that relates solely to the construction of
the casino or to the alteration of premises used or to be used as a casino,
or such other contracts as may be defined by the NSWCCA.
Gaming is not to be conducted in the casino unless the facilities
provided in relation to the conduct and monitoring of operations of the
casino are in accordance with the plans, diagrams and specifications that
are approved by the NSWCCA. The NSWCCA may approve the games to be played
in the casino. A casino operator must not conduct a game in a casino
unless there is an order in force approving the game and the game is
conducted in accordance with the rules approved by such order.
The casino is to be open to the public on such days and at such times
as are directed by the NSWCCA in writing. The casino must be closed on
days and at times that are not days or times specified by the NSWCCA.
42
A casino operator must not (i) accept a wager made otherwise than by
means of money or chips, (ii) lend money, chips or any other valuable
thing; provide money or chips as part of a transaction involving a credit
card or debit card, (iii) extend any other form of credit, or (iv) wholly
or partly discharge any debt. The casino operator may issue chips in
exchange for checks.
Indiana Gaming
In 1993, the state of Indiana passed a Riverboat Gambling Act which
created the Indiana Gaming Commission. The Indiana Gaming Commission is
given extensive powers and duties for the purposes of administering,
regulating and enforcing the system of riverboat gaming. It is authorized
to award no more than 11 gaming licenses (five to counties contiguous to
Lake Michigan, five to counties contiguous to the Ohio River and one to a
county contiguous to Patoka Lake).
With the exception of Lake County, a county must pass a referendum
approving (by a majority of those who voted) riverboat gaming before
riverboat gaming can be legalized in that county. If a referendum fails to
pass in any county, another referendum may not be held for another two
years. Once a referendum has passed in a county, the Riverboat Gambling
Act requires any proposed riverboat to operate from the most populous city
in that county, unless such city passes a resolution authorizing a
riverboat to operate elsewhere in the county. For Lake County, the
Riverboat Gambling Act provides that the second and third most populous
cities of the county, respectively Hammond and East Chicago according to
the 1990 census, may authorize riverboat gaming within such cities, by
passage of a municipal referendum. Voters in both cities have passed such
referenda. Gary, Lake County's most populous city, is exempted by the
Riverboat Gambling Act from the gaming referendum requirement altogether.
Pursuant to Indiana Gaming Commission resolution, the cost of any
referendum is to be borne by all license applicants for the voting county
or municipality. The constitutionality of the Indiana Riverboat Gambling
Act was upheld by the Indiana Supreme Court in INDIANA GAMING COMMISSION V.
MOSELEY, decided November 21, 1994.
The Indiana Gaming Commission has jurisdiction and supervision over
all riverboat gaming operations in Indiana and all persons on riverboats
where gaming operations are conducted. These powers and duties include
authority to (1) investigate all applicants for riverboat gaming licenses,
(2) select among competing applicants those that promote the most economic
development in a home dock area and that best serve the interest of the
citizens of Indiana, (3) establish fees for licenses, and (4) prescribe all
forms used by applicants. The Indiana Gaming Commission shall adopt rules
pursuant to statute for administering the gaming statute and the conditions
under which riverboat gaming in Indiana may be conducted. The Indiana
Gaming Commission has promulgated certain formal rules and has proposed
additional rules governing the application
43
procedure. The Indiana Gaming Commission may suspend or revoke the license
of a licensee or impose civil penalties, in some cases without notice or
hearing. The Indiana Gaming Commission will (1) authorize the route of the
riverboat and stops that the riverboat may make, (2) establish minimum
amounts of insurance and (3) after consulting with the United States Army
Corps of Engineers, determine which waterways are navigable waterways for
purposes of the Indiana Riverboat Gambling Act and determine which
navigable waterways are suitable for the operation of riverboats.
Additionally, the Indiana Gaming Commission may adopt emergency orders
concerning navigability of waters for extreme weather conditions or other
extreme circumstances.
The Indiana Riverboat Gambling Act requires an extensive disclosure of
records and other information concerning an applicant, including disclosure
of all directors, officers and persons holding one percent (1%) or more
direct or indirect beneficial interest.
In determining whether to grant an owner's license to an applicant,
the Indiana Gaming Commission shall consider (1) the character, reputation,
experience and financial integrity of the applicant and any person who
(a) directly or indirectly controls the applicant, or (b) is directly or
indirectly controlled by either the applicant or a person who directly or
indirectly controls the applicant, (2) the facilities or proposed
facilities for the conduct of riverboat gaming, (3) the highest total
prospective revenue to be collected by the state from the conduct of
riverboat gaming, (4) the good faith affirmative action plan to recruit,
train and upgrade minorities in all employment classifications, (5) the
financial ability of the applicant to purchase and maintain adequate
liability and casualty insurance, (6) whether the applicant has adequate
capitalization to provide and maintain the riverboat for the duration of
the license and (7) the extent to which the applicant meets or exceeds
other standards adopted by the Indiana Gaming Commission. The Indiana
Gaming Commission may also give favorable consideration to applicants for
economically depressed areas and applicants who provide for significant
development of a large geographic area. Each applicant must pay an
application fee of $50,000 and an additional investigation fee of $55,000.
If the applicant is selected, the applicant must pay an initial license fee
of $25,000 and post a bond. A person holding an owner's gaming license
issued by the Indiana Gaming Commission may not own more than a ten percent
(10%) interest in another such license. An owners license expires five
years after the effective date of the license. Unless the license has been
terminated, expired or revoked, the gaming license may be renewed if the
Indiana Gaming Commission determines that the licensee has satisfied all
statutory and regulatory requirements. A gaming license is a revocable
privilege and is not a property right. There can be no assurance that the
Indiana Partnership will obtain an Indiana Gaming license.
44
Some municipalities have initiated their own review process. The
Indiana Gaming Commission has passed a resolution stating that certain
evaluations by local governments will be important factors in the Indiana
Gaming Commission's economic development evaluation process, however, the
Indiana Gaming Commission retains the sole authority to award a license.
Minimum and maximum wagers on games are not established by regulation
but are left to the discretion of the licensee. Wagering may not be
conducted with money or other negotiable currency. Riverboat gaming
excursions are limited to a duration of four hours unless expressly
approved by the Indiana Gaming Commission. No gaming may be conducted
while the boat is docked except (1) for 30-minute time periods at the
beginning and end of a cruise while the passengers are embarking and
disembarking, (2) if the master of the riverboat reasonably determines that
specific weather or water conditions present a danger to the riverboat, its
passengers and crew, or (3) by rule of the Indiana Gaming Commission.
An admission tax of $3.00 for each person admitted to the gaming
excursion is imposed upon the license owner. An additional twenty percent
(20%) tax is imposed on the adjusted gross receipts received from gaming
operations, which is defined as the total of all cash and property
(including checks received by the licensee whether collected or not)
received, less the total of all cash paid out as winnings to patrons and
uncollected gaming receivables. The gaming license owner shall remit the
admission and wagering taxes before the close of business on the day
following the day on which the taxes were incurred. Legislation is
currently before the Indiana Legislature permitting the imposition of
property taxes on the riverboats at rates to be determined by local taxing
authorities of the jurisdiction in which a riverboat operates.
The Indiana Gaming Commission is authorized to license suppliers and
certain occupations related to riverboat gaming. Gaming equipment and
supplies customarily used in conducting riverboat gaming may be purchased
or leased only from licensed suppliers.
The Indiana Riverboat Gambling Act places special emphasis upon
minority and women's business enterprise participation in the riverboat
industry. Any person issued a gaming owners license must establish goals
of expending at least ten percent (10%) of the total dollar value of the
licensee's contracts for goods and services with minority business
enterprises and five percent (5%) of the total dollar value of the
licensees contracts for goods and services with women's business
enterprises. The Indiana Gaming Commission may suspend, limit or revoke
the gaming owners license or impose a fine for failure to comply with
statutory requirements.
45
U.S. Coast Guard
Each cruising riverboat also is regulated by the U.S. Coast
Guard, whose regulations affect boat design and stipulate on-
board facilities, equipment and personnel (including requirements
that each vessel be operated by a minimum complement of licensed
personnel) in addition to restricting the number of persons who
can be aboard the boat at any one time. All vessels operated by
the Company must hold a Certificate of Inspection. Loss of the
Certificate of Inspection of a vessel would preclude its use as
an operating riverboat. The vessel must be drydocked
periodically for inspection of the hull, which will result in a
loss of service that can have an adverse effect on the Company.
For vessels of the Company's type, the inspection cycle is every
five years. Less stringent rules apply to permanently moored
vessels. The Company believes that these regulations, and the
requirements of operating and managing cruising gaming vessels
generally, make it more difficult to conduct riverboat gaming
than to operate land-based casinos.
All shipboard employees of the Company employed on U.S.
Coast Guard regulated vessels, even those who have nothing to do
with the actual operation of the vessel, such as dealers,
cocktail hostesses and security personnel, may be subject to the
Jones Act which, among other things, exempts those employees from
state limits on workers' compensation awards. The Company
believes that it has adequate insurance to cover employee claims.
Shipping Act of 1916; Merchant Marine Act of 1936
In order for the Company's vessels to have United States
flag registry, the Company must maintain "United States
citizenship" as defined in the Shipping Act of 1916, as amended,
and the Merchant Marine Act of 1936, as amended. A corporation
operating any vessel in the coastwise trade, such as the Company,
is not considered a United States citizen unless United States
citizens own 75% of its outstanding capital stock.
ITEM 2. PROPERTIES.
Las Vegas
The Las Vegas Showboat is located on the eastern edge of the
City of Las Vegas approximately two and one-half miles from both
downtown Las Vegas and the area commonly known as the "Strip"
where many of Las Vegas' major resort hotel casinos are located.
The Las Vegas Showboat is primarily a two-story structure with an
eighteen-story high-rise hotel and a 620-car parking garage. The
hotel registration area, bowling center, restaurants, bars and
entertainment lounge surround the casino area and are on the
first floor of the Las Vegas Showboat. The buffet, 1,300-seat
bingo room, meeting and
46
banquet facilities, employee dining room, and the Company's
executive offices are located on the second floor. The Las Vegas
Showboat's high-rise tower contains 352 of the Showboat's 453
guest rooms. The entire facility covers approximately 26 acres,
which includes approximately 19.25 acres of improved parking
area. The Company also owns and operates the 33-room Showboat
Motel located immediately across the street from the Showboat on
approximately one acre of land.
The facilities are constantly monitored to make sure that
the needs of the Company's business and customers are met. In
1994 the Company authorized an approximately $18.5 million
renovation of the casino, dining rooms and bar areas, all of
which is anticipated to be completed in 1995. The renovation
will include the replacement of the HVAC units for the casino and
replacement of the existing roof over the casino in conjunction
with the raising of the casino ceiling up to twenty-three feet,
giving the casino a more expansive appearance. Stained glass
panes will be used to accent this larger look. Additionally,
near the buffet area, a balcony will be added, which will provide
an overview of the casino.
The renovation will also include a number of alterations and
expansions to the various dining and bar areas to improve their
variety and overall ambience. The coffee shop will be expanded
to include patio seating which will look into the casino. A fast
food restaurant will be added as a dining alternative. The Carnival
Lounge will be doubled in size to meet the demand of patrons when
popular entertainers are booked and the casino bar adjacent to
the lounge will be expanded with an added seating area containing
raised seating and a large screen television. Additionally, the
facilities power plant will be upgraded, a new pool building will
be constructed and new carpeting will be installed throughout the
property. For employees, the employee dining room will be
remodeled and enlarged. As a result of this extensive renovation
construction during 1995, approximately forty percent of the main
casino space of the Las Vegas Showboat will be closed for up to
six months of 1995.
The Company holds fee title to all of the above-described
properties. The real property, buildings and improvements
comprising the Las Vegas Showboat secure the Company's First
Mortgage Bonds. All of the above-mentioned land and buildings
are leased to Showboat Operating Company, a wholly-owned
subsidiary.
Atlantic City
The Atlantic City Showboat is located on approximately 13
acres, 10 1/2 acres of which is leased from Resorts
International, Inc. ("Resorts") pursuant to a 99-year lease
dated October 26, 1983 (as amended, "Lease"). The remaining
acreage is held in fee by Atlantic City Showboat, Inc.
Under the New Jersey Act, both Resorts and ACSI, because of
their lessor-lessee relationship, are jointly and severally
liable for the acts of the other with
47
respect to any violations of the New Jersey Act by the other. In
order to limit the potential liability which could result from
this provision, ACSI, OSI and Resorts have agreed to indemnify
each other from all liabilities and losses which may arise as a
result of the joint and several liability imposed by the New
Jersey Act. However, the New Jersey Commission could determine
that the party seeking indemnification is not entitled to or is
barred from such indemnification.
Pursuant to the New Jersey Act, the New Jersey Commission
approved, subject to certain changes, an Assumption Agreement
("Assumption Agreement") executed by Trump Taj Mahal Associates
Limited Partnership and Trump Taj Mahal Realty Corp.
(collectively, "Trump Taj"), ACSI and Resorts in connection with
Trump Taj's acquisition of the land on which the Taj Mahal Casino
Hotel is constructed and pursuant to which Trump Taj assumed some
of Resorts' obligations in the Lease. The New Jersey Commission
ruled that the Assumption Agreement is a lease under the New
Jersey Act for casino regulatory purposes. As a result, for
casino regulatory purposes, a lessor-lessee relationship is
deemed to exist among ACSI, Resorts, and Trump Taj making them
jointly and severally liable for the acts of the other with
respect to any violations of the New Jersey Act by the others.
In order to limit their potential liability, ACSI, Resorts and
Trump Taj have entered into an agreement to indemnify each other
from all liabilities and losses which may arise as a result of
the joint and several liability imposed upon them by the New
Jersey Act. However, the New Jersey Commission could determine
that the party seeking indemnification is not entitled to or is
barred from such indemnification.
In the event Resorts is unable under the laws of New Jersey
to act as lessor of the site to the Atlantic City Showboat
("Premises"), ACSI has an option to purchase the Premises for the
greater of $66.0 million or the fair market value of the "leased
fee estate" (determined by appraisal in the case of
disagreement), subject to a maximum purchase price of 11 times
the annual rent in the option year. However, if the appraisal is
not completed within the time period specified by the New Jersey
Commission, the purchase price is equal to the lesser of $66.0
million or 11 times the annual rent in the option year. If ACSI
is unable to continue operating the Atlantic City Showboat under
the New Jersey gaming laws, Resorts has a similar option to
purchase ACSI's interest in the Premises together with the
Atlantic City Showboat building and all furniture, fixtures and
equipment thereon for their fair market value as of the option
date (determined by appraisal in the case of disagreement). Also,
should Resorts elect to sell its interest in the Lease or the
Premises to an unaffiliated third party, ACSI has a first right
of purchase unless such sale is made to a person who acquires all
of the assets and liabilities of Resorts (subject to the Lease).
Similarly, Resorts has a first right of purchase of ACSI's
leasehold interest in the Premises or the Atlantic City Showboat
if ACSI elects to sell the same to any person other than an
affiliate of ACSI or a mortgagee of ACSI's leasehold interest and
improvements on the leased
48
land. Any such transfer by ACSI, other than to a permitted
transferee, requires Resorts' consent which cannot be
unreasonably withheld.
The Lease and all amendments thereto are subject to review
and approval by the New Jersey Commission, and Resorts and ACSI
have agreed that they will accept any reasonable modification to
the Lease that may be required by the New Jersey Commission. If
either party determines that the requested Lease modifications
are unduly burdensome, the Lease may be terminated, subject to
arbitration in the case of disagreement. The Lease, as amended
to date, has been approved by the New Jersey Commission. In
addition, Resorts, pursuant to a ruling by the New Jersey
Commission, in its capacity as lessor of the site of the Atlantic
City Showboat, must obtain a casino service industry license.
Resorts presently holds a casino service industry license, which
must be renewed every three years.
The First Mortgage Bonds are also secured by a first
leasehold mortgage on ACSI's interest in the Lease, the Atlantic
City Showboat building and future improvements on the leased land
as well as certain personal property therein. Such mortgage is
subject and subordinate to Resorts' rights under the Lease and
its fee interest in the Premises. Subject to certain limited
exceptions, the Lease may not be amended without the consent of
the trustee under the Indenture governing the First Mortgage
Bonds unless certain opinions are delivered to the effect that
the amendment does not materially impair the security of the
mortgage. An event of default under the Lease constitutes an
event of default under the mortgage and the Indenture.
In addition to its rental payment obligations under the
Lease, ACSI is obligated to contribute up to one-third of the
costs of certain infrastructure improvements to be constructed on
a 56-acre tract ("Urban Renewal Tract"). The Atlantic City
Showboat is located on a portion of the Urban Renewal Tract owned
by Resorts. ACSI is obligated to contribute only toward
improvements of which it is the beneficiary or which are expected
to benefit ACSI and all future occupants of the Urban Renewal
Tract. ACSI has contributed to infrastructure improvements
involving the construction of certain sewer and water lines and
the realigning of a portion of Delaware Avenue ("Realigned
Delaware Avenue") to permit direct ingress and egress from the
Realigned Delaware Avenue to the Atlantic City Showboat, which
improvements have been completed.
Realigned Delaware Avenue has not yet been dedicated to the
City of Atlantic City. Pending dedication of the Realigned
Delaware Avenue to the City, the Atlantic City Housing Authority
granted to ACSI a permanent easement and right of way
("Easement") for the Realigned Delaware Avenue for the benefit of
ACSI and ACSI's employees, agents, guests, suppliers, visitors,
invitees and all others seeking access to the Atlantic City
Showboat. Until acceptance of a deed of dedication of the
Realigned Delaware Avenue by the City of Atlantic City, ACSI
shall maintain at its expense and pay, if billed separately, the
real property taxes associated with the Easement, or
49
reimburse Resorts for its allocable share of such real property
taxes for the Easement.
In addition, the CRDA approved a plan effective November
1992 to widen Delaware Avenue to four traffic lanes and two
parking lanes. Delaware Avenue leads directly from White Horse
Pike (U.S. Route 30) to the Atlantic City Showboat. ACSI
proposed and the CRDA approved that $8.0 million of ACSI's
deposits with the CRDA will be used for the widening of Delaware
Avenue. In connection with its approval, the CRDA required ACSI
to donate $2.5 million of its deposits with the CRDA to certain
CRDA programs. The widening of Delaware Avenue was completed in
the Spring of 1994.
ACSI's Board of Directors routinely authorizes capital
expenditures at the Atlantic City Showboat. In addition to the
three-part expansion of the Atlantic City Showboat which was
completed in 1994, the Board has authorized expending $15.7
million for recurring annual capital improvements in 1995. None
of these recurring annual capital expenditures in 1995 commit the
Company to additional capital expenditures in subsequent years.
During 1994, the Company completed the construction of a
three-part $97 million expansion project, before credits of
$8.7 million from CRDA, at the Atlantic City Showboat. For a
discussion of CRDA credits see "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources." The first stage of the
expansion was completed in May 1993 and added Atlantic City's
first horse race simulcasting facility. Approximately 4,500
square feet of casino space was added in June 1993. With the
additional casino space, the Company added approximately 340 slot
machines and 28 table games to its Atlantic City Casino in 1993.
In the second stage of the expansion, during 1994, the
Company added an additional 15,500 square feet of casino space.
With the additional casino space, the Company added approximately
550 slot machines and 10 table games, bringing the then total
number of slot machines and table games at the Atlantic City
Showboat to approximately 3,000 and 115, respectively.
The final stage of the expansion was the addition of a new
seventeen story, 284-room hotel tower which opened in November
1994, three months ahead of the original schedule. The new tower
was constructed on approximately four acres of real property
abutting the Atlantic City Showboat which was purchased in 1993
from the Atlantic City Housing Authority and Urban Redevelopment
Agency ("ACHA").
The Company believes that it presently is utilizing the
Atlantic City facilities at an acceptable level. See Item 1.
"BUSINESS" p. 3. The Atlantic City facilities are constantly
monitored to make sure that the needs of the Company's business
and customers are met.
50
Other Facilities
ACSI leases a 63,200 square-foot warehouse and office in Egg
Harbor Township, New Jersey, approximately 15 miles from the
Atlantic City Showboat. The lease term is through July 31, 2001.
ACSI holds an option to purchase the warehouse for $1.9 million.
This option may be exercised by ACSI on or after January 1, 1996,
and shall remain in effect until March 31, 2001.
ACSI leases a parking area for its employees from Atlantic
City Public Parking Garage No. 1 for 250 parking spaces. This
lease expires, unless earlier terminated, on March 31, 1995. In
1993 the Company purchased a vacant city block from private
owners which currently provides approximately 500 parking spaces
for ACSI customers and employees. ACSI provides, through an
independent contractor, a shuttle service for its employees
between the two parking areas and the Atlantic City Showboat.
Additionally, ACSI owns an additional parcel of land nearby which
serves as an overflow for parking. In December 1994, ACSI
entered into a 5-year lease with ACHA for a parcel of land
adjacent to the Atlantic City Showboat. ACSI is currently
constructing on the land to construct a parking lot consisting of
approximately 500 additional parking spaces for use by customers
and employees by June 20, 1995.
The Company leases office space in Ventnor, New Jersey
pursuant to a lease agreement executed on December 20, 1993
between Showboat Operating Company and Ventroy Associates.
The term of the lease is five years commencing on January 1, 1994,
with monthly rental payments of approximately $22,000.
Lake Pontchartrain, Louisiana
The Star Casino permanently ceased gaming operations on
March 9, 1995. The Star Casino was located on the south side of
Lake Pontchartrain in New Orleans, Louisiana, approximately seven
miles from New Orleans' "French Quarter." The terminal building
and parking area were located on approximately 19.6 acres. The
terminal building is a two-story structure containing
approximately 34,000 square feet. The terminal building housed a
restaurant and cocktail lounge on the first floor and
administrative offices on the second floor. On-site parking for
1,150 cars was located immediately adjacent to the terminal
building.
Showboat Star Partnership leased land, wharf and water
bottom from the Orleans Levee District for use in its riverboat
gaming operations and leased space for employee parking. The
term of the land lease agreement was for ten years, with four
options to renew for a period of ten years each. Additionally,
Showboat Star Partnership leases a building from the Orleans
Levee District, which was adjacent to its terminal building,
pursuant to a lease agreement dated February 1, 1994. The term
of the lease agreement for the additional building was one year,
with nine options to renew for a
51
period of one year each. Each of the foregoing leases were
assigned to Belle of Orleans LLC in February 1995. The Showboat
Star Partnership, immediately following the assignment to Belle
of Orleans LLC, entered into a sublease agreement to sublet the
leased land until April 30, 1995. In March 1995, Showboat
Louisiana, Inc. and Lake Pontchartrain Showboat, Inc. sold their
partnership interests to subsidiaries of Players International,
Inc. for $52 million subject to adjustment.
ITEM 3. LEGAL PROCEEDINGS.
The Company is from time to time involved in legal proceed
ings arising in the ordinary course of business.
ATLANTIC CITY SHOWBOAT, INC. V. ATLANTIC CITY
HOUSING AUTHORITY AND URBAN DEVELOPMENT AGENCY
OF THE CITY OF ATLANTIC CITY, ET AL.
On March 9, 1995, Atlantic City Showboat filed an action in
an Atlantic County Superior Court against the Atlantic City
Housing Authority ("ACHA") and Forest City Ratner Companies
("FCR") to protect its ownership of, and its right to develop,
two parcels of beach-block land adjacent to the Atlantic City
Showboat which were purchased by the Company in 1993 for $4.6
million ("Parcels"). The complaint alleges that the ACHA
improperly sought to force the Company to give the Parcels to
ACHA so ACHA could give the Parcels to FCR as a site for a strip
mall construction project. The complaint further alleges that
ACHA acted in violation of the United States and New Jersey
constitutions as well as in violation of contracts between
Atlantic City Showboat and ACHA. The Company believes that its
lawsuit is meritorious but, it cannot evaluate the likelihood of
an favorable outcome with respect to these claims.
DARLING HARBOUR CASINO LIMITED V. NEW SOUTH
WALES CASINO CONTROL AUTHORITY, NEW SOUTH
WALES MINISTER FOR PLANNING; DARLING HARBOUR
CASINO LIMITED V. NEW SOUTH WALES CASINO CONTROL
AUTHORITY, CHIEF SECRETARY AND MINISTER FOR
ADMINISTRATIVE SERVICES AND SYDNEY HARBOUR
CASINO PTY LIMITED
In December 1994, the NSWCCA awarded the Casino License to
SHCP. Immediately thereafter, Darling Harbour Casino Limited
("DHCL") initiated legal proceedings in both the Land &
Environment Court of the State of New South Wales, Australia and
the Administrative Law Division of the Supreme Court of that
State. The Land & Environment Court proceedings were instituted
against NSWCCA and the New South Wales Minister for Planning, and
SHCP applied to be joined as a party to those proceedings in view
of its interest in their outcome. The action alleges that the
development plans for the Sydney Harbour Casino were improperly
approved. The proceedings in the Supreme Court of New South
Wales were instituted against
52
the NSWCCA, SHCP and the Chief Secretary and Minister for
Administrative Services, who is the Minister of the Crown in New
South Wales whose portfolio includes responsibility for the
operation and administration of the NSWCCA.
The proceedings in the Land & Environment Court have now
been heard at first instance and a judgment is expected shortly.
However, the proceedings in the Supreme Court have not as yet
been heard and are currently the subject of an application by
SHCP and the NSWCCA that they be struck out.
DHCL relies upon various grounds in its complaint against
SHCP, the NSWCCA and the Minister in these proceedings but its
principal contention is that the NSWCCA, in determining to issue
a license to SHCP, did not consider all matters relevant to, or
if it did consider such matters, it was not justified in
concluding that, SHCP and its "close associates" (as defined in
Section 13 of the Casino Control Act 1992 (NSW) and in particular
Leighton Properties) were suitable persons to be concerned in or
associated with the management and operation of a casino as it is
bound to do under the Casino Act. The action in the Supreme
Court seeks revocation of the license awarded to SHCP. The
Company believes that these actions are meritless and intends to
vigorously defend against the allegations.
POULOS/AHERN V. SHOWBOAT, INC., ET AL., On April 26, 1994
and May 10, 1994, complaints in purported class action lawsuits
were filed in the United States District Court, Middle District
of Florida, against 41 manufacturers, distributors and casino
operators of video poker and electronic slot machines, including
the Company. The complaints allege that the defendants have
engaged in a course of conduct intended to induce persons to play
such games based on a false belief concerning how the gaming
machines win on a given play. One complaint alleges violations
of the Racketeer Influenced and Corrupt Organizations Act (the
"RICO Act"), as well as claims of common law fraud, unjust
enrichment and negligent misrepresentation, and seeks damages in
excess of $1 billion. The other complaint alleges violations of
the RICO Act and seeks damages in excess of $1 billion. The
cases have been consolidated. Management believes that the
complaints are without merit and intends to vigorously defend the
allegations in the complaints. The case has been transferred to
U.S. District Court, State of Nevada, Case No. W/CV-S-94-1137-LDG
(RJJ). The Company has filed a motion to dismiss the complaints
on grounds of lack of jurisdiction. In the opinion of management,
the ultimate disposition of this matter will not have a material
adverse effect on the Company's financial position or results of
operation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
53
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's common stock is listed on the New York Stock
Exchange. The range of high and low sales prices for the
Company's common stock for each quarter in the last two years is
as follows:
High Low Dividends
Declared
Year Ended December 31, 1994
Quarter ended March 31, 1994 21 16 1/4 .025
Quarter ended June 30, 1994 22 7/8 15 3/8 .025
Quarter ended September 30, 1994 17 7/8 13 1/8 .025
Quarter ended December 31, 1994 14 1/2 11 3/4 .025
Year Ended December 31, 1993
Quarter ended March 31, 1993 24 5/8 15 3/8 .025
Quarter ended June 30, 1993 24 3/8 17 5/8 .025
Quarter ended September 30, 1993 21 1/2 15 3/8 .025
Quarter ended December 31, 1993 23 3/8 15 5/8 .025
On March 15, 1995, the closing price of the Company's common
stock on the New York Stock Exchange was $14 3/4.
The Company has paid quarterly dividends since 1970. The
declaration and payment of dividends is at the discretion of the
Board of Directors. The Board of Directors considers, among
other factors, the Company's earnings, financial condition and
capital spending requirements in determining an appropriate
dividend.
The Company is restricted in the payment of cash, dividends,
loans or other similar transactions by the terms of an Indenture
executed by it in connection with the issuance of First Mortgage
Bonds. See Note 6 to the Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The approximate number of holders of the common stock as of
March 15, 1995 was 1,850.
54
ITEM 6. SELECTED FINANCIAL DATA.
Year Ended December 31, 1994
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Income Statement Data: (In thousands, except per share data)
Net revenues $401,333 $375,727 $355,236 $331,560 $334,247
Income from 51,828 45,419 46,508 35,501 27,765
operations
Income before 15,699 13,464 15,857 6,014 1,081
extraordinary
items and
cumulative
effect of change
in method of
accounting for
income taxes
(a)(b)(c)(d)(e)
Net income 15,699 7,341 12,449 6,194 5,051
Income before 1.02 .89 1.37 .53 .10
extraordinary
items and
cumulative
effect of change
in method of
accounting for
income taxes per
share(a)(b)(c)
(d)(e)
Net income per 1.02 .49 1.08 .55 .45
share
Cash dividends .10 .10 .10 .10 .10
declared per
common share
December 31,
------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
Balance Sheet (In thousands)
Data:
Total assets $623,691 $470,700 $384,900 $320,032 $331,950
(a)(f)
Long-term debt 392,035 280,617 209,116 213,004 231,591
(including
current
maturities)(a)
(b)(c)(f)
Shareholders' 157,461 135,158 126,018 64,133 58,848
equity(f)
Shares 15,369 14,980 14,804 11,350 11,354
outstanding
at year-end (f)
____________________
(a) In the years ended December 31, 1991 and 1990, the Company
recognized an extraordinary gain of $.2 million and $4.0
million, respectively, net of tax, as a result of the
purchase of $12.1 million and
55
$18.5 million, respectively, of its 11 3/8% Mortgage-Backed
Bonds Due 2002 ("Mortgage-Backed Bonds").
(b) In the year ended December 31, 1992, the Company recognized
an extraordinary loss of $3.4 million net of tax, as a
result of the planned redemption of all of its outstanding
13% Subordinated Sinking Fund Debentures ("Debentures").
See Note 8 to the Consolidated Financial Statements.
(c) The Company adopted FAS 109 in 1993 and reported the
cumulative effect of the change in method of accounting for
income taxes as of January 1, 1993 in the 1993 Consolidated
Statement of Income.
(d) In the year ended December 31, 1993, the Company recognized
an extraordinary loss of $6.7 million, net of tax, as a
result of the redemption of all of its outstanding Mortgage-
Backed Bonds. See Note 8 to the Consolidated Financial
Statements.
(e) In 1993, the Company acquired a 30% equity interest in
Showboat Star Partnership which was engaged in the
development of a riverboat casino on Lake Pontchartrain in
New Orleans, Louisiana. Operation of the riverboat casino
commenced on November 8, 1993. The Company's share of the
partnership's loss from the commencement of operations
through December 31, 1993, is included in income from
operations for the year ended December 31, 1993, including
the write-off of preopening costs, of $1.3 million. The
Company's share of the net income of the partnership was $12.8
million and is included in income for operations for the
year ended December 31, 1994.
(f) In the year ended December 31, 1992, the Company sold 3.45
million shares of its common stock in a public offering.
Net proceeds of the offering were $50.4 million. Proceeds
of the offering were used in January 1993 to redeem all of
the Company's Debentures and to prepay the outstanding
balance of its construction and term loan. See Note 12 to
the Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
GENERAL
Showboat, Inc. and its subsidiaries, collectively the
Company or SBO, own and operate casino hotels in Las Vegas,
Nevada ("Las Vegas Showboat") and Atlantic City, New Jersey
("Atlantic City Showboat") and own an equity interest in and
manage a riverboat casino on Lake Pontchartrain in New Orleans,
Louisiana (Showboat Star Casino).
The consolidated financial statements include all domestic
and foreign subsidiaries which are more than 50% owned and
controlled. Investments in unconsolidated affiliates which are
at least 20% owned are carried at cost plus equity in
undistributed earnings or loss since acquisition.
In 1993, Showboat Louisiana, Inc. ("SLI") purchased a 30%
equity interest in Showboat Star Partnership ("SSP") which owns
the Showboat Star Casino for $18.6 million. In addition, Lake
Pontchartrain Showboat, Inc. ("LPSI") manages the Showboat Star
Casino for a fee equal
56
to 5% of gaming revenues net of gaming taxes. Operation of the
Showboat Star Casino commenced on November 8, 1993. On March 1,
1994, SLI purchased an additional 20% equity interest in SSP for
$9.0 million bringing its total interest to 50%. In March 1995,
SLI and LPSI purchased the remaining 50% equity interest from its
partners for $25.0 million, subject to adjustment, and
subsequently sold all of the equity of the partnership to a
competitor for $52.0 million, subject to adjustment. The
Company's equity in the income or loss of SSP is included in the
Consolidated Statement of Income as equity in income or loss of
unconsolidated affiliate. Intercompany management fees have been
eliminated in consolidation.
Showboat Australia Pty Limited ("SA") was formed in 1994
and, along with Leighton Properties Ltd. formed Sydney Harbour
Casino Pty Ltd. ("SHC") to apply for the exclusive full-service
casino license in Sydney, Australia. The casino license was
awarded to SHC in December 1994. SA invested approximately
$100.0 million in SHC for a 26.3% equity interest. SA also owns
85% of the company engaged to manage the casino for a management
fee. SHC anticipates that it will commence gaming operations in
a temporary facility in September 1995 and that the operations at
the permanent facility will commence in early 1998. As a result
of the anticipated write-off of certain preopening and
development costs subsequent to the opening of the temporary
casino, the Company anticipates minimal contribution to its
earnings in 1995 from the commencement of operations at the
Sydney Harbour Casino.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994 (1994)
COMPARED TO YEAR ENDED DECEMBER 31, 1993 (1993)
REVENUES
Net revenues for the Company increased to $401.3 million in
1994 from $375.7 million in 1993, an increase of $25.6 million or
6.8%. Casino revenues increased $21.9 million or 6.7% to $351.4
million in 1994 from $329.5 million in 1993. Nongaming revenues,
which consist principally of room, food, beverage, management fee
and bowling revenues, were $83.2 million in 1994 compared to
$78.3 million in 1993, an increase of $4.9 million or 6.3%.
The Atlantic City Showboat generated $320.2 million of net
revenues in 1994 compared to $294.2 million in 1993, an increase
of $26.0 million or 8.8%. Casino revenues were $292.4 million in
1994 compared to $268.8 million in 1993, an increase of $23.6
million or 8.8%. The increase in casino revenues was primarily
due to increases in both slot machine and table game revenues.
Slot machine revenues at the Atlantic City Showboat increased
$18.3 million or 9.3% in 1994. This compares favorably to 3.7%
growth in slot machine revenues in the Atlantic City market
during the same period. The improved slot revenue growth
experienced by the Atlantic
57
City Showboat is primarily attributed to the addition of 609 slot
machines throughout 1994 for a total of 3,027 slot machines by
December 31 1994. Table game revenues increased $2.9 million or
4.2% in 1994. Casino revenues were also favorably impacted by
the mid-1994 addition of keno and the mid-1993 addition of poker
and horse race simulcasting. Nongaming revenues increased $3.3
million or 6.2% in 1994 to $56.0 million from $52.7 million in
1993. This increase was primarily due to increased complimentary
room revenue of $1.2 million and non-complimentary food revenues
of $2.2 million.
At the Las Vegas Showboat, net revenues decreased to $79.2
million in 1994 from $81.1 million in 1993, a decrease of $1.9
million or 2.3%. The decrease in net revenues primarily resulted
from an approximate 37% increase in slot machine capacity on the
Boulder Strip in the third quarter of 1994. The Company
anticipates that revenues at the Las Vegas Showboat will be
negatively impacted until the excess casino capacity on the
Boulder Strip is absorbed by the Las Vegas market. Casino
revenues decreased to $59.0 million in 1994 from $60.7 million in
1993, a decrease of $1.7 million or 2.8%. Nongaming revenues
increased $.2 million in 1994 primarily as a result of increased
hotel occupancy due to increased effectiveness of certain hotel
marketing programs.
LPSI generated $3.5 million of management fee revenues,
before an intercompany elimination of $1.6 million, in 1994
compared to $.4 million in 1993. Showboat Star Casino, which
opened November 8, 1993 generated net revenues of $98.0 million
in 1994 consisting primarily of casino revenues of $97.2 million.
In 1993, Showboat Star Casino generated net revenues of $12.1
million and casino revenues of $10.9 million.
INCOME FROM OPERATIONS
The Company's income from operations increased to $51.8
million in 1994 from $45.4 million in 1993, an increase of $6.4
million or 14.1%. Improvements in income from operations at the
Atlantic City Showboat and the Showboat Star Casino were offset
by a decline in income from operations at the Las Vegas Showboat
and by an increase in corporate and development expenses.
Income from operations at the Atlantic City Showboat, before
intercompany management fees, was $50.7 million in 1994 compared
to $44.0 million in 1993, an increase of $6.7 million or 15.3%.
The increase in income from operations was primarily due to
increased revenues that were offset by a $19.3 million or 7.7%
increase in operating expenses before intercompany management
fees to $269.5 million in 1994 from $250.2 million in 1993. The
increase in operating expenses was primarily due to the
increased capacity and volume of business as a result of the
expansion of the Atlantic City facility. General and
administrative expenses were also impacted by a $1.5 million or
22.0% increase in real estate taxes and an increase of $1.0
million in a parking assessment absorbed by the Atlantic City
Showboat. Partially offsetting these increases was the decrease
of
58
$1.0 million in insurance costs borne by the parent company.
Income from operations at the Las Vegas Showboat, before
intercompany management fees, declined $3.8 million or 46.4% in
1994 to $4.4 million in 1994 from $8.2 million in 1993. The
decrease was primarily due to increased competition on the
Boulder Strip that resulted in a decrease in net revenue. In
addition operating expenses increased to $74.8 million in 1994
from $72.9 million in 1993, an increase of $1.9 million or 2.7%.
Increases in expenses were due to increased payroll and payroll
related costs and increased advertising costs.
Showboat Star Partnership realized net income of $24.8
million on net revenues of $98.4 million in 1994. Operations at
the Showboat Star Casino contributed $13.7 million in 1994 to the
Company's income from operations. In 1993, Showboat Star
Partnership recognized a loss of $2.8 million primarily as a
result of the write-off of preopening costs.
Corporate and development expenses totaled $17.0 million in
1994 compared to $5.5 million in 1993. The Company established a
separate corporate and development office in late 1993. Prior to
this time, a significant portion of corporate expenses were
absorbed by operating subsidiaries. In addition, the Company has
expanded the scope of its activities related to the pursuit of
expansion opportunities in jurisdictions outside Nevada and New
Jersey.
OTHER (INCOME) EXPENSE
In 1994, other (income) expense consisted of $29.5 million
of interest expense, net of $3.3 million of capitalized interest,
and $4.9 million of interest income. In 1993, other (income)
expense consisted of $24.7 million of interest expense, net of
capitalized interest, and $3.2 million of interest income. The
increase in interest expense is due to an increase in long-term
debt during the period. In connection with its expansion project
at the Atlantic City Showboat and the Company's 1994 investment
in Sydney Harbour Casino, the Company capitalized $2.7 million
and $.6 million, respectively, in 1994.
INCOME TAXES
In 1994, the Company incurred income taxes of $11.5 million,
or an effective tax rate of 42.4%, compared to $10.5 million,
before the income tax benefit of an extraordinary loss, or an
effective tax rate of 43.8% in 1993. Differences between the
Company's effective tax rate and the statutory federal tax rates
are due to permanent differences between financial and tax
reporting and state income taxes.
59
NET INCOME
In 1994, the Company realized net income of $15.7 million or
$1.02 per share. In 1993 income before an extraordinary loss and
a cumulative effect adjustment was $13.4 million or $.89 per
share. In 1993, the Company recognized an extraordinary loss net
of tax of $6.7 million, or $.44 per share, as a result of the
redemption of all of its 11 3/8% Mortgage-Backed Bonds Due 2002.
Net income for 1993 after recognition of the extraordinary loss
and the cumulative effect adjustment was $7.3 million or $.49 per
share.
YEAR ENDED DECEMBER 31, 1993 (1993)
COMPARED TO YEAR ENDED DECEMBER 31, 1992 (1992)
REVENUES
Net revenues for the Company increased to $375.7 million in
1993 from $355.2 million in 1992, an increase of $20.5 million or
5.8%. Casino revenues increased $16.3 million or 5.2% to $329.5
million in 1993 from $313.2 million in 1992. Nongaming revenues,
which consist principally of food, beverage, room, and bowling
revenue, were $78.3 million in 1993 compared to $71.2 million in
1992, an increase of $7.1 million or 10.0%.
The Atlantic City Showboat generated $294.2 million of net
revenues in 1993 compared to $277.3 million in 1992, an increase
of $16.9 million or 6.1%. Casino revenues were $268.8 million in
1993 compared to $254.7 million in 1992, an increase of $14.1
million or 5.5%. The increase in casino revenues was due
primarily to a $14.7 million or 8.0% increase in slot machine
revenue during the year. This compares to a 4.8% increase in
slot machine revenue in the Atlantic City market during the same
period. The improved slot revenue growth experienced by the
Atlantic City Showboat is primarily attributed to a 340 machine
increase in slot units throughout 1993 to 2,411 slot machines.
The increase in slot machine revenue was partially offset by the
$4.0 million or 5.5% decrease in table game revenues that
primarily resulted from the 3.2% decline in table game revenues
in the Atlantic City market during 1993 compared to 1992. Casino
revenues were favorably impacted by the mid-1993 addition of
poker and horse race simulcasting. These games contributed $1.1
million and $2.2 million, respectively, to casino revenues during
1993. Nongaming revenues increased $5.6 million or 12.0% in 1993
to $52.7 million from $47.1 million in 1992. This increase was
attributed to promotional programs offering casino customers
rooms, food and beverage at a reduced price as well as increases
in complimentary services.
At the Las Vegas Showboat, net revenues increased to $81.1
million in 1993 from $77.9 million in 1992, an increase of $3.2
million or 4.1%. Casino revenues increased $2.2 million or 3.8%
in 1993 to $60.7 million from $58.5 million in 1992. Slot
machine revenues showed the greatest casino revenue improvement
with an increase
60
of $1.6 million or 3.4%. Slot machine revenues accounted for
84.2% of casino revenues in 1993 compared to 84.5% of casino
revenues in 1992. Increases in gaming revenues were primarily
the result of higher patron volume due to promotions and
increased advertising. Nongaming revenues increased $1.1 million
or 4.3% in 1993 to $25.2 million from $24.1 million in 1992.
These increases were principally in rooms and food and beverage
revenues resulting from targeted marketing programs for rooms and
promotional programs offering food at a reduced price.
LPSI generated $.4 million in management fee revenues in
1993. LPSI receives a management fee of 5.0% of Showboat Star
Casino's casino revenues after gaming taxes of 18.5% and boarding
fees totaling $5.00 per passenger boarding the vessel. Showboat
Star Casino opened November 8, 1993 and generated net revenues of
$12.0 million in 1993 consisting primarily of casino revenues of
$10.9 million.
INCOME FROM OPERATIONS
The Company's income from operations decreased to $45.4
million in 1993 from $46.5 million in 1992, a decrease of $1.1
million or 2.3%.
The Company incurred approximately $5.5 million in corporate
and development expenses in 1993 compared to $2.1 million in
1992. During 1993, the Company increased its activities related
to the pursuit of expansion opportunities in jurisdictions other
than Nevada and New Jersey.
Income from operations at the Atlantic City Showboat, before
intercompany management fees, was $44.0 million in 1993 compared
to $39.5 million in 1992, an increase of $4.5 million or 11.1%.
The increase in income from operations was primarily due to
increased revenues that were offset by a $12.4 million or 5.3%
increase in operating expenses, before intercompany management
fees, to $250.2 million in 1993 compared to $237.8 million in
1992. The increase in operating expenses was primarily due to
the increased capacity and volume of business as a result of the
expansion of the Atlantic city facility. General and
administrative expenses also increased as a result of an $.8
million or 13.2% increase in real estate taxes and an $.8 million
parking assessment absorbed by the Atlantic City Showboat.
Income from operations at the Las Vegas Showboat declined
$.9 million or 8.9% in 1993 to $8.2 million from $9.1 million in
1992. The decrease was primarily due to a $4.1 million or 5.8%
increase in operating expenses resulting primarily from increases
in payroll and payroll related expenses, increased advertising
costs and increased repairs and maintenance expenses.
Showboat Star Partnership recognized a net loss in 1993 of
$2.8 million primarily as a result of the write-off in November
1993 of $4.2 million in preopening
61
expenses. Before the write-off of preopening costs, SSP
recognized net income of $1.4 million. Showboat's share of the
results of the Showboat Star Casino combined with management fees
received was a loss of $1.3 million in 1993.
OTHER (INCOME) EXPENSE
In 1993, other (income) expense consisted of $24.7 million
of interest expense, net of $1.1 million of capitalized interest,
and $3.2 million of interest income. In 1992, other (income)
expense consisted of $25.3 million of interest expense and $1.4
million of interest income. Two offsetting factors impacted 1993
interest expense. In January 1993, the Company repurchased all
of its outstanding 13% Sinking Fund Debentures and repaid its
construction and term loan, and in June 1993, the Company
repurchased all of its 11 3/8% Mortgage-Backed Bonds. This
resulted in a $14.4 million decrease in interest expense. This
decrease was offset by the issuance in May 1993 of $275.0 million
of 9 1/4% First Mortgage Bonds resulting in a $15.8 million
increase in interest expense. In connection with its expansion
project at the Atlantic City Showboat, the Company capitalized
$1.1 million of interest expense in 1993.
INCOME TAXES
In 1993, the Company incurred income taxes of $10.5 million,
before the income tax benefit on an extraordinary loss, or an
effective tax rate of 43.8% in 1993 compared to $6.8 million, or
an effective tax rate of 29.9% in 1992. Differences between the
Company's effective tax rate and the statutory federal tax rates
are due to permanent differences between financial and tax
reporting. In 1993, these differences consisted principally of
$.9 million of state income taxes resulting from the utilization,
for financial reporting purposes, of New Jersey net operating
loss carryforwards, a $.6 million restricted interest assessment,
net of tax, resulting from an Internal Revenue Service audit of
prior years and $.4 million resulting from an increase in federal
tax rates.
Effective January 1, 1993, the Company adopted the
provisions of Financial Accounting Standards No. 109 ("FAS 109"),
"Accounting for Income Taxes" without restating prior years'
financial statements. The adoption of FAS 109 resulted in a
reduction of net deferred tax liabilities of $.6 million, or $.04
per share, and this amount was reported separately as a
cumulative effect of a change in accounting method in the 1993
Consolidated Statement of Income.
NET INCOME
In 1993, the Company realized net income before an
extraordinary loss on the extinguishment of debt and cumulative
effect of the change in the method of accounting for income taxes
of $23.9 million or $.89 per share. On June 18, 1993, the
Company redeemed all of its
62
11 3/8% Mortgage-Backed Bonds at 107.5% of the principal amount
plus accrued and unpaid interest up to and including the
redemption date. The Company recognized an extraordinary loss,
before an income tax benefit of $11.2 million as a result of the
write-off of unamortized debt issue costs of $2.7 million and
payment of a 5.7% redemption premium of $8.5 million. The after
tax loss was $6.7 million or $.44 per share. The Company also
recognized a cumulative effect adjustment for the change in the
method of accounting for income taxes of $.6 million or $.04 per
share. Net income for 1993 was $7.3 million or $.49 per share.
In 1992, the Company realized income before an extraordinary
loss on the extinguishment of debt of $15.9 million or $1.37 per
share. As a result of the repurchase of the Company's
outstanding 13% Sinking Fund Debentures, the Company recognized
an extraordinary loss, net of tax, of $3.4 million or $.29 per
share. Net income for 1992 was $12.4 million or $1.08 per share.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1994, the Company held cash and cash
equivalents of $90.4 million compared to $122.8 million at
December 31, 1993. The Company's significant sources of cash and
cash investments were primarily from cash flows from operations
of $55.4 million and the issuance in August 1994 of $120.0
million of 13% Senior Subordinated Notes due 2009 ("Notes"). The
Company's significant uses of cash in 1994 related to capital
improvements of $72.5 million and investments in unconsolidated
affiliates of approximately $111.0 million.
In 1994, the Company expended $72.5 million on capital
improvement projects at its Atlantic City and Las Vegas
facilities. Normal capital expenditures at these facilities in
1994 were $24.5 million. In addition, the Company expended
approximately $48.0 million in 1994 on its expansion and
renovation project at its Atlantic City facility to add
additional casino space and hotel rooms. In connection with the
construction of hotel rooms at the Atlantic City facility, the
Company has applied for and received funding credits of
approximately $8.7 million from the Casino Reinvestment
Development Authority (CRDA). ACSI's CRDA funding credit could
increase to a maximum of $9.4 million if other applicants for
CRDA funding credits discontinue projects for which they have
applied. Likewise, ACSI's CRDA funding credit could decrease in
the event that other casino applicants in Atlantic City increase
their allowable expansion costs. To date ACSI has received $3.2
million of its eligible CRDA funding credits.
In 1995, the Company will commence an $18.5 million
renovation of its Las Vegas facility. The renovation will
include the replacement of existing HVAC systems and the
replacement of the existing wood roof with a steel structure.
This will allow an increase in the ceiling height up to 23 feet
and will eliminate the majority of
63
the approximately 47 support columns in the existing casino. The
construction project will require the closure of approximately
30,000 square feet, or 40%, of casino space for a period of up to
six (6) months commencing in June 1995. The number of slot
machines and table games are expected to be reduced to one half
of their present levels during the construction period. As a
result, the Company anticipates that revenues and results of
operations at the Las Vegas facility will be adversely impacted
by business disruption during the construction period.
At December 31, 1994, ACSI had available an unsecured line
of credit for general working capital purposes totaling $15.0
million. Interest is payable monthly at the bank's prime rate
plus .5%. The bank's prime rate was 8.5% at December 31, 1994.
This line of credit expires in August 1995. Borrowing on the
line of credit may not be used for the payment of management fees
to SBO or to fund ventures in other jurisdictions. At December
31, 1994, ACSI had all of the funds under this line of credit
available for use.
On May 18, 1993, the Company issued $275.0 million of 9 1/4%
First Mortgage Bonds due 2008 ("Bonds"). On July 1, 1994, the
Company obtained consents to amend ("Amendments") its Indenture
for the Bonds ("Bond Indenture"). The Company received consents
from holders of $359.8 million or 94% of the Bonds approving the
Amendments. In consideration, the consenting Bondholders
received 2.0% of the face value of the Bonds. On July 28, 1994,
the Company paid $5.2 million to the consenting Bondholders.
This amount is shown as a discount on the Bonds and is being
amortized as an adjustment to yield over the remaining life of
the Bonds using the effective interest method.
The Bond Indenture, as amended, places significant
restrictions on SBO and its subsidiaries including restrictions
on making loans and advances by SBO to subsidiaries that are Non-
Recourse subsidiaries in which SBO owns less than 50% of the
equity. All capitalized terms not otherwise defined in this
paragraph have the meanings assigned to them in the Bond
Indenture, as amended. The Bond Indenture, as amended, also
places significant restrictions on the incurrence of additional
indebtedness by SBO and its subsidiaries, the creation of
additional Liens on the Collateral securing the Bonds,
transactions with Affiliates and the investment by SBO and its
subsidiaries in certain investments. In addition, the terms of
the Bond Indenture, as amended, prohibit SBO and its subsidiaries
from making a Restricted Payment unless, at the time of such
Restricted Payment: (i) no Default or Event of Default has
occurred or would occur as a consequence of such Restricted
Payment; (ii) SBO, at the time of such Restricted Payment other
than an investment in a subsidiary in a gaming related business
or a quarterly dividend, and after giving pro forma effect
thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, would have been
permitted to incur at least $1.00 of additional Indebtedness,
and; (iii) such Restricted Payment, together with the aggregate
of all other Restricted Payments by SBO and its
64
subsidiaries less than the sum of (x) 50% of the Consolidated Net
Income of SBO for the period (taken as one accounting period)
from April 1, 1993 to the end of SBO's most recently ended fiscal
quarter for which internal financial statements are available
plus, (y) 100% of the aggregate net cash proceeds received by SBO
from the issuance or sale of Equity Interests of SBO since the
Issue Date, plus (z) Excess Non-Recourse Subsidiary Cash Proceeds
received after the Issue Date.
The term Restricted Payment does not include, among other
things, the payment of any dividend if, at the time of
declaration of such dividend, the dividend would have complied
with the provisions of the Bond Indenture, as amended; the
redemption, repurchase, retirement, or other acquisition of any
Equity Interest of SBO out of proceeds of the substantially
concurrent sale of other Equity Interests of SBO; Investments by
SBO in an amount not to exceed $75.0 million in the aggregate in
any Non-Recourse Subsidiary engaged in a Gaming Related Business;
Investments by SBO in any Non-Recourse Subsidiary engaged in a
Gaming Related Business in an amount not to exceed in the
aggregate 100% of all cash received by SBO from any Non-Recourse
Subsidiary up to $75.0 million in the aggregate and thereafter,
50% of all cash received by SBO from any Non-Recourse Subsidiary
other than cash required to be repaid or returned to the Non-
Recourse Subsidiary provided that the aggregate amount of
Investments pursuant thereto does not exceed $125.0 million in
aggregate; Investments in Controlled Entities; and the purchase,
redemption, defeasance of any pari passu indebtedness with a
substantially concurrent purchase, redemption, defeasance, or
retirement of the Bonds (on a pro rata basis). Notwithstanding
the foregoing, the Company is only permitted to make investments
in a Controlled Entity only if from July 18, 1994 until December
31, 1996, the Company's Fixed Charge Coverage Ratio for the
Company's most recently ended 12 months is greater than 1.5 to 1
and for the period commencing after December 31, 1996 the
Company's Fixed Charge Coverage Ratio is greater than 1.75 to 1.
For all other Restricted Payments, other than a Regular Quarterly
Dividend or a Restricted Investment in a Subsidiary engaged in a
Gaming Related Business, the Company's most recently ended four
full fiscal quarters, after the giving effect to such Restricted
Payment, must be greater than 2.25 to 1. As of December 31,
1994, the Company's Fixed Charge Coverage Ratio was 2.13 to 1.
Additionally, the Bond Indenture, as amended, permits the Company
to issue up to $150.0 million of debt (of which $120.0 million
has been issued) without compliance with the debt incurrence
tests stated therein.
On August 10, 1994, the Company issued $120.0 million of 13%
Senior Subordinated Notes due 2009 ("Notes"). The proceeds from
the sale of the Notes ("Note Offering") were $116.5 million, net
of underwriting discounts and commissions. Proceeds from the
Note Offering were reserved for or used to (i) invest $100.0
million for an approximately 26.3% equity interest in SHC, and
(ii) renovate the Las Vegas Showboat in order to upgrade the
facility and replace the existing power plant facility at an
approximate cost of $18.5 million.
65
The Notes are unconditionally guaranteed by OSI, ACSI and SOC.
Interest on the Notes is payable semi-annually on February 1 and
August 1 of each year. The Notes will be redeemable, in whole or
in part, at redemption prices specified in the Indenture for the
Notes ("Note Indenture"). The Notes are general obligations of
the Company, subordinated in right of payment to all Senior Debt
(as defined in the Note Indenture) of the Company. The Note
Indenture permits the issuance of an additional $30.0 million of
Notes at the discretion of the Company.
The Note Indenture places significant restrictions on the
Company, many of which are substantially similar to the
restrictions placed on the Company by the Bond Indenture, as
amended, including covenants restricting or limiting the ability
of the Company and its Restricted Subsidiaries (as defined in the
Note Indenture) to, among other things, (i) pay dividends or make
other Restricted Payments, (ii) incur additional Indebtedness and
issue Preferred Stock, (iii) create Liens, (iv) create dividend
and other payment restrictions affecting Restricted Subsidiaries,
(v) enter into mergers, consolidations, or make sales of all or
substantially all assets, (vi) enter into transactions with
Affiliates and (vii) engage in other lines of business.
In February 1995, SSP (i) assigned its leases with the
Orleans Levee Board for leased land, docking facilities and
parking areas, (ii) sold the terminal building and other
improvements it constructed on the leased land, and (iii) sold
certain personal property used at the terminal building, for $6.0
million to Belle of Orleans, L.L.C. Contemporaneously with the
sale of terminal facility and the assignment of the leases, SSP
entered into a sublease of the terminal and the leased land with
Belle of Orleans, L.L.C. which sublease terminates on April 30,
1995. On March 9, 1995, SSP elected to permanently cease
operations. In March 1995, SLI and LPSI acquired the balance of
the partnership interests from its partners for $25.0 million,
subject to certain adjustments. SLI and LPSI intend to sell all
of their interest in SSP to subsidiaries of Players
International, Inc. for $52.0 million, subject to certain
adjustments, on March 31, 1995. No significant gain or loss is
anticipated on this series of transactions related to SSP.
The Company is actively pursuing potential opportunities in
certain jurisdictions where gaming has recently been legalized,
as well as jurisdictions where gaming is not yet legalized.
There can be no assurance that (i) legislation to legalize gaming
will be enacted in any additional jurisdictions, (ii) properties
in which the Company has invested will be compatible with any
gaming legislation so enacted, (iii) legalized gaming will
continue to be authorized in any jurisdiction that the Company
currently operates or has pending applications to operate a
gaming establishment, or (iv) the Company will be able to obtain
the required licenses in any jurisdiction. Further, no assurance
can be given that any of the announced projects, or any project
under development will be completed, or result in any significant
contribution to the Company's cash flow
66
or earnings. Casino gaming operations are highly regulated and
new casino development is subject to a number of risks.
Expansion developments in 1994 included:
1. On December 14, 1994, the New South Wales Casino Control
Authority ("NSWCCA") selected SHC, a subsidiary of Sydney Harbour
Casino Holdings Limited ("SHCL"), as the single full-service
casino licensee in New South Wales, Australia. The casino
license has a term, subject to earlier termination, of 99 years,
and provides SHC the exclusive right to operate a casino in New
South Wales for twelve years commencing upon the opening of the
temporary casino. SA, a wholly owned subsidiary of the Company,
purchased 135,000,000 shares or 26.3% of the outstanding equity
in SHCL for approximately $100.0 million in December 1994. Slot
machines are currently permitted in approximately 1,500 non-
profit private clubs in New South Wales, most of which contain
less than 25 machines.
SHCL will begin operations in a temporary casino expected to
open in September 1995. The temporary casino will have
approximately 500 slot machines, 150 table games and, subject to
certain approvals, keno. The permanent casino is expected to be
open in early 1998. As a result of the anticipated write-off of
certain preopening and development costs subsequent to the
opening of the temporary casino, the Company anticipates minimal
contributions to its earnings in 1995 from the commencement of
operations at the Sydney Harbour Casino.
2. In February 1995, the Company along with Randolph Riverboat
Company, Inc. formed Randolph Riverboat Company, L.L.C. ("RLLC").
A subsidiary of the Company will own 35% of RLLC. The Company
has contributed $13.0 million to an escrow account for the
benefit of RLLC. Additional capital contributions, if needed,
shall be made by the partners of RLLC pro rata with their
respective interests. However, it is intended that the majority
of financing for the Randolph project, approximately $80.0
million, will be obtained by RLLC through high yield debt and
capital leases. No assurance can be given that RLLC will be
successful in obtaining funds to finance the Randolph project or
that RLLC will obtain a casino license.
3. On February 2, 1994, the Indiana Partnership, consisting of
Showboat Indiana Investment Limited Partnership, a wholly owned
limited partnership ("SII"), and Waterfront Entertainment and
Development, Inc., an unrelated Indiana corporation
("Waterfront"), filed Part I of its gaming application with the
Indiana Riverboat Gaming Commission to operate a riverboat casino
on Lake Michigan in East Chicago, Indiana. The Indiana
Partnership is the sole applicant for the only license allocated
to East Chicago by Indiana statute. The berth for the riverboat
casino is located approximately three miles from the city limits
of Chicago, Illinois. Showboat Marina Partnership is owned 55%
by SII and 45% by Waterfront. Subject to available financial
resources, the Company expects to invest approximately $28.0
million in the Indiana Partnership and will help the partnership
obtain in excess of $90.0 million in debt financing. Under the
current partnership agreement, the
67
Company will receive a 12% preferred return on its investment
prior to additional partnership distributions. The Indiana
Partnership application for a casino license will be considered
by the Indiana Gaming Commission in late 1995. Subject to
licensing, the Indiana Partnership shall commence gaming
operations in 1996 in a temporary vessel and facilities while a
larger permanent vessel and facilities are being constructed. No
assurance can be given that the Indiana Partnership will be
successful in obtaining the necessary funds to finance its gaming
project or that the Indiana Partnership will successfully obtain
a casino gaming license.
4. In January 1995, the Company and Rockingham Venture, Inc.,
the operator of Rockingham Park, a thoroughbred racetrack in New
Hampshire, entered into negotiations to finalize agreements to
develop and manage any additional gaming that may be authorized
at Rockingham Park. In connection therewith, the Company loaned
Rockingham Venture, Inc. $8.85 million, which loan is secured by
a second mortgage on Rockingham Park, in December 1994. At this
time casino gaming is not permitted in the State of New
Hampshire. No assurance can be given that casino gaming
legislation will be enacted in the State of New Hampshire.
The Company believes that it has sufficient capital
resources to cover the cash requirements of its existing
operations. The ability of the Company to satisfy its cash
requirements, however, will be dependent upon the future
performance of its casino hotels that will continue to be
influenced by prevailing economic conditions and financial,
business and other factors, certain of which are beyond the
control of the Company. As the Company realizes expansion
opportunities, the Company shall make significant capital
investments in such opportunities and additional financing will
be required. The Company anticipates that additional funds shall
be obtained through loans or a public offering of equity or debt
securities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Independent Auditors' Report;
Consolidated Balance Sheets December 31, 1994
and 1993;
Consolidated Statements of Income for the Years
Ended December 31, 1994, 1993 and 1992;
Consolidated Statements of Shareholders' Equity
for the Years Ended December 31, 1994, 1993 and 1992;
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1994, 1993 and 1992; and
Notes to Consolidated Financial Statements
Schedule - Valuation and Qualifying
Accounts
68
Independent Auditors' Report
The Shareholders and Board of Directors
Showboat, Inc.:
We have audited the consolidated financial statements of Showboat, Inc.
and subsidiaries as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also have
audited the financial statement schedules as listed in the accompanying
index. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Showboat, Inc. and subsidiaries as of December 31, 1994 and 1993, and
the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also in our opinion, the
related financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
As discussed in Notes 1 and 9 to the consolidated financial statements,
the Company changed its method of accounting for income taxes in 1993
to adopt the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes".
KPMG PEAT MARWICK LLP
Las Vegas, Nevada
March 10, 1995
-69-
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
ASSETS 1994 1993
--------- ---------
(In thousands)
Current assets:
Cash and cash equivalents $90,429 $122,787
Receivables, net 8,890 5,913
Inventories 2,591 2,359
Prepaid expenses 4,736 4,044
Investment in unconsolidated
affiliate held for sale 30,346 -
Current deferred income taxes 6,529 4,865
--------- ---------
Total current assets 143,521 139,968
--------- ---------
Property and equipment:
Land 9,545 9,425
Land improvements 10,142 541
Buildings 316,884 261,009
Furniture and equipment 164,388 145,178
Construction in progress 5,240 27,194
--------- ---------
506,199 443,347
Less accumulated depreciation
and amortization 168,531 145,527
--------- ---------
337,668 297,820
--------- ---------
Other assets, at cost:
Investments in unconsolidated affiliates 108,853 17,750
Deposits and other assets 22,537 7,892
Debt issuance costs, net of
accumulated amortization of $955,000
at December 31, 1994 and $323,000 at
December 31, 1993 11,112 7,270
--------- ---------
142,502 32,912
--------- ---------
$623,691 $470,700
========= =========
-70- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
(continued)
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993
--------- ---------
(In thousands)
Current liabilities:
Current maturities of long-term debt $19 $3,574
Accounts payable 11,059 14,173
Income taxes payable 4,562 1,752
Dividends payable 384 375
Accrued liabilities 34,286 23,664
--------- ---------
Total current liabilities 50,310 43,538
--------- ---------
Long-term debt, excluding current maturities 392,016 277,043
--------- ---------
Other liabilities 5,144 -
--------- ---------
Deferred income taxes 18,760 14,961
--------- ---------
Commitments and contingencies and
subsequent events (Note 7,15 and 16)
Shareholders' equity:
Common stock, $1 par value; 50,000,000
shares authorized; issued 15,794,578
shares at December 31, 1994 and 1993 15,795 15,795
Additional paid-in capital 76,845 71,162
Retained earnings 68,809 54,628
--------- ---------
161,449 141,585
Cumulative foreign currency translation adjustment 3,490 -
Cost of shares in treasury, 425,823 shares and
814,483 shares at December 31, 1994 and
1993, respectively (3,364) (6,370)
Unearned compensation for restricted stock (4,114) (57)
--------- ---------
Total shareholders' equity 157,461 135,158
--------- ---------
$623,691 $470,700
========= =========
See accompanying notes to consolidated financial statements.
-71-
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1994, 1993 and 1992
(In thousands except per share data)
1994 1993 1992
---------- --------- ---------
Revenues:
Casino $351,436 $329,522 $313,247
Food and beverage 50,624 48,669 44,511
Rooms 20,587 19,355 17,280
Sports and special events 4,168 4,251 4,443
Management fees 1,861 279 -
Other 5,938 5,703 4,932
---------- --------- ---------
434,614 407,779 384,413
Less complimentaries 33,281 32,052 29,177
---------- --------- ---------
Net revenues 401,333 375,727 355,236
---------- --------- ---------
Operating costs and expenses:
Casino 137,944 129,898 125,773
Food and beverage 58,180 55,608 51,173
Rooms 13,730 13,083 12,169
Sports and special events 3,321 3,198 3,141
General and administrative 109,058 92,739 84,058
Selling, advertising and promotion 11,713 11,629 10,402
Depreciation and amortization 28,387 23,303 22,012
---------- --------- ---------
362,333 329,458 308,728
---------- --------- ---------
Income from operations from
consolidated subsidiaries 39,000 46,269 46,508
Equity in income (loss) of
unconsolidated affiliate 12,828 (850) -
---------- --------- ---------
Income from operations 51,828 45,419 46,508
---------- --------- ---------
-72- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1994, 1993 and 1992
(In thousands except per share data)
(continued)
1994 1993 1992
---------- --------- ---------
Income from operations $51,828 $45,419 $46,508
---------- --------- ---------
Other (income) expense:
Interest income (4,872) (3,215) (1,441)
Interest expense, net of
amounts capitalized 29,452 24,696 25,335
---------- --------- ---------
24,580 21,481 23,894
---------- --------- ---------
Income before income tax expense,
extraordinary items and cumulative
effect adjustment 27,248 23,938 22,614
Income tax expense 11,549 10,474 6,757
---------- --------- ---------
Income before extraordinary items and
cumulative effect adjustment 15,699 13,464 15,857
Extraordinary items, net of income tax - (6,679) (3,408)
Cumulative effect of change in method of
accounting for income taxes - 556 -
---------- --------- ---------
Net income $15,699 $7,341 $12,449
========== ========= =========
Income per common and equivalent share:
Income before extraordinary items and
cumulative effect adjustment $1.02 $0.89 $1.37
Extraordinary items, net of income tax - (0.44) (0.29)
Cumulative effect of change in method of
accounting for income taxes - 0.04 -
---------- --------- ---------
Net income $1.02 $0.49 $1.08
========== ========= =========
See accompanying notes to consolidated financial statements
-73-
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1994, 1993 and 1992
Cumulative
foreign
currency
Additional transla- Unearned
Common paid-in Retained tion Treasury compen-
stock capital earnings adjustment stock sation Total
--------- --------- ---------- --------- --------- --------- ---------
(In thousands)
Balance, December 31,
1991 $12,345 $22,443 $37,464 $ - ($7,784) ($335) $64,133
Net income - - 12,449 - - - 12,449
Cash dividends ($.10
per share) - - (1,135) - - - (1,135)
Issuance of 3,450,000
shares of common
stock 3,450 46,916 - - - - 50,366
Share transactions
under stock plans - 15 - - 23 11 49
Amortization of un-
earned compensation - - - - - 156 156
--------- --------- ---------- --------- --------- --------- ---------
Balance, December 31,
1992 15,795 69,374 48,778 - (7,761) (168) 126,018
Net income - - 7,341 - - - 7,341
Cash dividends ($.10
per share) - - (1,491) - - - (1,491)
Share transactions
under stock plans - 1,788 - - 1,391 - 3,179
Amortization of un-
earned compensation - - - - - 111 111
--------- --------- ---------- --------- --------- --------- ---------
Balance, December 31,
1993 15,795 71,162 54,628 - (6,370) (57) 135,158
Net income - - 15,699 - - - 15,699
Cash dividends ($.10
per share) - - (1,518) - - - (1,518)
Issuance of warrants - 1,953 - - - - 1,953
Share transactions
under stock plans - 3,730 - - 3,006 (6,021) 715
Amortization of un-
earned compensation - - - - - 1,964 1,964
Foreign currency trans-
lation adjustment - - - 3,490 - - 3,490
--------- --------- ---------- --------- --------- --------- ---------
Balance, December 31,
1994 $15,795 $76,845 $68,809 $3,490 ($3,364) ($4,114) $157,461
========= ========= ========== ========= ========= ========= =========
See accompanying notes to consolidated financial statements.
-74-
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1994, 1993 and 1992
1994 1993 1992
---------- --------- ---------
(In thousands)
Cash flows from operating activities:
Net income $15,699 $7,341 $12,449
Adjustments to reconcile net income to
net cash provided by operating
activities:
Allowance for doubtful accounts 950 1,849 1,644
Depreciation and amortization 28,387 23,303 22,012
Amortization of original issue
discount and debt issuance costs 820 744 1,011
Provision for deferred income taxes 256 813 238
Amortization of unearned
compensation 1,964 111 156
Provision for loss on Casino
Reinvestment Development
Authority obligation 1,018 1,122 1,068
Undistributed (earnings) loss of
unconsolidated affiliate (3,596) 850 -
Extraordinary loss on
extinguishment of debt - 11,166 5,164
(Gain) loss on disposition of
property and equipment (251) 517 264
Increase in receivables, net (2,580) (2,670) (1,537)
Increase in inventories and
prepaid expenses (924) (23) (265)
(Increase) decrease in deposits
and other assets (1,378) (554) 284
Pension costs 995 - -
Increase in accounts payable 396 85 395
Increase in income taxes payable 3,051 968 429
Increase (decrease) in
accrued liabilities 10,622 (1,503) 400
Other (56) - -
---------- --------- ---------
Net cash provided by operating
activities 55,373 44,119 43,712
---------- --------- ---------
-75- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1994, 1993 and 1992
(continued)
1994 1993 1992
---------- --------- ---------
(In thousands)
Cash flows from investing activities:
Acquisition of property and equipment ($72,471) ($59,686) ($21,050)
Proceeds from sale of property
and equipment 290 78 105
Investments in unconsolidated
affiliates (110,979) (18,600) -
Advances to unconsolidated affiliates (899) - -
(Increase) decrease in deposits and
other assets (8,850) 4,046 910
Deposit for Casino Reinvestment
Development Authority obligation,
net of refunds (599) (3,289) (3,161)
---------- --------- ---------
Net cash used in investing
activities (193,508) (77,451) (23,196)
---------- --------- ---------
Cash flows from financing activities:
Principal payments of long-term debt (3,575) (3,914) (8,879)
Proceeds from issuance of
long-term debt 120,000 275,000 -
Early extinguishment of debt - (208,085) -
Debt issuance costs (4,474) (7,593) -
Payment of dividends (1,509) (1,400) (1,141)
Distribution to bond holders (5,195) - -
Issuance of common stock 530 2,510 50,366
Other - - 49
---------- --------- ---------
Net cash provided by financing
activities 105,777 56,518 40,395
---------- --------- ---------
Net increase (decrease) in cash and
cash equivalents (32,358) 23,186 60,911
Cash and cash equivalents at
beginning of year 122,787 99,601 38,690
---------- --------- ---------
Cash and cash equivalents at
end of year $90,429 $122,787 $99,601
========== ========= =========
-76- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1994, 1993 and 1992
(continued)
1994 1993 1992
---------- --------- ---------
(In thousands)
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest, net of amount capitalized $22,522 $25,741 $24,562
Income taxes 8,242 3,650 4,400
Supplemental schedule of non-cash
investing and financing activities:
Capital lease obligations incurred
in connection with acquisition
of equipment - - 152
Increase (decrease) in property and
equipment acquisitions included in
construction contracts and
retentions payable and long-term
debt (3,639) 3,914 1,890
Share transactions under long-term
incentive plan 6,131 - 27
Transfer deposits for Casino
Reinvestment Development Authority
obligation to construction in
progress (558) 6,667 -
Stock purchase warrants granted 1,953 - -
Accumulated benefit obligations of
the Supplemental Executive
Retirement Plan 4,149 - -
Foreign currency translation
adjustment 3,490 - -
See accompanying notes to consolidated financial statements.
-77-
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Principles of Consolidation
Showboat, Inc. and subsidiaries, collectively the Company or
SBO, conduct casino gaming operations in Las Vegas, Nevada,
Atlantic City, New Jersey and New Orleans, Louisiana. In addition,
the Company operates support services including hotel, restaurant,
bar, bowling and convention facilities.
The consolidated financial statements include all domestic and
foreign subsidiaries which are more than 50% owned and controlled.
Investments in unconsolidated affiliates which are at least 20%
owned are carried at cost plus equity in undistributed earnings or
loss since acquisition. All material intercompany balances have
been eliminated in consolidation.
Casino Revenue and Complimentaries
In accordance with common industry practice, casino revenues
are the net of gaming wins less losses.
Complimentaries primarily consist of rooms, food and beverage
furnished gratuitously to customers. The sales values of such
services are included in the respective revenue classifications and
are then deducted as complimentaries. Complimentary rates are
periodically reviewed and adjusted by management.
Cash Equivalents
For purposes of the consolidated statements of cash flows, the
Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
Fair Value of Certain Financial Instruments
The carrying amount of cash equivalents, accounts receivable
and all current liabilities approximates fair value because of the
short maturity of these instruments. See Notes 5 and 6 for
additional fair value disclosures.
-78- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property and Equipment
Property and equipment are stated at cost. Depreciation,
including amortization of capitalized leases, is computed using the
straight-line method. The cost of maintenance and repairs is
charged to expense as incurred; significant renewals and
betterments are capitalized.
Estimated useful lives for property and equipment are 5 to 15
years for land improvements, 10 to 40 years for buildings and 2 to
10 years for furniture and equipment.
Interest Costs
Interest is capitalized in connection with the construction of
major facilities. Further, interest is capitalized on equity
funds, loans and advances made to unconsolidated companies
accounted for by the equity method of accounting during the period
the investee company is undergoing activities necessary to start
its planned principal operations and those activities include the
use of funds to acquire assets qualifying for interest
capitalization. The capitalized interest is recorded as part of
the asset to which it relates and is amortized over the asset's
estimated useful life. For the years ended December 31, 1994 and
1993, $3,378,000 and $1,085,000, respectively, of interest cost was
capitalized. No interest was capitalized in the year ended
December 31, 1992.
Preopening and Development Costs
The Company is currently investigating expansion opportunities
in new gaming jurisdictions. Costs associated with these
investigations are expensed as incurred until such time as a
particular opportunity is determined to be viable, generally when
the Company is selected as the operator of a new gaming facility or
a gaming license has been granted.
Costs incurred during the construction and preopening phase are
capitalized. Types of costs capitalized include professional fees,
salaries and wages, temporary office expenses, marketing expenses
and training costs. When the new operation opens for business,
preopening costs will be amortized over a period not to exceed 12
months using the straight-line method.
-79- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Postemployment and Postretirement Benefits
The Company has a defined benefit pension plan that provides
retirement benefits for certain key employees. Pension costs under
this pension plan are actuarially computed. The benefits provided
under this plan are not funded until due.
Income Taxes
In February 1992, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (FAS 109). Under the asset and
liability method of FAS 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. Under FAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the period
that includes the enactment date.
Effective January 1, 1993, the Company adopted FAS 109 and has
reported the cumulative effect of that change in accounting method
in the 1993 Consolidated Statement of Income.
The Company previously used the asset and liability method
under Statement of Financial Accounting Standards No. 96 (FAS 96).
Under the asset and liability method of FAS 96, deferred tax assets
and liabilities were recognized for all the events that had been
recognized in the financial statements. Under FAS 96, the future
tax consequences of recovering assets or settling liabilities at
their financial statement carrying amounts were considered in
calculating deferred income taxes. Generally, FAS 96 prohibited
consideration of any other future events in calculating deferred
income taxes.
The Company and its subsidiaries file a consolidated federal
income tax return. For tax reporting purposes, the Company has
elected to continue its fiscal year ending June 30.
-80- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Amortization of Original Issue Discount and Debt Issuance Costs
Original issue discount is amortized over the life of the
related indebtedness using the effective interest method.
Costs associated with the issuance of debt have been deferred
and are being amortized over the life of the related indebtedness
using a weighted average method based on retirement schedules
specified in the debt indentures.
Income Per Common and Equivalent Share
Income per common and equivalent share is based on the weighted
average number of shares outstanding. Such averages were
15,363,984, 15,099,147 and 11,584,275 for the years ended December
31, 1994, 1993 and 1992, respectively. Fully-diluted and primary
income per common and equivalent share are the same.
Foreign Currency Translation
The financial statements of foreign subsidiaries are translated
into U.S. dollars for balance sheet accounts at current exchange
rates in effect at the balance sheet date. Items of revenue and
expense are translated at average exchange rates during the
reporting period. Gains and losses resulting from foreign
currency transactions are included in income currently. Gains and
losses resulting from translation of financial statements are
excluded from the Consolidated Statements of Income and are
credited or charged directly to a separate component of
Shareholders' Equity.
Reclassifications
Certain prior year balances have been reclassified to conform
to the current year's presentation.
-81- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
2. RECEIVABLES, NET
Receivables, net consist of the following:
December 31,
-------------------
1994 1993
--------- ---------
(In thousands)
Casino $6,983 $6,816
Hotel 993 1,020
Employees 81 88
Other 3,233 935
--------- ---------
11,290 8,859
Less allowance for doubtful accounts 2,400 2,946
--------- ---------
Receivables, net $8,890 $5,913
========= =========
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
December 31,
-------------------
1994 1993
--------- ---------
(In thousands)
Interest $10,350 $4,240
Salaries and wages 11,113 8,289
Taxes, other than taxes on income 3,380 1,988
Medical and liability claims 3,110 2,983
Advertising and promotion 2,201 2,397
Outstanding chips and tokens 1,897 1,204
Other 2,235 2,563
--------- ---------
Total accrued liabilities $34,286 $23,664
========= =========
-82- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
4. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
Showboat Louisiana, Inc. (SLI) was formed in 1993 to hold a 30%
equity interest in Showboat Star Partnership (SSP) which owns a
riverboat casino managed by Lake Pontchartrain Showboat, Inc.
(LPSI), a wholly-owned subsidiary of the Company. In 1993, the
Company invested $18,600,000 in SSP for its 30% equity interest in
the riverboat casino. Effective March 1, 1994, the Company
purchased an additional 20% equity interest from its partner for
$9,000,000. Operation of the riverboat casino commenced on
November 8, 1993. The investment by SLI in SSP has been accounted
for under the equity method of accounting. The Company's equity in
the income or loss of SSP is included in the Consolidated Statement
of Income as equity in income or loss of unconsolidated affiliate.
LPSI receives a management fee from SSP of 5.0% of casino revenues
net of gaming taxes of 18.5% and boarding fees. Intercompany
management fees have been eliminated in consolidation.
Preopening costs associated with the riverboat casino on Lake
Pontchartrain in New Orleans, Louisiana totaling $4,246,000 were
written-off upon commencement of operations. The Company's share
of those costs of $1,274,000 are included in equity in loss of
unconsolidated affiliate in the December 31, 1993 Consolidated
Statement of Income.
Showboat Australia Pty. Ltd. (SA), a wholly-owned subsidiary
of the Company, was formed in 1994 and along with Leighton
Properties Ltd. formed Sydney Harbour Casino Pty. Ltd. (SHC) to
apply for the sole casino license in Sydney, Australia. The casino
license was awarded to SHC in December 1994. SA invested
approximately $100,000,000 in SHC for a 26.3% equity interest.
SA's investment in SHC has been accounted for under the equity
method of accounting. SA also owns 85% of the company engaged to
manage the casino for a management fee. SHC anticipates that it
will commence gaming operations in a temporary facility in
September 1995 and that a permanent facility will commence
operations in early 1998.
-83- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
4. INVESTMENTS IN UNCONSOLIDATED AFFILIATES (continued)
Summarized condensed financial information of SSP and SHC at
December 31, 1994 and 1993 is as follows:
1994 1993
--------- ---------
Showboat Star Partnership: (In thousands)
Income statement data:
Net revenues $97,989 $12,062
Net income (loss) 24,782 (2,836)
Company's share of net income (loss) 12,828 (850)
Balance sheet data:
Assets
Current assets $16,624 $8,150
Property and equipment, net 35,135 36,236
Other assets 19,522 20,481
--------- ---------
Total assets $71,281 $64,867
========= =========
Liabilities and partners'
capital accounts:
Current liabilities 3,950 6,268
Partners' capital accounts 67,331 58,599
--------- ---------
Total liabilities and partners'
capital accounts $71,281 $64,867
========= =========
-84- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
4. INVESTMENTS IN UNCONSOLIDATED AFFILIATES (continued)
1994 1993
--------- ---------
Sydney Harbour Casino Holdings Ltd.(unaudited) (In thousands)
Income statement data:
Net revenues $ - $ -
Net income (loss) - -
Company's share of net income (loss) - -
Balance sheet data:
Assets:
Current assets $61,750 $ -
Property and equipment, net 20,024 -
Other assets 324,695 -
--------- ---------
Total assets $406,469 $ -
========= =========
Liabilities and shareholders' equity:
Current liabilities 8,608 $ -
Partners' capital accounts 397,861 -
--------- ---------
Total liabilities and shareholders'
equity $406,469 $ -
========= =========
-85- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
5. NEW JERSEY INVESTMENT OBLIGATION
The New Jersey Casino Control Act (Act) provides, among other
things, for an assessment on a gaming licensee based upon its gross
casino revenues after completion of its first full year of
operation. This assessment may be satisfied by investing in
qualified direct investments, purchasing bonds issued by the Casino
Reinvestment Development Authority (CRDA), or paying an
"alternative tax". In order for direct investments to be eligible,
they must be approved by the CRDA.
Deposits with the CRDA bear interest at two-thirds of market
rates resulting in a current value lower than cost. At December
31, 1994 and 1993, deposits and other assets include $5,277,000 and
$5,010,000, respectively, representing the Company's deposit with
the CRDA of $7,716,000 as of December 31, 1994 and $7,488,000 as of
December 31, 1993, net of a valuation allowance of $2,439,000 and
$2,478,000, respectively. The carrying value of these deposits,
net of the valuation allowance, approximates fair value.
The CRDA, as an agency of the City of Atlantic City, is
responsible for the redevelopment of the area surrounding the
Boardwalk. During 1994, $8,000,000 of the Company's deposits with
the CRDA were used in connection with the expansion of a City
street leading to the Atlantic City Showboat. In connection with
its approval, the CRDA required the Company to donate $2,500,000 of
its deposits with the CRDA to certain public programs.
Construction of the City street commenced in the fourth quarter of
1993 and was completed in 1994. The Company reclassified these
CRDA deposits, net of the valuation allowance, totaling
approximately $7,000,000 to property and equipment.
The Company has applied for and received approval for
approximately $8,700,000 in funding credits from the CRDA in
connection with the construction of Atlantic City Showboat's
additional hotel rooms. In connection with the Company's Credit
Agreement with the CRDA, which states the terms and conditions by
which the Company may receive funding credit, the Company applied
for and received funds from the CRDA of approximately $2,955,000
as a credit for expenditures made relating to the construction of
the hotel rooms. The balance of the funding credits may be
applied to portions of future CRDA deposits.
-86- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
6. LONG-TERM DEBT
Long-term debt consists of the following:
December 31,
-------------------
1994 1993
--------- ---------
(In thousands)
9 1/4% First Mortgage Bonds due 2008
net of unamortized discount of
$5,008,000 at December 31, 1994 (a) $269,992 $275,000
13% Senior Subordinated Notes due 2009 (b) 120,000 -
Capital lease obligations (Note 7) 2,043 5,617
--------- ---------
392,035 280,617
Less current maturities 19 3,574
--------- ---------
$392,016 $277,043
========= =========
(a) On May 18, 1993, the Company issued $275,000,000 of 9 1/4%
First Mortgage Bonds due 2008 (Bonds). The proceeds from the sale
of the Bonds were $268,469,000, net of underwriting discounts and
commissions. Proceeds from the sale of the Bonds were used to
redeem all of the outstanding 11 3/8% Mortgage-Backed Bonds Due
2002 at 105.7% of the principal amount plus accrued interest. The
remaining proceeds were reserved by the Company to benefit existing
facilities and to expand into new facilities or gaming
jurisdictions.
On July 1, 1994, the Company obtained consents to amend
(Amendments) its Indenture governing its Bonds (Bond Indenture).
The Company received consents from holders of approximately
$259,772,000 or 94% of the Bonds approving the Amendments. In
consideration for their consent, the consenting Bond holders
received 2% of the face value of the Bonds. On July 28, 1994, the
Company paid $5,195,000 to the consenting Bond holders. As the
amount paid does not represent as significant modification of the
terms of the Bonds, it is reflected as a discount on the Bonds and
is being amortized as an adjustment to yield over the remaining
life of the Bonds using the effective interest method.
-87- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
6. LONG-TERM DEBT (continued)
The Bonds are unconditionally guaranteed by Ocean Showboat,
Inc. (OSI), Atlantic City Showboat, Inc. (ACSI) and Showboat
Operating Company (SOC). Interest on the Bonds is payable
semi-annually on May 1 and November 1 of each year. The Bonds are
not redeemable prior to May 1, 2000. Thereafter, the Bonds will be
redeemable, in whole or in part, at redemption prices specified in
the Bond Indenture. The Bonds are senior secured obligations of
the Company and rank senior in right of payment to all existing and
future subordinated indebtedness of the Company and pari passu with
the Company's senior indebtedness. The Bonds are secured by a deed
of trust representing a first lien on the Las Vegas hotel casino
(other than certain assets), by a pledge of all outstanding shares
of capital stock of OSI, an intercompany note by ACSI in favor of
SBO, a pledge of certain intellectual property rights of the
Company, and by investments in Controlled Entities (as defined in
the Bond Indenture, as amended). OSI's obligation under its
guarantee is secured by a pledge of all outstanding shares of
capital stock of ACSI. ACSI's obligation under its guarantee is
secured by a leasehold mortgage representing a first lien on the
Atlantic City hotel casino (other than certain assets). SOC's
guarantee is secured by a pledge of certain assets related to the
Las Vegas hotel casino.
The Bond Indenture, as amended, places significant restrictions
on SBO and its subsidiaries including restrictions on making loans
and advances by SBO to subsidiaries which are Non-Recourse
subsidiaries or subsidiaries in which SBO owns less than 50% of the
equity. All capitalized terms not otherwise defined in this
paragraph have the meanings assigned to them in the Bond Indenture,
as amended. The Bond Indenture, as amended, also places
significant restrictions on the incurrence of additional
Indebtedness by SBO and its subsidiaries, the creation of
additional Liens on the Collateral securing the Bonds, transactions
with Affiliates and the investment by SBO and its subsidiaries in
certain Investments. In addition, the terms of the Bond Indenture,
as amended, prohibit SBO and its subsidiaries from making a
Restricted Payment unless, at the time of such Restricted Payment:
(i) no Default or Event of Default has occurred or would occur as a
consequence of such Restricted Payment; (ii) SBO, at the time of
such Restricted Payment other than an investment in a subsidiary in
a gaming related business or a quarterly dividend, and after giving
pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, would
-88- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
6. LONG-TERM DEBT (continued)
have been permitted to incur at least $1.00 of additional
Indebtedness; and, (iii) such Restricted Payment, together with the
aggregate of all other Restricted Payments by SBO and its
subsidiaries is less than the sum of (x) 50% of the Consolidated
Net Income of SBO for the period (taken as one accounting period)
from April 1, 1993 to the end of SBO's most recently ended fiscal
quarter for which internal financial statements are available plus,
(y) 100% of the aggregate net cash proceeds received by SBO from
the issuance or sale of Equity Interests of SBO since the Issue
Date, plus (z) Excess Non-Recourse Subsidiary Cash Proceeds
received after the Issue Date.
The term Restricted Payment does not include, among other
things, the payment of any dividend if, at the time of declaration
of such dividend, the dividend would have complied with the
provisions of the Bond Indenture, as amended; the redemption,
repurchase, retirement, or other acquisition of any Equity Interest
of SBO out of proceeds of the substantially concurrent sale of
other Equity Interests of SBO; Investments by SBO in an amount not
to exceed $75,000,000 in the aggregate in any Non-Recourse
Subsidiary engaged in a Gaming Related Business; Investments by SBO
in any Non-Recourse Subsidiary engaged in a Gaming Related Business
in an amount not to exceed in the aggregate 100% of all cash
received by SBO from any Non-Recourse Subsidiary up to $75,000,000
in the aggregate and thereafter, 50% of all cash received by SBO
from any Non-Recourse Subsidiary other than cash required to be
repaid or returned to such Non-Recourse Subsidiary provided that
the aggregate amount of Investments pursuant thereto does not
exceed $125,000,000 in the aggregate; Investments in Controlled
Entities; and the purchase, redemption, defeasance of any pari
passu indebtedness with a substantially concurrent purchase,
redemption, defeasance, or retirement of the Bonds (on a pro rata
basis). Notwithstanding the foregoing, the Company is only
permitted to make investments in a Controlled Entity only if from
July 18, 1994 until December 31, 1996, the Company's Fixed Charge
Coverage Ratio for the Company's most recently ended twelve months
is greater than 1.50 to 1 and for the period commencing after
December 31, 1996 the Company's Fixed Charge Coverage Ratio is
greater than 1.75 to 1. For all other Restricted Payments, other
-89- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
6. LONG-TERM DEBT (continued)
than a Regular Quarterly Dividend or a Restricted Investment in a
Subsidiary engaged in a Gaming Related Business, the Company's most
recently ended four full fiscal quarters, after giving effect to
such Restricted Payment must be greater than 2.25 to 1. As of
December 31, 1994, the Company's Fixed Charge Coverage Ratio was
2.13 to 1. Additionally, the Bond Indenture, as amended, permits
the Company to issue up to $150,000,000 of debt (of which
$120,000,000 has been issued) without compliance with the debt
incurrence tests stated therein.
(b) On August 10, 1994, the Company issued $120,000,000 of 13%
Senior Subordinated Notes due 2009 (Notes). The proceeds from the
sale of the Notes (Note Offering) were $116,520,000, net of
underwriting discounts and commissions. Proceeds from the Note
Offering were reserved for or used to (i) invest $100,000,000 for
an approximately 26.3% equity interest in SHC, an affiliate which
was granted the license to manage and operate the only full-service
casino in New South Wales, Australia and (ii) renovate the Las
Vegas Showboat in order to upgrade the facility and replace the
existing power plant facility at an approximate cost of $18,500,000.
The Notes are unconditionally guaranteed by OSI, ACSI and SOC.
Interest on the Notes is payable semi-annually on February 1 and
August 1 of each year. The Notes will be redeemable, in whole or
in part, at redemption prices specified in the Indenture for the
Notes (Note Indenture). The Notes are general obligations of the
Company, subordinated in right of payment to all Senior Debt (as
defined in the Note Indenture) of the Company. The Note Indenture
permits the issuance of an additional $30,000,000 of Notes at the
discretion of the Company.
The Note Indenture places significant restrictions on the
Company, many of which are substantially similar to the
restrictions placed on the Company by the Bond Indenture, as
amended, including covenants restricting or limiting the ability of
the Company and its Restricted Subsidiaries (as defined in the Note
Indenture) to, among other things, (i) pay dividends or make other
Restricted Payments, (ii) incur additional Indebtedness and issue
Preferred Stock, (iii) create Liens, (iv) create dividend and other
payment restrictions affecting Restricted Subsidiaries, (v) enter
into mergers, consolidations or make sales of all or substantially
all assets, (vi) enter into transactions with affiliates and (vii)
engage in other lines of business.
-90- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
6. LONG-TERM DEBT (continued)
At December 31, 1994, the Company's Atlantic City subsidiary,
ACSI, had available an unsecured line of credit for general working
capital purposes totaling $15,000,000. Interest is payable monthly
at the bank's prime rate plus .5%. The bank's prime rate was 8.5%
at December 31, 1994. The line of credit expires in August 1995.
Borrowings on this line of credit may not be used for the payment
of management fees or to fund ventures in other jurisdictions. At
December 31, 1994, ACSI had all the funds under this line of credit
available for use.
Maturities of the Company's long-term debt are as follows:
Year ending (In thousands)
December 31,
1995 $19
1996 1,950
1997 25
1998 29
1999 20
Thereafter 389,992
---------
$392,035
=========
The fair value of the Company's Bonds and Notes were
229,969,000 and $114,300,000, respectively, at December 31, 1994
based on the quoted market prices. The carrying amount of capital
leases approximates fair value at December 31, 1994.
-91- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
7. LEASES
The Company leases certain furniture and equipment and a
warehouse under long-term lease agreements. The leases covering
furniture and equipment expire in 1994 and the warehouse lease
expires in 2001. The Company has the option, which it currently
intends to exercise, to purchase the warehouse from January 1, 1996
through March 31, 2001 at an option price of approximately
$1,928,000.
Property leased under capital leases by major classes are as
follows:
December 31,
-------------------
1994 1993
--------- ---------
(In thousands)
Building - warehouse $2,050 $2,050
Furniture and equipment 152 22,621
--------- ---------
2,202 24,671
Less accumulated amortization 1,203 19,456
--------- ---------
$999 $5,215
========= =========
ACSI is leasing 10 1/2 acres of Boardwalk property in Atlantic
City, New Jersey for a term of 99 years commencing October 1983.
Annual rent payments, which are payable monthly, commenced upon
opening of the Atlantic City Showboat. The rent is adjusted
annually based upon changes in the Consumer Price Index. In April
1994, the annual rent increased $156,000 to $8,274,000. ACSI is
responsible for taxes, assessments, insurance and utilities.
-92- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
7. LEASES (continued)
The following is a schedule of future minimum lease payments
for capital leases and operating leases (with initial or remaining
terms in excess of one year) as of December 31, 1994:
Capital Operating
Leases Leases
--------- ---------
Year ending (In thousands)
December 31,
1995 $286 $10,268
1996 1,961 10,222
1997 33 10,129
1998 33 10,039
1999 20 9,518
Thereafter - 685,009
--------- ---------
Total minimum lease payments 2,333 $735,185
=========
Less amount representing interest
(10.4% to 12.9%) 290
---------
Present value of net minimum
capital lease payments $2,043
=========
Rent expense for all operating leases was $10,380,000,
$9,287,000 and $8,659,000 for the years ended December 31, 1994,
1993 and 1992, respectively.
-93- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
8. EXTRAORDINARY ITEMS
On June 18, 1993, the Company redeemed all of its remaining
11 3/8% Mortgage-Backed Bonds Due 2002 at 105.7% plus accrued and
unpaid interest up to and including the redemption date. The
Company recognized an extraordinary loss before any income tax
benefit of $11,166,000 as a result of the write-off of the
unamortized debt issuance costs of $2,666,000 and the payment of a
5.7% redemption premium of $8,500,000. The after tax loss was
$6,679,000 or $.44 per share.
On December 30, 1992, the Company notified debentureholders of
its intent to redeem all of the outstanding 13% Subordinated
Sinking Fund Debentures Due 2004 at par plus accrued interest on
January 29, 1993. Accordingly, as of December 31, 1992, the
Company recognized an extraordinary loss of $5,164,000 before an
income tax benefit of $1,756,000 as a result of the write-off of
the unamortized discount and debt issuance costs. The after tax
loss was $3,408,000 or $.29 per share.
9. INCOME TAXES
As discussed in Note 1, the Company adopted FAS 109 effective
January 1, 1993. The cumulative effect of the change in method of
accounting for income taxes of $556,000 is determined as of January
1, 1993 and is reported separately in the Consolidated Statement of
Income for the year ended December 31, 1993. Prior year financial
statements have not been restated to apply the provisions of FAS
109.
-94- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
9. INCOME TAXES (continued)
Total income tax expense for the years ended December 31, 1994
and 1993 was allocated as follows:
1994 1993
--------- ---------
(In thousands)
Continuing operations $11,549 $10,474
Extraordinary item - (4,487)
Shareholders' equity, related to cumulative
foreign currency translation adjustment (1,879) -
Shareholders' equity, related to
compensation expense deferred and reported
as a reduction of shareholders' equity for
financial reporting purposes (241) (661)
--------- ---------
$9,429 $5,326
========= =========
-95- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
9. INCOME TAXES (continued)
Income tax expense attributable to income from continuing
operations consists of:
Year ended December 31,
------------------------------
1994 1993 1992
---------- --------- ---------
(In thousands)
U.S. federal
Current $8,793 $7,910 $6,519
Deferred 323 965 238
---------- --------- ---------
9,116 8,875 6,757
---------- --------- ---------
State and local
Current 2,500 1,195 -
Deferred (67) 404 -
---------- --------- ---------
2,433 1,599 -
---------- --------- ---------
Total
Current 11,293 9,105 6,519
Deferred 256 1,369 238
---------- --------- ---------
$11,549 $10,474 $6,757
========== ========= =========
In 1992, income tax expense of $6,757,000 represents income tax
expense from continuing operations before extraordinary items. In
1992, as a result of an extraordinary loss of $5,164,000 (Note 8),
the Company recognized an income tax benefit of $1,756,000
resulting in total income tax expense of $5,001,000.
-96- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
9. INCOME TAXES (continued)
Income tax expense attributable to income from continuing
operations differed from the amounts computed by applying the U.S.
federal income tax rate of 35% for the years ended December 31,
1994 and 1993 and 34% for the year ended December 31, 1992 to
pretax income from continuing operations as a result of the
following:
Year ended December 31,
------------------------------
1994 1993 1992
---------- --------- ---------
(In thousands)
Computed "expected" tax expense $9,537 $8,378 $7,689
Increase (reduction) in income
taxes resulting from:
Change in the beginning of the
year balance of the valuation
allowance for deferred tax
assets allocated to income tax
expense (161) 224 -
Adjustment to deferred tax
assets and liabilities for
enacted changes in tax rates - 383 -
State and local income taxes,
net of federal tax benefit 1,715 930 -
Impact of settlement of
Internal Revenue Service
examination 277 - (102)
Restricted interest assessment,
net of tax 30 619 -
Other, net 151 (60) (830)
---------- --------- ---------
Income tax expense $11,549 $10,474 $6,757
========== ========= =========
-97- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
9. INCOME TAXES (continued)
The significant components of deferred income tax expense
attributable to income from continuing operations for the years
ended December 31, 1994 and 1993 are as follows:
December 31,
-------------------
1994 1993
--------- ---------
(In thousands)
Deferred tax expense (exclusive of other
components listed below) $417 $762
Adjustment to deferred tax assets and
liabilities for enacted changes in tax rates - 383
Change in beginning of the year balance of
the valuation allowance for deferred tax
assets (161) 224
--------- ---------
$256 $1,369
========= =========
For the year ended December 31, 1992, deferred income tax
expense of $238,000 results from temporary differences in the
recognition of income and expenses for income tax and financial
reporting purposes. The sources and tax effects of these temporary
differences are as follows:
(In thousands)
Depreciation and amortization $1,250
Utilization of credit carryforwards, net 1,145
Provision for loss on Casino Reinvestment
Development Authority obligation (1,496)
Allowance for doubtful accounts 309
Preopening costs 369
Accrued vacations (359)
Impact of settlement of Internal Revenue
Service examination (625)
Other, net (355)
---------
$238
=========
-98- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
9. INCOME TAXES (continued)
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1994 and 1993 are as follows:
1994 1993
--------- ---------
(In thousands)
Deferred tax assets:
Preopening costs ($2,191) ($1,268)
Accrued vacations (1,803) (1,621)
Casino Reinvestment Development
Authority obligation (1,002) (1,566)
Allowance for doubtful accounts (991) (1,210)
Accrued state income taxes (800) -
Long-term incentive plan (772) (176)
Alternative minimum tax credit
carryforwards (697) (2,423)
Other (3,029) (2,162)
--------- ---------
Total gross deferred tax assets (11,285) (10,426)
Less valuation allowance 440 601
--------- ---------
Net deferred tax assets (10,845) (9,825)
--------- ---------
Deferred tax liabilities:
Depreciation and amortization 18,655 17,350
Capitalized interest 2,494 2,571
Cumulative foreign currency
translation adjustment 1,879 -
Other 48 -
--------- ---------
Total gross deferred tax liabilities 23,076 19,921
--------- ---------
Net deferred tax liability $12,231 $10,096
========= =========
At December 31, 1994, the Company had available $697,000 of
alternative minimum tax credit carryforwards which are available to
reduce future federal regular income taxes, if any, over an
indefinite period.
-99- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
10. EMPLOYEE BENEFIT PLANS
The Company maintains a retirement and savings plan for
eligible employees who are not covered by a collective bargaining
agreement or by another plan to which the Company contributes.
Under the terms of the plan, eligible employees may defer up to 3%
of their compensation, as defined, of which 100% of the deferral is
matched by the Company. Eligible employees may contribute an
additional 12% of their compensation which will not be matched by
the Company. Contributions by the Company vest over a five-year
period. The Company contributed an aggregate of $1,826,000,
$1,525,000 and $1,285,000 to this and another Company plan merged
into this plan for the years ended December 31, 1994, 1993 and
1992, respectively.
The Company's union employees are covered by union-sponsored,
collectively-bargained, multi-employer pension plans. The Company
contributed and charged to expense $1,298,000, $1,197,000 and
$1,182,000 during the years ended December 31, 1994, 1993 and 1992,
respectively. These contributions are determined in accordance
with the provisions of negotiated labor contracts and generally are
based on the number of hours worked.
In August 1994, the Company implemented a Supplemental
Executive Retirement Plan (SERP) for a select group of senior line
staff and management personnel to ensure that the Company's overall
executive compensation program will attract, retain and motivate
qualified senior management personnel. The participants receive
benefits based on years of service and final compensation. This
defined benefit plan is noncontributory and unfunded. The pension
costs are determined actuarially and are based on the assumption
that all eligible personnel will participate in the SERP.
The net pension cost for the year ended December 31, 1994
consists of the following:
(In thousands)
Service costs of benefits earned $376
Interest cost on projected benefit
obligations 335
Amortization of unrecognized prior
service costs 284
---------
$995
=========
-100- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
10. EMPLOYEE BENEFIT PLANS (continued)
The status of the defined benefit plan at December 31, 1994 is
as follows:
(In thousands)
Fair value of plan assets $ -
---------
Actuarial present value of benefit obligations:
Vested benefit obligation 2,512
Non-vested benefit obligation 1,637
---------
Accumulated benefit obligation 4,149
Effect of projected future salary increases 512
---------
Projected benefit obligations 4,661
---------
Plan assets less than projected
benefit obligation (4,661)
Unrecognized prior service costs 3,964
Unrecognized gain (298)
Adjustment to recognize minimum liability (4,149)
---------
Accrued pension cost included in
other liabilities ($5,144)
=========
Prior service costs to be recognized in income in future years
of $4,149,000 are included in deposits and other assets on the
Consolidated Balance Sheet.
The assumptions used in computing the information above were as
follows:
Discount rate 7.50%
Future compensation growth rate 4.50%
-101- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
11. STOCK PLANS
The Company has various incentive plans under which stock
options or restricted shares may be granted to key employees,
members of the Board of Directors and all other full and part-time
employees. A total of 3,720,000 shares have been reserved for
issuance as stock options or restricted shares under these plans.
Restricted shares and options granted to key employees vest over a
five-year period. All other options vest over a one-year period.
The options are exercisable, subject to vesting, over ten years at
option prices not less than 100% of the fair market value of the
Company's common stock determined on the date of grant of the
options.
Unearned compensation in connection with restricted stock
issued for future services is recorded on the date of grant at the
fair market value of SBO's common stock and is being amortized
ratably from the date of grant over the five-year vesting period as
it is earned. Compensation expense of $1,964,000, $111,000 and
$156,000 was recognized for the years ended December 31, 1994, 1993
and 1992, respectively. Unearned compensation has been shown as a
reduction of shareholders' equity in the accompanying Consolidated
Balance Sheets.
A summary of certain stock option information is as follows:
Year ended December 31,
------------------------------
1994 1993 1992
---------- --------- ---------
Options outstanding at January 1 812,320 901,080 393,570
Granted 1,228,750 96,550 521,550
Exercised (37,160) (176,560) (6,840)
Forfeited (87,340) (8,750) (7,200)
---------- --------- ---------
Options outstanding at December 31 1,916,570 812,320 901,080
========== ========= =========
Option price range at December 31 $6.50 to $6.50 to $6.50 to
$20.25 $18.00 $14.50
Options exercisable at December 31 644,320 529,495 120,430
========== ========= =========
-102- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
12. SHAREHOLDERS' EQUITY
On December 24, 1992, the Company issued 3,450,000 shares of
its $1.00 par value common stock in a public offering. The price
to the public was $15.50 per share. Net proceeds of the offering,
after deducting all associated costs, were $50,366,000 or $14.60
per newly issued share.
On May 6, 1994, in connection with the Company's investment
in SHC, the Company issued warrants to purchase 150,000 shares of
Showboat, Inc. common stock with an exercise price of $15.50 per
share. The warrants were exercisable on issuance and are scheduled
to expire on May 6, 1999. At December 31, 1994, all warrants were
outstanding. The value of the warrants of $1,953,000 has been
reported as part of the investment in SHC and will be amortized
over the life of the principal assets.
13. FOREIGN CURRENCY TRANSLATION
Cumulative foreign currency translation adjustments at
December 31, 1994, which represent the effects of translating the
financial statements of the Company's foreign subsidiaries were:
(In thousands)
Balance, January 1, 1994 $ -
Translation adjustments 5,369
Related income tax effect (1,879)
---------
Balance, December 31, 1994 $3,490
=========
-103- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
14. SELECTED QUARTERLY DATA (Unaudited)
Summarized unaudited financial data for interim periods for the
years ended December 31, 1994 and 1993 are as follows:
Quarter ended (a) Year
---------------------------------------- ended
3/31/94 6/30/94 9/30/94 12/31/94 12/31/94
--------- --------- ---------- --------- ---------
(In thousands except per share data)
Net revenues $88,432 $102,395 $113,231 $97,275 $401,333
Income from
operations 11,088 14,041 17,262 9,437 51,828
Net income 3,440 5,354 5,915 990 15,699
Net income per
share 0.23 0.35 0.38 0.06 1.02
Quarter ended (a) Year
---------------------------------------- ended
3/31/93 6/30/93 9/30/93 12/31/93 12/31/93
--------- --------- ---------- --------- ---------
(In thousands except per share data)
Net revenues $85,496 $92,706 $108,005 $89,520 $375,727
Income from
operations (b) 7,685 11,983 18,250 7,501 45,419
Income before
extraordinary
loss and cumu-
lative effect
adjust-
ment (c)(d) 1,921 3,751 7,356 436 13,464
Net income (loss) 2,477 (2,928) 7,356 436 7,341
Income before
extraordinary
loss and cumu-
lative effect
adjustment per
share (c)(d) 0.13 0.24 0.48 0.03 0.89
Net income (loss)
per share 0.16 (0.20) 0.48 0.03 0.49
-104- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
14. SELECTED QUARTERLY DATA (Unaudited) (continued)
(a) Quarterly results may not be comparable due to the seasonal
nature of the Atlantic City operation.
(b) In 1993, the Company acquired a 30% equity interest in Showboat
Star Partnership which was engaged in the development of a
riverboat casino on Lake Pontchartrain in New Orleans,
Louisiana. Operation of the riverboat casino commenced on
November 8, 1993. The Company's share of the partnership's
loss from the commencement of operations through December 31,
1993, including the write-off of preopening costs of
$1,274,000, is included in income from operations for the
quarter ended December 31, 1993.
(c) The Company adopted FAS 109 in 1993 and reported the cumulative
effect of the change in method of accounting for income taxes
as of January 1, 1993 in the 1993 Consolidated Statement of
Income.
(d) In the quarter ended June 30, 1993, the Company recognized an
extraordinary loss of $6,679,000, net of tax, as a result of
the redemption of all of its outstanding 11 3/8%
Mortgage-Backed Bonds Due 2002 (Note 8).
15. COMMITMENTS AND CONTINGENCIES
In February 1994, the Company and Waterfront Entertainment and
Development, Inc. formed Showboat Marina Partnerhip (SMP). SMP
has filed a gaming application with the Indiana Gaming Commission
to operate a riverboat on Lake Michigan in East Chicago, Indiana.
Under the terms of the partnerhip agreement, Showboat will own 55%
of SMP and is required to make an initial capital contribution of
$1,000,000 and an additional contribution of $16,500,000 at
such later dates as specified in an initial development budget.
The Company is involved in various claims and legal actions
arising in the ordinary course of business. Additionally, the State
of New Jersey is currently auditing the Company's state income tax
returns for the years ended June 30, 1986 through 1992. In the
opinion of management, the ultimate disposition of these matters
will not have a material adverse effect on the Company's financial
position or results of operations.
-105- (continued)
SHOWBOAT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
15. COMMITMENTS AND CONTINGENCIES (continued)
In December 1995, the Company entered into a preliminary
agreement with a thoroughbred racetrack in New Hampshire to
finalize an agreement to develop and manage any additional gaming
which may be authorized at the facility by the State of New
Hampshire. In connection with the preliminary agreement, the
Company loaned the operator of the racetrack $8,850,000. The loan
is secured by a second mortgage on the racetrack. This note
receivable is included in deposits and other assets on the
Consolidated Balance Sheet.
16. SUBSEQUENT EVENTS
In February 1995, SSP (i) assigned its lease with the Orleans
Levee Board for leased land, docking facilities and parking areas;
(ii) sold the terminal building and other improvements it
constructed on the leased land and (iii) sold certain personal
property used at the terminal building for $6,000,000. Effective
March 3, 1995, the Company purchased the remaining 50% of the
equity of SSP from its partners for $25,000,000, subject to certain
adjustments. In March 1995, the Company entered into an agreement
to sell 100% of SSP for $52,000,000. The net proceeds of these
transactions approximates the Company's cumulative investment in
SSP. The investment in SSP has been reclassified to current assets
as Investment in unconsolidated affiliate held for sale. As a
result of certain issues related to the legality of dockside gaming
in Orleans Parish, the Company ceased all operations at the
Showboat Star Casino on March 9, 1995.
In February 1995, the Company formed Randolph Riverboat Company
L.L.C. (RLLC) to own and operate a riverboat casino near Kansas
City, Missouri. RLLC will be 35% owned by the Company. The Company
has contributed $13,000,000 to an escrow account for the benefit of
RLLC. Additional capital contributions, if needed, will be made by
the partners of RLLC pro rata with their respective interests. The
Company currently contemplates that the majority of the financing
for the project will be obtained through high yield debt and
capital leases.
-106-
SCHEDULE II
SHOWBOAT, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Years Ended December 31, 1994, 1993 and 1992
CHARGED
BALANCE AT TO COSTS CHARGED BALANCE
BEGINNING AND TO OTHER DEDUCTIONS AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS (a) OF YEAR
Year ended
December 31, 1993:
Allowance for
doubtful accounts $2,946 $ 667 $ --- $1,213 $2,400
Year ended
December 31, 1992:
Allowance for
doubtful accounts 3,079 1,849 --- 1,982 2,946
Year ended
December 31, 1991:
Allowance for
doubtful accounts 3,988 1,644 --- 2,553 3,079
(a) Accounts
written off.
All other information is omitted because it is inapplicable.
107
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following information is furnished with respect to each
member of the Board of Directors or nominee thereto, each of
whom, unless otherwise indicated, has served as a director
continuously since the year shown opposite his or her name.
Similar information is presented for the executive officers who
are not directors. There are no family relationships between or
among any of the Company's directors, nominees to the Board of
Directors or executive officers, except J.K. Houssels and Jeanne
S. Stewart formerly were married and are the parents of J. Kell
Houssels, III.
108
IDENTIFICATION OF DIRECTORS AND NOMINEES
Name and Position with the Age Director Background
Company(1) Since Information(1)
J.K. HOUSSELS 72 1960 Until May 1994,
(Nominee for term expiring in President and Chief
1998) Executive Officer
Chairman of the Board of the Com of the Company;
pany, Showboat Operating Company, Vice Chairman of
Showboat Development Company, the Board of Directors
Ocean Showboat, Inc., Ocean Show of Union Plaza
boat Finance Corporation, Show Hotel and Casino,
boat Louisiana, Inc., Showboat Inc., Las Vegas,
Missouri, Inc., Lake Pontchartrain Nevada; until July
Showboat, Inc., Showboat 1991, Director of
Indiana, Inc., Showboat Mohawk, First Western Financial
Inc. and Showboat Australia Pty Corporation (savings
Limited; Director of Atlantic and loan association),
City Showboat, Inc. Las Vegas, Nevada.
WILLIAM C. RICHARDSON 68 1972 Independent
(Nominee for term expiring in 1998) financial consultant,
Director of the Company and Ocean Los Angeles, California;
Showboat, Inc. since January 1986,
arbitrator and mediator for
the American Arbitration
Association and self
regulatory organizations;
until March 1991,
President, Chief
Executive Officer
and Vice Chairman
of Western Capital
Financial Group,
Los Angeles,
California.
JOHN D. GAUGHAN 74 1978 Chairman of the
(Term expires in 1997) Board and President
Director of the Company and all of Exber, Inc.,
subsidiaries. doing business as
the El Cortez Hotel
and the Western
Hotel and Casino,
Las Vegas, Nevada;
Chairman of the
Board of Union
Plaza Hotel and
Casino, Inc., Las
Vegas, Nevada. (2)
JEANNE S. STEWART 72 1979 Retired attorney,
(Nominee for term expiring in 1998) Las Vegas, Nevada.
Director of the Company and Ocean
Showboat, Inc.
109
FRANK A. MODICA 67 1980 Until February
(Term expires in 1997) 1995, Executive
Director of the Company and all Vice President and
subsidiaries; Chairman of the Chief Operating
Board of Atlantic City Showboat, Officer of the
Inc. Company and President
and Chief Executive
Officer of
Showboat Operating
Company; Director
of First Security
Bank (formerly Con
tinental National
Bank), Las Vegas,
Nevada.
H. GREGORY NASKY 52 1983 From March 1994 to
(Term expires in 1997) February 1995,
Executive Vice President of the Chief Executive
Company; Secretary and Director Officer and Managing
of the Company and all Director of
subsidiaries. Showboat Australia
Pty Limited and
Sydney Harbour
Casino; since March
1994, of counsel to
the law firm Kummer
Kaempfer Bonner &
Renshaw, Las Vegas,
Nevada, general
counsel to the
Company; until
February 1994, member
of the law firm
of Vargas &
Bartlett, Las Vegas
and Reno, Nevada,
previous general
counsel to the
Company.
J. KELL HOUSSELS, III 45 1983 From January 1990
(Term expires in 1997) to May 1994, Vice
President, Chief Executive President of the
Officer of the Company and Company; from May
Showboat Development Company; 1993 to June 1994,
Director of Showboat, Inc. and President and Chief
all subsidiaries; Executive Vice Executive Officer
President of Ocean Showboat, Inc. of Atlantic City
Showboat, Inc.;
from January 1990
to May 1993, President
and Chief Operating
Officer of Atlantic City
Showboat, Inc.;
GEORGE A. ZETTLER 67 1986 Since February
(Term expires in 1996) 1994, President of
Director of the Company and Ocean Zimex, Redondo
Showboat, Inc. Beach, California;
until January 1994,
President World
Trade Services
Group, Long Beach,
California; until
January 1991,
President, United
Export Trading
Company, Los
Angeles,
California.
110
CAROLYN M. SPARKS 53 1991 Co-owner of
(Term expires in 1996) International
Director of the Company and Ocean Insurance Services,
Showboat, Inc. Las Vegas, Nevada;
until January 1991,
Vice President,
Secretary and Treasurer
of International
Insurance Services,
Ltd.; until
December 1990,
claims administrator
for International
Insurance Services,
Ltd.; Director of
Southwest Gas Corporation;
Director of PriMerit
Bank - Federal Savings
Bank, Las Vegas,
Nevada; Regent,
University and Community
College System of Nevada.
_______________
(1)Positions held with the Company and any other business experience
since 1988 and other directorships in companies with a class of
securities registered under Section 12 of the Securities Exchange
Act of 1934 ("Exchange Act") or subject to the requirements of
Section 15(d) of the Exchange Act and companies registered under the
Investment Company Act of 1940.
(2)Mr. Gaughan also owns the Nevada Hotel and Casino, the Gold Spike
Inn and Casino, and a controlling interest in the Las Vegas Club
Hotel & Casino, each of which is located in Las Vegas, Nevada.
NON-DIRECTOR EXECUTIVE OFFICERS
G. Clifford Taylor, Jr., 49, has been Treasurer of the
Company and Showboat Operating Company since February 1981. He
served as Treasurer of Showboat Development Company from June
1983 to May 1993. He has been Treasurer of Ocean Showboat, Inc.
since December 1983, Atlantic City Showboat, Inc. since June 1984
and Ocean Showboat Finance Corporation since December 1986. He
also has served as the Assistant Secretary of the Company since
May 1990. Until February 1995, Mr. Taylor was the Executive Vice
President and Chief Operating Officer of Showboat Operating
Company. He serves at the pleasure of the respective board of
directors.
R. Craig Bird, 48, has been Executive Vice President-Finance
and Development of the Company since June 1994 and the Executive
Vice President and Chief Operating Officer of Showboat
Development Company since October 1993. Mr. Bird was Vice
President-Financial Administration of Atlantic City Showboat,
Inc. from March 1990 to October 1993. He serves at the pleasure
of the respective boards of directors.
Mark J. Miller, 38, has been Executive Vice President-
Operations of the Company since June 1994; President and Chief
Executive Officer of Atlantic City Showboat, Inc. since May 1994;
Vice President-Finance of Ocean Showboat since April 1988; Vice
President-Finance
111
and Chief Financial Officer of Ocean Showboat since April 1991.
From October 1993 to June 1994, Mr. Miller served as Executive
Vice President and Chief Operating Officer of Atlantic City
Showboat, Inc. and he was Vice President-Finance and Chief
Financial Officer of Atlantic City Showboat, Inc. from December
1988 to October 1993. He serves at the pleasure of the
respective boards of directors.
Donald L. Tatzin, 43, has been an Executive Vice President
of the Company since March 22, 1995 and an Executive Vice
President of Showboat Development Company since April 1993.
Mr. Tatzin has been a consultant with Arthur D. Little, Inc.,
San Francisco, California since June 1976.
Paul S. Harris, 59, has been Senior Vice President-Human
Resources of the Company since June 1994. Mr. Harris served as
Vice President-Organization and Development of Atlantic City
Showboat, Inc. from July 1988 to June 1994.
Leann Schneider, 41, has been Vice President-Finance and
Chief Financial Officer of the Company and Showboat Operating
Company since May 1990; Chief Financial Officer and Treasurer of
Showboat Development Company since May 1993; Treasurer of
Showboat Mohawk, Inc., Showboat Louisiana, Inc., Lake
Pontchartrain Showboat, Inc. since July 1993; Treasurer of
Showboat Indiana, Inc. since September 1993; and Treasurer of
Showboat Missouri, Inc. since February 1995. From December 1989
until May 1990, she served as Vice President-Financial Relations
and Chief Financial Officer of the Company. She serves at the
pleasure of the respective boards of directors.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors and executive officers, and
persons who own more than ten percent of the Common Stock, to
file with the Securities and Exchange Commission and the New York
Stock Exchange initial reports of ownership and reports of
changes in ownership of Common Stock. Directors, executive
officers and greater than ten percent shareholders are required
by Securities and Exchange Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company and written
representations that no other reports were required, during the
fiscal year ended December 31, 1994, all Section 16(a) filing
requirements were complied with, except that one report of
ownership for one transaction, covering an aggregate of three
shares, was filed late by George A. Zettler, and one report of
ownership for one transaction, covering an aggregate of 350
shares was filed late by R. Craig Bird. Mr. Zettler's late
filing disclosed a purchase of Common Stock due to a dividend
112
reinvestment which was inadvertently not timely reported on
Mr. Zettler's Forms 4, and Mr. Bird's late filing disclosed a
purchase of Common Stock by his children which also was
inadvertently not timely reported on Mr. Bird's Forms 4.
INFORMATION CONCERNING BOARD AND COMMITTEE MEETINGS
The entire Board of Directors met eleven times during the
year ended December 31, 1994 and each incumbent director, other
than Mr. Nasky, attended at least 75% of the board meetings held
and committee meetings held for committees of which each was a
member. Mr. Nasky resided in Sydney, Australia during 1994
assisting the Company's efforts to obtain the exclusive full-
service gaming license in Sydney. Mr. Houssels, Mr. Houssels,
III and Mr. Nasky are the only directors who are employees of the
Company.
The NOMINATING COMMITTEE met once during the twelve months
ended December 31, 1994. The Nominating Committee's
responsibilities include: interviewing potential nominees to the
Board of Directors; recommending to the Board of Directors
qualified nominees to fill Board of Directors vacancies;
developing procedures to identify potential nominees to the Board
of Directors; and developing criteria for Board of Directors
membership. During 1994, the Nominating Committee consisted of
Mr. Houssels, Mr. Richardson and Ms. Stewart.
The Nominating Committee will consider nominees to the Board
of Directors submitted in writing by shareholders to the
Secretary of the Company at least seventy-five days prior to the
initiation of solicitation of the shareholders for the election
of directors in the event of an election other than at an annual
meeting; and seventy-five days before the corresponding date that
had been the record date for the previous year's annual meeting
or seventy-five days before the date of the next annual meeting
of shareholders announced in the previous year's proxy materials
in the event of an election at an annual meeting. Such
shareholder's written notice to the Secretary shall set forth:
(a) as to each person whom the shareholder proposes to nominate
for election or re-election as a director (i) the name, age,
business address, and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class
and number of shares of capital stock of the Company beneficially
owned by the person, (iv) a description of all arrangements or
understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant
to which the nomination or nominations have to be made by the
shareholder, (v) any other information relating to the person
that is required to be disclosed in solicitations for proxies for
election of directors pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, and (vi) the consent
of such nominee to serve as a director; and (b) as to the
shareholder giving the
113
notice, (i) the name and record address of such shareholder, and
(ii) the class and number of shares of capital stock of the
Company which are beneficially owned by the shareholder.
The COMPENSATION COMMITTEE met ten times during the twelve
months ended December 31, 1994. Responsibilities include
reviewing the performance of the Company's officers and
recommending to the Board of Directors remuneration arrangements
and compensation plans involving the Company's directors,
executive officers, and key employees, including, but not limited
to, the incentive bonus plans for the Company's Las Vegas and
Atlantic City operations. The Compensation Committee also serves
as the administrators of the 1989 Executive Long-Term Incentive
Plan and the 1994 Executive Long Term Incentive Plan
(collectively the "Incentive Plans"). Pursuant to the Incentive
Plans, the Compensation Committee makes recommendations to the
Board of Directors respecting the grant of options or awards of
restricted stock and construes and interprets the Incentive Plan.
During 1994, the Compensation Committee consisted of Mr.
Richardson and Mr. Zettler.
The AUDIT COMMITTEE met six times during the twelve months
ended December 31, 1994. The Audit Committee's responsibilities
and functions include: review of reports of independent public
accountants to the Company; review of the Company's financial
practices, internal controls and policies with officers and key
personnel; review of such matters with the Company's independent
public accountants to determine the scope of compliance and any
deficiencies; select and recommend to the Board of Directors a
firm of independent public accountants to audit annually the
books and records of the Company; review and discuss the scope of
such audit; report periodically on such matters to the Board of
Directors; and perform such other functions as the Board of
Directors from time to time shall delegate to said committee.
During 1994, the Audit Committee consisted of Mr. Gaughan, Mr.
Zettler, and Mrs. Sparks.
EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE
COMPANY'S PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THAT
MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT,
IN WHOLE OR IN PART, THE FOLLOWING COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION AND THE PERFORMANCE GRAPH ON PAGE 12
SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.
OVERVIEW. The Compensation Committee of the Board of
Directors ("Compensation Committee") administers the Company's
executive compensation programs. The Compensation Committee
presently consists of Mr. Richardson and Mr. Zettler.
114
The compensation philosophy of the Company is based on two
central objectives:
* To provide competitive executive compensation
opportunities to attract, motivate and retain qualified
and motivated executive officers; and
* To align the Company's financial results and the
compensation paid to the Company's executive officers
with the enhancement of shareholder value.
The Company's compensation policy is structured so that
executive officers' compensation is dependent, in one part, on
the degree to which the Company achieves its current year
business plan objectives, and in another part, on the increase of
shareholder value.
COMPENSATION PROGRAMS. The Company's compensation programs
consist of a base salary, an annual incentive bonus, and an award
of restricted stock and/or stock options. The base salary is
targeted to fairly recognize each executive officer's unique
value and historical contributions to the success of the Company
in light of the industry median salary for the equivalent
position in the relevant market. The annual incentive bonus is
based on actual performance compared to pre-established
quantitative and qualitative performance objectives which may
include Company, operating subsidiary, and individual components.
The Company and operating subsidiary performance is generally
measured against the annual budgeted operating profits set forth
at the beginning of the year for the Company and/or the
particular operating subsidiary applicable to an individual.
Individual goals are also set at the beginning of the year for
each executive officer, and are determined through a series of
meetings with the Company's Compensation Committee and outside
compensation consultants. At the end of each quarter, an
evaluation of performance compared to all relevant objectives is
conducted in order to determine the incentive award amount
earned. In no event may an executive officer receive an annual
incentive award if pre-established threshold levels of
performance are not achieved. The Company's long-term incentive
compensation consists of awards of restricted stock and stock
options. Awards of restricted stock, which are forfeited if the
executive officer fails to be continuously employed by the
Company or one of its subsidiaries, provide an incentive to the
executive officer to remain in the employ of the Company. Awards
of stock options become exercisable over time and only have value
if the Company's Common Stock increases in value.
The Compensation Committee believes that it is important to
compensate executive officers on the basis of individual and
Company financial performance, including the enhancement of
shareholder value. To this end, the Compensation Committee
actively uses the incentive-based compensation programs, namely,
annual incentive bonuses and awards of restricted stock and/or
115
stock options. For 1994, the bonus compensation and the award of
restricted shares and options to the Chief Executive Officer and
the four named executive officers represented the incentive-based
compensation.
CHIEF EXECUTIVE OFFICER. The base salary of J. Kell
Houssels, III, the Company's President and Chief Executive
Officer, is targeted to fairly recognize his leadership skills
and management responsibilities in light of the median level for
chief executive officers of similar gaming companies. Mr.
Houssels, III salary was increased for the 1994 fiscal year based
upon a review of compensation of similarly sized gaming
companies. Mr. Houssels, III 1994 annual incentive award was
based on pre-established management objectives which included
both financial and non-financial objectives. Mr. Houssels, III
financial objectives included a comparison of consolidated
EBITDA for Atlantic City Showboat, Inc. to budgeted EBITDA.
Mr. Houssels, III non financial objectives included (i) the
implementation of the 1994 business plan for the Atlantic
City Showboat; (ii) continual improvement of customer experience
and employee satisfaction at the Atlantic City Showboat; and
(iii) the development and implementation of the business plan and
budget for Showboat's development division. Non-financial
objectives included spearheading the Company's development
activities both domestically and internationally. Additionally,
Mr. Houssels, III received 10,000 restricted shares, which vest
over a five-year period, and options to purchase 40,000 shares of
Common Stock of the Company. The Committee believes that the
primary duty of the Chief Executive Officer is to enhance
shareholder value. The restricted shares and options were
granted primarily based upon competitive practices within the
gaming industry.
February 23, 1995 COMPENSATION COMMITTEE
William C. Richardson
George A. Zettler
The following tables set forth compensation received by J.K.
Houssels, the Company's Chief Executive Officer until May 1994,
and J. Kell Houssels, III, the Company's Chief Executive Officer
after May 1994, and the four other highest paid executive
officers of the Company during the last fiscal year for each year
of the three-year period ended December 31, 1994 for services
rendered in all capacities to the Company and its subsidiaries:
116
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards Payouts(1)
Name and Year ANNUAL Other Annual Restricted Securities Long-Term All Other
Principal COMPENSATION Compensation Stock Underlying Incentive Compensation
Position ($) Awards Options/SARs Plans ($)
($)(2) (#)(3) Payouts ($)
Salary ($) Bonus ($)
J.K. Houssels 1994 200,000 123,728 -0- 167,500 40,000 -0- 44,375(4)
Chairman of 1993 200,000 144,070 -0- -0- -0- -0- 33,178(5)
the Board 1992 200,000 128,718 -0- -0- -0- -0- 44,824(6)
and,until
May 1994,
President
and Chief
Executive
Officer of
the Company
J.Kell 1994 291,808 201,595 -0- 167,500 40,000 109,600(7) 25,290(10)
Houssels, III 1993 275,000 164,174 -0- -0- -0- 110,400(8) 19,513(11)
President 1992 275,000 164,660 -0- -0- -0- 45,412(9) 19,403(12)
and Chief
Executive
Officer of
the Company
since
May 1994
Frank A. 1994 284,519 141,255 -0- 167,500(14) 40,000(15) 137,000(16) 38,341(18)
Modica 1993 275,000 154,077 -0- -0- -0- 110,400(8) 46,686(19)
Executive 1992 275,000 152,232 -0- -0- -0- 95,607(17) 33,045(20)
Vice
President
and Chief
Operating
Officer of
the
Company(13)
H. Gregory 1994 325,000 91,562 109,142(21) 125,625 30,000 -0- 13,640(22)
Nasky 1993 -0- -0- -0- -0- -0- -0- 27,900(23)
Executive 1992 -0- -0- -0- -0- -0- -0- 23,800(23)
Vice
President of
the Company
Donald L. 1994 381,631 15,000 -0- -0- 20,000 -0- 3,932(25)
Tatzin 1993 -0- -0- -0- -0- -0- -0- 188,063(26)
Executive 1992 -0- -0- -0- -0- -0- -0- -0-
Vice
President of
the
Company(24)
Mark J. 1994 217,146 131,946 -0- 125,625 30,000 34,250(27) 14,982(30)
Miller 1993 165,499 81,515 -0- -0- -0- 34,500(28) 19,110(31)
Executive 1992 148,308 79,787 -0- -0- -0- 6,813(29) 16,962(32)
Vice
President -
Operations
of the
Company;
President
and Chief
Operating
Officer of
Atlantic
City
Showboat,
Inc.
(1)Amounts represented in this column were received by the
named individuals under either the Ocean Showboat, Inc. Stock
Exchange Plan ("Stock Exchange Plan") or the Company's 1989
Executive Long Term Incentive Plan ("1989 Plan"), or both. Under
the Stock Exchange Plan, the Company exchanged restricted shares
of Common Stock for shares of Ocean Showboat, Inc. Common Stock.
The restricted shares granted under the Stock Exchange Plan
vested over a seven-year period, with the last of the restricted
shares of Common Stock vesting in March 1992. The restricted
shares granted under the 1989 Plan vested over a five-year
period, with the last of the restricted shares vesting in March
1994.
(2)Amounts represented in this column equal the number of
restricted shares of Common Stock granted to the named
individuals under the 1994 Executive Long Term Incentive Plan
("1994 Plan"), multiplied by the last reported sale price of the
Common Stock on the New York Stock Exchange on the date of grant,
or $16.750 per share. The restricted shares vest over a five-
year period, with the last of the restricted shares of Common
Stock vesting in March 1999; provided, however, that vesting on
all such restricted shares will accelerate to the date of any
change in control of the Company. This valuation does not take
into account the diminution in value attributable to the
restrictions applicable to the restricted shares. The number and
dollar value of unvested restricted shares held on December 31,
1994, based on the last reported sale price of the Company's
Common Stock on December 31, 1994, or $14.50 per share, was:
J.K. Houssels - 10,000 shares ($145,000); J. Kell Houssels, III -
10,000 shares ($145,000); Frank A. Modica - 10,000 shares
($145,000); H. Gregory Nasky - 7,500 shares ($108,750); and
Mark A. Miller - 7,500 shares ($108,750). Dividends are paid on
all restricted shares at the same rate as on unrestricted shares.
(3)Amounts represented in this column equal the number of
shares of Common Stock underlying the stock options granted to
the named individuals under the 1994 Plan.
(4)Of this amount, $40,719 represents excess coverage life
insurance and medical reimbursement costs and $3,656 represents
the Company's contribution to Mr. Houssels' 401(k) Plan account.
(5)Of this amount, $24,184 represents excess life insurance
costs and $8,994 represents the Company's contribution to Mr.
Houssels' 401(k) Plan account.
(6)Of this amount, $36,096 represents excess coverage life
insurance costs and $8,728 represents the Company's contribution
to Mr. Houssels' 401(k) Plan account.
(7)This amount represents the vesting of 6,400 shares under the
1989 Plan.
(8)This amount represents the vesting of 4,800 shares under the
1989 Plan.
117
(9)Of this amount, $23,612 (1,733 shares) vested under the
Stock Exchange Plan and $21,800 (1,600 shares) vested under the
1989 Plan.
(10)Of this amount, $9,129 represents excess coverage life
insurance, medical reimbursement and other miscellaneous costs
and $16,161 represents the Company's contribution to
Mr. Houssels, III's 401(k) Plan account.
(11)Of this amount, $4,519 represents excess coverage life
insurance and medical reimbursement costs, $6,000 represents an
automobile allowance and $8,994 represents the Company's
contribution to Mr. Houssels, III's 401(k) Plan account.
(12)Of this amount, $4,675 represents excess coverage life
insurance and medical reimbursement costs, $6,000 represents an
automobile allowance and $8,728 represents the Company's
contribution to Mr. Houssels, III's 401(k) Plan account.
(13)Mr. Modica retired from his position as Executive Vice
President and Chief Operating Officer of the Company on
February 28, 1995.
(14)Mr. Modica forfeited his right to the underlying restricted
shares as a result of his retirement as an officer of the Company
on February 28, 1995.
(15)Mr. Modica forfeited his right to these options as a result
of his retirement as an officer of the Company on February 28,
1995.
(16)This amount represents the vesting of 8,000 shares under
the 1989 Plan.
(17)Of this amount, $73,807 (5,417 shares) vested under the
Stock Exchange Plan and $21,800 (1,600 shares) vested under the
1989 Plan.
(18)This amount includes $30,483 for excess coverage life insurance and
medical reimbursement costs and $7,858 for forgiveness of indebtedness.
(19)This amount includes $30,510 in costs for excess coverage
life insurance and a $16,176 automobile allowance.
(20)This amount includes $16,869 in medical reimbursement costs
and a $16,176 automobile allowance.
(21)This amount represents the purchase of 77,000 shares of the
capital stock of Sydney Harbour Casino, including a gross up for
taxes incurred, paid to Mr. Nasky as a one-time overseas premium
for his work in Sydney, Australia.
(22)Of this amount, $9,384 represents excess coverage life
insurance, medical reimbursement and other miscellaneous costs
and $4,256 represents the Company's contribution to Mr. Nasky's
401(k) Plan account.
(23)This amount represents Mr. Nasky's fees received as a non-
employee director of the Company.
(24)Mr. Tatzin has been Executive Vice President of the Company
since March 22, 1995. Mr. Tatzin's salary for the year ended
December 1994 was for his position as Executive Vice President of
Showboat Development Company.
(25)This amount represents the Company's contribution to Mr.
Tatzin's 401(k) Plan account.
(26)This amount represents compensation paid to Mr. Tatzin for
services performed as an independent contractor.
(27)This amount represents the vesting of 2,000 shares under
the 1989 Plan.
(28)This amount represents the vesting of 1,500 shares under
the 1989 Plan.
(29)This amount represents the vesting of 500 shares under the
1989 Plan.
(30)Of this amount, $4,552 represents excess coverage life
insurance and medical reimbursement costs and $10,430 represents
the Company's contribution to Mr. Miller's 401(k) Plan account.
(31)Of this amount, $4,116 represents excess coverage life
insurance and medical reimbursement costs, $6,000 represents an
automobile allowance and $8,994 represents the Company's
contribution to Mr. Miller's 401(k) Plan account.
(32)Of this amount, $4,119 represents excess coverage life
insurance and medical reimbursement costs, $6,000 represents an
automobile allowance and $6,843 represents the Company's
contribution to Mr. Miller's 401(k) Plan account.
118
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Potential Realizable Value at Assumed
Grants Annual Rates of Stock Price Appreciation
for Option Term
Name Number of % of Exercise Expiration 5% ($) 10% ($)
Securities Total or Base Date
Underlying Options Price
Options Granted ($/Sh)(3)
Granted to
(#)(1),(2) Employees
in
Fiscal
Year
J.K. 40,000 3.6% 20.250 05/25/2004 509,405 1,290,931
Houssels
J. Kell 40,000 3.6% 20.250 05/25/2004 509,405 1,290,931
Houssels,
III
Frank A. 40,000 3.6% 20.250 05/25/2004 509,405 1,290,931
Modica(4)
H. Gregory 30,000 2.7% 20.250 05/25/2004 382,053 968,199
Nasky
Donald L. 20,000 1.8% 20.250 05/25/2004 254,702 645,466
Tatzin
Mark J. 30,000 2.7% 20.250 05/25/2004 382,054 968,199
Miller
(1)Options granted under the Company's 1994 Executive Long Term Incentive
Plan are exercisable commencing on March 31 in the year following the
date of grant, with 20% of the shares covered thereby becoming
exercisable at that time and with an additional 20% of the option
shares becoming exercisable on each successive March 31. Full vesting
of the options shall occur on March 31, 1999, provided, however, that
vesting of all unexercised options shall accelerate to the date of any
change in control of the Company.
(2)The options were granted for a term of 10 years, subject to earlier
termination in certain events related to death, retirement or
termination of employment.
(3)The exercise price is the last reported sale price of the Common Stock
on the New York Stock Exchange on the date of grant of the options, or
$20.250 per share. The tax withholding obligations related to
exercise may be paid by delivery of already owned shares or by offset
of the underlying shares, subject to certain conditions.
(4)Mr. Modica forfeited his right to the options granted in 1994 as a
result of his retirement as an officer of the Company on February 28,
1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
Number of Value of Unexercised In-the-
Securities Money Options/SARs at
Underlying December 31, 1994 ($)
Unexercised
Options/SARs
at
December 31,
1994 (#)
Name Shares Value Exercisable Unexercisable Exercisable Unexercisable
Acquired Realized
on ($)(1)
Exercise
(#)
J.K. -0- -0- 20,000 40,000 137,500 -0-
Houssels
J. Kell -0- -0- 32,000 40,000 220,000 -0-
Houssels,
III
Frank A. -0- -0- 32,000 40,000(1) 220,000 -0-
Modica
H. Gregory -0- -0- 9,000 30,000 47,750 -0-
Nasky
Donald L. -0- -0- -0- 20,000 -0- -0-
Tatzin
Mark J. -0- -0- 10,000 30,000 68,750 -0-
Miller
(1)Mr. Modica forfeited his right to these options as a result of his
retirement as an officer of the Company on February 28, 1995.
119
PENSION PLAN TABLE
The Company maintains the Supplemental Executive Retirement
Plan (the "SERP"), a nonqualified plan for highly compensated
employees whose retirement benefits are restricted by limitations
of the Code concerning qualified plans such as the 401(k) Plan.
In general, a participant will receive a retirement benefit under
the SERP equal to a percentage of his final average pay times
such participant's years of service up to 15 years, less any
benefits payable to such participant under the federal Social
Security Act, the 401(k) Plan, or under any stock plan of the
Company, with "final average pay" being the average of such
participant's annual base salary for his last three consecutive
years of service. A participant becomes vested in his benefits
under the SERP upon the participant's 65th birthday or upon the
participant's completion of 10 years of service if the
participant is at least 55 years of age.
The following table shows, as of December 31, 1994, the
approximate annual retirement benefits under the SERP to eligible
employees in specified compensation and years of service
categories, assuming retirement occurs at age 65 and that
benefits are payable only during the employee's lifetime. The
estimated retirement benefits provided in the table have not
been reduced by the amount of benefits payable to an individual
participant under the federal Social Security Act, the 401(k)
Plan, or under any stock plan of the Company.
ESTIMATED ANNUAL BENEFIT ($)
3 YEARS FINAL YEARS OF SERVICE AT AGE 65
AVERAGE
COMPENSATION
10 15 20 25 30 35
125,000 41,667 62,500 62,500 62,500 62,500 62,500
150,000 50,000 75,000 75,000 75,000 75,000 75,000
175,000 58,333 87,500 87,500 87,500 87,500 87,500
200,000 66,667 100,000 100,000 100,000 100,000 100,000
225,000 75,000 112,500 112,500 112,500 112,500 112,500
250,000 83,333 125,000 125,000 125,000 125,000 125,000
300,000 100,000 150,000 150,000 150,000 150,000 150,000
400,000 133,000 200,000 200,000 200,000 200,000 200,000
450,000 150,000 225,000 225,000 225,000 225,000 225,000
500,000 166,667 250,000 250,000 250,000 250,000 250,000
The years of service for certain employees as of December
31, 1994, are as follows: Mr. Houssels, 32 years; Mr.
Houssels III, 9 years; Mr. Modica, 24 years; Mr. Nasky,
1 year; Mr. Tatzin, 1 year and Mr. Miller, 9 years.
The vested benefits to Mr. Houssels and Mr. Modica, $851,000 and
$1,661,000, respectively, under the SERP have been accrued by the
Company.
120
EMPLOYMENT AGREEMENTS
The Company has Employment Agreements (the "Agreements")
with five of the six named executive officers and with eight
additional executive officers and other key employees
(collectively "employees" and individually "employee"). The
Agreements are renewed, unless terminated, on an annual basis.
The Agreements provide for severance benefits if the employee is
terminated by the Company (other than for cause or by reason of
the employee's retirement, death or disability) or by the
employee for Good Reason (as defined in the Agreements) within 24
months after a Change in Control (as defined in the Agreements)
or within 12 months after a Change in Control in the case of
Messrs. Houssels and Houssels, III. Each Agreement provides
that, in the event of a Potential Change in Control (as defined
in the Agreements), the employee shall not voluntarily resign as
an employee, subject to certain conditions, for at least six
months after the occurrence of such Potential Change in Control.
The Agreements provide for: (i) a lump-sum payment equal to
200% of the employee's annual salary if his employment was
terminated by the Company or 100% of the employee's annual salary
if his employment was terminated by the employee for Good Reason
(or, in the case of Messrs. Houssels and Houssels, III, 300% of
their respective annual salary), plus 200% of the average bonuses
awarded to the employee for the three fiscal years preceding the
employee's termination if the employee's employment was
terminated by the Company or 100% of the average bonuses awarded
to employee for the three fiscal years preceding employee's
termination if the employee's employment was terminated by the
employee for Good Reason (or, in the case of Messrs. Houssels and
Houssels, III, 300% of their respective average bonus for the
three fiscal years preceding their respective termination) and
(ii) the reimbursement of legal fees and expenses incurred by the
employee in seeking to enforce employee's rights under the
Agreement. In addition, in the event that payments to the
employee pursuant to employee's Agreement would subject such
employee to a tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), the employee may reduce
his severance benefits to an amount below the amount which would
require the employee to pay such tax. Certain provisions of the
Agreement could have the effect of delaying or preventing a
Change in Control of the Company. Based on compensation levels
as of December 31, 1994, assuming a Change in Control of the
Company, each of Messrs. Houssels, Houssels, III, Nasky, Tatzin and,
Miller would be entitled to receive a maximum lump-sum payment of
$996,516, $1,372,237, $833,124, $793,262, and $549,468, respectively,
under the Agreements.
121
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's executive compensation is determined by the
Compensation Committee ("Compensation Committee") of the Board of
Directors, no current member of which is or was an officer of the
Company. Throughout 1994, the Compensation Committee consisted
of Messrs. Zettler and Richardson.
PERFORMANCE GRAPH
The following graph compares the cumulative total
shareholder return on the Company's Common Stock for the last
five years with the cumulative total return on the Standard &
Poors 500 Composite Stock Index and an industry peer group
index(1). The graph assumes that $100 is invested in December 31,
1989 in each of the Company's Common Stock, the S&P 500 Composite
Stock Index and the industry peer group index. The total return
assumes the reinvestment of dividends.
Company/Index Name 1990 1991 1992 1993 1994
Showboat, Inc. 44.07 97.47 189.39 181.89 164.63
S&P 500 Index 96.89 126.42 136.05 149.76 151.74
Industry Peer Group Index 85.56 103.12 154.36 166.19 162.98
1. The industry peer group index includes the following
companies: Alliance Gaming Corp. (f/k/a United Gaming, Inc.),
American Gaming & Entertainment Ltd. (f/k/a Gamma International
Ltd.) Aztar Corp., Bally Entertainment Corp. (f/k/a Bally Mfg.
Corp.), Caesar's World, Inc., Cedar Fair L.P., Circus Circus
Enterprises, Inc., Disney (Walt) Company, Elsinore Corp., Grand
Casinos Inc., Great American Recreation, Inc., Jackpot
Enterprises, Inc., Jillians Entertainment Corp., MGM Grand, Inc.,
Mirage Resorts, Inc., Pratt Hotel Corp., Resorts International,
Inc., Rio Hotel & Casino, Inc., S-K-I Ltd., Sahara Gaming
Corporation, Sands Regent and Showboat, Inc. These companies
have the Standard Industrial Code 7990 - Miscellaneous Amusement
& Recreation Services.
[PERFORMANCE GRAPH]
122
COMPENSATION OF DIRECTORS
REMUNERATION OF NON-EMPLOYEE DIRECTORS.
For 1994, each non-employee director received a retainer of
$3,000 per quarter plus attendance fees of $2,000 per meeting
attended. Such fees are paid by the Company and Ocean Showboat,
Inc., as applicable. In addition, non-employee members of each
committee are paid $850 for each committee meeting attended.
Only non-employee directors receive the retainer or attendance
fees. Reasonable out-of-pocket expenses incurred in attending
scheduled meetings are reimbursed as to all directors.
1989 DIRECTORS' STOCK OPTION PLAN.
The Company maintains a director stock option plan entitled
the 1989 Directors' Stock Option Plan ("Option Plan"). The
Option Plan is designed to encourage non-employee directors to
take a long-term view of the affairs of the Company; to attract
and retain new superior non-employee directors; and to aid in
compensating non-employee directors for their services to the
Company. The Company's non-employee directors are William C.
Richardson, John D. Gaughan, Jeanne S. Stewart, George A. Zettler
and Carolyn M. Sparks.
Stock options granted under the Option Plan are intended to
be designated non-qualified options or options not qualified as
incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended. Subject to adjustment by reason of
stock dividend or split or other similar capital adjustments, an
aggregate of 120,000 shares of Common Stock are reserved for
issuance under the Option Plan.
The administration of the Option Plan is carried out by a
committee ("Committee") consisting of not less than two
non-employee directors of the Company selected by and serving at
the pleasure of the Company's Board of Directors. The Committee,
unless permitted by holders of the majority of outstanding Common
Stock, shall not have any discretion to determine or vary any
matters which are fixed under the terms of the Option Plan.
Fixed matters include, but are not limited to, which non-employee
directors shall receive awards, the number of shares of the
Common Stock subject to each option award, the exercise price of
any option, and the means of acceptable payment for the exercise
of the option. The Committee shall have the authority to
otherwise interpret the Option Plan and make all determinations
necessary or advisable for its administration. All decisions of
the Committee are subject to approval of the Company's Board of
Directors. Current members of the Committee are Messrs. Zettler
and Richardson.
Under the terms of the Option Plan, each option shall be
exercisable in full one year after the date of grant. Unless
special circumstances exist, each option shall expire on the
later of the tenth anniversary of the
123
date of its grant or two years after the non-employee director
retires. Each non-employee director initially receives a one-
time option to purchase 5,000 shares of Common Stock following
his or her election to the Board of Directors. Thereafter, each
non-employee director receives a grant to purchase 1,000 shares
of Common Stock each year, for five years following his or her
election to the Board of Directors.
The option exercise price is the greater of $7.625 or the
fair market value, as defined under the Option Plan, of the
Common Stock on the date such options are granted. The per share
exercise price of options granted during 1994 pursuant to the
Option Plan was $20.25.
As of December 31, 1994, options representing 71,000 shares
have been granted to the current five non-employee directors and
two former non-employee directors and a director who has since
become an employee. Of the outstanding options, options
representing 66,000 shares are currently exercisable. The
balance may not be exercised until May 25, 1995. As of
December 31, 1994, none of the options granted pursuant to the
Option Plan have been exercised.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth the number of shares of
Common Stock subject to options held by the Company's directors
and those executive officers named in the Summary Compensation
Table, by all directors and executive officers as
a group, and by persons beneficially owning more than 5% of the
outstanding Common Stock at the close of business on March 28,
1995. The address for all directors and executive officers of
the Company is: Showboat, Inc., 2800 Fremont Street, Las Vegas,
Nevada 89104. Security ownership was verified with filings with
the Securities and Exchange Commission received by the Company,
and according to individual verification as of March 28, 1995,
which the Company solicited and received from the beneficial
owners listed in the following table:
124
Name Amount and Nature of Beneficial Ownership
Number of Number of Total Number of Percent
Shares Shares Shares
Beneficially Subject to Beneficially
Owned Options Owned
Excluding Beneficially
Shares Owned(2)
Subject to
Options(1)
J.K. Houssels(3) 1,183,077 28,000 1,211,077 7.9
(4)
William C. 5,000 10,000 15,000 *
Richardson
John D. Gaughan 174,824 10,000 184,824 1.2
(5)
Jeanne S. Stewart 404,686 10,000 414,686 2.7
Frank A. Modica 71,169(6) 32,000 121,169 *
H. Gregory Nasky 15,760(7) 15,000 30,760 *
J. Kell Houssels, 93,017 40,000 133,017 *
III(8)
George A. Zettler 1,958 10,000 11,958 *
Carolyn M. Sparks 350,058 8,000 358,058 2.3
(9)
Mark J. Miller(10) 12,700 16,000 28,700 *
All Directors and 2,353,099 237,400 2,590,499 16.6
Executive Officers
as a Group
(15 persons)
FMR Corp. 937,150 0 937,150 6.1
(11)
State of Wisconsin 1,461,000 0 1,461,000 9.5
Investment Board (12)
MacKay-Shields 955,800 0 955,800 6.2
Financial (13)
Corporation
Massachusetts 983,550 0 983,550 6.4
Financial (14)
Services Company
_____________________
* Beneficial ownership does not exceed 1% of the outstanding Common
Stock.
(1)Unless otherwise specifically stated herein, each person has sole
voting power and sole investment power as to the identified Common
Stock ownership.
(2)Shares subject to currently exercisable options or otherwise
subject to issuance within 60 days of March 28, 1995, pursuant to
either the 1989 Directors' Stock Option Plan, the 1989 Executive Long
Term Incentive Plan, or the 1994 Executive Long Term Incentive Plan.
(3)Mr. Houssels may be deemed to be a control person. Mr. Houssels is
the Chairman of the Board of the Company.
(4)Mr. Houssels' shareholdings include 11,450 shares held in his
individual retirement account and 35,700 shares as a trustee of the
J.K. Houssels, Jr., 1976 Trust Agreement. He disclaims beneficial
ownership of 8,800 shares owned by his wife and such shares are
excluded from this table.
(5)Mr. Gaughan's shareholdings include 86,000 shares held by Exber,
Inc., a Nevada corporation controlled by Mr. Gaughan, and 69,674
shares over which he shares voting power and investment power with his
wife.
(6)Mr. Modica's shareholdings include 71,169 shares held by him as
trustee of the Frank A. Modica Revocable Family Trust. In 1994, Mr.
Modica was awarded 10,000 restricted shares of Common Stock and
options to purchase 40,000 shares of Common Stock pursuant to the 1994
Executive Long Term Incentive Plan. Mr. Modica forfeited his right to
those restricted shares and options as a result of his retirement as
an officer of the Company on February 28, 1995.
(7)Mr. Nasky is the Secretary of the Company. Mr. Nasky's
shareholdings include 1,250 shares owned by Mr. Nasky's wife over
which he does not have voting power or investment power.
(8)Mr. Houssels, III is the President and Chief Executive Officer of
the Company.
(9)Mrs. Sparks' shareholdings include 227,000 shares beneficially
owned by her as a co-trustee of the Fred L. Morledge Family Trust and
123,058 shares beneficially owned by her as a co-trustee of The Sparks
Family Trust.
(10)Mr. Miller is the Executive Vice President-Operations of the
Company. Mr. Miller is also the President and Chief Executive Officer
of Atlantic City Showboat, Inc., a subsidiary of the Company.
125
(11)FMR Corp. ("FMR"), the parent holding company of Fidelity
Management & Research Company, reported on a Schedule 13G dated
February 13, 1995, that it has sole investment discretion with respect
to all of such shares and sole voting discretion with respect to
51,400 of such shares. FMR's address is 82 Devonshire Street, Boston,
MA 02109.
(12)State of Wisconsin Investment Board ("Investment Board"), a
Wisconsin State Agency, reported on a Schedule 13G dated February 13,
1995, that it has sole voting and investment discretion to all such
shares. The Investment Board's address is P.O. Box 7842, Madison,
Wisconsin 53707.
(13)MacKay-Shields Financial Corporation ("MSFC") reported on a
Schedule 13G dated February 10, 1995, that it has sole voting and
investment discretion to all such shares. With respect to such
shares, MSFC beneficially owns 854,800 shares or 5.4% of the total
outstanding Common Stock at December 31, 1994, on behalf of Main Stay
High Yield Corporate Bond Fund, an investment company registered under
the Investment Company Act of 1940. MSFC's address is 9 West 57th
Street, New York, New York 10019.
(14)Massachusetts Financial Services Company ("MFSC") reported on a
Schedule 13G dated February 6, 1995, that it has sole voting and
investment discretion as to all such shares. MFSC's address is 500
Boylston Street, Boston, Massachusetts 02116.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company entered into a five-year lease agreement with Exber, Inc.
commencing on February 15, 1994, for land nearby the Las Vegas
Showboat. Exber, Inc., a Nevada corporation controlled by John D.
Gaughan, a Director of the Company, has rights to the land pursuant to
a sublease agreement dated November 5, 1966. The Company pays monthly
rent of $13,095.80 and has an option to purchase the land and all of
Exber, Inc.'s rights thereto for the purchase price of $1,400,000.00.
The Company's subsidiary, ACSI, leases space at the Atlantic City Showboat
to R. Craig Bird for the operation of a gift shop and certain vending machines.
During 1994, Mr. Bird paid rent and vending commissions to ACSI in the amount
of $100,000 and $240,394, respectively.
Carolyn M. Sparks, a director of the Company, is a co-owner of
International Insurance Services, Ltd. The Company engaged
International Insurance Services, Ltd. as its insurance adjuster for
the Company's Nevada subsidiaries. During 1994, the Company paid
International Insurance Services, Ltd. $100,081.00 for services
rendered to the Company.
At all times during 1994, H. Gregory Nasky was a director of the
Company and the Secretary of the Company and its subsidiaries.
Additionally, Mr. Nasky was a member of the law firm of Vargas &
Bartlett, previous general counsel to the Company. On March 1, 1994,
Vargas & Bartlett was reorganized from which the law firm of Kummer
Kaempfer Bonner & Renshaw was formed and it succeeded as general
counsel to the Company. Mr. Nasky is of counsel to Kummer Kaempfer
Bonner & Renshaw. During 1994, the law firm of Vargas & Bartlett was
paid $13,435.50 by the Company's Nevada gaming subsidiary, $2,275.00
by the Company's New Jersey subsidiaries, $75,727.50 by the Company in
connection with its expansion opportunities, and $37,369.00 by the
Company for other parent company matters. During 1994, the law firm
of Kummer Kaempfer Bonner & Renshaw was paid $64,128.50 by the
Company's Nevada gaming subsidiary, $46,582.55 by the Company's New
Jersey subsidiaries, $141,853.49 by the Company in connection with its
expansion opportunities, $165,095.50 by the Company in connection with
a public offering, and $174,229.00 by the Company for other parent
company matters.
126
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(l) The following consolidated financial statements of the Company
and its subsidiaries have been filed as a part of this report
(See "Item 8: Financial Statements and Supplementary Data"):
Independent Auditors' Report;
Consolidated Balance Sheets at December 31, 1994 and 1993;
Consolidated Statements of Income for the Years Ended
December 31, 1994, 1993 and 1992;
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1994, 1993 and 1992;
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992; and
Notes to Consolidated Financial Statements
(2) The following additional information for the Years Ended
December 31, 1994, 1993 and 1992 is submitted herewith, SEE ITEM
8., FINANCIAL STATEMENT AND SUPPLEMENTARY DATA:
All other schedules are omitted because they are not
required, inapplicable, or the information is otherwise shown in
the financial statements or notes thereto.
(3) Exhibits(1)
127
EXHIBIT
NUMBER DESCRIPTION(2)
3.01 Restated Articles of Incorporation of the Company dated July
23, 1994, is incorporated herein by reference from the Company's
Amendment No. 1 to Registration Statement on Form S-3 dated July
8, 1994 (file no. 33-54325), Item 16, Exhibit 4.02.
3.02 Restated Bylaws of the Company dated February 25, 1993, is
incorporated herein by reference from the Company's Form 10-K for
the Year Ended December 31, 1992, Part IV, Item 14(a)(3),
Exhibit 3.02.
4.01 Specimen common stock certificate for the Common Stock of
the Company is incorporated herein by reference from the
Company's Amendment No. 1 to Registration Statement on Form S-
3 dated July 8, 1994 (file no. 33-54325), Item 16, Exhibit 4.01.
4.02 Indenture for the 9 1/4% First Mortgage Bonds due 2008 among
the Company, OSI, ACSI, SBOC, and Trustee dated May 18, 1993;
Guaranty in favor of the Trustee issued by OSI, ACSI and SBOC;
and Form of Bond Certificate for the 9 1/4% First Mortgage Bonds
due 2008 are incorporated herein by reference from the Company's
Form 8-K dated May 18, 1993, Item 5, Exhibit 28.01. First
Supplemental Indenture for the 9 1/4% First Mortgage Bonds among
the Company, OSI, ACSI, SBOC and Trustee dated July 18, 1994;
Showboat Development Company Security and Pledge Agreement
between SDC and the Trustee dated July 18, 1994; and Showboat
Louisiana, Inc. Security and Pledge Agreement between SLI and the
Trustee dated July 18, 1994.
______________
(1)Copies of exhibits to this form 10-K will be furnished to any
requesting security holder who furnishes the Company a list identifying the
exhibits to be copied by the Company at a charge of $.25 per page.
(2)All exhibits which are incorporated by reference are incorporated
from the Company's respective periodic reports, Securities and Exchange
Commision File Number 1-7123
128
4.03 Indenture for the 13% Senior Subordinated Notes Due 2009 by
and among the Company, OSI, ACSI, SBOC, and Trustee dated August
10, 1994; Guaranty in favor of the Trustee issued by OSI, ACSI
and SBOC; and Form of Note Certificate for the 13% Senior
Subordinated Notes due 2009 are incorporated herein by reference
from the Company's Form 8-K dated August 10, 1994, Item 5,
Exhibit 4.01.
10.01 Ground Lease between OSI and Resorts International, Inc.
("Resorts") dated October 26, 1983 is incorporated by reference
herein from the Company's Form 8-K, as amended by the Form 8,
filed with the Securities and Exchange Commission on November 28,
1983. Assignment and Assumption of Leases between OSI and ACSI
dated December 3, 1985; First Amendment to Agreement between
Resorts and ACSI dated January 15, 1985; Second Amendment to
Lease Agreement between Resorts and ACSI dated July 5, 1985 are
incorporated herein by reference from the Form 10-K for the Year
Ended June 30, 1985, Part IV, Item 14(a)(3), Exhibit 10.02.
Restated Third Amendment to Lease Agreement dated August 28, 1986
between Resorts and ACSI is incorporated herein by reference from
the Form 10-K for the Year Ended June 30, 1986, Part IV, Item
14(a)(3), Exhibit 10.08; Fourth Amendment to Lease Agreement by
and between Resorts and ACSI dated December 16, 1986; Fifth
Amendment to Lease Agreement between Resorts and ACSI dated March
2, 1987; Sixth Amendment to Lease Agreement between Resorts and
ACSI dated March 13, 1987; Indemnity Agreement among Resorts,
ACSI, and OSI dated January 15, 1985; and Amended Indemnity Agreement
among Resorts, ACSI, and OSI dated December 3, 1985 are
incorporated herein by reference from the Company's Form 10-K for
the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit
10.02; and Seventh Amendment to Lease Agreement between Resorts
and ACSI dated October 18, 1988 is incorporated herein by
reference from the Company's Form 8-K dated November 16, 1988,
Item 7(c), Exhibit 28.01; and Eighth Amendment to Lease Agreement
by and between ACSI and Resorts International, Inc. dated May 18,
1993 is incorporated herein by reference from the Company's Form 8-K,
dated May 18, 1993, Item 5, Exhibit 28.06.
10.02 Tax Allocation Agreement among the Company and each of its
subsidiaries dated effective May 10, 1993, is incorporated herein by
reference from the Company's Form 10-K for the Year Ended June 30,
1987, Part IV, Item 14(a)(3), Exhibit 10.11. First Amendment to Tax
Allocation Agreement among the Company and each of its subsidiaries
dated effective May 10, 1993 is incorporated herein by reference from
the Company's Form 10-K for the Year Ended December 31, 1993,
Part IV, Item 14(a)(3), Exhibit 10.07.
129
10.03 Promissory Note in the principal amount of $56,801.75 between the
Company and Frank A. Modica dated December 31, 1993 is
incorporated herein by reference from the Company's Form 10-K for
the Year Ended December 31, 1993, Part IV, Item 14(a)(3), Exhibit
10.08.
10.04 Form of Indemnification Agreement between SBO and each director
and officer of the Company is incorporated herein by reference
from the Company's Form 10-K for the Year Ended December 31,
1987, Part IV, Item 14(a)(3), Exhibit 10.13.
10.05 Statement regarding the Company's Incentive Bonus Plans is
incorporated herein by reference from the Company's Form 10-K for
the Year Ended December 31, 1992, Part IV, Item 14(a)(3),
Exhibit 10.12.
10.06 Parent Services Agreement by and between Company and ACSI dated
November 21, 1985 is incorporated herein by reference from the
Company's Form 8-K dated November 25, 1985, Item 7(c), Exhibit
10.01. Amendment No. 1 to Parent Services Agreement by and
between the Company and ACSI dated February 1, 1987 is
incorporated herein by reference from the Company's Form 10-K for
the Year Ended June 30, 1987, Part IV, Item 14(a)(3), Exhibit
10.17. Amendment No. 2 to Parent Services Agreement by and
between the Company and ACSI dated December 31, 1990 is
incorporated herein by reference from the Company's Form 8-K
dated December 31, 1990, Item 7(c), Exhibit 28.01. Amendment
No. 3 to Parent Services Agreement by and between the Company and
ACSI dated May 8, 1991, is incorporated herein by reference from
the Company's Form 10-K for the Year Ended December 31, 1991,
Part IV, Item 14(a)(3), Exhibit 10.14. Amendment No. 4 to Parent
Services Agreement by and between the Company and ACSI dated
August 17, 1993, is incorporated herein by reference from the
Company's Form 10-K for the Year Ended December 31, 1993, Part IV,
Item 14(a)(3), Exhibit 10.11.
10.07 Closing Escrow Agreement among Housing Authority and Urban
Redevelopment Agency of the City of Atlantic City, Resorts, ACSI,
Trump Taj Mahal Associates Limited Partnership, and Clapp &
Eisenberg, P.C. dated as of September 21, 1988; Agreement as to
Assumption of Obligations with respect to Properties among ACSI,
Trump Taj Mahal Realty Corp. dated as of September 21, 1988;
First Amendment of Agreement as to Assumption of Obligations with
respect to Properties among ACSI, Trump Taj Mahal Associates
Limited Partnership, and Trump Taj Mahal Realty Corp. dated as of
September 21, 1988; Settlement Agreement among ACSI, Trump Taj
Mahal Associates Limited Partnership, Trump Taj Mahal Realty
Corp., Resorts and the Housing Authority and Urban Renewal
Redevelopment Agency of the City of Atlantic City dated October
18, 1988; Tri-Party Agreement among Resorts
130
International, Inc., ACSI and Trump Taj Mahal Associates
Limited Partnership dated October 18, 1988; Declaration of
Easement and Right of Way Agreement between the Housing Authority
and Redevelopment Agency of the City of Atlantic City, as
grantor, and ACSI, as grantee, dated October 18, 1988; and
Certificate of Trump Taj Mahal Associates Limited Partnership and
Resorts, dated November 16, 1988 are incorporated herein by
reference from the Company's Form 8-K dated November 16, 1988,
Item 7(c), Exhibit 28.01. Revised Second Amendment to Agreement
as to Assumption of Obligations with respect to Properties among
ACSI, Trump Taj Mahal Associates Limited Partnership and Trump
Taj Mahal Realty Corp. dated as of May 24, 1989, is incorporated
herein by reference from the Company's Form 10-K for the Year
Ended December 31, 1989, Part IV, Item 14(a)(3), Exhibit 10.17.
10.08 Lease between the Company and Showboat Operating Company, dated
January 1, 1989 is incorporated herein by reference from the
Company's Form 8-K dated January 1, 1989, Item 7(c), Exhibit
28.01.
10.09 Management Services Agreement between the Company and SBOC
dated January 1, 1989, is incorporated herein by reference from the
Company's Form 8-K dated January 1, 1989, Item 7(c), Exhibit 28.03.
10.10 Promissory Note in the principal amount of $20,400.69 among the
Company, R. Craig Bird and Debra E. Bird dated August 5, 1993, is
incorporated herein by reference from the Company's Form 10-K for
the Year Ended December 31, 1993, Part IV, Item 14(a)(3), Exhibit
10.15.
10.11 Securities Purchase Contract between the Casino Reinvestment
Development Authority and ACSI dated March 29, 1988, is
incorporated herein by reference from the Company's Form 10-K for
the Year Ended December 31, 1988, Part IV, Item 14(a)(3), Exhibit
10.23.
10.12 Lease of Retail Store No. 7 among ACSI, R. Craig Bird and Debra E.
Bird dated April 10, 1987; and Guaranty of Lease among ACSI, R.
Craig Bird and Debra E. Bird are incorporated herein by reference
from the Company's Form 10-K for the Year Ended December 31,
1988, Part IV, Item 14(a)(3), Exhibit 10.24.
10.13 ACSI Executive Health Examinations Plan effective date January 1,
1989 is incorporated herein by reference from the Company's Form
10-K for the Year Ended December 31, 1989, Part IV, Item
14(a)(3), Exhibit 10.24.
10.14 ACSI Executive Medical Reimbursement Plan, effective date August
15, 1991, is incorporated herein by reference from the Company's
Form 10-K for the Year Ended December 31, 1991, Part IV, Item
14(a)(3), Exhibit 10.23.
131
10.15 Showboat, Inc. 1989 Long Term Incentive Plan as Amended and
Restated February 25, 1993, is incorporated herein by reference from
the Company's Form 10-K for the Year Ended December 31, 1992, Part IV
Item 14(a)(3), Exhibit 10.23.
10.16 Letter agreement dated September 23, 1992 between Trump Taj Mahal
Associates and ACSI and letter agreement dated October 26, 1992 to
Trump Taj Mahal Associates from Atlantic City Showboat, Inc. are
incorporated herein by reference from the Company's Form 10-K for the
Year Ended December 31, 1992, Part IV, Item 14(a)(3), Exhibit 10.24.
10.17 Showboat, Inc. 1989 Directors' Stock Option Plan as Amended and
Restated February 25, 1993, is incorporated herein by reference from
the Company's Form 10-K for the Year Ended December 31, 1992,
Part IV, Item 14(a)(3), Exhibit 10.27.
10.18 Deed of Trust, Assignment of Rents, Security Agreement made by
the Company to Nevada Title Company for the benefit of Trustee
dated as of May 18, 1993; Showboat, Inc. Security and Pledge
Agreement between the Company and The Trustee dated as of May 18,
1993; Trademark Security Agreement by the Company in favor of the
Trustee dated as of May 18, 1993; Unsecured Indemnity Agreement
executed by the Company in favor of the Trustee dated May 18, 1993;
and Showboat Operating Company Security Agreement between SBOC and
the Trustee dated as of May 18, 1993, are incorporated by reference
from the Company's Form 8-K, dated May 18, 1993, Item 5,
Exhibit 28.02.
10.19 Leasehold Mortgage, Assignment of Rents, Security Agreement
("Guaranty") made by ACSI for the benefit of Trustee dated May
18, 1993; Assignment of Leases and Rents by and between ACSI and
Trustee dated as of May 18, 1993; and Ocean Showboat, Inc.
Security and Pledge Agreement between OSI and the Trustee dated
as of May 18, 1993 are incorporated by reference from the
Company's Form 8-K, dated May 18, 1993, Item 5, Exhibit 28.03.
132
10.20 Intercompany Note in the principal amount of $215.0 million,
dated as of May 18, 1993; Assignment of Lease and Rents by and
between ACSI and the Company dated as of May 18, 1993; and Issuer
Collateral Assignment executed by ACSI in favor of Trustee dated
May 18, 1993 are incorporated by reference from the Company's
Form 8-K, dated May 18, 1993, Item 5, Exhibit 28.04.
10.21 First Amendment to the Leasehold Mortgage, Assignment of Rents
and Security Agreement among ACSI and the Company dated July 9,
1993 is incorporated by reference from the Company's Form 8-K,
dated July 7, 1993, Item 5, Exhibit 28.01.
10.22 First Amendment to the Leasehold Mortgage, Assignment of Rents
and Security Agreement among ACSI and IBJ Schroder Bank & Trust
Company dated July 9, 1993 is incorporated by reference from the
Company's Form 8-K, dated July 7, 1993, Item 5, Exhibit 28.02.
10.23 Assignment of Rights under Agreement by ACSI, as assignee, to IBJ
Schroder Bank & Trust Company dated July 9, 1993 is incorporated
by reference from the Company's Form 8-K, dated July 7, 1993,
Item 5, Exhibit 28.03.
10.24 Form of Deed for Sale of Land for Private Redevelopment for Tract
1 and Tract 2 each dated July 7, 1993 is incorporated by
reference from the Company's Form 8-K, dated July 7, 1993, Item
5, Exhibit 28.04.
10.25 Use and Occupancy Agreement between ACHA and ACSI dated July 7,
1993 is incorporated by reference from the Company's Form 8-K,
dated July 7, 1993, Item 5, Exhibit 28.05.
10.26 Standard Form of Agreement between Owner and Contractor (AIA
Document A111) executed by ACSI and T.N. Ward Company dated July
2, 1993 is
133
incorporated by reference from the Company's Form 8-K, dated
July 2, 1993, Item 5, Exhibit 28.01.
10.27 Standard Form of Agreement Between Owner and Contractor (AIA
Document A111) executed by ACSI and T.N. Ward Company dated
September 15, 1993 is incorporated by reference from the
Company's Form 8-K, dated July 2, 1993, Item 5, Exhibit 28.02.
10.28 Showboat Star Partnership Agreement between Star Casino, Inc. and
Showboat Louisiana, Inc. dated July 2, 1993 and First Amendment
to Showboat Star Partnership Agreement between Star Casino, Inc.
and Showboat Louisiana, Inc. dated July 20, 1993 are incorporated
by reference from the Company's Form 8-K, dated July 2, 1993,
Item 5, Exhibit 28.01; Second Amendment to Showboat Star
Partnership Agreement between Star Casino, Inc. and Showboat
Louisiana, Inc. dated August 1, 1993 and Third Amendment to
Showboat Star Partnership Agreement between Star Casino, Inc and
Showboat Louisiana, Inc. dated March 1, 1994 are incorporated by
reference from the Company's Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(a)(3), Exhibit 10.35. Fourth
Amendment to Showboat Star Partnership Agreement between Star
Casino, Inc. and Showboat Louisiana, Inc. dated October 1, 1994,
Fifth Amendment to Showboat Star Partnership Agreement between
Star Casino, Inc. and Showboat Louisiana, Inc. dated January 26,
1995 and Sixth Amendment to Showboat Star Partnership Agreement
between Star Casino, Inc. and Showboat Louisiana, Inc. dated
March 17, 1995.
10.29 Management Agreement by and between Lake Pontchartrain Showboat,
Inc. and Star Casino, Inc. dated May 24, 1993 is incorporated by
reference from the Company's Form 8-K, dated July 2, 1993, Item
5, Exhibit 28.02.
10.30 Marine Management Services Agreement between Louisiana Riverboat
Services, Inc. and Showboat Star Partnership dated September 30,
1993 is incorporated herein by reference from the Company's Form
10-K for the Year Ended December 31, 1993, Part IV, Item
14(a)(3), Exhibit 10.37.
10.31 Agreement between Showboat, Inc., Showboat Indiana, Inc.,
Showboat Operating Company, Showboat Development Company,
Showboat Indiana Investment Limited Partnership and Waterfront
Entertainment and Development, Inc. dated September 13, 1993; and
Showboat Marina Partnership Agreement between Waterfront
Entertainment and Development, Inc. and Showboat Investment
Limited Partnership dated January 31, 1994 is incorporated herein
by reference from the Company's Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(a)(3), Exhibit 10.38.
134
10.32 Lease between the Company and Exber, Inc. effective January 14,
1994; and Sublease between Dodd Smith and John D. Gaughan and
Leslie C. Schwartz, dated November 5, 1966 is incorporated herein
by reference from the Company's Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(a)(3), Exhibit 10.39.
10.33 Lease between Showboat Star Partnership and Orleans Levee
District dated February 18, 1993 and First Amendment to Lease
dated August 27, 1993 are incorporated herein by reference from
the Company's Form 10-K for the Year Ended December 31, 1993,
Part IV, Item 14(a)(3), Exhibit 10.40.
10.34 Lease between Showboat Star Partnership and Orleans Levee
District dated February 1, 1994 is incorporated herein by
reference from the Company's Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(a)(3), Exhibit 10.41.
10.35 Lease between Showboat Operating Company and Ventroy Associates
executed on December 20, 1993 is incorporated by reference from
the Company's Form 10-K for the Year Ended December 31, 1993,
Part IV, Item 14(a)(3), Exhibit 10.42.
10.36 Showboat, Inc. 1994 Executive Long Term Incentive Plan, effective
May 25, 1994.
10.37 Showboat, Inc. Supplemental Executive Retirement Plan, effective
April 1, 1994.
10.38 Showboat, Inc. Restoration Plan, effective April 1, 1994.
10.39 Form of Severance Agreement between the Company and certain
executive officer and key employees of the Company and its
subsidiaries.
10.40 Operating Agreement dated January 25, 1995, between Showboat
Missouri, Inc. and Randolph Riverboat Company, Inc.; Management
Agreement dated January 25, 1995, between SBOC and Randolph
Riverboat Company, Inc.; Administrative Services Agreement dated
January 25, 1995 between SBOC and Randolph Riverboat Company,
L.L.C.; Trademark License Agreement dated January 25, between the
Company and Randolph Riverboat Company, L.L.C.
135
10.41 Purchase and Sale Agreement dated January 4, 1995, between
Showboat Star Partnership and Belle of Orleans, L.L.C.;
Assignment of Leases dated January 4, 1995 between Showboat Star
Partnership and Belle of Orleans, L.L.C.; Sublease dated January
4, 1995, between Showboat Star Partnership and Belle of Orleans,
L.L.C.
10.42 Non-Negotiable Mortgage Promissory Note dated December 28, 1994,
in the principal amount of $8,850,000, by Rockingham Venture,
Inc. in favor of the Company; Mortgage and Security Agreement
dated December 28, 1994, between Rockingham Venture, Inc. and the
Company.
10.43 Promissory Note dated January 1, 1994, in the principal amount of
$18,600,000 by Showboat Louisiana, Inc. in favor of the Company,
which Promissory Note expired on March 1, 1994; Promissory Note dated
March 1, 1994, in the principal amount of $27,905,388 by Showboat
Louisiana, Inc. in favor of the Company, which Promissory Note
expired on December 31, 1994; and Promissory Note dated January 1,
1995, in the principal amount of $23,807.832.11 by Showboat
Louisiana, Inc. in favor of the Company.
10.44 Promissory Note dated March 2, 1995, in the principal amount of
$25,000,000 by Lake Pontchartrain Showboat, Inc. and Showboat
Louisiana, Inc. in favor of Showboat, Inc.
10.45 Promissory Note dated March 19, 1995, in the principal amount of
$15,000,000 by Atlantic City Showboat, Inc. and the Company.
10.46 Lease dated December 22, 1994, between Housing Authority and
Urban Redevelopment Agency of the City of Atlantic City and
Atlantic City Showboat, Inc.; Tri-Party Agreement dated May 26,
1994, among Housing Authority and Urban Redevelopment Agency of
the City of Atlantic City, Forest City Ratner Companies and
Atlantic City Showboat, Inc.; Terms and Conditions Part II of
Contract for Sale of Land for Private Redevelopment between
Housing Authority and Urban Redevelopment Agency of the City of
Atlantic City and Atlantic City Showboat, Inc.; and Rider to
Contract for Sale of Land for Private Redevelopment between
Housing Authority and Urban Redevelopment Agency of the City of
Atlantic City and Atlantic City Showboat, Inc.
21.01 List of Subsidiaries.
136
23.01 Consent of KPMG Peat Marwick.
27.01 Financial Data Schedule for the Company's Form 10-K for the Year
Ended December 31, 1994.
99.01 Warrant Agreement dated as of May 6, 1994, by and between the
Company and DLJ Bridge Finance, Inc., is incorporated by
reference from the Company's Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(A)(3), Exhibit 99.01.
(b) REPORTS ON FORM 8-K.
None.
137
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by this undersigned, thereunto duly authorized.
REGISTRANT: SHOWBOAT, INC.
By: /S/ J.K. HOUSSELS, III
J.K. HOUSSELS, III,
President and Chief Executive
Officer (principal executive
officer)
DATE: March 28, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
March 28, 1995 By: /S/ J.K. HOUSSELS
J.K. Houssels, Chairman of the
Board
March 28, 1995 By: /S/ J.K. HOUSSELS, III
J.K. Houssels, III, President
and Chief Executive Officer
and Director
March 28, 1995 By: /S/ LEANN SCHNEIDER
Leann Schneider, Vice
President-Finance and Chief
Financial Officer
(principal accounting officer)
March 28, 1995 By: /S/ WILLIAM C. RICHARDSON
William C. Richardson,
Director
March 28, 1995 By: /S/ JOHN D. GAUGHAN
John D. Gaughan, Director
March 28, 1995 By: /S/ JEANNE S. STEWART
Jeanne S. Stewart, Director
March 28, 1995 By: /S/ FRANK A. MODICA
Frank A. Modica, Director
138
March 28, 1995 By: /S/ H. GREGORY NASKY
H. Gregory Nasky, Director, Executive
Vice President, and Secretary
March 28, 1995 By: /S/ GEORGE A. ZETTLER
George A. Zettler, Director
March __, 1995 By:
Carolyn M. Sparks, Director
139
EXHIBIT INDEX
Exhibit
NUMBER DESCRIPTION(1)
3.01 Restated Articles of Incorporation of the
Company dated July 23, 1994, is incorporated
herein by reference from the Company's Amendment
No. 1 to Registration Statement on Form S-3 dated
July 8, 1994 (file no. 33-54325), Item 16, Exhibit
4.02.
3.02 Restated Bylaws of the Company dated February
25, 1993, is incorporated herein by reference from
the Company's Form 10-K for the Year Ended
December 31, 1992, Part IV, Item 14(a)(3),
Exhibit 3.02.
4.01 Specimen common stock certificate for the
Common Stock of the Company is incorporated herein
by reference from the Company's Amendment No. 1 to
Registration Statement on Form S-3 dated July 8,
1994 (file no. 33-54325), Item 16, Exhibit 4.01.
4.02 Indenture for the 9 1/4% First Mortgage Bonds
Due 2008 among the Company, OSI, ACSI, SBOC, and
Trustee dated May 18, 1993; Guaranty in favor of
the Trustee issued by OSI, ACSI and SBOC; and Form
of Bond Certificate for the 9 1/4% First Mortgage
Bonds due 2008 are incorporated herein by
reference from the Company's Form 8-K dated May
18, 1993, Item 5, Exhibit 28.01. First
Supplemental Indenture for the 9 1/4% First
Mortgage Bonds among the Company, OSI, ACSI, SBOC
and Trustee dated July 18, 1994; Showboat
Development Company Security and Pledge Agreement
between SDC and the Trustee dated July 18, 1994;
and Showboat Louisiana, Inc. Security and Pledge
Agreement between SLI and the Trustee dated July
18, 1994.
4.03 Indenture for the 13% Senior Subordinated
Notes Due 2009 by and among the Company, OSI,
ACSI, SBOC, and Trustee dated August 10, 1994;
Guaranty in favor of the Trustee issued by OSI,
ACSI and SBOC; and Form of Note Certificate for
the 13% Senior Subordinated Notes due 2009 are
incorporated herein by reference from the
Company's Form 8-K dated August 10, 1994, Item 5,
Exhibit 4.01.
_______________
(1)All exhibits which are incorporated by reference are
incorporated from the Company's respective periodic reports,
Securities and Exchange Commision File Number 1-7123
140
10.01 Ground Lease between OSI and Resorts
International, Inc. ("Resorts") dated October 26,
1983 is incorporated by reference herein from the
Company's Form 8-K, as amended by the Form 8,
filed with the Securities and Exchange Commission
on November 28, 1983. Assignment and Assumption
of Leases between OSI and ACSI dated December 3,
1985; First Amendment to Agreement between Resorts
and ACSI dated January 15, 1985; Second Amendment
to Lease Agreement between Resorts and ACSI dated
July 5, 1985 are incorporated herein by reference
from the Form 10-K for the Year Ended June 30,
1985, Part IV, Item 14(a)(3), Exhibit 10.02.
Restated Third Amendment to Lease Agreement dated
August 28, 1986 between Resorts and ACSI is
incorporated herein by reference from the Form 10-
K for the Year Ended June 30, 1986, Part IV, Item
14(a)(3), Exhibit 10.08; Fourth Amendment to Lease
Agreement by and between Resorts and ACSI dated
December 16, 1986; Fifth Amendment to Lease
Agreement between Resorts and ACSI dated March 2,
1987; Sixth Amendment to Lease Agreement between
Resorts and ACSI dated March 13, 1987; Indemnity
Agreement among Resorts, ACSI, and OSI dated
January 15, 1985; and Amended Indemnity Agreement
among Resorts, ACSI, and OSI dated December 3,
1985 are incorporated herein by reference from the
Company's Form 10-K for the Year Ended June 30,
1987, Part IV, Item 14(a)(3), Exhibit 10.02;
Seventh Amendment to Lease Agreement between
Resorts and ACSI dated October 18, 1988 is
incorporated herein by reference from the
Company's Form 8-K dated November 16, 1988, Item
7(c), Exhibit 28.01; Eighth Amendment to Lease
Agreement by and between ACSI and Resorts
International, Inc. dated May 18, 1993 is
incorporated herein by reference from the
Company's Form 8-K, dated May 18, 1993, Item 5,
Exhibit 28.06.
10.02 Tax Allocation Agreement among the Company and
each of its subsidiaries dated effective May 10,
1993, is incorporated herein by reference from the
Company's Form 10-K for the Year Ended June 30,
1987, Part IV, Item 14(a)(3), Exhibit 10.11. First
Amendment to Tax Allocation Agreement among the
Company and each of its subsidiaries
141
dated effective May 10, 1993 is incorporated
herein by reference from the Company's Form 10-K
for the Year Ended December 31, 1993, Part IV,
Item 14(a)(3), Exhibit 10.07.
10.03 Promissory Note in the principal amount of
$56,801.75 between the Company and Frank A. Modica
dated December 31, 1993 is incorporated herein by
reference from the Company's Form 10-K for the
Year Ended December 31, 1993, Part IV, Item
14(a)(3), Exhibit 10.08.
10.04 Form of Indemnification Agreement between SBO and
each director and officer of the Company is incor
porated herein by reference from the Company's
Form 10-K for the Year Ended December 31, 1987,
Part IV, Item 14(a)(3), Exhibit 10.13.
10.05 Statement regarding the Company's Incentive Bonus
Plans is incorporated herein by reference from the
Company's Form 10-K for the Year Ended
December 31, 1992, Part IV, Item 14(a)(3),
Exhibit 10.12.
10.06 Parent Services Agreement by and between Company
and ACSI dated November 21, 1985 is incorporated
herein by reference from the Company's Form 8-K
dated November 25, 1985, Item 7(c), Exhibit 10.01.
Amendment No. 1 to Parent Services Agreement by
and between the Company and ACSI dated February 1,
1987 is incorporated herein by reference from the
Company's Form 10-K for the Year Ended June 30,
1987, Part IV, Item 14(a)(3), Exhibit 10.17.
Amendment No. 2 to Parent Services Agreement by
and between the Company and ACSI dated December
31, 1990 is incorporated herein by reference from
the Company's Form 8-K dated December 31, 1990,
Item 7(c), Exhibit 28.01 and Amendment No. 3 to
Parent Services Agreement by and between the
Company and ACSI dated May 8, 1991, is
incorporated herein by reference from the
Company's Form 10-K for the Year Ended December
31, 1991, Part IV, Item 14(a)(3), Exhibit 10.14.
Amendment No. 4 to Parent Services Agreement by
and between the Company and ACSI dated August
142
17, 1993, is incorporated herein by reference
from the Company's Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(a)(3), Exhibit
10.11.
10.07 Closing Escrow Agreement among Housing Authority
and Urban Redevelopment Agency of the City of
Atlantic City, Resorts, ACSI, Trump Taj Mahal
Associates Limited Partnership, and Clapp &
Eisenberg, P.C. dated as of September 21, 1988;
Agreement as to Assumption of Obligations with
respect to Properties among ACSI, Trump Taj Mahal
Realty Corp. dated as of September 21, 1988; First
Amendment of Agreement as to Assumption of
Obligations with respect to Properties among ACSI,
Trump Taj Mahal Associates Limited Partnership,
and Trump Taj Mahal Realty Corp. dated as of
September 21, 1988; Settlement Agreement among
ACSI, Trump Taj Mahal Associates Limited
Partnership, Trump Taj Mahal Realty Corp., Resorts
and the Housing Authority and Urban Renewal
Redevelopment Agency of the City of Atlantic City
dated October 18, 1988; Tri-Party Agreement among
Resorts International, Inc., ACSI and Trump Taj
Mahal Associates Limited Partnership dated October
18, 1988; Declaration of Easement and Right of Way
Agreement between the Housing Authority and
Redevelopment Agency of the City of Atlantic City,
as grantor, and ACSI, as grantee, dated October
18, 1988; and Certificate of Trump Taj Mahal
Associates Limited Partnership and Resorts, dated
November 16, 1988 are incorporated herein by
reference from the Company's Form 8-K dated
November 16, 1988, Item 7(c), Exhibit 28.01
Revised Second Amendment to Agreement as to
Assumption of Obligations with respect to
Properties among ACSI, Trump Taj Mahal Associates
Limited Partnership and Trump Taj Mahal Realty
Corp. dated as of May 24, 1989, is incorporated
herein by reference from the Company's Form 10-K
for the Year Ended December 31, 1989, Part IV,
Item 14(a)(3), Exhibit 10.17.
143
10.08 Lease between the Company and Showboat Operating
Company, dated January 1, 1989 is incorporated
herein by reference from the Company's Form 8-K
dated January 1, 1989, Item 7(c), Exhibit 28.01.
10.09 Management Services Agreement between the Company
and SBOC dated January 1, 1989, is incorporated
herein by reference from the Company's Form 8-K dated
January 1, 1989, Item 7(c), Exhibit 28.03.
10.10 Promissory Note in the principal amount of
$20,400.69 among the Company, R. Craig Bird and
Debra E. Bird dated August 5, 1993, is
incorporated herein by reference from the
Company's Form 10-K for the Year Ended December
31, 1993, Part IV, Item 14(a)(3), Exhibit 10.15.
10.11 Securities Purchase Contract between the Casino
Reinvestment Development Authority and ACSI dated
March 29, 1988, is incorporated herein by
reference from the Company's Form 10-K for the
Year Ended December 31, 1988, Part IV, Item
14(a)(3), Exhibit 10.23.
10.12 Lease of Retail Store No. 7 among ACSI, R. Craig
Bird and Debra E. Bird dated April 10, 1987; and
Guaranty of Lease among ACSI, R. Craig Bird and
Debra E. Bird are incorporated herein by reference
from the Company's Form 10-K for the Year Ended
December 31, 1988, Part IV, Item 14(a)(3), Exhibit
10.24.
10.13 ACSI Executive Health Examinations Plan effective
date January 1, 1989 is incorporated herein by
reference from the Company's Form 10-K for the
Year Ended December 31, 1989, Part IV, Item
14(a)(3), Exhibit 10.24.
10.14 ACSI Executive Medical Reimbursement Plan,
effective date August 15, 1991, is incorporated
herein by reference from the Company's Form 10-K
for the Year Ended December 31, 1991, Part IV,
Item 14(a)(3), Exhibit 10.23.
10.15 Showboat, Inc. 1989 Long Term Incentive Plan as
Amended and Restated February 25, 1993, is
incorporated herein by reference from the
Company's Form 10-K for the Year Ended
144
December 31, 1992, Part IV, Item 14(a)(3), Exhibit 10.23.
10.16 Letter agreement dated September 23, 1992 between
Trump Taj Mahal Associates and ASCI and letter
agreement dated October 26, 1992 to Trump Taj
Mahal Associates from Atlantic City Showboat, Inc.
are incorporated herein by reference from the
Company's Form 10-K for the Year Ended
December 31, 1992, Part IV, Item 14(a)(3),
Exhibit 10.24.
10.17 Showboat, Inc. 1989 Directors' Stock Option Plan
as Amended and Restated February 25, 1993, is
incorporated herein by reference from the
Company's Form 10-K for the Year Ended
December 31, 1992, Part IV, Item 14(a)(3),
Exhibit 10.27.
10.18 Deed of Trust, Assignment of Rents, Security
Agreement made by the Company to Nevada Title
Company for the benefit of Trustee dated as of
May 18, 1993; Showboat, Inc. Security and Pledge
Agreement between the Company and the Trustee
dated as of May 18, 1993; Trademark Security
Agreement by the Company in favor of the Trustee
dated as of May 18, 1993; Unsecured Indemnity
Agreement executed by the Company in favor of the
Trustee dated May 18, 1993; and Showboat Operating
Company Security Agreement between SBOC and the
Trustee dated as of May 18, 1993, are incorporated
by reference from the Company's Form 8-K, dated
May 18, 1993, Item 5, Exhibit 28.02.
10.19 Leasehold Mortgage, Assignment of Rents, Security
Agreement ("Guaranty") made by ACSI for the
benefit of Trustee dated May 18, 1993; Assignment
of Leases and Rents by and between ACSI and
Trustee dated as of May 18, 1993; and Ocean
Showboat, Inc. Security and Pledge Agreement
between OSI and the Trustee dated as of May 18,
1993 are incorporated by reference from the
Company's Form 8-K, dated May 18, 1993, Item 5,
Exhibit 28.03.
10.20 Intercompany Note in the principal amount of
$215.0 million, dated as of May 18, 1993;
Assignment of Lease and Rents by and between ACSI
and the Company dated as of May 18, 1993; and
Issuer Collateral Assignment executed by ACSI in
favor of Trustee dated May 18, 1993 are
incorporated by reference from the Company's Form
8-K, dated May 18, 1993, Item 5, Exhibit 28.04.
145
10.21 First Amendment to the Leasehold Mortgage,
Assignment of Rents and Security Agreement among
ACSI and the Company dated July 9, 1993 is
incorporated by reference from the Company's Form
8-K, dated July 7, 1993, Item 5, Exhibit 28.01.
10.22 First Amendment to the Leasehold Mortgage,
Assignment of Rents and Security Agreement among
ACSI and IBJ Schroder Bank & Trust Company dated
July 9, 1993 is incorporated by reference from the
Company's Form 8-K, dated July 7, 1993, Item 5,
Exhibit 28.02.
10.23 Assignment of Rights under Agreement by ACSI, as
assignee, to IBJ Schroder Bank & Trust Company
dated July 9, 1993 is incorporated by reference
from the Company's Form 8-K, dated July 7, 1993,
Item 5, Exhibit 28.03.
10.24 Form of Deed for Sale of Land for Private
Redevelopment for Tract 1 and Tract 2 each dated
July 7, 1993 is incorporated by reference from the
Company's Form 8-K, dated July 7, 1993, Item 5,
Exhibit 28.04.
10.25 Use and Occupancy Agreement between ACHA and ACSI
dated July 7, 1993 is incorporated by reference
from the Company's Form 8-K, dated July 7, 1993,
Item 5, Exhibit 28.05.
10.26 Standard Form of Agreement between Owner and
Contractor (AIA Document A111) executed by ACSI
and T.N. Ward Company dated July 2, 1993 is
incorporated by reference from the Company's Form
8-K, dated July 2, 1993, Item 5, Exhibit 28.01.
10.27 Standard Form of Agreement Between Owner and
Contractor (AIA Document A111) executed by ACSI
and T.N. Ward Company dated September 15, 1993 is
incorporated by reference from the Company's Form
8-K, dated July 2, 1993, Item 5, Exhibit 28.02.
146
10.28 Showboat Star Partnership Agreement between Star
Casino, Inc. and Showboat Louisiana, Inc. dated
July 2, 1993 and First Amendment to Showboat Star
Partnership Agreement between Star Casino, Inc. and
Showboat Louisiana, Inc. dated July 20, 1993 are
incorporated by reference from the Company's Form 8-K,
dated July 2, 1993, Item 5, Exhibit 28.01; Second Amendment
to Showboat Star Partnership Agreement between Star Casino,
Inc. and Showboat Louisiana, Inc. dated August 1, 1993
and Third Amendment to Showboat Star Partnership
Agreement between Star Casino, Inc and Showboat
Louisiana, Inc. dated March 1, 1994 areincorporated by
reference from the Company's Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(a)(3), Exhibit 10.35.
Fourth Amendment to Showboat Star Partnership Agreement
between Star Casino, Inc. and Showboat Louisiana,
Inc. dated October 1, 1994, Fifth Amendment to
Showboat Star Partnership Agreement between Star
Casino, Inc. and Showboat Louisiana, Inc. dated
January 26, 1995 and Sixth Amendment to Showboat
Star Partnership Agreement between Star Casino,
Inc. and Showboat Louisiana, Inc. dated March 17,
1995.
10.29 Management Agreement by and between Lake
Pontchartrain Showboat, Inc. and Star Casino, Inc.
dated May 24, 1993 is incorporated by reference
from the Company's Form 8-K, dated July 2, 1993,
Item 5, Exhibit 28.02.
10.30 Marine Management Services Agreement between
Louisiana Riverboat Services, Inc. and Showboat
Star Partnership dated September 30, 1993 is
incorporated herein by reference from the
Company's Form 10-K for the Year Ended December
31, 1993, Part IV, Item 14(a)(3), Exhibit 10.37.
10.31 Agreement between Showboat, Inc., Showboat
Indiana, Inc., Showboat Operating Company,
Showboat Development Company, Showboat Indiana
Investment Limited Partnership and Waterfront
Entertainment and Development, Inc. dated
September 13, 1993; and Showboat Marina
Partnership Agreement between Waterfront
Entertainment and Development, Inc. and Showboat
Investment Limited Partnership dated January 31,
1994 is incorporated herein by reference from the
Company's Form 10-K for the Year Ended
147
December 31, 1993, Part IV, Item 14(a)(3),
Exhibit 10.38.
10.32 Lease between the Company and Exber, Inc.
effective January 14, 1994; and Sublease between
Dodd Smith and John D. Gaughan and Leslie C.
Schwartz, dated November 5, 1966 is incorporated
herein by reference from the Company's Form 10-K
for the Year Ended December 31, 1993, Part IV,
Item 14(a)(3), Exhibit 10.39.
10.33 Lease between Showboat Star Partnership and
Orleans Levee District dated February 18, 1993 and
First Amendment to Lease dated August 27, 1993 are
incorporated herein by reference from the
Company's Form 10-K for the Year Ended December
31, 1993, Part IV, Item 14(a)(3), Exhibit 10.40.
10.34 Lease between Showboat Star Partnership and
Orleans Levee District dated February 1, 1994 is
incorporated herein by reference from the
Company's Form 10-K for the Year Ended December
31, 1993, Part IV, Item 14(a)(3), Exhibit 10.41.
10.35 Lease between Showboat Operating Company and
Ventroy Associates executed on December 20, 1993
is incorporated by reference from the Company's
Form 10-K for the Year Ended December 31, 1993,
Part IV, Item 14(a)(3), Exhibit 10.42.
10.36 Showboat, Inc. 1994 Executive Long Term Incentive
Plan, effective May 25, 1994.
10.37 Showboat, Inc. Supplemental Executive Retirement
Plan, effective April 1, 1994.
10.38 Showboat, Inc. Restoration Plan effective April 1,
1994.
148
10.39 Form of Severance Agreement between the Company
and certain executive officer and key employees of
the Company and its subsidiaries.
10.40 Operating Agreement dated January 25, 1995,
between Showboat Missouri, Inc. and Randolph Riverboat
Company, Inc.; Administrative Services Agreement
dated January 25, 1995, between SBOC and Randolph
Riverboat Company, Inc.; Administrative Services
Agreement dated January 25, 1995 between SBOC and
Randolph Riverboat Company, L.L.C.; Trademark
License Agreement dated January 25, between the
Company and Randolph Riverboat Company, L.L.C.
10.41 Purchase and Sale Agreement dated January 4, 1995,
between Showboat Star Partnership and Belle of
Orleans, L.L.C.; Assignment of Leases dated
January 4, 1995 between Showboat Star Partnership
and Belle of Orleans, L.L.C.; Sublease dated
January 4, 1995, between Showboat Star Partnership
and Belle of Orleans, L.L.C.
10.42 Non-Negotiable Mortgage Promissory Note dated
December 28, 1994, in the principal amount of
$8,850,000, by Rockingham Venture, Inc. in favor
of the Company; Mortgage and Security Agreement
dated December 28, 1994, between Rockingham
Venture, Inc. and the Company.
10.43 Promissory Note dated January 1, 1994, in the principal amount of
$18,600 by Showboat Louisiana, Inc. in favor of the Company, which
Promissory Note expired on March 1, 1994; Promissory Note dated
March 1, 1994, in the principal amount of $27,905,388 by Showboat
Louisiana, Inc. in favor of the Company which Promissory Note
expired on December 31, 1994; and Promissory Note dated January 1,
1995, in the principal amount of $23,807,832.11 by Showboat
Louisiana, Inc. in favor of the Company.
10.44 Promissory Note dated March 2, 1995, in the
principal amount of $25,000,000 by Lake
Pontchartrain Showboat, Inc. and Showboat
Louisiana, Inc. in favor of Showboat, Inc.
149
10.45 Promissory Note dated March 19, 1995, in the
principal amount of $15,000,000 by Atlantic City
Showboat, Inc. and the Company.
10.46 Lease dated December 22, 1994, between Housing
Authority and Urban Redevelopment Agency of the
City of Atlantic City and Atlantic City Showboat, Inc.;
Tri-Party Agreement dated May 26, 1994, among Housing
Authority and Urban Redevelopment Agency of the City of
Atlantic City, Forest City Ratner Companies and Atlantic City
Showboat, Inc.; Terms and Conditions Part II of
Contract for Sale of Land for Private
Redevelopment between Housing Authority and Urban
Redevelopment Agency of the City of Atlantic City
and Atlantic City Showboat, Inc.; and Rider to
Contract for Sale of Land for Private
Redevelopment between Housing Authority and Urban
Redevelopment Agency of the City of Atlantic City
and Atlantic City Showboat, Inc.
21.01 List of Subsidiaries.
23.01 Consent of KPMG Peat Marwick.
27.01 Financial Data Schedule for the Company's Form 10-K for
the Year Ended December 31, 1994.
99.01 Warrant Agreement dated as of May 6, 1994, by and
between the Company and DLJ Bridge Finance, Inc.,
is incorporated by reference from the Company's
Form 10-K for the Year Ended December 31, 1993,
Part IV, Item 14(A)(3), Exhibit 99.01.
(b) REPORTS ON FORM 8-K.
None.
150
EX-4.02
2
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE ("Supplemental Indenture")
dated as of July 18, 1994, by and among Showboat, Inc., a Nevada
corporation (the "Issuer"), Ocean Showboat, Inc., a New Jersey
corporation, Atlantic City Showboat, Inc., a New Jersey
corporation, and Showboat Operating Company, a Nevada corporation
(collectively, the "Guarantors"), and IBJ Schroder Bank & Trust
Company, a banking corporation organized and existing under the
laws of the State of New York ("Trustee").
RECITALS:
The Company, the Guarantors and the Trustee executed an
Indenture dated as of May 18, 1993 (the "Indenture"), with
respect to $275,000,000 principal amount of the Company's
9 1/4% First Mortgage Bonds due 2008 (the "Bonds"). The Bonds
are guaranteed by the Guarantors (the "Guaranty").
The Bonds and the Company's obligations under the Indenture
are secured by the real and personal property described in or
from time to time subject to a Deed of Trust (Nevada), Mortgage
(New Jersey) and other documents.
The Issuer has solicited the consent of the holders of the
Bonds (the "Bondholders") to make certain modifications (the
"Amendments") to the Indenture.
The consent of a majority of an aggregate principal amount
of the Bonds was obtained on July 1, 1992 pursuant to the terms
and conditions of Section 9.02 of the Indenture.
Pursuant to Section 9.07 of the Indenture, the Trustee is
authorized to execute the Supplemental Indenture.
NOW, THEREFORE, in consideration of the mutual covenants and
premises set forth herein, and for other valuable consideration
the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree that the Recitals are true and correct and
are incorporated into this Supplemental Indenture, and the
parties further agree as follows:
AGREEMENT
A. DEFINED TERMS
Any capitalized terms that are not expressly defined in this
Supplemental Indenture shall have the meaning provided in the
Indenture.
B. AMENDMENT OF SECTION 1.01
Section 1.01 ("Definitions") is hereby amended by inserting
the following:
"Australian Gaming Approval" means the official
selection of SHCH (or a Subsidiary of SHCH) as the sole
licensee or operator of a casino gaming operation in
Sydney, Australia.
"Controlled Entity" means:
any of (a) SHCH, (b) any Non-Recourse Subsidiary
of the Issuer, including Showboat Star Partnership and
Showboat Marina Partnership, provided that the Issuer
or a Subsidiary of the Issuer owns at least 50% of the
outstanding Capital Stock of such Non-Recourse
Subsidiary, and which is designated by the Issuer as a
Controlled Entity or (c) any Qualified Native American
Gaming Project, including the Qualified Native American
Project to be managed by Showboat Mohawk Investment
Limited Partnership, provided that in each case:
(i) each Subsidiary of the Issuer
that owns, directly or indirectly (through
one or more Subsidiaries), any Capital Stock
of such Controlled Entity shall become a
Guarantor of the Bonds by execution of a
Subsidiary Guaranty;
(ii) the Capital Stock of each such
Guarantor or such Controlled Entity owned by
the Issuer or by any Subsidiary shall be
pledged to the Trustee as Collateral to
secure the Bonds or the guaranty of such
Guarantor pursuant to a Guarantor Pledge
Agreement, which, in the case of Capital
Stock in the form of a partnership interest,
may be in the form of a collateral assignment
of the distributions or income from the
partnership;
(iii) each Subsidiary that owns any
other Investment (including any loan or
advance) in or to such Controlled
2
Entity shall pledge,
hypothecate, or collaterally assign such
Investment to the Trustee as Collateral to
secure the Bonds or a Guarantee of the Bonds;
(iv) such Controlled Entity is a
Managed Entity or a Subsidiary of such
Controlled Entity which is engaged in gaming
activities is a Managed Entity, and, to the
extent not restricted by any Gaming
Authority, the revenues from any management
contract to manage such Controlled Entity or
revenues from any administrative,
development, support or similar fee
generating agreement from such Controlled
Entity received by any Subsidiary of the
Issuer shall be pledged, hypothecated or
collaterally assigned to the Trustee to
secure the Bonds or a Guarantee thereof; and
(v) no such pledge, hypothecation
or collateral assignment (prior to the
realization or foreclosure thereon) shall
require the Trustee or any Bondholder to
become licensed, qualified or found suitable
under any gaming law or regulation (solely
due to such pledge, hypothecation or
collateral assignment) unless the Trustee or
such Bondholder consents to such procedure.
"Managed Entity" means either (i) any Person that is not
under Third-Party Management, so long as such Person is not
under Third-Party Management or (ii) a Person that the
Issuer or any Subsidiary has a contract with to manage the
day-to-day gaming operations and affairs, so long as such
contract remains in effect.
"Management Contract Approval" means, with respect to the
Sydney Harbour Casino, a binding agreement with SHCH that
provides that the Issuer or a Person at least 80% of whose
equity interests are owned by the Issuer or a wholly-owned
Subsidiary (other than a Non-Recourse Subsidiary) will
manage the gaming operations of the Sydney Harbour Casino
for a period of not less than 12 years.
"Regular Quarterly Dividend" means the quarterly dividend
determined by the Board of Directors of the Issuer in its
reasonable judgment to be its regular and normal quarterly
dividend and paid by the Issuer in accordance with the
Issuer's prior business practices in an amount per share not
to exceed $0.10 per fiscal year (or the equivalent thereof
after
3
giving effect to any stock splits, stock dividends or
recapitalizations of the common stock after June 17, 1994).
"Qualified Native American Gaming Project" means any Gaming
Related Business in the United States owned by a tribe or
band of Native Americans in which the Issuer or a Subsidiary
holds a management contract to manage or operate the day-to-
day casino or gaming operations. .
"SHCH" means Sydney Harbour Casino Holdings Limited, a New
South Wales corporation.
"Sydney Harbour Casino" means all of SHCH's interest in its
proposed casino and related properties located in Sydney,
Australia.
"Third-Party Management" with respect to any Person means
that the day-to-day affairs or business operations of such
Person are managed by a third party that is not the Issuer
or any of its Subsidiaries.
C. AMENDMENT OF SECTION 4.07
Section 4.07(e)(ii) is hereby replaced in its entirety with
the following:
"(ii) the aggregate principal amount of such
Indebtedness does not exceed 50% of the aggregate
Project Costs of such Project Expansion; and"
D. AMENDMENT OF SECTION 4.08
Section 4.08 ("Limitation on Indebtedness") is hereby
amended by inserting the following clause in the second paragraph
thereof immediately after clause (ix) thereof and before the "."
and deleting the word "and" preceding such clause:
"and (x) the incurrence by the Issuer of up to $150
million in aggregate principal amount of Indebtedness
outstanding at any one time under this clause (x) and
the guarantee by any Guarantor of such Indebtedness;
provided, that (1) the net proceeds up to $100 million
must be kept in a segregated account in the United
States invested in Cash Equivalents pledged as
Collateral to secure the Bonds until the receipt of the
Australian Gaming Approval and Management Contract
Approval, after which, such segregated net proceeds
must be used for investment in SHCH, provided further
that if such Australian Gaming Approval and Management
Contract Approval is not obtained within one year of
such incurrence, such segregated net proceeds shall
4
be used to redeem or prepay such Indebtedness or to
fund an offer to all Holders to repurchase the Bonds at
a purchase price of 100% of the principal amount
thereof, together with accrued and unpaid interest, or,
if such net proceeds remain after such offer, such net
proceeds may be used for general corporate purposes and
(2) such Indebtedness must not be secured, such
Indebtedness and any guaranty thereof must be expressly
subordinated in right of payment to the Bonds and/or a
Subsidiary Guaranty of the Bonds and no installment of
principal on such Indebtedness shall have a sinking
fund payment, scheduled maturity or final maturity
prior to May 15, 2008."
E. AMENDMENT OF SECTION 4.09
Section 4.09(a)(2) is hereby amended by adding the following
introductory phrase to such subparagraph: "With respect to a
Restricted Payment other than a Regular Quarterly Dividend or a
Restricted Investment in a Subsidiary engaged in a Gaming Related
Business."
Section 4.09(a)(3) is hereby amended by replacing the first
parenthetical therein with "(including Restricted Payments
permitted by clauses (i) and (ii) of Section 4.09(b) but
excluding any Restricted Payments permitted by clauses (iii)-(x)
of Section 4.09(b))."
The provision at the end of Section 4.09(b) is hereby
amended by deleting the words "clauses (iii)-(viii)" and
replacing them with the words "clauses (iii)-(x)" and by deleting
the phrase beginning with "and (y)" to the end of the sentence.
Section 4.09(b)(vii) is hereby amended to read as follows:
"dividends or distributions from a Non-Recourse Subsidiary and
dividends or distributions from a Controlled Entity to a Non-
Recourse Subsidiary."
Section 4.09 ("Limitation on Restricted Payments") is hereby
amended by inserting the following clause in paragraph (b)
immediately after clause (viii) thereof and deleting the word
"and" preceding such clause:
"and (ix) Investments by the Issuer or any Guarantor in
Controlled Entities, so long as such Persons remain
Controlled Entities provided that (A) any Investment in
SHCH exceeding $110 million shall be a Restricted
Payment pursuant to the preceding paragraph, (B) any
Investment in Showboat Marina Partnership exceeding $30
million shall be a Restricted Payment pursuant to the
preceding paragraph, (C) any Investment in Showboat
Mohawk Investment Limited Partnership exceeding $30
million shall be a
5
Restricted Payment pursuant to the preceding paragraph,
(D) neither the Issuer nor any Guarantor shall invest
any portion of the Las Vegas Showboat or the Atlantic
City Showboat in, or contribute any such assets to, a
Controlled Entity, and (E) the Issuer would have, at
the time of such Investment and after giving effect
thereto as if such Investment had been made at the
beginning of the applicable four-quarter period, a
Fixed Charge Coverage Ratio of at least 1.5 to 1 if
such Investment is made prior to December 31, 1996 and
at least 1.75 to 1 if such Investment is made
thereafter; and
(x) the retirement of any Indebtedness incurred to
finance or refinance the Restricted Investment used to
develop, construct or open the Sydney Harbour Casino in
the event that Australian Gaming Approval is not
obtained or Management Contract Approval is not
obtained in accordance with the provisions of Section
4.08(b)(x)."
Section 4.09 ("Limitation on Restricted Payments") is hereby
amended by adding the following new Section 4.09(e):
"(e) If any Controlled Entity ceases to be a
Controlled Entity, then all Investments owned by the
Issuer or any Subsidiary (other than a Non-Recourse
Subsidiary) in such Controlled Entity shall be deemed
to be a Restricted Investment made on such date, unless
such former Controlled Entity purchases or redeems all
such Investments for a price at least equal to the
greater of the book value of such Investments on the
date such entity ceases to be a Controlled Entity or
the original amount of such Investments."
F. AMENDMENT OF SECTION 4.14
Section 4.14 is hereby replaced in its entirety with the
following:
"If the Issuer or any of its Subsidiaries shall
transfer or cause to be transferred, in one or a series
of related transactions, any Collateral having a book
value in excess of $5 million to any Subsidiary (other
than a Non-Recourse Subsidiary or a Controlled Entity)
that is not a Guarantor, then such transferee or
acquired Subsidiary shall execute a Subsidiary Guaranty
6
and deliver an opinion of counsel, in accordance with
the terms of this Indenture."
G. INDENTURE AND OTHER COLLATERAL DOCUMENTS
Except as otherwise amended, modified or supplemented by
this Supplemental Indenture, the Indenture and other Collateral
Documents shall continue in full force and effect and are
enforceable in accordance with their terms.
H. COUNTERPARTS
This Supplemental Indenture may be executed in counterparts.
I. NEW YORK LAW TO GOVERN
The internal law of the State of New York shall govern and
be used to construe this Supplemental Indenture.
J. EFFECT OF HEADINGS
The Section headings herein are for convenience only and
shall not affect the construction hereof.
7
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first
written above.
"Trustee" "Issuer"
IBJ SCHRODER BANK & TRUST SHOWBOAT, INC., a Nevada
COMPANY, a banking corporation corporation
organized and existing under
the laws of New York
By:/s/Barbara McCluskey By:/s/J.K. Houssels
Barbara McCluskey
Its: Assistant Vice President Its: Chairman
"Guarantors"
OCEAN SHOWBOAT, INC., a New
Jersey corporation
By:/s/___________________
Its: Chairman
ATLANTIC CITY SHOWBOAT,INC.,
a New Jersey corporation
By:/s/Frank A. Modica
Its: Chairman of the Board
SHOWBOAT OPERATING COMPANY,
a nevada corporation
By:/s/Frank A. Modica
Its: President and chief
Executive Officer
8
SHOWBOAT DEVELOPMENT COMPANY SECURITY
AND PLEDGE AGREEMENT
THIS SECURITY AND PLEDGE AGREEMENT, made as of July 18, 1994
by SHOWBOAT DEVELOPMENT COMPANY, a Nevada corporation (the
"Pledgor"), in favor of IBJ SCHRODER BANK & TRUST COMPANY, a
banking corporation organized and existing under the laws of the
State of New York (the "Pledgee") and trustee for the holders
(the "Holders") of those certain 9 1/4% First Mortgage Bonds
due 2008 (the "First Mortgage Bonds") issued by Showboat, Inc.,
a Nevada corporation and parent of the Pledgor (the "Issuer").
RECITALS:
WHEREAS, the Pledgor, a wholly-owned subsidiary of the
Issuer, owns all of the outstanding capital stock of Showboat
Louisiana, Inc., a Nevada corporation ("SLI");
WHEREAS, the Issuer, Ocean Showboat, Inc., a New Jersey
corporation, Atlantic City Showboat, Inc., a New Jersey
corporation, and Showboat Operating Company, a Nevada
corporation, as guarantors, entered into that certain Indenture
(the "Indenture"), dated as of May 18, 1993, pursuant to which
the Issuer heretofore issued and sold the First Mortgage bonds to
the Holders;
WHEREAS, the Issuer solicited and received the consent of
the Holders to amend (the "Amendments") the First Mortgage Bonds
subject to, among other things, the grant to the Pledgee of a
security interest in and to all of the outstanding capital stock
of SLI;
WHEREAS, to obtain the Amendments to the Indenture and to
secure further the obligations of the Issuer under the First
Mortgage Bonds (whether such obligations now exist or are
hereafter created or incurred, whether they arise under or are
evidenced by this Agreement, the Guaranty, the First Mortgage
Bonds, or any other present or future instrument or agreement or
by operation of law, and whether they are or may be direct or
indirect, due or to become due, absolute or contingent, primary
or secondary, liquidated or unliquidated or sole, joint, several
or, joint and several), including, without limitation, the
payment of any principal, or interest (including, without
limitation, any interest accruing on or after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, whether or not a claim for
post-filing or post-petition interest is allowed in such
proceeding) on the First Mortgage Bonds (collectively, the
"Obligations"), the Pledgor has agreed to grant to the Pledgee a
security interest in and to all of the outstanding capital stock
of SLI, upon the terms and subject to the conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. PLEDGE. Pledgor hereby grants to the Pledgee a
security interest (the "Security Interest") in and to all of the
Pledgor's right, title and interest in: (i) all of the
outstanding capital stock of SLI now or hereafter owned by the
Pledgor and as more specifically described on EXHIBIT A attached
hereto and any subsequently issued or acquired capital stock of
SLI (the "Securities") and (ii) all distributions or allocations
of distributable cash, property, securities or other assets from
the Securities together with all substitutes and replacements for
and proceeds of the foregoing (the Securities and all such
distributions, allocations, substitutions, replacements and
proceeds are hereinafter collectively referred to as the "Pledged
Interests"). The Pledgor grants the aforementioned security
interest to secure the full and faithful payment and performance
of the Obligations. The Pledgor shall deliver to the Pledgee all
certificates and instruments representing or evidencing the
Pledged Interests in suitable form for transfer or accompanied by
duly executed instruments of transfer or assignments in blank,
all in form and substance satisfactory to the Pledgee. In
addition, the Pledgor shall execute and deliver to the Pledgee
any and all documents and instruments as Pledgee may determine
necessary in order to perfect and maintain the security interest
granted hereunder in and to the Pledged Interests.
2. DISTRIBUTIONS. Except as otherwise provided in the
Indenture, the Pledgor shall not be entitled to receive any
interest, dividends and other income payable on or with respect
to the Pledged Interests.
3. VOTING RIGHTS. Except as provided in Section 8 herein
or as otherwise provided in the Indenture, the Pledgor shall be
entitled to exercise all voting rights of the Securities.
4. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE
PLEDGOR. As further security for the full and faithful
performance of the Obligations, the Pledgor hereby covenants,
represents and warrants to the Pledgee as follows:
a. The Pledgor has good and marketable
title to the Securities, free and clear of all
claims, liens or encumbrances.
b. The Pledgor's right to the Pledged
Interests is not subject to any defense, rights,
setoff or counterclaim, and the Pledgor will
defend the Pledgee against all claims or demands
of all persons other than the Pledgee. No
financing statement covering all or any of the
Pledged Interest is on file in any public office.
c. The Pledgor shall not sell, convey,
assign, pledge, mortgage, grant a security
interest in or otherwise transfer or encumber all
or a part of the Pledgor's interest in the Pledged
Interests or other property pledged as security
hereunder.
2
d. The Pledgor hereby acknowledges that
this Agreement and the pledge and security granted
hereby is supported by good and valuable
consideration, and is binding upon the Pledgor.
Upon the delivery to the Pledgee of the Pledged
Interests and (as to certain proceeds thereof) the
filing of Uniform Commercial Code (the "UCC")
financing statements, the pledge of the Pledged
Interests pursuant to this Agreement creates a
valid first priority security interest in the
Pledged Interests.
e. The Pledgor has full power and authority
to execute this Agreement and to grant the
security interest in the Pledged Interests granted
hereunder.
f. The Pledgor will at any time or times
hereafter execute such financing statements,
continuation statements or other instruments of
assurance as Pledgee may request to establish,
maintain and perfect the Pledgee's security
interest in the Pledged Interests.
g. The Pledgor will pledge to the Pledgee
as security for the Obligations any additional
Securities acquired, together with duly executed
stock powers endorsed in blank.
h. The execution, delivery and performance
by the Pledgor of this Agreement have been duly
authorized by all necessary corporate action and
do not contravene, or constitute a default under,
any provision of applicable law or regulation or
of the certificate of incorporation or bylaws of
the Pledgor or of any agreement, judgment,
injunction, order, decree or other instrument
binding upon the Pledgor or result in the creation
or imposition of any Lien on any assets of the
Pledgor.
i. This Agreement has been duly executed
and delivered by the Pledgor and constitutes a
legal, valid and binding obligation of the Pledgor
enforceable against the Pledgor in accordance with
its terms, except as such enforceability may be
limited by the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights
generally or general principles of equity.
j. No consent of any other Persons and no
consent, authorization, approval or other action
by, and no notice to, or filing with, any
governmental authority or regulatory body is
required either (i) for the pledge by the Pledgor
of the Pledged Interests pursuant to this
Agreement by the Pledgor or (ii) for the exercise
by the Pledgee of the rights provided for in this
Agreement or the remedies in respect of the
Pledged Interests pursuant to this Agreement
(except as may be required in
3
connection with such disposition by laws
affecting the offering and sale of securities).
k. No litigation, investigation or
proceeding of or before any arbitrator or
governmental authority is pending or, to the best
knowledge of the Pledgor, threatened by or against
the Pledgor or against any of its properties or
revenues with respect to this Agreement or any of
the transactions contemplated hereby.
l. The Securities have been duly authorized
and validly issued and are fully paid and non-
assessable.
m. The Securities set forth on Exhibit A
hereto constitute all of the authorized capital
stock of SLI on the date hereof and constitute all
of the shares of capital stock and voting
securities of SLI beneficially owned by the
Pledgor.
5. TERM. This Agreement shall remain in full force and
effect until the payment in full of all Obligations.
6. AMENDMENTS. The terms of this Agreement may only be
amended, modified or waived in accordance with Article 9 of the
Indenture.
7. EVENT OF DEFAULT. An "Event of Default" wherever used
herein means any one of the following events.
a. This Agreement shall cease to be in full
force and effect;
b. The Pledged Interests granted to the
Pledgee pursuant to this Agreement shall cease to
give the Pledgee the rights, powers and privileges
purported to be created hereby.
c. The Pledgor fails in any material
respect to perform or observe any covenant or
agreement or breaches in any material respect any
representation contained in Sections 1, 2, 4, 15,
16, 18 and 19 hereof; and
d. An Event of Default under the Indenture.
8. REMEDIES UPON DEFAULT. Subject to paragraph 20, if any
Event of Default shall have occurred and be continuing the
Pledgee shall, in addition to all other rights given by law or by
this Agreement, the Indenture or otherwise, have all of the
rights and remedies with respect to the Security Interest of a
secured party under the UCC in effect in the State of New York at
that time and the Pledgee may, without notice and at its option,
transfer or register, and the Pledgor shall register or cause to
be registered upon request therefor by the Pledgee, the Security
Interest or any part thereof on the books of the Pledgor into the
name of the Pledgee or the Pledgee's nominee(s), indicating that
such Security Interest is subject to the security interest
hereunder. In addition, with respect to any Security Interest
which shall then be in or shall thereafter come into the
possession or custody of the Pledgee, the Pledgee may sell or
cause the same to be sold at any broker's board or at public or
private sale, in one or more sales or lots, at such price or
prices as the agent may deem best, for cash or on credit or for
future delivery, without assumption of any credit risk, all in
accordance with the terms and provisions of the Indenture and
this Agreement. The purchaser of any or all of the Security
Interest so sold shall thereafter hold the same absolutely, free
from any claim, encumbrance or right of any kind whatsoever.
Unless any of the Security Interest threatens to decline speedily
in value or is or becomes of a type sold on a recognized market,
the Pledgee will give Pledgor reasonable notice of the time and
place of any public sale thereof, or of the time after which any
private sale or other intended disposition is to be made. Any
sale of the Security Interest conducted in conformity with
reasonable commercial practices of banks, insurance companies,
commercial finance companies, or other financial institutions of
disposing of property similar to the Security Interest shall be
deemed to be commercially reasonable. Any requirements of
reasonable notice shall be met if such notice is mailed to the
Pledgor as provided in Section 10 below, at least ten (10) days
before the time of the sale or disposition. Any other
requirement of notice, demand or advertisement for sale is, to
the extent permitted by law, waived. The Pledgee may, in its own
name or in the name of a designee or nominee, buy any of the
Security Interest at any public sale and, if permitted by
applicable law, at any private sale. All expenses (including
court costs and reasonable attorneys' fees, expenses and
disbursements) of, or incident to, the enforcement of any of the
provisions hereof shall be recoverable from the proceeds of the
sale or other disposition of the Security Interest. In view of
the fact that federal and state securities laws may impose
certain restrictions on the method by which a sale of the
Security Interest may be effected after an Event of Default,
Pledgor agrees that upon the occurrence or existence of any Event
of Default, the Pledgee may, from time to time, attempt to sell
all or any part of the Security Interest by means of a private
placement, restricting the prospective purchasers to those who
will represent and agree that they are purchasing for investment
only and not for distribution. In so doing, the Pledgee may
solicit offers to buy the Security Interest, or any part of it,
for cash, from a limited number of investors who might be
interested in purchasing the Security Interest, and if the
Pledgee solicits such offers from not less than four (4) such
investors that are not affiliated with the Pledgee, then the
acceptance by the Pledgee of the highest offer obtained therefrom
shall be deemed to be a commercially reasonable method of
disposition of the Security Interest.
In addition, upon the occurrence or during the
continuance of an Event of Default, all rights of the
Pledgor to exercise the voting and other rights which it
would otherwise be entitled to exercise shall cease, and all
such rights shall thereupon become vested in the Pledgee.
5
9. WAIVER. No delay or failure by the Pledgee and the
exercise of any right or remedy shall constitute a waiver thereof
and no single or partial exercise by the Pledgee of any right or
remedy shall preclude other or further exercise of any other
right or remedy.
10. NOTICES. All notices, requests, demands and other
communications hereunder shall be deemed to have been duly given
if in writing and delivered in person or mailed by first class
mail to such party's address stated in Section 12.10 of the
Indenture.
11. SERVICE OF PROCESS. The Pledgor agrees to accept
service of process by mail at the following address: Kummer
Kaempfer Bonner & Renshaw, 3800 Howard Hughes Parkway, Seventh
Floor, Las Vegas, Nevada 89109, Attention: John N. Brewer.
12. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York,
without regard to its choice of law provisions.
13. BINDING EFFECT. This Agreement shall be binding upon
and inure to the parties hereto and their assigns and successors.
14. SEVERABILITY. In the event any provision hereof is
determined to be unenforceable or invalid, such provision or such
part thereof which may be unenforceable shall be deemed severed
from this Agreement and the remaining provisions carried out with
the same force and effect as if the severed provision of part
thereof had not been made a part hereof.
15. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall
constitute one agreement, and any of the parties may execute this
Agreement by signing any such counterpart.
16. INDEMNITY. The Pledgor agrees to indemnify and hold
harmless the Pledgee and the holders of the First Mortgage Bonds
from and against any and all claims, demand, losses, judgments
and liabilities (including liabilities for penalties) of
whatsoever kind or nature, and to reimburse the Pledgee and the
holders of the First Mortgage Bonds for all costs and expenses,
including reasonable attorneys' fees, growing out of or resulting
from this Agreement or the exercise by the Pledgee of any right
or remedy granted to it hereunder. In no event shall the Pledgee
be liable, in the absence of gross negligence or willful
misconduct on its part, for any matter or thing in connection
with this Agreement other than to account for moneys actually
received by it in accordance with the terms hereof. If and to
the extent that the obligations of the Pledgor under this Section
are unenforceable for any reason, the Pledgor hereby agrees to
make the maximum contribution to the payment and satisfaction of
such obligations permissible under applicable law.
6
17. FURTHER ASSURANCE; POWER-OF-ATTORNEY.
a. The Pledgor agrees that it will join
with the Pledgee in executing and, at its own
expense, filing, recording or registering and
refiling, re-recording or re-registering under the
UCC, or similar statutes, such financing
statements, continuation statements and other
documents in such offices as the Pledgee may deem
necessary or desirable and wherever required or
permitted by law in order to perfect and preserve
the Pledgee's security interest in the Pledged
Interests and hereby authorizes the Pledgee to
file financing statements, continuation statements
and amendments thereto relative to all or any part
of the Pledged Interests without the signature of
the Pledgor where permitted by law, and agrees to
do such further acts and things and to execute and
deliver to the Pledgee such additional
conveyances, assignments, agreements and
instruments as the Pledgee may reasonably require
or deem advisable to carry into effect the
purposes of this Agreement or to further assure
and confirm unto the Pledgee its rights, power and
remedies hereunder.
b. The Pledgor hereby appoints the Pledgee
the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor
and in the name of the Pledgor or otherwise, from
time to time after the occurrence and during the
continuance of an Event of Default, in the
Pledgee's discretion to take action and to execute
any instrument which the Pledgee may reasonably
deem necessary or advisable to accomplish the
purposes of this Agreement.
18. THE PLEDGEE AS AGENT. The Pledgee will hold in
accordance with this Agreement all items constituting the Pledged
Interests at any time received by it under this Agreement. It is
expressly understood and agreed that the obligations of the
Pledgee as holder of the Pledged Interests and with respect to
the disposition thereof, and otherwise under this Agreement, are
only those expressly set forth in this Agreement. The Pledgee
shall act hereunder on the terms and conditions set forth herein.
19. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. The obligations
of the Pledgor under this Agreement shall be absolute and
unconditional and shall remain in full force and effect without
regard to, and shall be released, suspended, discharged,
terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (a) any
renewal, extension, amendment or modification of, or addition or
supplement to or deletion from any of the Indenture, the First
Mortgage Bonds, or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (b) any
waiver, consent, extension, indulgence or other action or
inaction under or in respect of any such instrument or agreement
or this Agreement, the Indenture, or the First Mortgage Bonds or
any exercise or non-exercise of any right, remedy, power or
privilege under or in respect of this Agreement, the Indenture or
the First Mortgage Bonds; (c) any furnishing of any additional
security to the Pledgee or any acceptance thereof or any sale,
exchange, release, surrender or realization of or upon any
security by the Pledgee; (d) any invalidity, irregularity or
unenforceability of all or part of the Obligations or of any
security therefor; or (e) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation
or other like proceeding relating to the Pledgor or any
subsidiary of the Pledgor, or any action taken with respect to
this Agreement by any trustee or receiver, or by any court, in
any such proceeding, whether or not the Pledgor shall have notice
or knowledge of any of the foregoing.
7
20. REGISTRATION, ETC.
a. If an Event of Default shall have
occurred and be continuing and the Pledgor shall
have received from the Pledgee a written request
or requests that the Pledgor cause any
registration, qualification or compliance under
any federal or state securities law or laws to be
effected with respect to all or any part of the
Securities, the Pledgor as soon as practicable and
at its expense will use its best efforts to cause
such registration to be effected (and be kept
effective) and will use its best 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, including,
without limitation, registration under the
Securities Act of 1933, as then in effect (or any
similar statute then in effect), appropriate
qualifications under applicable blue sky or other
state securities laws and appropriate compliance
with any other governmental requirements, PROVIDED
that the Pledgee shall furnish to the Pledgor such
information regarding the Pledgee as the Pledgor
may request in writing and as shall be required in
connection with any such registration,
qualification or compliance. The Pledgor will
cause the Pledgee to be kept reasonably advised in
writing as to the progress of each such
registration, qualification or compliance and as
to the completion thereof, will furnish to the
Pledgee such number of prospectuses, offering
circulars or other documents incident thereto as
the Pledgee from time to time may reasonably
request, and will use its best efforts to cause
the issuer of the Securities to indemnify the
Pledgee and all others participating in the
distribution of such Securities against all
losses, liabilities, claims or damages 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, except
insofar as the same may have been caused by an
untrue statement or omission based upon
information furnished in writing to the Pledgor or
the Pledgee expressly for use therein.
8
b. If at any time when the Pledgee shall
determine to exercise its right to sell all or any
part of the Securities, such Securities or the
part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the
Securities Act of 1933, as then in effect, the
Pledgee may, in its sole and absolute discretion,
sell such Securities or part thereof by private
sale in such matter and under such circumstances
as Pledgee may deem necessary or advisable in
order that such sale may legally be effected
without such registration, PROVIDED that at least
(ten) 10 days' notice of the time and place of any
such sale shall be given to the Pledgor. Without
limiting the generality of the foregoing, in any
such event the Pledgee, in its sole and absolute
discretion (i) may proceed to make such private
sale notwithstanding that a registration statement
for the purpose of registering such Securities or
part thereof shall have been filed under such
Securities Act, (ii) may approach and negotiate
with a single possible purchaser to effect such
sale and (iii) may restrict such sale to a
purchaser who will represent and agree that such
purchaser is purchasing for its own account, for
investment, and not with a view to the
distribution or sale of such Securities or part
thereof. In the event of any such sale, the
Pledgee shall incur no responsibility or liability
for selling all or any part of the Securities at a
price which the Pledgee, in its sole and absolute
discretion, may in good faith deem commercially
reasonable under the circumstances,
notwithstanding the possibility that a
substantially higher price might be realized if
the sale were deferred until the registration as
aforesaid.
21. TERMINATION; RELEASE OF COLLATERAL. This Agreement
shall terminate with respect to any Pledged Interests upon
release of such Pledged Interests as provided in Section
10.04 of the Indenture, and with respect to all Pledged
Interests, upon the release of all Pledged Interests as
provided in Section 10.04(b)(iii) of the Indenture. At the
time of any such termination, the Pledgee at the request and
expense of the Pledgor will execute and deliver to the
Pledgor a proper instrument or instruments acknowledging the
satisfaction and termination of this Agreement with respect
to such Pledged Interests and will duly assign, transfer and
deliver to the Pledgor any such Pledged Interests as has not
yet theretofore been sold or otherwise applied or released
pursuant to this Agreement, together with any moneys at the
time held by the Pledgee in respect of such Pledged
Interests. Such assignment and delivery shall be without
warrant by or recourse to the Pledgee, except as to the
absence of any prior assignments by the Pledgee of its
interest in the Pledged Interests.
Notwithstanding any other provision contained herein to
the contrary, if the granting of a security interest in the
capital stock of any subsidiary of the Pledgor shall
conflict with or violate the New Jersey Casino Control Act,
the Nevada Gaming Control Act, the Louisiana Riverboat
Economic Development and Gaming Control Act or any other
state of federal gaming law (collectively, the "Gaming
Laws"), the Pledgee agrees to (i) release such capital stock
from the Pledge of this Agreement to the extent necessary to
avoid such conflict or
9
violation or (ii) take any other action sufficient to avoid
such conflict or violation. The Pledgee further
acknowledges and agrees that prior to exercising any
remedies set forth in Section 8 hereof with respect to the
capital stock of any of its subsidiaries subject to or
affected by the Gaming Laws, it shall obtain any and all
consents and approvals as may be required under the Gaming
Laws.
10
IN WITNESS WHEREOF, the Pledgor and the Pledgee have
executed and delivered this Agreement as of the day and year
first above written.
SHOWBOAT DEVELOPMENT COMPANY
as Pledgor
By:/s/_________________
Name: Leann Schneider
Title: Treasurer
IBJ SCHRODER BANK & TRUST COMPANY
as Pledgee
Dated: July 18, 1994 By:/s/________________
Name:Barbary McCluskey
Title:Assistant Vice President
11
IBJ SCHRODER BANK & TRUST COMPANY
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
Personally appeared before me, the undersigned
authority in and for the said county and state, on this 20th day
of July, 1994, within my jurisdiction, the within named Barbara
McCluskey, who acknowledged that she is Assistant Vice President
of IBJ Schroder Bank & Trust Company, a banking corporation
organized and existing under the laws of the State of New York,
and that for and on behalf of the said corporation, and as its
act and deed (s)he executed the above and foregoing instrument,
after first having been duly authorized by said corporation so to
do.
/s/________________________
NOTARY PUBLIC
My Commission expires:
3/30/95
(Affix official seal, if applicable)
SHOWBOAT DEVELOPMENT COMPANY
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
Personally appeared before me, the undersigned
authority in and for the said county and state, on this 15th day
of July, 1994, within my jurisdiction, the within named Leann
Schneider, who acknowledged that she is Treasurer of Showboat
Development Company, a Nevada corporation, and that for and on
behalf of the said corporation, and as its act and deed she
executed the above and foregoing instrument, after first having
been duly authorized by said corporation so to do.
/s/___________________________
NOTARY PUBLIC
My Commission expires:
8/6/97
(Affix official seal, if applicable)
12
EXHIBIT A
(Description of Securities)
SHOWBOAT LOUISIANA, INC. SECURITY AND PLEDGE AGREEMENT
THIS SECURITY AND PLEDGE AGREEMENT, made as of July 18, 1994
by SHOWBOAT LOUISIANA, INC., a Nevada corporation (the
"Pledgor"), in favor of IBJ SCHRODER BANK & TRUST COMPANY, a
banking corporation organized and existing under the laws of the
State of New York (the "Pledgee") and trustee for the holders
(the "Holders") of those certain 9 1/4% First Mortgage Bonds due
2008 (the "First Mortgage Bonds") issued by Showboat, Inc., a
Nevada corporation and parent of the Pledgor (the "Issuer").
RECITALS:
WHEREAS, the Pledgor is a wholly owned subsidary of
Showboat Development Company which is a wholly-owned subsidary
of the Issuer;
WHEREAS, the Pledgor is a party to that certain Showboat
Star Partnership Agreement dated July 2, 1993 between Pledgor and
Star Casino, Inc., a Louisiana corporation, as amended by that
certain First Amendment to Showboat Star Partnership Agreement
dated July 20, 1993, as amended by that certain Second Amendment
to Showboat Star Partnership dated August 1, 1993, as amended by
that certain Third Amendment to Showboat Star Partnership
Agreement dated March 1, 1994;
WHEREAS, the Issuer, Ocean Showboat, Inc., a New Jersey
corporation, Atlantic City Showboat, Inc., a New Jersey
corporation, and Showboat Operating Company, a Nevada
corporation, as guarantors, entered into that certain Indenture
(the "Indenture"), dated as of May 18, 1993, pursuant to which
the Issuer heretofore issued and sold First Mortgage bonds to the
Holders;
WHEREAS, the Issuer solicited and received the consent of
the Holders to amend the First Mortgage Bonds subject to, among
other things, the pledge of Pledgor's distributions or income
from the Showboat Star Partnership; and
WHEREAS, to obtain the Amendments to the Indenture and to
further secure further the obligations of the Issuer under the
First Mortgage Bonds (whether such obligations now exist or are
hereafter created or incurred, whether they arise under or are
evidenced by this Agreement, the Guaranty, the First Mortgage
Bonds, or any other present or future instrument or agreement or
by operation of law, and whether they are or may be direct or
indirect, due or to become due, absolute or contingent, primary
or secondary, liquidated or unliquidated or sole, joint, several
or, joint and several), including, without limitation, the
payment of any principal, or interest (including, without
limitation, any interest accruing on or after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, whether or not a claim for
post-filing or post-petition interest is allowed in such
proceeding) on the First Mortgage Bonds
(collectively, the "Obligations"), the Pledgor has agreed to
grant to the Pledgee a security interest in and to all of the
Pledgor's right, title or interest in all distributions or income
from the Showboat Star Partnership hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
1. PLEDGE. Pledgor hereby grants to the Pledgee a
security interest (the "Security Interest") in and to all of the
Pledgor's right, title and interest in all distributions or
income from the Showboat Star Partnership, together with all
substitutions and replacements for and proceeds of the foregoing
(all such distributions, allocations, substitutions, replacements
and proceeds are hereinafter collectively referred to as the
"Pledged Interests"). The Pledgor grants the aforementioned
security interest to secure the full and faithful payment and
performance of the obligations. The Pledgor shall execute and
deliver to the Pledgee any and all documents and instruments as
Pledgee may determine necessary in order to perfect and maintain
the security interest granted hereunder in and to the Pledged
Interests.
2. CONDITION PRECEDENT. The Pledgor has applied to the
Louisiana Riverboat Gaming Commission for approval to grant the
Security Interest in the Pledged Interests pursuant to this
Agreement. The effectiveness of this Agreement is conditioned
upon the receipt of such approval from the Louisiana Riverboat
Gaming Commission.
3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE
PLEDGOR. As further security for the full and faithful
performance of the Obligations, the Pledgor hereby covenants,
represents and warrants to the Pledgee as follows:
a. The Pledgor's right to the Pledged Interests
is not subject to any defense, rights, setoff or
counterclaim, and the Pledgor will defend the Pledgee
against all claims or demands of all persons other than
the Pledgee. No financing statement covering all or
any of the Pledged Interest is on file in any public
office.
b. The Pledgor shall not sell, convey, assign,
pledge, mortgage, grant a security interest in or
otherwise transfer or encumber all or a part of the
Pledgor's interest in the Pledged Interests or other
property pledged as security hereunder.
c. The Pledgor hereby acknowledges that this
Agreement and the pledge and security granted hereby is
supported by good and valuable consideration, and is
binding upon the Pledgor. Upon the delivery to the
Pledgee of the Pledged
2
Interests and (as to certain proceeds thereof) the
filing of Uniform Commercial Code (the "UCC") financing
statements, the pledge of the Pledged Interests
pursuant to this Agreement creates a valid first
priority security interest in the Pledged Interests.
d. The Pledgor has full power and authority to
execute this Agreement and to grant the security
interest in the Pledged Interests granted hereunder.
e. The Pledgor will at any time or times
hereafter execute such financing statements,
continuation statements or other instruments of
assurance as Pledgee may request to establish, maintain
and perfect the Pledgee's security interest in the
Pledged Interests.
f. The execution, delivery and performance by
the Pledgor of this Agreement have been duly authorized
by all necessary corporate action and do not
contravene, or constitute a default under, any
provision of applicable law or regulation or of the
certificate of incorporation or bylaws of the Pledgor
or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Pledgor or
result in the creation of imposition of any Lien on any
assets of the Pledgor.
g. This Agreement has been duly executed and
delivered by the Pledgor and constitutes a legal, valid
and binding obligation of the Pledgor enforceable
against the Pledgor in accordance with its terms,
except as such enforceability may be limited by the
effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws
affecting creditors' rights generally or general
principles of equity.
h. No consent of any other Persons and no
consent, authorization, approval or other action by,
and no notice to, or filing with, any governmental
authority or regulatory body is required either (i) for
the pledge by the Pledgor of the Pledged Interests
pursuant to this Agreement (except as may be required
under the Louisiana Economic Development and Gaming
Control Act or other applicable gaming laws) or (ii)
for the exercise by the Pledgee of the rights provided
for in this Agreement or the remedies in respect of the
Pledged Interests pursuant to this Agreement (except as
may be required under the Louisiana Economic
Development and Gaming Control Act or other applicable
gaming laws).
i. No litigation, investigation or proceeding of
or before any arbitrator or governmental authority is
pending or, to the best knowledge of the Pledgor,
threatened by or against the Pledgor or against any of
its properties or revenues with respect to this
Agreement or any of the transactions contemplated
hereby.
4. TERM. This Agreement shall remain in full force and
effect until the payment in full of all Obligations.
3
5. AMENDMENTS. The terms of this Agreement may only be
amended, modified or waived in accordance with Article 9 of the
Indenture.
6. EVENT OF DEFAULT. An "Event of Default" wherever used
herein means any one of the following events.
a. This Agreement shall cease to be in full
force and effect;
b. The Pledged Interests granted to the Pledgee
pursuant to this Agreement shall cease to give the
Pledgee the rights, powers and privileges purported to
be created hereby.
c. The Pledgor fails in any material respect to
perform or observe any covenant or agreement or
breaches in any material respect any representation
contained in Sections 1, 4, 5, 15, 17 and 18 hereof;
and
d. An Event of Default under the Indenture.
7. REMEDIES UPON DEFAULT. Subject to paragraph 19, if any
Event of Default shall have occurred and be continuing the
Pledgee shall, in addition to all other rights given by law or by
this Agreement, the Indenture or otherwise, have all of the
rights and remedies with respect to the Security Interest of a
secured party under the UCC in effect in the State of New York at
that time.
8. WAIVER. No delay or failure by the Pledgee and the
exercise of any right or remedy shall constitute a waiver thereof
and no single or partial exercise by the Pledgee of any right or
remedy shall preclude other or further exercise of any other
right or remedy.
9. NOTICES. All notices, requests, demands and other
communications hereunder shall be deemed to have been duly given
if in writing and delivered in person or mailed by first class
mail to such party's address stated in Section 12.10 of the
Indenture.
10. SERVICE OF PROCESS. The Pledgor agrees to accept
service of process by mail at the following address: Kummer
Kaempfer Bonner & Renshaw, 3800 Howard Hughes Parkway, Seventh
Floor, Las Vegas, Nevada 89109, Attention: John N. Brewer.
11. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York,
without regard to its choice of law provisions.
12. BINDING EFFECT. This Agreement shall be binding upon
and inure to the parties hereto and their assigns and successors.
4
13. SEVERABILITY. In the event any provision hereof is
determined to be unenforceable or invalid, such provision or such
part thereof which may be unenforceable shall be deemed severed
from this Agreement and the remaining provisions carried out with
the same force and effect as if the severed provision of part
thereof had not been made a part hereof.
14. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall
constitute one agreement, and any of the parties may execute this
Agreement by signing any such counterpart.
15. INDEMNITY. The Pledgor agrees to indemnify and hold
harmless the Pledgee and the holders of the First Mortgage Bonds
from and against any and all claims, demand, losses, judgments
and liabilities (including liabilities for penalties) of
whatsoever kind or nature, and to reimburse the Pledgee and the
holders of the First Mortgage Bonds for all costs and expenses,
including reasonable attorneys' fees, growing out of or resulting
from this Agreement or the exercise by the Pledgee of any right
or remedy granted to it hereunder. In no event shall the Pledgee
be liable, in the absence of gross negligence or willful
misconduct on its part, for any matter or thing in connection
with this Agreement other than to account for moneys actually
received by it in accordance with the terms hereof. If and to
the extent that the obligations of the Pledgor under this Section
are unenforceable for any reason, the Pledgor hereby agrees to
make the maximum contribution to the payment and satisfaction of
such obligations permissible under applicable law.
16. FURTHER ASSURANCE; POWER-OF-ATTORNEY.
a. The Pledgor agrees that it will join with the
Pledgee in executing and, at its own expense, filing,
recording or registering and refiling, re-recording or
re-registering under the UCC, or similar statutes, such
financing statements, continuation statements and other
documents in such offices as the Pledgee may deem
necessary or desirable and wherever required or
permitted by law in order to perfect and preserve the
Pledgee's security interest in the Pledged Interests
and hereby authorizes the Pledgee to file financing
statements, continuation statements and amendments
thereto relative to all or any part of the Pledged
Interests without the signature of the Pledgor where
permitted by law, and agrees to do such further acts
and things and to execute and deliver to the Pledgee
such additional conveyances, assignments, agreements
and instruments as the Pledgee may reasonably require
or deem advisable to carry into effect the purposes of
this Agreement or to further assure and confirm unto
the Pledgee its rights, power and remedies hereunder.
b. The Pledgor hereby appoints the Pledgee the
Pledgor's attorney-in-fact, with full authority in the
place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time after the
occurrence and during the
5
continuance of an Event of Default, in the
Pledgee's discretion to take action and to execute any
instrument which the Pledgee may reasonably deem
necessary or advisable to accomplish the purposes of
this Agreement.
17. THE PLEDGEE AS AGENT. The Pledgee will hold in
accordance with this Agreement all items constituting the Pledged
Interests at any time received by it under this Agreement. It is
expressly understood and agreed that the obligations of the
Pledgee as holder of the Pledged Interests and with respect to
the disposition thereof, and otherwise under this Agreement, are
only those expressly set forth in this Agreement. The Pledgee
shall act hereunder on the terms and conditions set forth herein.
18. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. The obligations
of the Pledgor under this Agreement shall be absolute and
unconditional and shall remain in full force and effect without
regard to, and shall be released, suspended, discharged,
terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (a) any
renewal, extension, amendment or modification of, or addition or
supplement to or deletion from any of the Indenture, the First
Mortgage Bonds, or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (b) any
waiver, consent, extension, indulgence or other action or
inaction under or in respect of any such instrument or agreement
or this Agreement, the Indenture, or the First Mortgage Bonds or
any exercise or non-exercise of any right, remedy, power or
privilege under or in respect of this Agreement, the Indenture or
the First Mortgage Bond; (c) any furnishing of any additional
security to the Pledgee or any acceptance thereof or any sale,
exchange, release, surrender or realization of or upon any
security by the Pledgee; (d) any invalidity, irregularity or
unenforceability of all or part of the Obligations or of any
security therefor; or (e) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation
or other like proceeding relating to the Pledgor or any
subsidiary of the Pledgor, or any action taken with respect to
this Agreement by any trustee or receiver, or by any court, in
any such proceeding, whether or not the Pledgor shall have notice
or knowledge of any of the foregoing.
19. TERMINATION; RELEASE OF COLLATERAL. This Agreement
shall terminate with respect to any Pledged Interests upon
release of such Pledged Interests as provided in Section 10.04 of
the Indenture, and with respect to all Pledged Interests, upon
the release of all Pledged Interests as provided in Section
10.04(b)(iii) of the Indenture. At the time of any such
termination, the Pledgee at the request and expense of the
Pledgor will execute and deliver to the Pledgor a proper
instrument or instruments acknowledging the satisfaction and
termination of this Agreement with respect to such Pledged
Interests and will duly assign, transfer and deliver to the
Pledgor any such Pledged Interests as has not yet theretofore
been sold or otherwise applied or released pursuant to this
Agreement, together with any moneys at the time held by the
Pledgee in respect of such Pledged Interests. Such assignment
and delivery shall be without warrant by or recourse to the
Pledgee, except as to the absence of any prior assignments by the
Pledgee of its interest in the Pledged Interests.
6
IN WITNESS WHEREOF, the Pledgor and the Pledgee have
executed and delivered this Agreement as of the day and year
first above written.
SHOWBOAT LOUISIANA, INC.
as Pledgor
By:/s/Leann Schneider
Name:Leann Schneider
Title:Treasurer
IBJ SCHRODER BANK & TRUST COMPANY
as Pledgee
Dated: July 18, 1994 By:/s/Barbara McCluskey
Name: Barbara McCluskey
Title: Assistant Vice President
7
IBJ SCHRODER BANK & TRUST COMPANY
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
Personally appeared before me, the undersigned
authority in and for the said county and state, on this 20th day
of July, 1994, within my jurisdiction, the within named Barbara
McCluskey, who acknowledged that (s)he is Assistant Vice
President of IBJ Schroder Bank & Trust Company, a banking
corporation organized and existing under the laws of the State of
New York, and that for and on behalf of the said corporation, and
as its act and deed (s)he executed the above and foregoing
instrument, after first having been duly authorized by said
corporation so to do.
/s/_______________________
NOTARY PUBLIC
My Commission expires:
3/30/95
(Affix official seal, if applicable)
SHOWBOAT LOUISIANA, INC.
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
Personally appeared before me, the undersigned
authority in and for the said county and state, on this 12th day
of July, 1994, within my jurisdiction, the within named Leann
Schneider, who acknowledged that she is Treasurer of Showboat
Louisiana, Inc., a Nevada corporation, and that for and on behalf
of the said corporation, and as its act and deed she executed the
above and foregoing instrument, after first having been duly
authorized by said corporation so to do.
/s/___________________________
NOTARY PUBLIC
My Commission expires:
8/6/97
(Affix official seal, if applicable)
8
EX-10.28
3
THE INTEREST REPRESENTED BY THIS AGREEMENT HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS SUCH DISPOSITION WILL NOT VIOLATE SUCH ACT OR
ANY STATE SECURITIES LAW OR THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED. STAR CASINO, INC. MAY REQUIRE
AN OPINION OF COUNSEL TO SUCH EFFECT PRIOR TO SUCH DISPOSITION.
FOURTH AMENDMENT TO
SHOWBOAT STAR PARTNERSHIP AGREEMENT
This Fourth Amendment to the Showboat Star Partnership
Agreement (the "Fourth Amendment") is made as of the first day of
October, 1994 by and among Star Casino, Inc., a Louisiana
corporation ("Star"), Showboat Louisiana, Inc., a Nevada
corporation ("Showboat"), and the Minority Partners whose names
appear below (the "Minority Partners"). Capitalized terms not
defined herein have the meanings set forth in the Showboat Star
Partnership Agreement, as amended.
WITNESSETH:
WHEREAS, Star and Showboat entered into the Showboat Star
Partnership Agreement on the 2nd day of July, 1993, and,
thereafter, Star and Showboat entered into the First Amendment to
Showboat Star Partnership Agreement as of the 20th day of July,
1993 and the Second Amendment to Showboat Star Partnership
Agreement as of the 1st day of August, 1993, and Star, Showboat
and the Minority Partners other than Benjamin S. Gravolet
("Gravolet") entered into the Third Amendment to Showboat Star
Partnership Agreement as of the 1st day of March, 1994 (the
Showboat Star Partnership Agreement as so amended and as amended
hereby being referred to hereinafter as the "Agreement");
WHEREAS, Star desires to sell to Gravolet, and Gravolet
desires to purchase, the Percentage Interest described in Section
III hereinbelow, in accordance with Section 2.1 of the Agreement;
WHEREAS, Gravolet has entered into a General Partnership
Interest Subscription Agreement with Star;
WHEREAS, the Management Committee and Showboat agree to the
aforesaid sale and the admission of Gravolet as a Partner in the
Partnership; and
WHEREAS, Star and Showboat, who hold, in the aggregate,
Percentage Interests exceeding 75% have authorized this Fourth
Amendment;
NOW THEREFORE, in consideration of the covenants herein
contained and intending to be mutually bound, the parties hereto
agree as follows:
I. SALE OF A PORTION OF STAR'S PERCENTAGE INTEREST TO
GRAVOLET. Effective as of October 1, 1994 (the "Fourth Amendment
Effective Date"), Star hereby sells and delivers to Gravolet, and
Gravolet hereby purchases and accepts from Star, the Percentage
Interest set forth opposite Gravolet's name in Section III
hereinbelow, in accordance with the terms and conditions set
forth herein, in the Agreement, and in the General Partnership
Interest Subscription Agreement between Star and Gravolet.
II. ADMISSION OF GRAVOLET. The parties hereto hereby agree
to admit Gravolet as a Partner in the Partnership, and Gravolet
hereby agrees to be bound by the terms of the Agreement. The
Management Committee agrees to the admission of Gravolet as a
Partner in the Partnership, as evidenced by the unanimous consent
in writing of the Representatives constituting the membership of
the Management Committee on file at the principal business
establishment of the Partnership.
III. AMENDMENT TO SECTION 3.1. A new Section (c) shall be
included at the end of Section 3.1 of the Agreement, reading as
follows:
"(c) The Percentage Interest of each of the Partners as
of the Fourth Amendment Effective Date shall be:
Star 39%
Showboat 50%
Gabe Salloum 1%
Southshore Investments, Inc. 4%
Richard Schwartz 1%
Las Ninas Corporation 4%
Benjamin S. Gravolet 1%
100%
IV. AMENDMENT TO SECTION 3.2(E). Section 3.2(e) of the
Agreement is amended to read as follows, rather than as
previously written:
"(e) In the event of a permitted transfer of an
Interest of a Partner pursuant to the terms of this
Agreement, the Capital Account of the transferor
Partner shall become the Capital Account of the
transferee Partner to the extent
2
it relates to the transferred Interest.
"On the Third Amendment Effective Date, the Capital
Account of Star shall become the Capital Account of
each Minority Partner and of Showboat to the extent it
relates to the transferred Percentage Interest.
Immediately prior to the Third Amendment Effective
Date, the Capital Account of Star (part of which will
be transferred to the Minority Partners and to
Showboat) will only contain Star's initial Capital
Contribution made pursuant to Section 3.7a(i) (which is
$700) of the Agreement and Star's additional Capital
Contributions made pursuant to Section 3.7b(i) (which
is $35,000,000) and 3.7(c) (which is $8,400,000) of the
Agreement, and expressly does not include Star's
distributive share of Partnership income for the period
from the Effective Date through February 28, 1994.
"On the Fourth Amendment Effective Date, the Capital
Account of Star shall become the Capital Account of
Gravolet to the extent it relates to the transferred
Percentage Interest. Immediately prior to the Fourth
Amendment Effective Date, the Capital Account of Star
(part of which will be transferred to Gravolet) will
contain Star' 8 initial Capital Contribution made
pursuant to Section 3.7a(i) of the Agreement (which is
$700), Star's additional Capital Contributions made
pursuant to Sections 3.7b(i) and 3.7(c) of the
Agreement (which are $35,000,000 and $8,400,000,
respectively), less that portion of the amount of the
Capital Account of Star immediately prior to the Third
Amendment Effective Date which was transferred by Star
pursuant to the Third Amendment to Showboat Star
Partnership Agreement ($18,600,300.00), and expressly
does not include Star's distributive share of
Partnership income for the period from the Effective
Date through September 30, 1994."
V. AMENDMENT TO SECTION 13.4. Section 13.4 of the
Agreement is amended by adding the following name and address at
the end thereof:
"Benjamin S. Gravolet: Benjamin S. Gravolet
1300 Henry Clay Avenue
New Orleans, LA 70118
The balance of the Agreement is not changed by this Fourth
Amendment and shall remain in full force and effect.
3
This Fourth Amendment may be executed in any number of
counterparts, each of which, when so executed and delivered,
shall be deemed to be an original and all of which, taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Fourth
Amendment as of the date first above written.
STAR CASINO, INC.
By: /S/LOUIE ROUSSEL, III
LOUIE ROUSSEL, III, President
SHOWBOAT LOUISIANA, INC.
By: /S/J. KEITH WALLACE
J. KEITH WALLACE, President
and Chief Executive Officer
GABE SALLOUM
SOUTHSHORE INVESTMENTS, INC.
RICHARD SCHWARTZ
LAS NINAS CORPORATION
BY: STAR CASINO, INC.
Agent and Attorney in Fact
for the above named Partners
By:/S/LOUIE ROUSSEL, III
LOUIE ROUSSEL, III,
President
/S/BENJAMIN S. GRAVOLET
BENJAMIN S. GRAVOLET
1300 Henry Clay Avenue
New Orleans, LA 70118
4
STATE OF LOUISIANA
PARISH OF JEFFERSON
BE IT KNOWN, that on this 14th day of November, 1994, before
me, the undersigned Notary, duly commissioned, qualified and
sworn within and for the State and Parish aforesaid, personally
came and appeared Louie Roussel, III, appearing herein in his
capacity as the President of Star Casino, Inc., to me personally
known to be the identical person whose name is subscribed to the
foregoing instrument as the said officer of the said corporation,
and declared and acknowledged to me, Notary, in the presence of
the undersigned competent witnesses, that he executed the same on
behalf of the said corporation with full authority of its Board
of Directors, and that the said instrument is the free act and
deed of the said corporation and was executed for the uses,
purposes and benefits therein expressed.
WITNESSES:
___/S/______________________ /S/LOUIE ROUSSEL, III
LOUIE ROUSSEL, III
___/S/______________________
/S/DONALD H. MCDANIEL
NOTARY PUBLIC
5
STATE OF LOUISIANA
PARISH OF ORLEANS
BE IT KNOWN, that on this 10th day of January, 1995, before
me, the undersigned Notary, duly commissioned, qualified and
sworn within and for the State and Parish aforesaid, personally
came and appeared J. Keith Wallace, appearing herein in his
capacity as the President and Chief Executive Officer of Showboat
Louisiana, Inc., to me personally known to be the identical
person whose name is subscribed to the foregoing instrument as
the said officer of the said corporation, and declared and
acknowledged to me, Notary, in the presence of the undersigned
competent witnesses, that he executed the same on behalf of the
said corporation with full authority of its Board of Directors,
and that the said instrument is the free act and deed of the said
corporation and was executed for the uses, purposes and benefits
therein expressed.
WITNESSES:
___/S/___________________ /s/J. KEITH WALLACE
J. KEITH WALLACE
___/S/___________________
/S/________________
NOTARY PUBLIC
6
STATE OF LOUISIANA
PARISH OF JEFFERSON
BE IT KNOWN, that on this 14th day of November, 1994, before
me, the undersigned Notary, duly commissioned, qualified and
sworn within and for the State and Parish aforesaid, personally
came and appeared Louie Roussel, III, appearing herein in his
capacity as the President of Star Casino, Inc., to me personally
known to be the identical person whose name is subscribed to the
foregoing instrument as the said officer of the said corporation,
and declared and acknowledged to me, Notary, in the presence of
the undersigned competent witnesses, that he executed the same on
behalf of the said corporation in its capacity as the agent and
attorney-in-fact for Gabe Salloum, Southshore Investments, Inc.,
Richard Schwartz, and Las Ninas Corporation, and that the said
instrument is the free act and deed of the aforesaid principals
and was executed on their behalf for the uses, purposes and
benefits therein expressed.
WITNESSES:
___/S/____________________ /S/LOUIE ROUSSEL, III
LOUIE ROUSSEL, III
___/S/____________________
/S/________________
NOTARY PUBLIC
7
STATE OF LOUISIANA
PARISH OF ORLEANS
BE IT KNOWN, that on this 8th day of November, 1994, before
me, the undersigned authority, duly commissioned, qualified and
sworn within and for the State and Parish aforesaid, personally
came and appeared Benjamin S. Gravolet, to me personally known to
be one of the parties who executed the above and foregoing
instrument who declared and acknowledged to me, Notary, in the
presence of the undersigned competent witnesses, that he executed
the above and foregoing instrument of his own free will, as his
free act and deed, for the uses, purposes and benefits therein
expressed.
WITNESSES:
___/S/____________________ /S/BENJAMIN S. GRAVOLET
BENJAMIN S. GRAVOLET
___/S/____________________
/S/DONALD H. MCDANIEL
NOTARY PUBLIC
8
UNANIMOUS CONSENT OF THE REPRESENTATIVES
CONSTITUTING THE MEMBERSHIP OF THE MANAGEMENT
COMMITTEE OF SHOWBOAT STAR PARTNERSHIP
The undersigned, who are all of the representatives
constituting the membership of the Management Committee of
Showboat Star Partnership (the "Partnership"), a Louisiana
partnership, and acting herein by unanimous consent as permitted
by Section 5.1(c) of the Showboat Star Partnership Agreement, as
amended (the "Partnership Agreement"), hereby adopt the following
resolution:
RESOLVED, that the Management Committee hereby agrees to the
sale by Star Casino, Inc. to Benjamin S. Gravolet of a one
percent Percentage Interest (as such term is defined in the
Partnership Agreement) in the Partnership, and the admission of
Benjamin S. Gravolet as a partner in the Partnership.
This Unanimous Consent may be executed in counterparts, each
of which, when so executed and delivered, shall be deemed to be
an original and all of which, taken together, shall constitute
one and the same instrument, and is dated ____, 1994.
/S/J. K. HOUSSELS
J. K. HOUSSELS
/S/FRANK A. MODICA
FRANK A. MODICA
/S/J. KELL HOUSSELS, III
J. KELL HOUSSELS, III
/S/J. KEITH WALLACE
J. KEITH WALLACE
/S/DONALD L. TATZIN
DONALD L. TATZIN
/S/LOUIE ROUSSEL, III
LOUIE ROUSSEL, III
_____________________
CARL J. EBERTS
_____________________
THOMAS B. BENDER
_____________________
GABE SALLOUM
_____________________
RICHARD SCHWARTZ
C E R T I F I C A T E
We hereby certify that the persons whose names appear
beneath the foregoing Unanimous Consent are all of the
representatives constituting the membership of the Management
Committee of Showboat Star Partnership, Inc.
STAR CASINO, INC.
By:/S/LOUIE ROUSSEL, III
LOUIE ROUSSEL, III, President
2
SHOWBOAT LOUISIANA, INC.
By:/S/J. KEITH WALLACE
J. KEITH WALLACE
President & Chief Executive
Officer
3
THE INTEREST REPRESENTED BY THIS AGREEMENT HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS SUCH DISPOSITION WILL NOT VIOLATE SUCH ACT OR
ANY STATE SECURITIES LAW OR THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED. THE PARTIES DESIGNATED AS
SELLERS HEREINBELOW MAY REQUIRE AN OPINION OF COUNSEL TO SUCH
EFFECT PRIOR TO SUCH DISPOSITION.
FIFTH AMENDMENT TO
SHOWBOAT STAR PARTNERSHIP AGREEMENT
This Fifth Amendment to the Showboat Star Partnership Agreement
(the "Fifth Amendment") is made as of the 26th day of January,
1995 by and among (i) Star Casino, Inc., a Louisiana corporation
("Star"), (ii) Gabe Salloum, (iii) Southshore Investments, Inc.,
(iv) Richard Schwartz, (v) Las Ninas Corporation, and (vi)
Benjamin S. Gravolet (individually, "Seller", and collectively,
"Sellers") and Showboat Louisiana, Inc., a Nevada corporation
("Showboat"), and Lake Pontchartrain Showboat, Inc., a Nevada
corporation ("Pontchartrain") (individually, "Purchaser", and
collectively, "Purchasers"). Capitalized terms not defined herein
have the meanings set forth in the Showboat Star Partnership
Agreement, as amended.
WITNESSETH:
WHEREAS, Star and Showboat entered into the Showboat Star
Partnership Agreement on the 2nd day of July, 1993, and,
thereafter, Star and Showboat entered into the First Amendment to
Showboat Star Partnership Agreement as of the 20th day of July,
1993 and the Second Amendment to Showboat Star Partnership
Agreement as of the 1st day of August, 1993, and Star, Showboat
and the Minority Partners other than Benjamin S. Gravolet
("Gravolet") entered into the Third Amendment to Showboat Star
Partnership Agreement as of the 1st day of March, 1994, and Star,
Showboat and the Minority Partners entered into the Fourth
Amendment to Showboat Star Partnership as of the 1st day of
October, 1994 (the Showboat Star Partnership Agreement as so
amended and as amended hereby being referred to hereinafter as
the "Agreement");
WHEREAS, Sellers desire to sell to Purchasers, and Purchasers
desire to purchase from Sellers, the Sellers' Interests;
WHEREAS, Purchasers desire to amend the Agreement in certain
other respects;
NOW THEREFORE, in consideration of the covenants herein contained
and intending to be mutually bound, the parties hereto agree as
follows:
I.SALE OF SELLERS' PERCENTAGE INTERESTS TO PURCHASER.
Effective upon the filing of the Fifth Amendment for
registry with the Louisiana Secretary of State following the
approval of this transaction by The Louisiana Riverboat
Gaming Commission and the Department of Public Safety &
Corrections, Office of
State Police, Riverboat Gaming Division (the "Fifth
Amendment Effective Date Sellers sell and deliver to
Purchasers, and Purchasers purchase and accept from Sellers,
undivided interests in all of Sellers' Interests and all of
Sellers' right, title and interest, if any, in and to all
assets, inclusive of cash, of the Partnership, such that
Purchasers will own the Percentage Interests set forth
opposite Purchasers' names in Section V below, in accordance
with the terms and conditions set forth herein and in the
Agreement. The purchase price and other terms and conditions
relating to this transaction are as follows.
a - The price to be paid by Purchasers for the Interests of
Sellers (the "Purchase Price") shall be calculated as
follows:
i - The aggregate price paid for the Sellers' Interests shall
be $25 million, or $500,000 per 1% Percentage Interest ("Base
Price"), subject to potential adjustment as set forth
hereinbelow.
ii - In the event of a sale of the assets of the Partnership
or the Purchasers' Partnership Interests to an unrelated third
party (in either case, the "Resale") during a period ending
three years from the Fifth Amendment Effective Date, the
Purchase Price shall be recalculated as follows and the
additional amount set forth in Paragraph C hereinbelow shall
be paid by Purchasers to Sellers as provided hereinafter:
A. The purchase price realized upon the Resale, net of
normal selling expenses in reasonable amounts, excluding the
"Ultimate Net Quick" (as defined in Paragraph B
hereinbelow), if the Ultimate Net Quick is included in such
purchase price, shall be determined. The Sellers acknowledge
that such purchase price will be exclusively negotiated
between Purchasers and the third party. Sellers waive all
right to participate in the negotiations of such purchase
price and shall accept as conclusive the negotiated purchase
price, and hereby release Purchasers from all liability in
connection therewith.
B. The final net realizable value of the current assets less
current liabilities of the Partnership shall be determined
(the "First Net Quick") as of the Fifth Amendment Effective
Date, and shall also be determined (the "Second Net Quick")
as of the earlier of the date (the "Second Net Quick Date")
(1) on which the Riverboat leaves South Shore Harbor
permanently, or (2) the date on which the Resale occurs.
Current assets shall include cash, cash
2
investments, inventories, prepaid expenses, the $6,000,000
in cash receivable from the sale of certain terminal
facilities to Belle of Orleans, L.L.C. pursuant to that
certain Purchase and Sale Agreement dated as of January 4,
1995 if such sale has occurred by the Second Net Quick Date,
and any other current assets recognized by generally
accepted accounting principles consistently applied. In the
event a sale of the aforesaid terminal facilities occurs
after the Second Net Quick Date and within three years from
the Fifth Amendment Effective Date, then Purchasers shall
promptly pay to Sellers one-half of the proceeds from such
sale, net of normal selling expenses in reasonable amounts
(the "Terminal Facilities Amount"). Current liabilities
shall include accounts payable and any other current
liabilities (whether pending, threatened or contingent, the
amount of such pending, threatened or contingent liabilities
to be determined by mutual agreement between Star and
Showboat) recognized by generally accepted accounting
principles consistently applied. The Second Net Quick shall
be the Ultimate Net Quick (i) if the Second Net Quick is
greater than the First Net Quick, or (ii) if the difference
between the Second Net Quick and the First Net Quick (when
the Second Net Quick is less than the First Net Quick) is
less than $3,100,000- If the difference between the Second
Net Quick and the First Net Quick (when the Second Net Quick
is less than the First Net Quick) is more than $3,100,000,
the Ultimate Net Quick shall be in First Net Quick less
$3,100,000.
C. The aggregate of A. and B. (except for the Terminal
Facilities Amount) above, multiplied by 50%, less the Base
Price (the "Claw Feature") shall be payable as set forth
hereinafter. Illustrations of the calculation of the Claw
Feature are attached hereto and made a part hereof as
Exhibits 1 and 2.
The Base Price portion of the Purchase Price shall be paid on the
Fifth Amendment Effective Date. Notwithstanding the foregoing,
the portion of the Base Price owed to the Minority Partners shall
be deposited in an account as soon as is practical following the
Fifth Amendment Effective Date. An amount equal to 75% of the
estimated minimum amount of the Claw Feature portion of the
Purchase Price shall be paid not later than 15 days after the
date of the closing of the Resale occurs, and the balance of the
Claw Feature of the Purchase Price shall be paid not later than
60 days after the date of the closing of the Resale occurs. In
the event a portion of the purchase price realized upon the
Resale is represented by a promissory note, payment of that part
of the Claw Feature portion of the Purchase Price which is the
same percentage of the total Claw Feature portion of
3
the Purchase Price as the percentage of the purchase price
realized upon the Resale that is represented by a promissory note
shall be deferred, and the deferred part of the Claw Feature
portion of the Purchase Price shall be paid proportionately as
payment of the purchase price realized upon the Resale which is
represented by a promissory note is received by Purchasers.
Sellers shall receive interest on the deferred part of the Claw
Feature portion of the Purchase Price at the same rate of
interest payable on the promissory note representing a portion of
the purchase price realized upon the Resale. An illustration of
the calculation of the deferred part of the Claw Feature portion
of the purchase price is annexed hereto as Exhibit 3 and made a
part hereof.
b - Purchasers shall also pay to the Sellers on the Fifth
Amendment Effective Date an amount equal to the product of
$15,000 times the number of days which have elapsed between
January 17, 1995 and the date hereof, both inclusive, in
proportion to the Sellers' respective Percentage Interests.
c - The Sellers appoint J. V. Leclere Krentel, C.P.A. as their
agent to receive the Purchase Price. Mr. Krentel shall promptly
distribute the Purchase Price to the Sellers.
d - Purchasers hereby release and discharge Sellers and all of
their officers, directors, employees and agents, including the
officers, directors, employees and agents of all affiliated
companies of Sellers, from any and all Claims, related to the
operations of the Partnership, the Project and the Riverboat
prior to the Fifth Amendment Effective Date, including taxes,
penalties, judgments, settlements, fines and the cost of
defending the Claims, provided however, that the foregoing
release shall not apply to any Claim against a Seller which
arises due to such Seller's acts of gross negligence, intentional
misconduct or criminal misconduct, including an act of gross
negligence, intentional misconduct or criminal misconduct by an
officer, director, employee or agent of such party or an
affiliated company of such Seller. Sellers hereby release and
discharge Purchasers and all of their officers, directors,
employees and agents, including the officers, directors,
employees and agents of all affiliated companies of Sellers, from
any and all Claims, related to the operations of the Partnership,
the Project and the Riverboat prior to the Fifth Amendment
Effective Date, including taxes, penalties, judgments,
settlements, fines and the cost of defending the Claims, provided
however, that the foregoing release shall not apply to any Claim
against a Purchaser which arises due to such Purchaser's acts of
gross negligence, intentional misconduct or criminal misconduct,
including an act of gross negligence, intentional misconduct or
criminal misconduct by an officer, director, employee or agent of
such party or an affiliated company of such Purchaser.
4
e - Purchasers shall, in solido, defend, indemnify, and hold
completely free and harmless the Sellers, including the officers,
directors, employees and agents of the Sellers, or any affiliated
companies of the Sellers, from any and all Claims related to the
operations of the Partnership, the Project or the Riverboat,
provided however, that the foregoing indemnification shall not
apply to any claim against a Seller from which such Seller is not
released and discharged pursuant to paragraph d hereinabove, and
any such Seller shall defend, indemnify and hold completely free
and harmless Purchasers with respect to such Claims.
f - The parties hereto agree to cooperate fully with each other
in order to achieve the purposes of this transaction and to take
all actions and execute and deliver all documents not
specifically described herein that may be required to carry out
the purposes and intent of this transaction. All disputes arising
under or related to this transaction shall be resolved by
arbitration in New Orleans, Louisiana by a single arbitrator
acting pursuant to the rules of the American Arbitration
Association. Any decision of such arbitrator may be enforced by
the Civil District Court for the Parish of Orleans, State of
Louisiana. This Fifth Amendment, the transaction contemplated
thereby, and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the
State of Louisiana without reference to the choice of law
provisions of the Agreement.
g - Each party hereto agrees for itself and its respective
affiliates, agents, representatives and consultants to hold in
the strictest confidence and not to disclose to any person,
entity, party, firm or corporation (other than agents or
representatives of either party who are also bound by this
paragraph) without the prior express written consent of the other
parties (except as such disclosures are required in applications
or by applicable securities or gaming laws) any of the other
parties' confidential data, whether related to the Project or to
general business matters, which has, or will come into their
possession or knowledge as a result of this transaction.
h - All press releases or prepared statements to the media made
by any party hereto or its respective affiliated companies
concerning this transaction shall be jointly approved in advance
by Star and Showboat, with the exception of any releases required
to be made by any party or their respective affiliated companies
pursuant to various securities laws applicable to any party or
their respective affiliated companies.
i - Sellers acknowledge that Showboat and its affiliated
companies currently conduct gaming operations in Nevada and New
Jersey and will conduct gaming operations in New South Wales,
Australia. Such gaming operations are highly regulated by gaming
authorities of these states and such
5
regulations impose upon Showboat an affirmative duty to
investigate the backgrounds of entities or individuals with whom
Showboat does business. Furthermore, such regulations require
that Showboat and its affiliates, which may include the Sellers,
subject themselves to rigorous investigation. Furthermore,
Showboat or its affiliated companies may in the future apply for
licensure in other jurisdictions, including states of the United
States or foreign countries which may have similar regulations.
Gaming authorities in other jurisdictions may require information
regarding entities and persons with whom Showboat does business.
Accordingly, Sellers agree, if requested by Showboat, to cause
their principals, directors, officers, major shareholders, owners
and any other key individuals to supply such information and
execute such affidavits and documents, including personal history
disclosure documents and personal financial disclosure documents
as Showboat may reasonably request.
II. ADMISSION OF PURCHASER. Showboat hereby agrees to admit
Pontchartrain as a Partner in the Partnership, and Pontchartrain
hereby agrees to be bound by the terms of the Agreement.\
III. AMENDMENT TO SECTION 2.6. Section 2.6 of the Agreement
is amended to read as follows, rather than as previously written:
"2.6 PRINCIPAL PLACE OF BUSINESS. The principal business
establishment of the partnership shall be located at 1 Star
Casino Boulevard, New Orleans, Louisiana 70126. The
Management Committee may, in its sole discretion, change the
location of the principal business establishment of the
Partnership, and, if it does so, it shall promptly notify
the Partners of such new location within five (5) days of
such change."
IV. AMENDMENT TO SECTION 2.8. Section 2.8 of the Agreement
is amended to read as follows, rather than as previously written:
"2.8 CERTIFICATE. Following the Fifth Amendment Effective
Date, Showboat shall perform all acts necessary to assure
the prompt filing of such certificate of fictitious name as
is required by Louisiana law, and after the Third Amendment
Effective Date the Management Committee shall perform all
other acts required by Louisiana law or any other law to
perfect and maintain the Partnership as a Partnership under
the laws of the State of Louisiana."
V. AMENDMENT TO SECTION 3.1. A Section 3.1(d) shall be
included at the end of Section 3.1 of the Agreement, reading as
follows:
6
"(d) The Percentage Interest of each of the Partners as of
the Fifth Amendment Effective Date shall be:
Showboat 99%
Pontchartrain 1%
----
100%
VI. AMENDMENT TO SECTION 3.2(E). Section 3.2(e) of the
Agreement is amended by adding the following sentence at the end
thereof, as a new paragraph:
"On the Fifth Amendment Effective Date the Capital Account
of each of the Sellers shall become a portion of the Capital
Account of each of the Purchasers to the extent it relates
to each of the Sellers' undivided interest in such Sellers'
Interest transferred to each of the Purchasers."
VII. AMENDMENT TO SECTION 6.3. Section 6.3 of the Agreement
is amended to read as follows, rather than as previously written:
"6.3 CONTINUING LIABILITY. Unless otherwise agreed, in the
event a Partner sells, exchanges, assigns or otherwise
transfers its Interest (including any transfer in accordance
with Section 8 of this Agreement), such Partner shall not
remain, liable for any obligations and liabilities incurred
by such Partner as a Partner prior to the effective date of
such transfer (including any tax liability of such Partner),
and shall be free of any obligations or liabilities incurred
on account of the activities of the Partnership after such
date."
VIII. AMENDMENT TO SECTION 13.4. Section 13.4 of the
Agreement is amended by deleting the names and addresses of all
parties presently listed other than Showboat, and by adding:
Lake Pontchartrain Showboat, Inc. 2800 Fremont Street
Las Vegas, Nevada 89104
The balance of the Agreement is not changed by this Fifth
Amendment and shall remain in full force and effect.
This Fifth Amendment may be executed in any number of
counterparts, which taken together shall constitute one and the
same instrument and each of which shall be considered an original
for all purposes.
IN WITNESS WHEREOF, the parties have executed this Fifth
Amendment as of the date first above written.
7
STAR CASINO, INC.
By:/S/Louis J. Roussel, III
LOUIS J. ROUSSEL, III,
President
SOUTHSHORE INVESTMENTS, INC.
By:/S/Carl J. Eberts
CARL J. EBERTS, Secretary
/S/Richard Shwartz
RICHARD SCHWARTZ
LAS NINAS CORPORATION
By:/S/Dina B. Middlekauff
Dina B. Middlekauff, President
/S/Benjamin S. Gravolet
BENJAMIN S. GRAVOLET
SHOWBOAT LOUISIANA, INC.
By:/S/John N. Brewer
JOHN N. BREWER, Assistant Secretary
LAKE PONTCHARTRAIN SHOWBOAT, INC.
By:/S/John N. Brewer
JOHN N. BREWER, Assistant Secretary
8
STATE OF LOUISIANA
PARISH OF JEFFERSON
BE IT KNOWN, that on this 25th day of January, 1995, before
me, the undersigned Notary, duly commissioned, qualified and
sworn within and for the State and Parish aforesaid, personally
came and appeared Louie J. Roussel, III, appearing herein in his
capacity as the President of Star Casino, Inc., to me personally
known to be the identical person whose name is subscribed to the
foregoing instrument as the said officer of the said corporation,
and declared and acknowledged to me, Notary, in the presence of
the undersigned competent witnesses, that he executed the same on
behalf of the said corporation with full authority of its Board
of Directors, and that the said instrument is the free act and
deed of the said corporation and was executed for the uses,
purposes and benefits therein expressed.
WITNESSES:
/S/__________________ /S/ Louie J. Roussel, III
LOUIE J. ROUSSEL, III
/S/__________________
/S/Donald H. McDaniel
NOTARY PUBLIC
STATE OF LOUISIANA
PARISH OF ORLEANS
BE IT KNOWN, that on this 25th day of January, 1995, before
me, the undersigned authority, duly commissioned, qualified and
sworn within and for the State and Parish aforesaid, personally
came and appeared Gabe Salloum, to me personally known to be one
of the individual persons who executed the above and foregoing
instrument who declared and acknowledged to me, Notary, in the
presence of the undersigned competent witnesses, that he executed
the above and foregoing instrument of his own free will, as his
free act and deed, for the uses, purposes and benefits therein
expressed.
WITNESSES:
/S/_________________ /S/Gabe Salloum
GABE SALLOUM
/S/_________________
/S/Donald H. McDaniel
NOTARY PUBLIC
STATE OF LOUISIANA
PARISH OF JEFFERSON
BE IT KNOWN, that on this 26th day of January, 1995, before
me, the undersigned Notary, duly commissioned, qualified and
sworn within and for the State and Parish aforesaid, personally
came and appeared Carl J. Eberts, appearing herein in his
capacity as the Secretary of Southshore Investments, Inc., to me
personally known to be the identical person whose name is
subscribed to the foregoing instrument as the said officer of the
said corporation, and declared and acknowledged to me, Notary, in
the presence of the undersigned competent witnesses, that he
executed the same on behalf of the said corporation with full
authority of its Board of Directors, and that the said instrument
is the free act and deed of the said corporation and was executed
for the uses, purposes and benefits therein expressed.
WITNESSES:
____________________ /S/Carl J. Eberts
CARL J. EBERTS
____________________
/S/_______________
NOTARY PUBLIC
STATE OF LOUISIANA
PARISH OF ORLEANS
BE IT KNOWN, that on this 25th day of January, 1995, before
me, the undersigned authority, duly commissioned, qualified and
sworn within and for the State and Parish aforesaid, personally
came and appeared Richard Schwartz, to me personally known to be
one of the individual persons who executed the above and
foregoing instrument who declared and acknowledged to me, Notary,
in the presence of the undersigned competent witnesses, that he
executed the above and foregoing instrument of his own free will,
as his free act and deed, for the uses, purposes and benefits
therein expressed.
WITNESSES:
/S/_________________ /S/Richard Shwartz
RICHARD SCHWARTZ
/S/_________________
/S/Donald H. McDaniel
NOTARY PUBLIC
STATE OF LOUISIANA
PARISH OF ORLEANS
BE IT KNOWN, that on this 25th day of January, 1995, before
me, the undersigned Notary, duly commissioned, qualified and
sworn within and for the State and Parish aforesaid, personally
came and appeared Dina B. Middlekauff, appearing herein in her
capacity as the President of Las Ninas Corporation, to me
personally known to be the identical person whose name is
subscribed to the foregoing instrument as the said officer of the
said corporation, and declared and acknowledged to me, Notary, in
the presence of the undersigned competent witnesses, that she
executed the same on behalf of the said corporation with full
authority of its Board of Directors, and that the said instrument
is the free act and deed of the said corporation and was executed
for the uses, purposes and benefits therein expressed.
WITNESSES:
/S/_________________ /S/Dina B. Middlekauff
DINA B. MIDDLEKAUFF
/S/_________________
/S/Donald H. McDaniel
NOTARY PUBLIC
STATE OF LOUISIANA
PARISH OF ORLEANS
BE IT KNOWN, that on this 25th day of January, 1995, before
me, the undersigned authority, duly commissioned, qualified and
sworn within and for the State and Parish aforesaid, personally
came and appeared Benjamin S. Gravolet, to me personally known to
be one of the individual persons who executed the above and
foregoing instrument who declared and acknowledged to me, Notary,
in the presence of the undersigned competent witnesses, that he
executed the above and foregoing instrument of his own free will,
as his free act and deed, for the uses, purposes and benefits
therein expressed.
WITNESSES:
/S/_________________ /S/Benjamin S. Gravolet
BENJAMIN S. GRAVOLET
/S/_________________
/S/Donald H. McDaniel
NOTARY PUBLIC
STATE OF LOUISIANA
PARISH OF ORLEANS
BE IT KNOWN, that on this 26th day of January, 1995, before
me, the undersigned Notary, duly commissioned, qualified and
sworn within and for the State and Parish aforesaid, personally
came and appeared John N. Brewer, appearing herein in his
capacity as the Assistant Secretary of Showboat Louisiana, Inc.,
to me personally known to be the identical person whose name is
subscribed to the foregoing instrument as the said officer of the
said corporation, and declared and acknowledged to me, Notary, in
the presence of the undersigned competent witnesses, that he
executed the same on behalf of the said corporation with full
authority of its Board of Directors, and that the said instrument
is the free act and deed of the said corporation and was executed
for the uses, purposes and benefits therein expressed.
WITNESSES:
/S/_________________ /S/John N. Brewer
JOHN N. BREWER
/S/_________________
/S/Donald H. McDaniel
NOTARY PUBLIC
STATE OF LOUISIANA
PARISH OF ORLEANS
BE IT KNOWN, that on this 26th day of January, 1995, before
me, the undersigned Notary, duly commissioned, qualified and
sworn within and for the State and Parish aforesaid, personally
came and appeared John N. Brewer, appearing herein in his
capacity as the Assistant Secretary of Lake Pontchartrain
Showboat, Inc., to me personally known to be the identical person
whose name is subscribed to the foregoing instrument as the said
officer of the said corporation, and declared and acknowledged to
me, Notary, in the presence of the undersigned competent
witnesses, that she executed the same on behalf of the said
corporation with full authority of its Board of Directors, and
that the said instrument is the free act and deed of the said
corporation and was executed for the uses, purposes and benefits
therein expressed.
WITNESSES:
/S/_________________ /S/John N. Brewer
JOHN N. BREWER
/S/_________________
/S/Donald H. McDaniel
NOTARY PUBLIC
EXHIBIT 1
CLAW FEATURE
EXAMPLE WHEN SECOND NET QUICK IS LESS THAN
FIRST NET QUICK BY MORE THAN $3,100,000
Sale to Third Party, less selling expenses $51,500,000
First Net Quick $17,000,000
-----------
$68,500,000
Calculation of Decrease in Net Quick
First Net Quick $17,000,000
Second Net Quick (13,000,000)
------------
Decrease in Net Quick $ 4,000,000
Less Amount in Excess of
$3,100,000 ( 900,000)
-----------
$ 3,100,000 $ 3,100,000
----------- -----------
Recalculated Purchase Price $65,400,000
===========
50% Ownership $32,700,000
Less Base Price $25,000,000
-----------
AMOUNT OF CLAW FEATURE $ 7,700,000*
===========
*If the cash receivable from the sale to Belle of Orleans, L.L.C.
does not occur by the Second Net Quick Date, the Claw Feature
shall be reduced by $3,000,000
EXHIBIT 2
CLAW FEATURE
EXAMPLE WHEN SECOND NET QUICK IS LESS; THAN
FIRST NET QUICK BY LESS THAN $3,100,000
Sale to Third Party, less selling expenses $51,500,000
First Net Quick $17,000,000
-----------
$68,500,000
Calculation of Decrease in Net Quick:
First Net Quick $17,000,000
Second Net Quick (Ultimate
Net Quick) $14,500,000
-----------
Decrease in Net Quick $ 2,500,000 $ 2,500,000
----------- -----------
Recalculated Purchase Price $66,000,000
50% Ownership $33,000,000
Less Base Price $25,000,000
-----------
AMOUNT OF CLAW FEATURE $ 8,000,000*
===========
*If the cash receivable from the sale to Belle of Orleans, L.L.C.
does not occur by the Second Net Quick Date, the Claw Feature
shall be reduced by $3,000,000
EXHIBIT 3
ILLUSTRATION OF CALCULATION OF DEFERRED PART OF CLAW FEATURE
Selling Price to Third Party, less
selling expenses $51,500,000
Ultimate Net Quick $13,950,000
-----------
Purchase Price $65,450,000
50% Ownership $32,725,000
Less Base Amount (25,000,000)
------------
CLAW FEATURE AMOUNT DUE SELLERS $ 7,725 000
============
Distribution of proceeds from Resale assuming purchase price
realized upon Resale less selling expenses is $41,500,000 cash
and a promissory note in the amount of $10,000,000
AMOUNT % CASH RECEIVABLE TOTAL
Purchasers 43,775,000 85.0 35,275,000 8,500,000 43,775,000
Sellers 7,725,000 15.0 6,225,000 1,500,000 7,725,000
---------- ---- ---------- --------- ----------
51,500,000 100.0 41,500,000 10,000,000 51,500,000
========== ===== ========== ========== ==========
SIXTH AMENDMENT TO
SHOWBOAT STAR PARTNERSHIP AGREEMENT
This Sixth Amendment to the Showboat Star Partnership Agreement
(the "Sixth Amendment") is made as of the 17th day of March, 1995
by and between Showboat Louisiana, Inc., a Nevada corporation
("Showboat") and Lake Pontchartrain Showboat, Inc., a Nevada
corporation ("Pontchartrain"). Capitalized terms not defined
herein have the meanings set forth in the Showboat Star
Partnership Agreement, as amended.
WITNESSETH:
WHEREAS, Star and Showboat entered into the Showboat Star
Partnership Agreement on the 2nd day of July, 1993, and,
thereafter, Star and Showboat entered into the First Amendment to
Showboat Star Partnership Agreement as of the 20th day of July,
1993 and the Second Amendment to Showboat Star Partnership
Agreement as of the 1st day of August, 1993, Star, Showboat and
the Minority Partners other than Benjamin S. Gravolet entered
into the Third Amendment to Showboat Star Partnership Agreement
as of the 1st day of March, 1994, Star, Showboat and the Minority
Partners entered into the Fourth Amendment to Showboat Star
Partnership Agreement as of the 1st day of October, 1994, and
Star, Showboat, the Minority Partners and Pontchartrain entered
into the Fifth Amendment ("Fifth Amendment') to Showboat Star
Partnership Agreement as of the 26th day of January, 1995 (the
Showboat Star Partnership Agreement as so amended and as amended
hereby being referred to hereinafter as the Agreement");
WHEREAS, pursuant to the Fifth Amendment, Star and the
Minority Partners withdrew from the Partnership and Pontchartrain
was added as a Partner;
WHEREAS, Showboat and Pontchartrain desire to amend the
Agreement in certain other respects;
NOW THEREFORE, in consideration of the covenants herein
contained and intending to be mutually bound, the parties hereto
agree as follows:
I. AMENDMENT TO SECTION 1.14. Section 1.14 of the
Agreement is amended to read as follows, rather than as
previously written:
"1.14 MANAGING PARTNER. The Managing Partner of the
Partnership is Showboat."
II. DELETION OF SECTION 2.5.C. Section 2.5.c. is deleted
from the Agreement.
III. AMENDMENT TO SECTION 3.7.C. Section 3.7.c. of the
Agreement is amended by substituting the words "Managing Partner"
wherever the words "Management Committee" appear within Section
3.7.c.
IV. DELETION OF SECTION 3.9. Section 3.9 is deleted from
the Agreement.
V. AMENDMENT TO SECTION 4.2. Paragraph F of Section 4.2 of
the Agreement is amended by substituting the words "Managing
Partner" wherever the words "Management Committee" appear within
Paragraph F of Section 4.2.
VI. AMENDMENT TO SECTION 4.3. Section 4.3 of the Agreement
is amended by substituting the words "Managing Partner" wherever
the words "Majority Partners" appear within Section 4.3.
VII. AMENDMENT TO SECTION 5. Section 5 of the Agreement is
amended to read in its entirety as follows, rather than as
previously written:
"5. MANAGEMENT OF THE PARTNERSHIP.
"5.1 MANAGING PARTNER. The management of the
Partnership shall be vested in Showboat, as Managing
Partner. The Managing Partner shall represent and act for
and on behalf of the Partnership in any matter or thing
whatsoever, being hereby expressly authorized and empowered
in its sole and unlimited discretion to conduct, manage and
transact the business, affairs, and concerns of the
Partnership.
"5.2 PARTNERSHIP DEBTS. The Partnership shall be
primarily liable to creditors of the Partnership for all
Partnership debts. Each Partner shall be proportionately
liable to such creditors on the basis of such Partner's
Percentage Interest. Each Partner agrees to indemnify each
other Partner to the extent such other Partner may pay to a
creditor of the Partnership any amounts in excess of such
Partners proportionate share of a Partnership debt.
Notwithstanding anything in this Section to the contrary the
Partners are responsible for their respective obligations
under Section 10.
"5.3 DELEGATION OF AUTHORITY. The Managing Partner
may delegate all or any of its powers, rights, and
obligations hereunder, and the person so delegated may
appoint, employ, contract, or otherwise deal with any
Person, including any other Partner(s), for the transaction
of the business of the Partnership, which person, under the
supervision of the Managing Partner, may perform any acts or
2
services for the Partnership as the Managing Partner may
approve in writing.
"5.4 OTHER VENTURES. Nothing contained herein
shall be construed to prevent either of the Partners from
engaging in any other business venture, whether or not in
competition with the Partnership. Neither the Partnership
nor any other Partner shall have any rights in and to any
such ventures or the profits, losses, or cash flow derived
therefrom.
"5.5 EXCULPATION FROM LIABILITY: INDEMNIFICATION.
"(a) No Partner shall be liable to the
Partnership or to any other Partner because any taxing
authority contests, disallows, or adjusts any item of
income, gain, loss, deduction, credit, or tax preference in
the Partnership income tax returns.
"(b) No Partner shall be liable for the
return of the Capital Contributions of the remaining
Partners or for any portion thereof, it being expressly
understood that any such return shall be made solely from
the assets of the Partnership.
"(c) The Managing Partner shall not be liable
to the Partnership or any of the other Partners for, and the
Managing Partner shall be indemnified and held harmless by
the Partnership from and against, any and all claims,
demands, liabilities, costs, expenses (including attorney's
fees and court costs), and damages of any nature whatsoever
arising out of or incidental to the Managing Partner's
management of the Partnership's affairs, except where such
claim is based upon the willful misconduct of the Managing
Partner, or by the breach by the Managing Partner of any
provision of this Agreement. The indemnification rights
herein contained shall be cumulative of, and in addition to,
any and all other rights, remedies, and recourse of the
Managing Partner, whether available pursuant to this
Agreement or at law.
"(d) The Partners shall not be liable to the
Partnership or any of the other Partners for, and the
Partners shall be indemnified and held harmless by the
Partnership from and against, any and all claims, demands,
liabilities, costs, expenses (including attorney's fees and
court costs), and damages of any nature whatsoever arising
out of or incidental to the Partners' management of
3
the Partnership's affairs, except where such claim is based
upon the willful misconduct of the Partners, or by the
breach by the Partners of any provision of this Agreement.
The indemnification rights herein contained shall be
cumulative of, and in addition to, any and all other rights,
remedies, and recourse of the Partners, whether available
pursuant to this Agreement or at law.
"5.6 REIMBURSEMENT OF EXPENSES. The Partners shall
be entitled to reimbursement for all direct expenses of the
Partnership incurred or paid by such Partners on behalf of
the Partnership.
5.7 ISSUANCE OF CREDIT. If any Partner approves
credit for anyone gambling at the Casino Facilities and that
credit is not paid and it is determined that the issuance of
such credit was not reasonable under the circumstances, the
Partner approving the credit shall be responsible to the
Partnership for the unpaid credit."
VIII.DELETION OF SECTION 6.1. Section 6.1 is deleted from
the Agreement.
IX. AMENDMENT TO SECTION 6.2. Section 6.2 of the Agreement
is amended by substituting the words "Managing Partner" wherever
the words "Majority Partners" appear within Section 6.2.
X. DELETION OF SECTION 6.4. Section 6.4 is deleted from
the Agreement.
XI. DELETION OF SECTION 7.1. Section 7.1 is deleted from
the Agreement.
XII. DELETION OF SECTION 8. Section 8 is deleted from the
Agreement.
XIII.DELETION OF SECTION 9. Section 9 is deleted from the
Agreement.
XIV. AMENDMENT TO SECTION 10.3. Section 10.3 of the
Agreement is amended to substituting the words "Managing Partner"
for the words "Management Committee" in the first paragraph
thereof.
XV. DELETION OF SECTION 11.1. Section 11.1 is deleted from
the Agreement.
4
XVI. DELETION OF SECTION 11.3. Section 11.3 is deleted from
the Agreement.
XVII.AMENDMENT TO SECTION 13.1. Section 13.1 of the
Agreement is amended by substituting the words "Managing Partner"
for the words "Management Committee" in the third paragraph
thereof.
XVIII.AMENDMENT TO SECTION 13.3. Section 13.3 of the
Agreement is amended by substituting the words "Managing Partner"
for the words "Management Committee" in the second paragraph
thereof.
XIX. DELETION OF SECTION 14.1. Section 14.1 is deleted from
the Agreement.
XX. DELETION OF SECTION 14.6. Section 14.6 is deleted from
the Agreement.
The balance of the Agreement is not changed by this Sixth
Amendment and shall remain in full force and effect.
This Sixth Amendment may be executed in any number of
counterparts, each of which, when so executed and delivered,
shall be deemed to be an original and all of which, taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Sixth
Amendment as of the date first above written.
SHOWBOAT LOUISIANA, INC.
By: /S/J. KEITH WALLACE
J. KEITH WALLACE, President
LAKE PONTCHARTRAIN SHOWBOAT, INC.
By: /S/J. KEITH WALLACE
J. KEITH WALLACE, President
5
STATE OF NEVADA
COUNTY OF CLARK
BE IT KNOWN, that on this 17th day of March, 1995, before
me, the undersigned Notary, duly commissioned, qualified and
sworn within and for the State and Parish aforesaid, personally
came and appeared J. Keith Wallace, appearing herein in his
capacity as the President of Showboat Louisiana, Inc., to me
personally known to be the identical person whose name is
subscribed to the foregoing instrument as the said officer of the
said corporation, and declared and acknowledged to me, Notary, in
the presence of the undersigned competent witnesses, that he
executed the same on behalf of the said corporation with full
authority of its Board of Directors, and that the said instrument
is the free act and deed of the said corporation and was executed
for the uses, purposes and benefits therein expressed.
WITNESSES:
___/S/____________________ /S/J. KEITH WALLACE
J. KEITH WALLACE
___/S/____________________
___/S/JEAN Y. ZORN____
NOTARY PUBLIC
6
STATE OF Nevada
COUNTY OF CLARK
BE IT KNOWN, that on this 17th day of March, 1995, before
me, the undersigned Notary, duly commissioned, qualified and
sworn within and for the State and Parish aforesaid, personally
came and appeared J. Keith Wallace, appearing herein in his
capacity as the President of Lake Pontchartrain Showboat, Inc.,
to me personally known to be the identical person whose name is
subscribed to the foregoing instrument as the said officer of the
said corporation, and declared and acknowledged to me, Notary, in
the presence of the undersigned competent witnesses, that he
executed the same on behalf of the said corporation with full
authority of its Board of Directors, and that the said instrument
is the free act and deed of the said corporation and was executed
for the uses, purposes and benefits therein expressed.
WITNESSES:
___/S/____________________ /S/J. KEITH WALLACE
J. KEITH WALLACE
___/S/____________________
/S/JEAN Y. ZORN
NOTARY PUBLIC
7
EX-10.36
4
SHOWBOAT, INC.
1994 Executive Long Term Incentive Plan
1. Purpose
The 1994 Executive Long Term Incentive Plan (the "Plan") is
intended to promote the interest of Showboat, Inc. and its
subsidiaries (collectively the "Corporation") by offering those
executive officers and key employees of the Corporation who are
primarily responsible for the management, growth and success of
the business of the Corporation the opportunity to participate in
a long-term incentive plan designed to reward them for their
services and to encourage them to continue in the employ of the
Corporation.
2. Definitions
For all purposes of this Plan, the following terms shall
have the following meanings:
"Common Stock" means Showboat, Inc. common stock, $1.00 par
value.
"ISO" means incentive stock options qualified under Section
422 of the Internal Revenue Code of 1986, as amended.
"Non-qualified Options" means stock options not qualified
under Section 422 of the Internal Revenue Code of 1986, as
amended.
"Restricted Shares" means shares of Common Stock which are
issued with transfer and other restrictions pursuant to the Plan.
"SBI" means Showboat, Inc.
"Subsidiary" means any company or partnership of which SBI
owns, directly or indirectly, a portion of the combined voting
power of all classes of stock or partnership interests.
3. Administration
The Plan shall be administered by a Committee (the
"Committee") of not less than two non-employee directors of SBI
selected by, and serving at the pleasure of, SBI's Board of
Directors ("SBI Board"). Directors who are also employees of SBI
or any Subsidiary, or who have been such employees within one
year, may not serve on the Committee.
Initially, the Subsidiary will recommend to the Committee
persons to whom awards may be granted. The Committee then shall
have the authority, subject to the terms of the Plan, to
determine, based upon recommendations from the Subsidiaries, the
persons to whom awards shall be granted ("Participants") the
number of shares covered by each award, the time or times at
which awards shall be granted, the timing of when awards shall
vest, and the terms and provisions of the instruments by which
awards shall be evidenced; and to interpret the Plan and make all
determinations necessary or advisable for its administration.
The Committee shall notify the SBI Board of all decisions
concerning awards granted to Participants under the Plan, the
interpretation thereof, and determinations concerning its
administration.
4. Eligibility
Only employees who serve as executives or other key
employees of the Corporation shall be granted awards.
5. Stock Subject to the Plan
The stock from which awards may be granted shall be shares
of Common Stock. When Restricted Shares are vested or when
options are exercised, SBI may either issue authorized but
unissued Common Stock or SBI or the Subsidiary which employs the
Participant, may transfer issued Common Stock held in its
treasury. Each of the respective Boards of the Corporation will
fund the Plan to the extent so required to provide Common Stock
for the benefit of Participants employed by SBI or the
Subsidiary, respectively. The total number of shares of Common
Stock which may be granted as Restricted Shares or stock options
shall not exceed, in the aggregate, 2,000,000 shares in total.
Any Restricted Shares awarded and later forfeited are again
subject to award under the Plan. If an option expires, or is
otherwise terminated prior to its exercise, the shares of Common
Stock covered by such an option immediately prior to such
expiration or other termination shall continue to be available
for grant under the Plan.
6. Granting of Options
The date of grant of options to Participants under the Plan
will be the date on which the options are awarded by the
Committee. The grant of any option to any Participant shall
neither entitle nor disqualify such Participant from
participating in any subsequent grant of options.
7. Terms and Conditions of Options
Options shall be designated Non-qualified Options or
Incentive Stock Options qualified under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and shall
be evidenced by written instruments approved by the Committee.
Such instruments shall conform to the following terms and
conditions.
7.1 Option price
The option price per share for Incentive Stock Options
shall be the fair market value of the Common Stock under option
on the day the option is granted, which shall be an amount equal
to the closing price of the Common Stock on the Consolidated
Trading Tape on that day or, if no sale of Common Stock is
recorded on such Tape on that day, then on the next preceding day
on which there was such a sale. The price for Non-qualified
Options shall be an amount equal to the closing price of the
Common Stock under option as determined above. The option price
shall be paid (i) in cash or (ii) in Common Stock having a fair
market value equal to such option price or (iii) in a combination
of cash and Common Stock. The fair market value of Common Stock
delivered to the Corporation pursuant to the immediately
preceding sentence shall be determined on the basis of the
closing price for the Common Stock on the Consolidated Trading
Tape on the day of exercise or, if there was no such sale on the
day of exercise, on the day next preceding the day of exercise on
which there was such a sale. Notwithstanding the above, no
Incentive Stock Option shall be granted to any person who, at the
time the option is granted, owns (within the meaning of Section
425(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of SBI or of any
Subsidiary, unless at the time the Incentive Stock Option is
granted to such person the option price is at least 110% of the
fair market value (as described above) of the shares subject to
the option and the term is not more than five years.
7.2 Term and exercise of options
Except in special circumstances, each option shall
expire on the tenth anniversary of the date of its grant and
shall be exercisable according to a vesting schedule to be
determined by the Committee. However the Committee may include
in any option instrument, initially or by amendment at any time,
a provision making any installment or installments exercisable at
such earlier date, if the Committee deems such provision to be in
the interests of the Corporation or necessary to realize the
reasonable expectation of the optionee.
After becoming exercisable, each installment shall
remain exercisable until expiration or termination of the option.
After becoming exercisable an option may be exercised by the
optionee from time to time, in whole or part, up to the total
number of shares with respect to which it is then exercisable.
The Committee may provide that payment of the option exercise
price may be made following delivery of the certificate for the
exercised shares.
Upon the exercise of a stock option, the purchase price
will be payable in full in cash or its equivalent in property
acceptable to SBI or the Subsidiary which employs the
Participant. In the discretion of the Subsidiary which employs
the Participant grantee, the purchase price may be paid by the
assignment and delivery to SBI or Subsidiary who employs the
Participant of shares of Common Stock or a combination of cash
and such shares equal in value to the purchase price. Any shares
of Common Stock so assigned and delivered to SBI or the
Subsidiary, as applicable, in payment or partial payment of the
purchase price will be valued at Fair Market Value on the
exercise date. Upon the exercise of a Non-qualified Option, the
Participant may (a) direct SBI or the employing Subsidiary to
withhold from the shares of Common Stock to be issued to the
Participant the number of shares necessary to satisfy SBI's or
the Subsidiary's, as applicable, obligation to withhold Federal
taxes, such determination to be based on the shares Fair Market
Value on the date of exercise, (b) deliver to SBI or the
employing Subsidiary sufficient shares of Common Stock (based
upon the Fair Market Value at date of exercise) to satisfy SBI's
or the employing Subsidiary's, as applicable, withholding
obligations, based on the shares Fair Market Value as of the date
of exercise, or (c) deliver sufficient cash to SBI or the
employing Subsidiary to satisfy its respective Federal tax
withholding obligations. Participants who elect to use the stock
withholding feature must make that election at the time and in
the manner prescribed by the Committee.
7.3 Termination of employment
If an optionee ceases, other than by reason of death or
retirement as determined under any of the Corporation's pension
plans, to be employed by the Corporation, all options granted to
such optionee and exercisable on the date of termination of
employment shall expire on the earlier of (i) the tenth
anniversary after the date, of grant or (ii) one month after the
day such optionee's employment ends.
If an optionee retires, all options granted to such
optionee, and exercisable on the date of such optionee's
retirement shall expire on the earlier of (i) the tenth
anniversary after the date of grant or (ii) the third anniversary
of the day of such optionee's retirement. Any installment not
exercisable on the date of such termination or retirement shall
expire and be thenceforth unexercisable. Whether authorized
leave of absence or absence in military or governmental service
may constitute employment for the purposes of the Plan shall be
conclusively determined by the Committee. The Committee can
increase or reduce the amount of options that are exercisable up
to but not exceeding the tenth anniversary of the date of grant,
in the event of optionee termination for other than death or
retirement.
7.4 Exercise upon death of optionee
If an optionee dies, the option may be exercised, to
the extent of the number of shares that the optionee could have
exercised on the date of such death, by the optionee's estate,
personal representative or beneficiary who acquires the option by
will or by the laws of descent and distribution. Such exercise
may be made at any time prior to the earlier of (i) the tenth
anniversary after the date of grant or (ii) the third anniversary
of such optionee's death. On the earlier of such dates, the
option shall terminate. The Committee may approve all cash
payments to the estate of an optionee if circumstances warrant
such a decision.
7.5 Assignability
No option shall be assignable or transferable by the
optionee except by will or by the laws of descent and
distribution and during the lifetime of the optionee the option
shall be exercisable only by such optionee.
7.6 Limitation on Incentive Stock Options
During a calendar year, the aggregate fair market value
of the option stock (determined at the time of the ISO grant) for
which ISOs are exercisable for the first time under the Plan,
cannot exceed $100,000.
8. Restricted Share Awards
8.1 Grant of Restricted Share Awards
The Committee will determine for each Participant the
time or times when Restricted Shares shall be awarded and the
number of shares of Common Stock to be covered by each Restricted
Share Award.
8.2 Restrictions
Shares of Common Stock issued to a Participant as a
Restricted Share Award will be subject to the following
restrictions ("Share Restrictions"):
(a) Except as set forth in Sections 8.4 and 8.5, all
of the Restricted Shares subject to a Restricted Award will be
forfeited and returned to SBI or, in the event such Restricted
Shares were provided to the Participant from shares of Common
Stock purchased by the Subsidiary, then the Restricted Shares
will be returned to the Subsidiary. In either case, all rights
of the Participant to such Restricted Shares will terminate
without any payment of consideration by SBI or the employing
Subsidiary unless the Participant remains in the continuous
employment (employment may include consulting agreements) of SBI
or a Subsidiary for a period of time determined by the Committee.
(b) During the Restriction Period relating to a
Restricted Share Award, none of the Restricted Shares subject to
such award may be sold, assigned, bequeathed, transferred,
pledged, hypothecated or otherwise disposed of in any way by the
Participant. "Restriction Period" shall mean the period of time
in which the Restricted Shares shall vest. Subject to Sections
8.4 and 10, the Restriction Period shall not be less than three
years.
(c) The Committee may require the Participant to enter
into an escrow agreement providing that the certificates
representing Restricted Shares sold or granted pursuant to the
Plan will remain in the physical custody of SBI or the employing
Subsidiary or an escrow holder during the Restriction Period.
(d) Each certificate representing a Restricted Share
sold or granted pursuant to the Plan will bear a legend making
appropriate reference to the restrictions imposed on the
Restricted Share.
(e) The Committee may impose other restrictions on any
Restricted Shares sold pursuant to the Plan as it may deem
advisable, including without limitation, restrictions under the
Securities Act of 1933, as amended, under the requirements of any
stock exchange upon which such share or shares of the same class
are then listed and under any state securities laws or other
securities laws applicable to such shares.
8.3 Rights as a Shareholder
Except as set forth in Section 8.2(b), the recipient of
a Restricted Share Award will have all of the rights of a
shareholder of SBI with respect to the Restricted Shares,
including the right to vote the Restricted Shares and to receive
all dividends or other distributions made with respect to the
Restricted Shares.
8.4 Lapse of Restrictions at Termination of Employment
In the event of the termination of employment of a
Participant during the Restriction Period by reason of death,
total and permanent disability, retirement as determined under
any of the Corporation's pension plans, or discharge from
employment other than a discharge for cause, the Committee may,
at its discretion, remove Share Restrictions on Restricted Shares
subject to a Restricted Share Award.
Restricted Shares to which the Share Restrictions have
not so lapsed will be forfeited and returned to the Corporation
as provided in Section 8.2(a).
8.5 Lapse of Restrictions at Discretion of the Committee
The Committee may shorten the Restriction Period or
remove any or all Share Restrictions if, in the exercise of its
absolute discretion, it determines that such action is in the
best interests of the Corporation and equitable to the
Participant. Notwithstanding the foregoing, the Committee shall
not shorten the Restriction Period to a period which is less than
three years.
8.6 Listing and Registration of Shares
SBI may, in its discretion, postpone the issuance
and/or delivery of Restricted Shares until completion of stock
exchange listing, or registration, or other qualification of such
Restricted Shares under any law, rule or regulation.
8.7 Designation of Beneficiary
A Participant may, with the consent of the Committee,
designate a person or persons to receive, in the event of death,
any Restricted Shares to which such Participant would then be
entitled. Such designation will be made upon forms supplied by
and delivered to the Committee and may be revoked in writing by
the Participant. If a Participant fails effectively to designate
a beneficiary, then such Participant's estate will deemed to be
the beneficiary.
8.8 Withholding of Taxes for Restricted Shares
When the Participant, as holder of the Restricted
Shares, recognizes income, either on the Date of Grant or the
date the restrictions lapse, the Participant may (i) direct SBI
or the Subsidiary, as applicable, to withhold from the shares of
Common Stock, the number of shares necessary to satisfy SBI's or
the Subsidiary's, as applicable, obligation to withhold Federal
taxes, such determination to be based on the shares' Fair Market
Value as of the date income is recognized, (ii) deliver to SBI or
the employing Subsidiary sufficient shares of Common Stock (based
on the Fair Market Value on the date income is recognized) to
satisfy SBI's or the Subsidiary's, as applicable, withholding
obligations based on the shares' Fair Market Value on the date
the income is recognized, or (iii) deliver sufficient cash to SBI
or the Subsidiary, as applicable, to satisfy its respective
Federal tax withholding obligations. Participants who elect to
use the stock withholding feature must make that election at the
time and in the manner prescribed by the Committee.
9. Capital Adjustments
The number and price of Common Stock covered by each award
of options and/or Restricted Shares and the total number of
shares that may be granted or sold under the Plan shall be
proportionally adjusted to reflect, as deemed equitable and
appropriate by the Committee and subject to any required action
by shareholders, any stock dividend or split, recapitalization,
merger, consolidation, spin-off, reorganization, combination or
exchange of shares or other similar corporate change.
10. Change of Control
Notwithstanding the provisions of Section 9, in the event of
a change of control, all share restrictions on all Restricted
Shares will lapse and vesting on all unexercised stock options
will accelerate to the change of control date. For purposes of
this plan, a "Change of Control" of SBI shall be deemed to have
occurred at such time as (a) any "person" (as term is used in
Section 13(d) and 14(d) of the Exchange Act) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of SBI representing
25.0% or more of the combined voting power of SBI's outstanding
securities ordinarily having the right to vote at the election of
directors; or (b) individuals who constitute the Board of
Directors of SBI on the date hereof (the "Incumbent Board") cease
for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to the
date hereof whose election was approved by at least a majority of
the directors comprising the Incumbent Board, or whose nomination
or election was approved by a majority of the Board of Directors
of SBI serving under an Incumbent Board, shall be, for purposes
of this clause (b), considered as he or she were a member of the
Incumbent Board; or (c) merger, consolidation or sale of all or
substantially all the assets of SBI occurs, unless such merger or
consolidation shall have been affirmatively recommended to SBI's
stockholders by a majority of the Incumbent Board; or (d) a proxy
statement soliciting proxies from stockholders of SBI, by someone
other than the current management of SBI seeking stockholder
approval of a plan or reorganization, merger or consolidation of
SBI with one or more corporations as a result of which the
outstanding shares of SBI's securities are actually exchanged for
or converted into cash or property or securities not issued by
SBI unless the reorganization, merger or consolidation shall have
been affirmatively recommended to SBI's stockholders by a
majority of the Incumbent Board.
11. Approvals
The issuance of shares pursuant to this Plan is expressly
conditioned upon obtaining all necessary approvals from the
Nevada Gaming Commission, the New Jersey Casino Control
Commission, the Louisiana Riverboat Gaming Commission, and upon
obtaining shareholder approval of the Plan.
12. Effective Date of Plan
The effective date of the Plan is May 27, 1994. The Plan
will become effective as of that date provided that the Plan
receives the approval of the holders of a majority of the
outstanding Common Stock at SBI's 1994 Annual Meeting of
Shareholders. If such approval is not forthcoming, the Plan
shall be null and void.
13. Term: Amendment of Plan
This Plan shall expire on May 26, 2004, (except to options
outstanding on that date). SBI's Board may terminate or amend
the Plan in any respect at any time, except that, without the
approval of the holders of a majority of the outstanding Common
Stock: the total number of shares that may be sold, issued or
transferred under the Plan may not be increased (except by
adjustment pursuant to Section 9); the provisions of Section 4
regarding eligibility may not be modified; the purchase price at
which shares may be offered pursuant to options may not be
reduced (except by adjustment pursuant to Section 9); and the
expiration date of the Plan may not be extended and no change may
be made which would cause the Plan not to comply with Rule 16(b)3
of the Securities Exchange Act of 1934, as amended from time to
time. No action of the SBI Board or SBI's shareholders, however,
may, without the consent of an optionee, alter or impair such
optionee's rights under any option previously granted.
14. No Right of Employment
Neither the action of the Corporation in establishing this
Plan, nor any action taken by any Board of SBI or any Subsidiary
or the Committee under the Plan, nor any provision of the Plan
itself, shall be construed to limit in any way the right of the
Corporation to terminate a Participant's employment at any time;
nor shall it be evidence of any agreement or understanding,
expressed or implied, that the Corporation will employ an
employee in any particular position nor ensure participation in
any future compensation or stock purchase program.
15. Withholding Taxes
SBI or the Subsidiary, as applicable, shall have the right
to deduct withholding taxes from any payments made pursuant to
the Plan or to make such other provisions as it deems necessary
or appropriate to satisfy its obligations to withhold Federal,
state or local income or other taxes incurred by reason of
payments or the issuance of Common Stock under the Plan.
Whenever under the Plan, Common Stock is to be delivered upon
vesting of Restricted Shares or exercise of an option, the
Committee shall be entitled to require as a condition of delivery
that the Participant remit an amount sufficient to satisfy all
Federal, state and other government withholding tax requirements
related thereto.
16. Plan not a Trust
Nothing contained in the Plan and no action taken pursuant
to the Plan shall create or be construed to create a trust of any
kind, or a fiduciary relationship, between the Corporation and
any Participant, the executor, administrator or other personal
representative, or designated beneficiary of such Participant, or
any other persons. Any reserves that may be established by the
Corporation in connection with the Plan shall continue to be part
of the general funds of the Corporation and no individual or
entity other than the Corporation shall have any interest in such
funds until paid to a Participant. If and to the extent that any
Participant of such Participant's executor, administrator or
other personal representative, as the case may be, acquires a
right to receive any payment from the Corporation pursuant to the
Plan, such right shall be no greater than the right of an
unsecured general creditor of the Corporation.
17. Notices
Each Participant shall be responsible for furnishing the
Committee with the current and proper address for the mailing of
notices and delivery of agreements, Common Stock and cash
pursuant to the Plan. Any notices required or permitted to be
given shall be deemed given if directed to the person to whom
addressed at such address and mailed by regular United States
mail, first-class and prepaid. If any item mailed to such
address is returned as undeliverable to the addressee, mailing
will be suspended until the Participant furnishes the proper
address. This provision shall not be construed as requiring the
mailing of any notice or notification if such notice is not
required under the terms of the Plan or any applicable law.
18. Separability of Provisions
If any provision of this Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and this Plan shall be
construed and enforced as if such provisions had not been
included.
19. Payment to Minors, etc.
Any benefit payable to or for the benefit of a minor, an
incompetent person or other person incapable of receipting
therefor shall be deemed paid when paid to such person's guardian
or to the party providing or reasonably appearing to provide for
the care of such person, and such payment shall fully discharge
the Committee, the Corporation and other parties with respect
thereto.
20. Headings and Captions
The headings and captions herein are provided for reference
and convenience only, shall not be considered part of the Plan,
and shall not be employed in the construction of the Plan.
21. Controlling Law
This Plan shall be construed and enforced according to the
laws of the State of Nevada except as otherwise required by the
laws of the State of New Jersey and the laws of the State of
Louisiana and to the extent not preempted by Federal law, which
shall otherwise control.
EX-10.37
5
SHOWBOAT, INC.
SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
(Effective April 1, 1994)
SHOWBOAT, INC.
SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
Table of Contents
Page
PREAMBLE.......................................1
SECTION 1. DEFINITIONS....................................2
1.1. "Affiliated Company"...........................2
1.2. "Basic Retirement Plan"........................2
1.3. "Basic Retirement Plan Benefit.................2
1.4. "Company"......................................2
1.5. "Earnings".....................................2
1.6. "Final Average Earnings........................2
1.7. "Participant...................................2
1.8. "Plan".........................................2
1.9. "Primary Social Security Benefit...............2
1.10. "President"....................................3
1.11. "Retirement Committee".........................3
1.12. "Restoration Plan".............................3
1.13. "Restricted Stock Benefit......................3
1.14. "Retirement Date"..............................3
1.15. "Showboat".....................................3
SECTION II. ELIGIBILITY TO PARTICIPATE.....................4
SECTION III. ELIGIBILITY FOR AND AMOUNT OF BENEFITS.........5
3.1. Eligibility....................................5
3.2. Normal or Early Retirement Benefit.............5
3.3. Postponed Retirement Benefit...................5
3.4. Termination of Employment......................6
SECTION IV. FORM AND COMMENCEMENT OF BENEFITS..............7
4.1. Form of Benefits...............................7
4.2. Commencement of Benefits.......................7
SECTION V. AMENDMENT AND TERMINATION......................8
5.1. Amendment or Termination.......................8
5.2. Termination Benefit............................8
5.3. Corporate Successors...........................8
ii
SECTION VI. MISCELLANEOUS..................................9
6.1. Forfeiture of Benefits.........................9
6.2. No Effect on Employment Rights.................9
6.3. Funding........................................9
6.4. Spendthrift Provision..........................9
6.5. Administration.................................10
6.6. Disclosure.....................................10
6.7. State Law......................................10
6.8. Incapacity of Participant......................10
6.9. Unclaimed Benefit..............................10
6.10. Limitations on Liability.......................11
6.11. Headings and Captions..........................11
iii
PREAMBLE
Showboat, Inc. has adopted the Showboat Supplemental Executive
Retirement Plan, effective April 1, 1994, for a select group of
senior line and staff management personnel to ensure that the
Company's overall executive compensation program will attract,
retain, and motivate qualified senior management personnel.
1
SECTION 1. DEFINITIONS
When used herein, the following words shall have the meanings
below unless the context clearly indicates otherwise:
1.1. "AFFILIATED COMPANY" means any trade or business
entity, or a predecessor company of such entity, if
any, which is a member of a controlled group of
corporations of which the Company is also a member (as
defined within the meaning of Internal Revenue Code
Sections 414(b), 414(c), 414(m) and 414(o)).
1.2. "BASIC RETIREMENT PLAN" means the Showboat 401(k)
Retirement and Savings Plan as amended from time to
time or any successor thereto.
1.3. "BASIC RETIREMENT PLAN BENEFIT" means a Participant's
annual retirement benefit payable as a straight life
annuity based on the actuarial equivalent value of the
Company match portion of the account which a
Participant would have had as of the Retirement Date,
if he had participated in the Basic Retirement Plan,
January 1, 1994, and his first day of employment with
the Company, and deferred the maximum percentage of his
Earnings allowed under the 401(k) Plan in each Plan
Year. The account is assumed to earn interest at the
administrative interest rate indicated in Appendix A.
1.4. "COMPANY" means Showboat, Inc., any successor thereto,
and any Affiliated Company.
1.5. "EARNINGS" means the Participant's Base Pay plus Bonus.
1.6. "FINAL AVERAGE EARNINGS" means the Final Average
Earnings of the Participant for his last three
consecutive years of employment.
1.7. "PARTICIPANT" means any employee of the Company who
meets the eligibility requirements of Section II and is
designated and approved as set forth in Section II.
1.8. "PLAN" means the Showboat, Inc. Supplemental Executive
Retirement Plan.
1.9. "PRIMARY SOCIAL Security Benefit" means the annual
Primary Insurance Amount estimated by the Board to be
payable to the Participant at age 65 under the federal
Social Security Act, provided, however, that:
(a) The Primary Social Security Benefit for a
Participant who dies, retires, or terminates
2
employment before age 65 will be calculated
assuming:
(i) the Participant will not receive any future
wages that would be treated as wages for
purposes of the federal Social Security Act;
and
(ii) the Participant will elect to begin receiving
his Social Security Benefit as of the
earliest age then allowable under the Act or,
if later, at the Retirement Date.
(b) The Primary Social Security Benefit, once
calculated, will be frozen as of the date the
Participant dies, retires, or terminates
employment, whichever is applicable.
1.10. "PRESIDENT" means the President of Showboat.
1.11. "RETIREMENT COMMITTEE" means a committee with three (3)
members appointed by the Board of Directors of
Showboat.
1.12. "RESTORATION PLAN" means the Restoration Plan for
Employee of the Company as amended from time to time or
any successor thereto.
1.13. "RESTRICTED STOCK BENEFIT" means the annual benefit
payable as a straight life annuity actuarially
equivalent to the value on his Retirement Date of any
vested Restricted Stock Allocations made to the
Participant under any stock plan benefitting executives
and key employees of the Company.
1.14. "RETIREMENT Date" means a Participant's Normal
Retirement Date, Early Retirement Date or Postponed
Retirement Date as defined in Section III of the Plan.
1.15. "SHOWBOAT" means Showboat, Inc. and any successor
thereto.
1.16. "SUPPLEMENTAL PLAN BENEFIT" means the annual benefit
payable in accordance with the provisions of this Plan.
1.17. "YEARS OF SERVICE" means the Participant's credited
service as defined in the Basic Retirement Plan.
3
SECTION II. ELIGIBILITY TO PARTICIPATE
A senior employee of the Company is eligible to become a
Participant in the Plan; provided such employee (i) is designated
as a Participant by the Retirement Committee in writing and such
designation is approved in writing by the President; (ii) at the
time of such designation and approval, the employee is eligible
to participate in the Basic Retirement Plan; and (iii) enters
into a noncompete agreement substantially in the form attached
hereto as Exhibit A.
Once an employee becomes a Participant, he shall remain a
Participant until his termination of employment with the Company
and thereafter until all benefits to which he or his beneficiary
is entitled under the Plan have been paid.
4
SECTION III. ELIGIBILITY FOR AND AMOUNT OF BENEFITS
3.1. ELIGIBILITY. Each Participant is eligible to retire
from the Company and receive a benefit under the Plan
beginning on one of the following dates:
(a) "NORMAL RETIREMENT DATE" which is the first day of
the month coincident with or next following the
Participant's 65th birthday;
(b) "EARLY RETIREMENT DATE" which is the first day of
any month coincident with or following the month n
which the Participant completes 10 Years of
Service and reaches age 55; and
(c) "POSTPONED RETIREMENT DATE" which is the first day
of the month coincident with or next following the
Participant's termination of employment with the
Company after his Normal Retirement Age.
3.2. NORMAL OR EARLY RETIREMENT BENEFIT. The Normal or
Early Retirement Benefit of a Participant who attains
his Normal Retirement Date or Early Retirement Date
shall be an annual Supplement Plan Benefit, payable in
the form of a single life annuity over the life of the
Participant, equal to (a) less the sum of (b), (c),
(d), and (e) as follows:
(a) 3.33% of his Final Average Earnings multiplied by
Years of Service up to 15 years;
(b) 100% of his Primary Social Security Benefit;
(c) 100% of his Basic Retirement Plan Benefit;
(d) 100% of his Restoration Plan Benefit;
(e) 100% of his Restricted Stock Benefit.
An Early Retirement Benefit payable prior to Normal
Retirement Date will be further reduced 0.5% for each
month that Early Retirement Date precedes Normal
Retirement Date.
3.3. POSTPONED RETIREMENT BENEFIT. The Postponed Retirement
Benefit of a Participant shall be an annual
Supplemental Plan Benefit calculated as set forth in
paragraph 3.2 above and based on his Years of Service,
and Final Average Earnings, as of his Postponed
Retirement Age.
5
3.4 TERMINATION OF EMPLOYMENT. If a Participant's
employment with the Company is terminated and the
Participant does not qualify for benefits under any of
the preceding paragraphs of this Section III, neither
the Participant nor any other person shall have a right
to any benefit from the Plan with respect to such
Participant.
6
SECTION IV. FORM AND COMMENCEMENT OF BENEFITS
4.1. FORM OF BENEFITS. Supplemental Plan Benefits payable
to a Participant pursuant to Section III will be
payable in the form of a single life monthly benefit
payable to the Participant under this Plan.
4.2. COMMENCEMENT OF BENEFITS. A Supplemental Plan Benefit
payable to a Participant pursuant to paragraph 3.2 or
3.3 will commence on the first day of the month
coincident with or next following the later to occur of
the date of termination of employment of the
Participant with the Company and the date on which the
Participant attains the age of 65 years; provided,
however, a Supplemental Plan Benefit payable to a
Participant pursuant to paragraph 3.2 who terminates
his employment with the Company prior to attaining the
age of 65 years, may, with the written approval of the
President, commence on the first day of any month
following the Participant's 55th birthday as shall be
designated by the President. Payment of a Supplemental
Plan Benefit to a Participant will terminate with the
payment made on the first day of the month in which the
Participant dies.
7
SECTION V. AMENDMENT AND TERMINATION
5.1. AMENDMENT OR TERMINATION. The Company intends the Plan
to be permanent but reserves the right to amend or
terminate the Plan when, in the sole opinion of the
Company, such amendment or termination is advisable.
Any such amendment or termination shall be made
pursuant to a resolution of the Board of Directors of
Showboat and shall be effective as of the date of such
resolution. No amendment or termination of the Plan
shall directly or indirectly deprive any Participant of
all or any portion of any Supplemental Plan Benefit
payment of which has commenced prior to the effective
date of the resolution amending or terminating the
Plan.
5.2. TERMINATION BENEFIT. In the case of a Plan
termination, each actively employed Participant on the
termination date shall become vested in his accrued
Supplemental Plan Benefit as of the termination date.
Such accrued Supplemental Plan Benefit shall be
calculated as set forth in paragraph 3.2 above and
based on the Participant's Years of Service, Final
Average Earnings, and Basic Retirement Plan Benefit, as
of the termination date. For purposes of determining a
Participant's accrued Supplemental Plan Benefit
pursuant to this paragraph, the Participant's Basic
Retirement Plan Benefit shall be the benefit calculated
as if he continued participation in the Basic
Retirement Plan, and Restoration Plan until age 65.
Payment of a Participant's accrued Supplemental Plan
Benefit shall not be dependent on his continuation of
employment with the Company following the Plan
termination date, and such Benefit shall become payable
at the date for commencement of payment of a
Supplemental Plan Benefit pursuant to the terms of
paragraph 4.2 above.
5.3. CORPORATE SUCCESSORS. The Plan shall not be
automatically terminated by a transfer or sale of
assets of the Company or by the merger or consolidation
of the Company into or with any other corporation or
other entity, but the Plan shall be continued after
such sale, merger, or consolidation only if and to the
extent that the transferee, purchaser, or successor
entity agrees to continue the Plan. In the event the
Plan is not continued by the transferee, purchaser, or
successor entity, then the Plan shall terminate subject
to the provisions of paragraphs 5.1 and 5.2.
8
SECTION VI MISCELLANEOUS
6.1. FORFEITURE OF BENEFITS. Notwithstanding any other
provision of the Plan, future payment of a Supplemental
Plan Benefit hereunder to a Participant will, at the
discretion of the President, be discontinued and
forfeited, and the Company will have no further
obligation hereunder to such Participant if any of the
following circumstances occur:
(a) The Participant is discharged from employment with
the Company for cause;
(b) The Participant performs acts of willful
malfeasance or gross negligence in a matter of
material importance to the Company, and such acts
are discovered by the Company at any time prior to
the date of death of the Participant. The
Retirement Committee shall have sole discretion
with respect to the application of the provisions
of this paragraph and such exercise of discretion
shall be conclusive and binding on the
Participant, and all other persons.
6.2. NO EFFECT ON EMPLOYMENT RIGHTS. Nothing contained
herein will confer on any Participant the right to be
retained in the service of the Company nor limit the
right of the Company to discharge or otherwise deal
with Participants without regard to the existence of
the Plan.
6.3. FUNDING. The Plan at all times shall be entirely
unfunded and no provision shall at any time be made
with respect to segregating any assets of the Company
for payment of any benefits hereunder. No Participant
or any other person shall have any interest in any
particular assets of the Company by reason of the right
to receive a benefit under the Plan and any such
Participant or other person shall have only the rights
of a general unsecured creditor of the Company with
respect to any rights under the Plan. Nothing
contained in the Plan shall constitute a guaranty by
the Company or any other entity or person that the
assets of the Company will be sufficient to pay any
benefit hereunder.
6.4. SPENDTHRIFT PROVISION. No benefit payable under the
Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge,
encumbrance, or charge prior to actual receipt thereof
by the payee, and any attempt so to anticipate,
alienate, sell, transfer, assign, pledge, encumber, or
charge prior to such receipt shall be void; and the
Company shall not be liable in any manner for or
subject to the debts, contracts, liabilities,
engagements, or torts of any person entitled to any
benefit under the Plan.
9
6.5. ADMINISTRATION. The Retirement Committee shall be
responsible for the general operation and
administration of the Plan and for carrying out the
provisions thereof. All provisions set forth in the
Basic Retirement Plan with respect to the
administrative powers and duties of the Retirement
Committee, expenses of administration, and procedures
for filing claims shall also be applicable with respect
to the Plan. The Retirement Committee shall be
entitled to rely conclusively on all tables,
valuations, certificates, opinions, and reports
furnished by any actuary, accountant, controller,
counsel, or other person employed or engaged by the
Company with respect to the Plan.
6.6. DISCLOSURE. Each Participant shall receive a copy of
the Plan and the Retirement Committee will make
available for inspection by any Participant a copy of
the rules and regulations used by the Retirement
Committee in administering the Plan.
6.7. STATE LAW. The Plan is established under and will be
construed according to the laws of the State of Nevada,
to the extent that such laws are not preempted by the
Employee Retirement Income Security Act and valid
regulations published thereunder.
6.8. INCAPACITY OF PARTICIPANT. In the event a Participant
is declared incompetent and a conservator or other
person legally charged with the care of his person or
of his estate is appointed, any benefits under the Plan
to which such Participant is entitled shall be paid to
such conservator or other person legally charged with
the care of his estate. Except as provided above in
this paragraph, when the Retirement Committee in its
sole discretion, determines that a Participant is
unable to manage his financial affairs, the Retirement
Committee may direct the Company to make distributions
to any person for the benefit of such Participant.
6.9. UNCLAIMED BENEFIT. Each Participant shall keep the
Retirement Committee informed of his current address.
The Retirement Committee shall not be obligated to
search for the whereabouts of any person. If the
location of a Participant is not made known to the
Retirement Committee within three (3) years after the
date on which any payment of the Participant's
Supplemental Plan Benefit may be made, payment may be
made as though the Participant had died at the end of
10
the three-year period. If, within one additional year
after such three-year period has elapsed, or, within
three years after the actual death of a Participant,
the Retirement Committee is unable to locate the
Participant, then the Company shall have no further
obligation to pay any benefit hereunder to such
Participant or any other person and such benefit shall
be irrevocably forfeited.
6.10. LIMITATIONS ON LIABILITY. Notwithstanding any of the
preceding provisions of the Plan, neither the Company
nor any individual acting as an employee or agent of
the Company or as a member of the Retirement Committee
shall be liable to any Participant, former Participant,
or any other person for any claim, loss, liability, or
expense incurred in connection with the Plan.
6.11. HEADINGS AND CAPTIONS. The headings and captions
herein are provided for reference and convenience only,
shall not be considered part of the Plan, and shall not
be employed in the construction of the Plan.
IN WITNESS WHEREOF, the Company hereby adopts the Showboat
Supplemental Executive Retirement Plan as of the 1st day of
April, 1994.
SHOWBOAT, INC.
By:_________________________________
Title:______________________________
11
EX-10.38
6
RESTORATION PLAN FOR EMPLOYEES
SHOWBOAT
EFFECTIVE APRIL 1, 1994
TABLE OF CONTENTS
ARTICLE I Definitions 1
1.01 Accounts 1
1.02 Committee 1
1.03 Company Account 1
1.04 Company Contributions 1
1.05 Compensation l
1.06 Deferral Account 1
1.07 Earnings 1
1.08 Employer l
1.09 Excess Compensation 1
1.10 Fixed Deferrals 1
1.11 Participant 2
1.12 Plan 2
l.13 Plan Year 2
1.14 Qualified Savings Plan 2
1.15 Recognizable Compensation 2
1.16 Statutory Limits 2
1.17 Variable Deferrals 2
ARTICLE II Eligibility for and Amount of Benefits 3
2.01 Purpose 3
2.02 Eligibility 3
2.03 Application To Participate 3
2.04 Amount of Deferral 4
2.05 Amount of Company Contributions 5
2.06 Earnings of Accounts 5
2.07 Vesting 5
2.08 Fairness and Times Benefit Payments 5
2.09 Plan Termination 5
ARTICLE III Miscellaneous 6
3.01 Amendment and Plan Termination 6
3.02 Not an Employment Agreement 6
3.03 No Obligation To Fund 6
3.04 Assignment of Benefits 6
3.05 Administration 6
3.06 Governing Low 7
3.07 Number and Gender 7
ARTICLE IV Change of Control 8
2
ARTICLE I
DEFINITIONS
Terms not specifically defined in this Plan shall have the same
meaning as in the Qualified Savings Plan.
1.01 Accounts means accounts established and maintained by the
committee for each Participant, which includes the Deferral
Account and the Company Account. All Accounts established
pursuant to this Plan are strictly hypothetical and are not
backed by actual investments.
1.02 Committee means a committee with three (3) members appointed
by the Board of Directors of Showboat.
1.03 Company Account means the account established and maintained
by the Committee for each Participant that is to be credited
with the amounts of Company Contributions that are allocated
pursuant to Section 2.05 of this Plan, together with the
Earnings credited thereon.
1.04 Company Contributions means Showboat matching contributions
as defined in the Qualified Savings Plan.
1.05 Compensation means Compensation as defined in the Qualified
Savings Plan.
1.06 Deferral Account means the account established and
maintained by the Committee for each Participant that is to
be credited with the amounts of the Participant's
Compensation that are deferred pursuant to this Plan
("Deferrals") together with the Earnings credited thereon.
1.07 Earnings means amounts credited to a Participants Accounts
as investment growth. The tote of growth shall be determined
by the actual growth of the Money Market Fund in the
Qualified Savings Plan.
1.08 Employer means Showboat or any other Participating Company
as defined in the Qualified Savings Plan and who, with the
Board of Directors' consent, adopts and maintains this Plan.
1.09 Excess Compensation means Compensation in excess of the Pay
Cap.
1.10 Fixed Deferrals means amounts elected to be deferred in this
Plan pursuant to Section 2.03 that cannot be varied by the
Committee pursuant to Section 2.04 of this Plan.
3
1.11 Participant means any employee who (a) is eligible for
benefits under the Qualified Savings Plan, (b) meets the
eligibility requirements of Section 2.02 of this Plan, and (
(c) elects to participate in this Plan.
1.12 Plan means the Restoration Plan for Employees of Showboat.
1.13 Plan Year means the Plan Year as defined in the Qualified
Saving Plan.
1.14 Qualified Savings Plan means the Showboat 401(k) Retirement
& Savings Plan.
1.15 Recognizable Compensation means Compensation not in excess
of the Pay Cap.
1.16 Statutory Limits means the following:
(a) The maximum recognizable compensation under
Internal Revenue Code (IRC) Section 401(a)(17) -- the
"Pay Cap."
(b) The maximum annual additions under IRC Section 415
(c) -- the "415 Limit."
(c) The exclusion of excess deferrals under IRC
Section 402(g)(1) -- the "Deferral Limit."
(d) The limits on contributions for highly compensated
employees under IRC Sections 40l(c)(3) (the "ADP Test")
and 401(m)(2) (the "ACP Test").
1.17 Variable Deferrals means amounts elected to be deferred in
this Plan pursuant to Section 2.03 that can be changed by
action of the Committee pursuant to Section 2.04 of this
Plan in response to estimates of the results of the ADP
and/or ACP Tests for the Plan Year.
4
ARTICLE II
ELIGIBILITY FOR AND AMOUNT OF BENEFITS
2.01 PURPOSE
The purpose of this Plan is to restore to employees of the
Employer the benefits they lose under the Qualified Savings
Plan as a result of the Statutory Limits.
2.02 ELIGIBILITY
Each Participant is eligible to receive a benefit under this
Plan if:
(a) His annual Compensation has exceeded the Pay Gap
at any time during his employment or, in the sole
discretion of the Committee, is expected to exceed the
Pay Cap in the ensuing Plan Year; and
(b) He has filed an application to participate in this
Plan pursuant to Section 2.03; and
(c) He has had a Deferral Account established pursuant
to elections to defer Compensation under this Plan or
has had a Company Account established pursuant to
elections to participate in this Plan.
2.03 APPLICATION TO PARTICIPATE
To be eligible to defer Compensation that is paid as part of
a Participant's earnings during any Plan Year, an Eligible
Employee must file a Written application with the Committee
no later than the 15th day preceding the beginning of each
Plan Year. The Committee shall notify each employee of his
prospective eligibility to participate in the Plan at least
45 days prior to the beginning of each Plan Year. The
Committee, in its sole discretion, may permit the filing of
an application later than the 15th day preceding the
beginning of each Plan Year (but in no event on or after the
first day of the Plan Year) if it is determined that failure
to file by such date was due to reasonable cause.
The application for participation shall signify the Eligible
Employee's acceptance of the terms of this Plan, the
percentages (if any) of Recognizable Compensation and Excess
Compensation he elects to defer in accordance with Section 2
2.04 of this Plan, and his agreement to have Company
Matching Contributions that would exceed the Statutory
Limits directed to this Plan. In addition, the election
shall indicate whether the deferral of Recognizable
5
Compensation shall be a Fixed Deferral or a Variable
Deferral. No deferral under this Plan shall be required in
order to receive allocations of Company Contributions under
this Plan.
Notwithstanding the above, no further application shall be
required from any Participant who elects to defer
Compensation hereunder unless and until such Participant
wishes to change the amounts to be deferred or his
Participation in Company Contributions pursuant to the next
paragraph.
A Participant may elect, with fifteen (15) days' advance
written notification to the Committee, to terminate his
deferrals under this Plan, or to cease participation in
Company Contributions. Such application will be effective
only with respect to Compensation or Earnings in subsequent
Plan Years. An application must be filed pursuant to this
Section 2.03 in order to resume Participation in Deferrals
or Company Contributions as of the first day of any later
Plan Year.
2.04 AMOUNT OF DEFERRAL
A Participant shall be permitted to defer the following
amounts under this Plan:
(a) Amounts that could have been contributed to the
Qualified Savings Plan were it not for the Pay Cap;
(b) Amounts that could have been contributed to the
Qualified Savings Plan attributable to Recognizable
Compensation were it not for lower Contribution
Percentage Limits for highly compensated employees
established by the Plan Administrator of the Qualified
Savings Plan;
(c) Amounts that could have been contributed to the
Qualified Savings Plan were it not for the application
of the Deferral Limit.
In the event that the Committee and the Administrator of the
Qualified Savings Plan determine that contributions in
addition to those originally determined pursuant to sub
paragraph (b) above will not cause failure of the ADP and/or
ACP Tests, then the Committee may, in its sole discretion,
direct that such additional contributions be made from
Variable Deferrals elected pursuant to Section 2.03 of this
Plan.
If, in the sole discretion of the Committee and the
Administrator of the Qualified Savings Plan, contribution
percentages under the qualified Savings Plan must be further
reduced in order to ensure passage of the ADP Test and/or
6
the ACP Test, any reduced contribution attributable to
Participants who have elected Variable Deferrals pursuant to
Section 2.03 of this Plan shall automatically be deferred
under this Plan. However, if it is determined after the end
of the Plan Year that the ADP and/or ACP Tests would be
failed, any and all corrective action will be taken by and
in accordance with the rules of the Qualified Savings Plan
and no additional amounts may be deferred under this Plan
for that Plan Year.
Amounts withheld from a Participants' Compensation as
deferrals under this Plan shall be held in the general
assets of the Employer.
2.05 AMOUNT OF COMPANY CONTRIBUTIONS
Company Contributions shall be made in the amount of the
Company Contributions that would have been made pursuant to
the Qualified Savings Plan had all Deferrals been made to
the Qualified Savings Plan and as if the Pay Cap, 415 Limit,
and Deferral Limits did not exist, offset by the amount of
Company Contributions actually allocated to the Qualified
Savings Plan.
2.06 EARNINGS OF ACCOUNTS
Earnings shall be credited to each Participant's Accounts as
of the end of each calendar quarter on the balance(s)
credited up to that time. Such Earnings shall be the amount
that would have been earned had the Accounts, Deferrals, and
Company Contributions been invested in the Money Market Fund
of the Qualified Savings Plan.
2.07 VESTING
A Participant shall always be fully vested in his Deferral
Account. A Participant is fully vested in his Company
Account upon death, total disability, or retirement or after
completing five years of service as defined in the Qualified
Savings Plan. There is no partial vesting in this Plan.
2.08 FORMS AND TIMES OF BENIFIT PAYMENTS
All vested benefits under this Plan shall be paid in a lump
sum as soon as administratively possible following the
termination, death, total disability (as defined in the
realified Savings Plan) or retirement of the Participant.
No loans or hardship withdrawals or in-service distributions
shall be permitted from this Plan.
2.09 PLAN TERMINATION
No additional benefits will accrue under this Plan in the
Event of the termination of the Qualified Savings Plan.
7
ARTICLE III
MISCELLANEOUS
3.01 AMENDMENT AND PLAN TERMINATION
The Employer may, in its sole discretion, terminate,
suspend, or amend this Plan at any time or from time to
time, in whole or in part, but no amendment, suspension, or
termination of the Plan shall, without the consent of a
Participant, affect the Participant's right or the right of
the surviving spouse or beneficiary to receive benefits in
the amounts credited to Accounts prior to the termination,
suspension, or amendment of this Plan.
3.02 NOT AN EMPLOYMENT AGREEMENT
Nothing contained herein will confer on any Participant the
right to be retained in the service of the Employer, nor
does the interface with right of the Employer to discharge
or otherwise deal with Participants without regard to the
existence of this Plan.
3.03 NO OBLIGATIONS TO FUND
This Plan shall not be construed to require the Employer to
fund any of the benefits payable under this Plan nor to
require the establishment of a trust. The Employer, in its
sole discretion, may make such arrangement as it desires to
provide for the payment of any benefits hereunder, and no
person shall have any claim against a particular fund or
asset owned by the Employer or in which it has an interest
to secure the payment of the Employer's obligations
hereunder.
3.04 ASSIGNMENT OF BENEFITS
A Participant, retired Participant, surviving spouse, or
beneficiary may not, either voluntarily or involuntarily,
assign, anticipate, alienate, commute, pledge, or encumber
any benefits to which he is or may become entitled under
this Plan, nor may the same be subject to attachment or
garnishment by any creditor's claim or to legal process.
3.05 ADMINISTRATION
The Committee shall have full discretionary authority to
determine eligibility and to construe and interpret the
terms of this Plan, including the power to remedy possible
ambiguities, inconsistencies, or omissions.
8
3.06 GOVERNING LAW
This Plan shall be governed by the laws of the State of New
Jersey, except to the extent superseded by federal law.
3.07 NUMBER AND GENDER
The singular, where appearing in this Plan, will be deemed
to include the plural, unless the context clearly indicates
the contrary, and the masculine, where appearing in this
Plan, will be deemed to include the feminine.
9
ARTICLE IV
CHANGE OF CONTROL
In the event of a change of control, the vested amount of the
company's matching portion will be paid to the participant
immediately prior to the change in control. For purposes of this
plan, a "Change of Control" of SBI shall be deemed to have
occurred at such time as (a) any "person" (as term is used in
Section 13(d) and 14(d) of the Exchange Act) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of SBI representing
25.0% or more of the combined voting power of SBI's outstanding
securities ordinarily have the right to vote at the election of
directors; or (b) individuals who constitute the Board of
Directors of SBI on the date hereof (the "Incumbent Board") cease
for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to the
date hereof whose election was approved by at least a majority of
the directors comprising the Incumbent Board, or whose nomination
or election was approved by a majority of the Board of Directors
of SBI serving under an Incumbent Board, shall be for purposes of
this clause (b) considered as he or she were a member of the
Incumbent Board or (c) merger, consolidation or sale of all or
substantially all the assets of SBI occurs, unless such merger or
consolidation shall have been affirmatively recommended to SBI's
stockholders by a majority of the Incumbent Board; or (d) a proxy
statement soliciting proxies from Stockholders of SBI by someone
other than the current management of SBI seeking stockholder
approval of a plan or reorganization, merger or consolidation of
SBI, with one or more corporations as a result of which the
outstanding shares of SBI's securities are actually exchanged for
or converted into cash or property or securities not issued by
SBI unless the reorganization, merger or consolidation shall have
been affirmatively recommended to SBI's stockholders by a
majority of the Incumbent Board.
IN WITNESS WHEREOF, this instrument has been executed
effective April 1, 1994 as a supplement to the Showboat 401(k)
Retirement & Savings Plan.
10
EX-10.39
7
November 1, 1994
Mr. ______________
Showboat, Inc.
2800 Fremont Street
Las Vegas, Nevada
Re: Severance Agreement
Dear Mr. ______________:
Showboat, Inc. (the "Company" ) believes that it is in
the best interest of its stockholders and the Company to foster
the continuous employment of key management personnel. In this
connection, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist
and that such possibility, and the uncertainty and questions
which it may raise among management personnel, may result in the
departure or distraction of management personnel to the detriment
of the Company and its stockholders.
Although a change of control in the Company is not
contemplated, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management,
including yourself, to their assigned duties without distraction
in the face of potentially disturbing circumstances arising from
the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the
Company and in consideration of your agreements set forth in
Subsection 2(b) hereof, the Company agrees that you shall receive
the severance benefits set forth in this letter agreement (this
"Agreement") in the event your employment with the Company
terminates subsequent to a "Change in Control of the Company" (as
defined in Section 2 hereof) under the circumstances described
below.
1. Term of Agreement. The term of this Agreement
shall commence on November 1, 1994 and shall continue in effect
through December 31, 1994; provided, however, that commencing on
January 1, 1995 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional
year; provided, further, if a Change in Control of the Company
shall have occurred during the original or extended term of this
Agreement, this Agreement shall automatically continue in effect
for a period of twenty-four (24) months beyond the month in which
such Change in Control of the Company occurred.
2. Change in Control.
(a) No benefit shall be payable to you hereunder
unless there shall have been a Change in Control of the Company,
as set forth below. For purposes of this Agreement, a "Change in
Control of the Company" shall be deemed to have occurred if any
of the events in Subsections (2)(a)(i), (ii) or (iii) occur:
(i) Any "person" (as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), other than an
employee benefit plan of the Company, or a trustee or other
fiduciary holding securities under an employee benefit plan
of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 20% or more of the Company's then outstanding
voting securities carrying the right to vote in elections of
persons to the Board, regardless of comparative voting power
of such voting securities, and regardless of whether or not
the Board shall have approved such Change in Control of the
Company; or
(ii) During any period of two (2)
consecutive years (not including any period prior to the
execution of this Agreement), individuals who at the
beginning of such period constitute the Board and any new
director (other than a director designated by a person who
shall have entered into an agreement with the Company to
effect a transaction described in clauses (i) or (iii) of
this subsection) whose election by the Board or nomination
for election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the
period or whose election or nomination for election was
2
previously so approved, cease for any reason to constitute a
majority thereof; or
(iii) The holders of securities of the
Company entitled to vote thereon approve the following:
(A) A merger or consolidation
of the Company with any other corporation regardless of
which entity is the surviving company, other than a
merger or consolidation which would result in the
voting securities of the Company carrying the right to
vote in elections of persons to the Board outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted
into voting securities of the surviving entity) at
least 80% of the Company s then outstanding voting
securities carrying the right to vote in elections of
persons to the Board, or such securities of such
surviving entity outstanding immediately after such
merger or consolidation, or
(B) A plan of complete liquidation of the
Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's
assets.
(b) For purposes of this Agreement, a "Potential
Change in Control of the Company" shall be deemed to have
occurred if the following occur:
(i) The Company enters into an agreement
or letter of intent, the consummation of which would result
in the occurrence of a Change in Control of the Company;
(ii) Any person (including the Company)
publicly announces an intention to take or to consider
taking actions which if consummated would constitute a
Change in Control of the Company;
(iii) Any person, other than an employee
benefit plan of the Company, or a trustee or other fiduciary
holding securities under an employee benefit plan of the
Company, who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 9.9%
or more of the Company's then outstanding voting securities
carrying the right to vote in elections of persons to the
3
Board increases his beneficial ownership of such securities
by 5% or more over the percentage so owned by such person on
the date hereof; or
(iv) The Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control of the Company has occurred.
You agree that, subject to the terms and conditions of this
Agreement, in the event of a Potential Change in Control of the
Company, you will remain in the employ of the Company until the
earliest of (w) a date which is six (6) months from the
occurrence of such Potential Change in Control of the Company;
(x) the date of occurrence of a Change in Control of the Company;
(y) the date of termination by you of your employment for Good
Reason or by reason of death, Disability or Retirement (at your
normal retirement age), as defined in Subsection 3(a); or (z) the
termination by the Company of your employment for any reason.
3. Termination Following Change in Control. If any
of the events described in Subsection 2(a) hereof constituting a
Change in Control of the Company shall have occurred, you shall
be entitled to the benefits provided in Subsection 4(c) hereof
upon the subsequent termination of your employment (whether or
not such termination is by you by voluntary resignation) during
the term of this Agreement unless such termination is (x) because
of your death, Disability or Retirement, (y) by the Company for
Cause, or (z) by you other than for Good Reason. For the
purposes of this Agreement, any reference to termination of
employment with the Company includes any subsidiary of the
Company by which you are employed at the date of any Potential
Change in Control or Change in Control of the Company.
(a) Disability; Retirement. If, as a result of
your incapacity due to physical or mental illness, you shall have
been absent from the full-time performance of your duties with
the Company for six (6) consecutive months, and within thirty
(30) days after written notice of termination is given you shall
not have returned to the full-time performance of your duties,
your employment may be terminated for "Disability." Termination
by the Company or you of your employment based on "Retirement"
shall mean termination at age 65 (or later) with ten years of
service or retirement in accordance with any retirement contract
4
between the Company and you, including, but not limited to, the
Supplemental Executive Retirement Plan.
(b) Cause. Termination by the Company of your
employment for "Cause" shall mean termination upon your engaging
in willful and continued misconduct, or your willful and
continued failure to substantially perform your duties with the
Company (other than due to physical or mental illness), if such
failure or misconduct is materially damaging or materially
detrimental to the business and operations of the Company,
provided that you shall have received written notice of such
failure or misconduct and shall have continued to engage in such
failure or misconduct after thirty (30) days following receipt of
such notice from the Board, which notice specifically identifies
the manner in which the Board believes that you have engaged in
such failure or misconduct. For purposes of this subsection, no
act, or failure to act, on your part shall be deemed willful
unless done, or omitted to be done, by you not in good faith and
without reasonable belief that your action or omission was in the
best interest of the Company. Notwithstanding the foregoing, you
shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in
the good faith opinion of the Board you failed to substantially
perform your duties or of misconduct in accordance with the first
sentence of this subsection, and of continuing such failure to
substantially perform your duties or misconduct as aforesaid
after notice from the board, and specifying the particulars
thereof in detail.
(c) Voluntary Resignation. After a Change in
Control of the Company and for purposes of receiving the benefits
provided in Subsection 4(c) hereof, you shall be entitled to
terminate your employment for any reason whatsoever by voluntary
resignation given at any time during one (1) year following the
occurrence of a Change in Control of the Company hereunder
("voluntary resignation"). Such voluntary resignation shall not
be deemed a breach of any employment contract between you and the
Company.
(d) Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of this
5
Agreement, "Good Reason" shall mean, without your express written
consent, the occurrence following a Change in Control of the
Company of any of the following circumstances unless, in the case
of Subsections 3(d)(i), (v), (vi), (vii) or (viii), such
circumstances are fully corrected prior to the Date of
Termination (as defined in Subsection 3(f)) specified in the
Notice of Termination (as defined in Subsection 3(e)) given in
respect thereof:
(i) The assignment to you of any duties
inconsistent with the position in the Company that you held
immediately prior to the Change in Control of the Company,
or a significant adverse alteration in the nature or status
of your responsibilities or the conditions of your
employment from those in effect immediately prior to such
Change in Control of the Company;
(ii) A reduction by the Company in your
annual base salary as in effect on the date hereof or as the
same may be increased from time to time except for across-
the-board salary reductions similarly affecting all
management personnel of the Company and all management
personnel of any person in control of the Company;
(iii) The relocation of the Company's
offices at which you are principally employed immediately
prior to the date of the Change in Control of the Company to
a location more than 25 miles from such location or the
Company's requiring you to be based anywhere other than the
Company's offices at such location except for required
travel on the Company's business to an extent substantially
consistent with your present business travel obligations;
(iv) The failure by the Company to pay to
you any portion of your current compensation or to pay to
you any portion of an installment of deferred compensation
under any deferred compensation program of the Company
within seven (7) days of the date such compensation is due;
(v) The failure by the Company to
continue in effect any material compensation or benefit plan
in which you participate immediately prior to the Change in
Control of the Company, unless an equitable arrangement
(embodied in an on-going substitute or alternative plan) has
been made with respect to such plan, or the failure by the
6
Company to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially
less favorable, both in terms of the amount of benefits
provided and the level of your participation relative to
other participants, as existed at the time of the Change in
Control of the Company.
(vi) The failure by the Company to
continue to provide you with benefits substantially similar
to those enjoyed by you under any of the Company's life
insurance, medical, health and accident, or disability plans
in which you were participating at the time of the Change in
Control of the Company, the taking of any action by the
Company which would directly or indirectly materially reduce
any of such benefits, or the failure by the Company to
provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control of the
Company;
(vii) The failure of the Company to obtain
a satisfactory agreement from any successor to assume and
agree to perform this Agreement, as contemplated in Section
5 hereof; or
(viii) Any purported termination of your
employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of Subsection 3(e)
(and, if applicable, the requirements of Subsection 3(b)),
which purported termination shall not be effective for
purposes of this Agreement.
Your right to terminate your employment pursuant to this
subsection shall not be affected by your incapacity due to
physical or mental illness. Your continued employment shall not
constitute consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason hereunder.
(e) Notice of Termination. Any purported
termination of your employment by the Company or by you shall be
communicated by written Notice of Termination to the other party
hereto in accordance with Section 6 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
7
the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(f) Date of Termination. "Date of Termination"
shall mean:
(i) If your employment is terminated for
Disability thirty (30) days after Notice of Termination is
given (provided that you shall not have returned to the
full-time performance of your duties during such thirty day
period), and
(ii) If your employment is terminated
pursuant to Subsections 3(b), (c) or (d) above or for any
other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a
termination pursuant to Subsection 3(b) above shall not be
less than thirty (30) days from the date such Notice of
Termination is given, and in the case of a termination
pursuant to Subsections 3(c) or 3(d) shall not be less than
fifteen (15) nor more than sixty (60) days from the date
such Notice of Termination is given;
provided that if within fifteen (15) days after any Notice of
Termination is given, the party receiving such Notice of
Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual
written agreement of the parties, by a binding arbitration award,
or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which
the time for appeal therefrom has expired and no appeal has been
perfected; provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in
good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company
will continue to pay you your full compensation in effect when
the notice giving rise to the dispute was given (including, but
not limited to, base salary) and continue you as a participant in
all compensation, bonus, benefit and insurance plans in which you
were participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with
this subsection. Amounts paid under this subsection are in
8
addition to all other amounts due under this Agreement and shall
not be offset against or reduce any other amounts due under this
Agreement.
4. Compensation Upon Termination or During Disability
Following a Change of Control. Following a Change in Control of
the Company, as defined in Subsection 2(a), upon termination of
your employment or during a period of Disability, you shall be
entitled to the following benefits
(a) During any period that you fail to perform
your full-time duties with the Company as a result of incapacity
due to physical or mental illness, you shall continue to receive
your base salary at the rate in effect at the commencement of any
such period, together with all compensation payable to you under
any compensation or benefit plan of the Company during such
period, until this Agreement is terminated pursuant to
Subsection 3(a) hereof. Thereafter, or in the event your
employment shall be terminated for Retirement, or by reason of
your death, your benefits shall be determined under the Company's
retirement, insurance and other compensation programs then in
effect in accordance with the terms of such programs, subject to
Subsection 4(e) hereof.
(b) If your employment shall be terminated by the
Company for Cause, the Company shall pay you your full base
salary through the Date of Termination at the rate in effect at
the time the Notice of Termination is given, plus all other
amounts to which you are entitled under any compensation plan of
the Company at the time such payments are due, and the Company
shall have no further obligations to you under this Agreement.
(c) If your employment by the Company shall be
terminated (y) by the Company other than for Cause, Retirement or
Disability or (z) by you for Good Reason or by voluntary
resignation, then you shall be entitled to the benefits provided
below:
(i) The Company shall pay you your full
base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all
other amounts to which you are entitled under any
compensation or benefit plan of the Company, at the time
such payments are due;
9
(ii) In lieu of any further salary
payments to you for periods subsequent to the Date of
Termination, the Company shall pay as severance pay to you a
lump sum severance payment equal to (w) 200% of your annual
salary as in effect as of the Date of Termination or
immediately prior to the Change in Control of the Company,
whichever is greater, if your employment was terminated by
the Company other than for Cause, Retirement or Disability,
or by you for Good Reason, or (x) 100% of your annual salary
as in effect as of the Date of Termination or immediately
prior to the Change in Control, whichever is greater, if you
terminate your employment for any reason other than for a
Good Reason; and (y) 200% of the average bonuses awarded to
you by the Company for the three (3) fiscal years preceding
the Date of Termination, if your employment was terminated
by the Company other than for Cause, Retirement or
Disability, or by you for Good Reason, or (z) 100% of the
average bonuses awarded to you by the Company for the three
(3) fiscal years preceding the Date of Termination, if your
employment was terminated by you for other than a Good
Reason. If you were not employed by the Company or its
affiliates during the entire three (3) fiscal years
preceding the Date of Termination, then such average shall
be the average of your annual bonuses for the complete
fiscal years (if any) and partial fiscal year (if any)
during which you were so employed; provided that the amount
for any such partial fiscal year shall be an annualized
amount based on the amount of annual bonus paid to you
during the partial fiscal year.
(iii) The Company shall also pay to you the
amounts of any compensation or awards payable to you or due
to you in respect of any period preceding the Date of
Termination under any incentive compensation or other
benefit plan of the Company and under any agreements with
you in connection therewith, and shall make any other
payments and take any other actions provided for in such
plans and agreements.
(iv) In the event that your employment
with the Company is terminated by you following a Change in
Control for a Good Reason as specified in Subsection 3(d)
or by the Company for other than death, Disability,
Retirement or Cause, then a period of two (2) years from the
date of the Change in Control shall be included in the
definition of "service" for calculation of benefits under
the Supplemental Executive Retirement Plan, if applicable.
In the event that you terminate your employment by voluntary
10
resignation following a Change in Control of the Company in
accordance with Subsection 3(c), then a period of one (1)
year from the date of the Change in Control of the Company
shall be included in the definition of "service" for
calculation of benefits under the Supplemental Executive
Retirement Plan, if applicable. The two or one year period
detailed above shall be referred to as the Severance
Period."
(v) The Company shall also pay to you all
legal fees and expenses incurred by you as a result of such
termination (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or
in seeking to obtain or enforce any right or benefit
provided by this Agreement or in connection with any tax
audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or
benefit provided hereunder).
(vi) In the event that you become entitled
to the payments (the "Severance Payments") provided under
Subsections 4(c)(ii) and (iii) above (and Sections 4(d) and
4(e) below), and the Severance Payments will be subject to
the tax (the "Excise Tax") imposed by Section 4999 of the
Code, you may elect to reduce your severance to an amount
which is $1.00 below the amount which would require you to
pay the Excise Tax.
(d) If your employment shall be terminated (y) by
the Company other than for Cause, Retirement or Disability or (z)
by you for Good Reason or by voluntarily resignation, then for
and throughout the Severance Period, the Company shall arrange to
provide you with life, disability, accident and health insurance
benefits substantially similar to those which you are receiving
immediately prior to the Notice of Termination. Benefits
otherwise receivable by you pursuant to this Subsection 4(d)
shall be reduced to the extent comparable benefits are actually
received by you during the Severance Period following your
termination, and any such benefits actually received by you shall
be reported to the Company.
(e) In the event a Change in Control of the
Company occurs after you and the Company have entered into any
retirement agreement including an agreement providing for early
retirement, then the present value, computed using a discount
rate of 8% per annum, of the total amount of all unpaid deferred
11
payments as payable to you in accordance with the payment
schedule that you elected when the deferral was agreed to and
using the plan interest rate applicable to your situation, or
other payments payable or to become payable to you or your estate
or beneficiary under such retirement agreement (other than
payments payable pursuant to a plan qualified under section
401(a) of the Code), shall be paid to you (or your estate or
beneficiary if applicable) in cash within five (5) business days
after the occurrence of the Change in Control of the Company. If
you and the Company or its affiliates have executed a retirement
agreement and if the Change in Control of the Company occurs
before the effective date of your retirement, then you shall
receive the Severance Payments payable under Subsection 4(c)
herein in addition to the present value of your unpaid deferred
retirement payments and other payments under the retirement
agreement as aforesaid. All other benefits to which you or your
estate or any beneficiary are entitled under such retirement
agreement shall continue in effect notwithstanding the Change in
Control of the Company. This Subsection 4(e) shall survive your
retirement.
(f) You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking
other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this Section 4 be reduced by
any compensation earned by you as the result of employment by
another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Company, or otherwise
(except as specifically provided in this Section 4).
(g) In addition to all other amounts payable to
you under this Section 4, you shall be entitled to receive all
benefits payable to you under any benefit plan of the Company in
which you participate to the extent such benefits are not paid
under this Agreement.
5. Successors; Binding Agreement.
(a) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and for
assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. Failure of the Company to obtain such assumption and
12
agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same
terms as you would be entitled to hereunder if you terminate your
employment for Good Reason following a Change in Control of the
Company, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(b) This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to your devisee,
legatee or other designee or, if there is no such designee, to
your estate.
6. Notice. For the purpose of this Agreement,
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 or mailed by United States registered
or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page
of this Agreement, provided that all notices to the Company shall
be directed to the Secretary of the Company, or to such other
address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may
be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by
you and such officer as may be specifically designated by the
Board. No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time. No agreement or representations, oral or
otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set
forth in this Agreement. The validity, interpretation,
13
construction and performance of this Agreement shall be governed
by the laws of the State of Nevada. All references to sections
of the Exchange Act or the Code shall be deemed also to refer to
any successor provisions to such sections. Any payments provided
for hereunder shall be paid net of any applicable withholding
required under federal, state or local law. The obligations of
the Company under Section 4 shall survive the expiration of the
term of this Agreement.
8. Validity. The invalidity or unenforceability of
any provision 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.
9. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
10. Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Las Vegas, Nevada, in accordance
with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any
court having jurisdiction; provided, however, that you shall be
entitled to seek specific performance of your right to be paid
until the Date of Termination during the pendency of any dispute
or controversy arising under or in connection with this
Agreement.
11. Similar Provisions in Other Agreement. The
Severance Payment under this Agreement supersedes and replaces
any other severance payment to which you may be entitled under
any previous agreement between you and the Company or its
affiliates.
14
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed
copy of this letter which will then constitute our binding
agreement on this subject.
Very truly yours,
SHOWBOAT, INC.
By:______________________________
Agreed to as of this _____ day
of November, 1994
_______________________________
15
EX-10.40
8
OPERATING AGREEMENT
OF
RANDOLPH RIVERBOAT COMPANY, L.L.C.,
A NEVADA LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
RANDOLPH RIVERBOAT COMPANY, L.L.C.,
A NEVADA LIMITED LIABILITY COMPANY
TABLE OF CONTENTS
PAGE
ARTICLE I. RECITALS AND DEFINITIONS 1
1.1 Recitals 1
1.2 Definitions 1
ARTICLE II. OFFICES 6
2.1 Principal Office 6
ARTICLE III. PURPOSE 6
3.1 Purpose 6
ARTICLE IV. CAPITAL 6
4.1 Initial Capital 6
4.2 Capital Accounts 7
4.3 Federal Income Tax Elections 8
4.4 Members Invested Capital 8
4.5 Interest 9
4.6 Additional Capital Contribution 9
ARTICLE V. MEMBERS 9
5.1 Powers 9
5.2 Salaries to Members 10
5.3 Other Ventures 10
5.4 Meeting of Members 10
5.5 Action By Written Consent 11
5.6 Place of Meetings of Members 11
5.7 Annual Meetings 11
5.8 Annual Meetings: Notice 11
5.9 Special Meetings 11
5.10 Waiver of Notice 12
5.11 Adjourned Meetings And Notice Thereof 12
5.12 Delegation of Authority To Members and Managers 12
5.13 Admission of New Members 12
5.14 Cooperation of the Member 12
5.15 Company Action by Members 13
ARTICLE VI. MANAGERS 13
6.1 Election 13
6.2 Removal, Resignation and Vacancies 14
6.3 Managers' Power 15
6.4 Company Action by Managers 15
6.5 Bank Accounts 16
6.6 Meetings of Managers 16
6.7 Action by Written Consent 16
6.8. Place of Meetings of Managers 16
6.9 First Meeting 17
6.10 Special Meetings 17
6.11 Notice 17
6.12 Remuneration of Managers 17
6.13 Deadlock 17
ARTICLE VII. TRANSFER OF MEMBERS' INTERESTS 17
7.1 Transfer of Members' Interests 17
7.2 No Transfer Permitted Under Certain
Circumstances 18
7.3 Permitted Transferees 18
i
ARTICLE VIII. COMPULSORY BUY-SELL PROVISION 19
8.1 Offer to Purchase 19
8.2 Acceptance. 19
8.3 Purchase Price 20
8.4 Payment of Purchase Price 20
8.5 Closing 20
8.6 Government Approval 20
ARTICLE IX. DEFAULTING MEMBER 21
9.1 Option to Purchase Member's Interest 21
9.2 Offer to Purchase Shares of Randolph
Shareholders 21
9.3 Determination of Purchase Price 22
9.4 Payment of Purchase Price 22
9.5 Closing 22
ARTICLE X. RIGHT OF FIRST REFUSAL 23
10.1 Third Party Offer. 23
10.2 Acceptance of Offer 23
10.3 Third Party Sale 24
10.4 Re-Application of Provisions 24
ARTICLE XI. SHOWBOAT PUT OPTION 24
11.1 Showboat Put Option 24
ARTICLE XII. GENERAL SALE PROVISIONS 25
12.1 Application of Sale Provisions 25
12.2 Defined Terms 25
12.3 Obligations of Vendor 25
12.4 Release of Guarantees etc 26
12.5 Deliveries to Vendor 27
12.6 Repayment of Debts 27
12.7 Non-Completion by Vendor 27
12.8 Non-Completion by Purchaser 28
12.9 Restrictions on Business 28
12.10 No Joint Liability 28
12.11 Consents 28
ARTICLE XIII. PROFITS AND LOSSES 28
13.1 Net Profits and Losses 28
13.2 Allocations of Deductions 28
13.3 Special Allocations 29
13.4 Curative Allocations 30
13.5 Federal Income Tax 31
ARTICLE XIV. DISTRIBUTIONS 31
14.1 Operating Distributions 31
14.2 Payment of Member Loans 31
14.3 Distribution on Dissolution and Liquidation 31
ARTICLE XV. ACCOUNTING AND RECORDS 32
15.1 Records and Accounting 32
15.2 Access to Accounting Records 32
15.3 Annual Tax Information 32
15.4 Interim Statements and Reports 32
ARTICLE XVI. TERM 32
16.1 Term 32
ii
ARTICLE XVII. DISSOLUTION OF THE COMPANY
AND TERMINATION OF A MEMBER'S INTEREST 33
17.1 Dissolution 33
17.2 Death of a Member; Continuation 33
17.3 Option To Purchase Deceased Member's
Interest 33
17.4 Bankruptcy, Insolvency or Dissolution 33
ARTICLE XVIII. TRUST MEMBERS 34
18.1 Trustee Liability 34
18.2 Status of Successor Trustees as Members 34
ARTICLE XIX. INDEMNIFICATION 34
19.1 Indemnity 34
19.2 Indemnity for Actions By or In the Right of
The Company 35
19.3 Indemnity If Successful 35
19.4 Expenses 36
19.5 Advance Payment of Expenses 36
19.6 Other Arrangements Not Excluded 36
ARTICLE XX. MISCELLANEOUS PROVISIONS 37
20.1 Time is of the Essence 37
20.2 Default Interest Rate 37
20.3 Counterparts 37
20.4 Execution by Facsimile 37
20.5 Force Majeure 37
20.6 Complete Agreement 37
20.7 Amendments 37
20.8 Governing Law 38
20.9 Headings 38
20.10 Severability 38
20.11 Expenses 38
20.12 Heirs, Successors and Assigns 38
20.13 Execution 38
20.14 Power of Attorney 38
20.15 Compliance with Laws 39
20.16 Background Investigations 39
20.17 Compliance with Other Agreements 40
20.18 Governmental Approval 40
20.19 Licensing Requirements 40
20.20 Foreign Gaming Licenses 41
20.21 Press Releases 41
20.22 Financing Matters 41
ARTICLE XXI. CONFIDENTIALITY AND NON-USE 42
21.1 Disclosure of Propriety Information 42
21.2 Use of Proprietary Information 43
21.3 Destruction or Return of Confidential Information 43
21.4 Exception 43
21.5 Survival 44
ARTICLE XXII. ARBITRATION 44
22.1 Appointment of Arbitrators 44
22.2 Inability to Act 45
ARTICLE XXIII. NOTICES 45
SCHEDULE A-1 48
EXHIBIT A-2 49
EXHIBIT B-1 50
iii
OPERATING AGREEMENT
OF
RANDOLPH RIVERBOAT COMPANY, L.L.C.,
A NEVADA LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT (this "Agreement") is made and
entered into as of January 25, 1995, by and among Randolph
Riverboat Company, Inc., a Nevada corporation ("Randolph"), and
Showboat Missouri, Inc., a Nevada corporation ("Showboat"),
(Randolph and Showboat are hereinafter collectively referred to
as the "Members") and Randolph Riverboat Company, L.L.C. (the
"Company").
RECITALS
A. The Company has been formed to design and develop a
riverboat casino in order to conduct a riverboat gaming business
on the Missouri River in or near Randolph, Missouri.
B. The Company expects to have completed construction of
the riverboat and all ancillary facilities, including, but not
limited to, docking, parking areas and administrative offices,
and to have obtained all licenses necessary to open the riverboat
to the public for gaming operations on or before November 1995.
C. The Members are the registered and beneficial owners of
100% of the total Interest (as defined below) in the Company.
D. The Members desire to enter into an operating agreement
to govern the affairs of the Company and the conduct of its
business, including, without limitation, the rights and
restrictions on the transfer of shares of a Member's Interest in
the Company owned by the current and future Members of the
Company.
NOW, THEREFORE, in consideration of the mutual promises
contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and with the intention of being bound by this
Agreement, the Members agree as follows:
ARTICLE I. RECITALS AND DEFINITIONS
1.1 RECITALS. The foregoing Recitals are true and correct.
1.2 DEFINITIONS. The following defined terms are used in
this Agreement:
"Act" shall mean the Nevada Limited Liability Company Act as
set forth in the Nevada Revised Statutes 86.021 to 86.121,
inclusive, as amended from time to time.
1
"Affiliate" shall mean a Person who (i) controls, is
controlled by, or is under common control with the Person in
question; (ii) is an officer, director or 5% shareholder, partner
in or trustee of any Person referred to in the preceding clause;
or (iii) is a spouse, father, mother, son, daughter, brother,
sister, uncle, aunt, nephew or niece of any Person described in
clauses (i) and (ii).
"Agreement" shall mean this Operating Agreement as
originally executed and as amended, modified, supplemented, or
restated from time to time, as the context may require.
"Casino" shall mean those areas reserved for the operation
of slot machines, table games and any other legal forms of gaming
permitted under applicable law, and ancillary service areas,
including reservations and admissions, cage, vault, count room,
surveillance room and any other room or area or activities
therein regulated or taxed by the state of Missouri by reason of
gaming operations.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Control" shall mean, in relation to a Person that is a
corporation, the ownership, directly or indirectly, of voting
securities of such Person carrying more than 50% of the voting
rights attaching to all voting securities of such Person and
which are sufficient, if exercised, to elect a majority of its
board of directors; "Controls" and "Controlled" shall have
similar meanings.
"Company" shall mean Randolph Riverboat Company, L.L.C. and
includes any successor entity resulting from any merger,
amalgamation, reorganization, arrangement or other combination of
the Randolph Riverboat Company, L.L.C. and any other Person.
"Debt" shall mean, in relation to any Person (i) all
indebtedness of such Person for borrowed money, including
obligations with respect to bankers' acceptances; (ii) all
indebtedness of such Person for the deferred purchase price of
property or services represented by a note or other security;
(iii) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property
acquired by such Person; (iv) all obligations under leases which
shall have been or should be, in accordance with GAAP
consistently applied, recorded as capital leases in respect of
which such Person is liable as lessee; (v) all reimbursement
obligations in respect of letters of credit issued at the request
of such Person; and (vi) all Debt Guaranteed by such Person.
"Debt Guaranteed" by any Person shall mean all Debt of the
kinds referred in (i) through (v) of the definition of Debt which
is directly or indirectly guaranteed by such Person, or which
such Person has agreed (contingently or otherwise) to purchase or
otherwise acquire, or in respect of which such Person has
otherwise assured or agreed to indemnify a creditor against loss.
"Defaulting Member" shall have the meaning assigned to that
term in Section 9.1.
2
"Extraordinary Resolution":
(a) of the Managers shall mean a resolution that is:
(i) approved at a properly constituted meeting
of the Managers for the purpose of considering the
proposed resolution by at least 83.3% of the Managers
present; or
(ii) consented to by all of the Managers by an
instrument or instruments in writing.
(b) of the Members shall mean a resolution that is:
(i) approved at a properly constituted
meeting of Members convened for the purpose of
considering the proposed resolution by Members
holding at least 80% of the Invested Capital
present or represented by proxy; or
(ii) consented to by all of the Members by an
instrument or instruments in writing.
"GAAP" shall mean, at any time, accounting principles
generally accepted in the United States of America at such time.
"Gaming Authorities" shall mean the Nevada Gaming Control
Board, the Nevada Gaming Commission, the New Jersey Casino
Control Commission, the New South Wales Casino Control Authority,
the Missouri Gaming Commission, the Riverboat Division of the
Louisiana State Police and such other authority governing gaming
in states or countries in which the Company or any of the Members
currently conduct or in the future may conduct gaming operations.
"Gross Gaming Revenues" shall mean all of the revenue from
the operation of the Casino (which is taxed by the state of
Missouri), including, but not limited to, table games, electronic
games of chance, and electronic games of skill.
"Invested Capital" is defined in Section 4.4 of this
Agreement.
"Management Agreement" shall mean that certain Management
Agreement of even date herewith, entered into between the Company
and an affiliate of Showboat for the management of the Riverboat.
"Manager(s)" shall mean the person(s) elected by the Members
to manage the Company.
"Members" shall mean Randolph and Showboat and any of their
Permitted Transferees or other Person who acquires, with the
unanimous written consent of the other Members, and directly or
beneficially owns an Interest in accordance with the provisions
of this Agreement.
3
"Member's Interest" or "Interest" shall mean a Member's
ownership interest in the Company, including the Member's share
of the profits and losses of the Company and the right to receive
distributions of the Company's assets.
"Original Randolph Shareholders" shall mean Edward Herbst,
Troy Herbst and Timothy Herbst.
"Parties" shall mean the parties to this Agreement, and
"Party" shall mean any of them.
"Percentage Interest" shall mean each Member's Invested
Capital as a percentage of all Members' Invested Capital. The
Members' initial percentage interests therefore are as follows:
Showboat 35%
Randolph 65%
"Permitted Randolph Transferee" shall mean, in the case of a
particular Randolph Shareholder, (i) an entity, all of the voting
securities or other ownership interests of which are owned by the
Randolph Shareholder, free and clear of all liens, charges,
claims and encumbrances of any nature whatsoever (including any
agreement or any option or right capable of becoming an agreement
entitling any other Person to acquire such voting securities or
other ownership interests in whole or in part); (ii) an inter
vivos family trust for the benefit of the Randolph Shareholder or
for the benefit of the Randolph Shareholder and his spouse; (iii)
the Randolph Shareholder's parent, spouse, or child; (iv) Sam
Levine, an individual; (v) Sean T. Higgins, an individual; (vi)
John Davis Gaughn, an individual; and/or (vii) another Original
Randolph Shareholder.
"Permitted Transferee" shall mean, in the case of a
particular Member, an entity, all of the voting securities or
other ownership interests of which are owned by the Member (or
parent corporation of the Member) free and clear of all liens,
charges, claims and encumbrances of any nature whatsoever
(including any agreement or any option or right capable of
becoming an agreement entitling any other Person to acquire such
voting securities or other ownership interests in whole or in
part).
4
"Person" shall mean any individual, partnership, limited
partnership, limited liability company, corporation,
unincorporated association, joint venture, trust, governmental
entity or other entity.
"Project Financing" is defined in Section 20.22 of this
Agreement.
"Randolph" shall mean Randolph Riverboat Company, Inc., a
Nevada corporation, or its Permitted Transferees and its
successors and assigns.
"Randolph Shareholders" shall mean Edward Herbst, Troy
Herbst, and Timothy Herbst, or any of the Permitted Randolph
Shareholders and their successors and assigns.
"Regulations" shall mean rulings issued by the U.S. Treasury
as interpretations of the Code.
"Riverboat" shall mean the riverboat constructed by the
Company for the operation of the Casino on the Missouri River in
or near Randolph, Missouri, and all necessary ancillary
facilities to the Riverboat, including, but not limited to,
docks, piers, vehicular parking area, waiting areas, restaurants,
restrooms, administrative offices for, but not limited to,
accounting, purchasing, and management information services and
other areas utilized in support of the operations of the
Riverboat. The total cost and expenses associated with the
development of the Riverboat shall not exceed $80,000,000 or be
less than $70,000,000, unless mutually agreed otherwise by the
Parties.
"Riverboat Authority" shall mean the Missouri Gaming
Commission.
"Sale Transaction" shall mean a purchase and sale of a
Member's Interest between or among parties hereto pursuant to the
provisions of Articles 8, 9, 10, 11 or 12 as the case may be.
"Showboat" shall mean Showboat Missouri, Inc. or its
Permitted Transferees and its successors and assigns.
"Vendor" shall mean any Party who elects or is required to
sell its Interest pursuant to a Sale Transaction.
5
ARTICLE II. OFFICES
2.1 PRINCIPAL OFFICE. The principal office of the Company
in the state of Nevada shall be at 5195 Las Vegas Boulevard
South, Las Vegas, Nevada 89119. The Members may change said
principal office at any time from one location to another in the
state of Nevada.
ARTICLE III. PURPOSE
3.1 PURPOSE. The purpose of the Company shall be to engage
in the development, ownership and operation of the Riverboat.
Any business beyond the business described herein shall require
the unanimous written consent of the Members.
ARTICLE IV. CAPITAL
4.1 INITIAL CAPITAL.
(a) The initial capital of the Company shall be the
sums of cash or the agreed fair market value of the property or
services (or combination of cash, property and services)
contributed to the Company by the Members in such amounts or
value as are set out opposite the name of each of the Members on
Schedule A-1 attached hereto and incorporated herein by this
reference which shall be amended from time to time by the
Managers to reflect a current list of the names and addresses of
each current member. In the event that property is contributed
by a Member as its capital contribution, such property shall be
contributed to the Company free and clear of all liens and other
interests except as may otherwise be agreed in writing by all
Members. A transfer of any membership Interest shall not be
effective until it has been recorded in the records of the
Company.
(b) Randolph shall contribute to the Company all of
the assets set forth in Schedule B-1 attached hereto and
incorporated herein by this reference as its capital
contribution, which assets constitute all of the assets of
Randolph. All of such assets are hereinafter referred to as the
"Randolph Assets." The Parties agree that the value of the
Randolph Assets is $24,142,857.14. Randolph shall execute any
and all documents necessary and obtain all necessary approvals to
assign, transfer and deliver to the Company all of Randolph's
right, title and interest in and to the Randolph Assets. Until
such time as Randolph assigns the Randolph Assets to the Company,
Randolph shall hold the Randolph Assets in trust for the benefit
of the Company, and shall take all action necessary to preserve
and protect the Randolph Assets.
(c) Randolph represents and warrants that it has good
and marketable title to the Randolph Assets, including, without
limitation, real and personal property, leasehold estates, and
all other tangible and intangible assets, free and clear of all
leases, claims, encumbrances or other defects in title except as
may otherwise be agreed to in writing by Showboat.
6
4.2 CAPITAL ACCOUNTS. Capital Accounts shall be
established on the Company's books representing the Members'
respective capital contributions to the Company. The term
"Capital Account" shall mean the capital account maintained for
such Member in accordance with the following provisions:
(a) Each Member's Capital Account shall be increased
by:
(1) The amount of the Member's cash or in-kind
capital contributions to the Company pursuant to Section 4.1
hereof;
(2) The fair market value of any property
contributed by the Member to the Company (net of liabilities
secured by any such contributed property that the Company is
considered to assume or take subject to for purposes of Section
752 of the "Code");
(3) The amount of Net Profits (or items thereof)
allocated to the Member pursuant to Article XIII hereof; and
(4) Any other increases required by Regulations
issued pursuant to the Code. If Section 704(c) of the Code
applies to property contributed by a Member to the Company, then
the Members' Capital Accounts shall be adjusted in accordance
with Regulations Section 1.704-1(b)(2)(iv)(g).
(b) Each Member's Capital Account shall be decreased
by:
(1) The amount of Net Losses allocated to the
Member pursuant to Article XIII hereof;
(2) All amounts paid or distributed to the Member
pursuant to Article XIV hereof, other than amounts required to be
treated as a payment for property or services under the Code;
(3) The fair market value of any property
distributed in-kind to the Member (net of any liabilities secured
by such distributed property that such Member is considered to
assume or take subject to for purposes of Section 752 of the
Code); and
(4) Any other decreases required by the
Regulations.
Before decreasing a Member's Capital Account (as described
above) with respect to the distribution of any property to such
Member, all Members' accounts shall be adjusted to reflect the
manner in which the unrealized income, gain, loss, and deduction
inherent in such property (that has not been previously reflected
in the Members' Capital Accounts) would be allocated among the
Members if there were a taxable disposition of such property by
the Company on the date of distribution, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(e).
(c) In determining the amount of any liability for
purposes of Sections 4.2(a) and 4.2(b) hereof, there shall be
taken into account Code Section 752(c) and any other applicable
provisions of the Code and any Regulations promulgated
thereunder.
7
(d) Members' Capital Accounts shall be adjusted in
accordance with, and upon the occurrence of an event described in
Regulations Section 1.704-1(b)(2)(iv)(f), including the addition
of new Members pursuant to Section 5.13 hereof or the receipt of
additional capital contributions pursuant to Section 4.6 hereof,
to reflect a revaluation of the Company's assets on the Company's
books. Such adjustments to the Members' Capital Accounts shall
be made in accordance with Regulations Section 1.704-
1(b)(2)(iv)(g) for allocations of depreciation, depletion,
amortization and gain or loss with respect to such revalued
property.
(e) All provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and
applied in a manner consistent with such Regulations. The
Members shall make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to
comply with Regulations Section 1.704-1(b).
4.3 FEDERAL INCOME TAX ELECTIONS. The Company may make all
elections for federal income tax purposes, including but not
limited to an election, pursuant to Code Section 754, to adjust
the basis of the Company's assets under Code Sections 734 or 743.
In the event an election pursuant to Code Section 754 is made by
the Company, upon the adjustment to the basis of the Company's
assets, the Members' Capital Accounts shall be adjusted in
accordance with the requirements of Regulation Section 1.704-
1(b)(2)(iv)(m).
4.4 MEMBERS INVESTED CAPITAL. The "Invested Capital" of a
Member shall be the sum of any cash contributed by said Member to
the Company, and the fair market value of any property
contributed by said Member to the Company, less the amount of any
liabilities of such Member assumed by the Company or which are
secured by property contributed by such Member to the Company.
In the event the Company's assets are revalued pursuant to
Section 4.2(d) hereof resulting in an adjustment to the Members'
Capital Accounts, the Members' "Invested Capital" shall, for
purposes of this Agreement, be deemed to be each Member's
respective Capital Account balance immediately after such
revaluation.
8
4.5 INTEREST. Except as may otherwise be provided for
herein, no interest shall be paid or credited to the Members on
their Capital Accounts or upon any undistributed profits left on
deposit with the Company.
4.6 ADDITIONAL CAPITAL CONTRIBUTION. At such time as the
Members unanimously determine that additional capital is required
by the Company, such additional capital contribution shall be
made by the Members in proportion to the Members' Invested
Capital. If any Member should fail to make any additional
capital contribution on or before the date such contribution is
due, such Member shall be deemed to be a Defaulting Member and
subject to the provision of Section 8.1, the other Members
("Contributing Members"), or the Company, as the case may be,
shall be entitled to purchase the Defaulting Member's Interest in
the Company in accordance with the provisions of Article IX, or,
at the option of a majority of the Invested Capital held by the
Contributing Members, the Contributing Members may advance to the
Company an amount equal to the Defaulting Member's additional
capital contribution, and the amount so advanced by the
Contributing Members shall be considered a loan to the Company
and shall be entitled to preferential repayment by the Company,
including a preferential, cumulative, annual return of eighteen
percent (18%) per annum until such additional capital
contribution and interest are paid in full. However, in no event
shall the interest rate exceed the maximum lawful rate.
ARTICLE V. MEMBERS
5.1 POWERS. Subject to the provisions of the Articles of
Organization, this Operating Agreement and the provisions of the
Act, all powers shall be exercised by or under the authority of,
and the business and affairs of the Company shall be controlled
by, the Members. Without prejudice to such general powers, but
subject to the same limitations, it is hereby expressly declared
that the Members shall have the following powers:
(a) Subject to the provisions of Section 6.1, to
select and remove all Managers, agents and employees of the
Company, prescribe such powers and duties for them as may be
consistent with the Act, with the Articles of Organization or
this Operating Agreement, fix their compensation, and require
from them security for faithful service.
(b) To change the principal office of this Company
from one location to another within Nevada; to fix and locate
from time to time one or more subsidiary offices of the Company;
and to designate any place within or without the state of Nevada
for the holding of any Members' meeting or meetings.
Each of the Members covenants and agrees to exercise
the rights and votes attaching to the Member's Interest at all
times and to use its best efforts to cause its nominees for
Manager to act at all times so that the provisions of this
Agreement shall govern the affairs of the Company to the maximum
extent permitted by law. In the event of any conflict between
the provisions of this Agreement and the provisions of the
Articles of Organization, each of the Members covenants and
agrees to take or cause to be taken such steps and proceedings as
may be required under Nevada law or otherwise to amend such
Articles of Organization to resolve such conflict so that the
provisions of this Agreement shall, to the maximum extent
permitted by law, at all times prevail.
9
5.2 SALARIES TO MEMBERS. By Extraordinary Resolution of
the Members, the Company shall have authority to pay to any
Member a reasonable salary for said Member's services to the
Company. It is understood that the salary paid to any Member
under the provisions of this Section shall be determined without
regard to the income of the Company and shall be considered as an
operating expense of the Company and shall be deducted as an
expense item in determining the net profits and losses of the
Company.
5.3 OTHER VENTURES. Except as may otherwise be provided
for herein, nothing contained in this Agreement shall be
construed to restrict or prevent, in any manner, any Member from
engaging in any other businesses or investments, including,
without limitation, any similar or competitive casino operation;
provided, however, a Member shall obtain the prior written
consent of the other Members to engage in any similar or
competitive activities within the boundaries surrounding
Randolph, Missouri as shown on the map attached hereto as Exhibit
"A-2." The Members acknowledge that Showboat and/or its
Affiliates and Randolph and/or its Affiliates operate other
casinos and may in the future operate additional casinos in
different areas of the world, and that marketing efforts may
cross over in the same markets and with respect to the same
potential customer base. The Members agree that the Parties may
refer customers of the Riverboat to other facilities operated by
Showboat and/or its Affiliates or Randolph and/or its Affiliates
to utilize gaming, entertainment and other amenities, without
payment of any fees to any Member or the Company.
5.4 MEETING OF MEMBERS. Management of the Company is
vested in, and all actions of the Members are taken by the
Members in proportion to their Invested Capital at the time of
the action taken. Except as specifically otherwise provided
herein, the Members vote to approve a matter or to take any
action shall be by the vote of Members at a meeting, in person or
by proxy or without a meeting by unanimous written consent. For
any meeting of Members, the presence in person or by proxy of
Members owning 100% of the Invested Capital at the time of the
action taken constitutes a quorum for the transaction of
business. Members vote in proportion to their Invested Capital
and, except for an action that requires an Extraordinary
Resolution, an action approved at a meeting by Members owning
more than 50% of the Invested Capital ("Majority") of that quorum
shall be the action of the Members. From and after the date a
Member becomes a Defaulting Member the votes of such Member, or
its nominee Managers, or both of them, as the case may be, shall
be excluded for purposes of determining whether a decision,
action or matter has been approved by the Members or Managers,
respectively.
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5.5 ACTION BY WRITTEN CONSENT. Any action may be taken by
the Members without a meeting if authorized by the unanimous
written consent of Members.
5.6 PLACE OF MEETINGS OF MEMBERS. All annual meetings and
special meetings of the Members shall be held at any place
designated by the Members, or, if no such place is designated,
then at the principal office of the Company.
5.7 ANNUAL MEETINGS. The annual meeting of the Members
shall be held on the 1st day of May of each year at the hour of
10:00 a.m., beginning with the year 1995 or on such other date
and time as the Members shall specify in writing. Should said
day fall upon a legal holiday, then any such annual meeting of
Members shall be held at the same time and place on the next day
which is not a legal holiday.
5.8 ANNUAL MEETINGS: NOTICE. Written notice of each annual
meeting signed by a Manager or by such other person or persons as
the Members shall designate, shall be given to each Member
entitled to vote at the meeting, either personally or by mail or
other means of written communication, charges prepaid, addressed
to such Member at his address appearing on the books of the
Company or given by him to the Company for the purpose of notice.
If a Member gives no address, notice shall be deemed to have been
given him if sent by mail or other means of written communication
addressed to the place where the principal office of the Company
is situated. All such notices shall be sent to each Member
entitled thereto not less than seven (7) nor more than sixty (60)
calendar days before each annual meeting, and shall specify the
place, the day and the hour of such meeting.
5.9 SPECIAL MEETINGS. Special meetings of the Members, for
any purpose or purposes whatsoever, may be called at any time by
a Manager or by any Member. Except in special cases where other
express provision is made by statute, notice of such special
meetings shall be given in the same manner as for annual meetings
of Members. Notices of any special meeting shall specify, in
addition to the place, day and hour of such meetings the purpose
or purposes for which the meeting is called.
11
5.10 WAIVER OF NOTICE. The transactions of any meeting of
the Members, however called and noticed or wherever held, shall
be as valid as though had at a meeting duly held after regular
call and notice, if a quorum be present, and if, either before or
after the meeting, each of the Members not present sign a written
waiver of notice or a consent to holding such meeting or an
approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the records or made a part of the
minutes of the meeting.
5.11 ADJOURNED MEETINGS AND NOTICE THEREOF. Any Members'
meeting, annual or special, whether or not a quorum is present,
may be adjourned from time to time by the vote of a Majority,
present in person or represented by proxy, but in the absence of
a quorum no other business may be transacted at any such meeting.
Other than by announcement at the meeting at which such
adjournment is taken, it shall not be necessary to give any
notice of an adjournment or of the business to be transacted at
an adjourned meeting. However, when any Members' meeting, either
annual or special, is adjourned for thirty (30) days or more,
notice of the adjourned meeting shall be given as in the case of
an original meeting.
5.12 DELEGATION OF AUTHORITY TO MEMBERS AND MANAGERS. By
Extraordinary Resolution, the Members or Managers may at any time
or times, and for such period as the Members shall determine,
delegate their authority to determine questions relating to
specific areas of the conduct, operation, and management of the
Company. Until such direction or delegation of authority is
made, however, the Members and Managers shall have the authority
set forth in this Article V and Article VI below.
5.13 ADMISSION OF NEW MEMBERS. New Members may be admitted
to membership in the Company only with the unanimous consent of
the existing Members. A new Member must agree in writing to be
bound by the terms and provisions of the Articles of Organization
and this Operating Agreement, as amended, and upon admission the
new Member shall have all rights and duties of a Member of this
Company.
5.14 COOPERATION OF THE MEMBER. One of the reasons for
entering into this Agreement is to create and recognize the
fiduciary rights/obligations between Members delineated in this
Agreement. In that regard, the Members shall cooperate fully
with each other during the term of this Agreement to facilitate
the performance by the Company of the Company's obligations and
responsibilities set forth in this Agreement and to procure and
maintain all construction, operating and gaming licenses and
permits related to the Riverboat.
12
5.15 COMPANY ACTION BY MEMBERS. The taking of any of the
following decisions or actions or the implementation of any of
the following matters by the Company shall require Extraordinary
Resolution of the Members:
(a) sale of all or substantially all of the assets of
the Company;
(b) approval of the initial development and business
plans and budgets for the Riverboat;
(c) amendments to the Management Agreement, Articles
of Organization or Operating Agreement of the Company;
(d) material changes in the nature of the Company's
business;
(e) application for additional gaming licenses by the
Company;
(f) a change in the auditor of the Company.
ARTICLE VI. MANAGERS
6.1 ELECTION.
(a) The Members agree that the business of the Company
shall be managed by six (6) Managers. The number of Managers may
be increased to eight (8) in the event that any additional
Members purchase an Interest and are admitted to membership in
the Company. So long as Showboat has a membership interest in
the Company, Showboat shall have the right to nominate at least
one-half (1/2) of all of the Managers. All of the Members other
than Showboat shall have the right to nominate the remaining
number of Managers. Each Manager of this Company shall be chosen
annually by the Members and each shall hold office until such
Manager shall resign or shall be removed or otherwise
disqualified to serve, or the Manager's successor shall be
elected and qualified.
(b) Each Member shall vote at all meetings of Members,
and shall use its best efforts to cause its nominee Managers to
act, in such a manner as to ensure that the nominees for Manager
designated pursuant to Section 6.1(a) are elected or appointed
and maintained in office as Managers.
(c) In the event a Member transfers only a portion of
its Interest to a Permitted Transferee, the right of such Member,
if any, to nominate any Manager under Subsection 6.1(a) shall be
exercised by such Member and the Permitted Transferee jointly or,
in the event the Member and Permitted Transferee are unable to
agree as to the exercise of such powers, by the original Member
alone as attorney-in-fact for each of them.
(d) If a Member acquires all of the Interest of
another Member, the Member acquiring such Interest shall be
entitled to nominate the Managers, if any, which the other Member
was formerly entitled to nominate.
(e) In the event that a nominee Manager of any Member
resigns from the office of Manager, such Member shall forthwith
deliver or cause to be delivered to the Company a resignation and
release of such nominee Manager in a form satisfactory to the
Company.
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(f) From and after the date that a Member becomes a
Defaulting Member, the right of such Member to nominate any
Managers shall be suspended and the nominee Managers of such
Defaulting Member shall immediately resign. In the event of the
failure of the Defaulting Member to obtain such resignations, the
remaining Managers shall be entitled to remove such nominee
Managers from office and replace them with nominees designated by
the remaining Members.
6.2 REMOVAL, RESIGNATION AND VACANCIES.
(a) Subject to Section 6.1 above, a Member may remove
any of its nominee Managers, either with or without cause in
accordance with the terms of this Agreement. Any Manager may
resign at any time by giving written notice to the Members. 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.
(b) In the event that a vacancy in the office of any
Manager arises for any reason whatsoever, and provided that the
Member entitled to nominate a replacement Manager is not a
Defaulting Member, such vacancy shall be filled by the election
or appointment of a Manager nominated by the same procedure as
that by which its predecessor was nominated in accordance with
the provisions of Section 6.1, Until such vacancy is filled, the
Managers shall not transact any business or exercise any of its
powers or functions, save and except as may be necessary to elect
or appoint such new Manager and preserve the business and assets
of the Company.
(c) If a replacement Manger is not elected within ten
(10) days of such vacancy occurring because of the failure of the
Member who is entitled to nominate such replacement Manager to
designate a nominee, thereafter the Managers then in office shall
be entitled to transact business and exercise all of the powers
and functions of the Managers. A decision or action of the
majority of the Managers then in office shall be deemed to be the
decision or action by Extraordinary Resolution of the Managers,
and a decision or action of all of the Managers then in office
shall be deemed to be the unanimous decision or action of the
Managers.
14
6.3 MANAGERS' POWER. The Managers shall be the chief
executives of the Company and shall have the right to make the
following decisions or actions at a properly constituted meeting
of Managers by at least a majority of the Managers:
(a) To select and remove all employees, agents and
representatives of the Company, prescribe such powers and duties
for them as may be consistent with law, with the Articles of
Organization or this Operating Agreement, fix their compensation,
and require from them security for faithful service.
(b) To conduct, manage and control the affairs and
business of the Company, and to make such rules and regulations
therefor consistent with the Act, with the Articles of
Organization or this Operating Agreement.
(c) To change the principal office of this Company
from one location to another within Nevada; to fix and locate
from time to time one or more subsidiary offices of the Company;
and to designate any place within or without the State of Nevada
for the holding of any Members' meeting or meetings.
6.4 COMPANY ACTION BY MANAGERS. The taking of any of the
following decisions or actions or the implementation of any of
the following matters by the Company shall require an
Extraordinary Resolution of the Managers;
(a) Except as otherwise provided for herein,
construct, improve, buy, own, sell, convey, exchange, assign,
rent, or lease any property (real, personal or mixed), or any
interest therein totaling, during any one calendar year, more
than $500,000 unless in an approved budget;
(b) Borrow money, issue evidence of indebtedness,
secure any such indebtedness by mortgage, deed of trust, pledge,
or other lien, or execute agreements, notes, mortgages, deeds of
trust, assignments, security agreements, financing statements or
other documents relating thereto which involve a credit facility
to carry out the same totaling, during any one calendar year,
more than $500,000 in a single or related transactions;
(c) Abandon any of the assets of the Company in excess
of $50,000 in a single or related transactions;
(d) Perform any act in violation of the terms and
conditions of this Agreement;
(e) Make, execute, or deliver any general assignment
for the benefit of creditors or any bond, confession of judgment,
guaranty, indemnity bond or surety bond;
(f) Initiate or settle any litigation by or against
the Company or any proceeding before any governmental or
regulatory body for more than $100,000;
15
(g) Disburse funds that exceed an approved budget by
more than 10%. Any such variance in excess of 10% shall be
promptly reported to the Managers with reasonable explanations.
(h) Sell, lease or otherwise dispose of the Riverboat;
(i) Approve annual business plans and budgets with
respect to operations and capital expenditures.
(j) Appoint an executive committee and other
committees, and to delegate to the executive committee any of the
power and authority of the Managers in the management of the
business affairs of the Company. A Manager, in its discretion,
may or may not be a member of an executive committee.
6.5 BANK ACCOUNTS. From time to time, the Manager may
designate a person or persons, whether such persons be the
Manager or not, to open and maintain one or more bank accounts;
rent safety deposit boxes or vaults; sign checks, written
directions, or other instruments to withdraw all or any part of
the funds belonging to the Company and on deposit in any savings
account or checking account; negotiate and purchase certificates
of deposit, obtain access to the Company's safety deposit box or
boxes, and, generally, sign such forms on behalf of the Company
as may be required to conduct the banking activities of the
Company.
6.6 MEETINGS OF MANAGERS. The quorum for a meeting of the
Managers shall be four (4) Managers, of whom at least two (2)
Managers shall be nominees of Showboat and two (2) Managers shall
be nominees of Randolph. At least seven (7) days' prior written
notice of any meeting of the Managers must be given unless all of
the Managers waive such notice.
6.7 ACTION BY WRITTEN CONSENT. Any action may be taken by
the Managers without a meeting if authorized by the unanimous
written consent of the Managers.
6.8. PLACE OF MEETINGS OF MANAGERS. All regular and special
meetings of the Managers shall be held at any place within or
without the state of Nevada which has been designated from time
to time by resolution of the Managers or by written consent of
all of the Managers. In the absence of such designation, regular
or special meetings shall be held at the principal office of the
Company.
16
6.9 FIRST MEETING. The first meeting of the newly elected
Managers shall be held immediately following the adjournment of
the meeting of the Members and at the place thereof.
6.10 SPECIAL MEETINGS. Special meetings of the Managers,
for any purpose or purposes whatsoever, may be called at any time
by a Manager.
6.11 NOTICE. Except in special cases where other express
provision is made by statute, notice of any meeting of the
Managers shall be given in the same manner as for meetings of the
Members, including waiver of notice of such meetings.
6.12 REMUNERATION OF MANAGERS. Unless otherwise determined
by an Extraordinary Resolution of the Members, no amount shall be
payable by way of salary, bonus or other remuneration to any
Manager for acting as such. Each Manager shall be entitled to be
reimbursed for reasonable out-of-pocket traveling and subsistence
expenses incurred while attending meetings of, or otherwise being
engaged in the business of, the Company.
6.13 DEADLOCK. In the event of a deadlock in the Managers,
each of Randolph and Showboat shall select one representative to
negotiate a resolution of such deadlock.
ARTICLE VII. TRANSFER OF MEMBERS' INTERESTS
7.1 TRANSFER OF MEMBERS' INTERESTS. The Interest of each
Member of this Company is personal property. Except as otherwise
provided in this Operating Agreement, the transfer, directly or
indirectly, of a Member's Interest is restricted. The transfer
of a Member's interest shall include a gift, sale, transfer,
assignment, hypothecation, pledge, encumbrance or any other
disposition, whether voluntary or involuntary, by operation of
law or otherwise, including, without limitation, any transfer
occurring upon or by virtue of the bankruptcy, insolvency or
dissolution of a Member; the appointment of a receiver, trustee,
conservator or guardian for a Member or his property; pursuant to
any loan or security agreement under which any of the Member's
Interests are pledged or otherwise serve as collateral, as well
as the transfer of any such Interest in the event recourse is
made to such collateral; or the transfer, directly or indirectly,
of any voting securities or other ownership interest in a Member.
Unless the proposed transferee of a transfer or assignment
of a Member's Interest receives the unanimous written consent of
the Members (excluding the proposed transferee), which consent
may be unreasonably withheld by any Member, the transferee of the
Member's Interest has no right to participate in the management
of the business and affairs of the Company or to become a Member.
The transferee is only entitled to receive the share of profits
or other compensation by way of income and the return of
contributions, to which the transferring Member would otherwise
be entitled. If the transfer is approved by all of the other
Members of the Company by unanimous written consent, the
transferee has all the rights and powers and is subject to all
the restrictions and liabilities of his assignor, has the right
to participate in the management of the business and affairs of
the Company and becomes a substituted Member.
17
7.2 NO TRANSFER PERMITTED UNDER CERTAIN CIRCUMSTANCES.
Notwithstanding any other provision of this Agreement, a Member
shall not transfer all or any part of its Interest if such
transfer would cause the termination of the Company for federal
income tax purposes, would jeopardize any gaming license or would
violate any applicable federal or state securities laws, unless
unanimously agreed by all Parties.
7.3 PERMITTED TRANSFEREES. Each Member shall be entitled,
upon prior written notice to the Company and the other Members,
with adequate explanation for the transfer and a representation
and warranty that the transferee is a Permitted Transferee as
defined herein, to transfer the whole or any part of its Interest
to any Permitted Transferee of the Member. No such transfer
shall be or become effective, however, until such Permitted
Transferee executes and delivers to the Company a counterpart
copy of this Agreement or a written agreement in form and
substance satisfactory to the other Members agreeing to be bound
by the terms and conditions hereof formerly applicable to the
transferor of such Interest. No such transfer shall release or
discharge the transferor from any of its liabilities or
obligations under this Agreement until it becomes effective and,
then, only to the extent provided herein. In addition, Randolph
agrees not to record in its books or register any attempted
transfer of shares of capital stock of Randolph in violation of
this Agreement.
Each Randolph Shareholder shall be entitled, upon prior
written notice to the Company and the other Members, with
adequate explanation for the transfer and a representation and
warranty that the transferee is a Permitted Randolph Transferee
as defined herein, to transfer the whole or any part of its
voting securities or ownership interest in Randolph (the
"Shares") to any Permitted Randolph Transferee of the Randolph
Shareholder. No such transfer shall become effective, however,
until such Permitted Randolph Transferee executes and delivers to
the Company a counterpart copy of this Agreement or a written
agreement in form and substance satisfactory to the Members
agreeing to be bound by the terms and conditions hereof formerly
applicable to the transferor of such Shares. No such transfer
shall release or discharge the transferor from any liabilities or
obligations under this Agreement until it becomes effective, and,
then, only to the extent provided herein. In addition, Randolph
agrees not to record in its books or registers any attempted
transfer of shares of capital stock of Randolph by the Randolph
Shareholders in violation or contrary to the terms of this
Agreement.
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ARTICLE VIII. COMPULSORY BUY-SELL PROVISION
8.1 OFFER TO PURCHASE. In the event that any Member fails
to fully and finally perform and fulfill its obligations pursuant
to this Agreement, then in such event a "Buyout Event" shall be
deemed to have occurred. At any time after the occurrence of a
Buyout Event, the non-defaulting Member(s) shall have the right
to take the actions set out in this Section 8.1. The non-
defaulting Member(s) which first takes such action is referred to
in this Article as the "Offering Members". The Offering Members
may notify the remaining Members (the "Remaining Member") in
writing that it offers to purchase all, but not less than all, of
the Interest owned by the Remaining Member. The Offering Members
shall specify in the offer the terms of the purchase and sale
including the price (the "Designated Price") to be paid for the
Interest owned by the Remaining Member.
8.2 ACCEPTANCE.
(a) Within twenty-one (21) days after the receipt by the
Remaining Member(s) of the offer from the Offering Members
pursuant to Section 8.1, the Remaining Member(s) shall advise the
Offering Member(s) in writing either:
(i) that the Remaining Member(s) accept the offer made
by the Offering Member(s) to purchase the Interest owned by it on
the terms and conditions set out in the offer; or
(ii) that the Remaining Member(s) elect to purchase all
the Interest owned by the Offering Member(s) on the terms and
conditions set forth in the offer. During such twenty-one (21)
day period, the Remaining Member(s) may not make an offer under
Section 8.1.
(b) If the Remaining Member(s) elect to purchase the
Interest of the Offering Member(s), (i) they shall thereupon be
conclusively deemed to have made an offer to purchase the
Interest of the Offering Member(s) on the terms and conditions,
including the Designated Price, set out in the offer referred to
in Section 8.1, and the Offering Member(s) shall be conclusively
deemed to have accepted such offer of the Remaining Member(s);
and (ii) each Remaining Member(s) shall purchase from each
Offering Member(s) the proportionate share of such Offering
Member's Interest that the Invested Capital of the Remaining
Member(s) is of the total number of Invested Capital held by
Remaining Member(s), but such Remaining Member(s) may agree among
themselves to purchase the Interest of the Offering Member(s) in
different proportions and such purchase may be made by any of the
Remaining Member(s) jointly or by any one of them alone.
19
(c) If the Remaining Member(s) accept the offer of the
Offering Member(s) or fail to advise the Offering Member(s) in
writing within the period specified in Subsection 8.2(a) of their
intention to purchase the Interest of the Offering Member(s), (i)
the Remaining Member(s) shall be conclusively deemed to have
accepted the offer made by the Offering Member(s) to purchase the
Interest owned by the Remaining Member(s) on the terms and
conditions set out in the offer; and (ii) each Offering Member
shall purchase from each Remaining Member the proportionate share
of such Remaining Member's Interest that the Invested Capital of
the Offering Member is of the total Invested Capital held by the
Offering Member(s), but such Offering Member(s) may agree to
purchase the Interest of the Remaining Member(s) in different
proportions and such purchase may be made by any of the Offering
Member(s) jointly or by any one of them alone.
(d) The Member(s) who have accepted or been deemed to have
accepted an offer under this Section 8.2 shall be the "Vendor"
and the Member(s) who have elected or are required to purchase
the Interest under this Section 8.2 shall be the "Purchaser."
8.3 PURCHASE PRICE. The purchase price for the Interest of
the Vendor shall be the Designated Price (the "Purchase Price").
8.4 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be
paid by the Purchaser in full by cash, wire transfer of
immediately available funds or certified check at the Time of
Closing.
8.5 CLOSING. The purchase and sale of the Purchased Shares
resulting from the acceptance or deemed acceptance of the offer
pursuant to Section 8.2 (a "Sale Transaction") shall be completed
at the Time of Closing and the Place of Closing on the date which
is thirty (30) days following the date of such acceptance or
deemed acceptance (the "Date of Closing"). The Sale Transaction
shall be effected in accordance with the general sale provisions
set forth in Article XII.
8.6 GOVERNMENT APPROVAL. No transfer of an Interest
pursuant to the provisions of this Article VIII shall occur,
except with the prior written approval of any relevant Gaming
Authority, if the same is required.
20
ARTICLE IX. DEFAULTING MEMBER
9.1 OPTION TO PURCHASE MEMBER'S INTEREST. If a Member shall
become a "Defaulting Member" as a result of the occurrence of any
of the following events or is otherwise deemed pursuant to this
Agreement to be a Defaulting Member, the non-defaulting Members
shall have the option to purchase all of the Defaulting Member's
Interest (the "Purchased Interest") at the fair market value of
such Purchased Interest (the "Purchase Price") as determined in
accordance with this Agreement at the time of the exercise of the
option:
(a) If a Member is declared bankrupt or makes a proposal in
bankruptcy or otherwise becomes the subject of bankruptcy,
insolvency, liquidation, dissolution, winding up or similar
proceeding;
(b) If a Member makes an assignment for the benefit of
creditors or otherwise acknowledges its insolvency;
(c) If a Member allows its shares to be subject to seizure;
(d) If a Member ceases paying its debts as they mature
(other than those being contested in good faith and by
appropriate proceedings);
(e) If a Member, directly or indirectly, transfers its
Interest or any portion thereof in the Company to any Person
other than a Permitted Transferee or a Randolph Permitted
Transferee, as the case may be, without the unanimous written
consent of the Members (excluding the proposed transferee); or
(f) If a Member adversely affects the gaming license of the
Company due to concerns of any aspect of the suitability of such
Member or any of its shareholders.
9.2 OFFER TO PURCHASE SHARES OF RANDOLPH SHAREHOLDERS. In
the event that (i) the gaming license of the Company is adversely
affected due to concerns of any aspect of the suitability of a
particular Randolph Shareholder or (ii) a Randolph Shareholder
transfers or attempts to transfer his shares of capital stock of
Randolph other than as provided in Article VII (in either event
under subsections (i) or (ii) above, the Randolph Shareholder
shall be referred to hereinafter as the "Defaulting Randolph
Shareholder"), and the continuation of such adverse impact or
violation for a period of fifteen (15) days after receipt by the
Defaulting Randolph Shareholder of written notice from the non-
Defaulting Randolph Shareholders or a Member specifying the same
(the "curative period"), then the non-Defaulting Randolph
Shareholders shall have the option to purchase the Defaulting
Shareholders shares in the capital stock of Randolph (the
"Shares") for a mutually agreed purchase price. In the event
that the non-Defaulting Randolph Shareholders fail to purchase
all of the Shares of the Defaulting Randolph Shareholder within
fifteen (15) days following the curative period, Showboat may
purchase such proportion of Randolph's Interest in the Company as
the number of Shares held by the Defaulting Randolph Shareholder
bears to the total number of shares of outstanding capital stock
of Randolph times Randolph's percentage share of the Company, in
the manner set forth in this Article IX. Upon receipt of the
purchase price from Showboat, Randolph shall immediately use such
funds to redeem the Shares held by the Defaulting Randolph
Shareholder.
21
9.3 DETERMINATION OF PURCHASE PRICE. Except as otherwise
provided in Section 9.2, the non-defaulting Member exercising an
option under Section 9.1 (the "Buyer") and the Defaulting Member
(the "Vendor" in this Article IX) shall mutually arrive at an
agreeable Purchase Price within ten (10) days of the occurrence
of an event giving rise to the existence of an option under
Section 9.1 (a "Triggering Event"). If the parties cannot agree
upon the Purchase Price within such ten (10) day period, the
Purchase Price shall be the fair market value of the Purchased
Interest at the time of the Triggering Event, as determined by
the arbitration provisions of Article XXII.
9.4 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be
paid by the Purchaser in full by cash or certified check on the
Date of Closing as determined pursuant to Section 9.5.
9.5 CLOSING.
(a) The closing of the transaction of purchase and sale
contemplated by this Article IX (a "Sale Transaction") shall take
place at the Place of Closing at the Time of Closing on the date
(in this Article IX the "Date of Closing") that, unless the
Vendor and Buyer otherwise agree, is the latest of:
(i) the date which is ninety (90) days after the
relevant Triggering Event:
(ii) the date which is seven (7) days following the
receipt of all necessary governmental releases or approvals
required to be obtained in order to effect a valid transfer of
the Purchased Shares (and the Parties covenant and agree to use
their best efforts to obtain such consents, releases or
approvals); and
(iii) the date which is thirty (30) days after the
Purchase Price is finally determined in accordance with the
provisions of Section 9.3.
(b) The Sale Transaction shall be effected in accordance
with the general sale provisions of Article XII.
22
ARTICLE X. RIGHT OF FIRST REFUSAL
10.1 THIRD PARTY OFFER.
(a) No transfer by any Member of any Interest to any Person
other than a Permitted Transferee of such Member or another
Member shall be effected except in compliance with this Article
X. Any transfer effected in compliance with this Article X shall
also be in compliance with Article VIII.
(b) If any Member or Members (the "Offeror") receives a
bona fide written offer (a "Third Party Offer") from any Person
dealing at arm's length with the Parties (the "Buyer") to
purchase all or less than all of the Interest owned by the
Offeror (the "Purchased Interest"), which Third Party Offer is
acceptable to the Offeror, the Offeror shall, by notice in
writing to the other Members (the "Offerees"), offer to sell the
Purchased Interest to the Offerees at the same price and upon the
same terms and conditions as are contained in the Third Party
Offer (the "Offer").
(c) The Offer (i) shall identify in reasonable detail the
Buyer and, if the Buyer is not an individual, identify those
Persons who, together with their Affiliates, control the Buyer;
(ii) shall be accompanied by a true and complete copy of the
Third Party Offer setting forth all of the terms and conditions
of the Third Party Offer; and (iii) shall provide such
information concerning the business experience and expertise of
the Buyer and its financial condition as is reasonably available
to the Offeror. The Offer shall not be revocable except with the
consent of the Offerees and shall be open for acceptance by the
Offerees for a period of ten (10) days from the date received by
them (the "Offer Period").
10.2 ACCEPTANCE OF OFFER.
(a) If the Offer is accepted by any of the Offerees within
the Offer Period, then the Offeror (the "Vendor") shall sell and
the Offerees accepting the Offer (the "Purchaser") shall purchase
the Purchased Interest upon the terms and conditions contained in
the Offer.
(b) If there is more than one Purchaser, the Purchasers
shall purchase the Purchased Interest from the Offeror in the
same proportions that the Invested Capital of each Purchaser is
to the total Invested Capital held by all Purchasers, but such
Purchasers may agree to purchase the Purchased Interest in
different proportions and such purchase may be made by any of the
Purchasers jointly or by any one of them alone.
(c) The closing of the transaction of purchase and sale
pursuant to the Offer (a "Sale Transaction") shall take place at
the Place of Closing at the Time of Closing on the date which is
thirty (30) days after the expiration of the Offer Period (the
"Date of Closing"). The Sale Transaction shall be effected in
accordance with the general sale provisions of Article XII.
23
10.3 THIRD PARTY SALE.
(a) If the Offerees do not accept the Offer during the
Offer Period, then, subject to the provisions of this Section
10.3, the Offeror shall be entitled, within a period of sixty
(60) days after the expiration of the Offer Period, to sell the
Purchased Interest to the Buyer in accordance with the Third
Party Offer.
(b) The Managers before consenting to the transfer of the
Purchased Interest to the Buyer shall be entitled to require
proof that the sale to the Buyer took place in accordance with
the Third Party Offer and the Managers shall refuse to permit the
recording of the transfer of the Purchased Interest if, in the
opinion of the Managers, the Purchased Interest were sold
otherwise than in accordance with the provisions of the Third
Party Offer.
(c) No disposition to any Buyer pursuant to any Third Party
Offer shall be valid or effective until the Buyer shall have
executed a counterpart copy of this Agreement or a written
agreement in form and substance satisfactory to the Company and
the other Members agreeing to be bound by the terms and
conditions hereof.
(d) Contemporaneously with the completion of the
transaction of purchase and sale under the Third Party Offer the
Offeror shall (i) repay any indebtedness owing by the Offeror to
the Company; and (ii) deliver to the Company and the remaining
Members the documents referred to in Sections 12.3(a), (d) and
(f). At such time, the remaining Members shall deliver to the
Offeror the documents referred to in Section 12.5.
10.4 RE-APPLICATION OF PROVISIONS. If a sale of the
Purchased Interest to the Buyer pursuant to the Third Party Offer
is not completed within the sixty (60) day period referred to in
Subsection 10.3(a), no sale of the Purchased Interest shall be
made without the Offeror again complying with the terms of this
Article X.
ARTICLE XI. SHOWBOAT PUT OPTION
11.1 SHOWBOAT PUT OPTION.
(a) In the event that the Company or its Affiliates fail to
receive a gaming license with respect to the Riverboat on or
before December 31, 1995 (unless the Company or its Affiliates
are being investigated by the Riverboat Authority for a gaming
license on such date, in which case the date shall be extended to
the date of determination regarding the issuance of the license
by the Riverboat Authority but in no event later than June 30,
1996), Showboat may elect to require the Company, or Randolph, or
both the Company and Randolph, to purchase all of Showboat's
Interest in the Company then held by Showboat ("Showboat's
Interest"). The purchase price for Showboat's Interest shall be
equal to Showboat's Invested Capital. In the event that the
Company or Randolph, or both the Company and Randolph do not
reach an agreement with respect to the terms and conditions of
the payment to Showboat of the purchase price for Showboat's
Interest within sixty (60) days of Showboat's election to
exercise its put option, Showboat shall have the right to
dissolve the Company.
(b) Each Member shall vote at all meetings of the Members,
and shall use its best efforts to cause its nominee Manager to
act, in such a manner as to ensure that a dissolution as may be
required by Showboat pursuant to Section 11.1(a) is completed.
24
ARTICLE XII. GENERAL SALE PROVISIONS
12.1 APPLICATION OF SALE PROVISIONS. Except as may
otherwise be provided in this Agreement, the provisions of this
Article XII shall apply to any sale of the Interest between or
among the Members or, to the extent applicable, between Members
and the Company, pursuant to the provisions of Articles VIII, IX,
X and XII or Section 12.8 of this Article XII as the case may be.
12.2 DEFINED TERMS. For the purpose of this Article XII,
the terms "Vendor", "Purchaser", "Date of Closing", "Purchase
Price" and "Purchased Interest" with respect to any Sale
Transaction shall have the meanings attributed thereto in Article
VIII, IX, X or XI, as the case may be. As used in this Article
and in Articles VIII, IX and X. "Time of Closing" shall be 2 p.m.
Las Vegas time on the Date of Closing.
12.3 OBLIGATIONS OF VENDOR. At or prior to the Time of
Closing, each Vendor shall:
(a) deliver to the Company signed resignations of the
Vendor and its nominees, if any, as Managers, officers and
employees of the Company, as the case may be;
(b) assign and transfer to the Purchaser the Purchased
Interest and deliver the membership certificate(s), if any,
representing the Purchased Interest duly endorsed for transfer to
the Purchaser or as directed by it;
(c) do all other things required in order to deliver good
and marketable title to the Purchased Interest to the Purchaser
free and clear of any claims, liens and encumbrances whatsoever
including, without limitation, the delivery of any governmental
releases and declarations of transmission (provided that, if at
the Time of Closing the Purchased Interest is not free and clear
of all claims, liens and encumbrances whatsoever, the Purchaser
may, without prejudice to any other rights which it may have,
purchase the Purchased Interest subject to such claims, liens and
encumbrances and, in that event, the Purchaser shall, at the Time
of Closing, assume all obligations and liabilities with respect
to such claims, liens and encumbrances and the Purchase Price
payable by the Purchaser for the Purchased Interest shall be
satisfied, in whole or in part, as the case may be, by such
assumption and the amount so assumed by the Purchaser shall be
deducted from the Purchase Price payable at the Time of Closing);
(d) deliver to the Company a release by each of the Vendor
and its nominees, if any, of all claims against the Company with
respect to any matter or thing up to and including the Time of
Closing in their capacities as a Manager, officer, Member,
employee or creditor of the Company, as the case may be, except
for (i) any claims which might arise out of the Sale Transaction,
or (ii) any claims which might arise out of the intentional
misconduct, gross negligence or fraud of the Purchaser, in a form
satisfactory to the Company acting reasonably;
(e) deliver to the remaining Members a release by the
Vendor and its nominees in their capacity as a Manager, officer
and Member of the Company of all of their claims against each
remaining Member and their respective nominees, if any, in their
capacities as a Member, Manager or officer of the Company, except
for (i) any claims which might arise out of the Sale Transaction,
or (ii) any claims which might arise out of the intentional
misconduct, gross negligence or fraud of the Purchaser, in a form
satisfactory to the remaining Members acting reasonably.
25
12.4 RELEASE OF GUARANTEES ETC. If, at the Time of Closing,
the Vendor, any principal of the Vendor or any other Person for
and on behalf of the Vendor, shall have any guarantees,
securities or covenants lodged with any Person to secure any
indebtedness, liability or obligation of the Company and/or the
remaining Members, then the remaining Members shall use their
reasonable best efforts to deliver or cause to be delivered to
the Vendor or cancel or cause to be canceled all of such
guarantees, securities and covenants at the Time of Closing. If,
notwithstanding such reasonable best efforts, the delivery or
cancellation of any such guarantee, security or covenant is not
obtained, the remaining Members shall deliver to the Vendor an
indemnity of such Vendor, principal or other Person in writing,
in form reasonably satisfactory to counsel for the Vendor,
indemnifying them against any and all claims, demands, costs,
expenses, damages, liabilities and suits which may be or which
shall have been paid, suffered or incurred by them with respect
to the said guarantee, security or covenant.
26
12.5 DELIVERIES TO VENDOR. At or prior to the Time of
Closing, each of the remaining Members shall:
(a) deliver to each of the Vendor and its nominees, if any,
a release by it, in its capacity as a Manager, officer and Member
of the Company, of all of its claims against the Vendor and its
nominees in its capacity as a Member, Manager or officer of the
Company, except for (i) any claims which may arise out of the
Sale Transaction, or (ii) any claims which might arise out of the
intentional misconduct, gross negligence or fraud of the Vendor,
in a form satisfactory to the Vendor acting reasonably; and
(b) cause the Company to deliver to each of the Vendor and
its nominees a release by the Company of all its claims against
each of the Vendor and its nominees with respect to any matter or
thing arising as a result of the Vendor or its nominees being a
Member, Manager or officer of the Company, as the case may be,
except for (i) any claims which might arise out of the Sale
Transactions, or (ii) any claims which might arise out of the
intentional misconduct, gross negligence or fraud of the Vendor,
in a form satisfactory to the Vendor acting reasonably.
12.6 REPAYMENT OF DEBTS. If, at the Time of Closing, the
Company is indebted to the Vendor in an amount recorded on the
books of the Company and verified by the Auditor, the Company
shall repay such amount to the Vendor at the Time of Closing. If,
at the Time of Closing, the Vendor is indebted to the Company in
an amount recorded on the books of the Company and verified by
the Auditors, the Vendor shall repay such amount to the Company
at the Time of Closing and, if the Vendor fails to make such
repayment, the Purchaser shall be entitled to pay the amount of
such indebtedness to the Company from the Purchase Price and the
amount of the Purchase Price payable to the Vendor shall be
reduced accordingly.
12.7 NON-COMPLETION BY VENDOR. If, at the Time of Closing,
the Vendor fails to complete the Sale Transaction for any reason
other than Purchaser's default, the Purchaser shall have the
right, if not in default under this Agreement, without prejudice
to any other rights which it may have, upon payment of the
Purchase Price payable to the Vendor at the Time of Closing to
the credit of the Vendor in the main branch of the Company's
bankers in the City of Las Vegas, to execute and deliver, on
behalf of and in the name of the Vendor, such deeds, transfers,
share certificates, resignations or other documents that may be
necessary to complete the Sale Transaction and each Member, to
the extent it may be a Vendor hereunder, hereby irrevocably
appoints any Member who becomes a Purchaser in a Sale Transaction
its attorney-in-fact on its behalf, with no restriction or
limitation in that regard and declaring that this power of
attorney may be exercised during any subsequent legal incapacity
on its part.
27
12.8 NON-COMPLETION BY PURCHASER. If, at the Time of
Closing, the Purchaser fails to complete a Sale Transaction for
any reason other than Vendor's default, the Vendor shall have the
right (without prejudice to any other rights which it may have),
at its option, exercisable within a period of thirty (30) days
following the Date of Closing of such Sale Transaction upon
notice to the Purchaser, to purchase from the Purchaser all the
Interest owned by the Purchaser for an amount equal to 75% of the
Purchase Price payable pursuant to the Sale Transaction which the
Purchaser has neglected or refused to perform, less all costs
incurred by the Vendor in connection with the failure by the
Purchaser to complete the Sale Transaction, and the provisions of
this Article XII shall apply to the purchase by the Vendor of the
Purchaser's Interest pursuant to this Section 12.8.
12.9 RESTRICTIONS ON BUSINESS. If the provisions of any of
Articles VIII, IX, X or XI, Section 12.8 of this Article XII
hereof become applicable, then from such date until the Time of
Closing, the Members shall not do, nor cause, nor permit to be
done anything except that which is in the ordinary course of
business of the Company.
12.10 NO JOINT LIABILITY. For greater certainty, the
Parties hereto acknowledge and agree that where a Sale
Transaction involves more than one Purchaser, the Purchasers in
such Sale Transaction are not jointly liable for the payment of
the Purchase Price for the Purchased Interest and any
indebtedness purchased hereunder, but are only liable for their
proportionate share thereof.
12.11 CONSENTS. The Parties acknowledge that the completion
of any Sale Transaction shall be subject, in any event, to the
receipt of all necessary government, regulatory and lender
consents and approvals to the transfer of Interest contemplated
thereby, including the Gaming Authorities.
ARTICLE XIII. PROFITS AND LOSSES
13.1 NET PROFITS AND LOSSES. Except as otherwise provided
in Section 13.2, 13.3 and 13.4 hereof, all Company income, gains,
losses, deductions and credit for each Company taxable year shall
be allocated among the Members in proportion to their Percentage
Interests on the last day of such taxable year.
13.2 ALLOCATIONS OF DEDUCTIONS.
(a) COMPANY NONRECOURSE DEDUCTIONS. Except as
otherwise required by Section 13.3 and 13.4 hereof, all
Nonrecourse Deductions of the Company for any taxable year shall
be shared by the Members in proportion to their Percentage
Interests on the last day of such taxable year. The amount of
Nonrecourse Deductions of the Company shall be determined in
accordance with Regulations Section 1.704-2(c).
(b) MEMBER NONRECOURSE DEDUCTIONS. Except as
otherwise required by Section 13.3 and 13.4 hereof, all Member
Nonrecourse Deductions of the Company for any taxable year shall
be allocated in accordance with Regulations Section 1.704-
2(i)(1). The amount of Member Nonrecourse Deductions shall be
determined in accordance with Regulations Section 1.704-2(i)(2).
28
13.3 SPECIAL ALLOCATIONS.
(a) QUALIFIED INCOME OFFSET. Except as otherwise
provided in Section 13.3(b) hereof, in the event any Member
unexpectedly receives any adjustments, allocations or
distributions described in Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain
shall be specially allocated to each such Member in an amount and
manner sufficient to eliminate, to the extent required by the
Regulations, the adjusted capital account deficit of such Member
as quickly as possible.
(b) MINIMUM GAIN CHARGEBACK. Notwithstanding any
other provision of this Section 13.3, if there is a net decrease
in Company Minimum Gain during any Company fiscal year, each
Member who would otherwise have an adjusted capital account
deficit at the end of such year shall be specially allocated
items of Company income and gain for such year (and, if
necessary, subsequent years) in an amount and manner sufficient
to eliminate such Member's adjusted capital account deficits as
quickly as possible. The items to be so allocated shall be
determined in accordance with Regulations Section 1.704-
1(b)(4)(iv)(e). Notwithstanding any other provision of this
Section 13.3, if there is a net decrease in Minimum Gain
attributable to Member Nonrecourse debt during a Company Taxable
Year, each Member with a share of the Minimum Gain attributable
to such member Nonrecourse Debt shall be allocated items of
income and gains for such year (and, if necessary, subsequent
years) in accordance with Regulations Section 1.704-(i)(4). The
items to be so allocated shall be determined in accordance with
Regulations Section 1.704-2(i). This Section 13.3(b) is intended
to comply with the minimum gain chargeback requirements in such
sections of the Regulations and shall be interpreted consistently
therewith.
(c) ALLOCATION OF REMAINING INCOME AND GAINS ON SALE
OR OTHER DISPOSITION. Except as otherwise required by this
Section 13.3, income and gains arising from the sale, exchange,
transfer or disposition or condemnation of all or substantially
all of the Company's property shall be allocated, for Federal
income tax purposes, among those who shall be Members on the date
of such transaction or transactions as follows:
(i) If one or more Members has a negative Capital
Account after such Member's Capital Account is adjusted to
reflect any allocation of gains under Section 13.2(b) but before
such Member's Capital Account is adjusted to reflect any
distribution under Section 14.3 with respect to the disposition
to which this Section 13.3(c) is being applied, such income and
gains shall be allocated to such Members in proportion to their
negative Capital Accounts until each such Member's Capital
Account equals zero.
(ii) To the extent one or more Member's Capital
Account balance is less than (A) the total of all Members'
Capital Account balances times (B) such Member's Percentage
Interest in the Company (a "Capital Disparity"), such income and
gains shall be allocated among such Members in proportion to
Capital Disparities until all of the Members' Capital Accounts
are, as nearly as possible, in proportion to their Percentage
Interests.
(iii) The balance of such income and gains shall be
allocated to the Members in proportion to their Percentage
Interests.
29
(d) ASSIGNMENTS. In the event of an assignment of an
interest in the Company (other than an assignment by reason of
the death of a Member), the assignor's distributive share of
Company income, gains, loss, deductions and credits and
expenditures not deductible in computing its taxable income (in
respect of the interest so assigned) shall be the share of such
items attributable to such interest accruing prior to such
assignment (based on an interim closing of the books of the
Company), and the Assignee's share shall be the share of such
items attributable to such interest after such assignment (based
on such interim closing).
(e) MANDATORY SECTION 704(C) ALLOCATIONS.
Notwithstanding the foregoing, to the extent that Code Section
704(c), Regulations Section 1.704-3, 1.704-1(b)(2)(iv), or any
other regulations which may be proposed or promulgated under Code
Section 704(c), require allocations of Company income, gains,
losses or deductions in a manner which is different than that set
forth above, the provisions of Section 704(c) and the regulations
thereunder shall control such allocations among the Members. In
the absence of a contrary agreement among the Members, such items
shall be allocated in accordance with the "Traditional method
with curative allocations" set forth in Regulations Section 1.704-
3(c) or any successor regulation.
13.4 CURATIVE ALLOCATIONS. The allocations set forth in
Section 13.2 and 13.3 (the "Regulatory Allocations") are intended
to comply with Regulations Section 1.704-1(b), Regulations
Section 1.704-2 and Regulations Section 1.704-3, and shall be
interpreted and applied in a manner consistent therewith.
Notwithstanding any other provisions of this Section (other than
the Regulatory Allocations), the Regulatory Allocations shall be
taken into account in allocating other profits, losses and items
of income, gain, loss and deduction among the Members so that, to
the extent possible, the net amount of such allocations of other
profits, losses and other items in the Regulatory Allocations to
each Member shall be equal to the net amount that would have been
allocated to each such Member if the Regulatory Allocations had
not occurred.
30
13.5 FEDERAL INCOME TAX. It is the intent of this Company
and its Members that this Company will be governed by the
applicable provisions of Subchapter K, of Chapter 1, of the Code.
ARTICLE XIV. DISTRIBUTIONS
14.1 OPERATING DISTRIBUTIONS. The Company's Cash Available
For Distribution shall, at such times as the Managers of the
Company deem advisable, be distributed among the Members in
proportion to their respective balances of Invested Capital, as
of the date of any such distribution. The term "Cash Available
For Distribution" shall mean the total cash revenues generated by
the Company's operations (including proceeds from the sale or
refinancing of Company assets), less all cash expenditures of the
Company for debt service and operating expenses, and less a
reasonable amount determined by the Company to be set aside for
reserves.
14.2 PAYMENT OF MEMBER LOANS. Under all circumstances,
Member Loans shall be repaid first out of any Cash Available for
Distribution. If a difference exists between the Members in the
amount of Member Loans made to the Company, any Member with more
Member Loans outstanding (in value) than another Member shall
receive the first distributions of any available cash until that
Member's Loan is in parity with the other Member Loans, if any,
unless otherwise provided herein. Thereafter, the Member Loans
will be repaid ratably to the Members with Loans. It is the
intention of the Members that Member Loans will be repaid as cash
is available for distribution and may result in revolving
payments to the Members as additional Member Loans are advanced
to the Company.
14.3 DISTRIBUTION ON DISSOLUTION AND LIQUIDATION. In the
event of the dissolution and liquidation of the Company for any
reason, after the payment of or provision for creditors pursuant
to Nevada Revised Statutes Section 86.521 and other applicable
law, the Company's assets shall be distributed among the Members
in accordance with their respective positive Capital Account
balances, in accordance with Regulations Section 1.704-
1(b)(2)(ii)(b)(2).
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ARTICLE XV. ACCOUNTING AND RECORDS
15.1 RECORDS AND ACCOUNTING. The Company shall cause an
accurate, current and complete accounting system in connection
with its operation of the Riverboat. The books and records shall
be kept in accordance with GAAP consistently applied and in
accordance with federal tax law. Such books and records shall be
kept on a calendar year basis. Books and accounts shall be
maintained at the principal office of the Company and at the
Riverboat, or at other locations as determined from time to time
by the Company. The Members, or any of them, shall have the right
to inspect the books and records of the Company at any time
during normal business hours with reasonable notice of such
inspection.
15.2 ACCESS TO ACCOUNTING RECORDS. Each Member, and his
duly authorized representative, shall have access to the
accounting records at the principal office of the Company and the
right to inspect and copy the books and records at reasonable
times. The Company shall keep all records required to be kept at
the registered office of the Company by Chapter 86 of the Nevada
Revised Statutes at such registered office of the Company.
15.3 ANNUAL TAX INFORMATION. The Managers shall use their
best efforts to cause the Company to deliver to each Member
within ninety (90) days after the end of each fiscal year all
information necessary for the preparation of such Member's
federal income tax return.
15.4 INTERIM STATEMENTS AND REPORTS. On or before the
thirtieth (30th) day of each month, the Company shall furnish the
Managers with an unaudited operating statement for the preceding
calendar month detailing the Gross Gaming Revenues received from
the casino and ancillary services and expenses incurred. The
Gross Gaming Revenues detail shall specify drop figure accounts
on all gaming revenues. Additionally, the Managers shall meet in
person or by telephone at least once each month to discuss the
Company's operations. The Company shall provide written, oral or
videotaped reports on the operations of the Riverboat on a
monthly basis to the Managers.
ARTICLE XVI. TERM
16.1 TERM. The term of this Company shall begin on the
date the Articles of Organization are filed with the Nevada
Secretary of State and shall continue for a period not to exceed
thirty (30) years, unless terminated prior thereto in accordance
with the provisions hereof, by unanimous agreement of the Members
or pursuant to Chapter 86 of the Nevada Revised Statutes.
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ARTICLE XVII. DISSOLUTION OF THE COMPANY
AND TERMINATION OF A MEMBER'S INTEREST
17.1 DISSOLUTION. This Company must be dissolved on the
death, retirement, resignation, expulsion, bankruptcy or
dissolution of a Member or occurrence of any other event which
terminates a Member's continued membership in the Company, unless
the business of the Company is continued by the consent of all
the remaining Members of the Company.
17.2 DEATH OF A MEMBER; CONTINUATION. After the death of a
Member, if all the remaining Members consent to the continuation
of the business of the Company, the personal representative
("Representative") of the deceased Member and, after the
distribution of the deceased Member's estate, the deceased
Member's heirs or legatees, shall immediately succeed to the
Interest of the deceased Member in the Company, subject to the
provisions of this Operating Agreement. During administration of
the estate of the deceased Member, such Representative (and after
distribution of the deceased Members estate such heirs or
legatees) shall have the same rights and obligations in the
Company for the remainder of the Company's term as the deceased
Member would have had, if the deceased Member had survived. Such
rights and obligations shall include, but shall not be limited
to, the conduct of the Company's business and the share in the
profits and losses of the Company, but shall not include the
right to become a Member.
17.3 OPTION TO PURCHASE DECEASED MEMBER'S INTEREST. Upon
the death of a Member, the Company shall have the option, within
120 days of the Member's date of death, to purchase the deceased
Member's interest in the Company for an agreed upon price, or if
no price can be agreed upon, the fair market value of such
interest as determined by an independent qualified appraiser
appointed by the Members and the deceased Member's
Representative. If they cannot agree on an appraiser, the
Members and such Representative shall agree on three possible
appraisers, place their names on pieces of paper placed into a
hat, and one person chosen by the Members and such Representative
shall, without looking, reach into a hat and pick out one name
who shall be the appraiser. If the Company elects to purchase
the interest of the deceased Member, it shall pay the agreed
price or the fair market value of such interest to the deceased
Member's Representative, in cash, within such 120 day period. If
the Company does not purchase the interest of the deceased Member
within such 120 day period, then all rights to purchase the
deceased Member's interest pursuant to this Section shall
terminate.
17.4 BANKRUPTCY, INSOLVENCY OR DISSOLUTION. In the event a
Member (the "Bankrupt Member") institutes or consents to any
proceeding under the federal bankruptcy laws relating to the
Member or to all or any part of its property; or is unable or
admits in writing to its inability to pay its debts as they
mature, or makes an assignment for the benefit of creditors; or
applies for or consents to the appointment of any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or
similar officer for it or for all or any part of its property; or
applies for or consents to the liquidation or dissolution of such
Member or all or substantially all of its property; or any
receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer is appointed without the
application or consent of the Member and the appointment
continues undischarged or unstayed for thirty (30) calendar days;
or any proceeding under the federal bankruptcy laws or any other
applicable laws relating to such Member or to all or any part of
its property is instituted without the consent of such Member and
continues undischarged or unstayed for sixty (60) calendar days,
if all the remaining Members consent to the continuation of the
business of the Company, the remaining Members shall have the
right to purchase the entire Interest of the Bankrupt Member in
the manner set forth in Article IX.
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ARTICLE XVIII. TRUST MEMBERS
18.1 TRUSTEE LIABILITY. When any trustee becomes a Member
of this Company, he shall be a Member not individually but solely
as a trustee, in the exercise and under the power and authority
conferred upon and vested in such trustee. Nothing contained in
this Operating Agreement shall be construed as creating any
liability on any such trustee personally to pay any amounts
required to be paid hereunder, or to perform any covenant, either
express or implied, contained herein; all such liability, if any,
is hereby expressly waived by the other Members of this Company.
Any liability of any Member which is a trust (whether to the
Company or to any third person) shall be a liability to the full
extent of the trust estate and shall not be a personal liability
of any Trustee, grantor or beneficiary of any trust.
18.2 STATUS OF SUCCESSOR TRUSTEES AS MEMBERS. Any
successor trustee or co-trustee of any trust which is a Member
shall be entitled to exercise the same rights and privileges and
be subject to the same duties and obligations as the predecessor
trustee. As used in this Article XII, the term "trustee" shall
include any and all such successor trustees.
ARTICLE XIX. INDEMNIFICATION
19.1 INDEMNITY. This Company does hereby indemnify any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the
Company, by reason of the fact that he is or was a Manager,
Member, employee or agent of this Company, or is or was serving
at the request of this Company as manager, director, officer,
employee or agent of another limited liability company or
corporation, against expenses, subject to the provisions of
Section 19.4 hereof, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred
by him in connection with the action, suit or proceeding if he
acted in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of this Company,
and, with respect to a criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. 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 did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest
of this Company, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct
was unlawful.
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19.2 INDEMNITY FOR ACTIONS BY OR IN THE RIGHT OF THE
COMPANY. This Company does hereby indemnify any person who was
or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the
right of this Company to procure a judgment in its favor by
reason of the fact that he is or was a Member, Manager, employee
or agent of this Company, or is or was serving at the request of
this Company as a Member, Manager, director, officer, employee or
agent of another limited-liability company, corporation,
partnership, joint venture, trust or other enterprise against
expenses, subject to the provisions of Section 19.4 hereof,
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 if he acted in good faith and
in a manner which he reasonably believed to be in or not opposed
to the best interests of this Company. 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 this Company
or for amounts paid in settlement to this Company, 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.
19.3 INDEMNITY IF SUCCESSFUL. To the extent that a Member,
Manager, employee or agent of this Company has been successful on
the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 19.1 and 19.2, or in defense
of any claim, issue or matter therein, this Company does hereby
indemnify such person or entity against expenses, subject to the
provisions of Section 19.4 hereof, including attorneys' fees,
actually and reasonably incurred by him in connection with the
defense.
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19.4 EXPENSES. Any indemnification under Sections 19.1 and
19.2, unless ordered by a court or advanced pursuant to Section
19.5 below, must be made by this Company only as authorized in
the specific case upon a determination that indemnification of
the Member, Manager, employee or agent is proper in the
circumstances. The determination must be made:
(a) By a majority vote of a quorum of Members who were
not parties to the act, suit or proceeding; or
(b) By a majority vote of Managers who were not
parties to the act, suit or proceeding; or
(c) If a quorum consisting of Members or Managers who
were not parties to the act, suit or proceeding cannot be
obtained, by independent legal counsel pursuant to a written
opinion.
19.5 ADVANCE PAYMENT OF EXPENSES. The expenses of Members
and Managers incurred in defending a civil or criminal action,
suit or proceeding shall be paid by this Company 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 Member or Manager to repay the amount if it is
ultimately determined by a court of competent jurisdiction that
he is not entitled to be indemnified by this Company. The
provisions of this subsection do not affect any rights to
advancement of expenses to which personnel other than Members or
Managers may be entitled under any contract or otherwise by law.
19.6 OTHER ARRANGEMENTS NOT EXCLUDED. The indemnification
and advancement of expenses authorized in or ordered by a court
pursuant to this Article XIX:
(a) Does not exclude any other rights to which a
person seeking indemnification or advancement of expenses may be
entitled under the Articles of Organization or any agreement,
vote of Members or otherwise, for either an action in his
official capacity or an action in another capacity while holding
his office, except that indemnification, unless ordered by a
court pursuant to Section 19.2 above or for the advancement of
expenses made pursuant to Section 19.5 above, may not be made to
or on behalf of any Member or Manager 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.
(b) Continues for a person who has ceased to be a
Member, Manager, employee or agent and inures to the benefit of
the heirs, executors and administrators of such a person.
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ARTICLE XX. MISCELLANEOUS PROVISIONS
20.1 TIME IS OF THE ESSENCE. Time is of the essence with
respect to all time periods set forth in this Agreement.
20.2 DEFAULT INTEREST RATE. Any sum accruing to any Party
under this Agreement which shall not be paid when due shall bear
interest at a rate per annum equal to the Bank of America Nevada
prime rate plus 5% from the date such payment becomes due and
payable until it is paid in full with said interest.
20.3 COUNTERPARTS. This Agreement may be executed in two
or more counterparts and shall be deemed to have become effective
when and only when all parties hereto have executed this
Agreement, although it shall not be necessary that any single
counterpart be signed by or on behalf of each of the parties
hereto, and all such counterparts shall be deemed to constitute
but one and the same instrument.
20.4 EXECUTION BY FACSIMILE. This Agreement may be
executed by facsimile and if so executed shall be legal, valid
and binding on any Party executing in such manner.
20.5 FORCE MAJEURE. Whenever this Agreement requires an
act to be performed within a specified time period or to be
completed diligently, such periods are subject to "unavoidable
delays." Unavoidable delays include delays caused by acts of God,
acts of war, civil commotions, riots, strikes, lockouts, acts of
government in either its sovereign or contractual capacity,
perturbation in telecommunications transmissions, inability to
obtain suitable labor or materials, accident, fire, water
damages, flood, earthquake, or other natural catastrophes.
20.6 COMPLETE AGREEMENT. This Operating Agreement, and the
Articles of Organization, constitute the complete and exclusive
statement of the Agreement among the Members with respect to the
subject matter contained therein. This Agreement and the
Articles replace and supersede all prior agreements by and among
the Members or any of them. This Agreement and the Articles
supersede all prior written and oral statements and no
representation, statement, or condition or warranty not contained
in this Agreement or the Articles will be binding on the Members
or be of any force and effect whatsoever.
20.7 AMENDMENTS. This Operating Agreement may be amended
by the Members but only at a special or annual meeting of the
Members, not by written consent, and only if the notice of the
intention to amend the Operating Agreement was contained in the
notice of the meeting, or such notice of a meeting is waived by
all Members.
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20.8 GOVERNING LAW. This Operating Agreement, and its
application, shall be governed exclusively by its terms and by
the laws of the State of Nevada without reference to its choice
of law provisions.
20.9 HEADINGS. 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 provisions contained herein.
20.10 SEVERABILITY. If any provision of this Operating
Agreement or the application thereof to any person or
circumstance shall be deemed 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.
20.11 EXPENSES. If any litigation or other proceeding is
commenced in connection with or related to this Agreement, the
prevailing party shall be entitled to recover from the losing
party all of the incidental costs and reasonable attorneys' fees,
whether or not a final judgment is rendered.
20.12 HEIRS, SUCCESSORS AND ASSIGNS. Each and all of the
covenants, terms, provisions and agreements contained in this
Operating Agreement shall be binding upon and inure to the
benefit of the existing Members, all new and substituted Members,
and their respective assignees (whether permitted by this
Agreement or not), heirs, legal representatives, successors and
assigns.
20.13 EXECUTION. This Agreement may be executed in
counterparts, and when so executed each counterpart shall be
deemed to be an original, and said counterparts together shall
constitute one and the same instrument.
20.14 POWER OF ATTORNEY. Each Member, in accepting this
Agreement, makes, constitutes and appoints the Managers and each
of them, with full power of substitution, as his, her, or its
attorney-in-fact and personal representative to sign, execute,
certify, acknowledge, file and record the Articles of
Organization, and to sign, execute, certify, acknowledge, file
and record all appropriate instruments amending the Articles of
Organization and this Operating Agreement on behalf of each such
Member. In particular, the Manager as attorney-in-fact may sign,
acknowledge, certify, file and record on behalf of each Member
such instruments, agreements and documents which: (1) reflect any
amendments to the Articles of Organization or Operating
Agreement; (2) reflect the admission or withdrawal of a Member;
and (3) may otherwise be required of the Company, a Member or by
law. The Power of Attorney herein given by each Member is a
durable power and will survive the disability or incapacity of
the principal.
38
20.15 COMPLIANCE WITH LAWS.
(a) At all times during the term of this Agreement,
each Member agrees that its actions, and those of its
representatives, agents, and consultants, will be entirely in
accordance with all applicable laws, rules, ordinances and
regulations of all states, counties, districts and municipalities
in which such Member conducts business on behalf of the Company,
and also will follow applicable federal laws, rules and
regulations.
(b) In connection with this Agreement, the Members
each acknowledge that certain casino gaming licenses are
currently issued to and held by certain Members or their
Affiliates by the states of Nevada, Louisiana and New Jersey, and
the state of New South Wales, Australia, and that the Members or
their Affiliates may in the future apply for gaming licenses in
additional states or foreign countries. The laws of such
jurisdictions may require such Member to disclose private or
otherwise confidential information about the other Members and
their respective principals, lenders and affiliates. The Members
each agree to refrain from all conduct that may negatively affect
such licenses or license applications. The Members further agree
that if any representative, agent, Affiliate, or Member is
required to be licensed, qualified or found suitable by the
Gaming Authorities and is denied such status by such gaming
authority, such unlicensed, unqualified or unsuitable Member
shall immediately sell his interest in the Company in the manner
specified in Article IX.
20.16 BACKGROUND INVESTIGATIONS.
(a) The Members each acknowledge that Showboat or
its Affiliates currently conduct gaming operations in Nevada, New
Jersey, and Louisiana and will conduct gaming operations in New
South Wales, Australia. Such gaming operations are highly
regulated by Gaming Authorities of these states and that such
regulations impose upon Showboat an affirmative duty to
investigate the backgrounds of entities or individuals with whom
Showboat does business. Furthermore, such regulations require
that Showboat and its Affiliates, which includes the Company and
the Randolph, subject themselves to rigorous investigation.
Furthermore, Showboat or its Affiliates may in the future apply
for licensure in other jurisdictions, including states of the
United States or foreign countries which may have similar
regulations. Gaming authorities in other jurisdictions may
request information regarding entities and persons with whom
Showboat does business. Accordingly, the Members each agree, if
requested by Showboat, to use their best efforts to supply and to
cause its principals, directors, officers, major shareholders,
owners and any other key individuals, to supply such information
and execute such affidavits and documents, including personal
history disclosure documents and personal financial disclosure
documents as Showboat may reasonably request. Furthermore,
gaming regulations require that Showboat and its Affiliates be of
good repute. The Company and its principals, directors,
officers, Members, owners and Affiliates represent that they are
of good repute.
(b) The Members each acknowledge that Randolph or
its Affiliates currently conduct gaming operations in Nevada and
New Jersey. Such gaming operations are highly regulated by
Gaming Authorities of these states and that such regulations
impose upon the Randolph an affirmative duty to investigate the
backgrounds of entities or individuals with whom Randolph does
business. Furthermore, such regulations require that Randolph
and its Affiliates subject themselves to rigorous investigation.
Furthermore, Randolph or its Affiliates may in the future apply
for licensure in other jurisdictions, including states of the
United States or foreign countries which may have similar
regulations. Gaming authorities in other jurisdictions may
request information regarding entities and persons with whom
Randolph do business. Accordingly, the Members each agree, if
requested by Randolph, to use their best efforts to cause their
principals, directors, officers, major shareholders, owners and
any other key individuals, to supply such information and execute
such affidavits and documents, including personal history
disclosure documents and personal financial disclosure documents
as Randolph may reasonably request. Furthermore, gaming
regulations require that Randolph be of good repute so Randolph
will represent that the Company and its principals, directors,
officers, Members, owners and Affiliates are of good repute.
39
20.17 COMPLIANCE WITH OTHER AGREEMENTS. Each Member shall
use its best efforts to perform, or cause to be performed, all
obligations of the Company under any agreement negotiated in
connection herewith or pursuant hereto, including, without
limitation, the Management Agreement of even date herewith
between the Company and an Affiliate of Showboat.
20.18 GOVERNMENTAL APPROVAL. Each Members shall use their
best efforts to cause the Company to obtain all necessary
licenses, permits and approvals from all applicable governmental
authorities with respect to the construction and development of
the Riverboat.
20.19 LICENSING REQUIREMENTS. Each Member covenants to use
its best efforts to diligently obtain all state and local
licenses, including gaming licenses, necessary to conduct gaming
operations at the Riverboat. The Members agree to provide the
other Members with copies of all applications, reports, letters,
and other documents filed or provided to the state or local
licensing authorities. In the event that any Member as a result
of a communication or action by the Missouri gaming authorities
(including, without limitation, the Riverboat Authority) or on
the basis of consultations with its gaming counsel and/or other
professional advisors, reasonably believes in good faith, with
the concurrence of the Managers, that the Missouri gaming
authorities are likely to: (i) fail to license and/or approve the
Company or its Affiliates to own and operate any gaming related
businesses; (ii) grant required gaming licensing and/or approval
only upon terms and conditions which are unacceptable to the
Company; (iii) significantly delay the licensing and/or approval
contemplated under this Agreement; or (iv) revoke any existing
license or casino operating contract of the Company or its
Affiliates, in each case due to concerns of any aspect of the
suitability of a particular Member or its shareholders, then the
Company shall cause such Member to divest itself of such Interest
by sale to the other Members in the manner set forth in Article
IX.
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20.20 FOREIGN GAMING LICENSES. If Showboat determines, at
its sole discretion, that any gaming licenses held by Showboat or
its Affiliates in other jurisdictions may be adversely affected
or in jeopardy because of its status as a Member, Showboat shall
have the option at any such time to sell its Interest, subject to
the right of first refusal pursuant to Article X. If this occurs
prior to or within the first six (6) months after commencement of
operations at the Riverboat and Randolph elects its right of
first refusal, Showboat shall receive as sole compensation for
Randolph's purchase of its Interest, the capital contribution
Showboat has made to the Company. In case of a sale by Showboat
of all of its Interest under this Section, the Management
Agreement shall terminate upon the consummation of such sale.
20.21 PRESS RELEASES. Any press release issued by the
Company shall be approved by a majority of the Managers prior to
the issuance thereof. Any press release of any Member or its
Affiliates concerning the Riverboat or the Company shall be
approved by a majority of the Managers prior to the issuance
thereof, with the exception of any press releases required to be
made by any Member or its Affiliates pursuant to various
securities laws applicable to such Member or its affiliates.
20.22 FINANCING MATTERS.
(a) Randolph has previously entered into an
Agreement with Bear Stearns & Co., as underwriter, to obtain
project financing to fund the construction of the Riverboat
("Project Financing") in an amount not to exceed $57,000,000 or
to be less than $47,000,000, unless the Members unanimously agree
otherwise.
Such Project Financing may be either bank debt, high yield debt
and/or capital leases. Project Financing may be obtained in one
or more phases. If in connection with such Project Financing,
the lender requires a completion guaranty of the Riverboat,
Showboat shall provide such completion guaranty, the cost of
which shall be an expense of the Company. Randolph shall cause
E-T-T, Inc. and Market Gaming, Inc., and E-T-T, Inc. and Market
Gaming, Inc. each jointly and severally agree, to absolutely and
unconditionally guarantee the payment in full of all financing
obtained by the Company after December 31, 1994, from Bear
Stearns & Co., or any other lender, for the development and
construction of the Riverboat, including without limitation, the
costs of obtaining a gaming license. E-T-T, Inc. and Market
Gaming, Inc. each represent and acknowledge that they are
Affiliates of Randolph.
(b) If any Member or any of its respective
Affiliates, shall, at any time, sell or offer to sell any
securities issued by such Member, or its Affiliates, as
applicable through the medium of any prospectus or otherwise and
which relates to the Riverboat or its operation, it shall do so
only in compliance with all applicable laws, and shall clearly
disclose to all purchasers and offerees that neither the other
Member nor any of their Affiliates, officers, directors, agents
or employees shall in any way be deemed to be an issuer or
underwriter of such securities, and the other Member and their
Affiliates, officers, directors, agents and employees have not
assumed and shall not have any liability arising out of or
related to the sale or offer of such securities, including,
without limitation, any liability or responsibility for any
financial statements, projections or other information contained
in any prospectus or similar written or oral communication. The
other Member shall have the right to approve any description of
them or their Affiliates, or any description of this Agreement or
of their relationship with such Member hereunder, which may be
contained in any prospectus or other communications, and the
Member agrees to furnish copies of all such materials to the
other Member for such purposes not less than twenty (20) days
prior to the delivery thereof to any prospective purchaser or
offeree. The Member agrees to indemnify, defend or hold the
other Member and its Affiliates, officers, directors, agents and
employees, free and harmless from any and all liabilities, costs,
damages, claims or expenses arising out of or related to the
breach of such Member's obligations under this Section. Each
Member agrees to reasonably cooperate with the other in the
preparation of such agreements and offerings.
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ARTICLE XXI. CONFIDENTIALITY AND NON-USE
21.1 DISCLOSURE OF PROPRIETY INFORMATION. Unless
otherwise provided for herein, each Party hereto agrees for
itself and its respective Affiliates, agents, representatives and
consultants that it shall not disclose, reveal or make available
to any third party, and that it shall take all steps necessary or
desirable to prevent the Company from disclosing, revealing or
making available to any third party, any confidential or
proprietary information, whether of a technical, financial,
commercial or other nature ("Confidential Information"), received
directly or indirectly from or in respect of any other Party or
in respect of the Company, except as authorized in writing by
such other Party (or in the case of the Company by all parties)
and except that either Party may disclose such information:
(a) to its employees, agents, representatives and
consultants or employees of the Company to whom, and to the
extent that, such disclosure is necessary in furtherance of the
purposes of this Agreement, provided, however, that the
disclosing Party shall be responsible for ensuring that such
persons comply with the confidentiality and non-use provisions of
this Article 16, and shall take the steps necessary to ensure
such compliance, whether by agreement, establishment of internal
regulations, or otherwise; or
(b) to the extent required by applicable law,
judicial or administrative process or by any Gaming Authority.
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21.2 USE OF PROPRIETARY INFORMATION. Each Party hereto
agrees that it shall not use and that it shall take all steps
necessary or desirable to prevent the Company from using, any
Confidential Information received from another Party or from the
Company except as specifically provided in this Agreement or as
otherwise expressly authorized in writing by the relevant Party
(or in the case of the Company by all Parties).
21.3 DESTRUCTION OR RETURN OF CONFIDENTIAL INFORMATION.
All documents received by a Party (the "Receiving Party")
containing Confidential Information of another Party or the
Company and all documents derived or prepared from such documents
and all copies thereof shall be inventoried by the Receiving
Party, marked with a suitable label to indicate their
confidential status (to the extent such documents are not already
so marked) and segregated from all other papers of the Receiving
Party. Upon termination of this Agreement for any reason, such
documents and all copies thereof in the possession or control of
the Receiving Party or its present or former employees, agents,
representatives, or consultants relating to the Confidential
Information of the other Party (the "Disclosing Party") shall be
destroyed under the supervision of the Disclosing Party or
returned to the Disclosing Party, at the Disclosing Party's
discretion, and the receiving Party shall immediately cease using
the Confidential Information of the disclosing Party.
21.4 EXCEPTION. A Party (in this Section 21.4, the
"Disclosing Party") shall not be obligated to keep confidential
or shall not incur any liability for the use or disclosure to a
third party of any information that (i) has fallen into the
public domain through no unauthorized act of the Disclosing
Party; (ii) was received from a third party not under any
obligation to refrain from revealing such information; or (iii)
was in the Disclosing Party's possession prior to the receipt
from another Party or the Company.
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21.5 SURVIVAL. Notwithstanding anything to the contrary
herein, the provisions of this Article 21 shall survive and inure
to the benefit of and be binding upon the Parties for a period of
five (5) years subsequent to the date of termination of this
Agreement.
ARTICLE XXII. ARBITRATION
22.1 APPOINTMENT OF ARBITRATORS. If any dispute shall
arise or if any issue left open hereunder cannot be resolved
between the Parties hereto after negotiating in good faith to
reach a just and equitable solution satisfactory to the Parties
within fifteen (15) days, such dispute is to be referred first to
a committee of four persons who shall meet in an attempt to
resolve said dispute or open issue. The committee shall consist
of two persons appointed by Randolph and two persons appointed by
Showboat. If an agreement cannot be reached to resolve the
dispute by the committee within fifteen (15) days, the dispute or
open issue will be resolved by binding arbitration before
arbitrators having not less than 10 years experience in the
gaming industry. In the event an appraisal of the Riverboat or
other assets needs to be performed, such appraisal is to be
settled by binding arbitration before arbitrators having not less
than 10 years experience in the gaming industry. Any award of the
arbitrators may be filed in a court of law as a final judgment.
Any such arbitration shall be in accordance with the rules and
regulations adopted by the American Arbitration Association or as
the Parties otherwise agree. Either Party may serve upon the
other Party a written notice of the demand that the dispute or
appraisal to be resolved pursuant to this Article. Within thirty
(30) days after the giving of such notice, each of the Parties
hereto shall nominate and appoint an arbitrator (or appraiser, as
the case may be) and shall notify the other Party in writing of
the name and address of the arbitrator so chosen. Upon the
appointment of the two arbitrators as hereinabove provided, said
two arbitrators shall forthwith, within fifteen (15) days after
the appointment of the second arbitrator, and before exchanging
views as to the question at issue, appoint in writing a third
arbitrator ("Selected Arbitrator") and give written notice of
such appointment to each of the Parties hereto. In the event that
the two arbitrators shall fail to appoint or agree upon the
Selected Arbitrator within said fifteen (15) day period, the
Selected Arbitrator shall be selected by the Parties themselves
if they so agree upon such Selected Arbitrator within a further
period of ten (10) days. If a Selected Arbitrator shall not be
appointed or agreed upon within the time herein provided, then
either Party on behalf of both may request such appointment in
accordance with the American Arbitration Association. Randolph
and Showboat shall share equally the cost of the Selected
Arbitrator. Said arbitrators shall be sworn faithfully and fairly
to determine the question at issue. The arbitrators shall afford
to Randolph and Showboat a hearing and the right to submit
evidence, with the privilege of cross-examination, on the
question at issue, and shall with all possible speed make their
determination in writing and shall give notice to the Parties
hereto of such determination. The concurring determination of any
two of said three arbitrators shall be binding upon the Parties,
or, in case of no two of the arbitrators shall rendering a
concurring determination, then the determination of the Selected
Arbitrator be binding upon the Parties hereto. Each Party shall
pay the fees of the arbitrator appointed by it, and the fees of
the Selected Arbitrator shall be divided equally between Randolph
and Showboat.
44
22.2 INABILITY TO ACT. In the event that an arbitrator
appointed as aforesaid shall thereafter die or become unable or
unwilling to act, his successor shall be appointed in the same
manner provided in this Article for the appointment of the
arbitrator so dying or becoming unable or unwilling to act.
ARTICLE XXIII. NOTICES
All notices provided for in this Agreement or related to
this Agreement, which any Member desires to serve on the other,
shall be in writing, and any and all notices or other papers or
instruments related to this Agreement shall be deemed
sufficiently served or delivered on the date of mailing if sent
(i) by United States registered or certified mail (return receipt
requested), postage prepaid, in an envelope properly sealed, (ii)
by a facsimile transmission where written acknowledgment of
receipt of such transmission is received, or (iii) by a
nationally recognized overnight carrier service providing for
receipted delivery, addressed as follows:
If intended for Randolph Troy Herbst, President
or the Company: Randolph Riverboat Company, Inc.
5195 Las Vegas Boulevard South
Las Vegas, NV 89119
With a copy to: Sean T. Higgins, General Counsel
Randolph Riverboat Company, Inc.
5195 Las Vegas Boulevard South
Las Vegas, NV 89119
and
The Stolar Partnership
Attention: Jay Levitch
911 Washington Avenue
St. Louis, Missouri 63101
If intended for Showboat J. Kell Houssels, III, President
or the Company: Showboat Missouri Investment
Limited Partnership
2800 Fremont Street
Las Vegas, NV 89104
With a copy to: John N. Brewer, Esq.
Kummer Kaempfer
Bonner & Renshaw
3800 Howard Hughes
Parkway
Seventh Floor
Las Vegas, NV 89109
45
Either Randolph or Showboat may change the address or name of
addressee applicable to subsequent notices (including copies of
said notices as hereinafter provided) or instruments or other
papers to be served upon or delivered to the other party, by
giving notice to the other party as aforesaid, provided that
notice of such change shall not be effective until the fifth day
after mailing or facsimile transmission.
IN WITNESS WHEREOF, this Operating Agreement was adopted by
a unanimous vote of all the Members of this Company at the
organizational meeting thereof held on January 25, 1995.
Members: Company:
Randolph Riverboat Company, Randolph Riverboat Company,
Inc., a Nevada corporation L.L.C., a Nevada limited
liability company
By /s/Troy Herbst By /s/Troy Herbst
Troy Herbst, Manager
Its _________________________
Showboat Missouri, Inc.
a Nevada corporation
By /s/Leann Schneider
Its Treasurer
46
ACKNOWLEDGED AND AGREED TO ACKNOWLEDGED AND AGREED TO
WITH RESPECT TO SECTION WITH RESPECT TO ARTICLES
20.22 ONLY: VII AND IX ONLY:
E-T-T, Inc., a Nevada Randolph Shareholders:
corporation
By /s/Edward Hebst By /s/Edward Herbst
Edward Herbst
Its___________________________
By /s/Troy Herbst
Troy Herbst
Market Gaming, Inc., a Nevada
corporation
By /s/Timothy Herbst
Timothy Herbst
By /s/Edward Herbst
Its___________________________
47
SCHEDULE A-1
Member Initial Capital Member
Contribution Interest
-------------------------------- --------------- --------
Randolph Riverboat Company, Inc. $24,142,857.14 65%
5195 Las Vegas Boulevard South in property and
Las Vegas, Nevada 89119 assets
described in
Exhibit B-1
Showboat Missouri, Inc. $13,000,000 35%
2800 Fremont Street in cash
Las Vegas, Nevada 89104
49
EXHIBIT A-2
MAP OF RANDOLPH, MISSOURI
EXHIBIT B-1
DESCRIPTION OF RANDOLPH ASSETS
The Randolph Assets shall mean all present and future right,
title and interest of Randolph in and to all of the assets of every
kind, character and description, whether real or personal property,
tangible or intangible, owned by Randolph or used in connection with
the operation of Randolph's business, including, but not limited to,
(i) all real property, buildings, structures and improvements of every
kind, and all extensions, additions, accessions and fixtures, attached
to or made a part of such real property, buildings, structures and
improvements together with all easements, rights-of-way, strips of
land, streets, ways, alleys, passages, sewer rights, water rights and
powers and all appurtenances whatsoever, relating or appertaining to
such real property, buildings, structures and improvements; (ii) all
furniture, fixtures, equipment, general intangibles, deposit accounts,
contract rights, money, right to tax credits, instruments and
documents (as those terms are defined in the UCC) all other
agreements, right and written materials; (iii) all permits, approvals,
licenses and other governmental authorizations; (iv) all plans,
specifications and architectural drawings; (v) all agreements with
contractors, subcontractors, suppliers, project managers and
supervisors, designers, architects, engineers, sales agents, leasing
agent and consultants; (vi) all takeout, refinancing and permanent
loan commitments; (vii) all warranties, guaranties, indemnities and
insurance policies; (viii) all claims, demands, awards, settlements
and other payments; (ix) all leases, rental agreements, license
agreements, service and maintenance agreements, purchase and sale
agreements and purchase options, together with advance payments,
security deposits and other amounts paid to or deposited with Randolph
under any such agreements; (x) all reserves, accounts, deposits,
bonds, deferred payments, refunds, rebates, discounts, cost savings,
escrow proceeds, sale proceeds and other rights to the payment of
money; (xi) all trade names, trademarks, copyrights, goodwill and all
other types of intangible personal property of any kind or nature; and
(xii) all supplements, modifications, amendments, renewals,
extensions, proceeds, replacements and substitution of any such
property.
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT
TABLE OF CONTENTS
PAGE
ARTICLE 1. RECITALS AND DEFINITIONS 2
ARTICLE 2. APPOINTMENT/TERM/OPTION TO EXTEND TERM 10
Section 2.01 Appointment 10
Section 2.02 Term 10
Section 2.03 Opening the Casino 10
ARTICLE 3. OWNER AND MANAGER DEVELOPMENT
OBLIGATIONS DURING DEVELOPMENT TERM 11
Section 3.01 Construction of Riverboat/
Compliance with Law 11
Section 3.02 Engagement of Manager As
Consultant 11
Section 3.03 Preliminary Plans and
Specifications. 12
Section 3.04 Pre-Opening Committee 12
Section 3.05 Obligations during Development
Term 13
Section 3.06 Construction 13
Section 3.07 Pre-Opening Services by Manager 13
Section 3.08 Payment of Pre-Opening Expenses. 14
ARTICLE 4. OPERATIONS 14
Section 4.01 Accounting Procedures and
Services Books and Records 14
Section 4.02 Owner's Access to Gaming Financial
Records 15
Section 4.03 Audits 15
Section 4.04 Monthly Financial Statements 16
Section 4.05 Expenses 17
Section 4.06 Standards 17
Section 4.07 Plans and Budgets 19
Section 4.08 Management 21
Section 4.09 Bank Accounts 21
Section 4.10 Credit 22
Section 4.11 Owner's Advances 22
Section 4.12 Special Events 24
Section 4.13 Cooperation of Owner and Manager 24
Section 4.14 Financing Matters. 25
Section 4.15 Conflict of Interest/Non-
Competition 27
ARTICLE 5. MANAGEMENT FEE 28
Section 5.01 Payments to Manager 28
ARTICLE 6. MANAGER'S RIGHT OF FIRST REFUSAL TO
MANAGE RIVERBOAT 28
ARTICLE 7. REAL PROPERTY TAXES AND ASSESSMENTS,
AND PAYMENTS TO THE RIVERBOAT AUTHORITIES 29
Section 7.01 Payment of Real Estate Taxes
and Assessments 29
Section 7.02 Exceptions 30
ARTICLE 8. USE AND OCCUPANCY OF THE CASINO 30
Section 8.01 Uses 30
Section 8.02 Name 30
ARTICLE 9. MAINTENANCE AND REPAIRS 31
Section 9.01 Owner's Maintenance and Repairs 31
ARTICLE 10. INSURANCE AND INDEMNITY 32
Section 10.01 Owner Insurance Obligations 32
Section 10.02 Parties Insured 35
Section 10.03 Approved Insurance Companies 36
Section 10.04 Approval of Insurance Coverage 36
Section 10.05 Failure to Obtain Required
Insurance 36
Section 10.06 Waiver of Subrogation 37
Section 10.07 Mutual Cooperation 37
Section 10.08 Delivery of Insurance Policies 37
Section 10.09 Indemnification by Manager 38
Section 10.10 Indemnification by Owner 39
Section 10.11 Selection of Counsel/Conduct of
Litigation 40
ARTICLE 11. CASUALTY 40
ARTICLE 12. TAKING OF THE RIVERBOAT 41
Section 12.01 Definitions 41
Section 12.02 Entire Taking of the Support
Areas 42
Section 12.03 Duty to Restore 43
ARTICLE 13. DISPOSITION OF INSURANCE PROCEEDS AND
AWARDS 43
Section 13.01 Trustee 43
Section 13.02 Deposits of Insurance Proceeds
and Awards 44
Section 13.03 Procedure for Distribution of
Insurance Proceeds and Awards 44
ARTICLE 14. ASSIGNMENT AND SUBLETTING 47
ARTICLE 15. AFFIRMATIVE COVENANTS OF MANAGER 47
Section 15.01 Corporate Status 47
Section 15.02 Compliance with Laws 47
Section 15.03 Gaming Approvals 48
Section 15.04 Confidential Information 49
Section 15.05 Gaming Applications 49
ii
ARTICLE 16. AFFIRMATIVE COVENANTS OF OWNER 49
Section 16.01 Corporate Status 49
Section 16.02 Maintenance of Insurance 50
Section 16.03 Compliance with Laws 50
Section 16.04 Cooperation with Gaming
Authorities 51
Section 16.05 Confidential Information 51
Section 16.06 Compliance with Loan Covenants 52
Section 16.07 Non-Interference 52
Section 16.08 Gaming Applications 52
ARTICLE 17. REPRESENTATIONS AND WARRANTIES 52
Section 17.01 Owner Corporate Status 52
Section 17.02 Manager Corporate Status 53
Section 17.03 Authorization/No Conflict 53
Section 17.04 Permits/Approvals 54
Section 17.05 Accuracy of Representations 54
Section 17.06 Development Plans 54
Section 17.07 Maintenance of Gaming and Other
Licenses 55
Section 17.08 Financings; Governmental Approval 55
Section 17.09 Condition of Riverboat During
Term 55
Section 17.10 Utilities 56
Section 17.11 Impair Reputation 56
ARTICLE 18. ARBITRATION 56
SECTION 18.01 Appointment of Arbitrators 56
Section 18.02 Inability to Act 58
ARTICLE 19. DEFAULT/STEP-IN RIGHTS 58
Section 19.01 Definition 58
Section 19.02 Manager's Defaults 58
Section 19.03 Step-In Rights 59
Section 19.04 Owner's Default 61
Section 19.05 Bankruptcy 62
Section 19.06 Reorganization/Receiver 62
Section 19.07 Delays and Omissions 63
Section 19.08 Disputes in Arbitration 63
ARTICLE 20. TERMINATION 63
Section 20.01 Termination Events 63
Section 20.02 Notice of Termination 64
Section 20.03 Remedies Upon Termination 65
Section 20.04 Delivery of Riverboat 65
ARTICLE 21. HAZARDOUS MATERIALS 66
Section 21.01 No Hazardous Materials 66
Section 21.02 Compliance With Laws 66
Section 21.03 Indemnification 67
Section 21.04 Hazardous Material Defined 67
ARTICLE 22. NOTICES 68
iii
ARTICLE 23. MISCELLANEOUS 69
Section 23.01 Time of the Essence 69
Section 23.02 Heirs, Successors, Assigns 69
Section 23.03 Construction 69
Section 23.04 Governing Law 70
Section 23.05 Severability 70
Section 23.06 Relation of the Parties 70
Section 23.07 No Broker or Finder 70
Section 23.08 Default Interest Rate 71
Section 23.09 Attorneys' Fees 71
Section 23.10 Entire Agreement 71
Section 23.11 Counterparts 72
Section 23.12 Force Majeure 72
Section 23.13 No Warranties 72
Section 23.14 Headings 72
Section 23.15 Waiver 73
iv
MANAGEMENT AGREEMENT
This Management Agreement ("Agreement") is dated as of
January 25, 1995, and is made and entered into by and between
Randolph Riverboat Company, L.L.C., a Nevada limited liability
company or its successors and assigns ("Owner"), whose address is
5195 Las Vegas Boulevard South, Las Vegas, Nevada 89119, and
Showboat Operating Company, a Nevada corporation, or its
successors and assigns ("Manager"), whose address 2800 Fremont
Street, Las Vegas, Nevada 89104.
RECITALS
A. Owner is designing and developing a riverboat casino in
order to conduct a riverboat gaming business on the Missouri
River in or near Randolph, Missouri.
B. Owner expects to have completed construction of the
riverboat and all ancillary facilities, including, but not
limited to, docking, parking areas and administrative offices,
and to have obtained all licenses necessary to open the riverboat
to the public for gaming operations approximately by November
1995.
C. Manager has experience in designing interior gaming
premises, and in starting up and conducting a gaming business.
D. Owner desires to engage Manager as a consultant to Owner in
designing the interior gaming area of the riverboat, training
staff and installing gaming equipment for public use, and, upon
completion of the construction of the riverboat and all ancillary
facilities, including the receipt of all gaming and other
approvals, to manage and operate the gaming operations associated
with the riverboat.
1
E. Manager desires to be engaged as a consultant to assist in
the design of the interior gaming area of the riverboat and, upon
completion of the construction of the riverboat and all ancillary
facilities, to manage and operate the gaming operations
associated with the riverboat.
F. Predecessors of Owner and Manager entered into a Preliminary
Management Agreement dated December 23, 1994, whereby Owner and
Manager agreed to negotiate a definitive management agreement
regarding the operations of a riverboat casino.
G. Neither Owner nor Manager has obtained a permanent riverboat
gaming license from the Missouri Gaming Commission.
NOW, THEREFORE, in consideration of the mutual promises
contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, and with the intention of being bound by this
Agreement, the parties stipulate and agree as follows:
ARTICLE 1. RECITALS AND DEFINITIONS
The foregoing Recitals are true and correct.
The following defined terms are used in this Agreement:
"Affiliate" shall mean a person who, directly or indirectly,
or through one or more intermediaries, (i) controls, is
controlled by, or is under common control with the person in
question; (ii) is an officer, director, 5% stockholder, partner
in or trustee of any person referred to in the preceding clause;
or (iii) is a
2
spouse, father, mother, son, daughter, brother, sister, uncle,
aunt, nephew or niece of any person described in clauses (i) and
(ii).
"Audit Day" is defined in Section 4.03.
"Audited Statements" is defined in Section 4.03.
"Award" is defined in Section 12.01.
"Bad Debts" shall mean the amount equal to gaming accounts
receivables which have not been collected for more than 120 days.
"Bank Accounts" is defined in Section 4.09.
"Business Days" shall mean all weekdays except those that
are official holidays of the state of Missouri or the U.S.
government. Unless specifically stated as "Business Days," a
reference in this Agreement to "days" means calendar days.
"Casino" shall mean those areas reserved for the operation
of slot machines, table games and any other legal forms of gaming
permitted under applicable law, and ancillary service areas,
including reservations and admissions, cage, vault, count room,
surveillance room and any other room or area or activities
therein regulated or taxed by the Riverboat Authorities by reason
of gaming operations.
"Casino Bankroll" shall mean an amount reasonably determined
by Manager as funding required to bankroll Casino Gaming
Activities, but in no case less than the amount required by
Missouri gaming law. In no event shall such Casino Bankroll
include amounts necessary to cover Operating Expenses or
Operating Capital. Casino Bankroll shall include the funds
located on the casino tables, in the gaming devices, cages,
vault, counting rooms, or in any other location in the Casino
3
where funds may be found and funds in a bank account identified
by Owner for any additional amount required by Missouri gaming
law or such other amount as is reasonably determined by Manager.
"Casino Gaming Activities" shall mean the casino cage, table
games, slot machines, video machines, electronic games of chance,
electronic games of skill, and any other form of gaming managed
by Manager in the Casino. The area reserved in the Riverboat for
the Casino Gaming Activities shall be an area of approximately
26,000 square feet.
"Casino Operating Budget" shall be the budget of Casino
Operating Expenses.
"Casino Operating Expenses" shall mean expenses incurred by
Manager on behalf of Owner in the management of the Casino,
including, but not limited to, gaming supplies, maintenance of
the Casino area, gaming marketing materials, uniforms,
complimentaries, Casino employee training, Casino employee
compensation and entitlements, and Gaming Taxes.
"Control" shall mean, in relation to a person that is a
corporation, the ownership, directly or indirectly, of voting
securities of such person carrying more than 25% of the voting
rights attaching to all voting securities of such person and
which are sufficient, if exercised, to elect a majority of its
board of directors; "Controls" and "Controlled" shall have
similar meanings.
"Commencement Date" shall mean the first day on which a
revenue-paying customer is admitted to the Casino.
4
"Credit Policy" shall mean the policy approved by Owner,
whose approval shall not be unreasonably withheld, regarding the
extension and collection of credit to patrons of the Casino,
which Credit Policy shall be prepared by Manager based on (i) the
target markets of the Casino; (ii) prudent business judgment; and
(iii) such changes and refinements as Owner may reasonably
require and shall comply and conform in all respects with the
rules and regulations of the Riverboat Authorities.
"Default" or "Event of Default" is defined in Section 19.01.
"Development Term" shall mean the period beginning on the
date of this Agreement and ending on the Commencement Date.
"Earnings" shall mean Gross Revenue less Operating Expenses.
"Effective Date" is defined in Section 2.02.
"FF&E" shall mean all furniture, furnishings, equipment, and
fixtures, including gaming equipment, computers, housekeeping and
maintenance equipment, necessary or convenient to the operations
of the Riverboat in conformity with this Agreement and in
accordance with applicable law.
"Gross Gaming Revenue" shall mean all of the revenue from
the operation of the Casino (which is taxed by the State of
Missouri), including, but not limited to, table games, electronic
games of chance, and electronic games of skill.
"Gaming Taxes" shall mean any tax imposed by the state of
Missouri on Gross Gaming Revenue, including, without limitation,
any state admissions tax (currently 20% of Gross Gaming Revenue
and $2.00 per customer).
5
"Governmental Authorities" shall mean the United States, the
state of Missouri, county of Clay, city of Randolph, any other
political subdivision in which the Riverboat is located or does
business, and any court or political subdivision agency,
commission, board or instrumentality or officer thereof, whether
federal, state or local, having or exercising jurisdiction over
Owner, Manager or the Riverboat, including the Casino.
"Gross Revenue" shall mean Gross Gaming Revenues plus all
other revenues resulting from the operation of Riverboat.
"Hazardous Material" is defined in Section 21.04.
"Impositions" is defined in Section 7.01.
"Incentive Management Fee" shall mean 20% of Earnings in
excess of $20,000,000, before any interest expense, income taxes,
property taxes, ground lease rent, capital lease rent,
depreciation and amortization.
"Initial Inventory" shall mean the list of operating
supplies required for the operation of the Riverboat for the
initial 30-day period following the Commencement Date.
"Initial Inventory Price" shall mean the cost of purchasing
the Initial Inventory.
"Institution" is defined in Section 13.01.
"Institutional Mortgage" is defined in Section 13.01.
"Loan Documents" shall mean all of the documents evidencing,
securing and relating to any indebtedness owing by Owner to any
person, including, without limitation, all promissory notes, loan
6
agreements, mortgages, pledges, assignments, certificates,
indemnities and other instruments or agreements.
"Management Fee" shall mean that sum which is equal to 2% of
Gross Gaming Revenue net of all Gaming Taxes, plus the Incentive
Management Fee.
"Management Fee Account" shall be the bank account
established by Manager into which the Management Fee shall be
deposited.
"Manager's Management Team" is defined in Section 4.06(d).
"Manager Pre-Opening Expenses" are those expenses incurred
during the Development Term including, but not limited to, travel
by Manager employees, officers and directors, rent, regulatory
fees, salaries, wages and benefits, and other costs of Manager
employees which are operational in nature. The Manager Pre-
Opening Expenses are estimated to be at least $[150,000] per
month.
"Nevada Gaming Authorities" shall mean the Nevada Gaming
Commission and the Nevada Gaming Control Board.
"Operating Budget" shall mean the Casino Operating Budget
and the budget for all other operations of the Riverboat.
"Operating Capital" shall mean such amount in the Bank
Accounts as will be reasonably sufficient to assure the timely
payment of all current liabilities of the Riverboat, including
the operations of the Casino, during the term of this Agreement,
and to permit Manager to perform its management responsibilities
and obligations hereunder, with reasonable reserves for
unanticipated contingencies and for short term business
fluctuations resulting from monthly variations from the Operating
Budget.
7
"Operating Expenses" shall mean actual expenses incurred
following the Commencement Date in operating the Riverboat,
including, but not limited to, the Management Fee, the Casino
Operating Expenses, employee compensation and entitlements,
including Manager's employees assigned to the Riverboat,
Operating Supplies, maintenance costs, fuel costs, utilities and
taxes.
"Operating Supplies" shall mean gaming supplies, paper
supplies, cleaning materials, marketing materials, maintenance
supplies, uniforms and all other materials used in the operation
of the Riverboat.
"Organizational Chart" shall be the Organizational Chart
attached hereto as Exhibit A, detailing the reporting lines of
representatives of Owner and Manager in relation to the
operations of the Riverboat.
"Owner's Advances" is defined in Section 4.11.
"Pre-Opening Budget" shall mean the budget of anticipated
Pre-Opening Expenses.
"Pre-Opening Expenses" shall mean all costs and expenses
incurred by Owner and Owner's Affiliates and Manager and
Manager's Affiliates in implementing the Pre-Opening Plan,
including, without limitation, the Manager Pre-Opening Expenses,
the costs of recruitment and training for all employees of the
Riverboat, costs of licensing or other qualification of Casino
employees prior to the Commencement Date, the cost of pre-opening
sales, marketing, advertising, promotion and publicity, the cost
of obtaining all operating permits, and permits for employees,
8
and the fees and expenses of lawyers and other professionals and
consultants retained by Owner and Manager in connection
therewith.
"Pre-Opening Plan" shall mean the plan and schedule for
implementing and performing the Pre-Opening Services.
"Pre-Opening Services" is defined in Section 3.07.
"Riverboat" shall mean the Vessel and all necessary
ancillary facilities to the Vessel, including, but not limited
to, docks, piers, vehicular parking area, waiting areas,
restaurants, restrooms, administrative offices for, but not
limited to, accounting, purchasing, and management information
services (including offices for Manager's Management Team) and
other areas utilized in support of the operations of the
Riverboat. The total cost and expenses associated with the
development of the Riverboat shall not exceed $80,000,000 or be
less than $70,000,000, unless mutually agreed otherwise.
"Riverboat Authorities" shall mean the Missouri Gaming
Commission.
"Taking" is defined in Section 12.01.
"Taking Date" is defined in Section 12.01.
"Term" is defined in Section 2.02.
"Trustee" is defined in Section 13.01.
"Vessel" shall mean the riverboat constructed by Owner for
operation of the Casino on the Missouri River in or near
Randolph, Missouri.
9
ARTICLE 2. APPOINTMENT/TERM/OPTION TO EXTEND TERM
SECTION 2.01 APPOINTMENT. Owner hereby appoints and
employs Manager to act as its agent for the supervision and
control of the management of the Riverboat on Owner's behalf,
upon the terms and conditions set forth herein. Manager hereby
accepts such appointment and undertakes to manage the Riverboat
upon the terms and conditions hereinafter set forth.
SECTION 2.02 TERM. This Agreement shall be effective upon
execution ("Effective Date"). The terms of this Agreement shall
commence upon the Effective Date and shall continue until the
Manager or its Affiliates no longer hold an equity position in
the Owner or its successor (hereinafter referred to as the
"Term").
SECTION 2.03 OPENING THE CASINO. The Commencement Date
shall be a date established by Owner upon giving written notice
thereof to Manager and shall be a date no earlier than 10 days
after, and no later than 15 days after, the satisfaction of all
the following conditions: (i) the project architect has issued to
Owner a certificate of substantial completion confirming that the
Riverboat has been substantially completed in accordance with the
plans and specifications, (ii) the project interior designer has
issued to Owner a certificate of substantial completion
confirming that the FF&E has been substantially installed in the
Riverboat in accordance with the FF&E specifications contained in
the plans and specifications, (iii) all operating permits for the
Riverboat and its operations (including, without limitation, a
certificate of occupancy or local equivalent, gaming, liquor and
10
restaurant licenses) have been obtained, (iv) the Operating
Capital and the Casino Bankroll for the Casino has been furnished
by Owner, (v) Manager shall have given written notice to Owner
that all operational systems have been tested on a "dry-run"
basis to the satisfaction of Manager and, to the extent required
by applicable law, the Riverboat Authorities, and (vi) all other
material state and federal governmental requirements necessary to
open, occupy and operate the Riverboat, have been satisfied.
Owner shall use its best efforts to assure that the conditions
set forth in Clauses (i)-(iv) and (vi) are met on or before
November 30, 1995. Manager shall use its best efforts in the
performance of its duties under this Agreement to assist Owner in
achieving the satisfaction of all of the foregoing requirements.
ARTICLE 3. OWNER AND MANAGER DEVELOPMENT OBLIGATIONS
DURING DEVELOPMENT TERM
SECTION 3.01 CONSTRUCTION OF RIVERBOAT/COMPLIANCE WITH LAW.
Owner, at its sole cost and expense, shall construct the
Riverboat and install the FF&E. The Riverboat and its systems
(including but not limited to plumbing, heating, air
conditioning, electrical, and life safety systems, if applicable)
shall comply with the Missouri Gaming Act, and all regulations
promulgated thereunder, all appropriate building, fire and zoning
codes, the Americans With Disability Act, maritime law, including
all regulations governing maritime vessels adopted by the United
States Coast Guard.
SECTION 3.02 ENGAGEMENT OF MANAGER AS CONSULTANT. Owner
engages Manager to be Owner's consultant in the configuration,
11
layout, interior design and construction of the Casino.
Additionally, Manager shall recommend to Owner and advise Owner
as to the suggested placement of all gaming equipment and
ancillary furnishings and the configuration of ancillary areas
within the Riverboat.
SECTION 3.03 PRELIMINARY PLANS AND SPECIFICATIONS. Owner,
at its sole and separate expense, shall prepare preliminary
design plans, working drawings, and specifications of the
Riverboat. Manager shall evaluate the preliminary design plans,
working drawings and assist Owner in designing the Casino. Owner
shall have the sole and exclusive right to manage, direct,
control, coordinate and prosecute the construction of the
Riverboat and the installation of the FF&E.
SECTION 3.04 PRE-OPENING COMMITTEE. Owner and Manager
shall form a Pre-Opening Committee which shall consist of four
persons, two persons appointed by Owner and two persons appointed
by Manager immediately upon execution of this Agreement. Within
three (3) weeks of the date hereof, Manager shall prepare and
submit to the Pre-Opening Committee the Pre-Opening Budget for
the committee's approval. The Pre-Opening Committee shall also
prepare promptly the Pre-Opening Plan detailing each party's
responsibilities (including those set forth in Section 3.07) and
the time frame for the performance of such responsibilities
during the Development Term. Each party agrees to use its best
efforts to timely complete each task, in accordance with the Pre-
Opening Plan and the Pre-Opening Budget. Manager agrees not to
12
exceed the Pre-Opening Budget without the prior approval of
Owner.
SECTION 3.05 OBLIGATIONS DURING DEVELOPMENT TERM.
(a) Owner represents that it has commenced the
construction of the Riverboat, and agrees that it shall
diligently complete the construction of the Riverboat by
approximately October 31, 1995.
(b) Owner and Manager shall file all applications
necessary to obtain all required permits and other approvals
necessary to operate the Riverboat, and the Casino located
therein, as contemplated by this Agreement.
SECTION 3.06 CONSTRUCTION. The construction of the
Riverboat shall be in accordance with appropriate laws,
regulations and ordinances of any kind and nature.
SECTION 3.07 PRE-OPENING SERVICES BY MANAGER.
(a) Prior to the Commencement Date, Manager, as agent of
Owner, shall, among other things, perform or arrange for others
to perform the following services on behalf of and for the
account of Owner pursuant to the Pre-Opening Plan and Pre-Opening
Budget (the "Pre-Opening Services").
(b) Manager shall implement the marketing portion of the
approved Pre-Opening Plan, including, but not limited to, direct
sales, media and direct mail advertising, promotion, publicity
and public relations designed to attract customers to the
Riverboat from and after the Commencement Date.
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(c) Manager shall recruit, hire, provide orientation to and
train all executive and general staff of the Riverboat, including
all personnel to be utilized during the period from the date
hereof until the Commencement Date in accordance with the Pre-
Opening Plan.
(d) Manager shall prepare and deliver to Owner a list of
all Operating Supplies necessary to operate the Casino and Owner
shall timely purchase the initial inventories for the Casino and
the Riverboat.
SECTION 3.08 PAYMENT OF PRE-OPENING EXPENSES. The cost of
the Pre-Opening Expenses shall be paid by Owner. Pre-Opening
Expenses and the time schedule for incurring such expense shall
be established in the Pre-Opening Budget and Pre-Opening Plan.
Owner shall deposit such sums to fund the Pre-Opening Expenses in
accordance with the schedules as shall be established by the
parties in the Pre-Opening Plan and Pre-Opening Budget and Owner
shall maintain sufficient funds therein to timely provide for any
and all Pre-Opening Expenses.
ARTICLE 4. OPERATIONS
SECTION 4.01 ACCOUNTING PROCEDURES AND SERVICES BOOKS AND
RECORDS. Manager shall cause Owner's employees to maintain a
complete accounting system in connection with the operation of
the Riverboat. The books and records shall be kept in accordance
with generally accepted accounting principles consistently
applied and in accordance with federal tax laws. Such books and
records shall be kept on a calendar year basis. Books and
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accounts shall be maintained at the Riverboat. Manager shall
use its best efforts to cause Owner to comply with all
requirements with respect to internal controls in accounting and
Owner shall prepare and provide all required reports under the
rules and regulations of the Riverboat Authorities regarding the
operations of the Riverboat. The cost of preparing such reports
shall be an Operating Expense. All operating bank accounts shall
be maintained in the state of Missouri.
SECTION 4.02 OWNER'S ACCESS TO GAMING FINANCIAL RECORDS.
Owner, at its option and at its sole cost and expense, may engage
and appoint a representative to review, examine, and copy the
gaming books and records, including all daily reports, prepared
by Manager detailing the results of operations of Manager's
business conducted from the Riverboat during regular business
hours. Any representative's review, examination and copying
shall be conducted in such a manner so as to not be disruptive to
Manager's operations. Such representative shall at all times be
bound by Owner's confidentiality covenant contained in Section
16.05 hereof.
SECTION 4.03 AUDITS. Owner shall engage a certified public
accountant to audit the operations of the Riverboat as of and at
the end of each calendar year (or portion thereof) occurring
after the date of this Agreement (the "Audited Statements") by a
nationally recognized reputable accounting firm ("Regular
Auditor"), and a sufficient number of copies of the Audited
Statements shall be furnished to Owner and Manager as soon as
available to permit Owner and Manager to meet any public
15
reporting requirements as may be applicable to them, but in no
event later than ninety (90) days following the end of such
fiscal period (such 90th day to be the "Audit Day"). All costs
and expenses incurred in connection with the preparation of the
Audited Statements shall be Operating Expenses. Nothing herein
contained shall prevent either party from designating an
additional reputable accounting firm ("Special Auditor") to
conduct an audit of the Riverboat as of the end of the calendar
year during regular business hours at the requesting party's
expense; provided, however, that if the additional audit shall
reveal a discrepancy within the control of Manager in the
computation of Gross Gaming Revenue of more than 5% from the
audit performed by the Regular Auditor, then the special audit
shall be paid for by Manager. In the event of any dispute
between the Regular Auditor and the Special Auditor as to any
item subject to audit, the Regular Auditor and the Special
Auditor shall select a third national, reputable accounting firm
whose resolution of such dispute shall bind the parties.
SECTION 4.04 MONTHLY FINANCIAL STATEMENTS. On or before
the thirtieth (30th) day of each month, Owner shall prepare under
the supervision of Manager an unaudited operating statement for
the preceding calendar month detailing the Gross Revenue and
expenses incurred in the operation of the Riverboat (the "Monthly
Financial Statements"). The Monthly Financial Statements shall
include a statement detailing drop figure accounts on all Gross
Gaming Revenue.
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SECTION 4.05 EXPENSES. All costs, expenses, funding or
operating deficits and Operating Capital, real property and
personal property taxes, insurance premiums and other liabilities
incurred due to the gaming and nongaming operations of the
Riverboat shall be the sole and exclusive financial
responsibility of Owner, except for those instances herein where
it is expressly and specifically stated that such costs and
expenses shall be the responsibility of Manager. It is
understood that statements herein indicating that Manager shall
furnish, provide or otherwise supply, present or contribute items
or services hereunder shall not be interpreted or construed to
mean that Manager is liable or responsible to fund or pay for
such items or services, except in those instances specifically
mentioned herein.
SECTION 4.06 STANDARDS.
(a) Manager shall exclusively manage and maintain the
Riverboat in a manner reasonably consistent with other riverboat
gaming operators in the management of riverboat casinos of the
same or similar type, class and quality, located in Missouri
subject to such adjustments as Manager in its reasonable
discretion deems necessary to adjust to the Randolph, Missouri
riverboat gaming market. Manager shall establish such standards
and procedures in its sole discretion, subject only to standards
and procedures required by law.
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(b) Owner hereby agrees that Manager shall have
uninterrupted control of and the exclusive responsibility for the
operation of the Riverboat during the Term of this Agreement.
Owner will not interfere or involve itself with the day-to-day
operation of the Riverboat, and Manager shall operate the
Riverboat free of eviction or disturbance by Owner or any third
party claiming by, through or under Owner. Manager acknowledges
that it is a fiduciary with respect to Owner, and agrees that it
will discharge its fiduciary duties and responsibilities in the
control and operation of the Casino in good faith and for the
purposes of maximizing Gross Gaming Revenue; provided, however,
that in no event shall Owner make any claim against Manager on
account of any alleged errors of judgment made in good faith in
connection with the operation of the Riverboat. Manager agrees
that, notwithstanding the foregoing, it shall not alter the
interior and exterior design and architecture, including color
schemes of the Casino, nor make any structural engineering
modifications without the prior written consent of Owner.
(c) All persons employed in connection with the
operations of the Riverboat, including the Casino located
therein, shall be employees of Owner or a subsidiary of Owner,
except for Manager's Management Team. Manager shall determine
the fitness and qualifications of all Casino employees, whether
Owner employees or Manager's Management Team, subject only to
Missouri riverboat gaming licensing standards. Manager shall
hire, supervise, direct the work of, and discharge all personnel
working in the Riverboat. Manager shall determine the wages and
18
conditions of employment of all employees, all of which shall be
comparable to the existing standards therefor in Missouri for
employees of riverboat casinos. Manager and Owner shall consult,
and if Owner approves, Manager may hire at Owner's expense
consultants or independent contractors for surveillance, security
and other matters. All wages, bonuses, compensation and
entitlements of employees of the Riverboat and the Manager's
Management Team (although not employees of the Riverboat) shall
be an expense of Owner.
(d) Manager shall assign experienced gaming executives
to direct and supervise the management of the Riverboat
("Manager's Management Team"). Manager shall solely select
individuals who shall collectively represent Manager's Management
Team.
(e) Manager shall formulate, coordinate and implement
promotions and sales programs for casino operations on the
Riverboat and Owner shall cause the Riverboat to participate in
such sales and promotional campaigns and, as appropriate,
activities involving complimentary food and beverages to patrons
of the Riverboat in Manager's sole discretion in the exercise of
good management practice. All such promotion and sales programs
shall be an expense of Owner.
SECTION 4.07 PLANS AND BUDGETS.
(a) Manager shall furnish Owner with the Casino
Operating Budget on or before July 1, 1995. Manager shall use
its best efforts to comply with the Casino Operating Budget to
meet or exceed the goals set forth therein. Manager and Owner
19
shall jointly prepare the Operating Budget on or before the
Commencement Date.
(b) Owner shall approve or disapprove the Casino
Operating Budget within 20 days of receipt of the budget,
provided that if Owner does not give written notice to Manager of
its approval or disapproval within such time period, the Casino
Operating Budget shall be deemed approved. Owner's approval of
the Casino Operating Budget cannot be unreasonably withheld or
delayed. Owner may hire a consultant to evaluate the Casino
Operating Budget. In the event that Owner disagrees with any
line item contained in the Casino Operating Budget, Owner shall
discuss its disagreement with Manager. Manager will, within 10
days of notice of Owner's disagreement, offer constructive
corrections to resolve Owner's concerns. During any period that
Owner disapproves of the Casino Operating Budget, Manager will
continue to manage the Riverboat in accordance with the Casino
Operating Budget for the preceding year as the same may be
adjusted for increases year-to-year in the Consumer Price Index
applicable to the Kansas City area.
(c) The Casino Operating Budget and the Operating
Budget may be amended from time to time with Owner's and
Manager's approval, which approvals shall not be unreasonably
withheld or delayed, after submission by Manager or Owner, as
applicable, of the amendments to such budgets and the rationale
for such amendments.
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(d) Manager and Owner make no guaranty, warranty or
representation whatsoever in regard to either of the Casino
Operating Budget or the Operating Budget, the same being intended
as reasonable estimates only.
(e) Manager shall furnish Owner with the Initial
Inventory and the Initial Inventory Price on or before July 1,
1995.
SECTION 4.08 MANAGEMENT. Manager shall have the discretion
and authority to determine operating policies and procedures,
standards of operating, staffing levels and organization, win-
payment arrangements, standards of service and maintenance, food
and beverage quality and service, pricing, and other policies
affecting the Riverboat, or the operation thereof, to implement
all such policies and procedures, and to perform any act on
behalf of Owner which Manager deems necessary or desirable in its
reasonable business judgment for the operation and maintenance of
the Riverboat on behalf of, for the account of, and at the
expense of Owner.
SECTION 4.09 BANK ACCOUNTS. Immediately upon giving
written notice to Manager of the Commencement Date, Owner shall
have established bank accounts that are necessary for the
operation of the Riverboat, including an account for the Casino
Bankroll, and to effect the Pre-Opening Plan at various banking
institutions chosen by Owner and reasonably acceptable to Manager
(such accounts are hereinafter collectively referred to as the
"Bank Accounts"). The Bank Accounts shall be in Owner's name.
Checks drawn on the Bank Accounts shall be signed only by
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representatives of Manager who are covered by the fidelity
insurance described in Section 10.02 and Manager may be the only
signatures on checks drawn on the Bank Accounts which do not
exceed $50,000. Any checks exceeding $50,000 shall be executed
by a representative of Owner and a representative of Manager.
The Bank Accounts shall be interest bearing accounts if such
accounts are reasonably available and all interest thereon shall
be credited to the Bank Accounts. All Gross Revenue shall be
deposited in the Bank Accounts and Manager shall use its best
efforts to cause Owner to pay out of the Bank Accounts, to the
extent of the funds therein, from time to time, all Operating
Expenses and other amounts required by Manager to perform its
obligations under this Agreement. All funds in the Bank Accounts
shall be separate from any other funds of any of Owner's
Affiliates and Owner may not commingle any of Owner's funds with
the funds of any of Owner's Affiliates in the Bank Accounts.
Owner shall bear the risk of the insolvency of any financial
institutions holding such Bank Accounts.
SECTION 4.10 CREDIT. If permitted by Missouri law, all
decisions regarding the granting and collection of credit shall
be governed by the Credit Policy to be developed by Manager and
Owner. All credit consistent with the Credit Policy shall be for
the account of and at the sole risk of Owner.
SECTION 4.11 OWNER'S ADVANCES. Owner shall advance to
Manager on a timely and prompt basis immediately available funds
to conduct the affairs of the Riverboat and maintain the
22
Riverboat (hereinafter referred to as "Owner's Advances") as set
forth in this Agreement and as otherwise provided hereunder.
(a) Pre-Opening Budget. Owner shall timely deposit in the
Bank Accounts the amounts set forth in the Pre-Opening Plan and
Pre-Opening Budget or any revisions thereof approved by Owner.
In the event that Owner or Manager anticipates a delay in the
opening of the Riverboat beyond September 1, 1995, each shall be
obligated to immediately notify the other in writing and Owner
shall, at the request of Manager, at any time and from time to
time, deposit any additional amounts that are reasonably
necessary to pay the additional pre-opening expenses attributable
to the delay, which shall include, without limitation, wages and
other expenses relating to the Riverboat personnel already
employed.
(b) Initial Cash Needs. Two (2) weeks prior to the
Commencement Date, Owner shall fund the Operating Capital
necessary to commence operating the Riverboat, in an amount not
to exceed the estimated operating expenses for eight (8) weeks,
as set forth in the Operating Budget, and an amount equal to the
Casino Bankroll.
(c) Operating Capital. During the Term of this Agreement,
within five (5) Business Days after receipt of written notice
from Manager, Owner shall fund Owner's Advances in such a fashion
so as to adequately insure that the Operating Capital set forth
in the Operating Budget as revised is sufficient to support the
uninterrupted and efficient ongoing operation of the Riverboat.
The written request for any additional Operating Capital shall be
23
submitted by Manager to Owner on a monthly basis based on the
interim statements and the Operating Budget as revised.
(d) Payment of Expenses. Owner shall pay from the Gross
Revenue the following items in the order of priority listed
below, subject to the laws of the state of Missouri, on or before
their applicable due date: (i) Operating Expenses (including
taxes and Management Fee), (ii) emergency expenditures to correct
a condition of an emergency nature, including structural repairs,
which require immediate repairs to preserve and protect the
Riverboat, (iii) required payments to the state of Missouri, and
(iv) principal, interest and other payments due the holder of any
Institutional Mortgage. In the event that funds are not
available for payment of the Operating Expenses in their entirety
all state and local taxes shall be paid first from the available
funds. Failure to pay the Management Fee in accordance with the
time periods set forth in this Agreement shall constitute a
default of this Agreement.
SECTION 4.12 SPECIAL EVENTS. Owner shall have the right
from time to time to use a portion of the Riverboat to host
special events (each, a "Special Event") provided (i) Owner gives
Manager at least two (2) weeks prior written notice of the
Special Event and (ii) the Special Event does not unreasonably
interfere with the efficient operation of the Riverboat. Manager
shall have the right to make revisions to the Operating Budget to
reflect the impact of such events, subject to Owner's approval.
SECTION 4.13 COOPERATION OF OWNER AND MANAGER. Owner and
Manager shall cooperate fully with each other during the Term of
24
this Agreement to facilitate the performance by Manager of
Manager's obligations and responsibilities set forth in this
Agreement and to procure and maintain all construction and
operating permits. Owner shall provide Manager with such
information pertaining to the Riverboat necessary to the
performance by Manager of its obligations hereunder as may be
reasonably and specifically requested by Manager from time to
time.
SECTION 4.14 FINANCING MATTERS.
(a) If Owner, or any Affiliate of Owner shall, at any time,
sell or offer to sell any securities issued by Owner or any
Affiliate of Owner through the medium of any prospectus or
otherwise and which relates to the Riverboat or its operation, it
shall do so only in compliance with all applicable laws, and
shall clearly disclose to all purchasers and offerees that,
except to the extent of Manager or its Affiliates' interest in
Owner, (i) neither Manager nor any of its Affiliates, officers,
directors, agents or employees shall in any way be deemed to be
an issuer or underwriter of such securities, and (ii) Manager and
its Affiliates, officers, directors, agents and employees have
not assumed and shall not have any liability arising out of or
related to the sale or offer of such securities, including
without limitation, any liability or responsibility for any
financial statements, projections or other information contained
in any prospectus or similar written or oral communication.
Manager shall have the right to approve any description of
Manager or its Affiliates, or any description of this Agreement
or of Owner's relationship with Manager hereunder, which may be
25
contained in any prospectus or other communications, and Owner
agrees to furnish copies of all such materials to Manager for
such purposes not less than twenty (20) days prior to the
delivery thereof to any prospective purchaser or offeree. Owner
agrees to indemnify, defend or hold Manager and its Affiliates,
officers, directors, agents and employees, free and harmless from
any and all liabilities, costs, damages, claims or expenses
arising out of or related to the breach of Owner's obligations
under this Section 4.14. Manager agrees to reasonably cooperate
with Owner in the preparation of such agreements and offerings.
(b) Notwithstanding the above restrictions, subject to
Manager's right of review set forth in Section 4.14, Owner may
represent that the Riverboat shall be managed by Manager and
Manager may represent that it manages the Riverboat and both may
describe the terms of this Agreement and the physical
characteristics of the Riverboat in regulatory filings and public
or private offerings. Moreover, nothing in this Section shall
preclude the disclosure of (i) already public information, or
(ii) audited or unaudited financial statements from the Riverboat
required by the terms of this Agreement or (iii) any information
or documents required to be disclosed to or filed with the
Governmental Authorities, or (iv) the amount of the Management
Fees earned in any period. Both parties shall use their best
efforts to consult with the other concerning disclosures as to
the Riverboat. Owner and Manager shall cooperate with each other
in providing financial information concerning the Riverboat and
26
Manager that may be required by any lender or required by any
Governmental Authority.
(c) In the event that the holder of any Institutional
Mortgage requires the collateral assignment of this Agreement as
further security for its loan, Manager shall consent to such
assignment; provided, however, that such collateral assignment
shall contain non-disturbance provisions satisfactory to Manager
and provided further that in no event shall Manager be required
to accept any reduction or subordination of its Management Fee
and Incentive Management Fee or to diminish any right which it
may have under this Agreement.
SECTION 4.15 CONFLICT OF INTEREST/NON-COMPETITION. Owner
acknowledges that Manager and/or its Affiliates operate other
casinos and may in the future operate additional casinos in
different areas of the world, and that marketing efforts may
cross over in the same markets and with respect to the same
potential customer base. Manager, in the course of managing the
Casino, may refer customers of the Riverboat and other parties to
other facilities operated by Affiliates of Manager to utilize
gaming, entertainment and other amenities, without payment of any
fees to Owner. Owner consents to such activities and agrees that
such activities will not constitute a conflict of interest.
Owner acknowledges and agrees that Manager may distribute
promotional materials for Manager's Affiliates and facilities,
including casinos, at the Riverboat. Either Manager or Owner
and/or their Affiliates in the future may acquire an interest or
27
operate other casinos, including, without limitation, any similar
or competitive riverboat operation, so long as such casino is not
within the boundaries surrounding Randolph, Missouri as shown on
the map attached hereto as Exhibit "A."
ARTICLE 5. MANAGEMENT FEE
SECTION 5.01 PAYMENTS TO MANAGER. The Management Fee shall
be paid monthly. Manager shall deposit the Management Fee into
the Management Fee Account for any calendar month in which the
Riverboat conducts gaming operations by the twentieth (20th) day
of the following month. The Management Fee shall be deemed paid
upon deposit in the Management Fee Account.
ARTICLE 6. MANAGER'S RIGHT OF FIRST REFUSAL TO MANAGE
RIVERBOAT
In the event that Owner transfers the Riverboat to conduct a
gaming business in a new location or locations other than on the
Missouri River in Randolph, Missouri, Owner hereby grants to
Manager a right of first refusal to manage the gaming operations
of the Riverboat at such new location. Should Owner determine to
so relocate the Riverboat, Owner shall immediately submit to
Manager in writing the terms of the management agreement
acceptable to Owner. Owner covenants and agrees that the terms
for the management agreement for such relocated Riverboat shall
be substantially similar to the terms hereof, with such changes
as are necessary to reflect the appropriate laws and regulations
governing gaming operations at such new location. The offer or
terms submitted hereby shall be accompanied by a written notice
28
giving Manager a first right to manage the relocated Riverboat
within the time provided in such offer, but in no event less than
thirty (30) days of the date upon which Manager receives from
Owner notification of such terms. If Manager elects to exercise
its right of first refusal, Manager shall give Owner written
notice thereof within thirty (30) days of receipt of the
notification from Owner and Manager and Owner shall prepare and
execute a management agreement for such relocated Riverboat
within sixty (60) days following Owner's receipt of acceptance by
Manager.
ARTICLE 7. REAL PROPERTY TAXES AND ASSESSMENTS, AND
PAYMENTS TO THE RIVERBOAT AUTHORITIES
SECTION 7.01 PAYMENT OF REAL ESTATE TAXES AND ASSESSMENTS.
Owner shall be responsible for the payment when due, if any, of
all property taxes and assessments, including, without
limitation, assessments for benefits from public works or
improvements, levies, fees, and all other governmental charges,
general or special, ordinary or extraordinary, foreseen or
unforeseen, together with interest and penalties thereon, which
may heretofore or hereafter be levied upon or assessed against
the Riverboat. All charges set forth in this Section 7.01 are
herein called "Impositions." If any Impositions are levied or
assessed against the Riverboat which may be legally paid in
installments, Owner shall have the option to pay such Impositions
in installments except that each installment thereof, and any
interest thereon, must be paid by the final date fixed for the
payment thereof.
29
In the event of the enactment, adoption or enforcement by
any governmental authority (including the United States, any
state and any political or governmental subdivision) of any
assessment, levy or tax, whether sales, use or otherwise, on or
in respect of the Management Fee and charges set forth herein,
Manager shall pay such assessment levy or tax.
SECTION 7.02 EXCEPTIONS. Nothing contained in this
Agreement shall be construed to require Owner to pay any estate,
inheritance or succession tax, any capital levy, corporate
franchise tax or any net income or excess profits tax of Manager.
ARTICLE 8. USE AND OCCUPANCY OF THE CASINO
SECTION 8.01 USES. Manager agrees to manage the Riverboat
continuously during the Term hereof only for the purpose of
legally operating a gaming casino establishment and related
ancillary services. Manager and Owner shall not use or allow the
Riverboat or any part thereof to be used or occupied for any
unlawful purpose or for any dangerous or other trade or business
not customarily deemed acceptable to relevant casinos. In no
event may Manager or Owner conduct ancillary uses which violate
the Missouri Gaming Act. In addition, Manager shall not
knowingly permit any unlawful occupation, business or trade to be
conducted on the Riverboat or any use to be made of the Casino
contrary to any law, ordinance or regulation as aforesaid with
respect thereto.
SECTION 8.02 NAME. Manager or its Affiliates (excluding
Owner) are the owners of the trademark "Showboat," its logos,
trademarks, tradenames, service marks, and any variation or
30
extension of such name (collectively "Trademark.") Manager shall
operate the Riverboat under the Trademark, and shall grant to
Owner a non-exclusive personal and non-transferable right to use
the Trademark in Randolph, Missouri in connection with the
operation of the Riverboat, pursuant to a trademark license
agreement satisfactory to Manager. Notwithstanding the
foregoing, Owner acknowledges that its use of the Trademark shall
not create in Owner's favor any right, title, or interest in or
to the Trademark, but all rights of ownership and control of the
Trademark shall reside solely in Manager.
ARTICLE 9. MAINTENANCE AND REPAIRS
SECTION 9.01 OWNER'S MAINTENANCE AND REPAIRS. Owner, at
its cost, shall maintain, in good condition and repair, the
following:
(a) The structural parts of the Riverboat;
(b) The electrical, plumbing, and sewage systems of
the Riverboat;
(c) Heating, ventilating, and air conditioning systems
servicing the Riverboat.
Owner shall have ten (10) days after notice pursuant to
Article 22 from Manager to commence to perform its obligations
under Section 9.01, except that (i) Owner shall perform its
obligations immediately upon receipt of oral notice from Manager
if the nature of the problem presents a hazard or emergency; or
(ii) Owner shall perform and complete its obligations within
twelve (12) hours after receipt of written or oral notice from
Manager if the nature of the problem interferes with gaming
operations in the Casino. If Owner does not perform its
31
obligations within the time limitations in this Section, Manager
may perform the obligations of Owner and have the right to be
reimbursed for the sum it actually expends in the performance of
Owner's obligations. Any amounts paid by Manager shall be due
from Owner on the first (1st) day of the month occurring after
any such payment, with interest at the rate of twelve percent
(12%) per annum from the date of payment thereof by Manager until
repayment thereof by Owner.
ARTICLE 10. INSURANCE AND INDEMNITY
SECTION 10.01 OWNER INSURANCE OBLIGATIONS. Owner covenants
and agrees that it will at all times stated herein, at its sole
cost and expense, of this Agreement, keep the Riverboat insured,
with:
(a) appropriate marine hull insurance coverage forms
to provide coverage for all risks as is traditionally covered by
such insurance. The marine hull insurance shall contain full
repair and replacement coverage and against all risks as now are
or hereafter may be available by extended coverage form or
endorsements in an amount not less than one hundred percent
(100%) of the full insurable replacement value of the Vessel.
Owner shall obtain such marine hull insurance coverage at the
time that it obtains possession of the Vessel, and Owner shall
maintain such insurance thereafter until the termination of this
Agreement.
(b) full repair and replacement coverage endorsements,
against all risks including, but not limited to, ice, floods and
earthquakes, and against loss or damage by such other, further
32
and additional risks as now are or hereafter may be available by
standard extended coverage forms or endorsements in an amount
sufficient to prevent Manager or Owner from becoming a co-insurer
of any loss, but in no event in an amount less than one hundred
percent (100%) of the full insurable replacement value of the
Riverboat. So long as Owner is not in default under this
Agreement, all proceeds of insurance not otherwise applied for
the purpose of repairing, replacing or restoring the damage
insured against or applied to an Institutional Mortgage shall be
paid over to Owner. Owner shall obtain such insurance coverage
at the time that it obtains possession of the Riverboat
(exclusive of the Vessel), and Owner shall maintain such
insurance thereafter until the termination of this Agreement.
(c) general comprehensive public liability insurance
including Broad Form Liability coverage (including coverage for
false arrest, wrongful detention and invasion of privacy, and
coverage for elevators, if any, on the Riverboat) against claims
for bodily injury, death or property damage occurring on, in or
about the Riverboat, the ancillary facilities and the adjoining
streets, sidewalks and passageways, such insurance to afford
protection, with respect to any one occurrence, of not less than
$1,000,000 and no less than $5,000,000 in the aggregate or such
higher amount as Owner and Manager may from time to time
reasonably agree to be maintained, which insurance shall also
cover Owner's liability under any indemnity contained herein, it
being understood that the standard of reasonableness shall be
that amount of insurance which a prudent owner of a comparable
33
property would maintain. Owner shall also obtain and maintain a
$40,000,000 umbrella liability policy in excess of the general
comprehensive public liability policy. Owner shall obtain such
general comprehensive public liability insurance at the time that
Owner employs its first employee, and Owner shall maintain such
insurance until the termination of this Agreement.
(d) adequate boiler and pressure vessel insurance on
all equipment, parts thereof and appurtenances attached or
connected to the Riverboat which by reason of their use or
existence are capable of bursting, erupting, collapsing or
exploding. Owner shall obtain such insurance at the time that it
obtains possession of the Vessel, and Owner shall maintain such
insurance thereafter until the termination of this Agreement.
(e) war-risk insurance as and when such insurance is
obtainable from the United States Government or any agency or
instrumentality thereof, and a state of war or national or public
emergency exists or threatens, in an amount not less than the 90%
of the replacement value of the Riverboat.
(f) such other insurance as Owner and Manager may from
time to time reasonably agree to be maintained or as may be
required by lenders of Owner in such amounts and against such
insurable hazards which at the time is customary in the case of
businesses similarly situated.
(g) for the mutual benefit of Owner and Manager,
maintain liquor liability insurance in an amount to be determined
34
by Owner, covering Manager and Owner under any liquor liability
laws which may currently be in existence or which may hereafter
be enacted as they would be applicable to Manager's operations of
the Riverboat. Owner shall obtain such insurance on or before
the Commencement Date, and Owner shall maintain such insurance
until the termination of the Agreement.
(h) all required workmen's compensation insurance or
equivalent Missouri industrial accident coverage, or coverages
required by the federal maritime act (a\k\a Jones Act). Owner
shall obtain such insurance at the time that Owner employs its
first employee, and Owner shall maintain such insurance until the
termination of this Agreement.
(i) business interruption resulting from losses
covered under policies covering land-based buildings and marine
water borne hull will be required in an amount sufficient to
protect losses for a period of six (6) months. Owner shall
obtain such insurance on or before the Commencement Date, and
Owner shall maintain such insurance until the termination of this
Agreement.
(j) crime insurance which includes fidelity and such
other crime coverages as may be desired in the amount of
$5,000,000. Owner shall obtain such insurance at the time that
Owner employs its first employee, and Owner shall maintain such
insurance until the termination of this Agreement.
SECTION 10.02 PARTIES INSURED. The policies with respect
to such insurance as described in Section 10.01 shall name Owner
and Manager as parties insured thereby and such policies shall
35
require all insurance proceeds except for liability and third
party insurance to be paid to a Trustee as designated pursuant to
Article 13. Such policies shall also contain, when requested by
Owner or Manager, a mortgagee clause or clauses naming the
mortgagee or mortgagees involved and/or the holder or such
mortgage or mortgages as parties insured thereby (in the form
required by such mortgagee or mortgagees) all as their respective
interests may appear and with loss payable provisions
accordingly.
SECTION 10.03 APPROVED INSURANCE COMPANIES. Insurance
procured under this Article 10 shall be placed with reputable,
financially sound insurance companies, with a Best guide rating
of A-10 admitted in the state of Missouri, acceptable to Owner
and Manager, as the parties may mutually agree.
SECTION 10.04 APPROVAL OF INSURANCE COVERAGE. Each year,
Manager and Owner shall submit to Manager a summary of the
insurance coverage maintained by Owner (including deductibles)
with respect to the Riverboat and Manager shall have thirty (30)
days thereafter to give its comments thereon to Owner. If Owner
receives no written comments from Manager within said period, the
insurance program shall be deemed approved for that year.
SECTION 10.05 FAILURE TO OBTAIN REQUIRED INSURANCE. In the
event Owner shall at any time fail, neglect, or refuse to
maintain any of the insurance required under the provisions of
this Article 10, then the Manager may procure or renew such
insurance, and any amounts paid therefor by the Manager shall be
due from the Owner on the first day of the month occurring after
any such payment, with interest at the rate of twelve percent
36
(12%) per annum from the date of payment thereof by the Manager
until repayment thereof to Manager by the Owner.
SECTION 10.06 WAIVER OF SUBROGATION. As long as the
insurer of a party is willing to include a waiver of subrogation
in the policies insuring against the loss or damages referred to
in this Article 10 without an extra charge, the parties shall
cause the waiver of subrogation to be included in the policies.
If an insurer of a party is willing to include a waiver of
subrogation in an insurance policy only if an extra charge is
paid, the party carrying the insurance shall be required to cause
the waiver of subrogation to be included in the policy only if
the other party pays the extra charge.
SECTION 10.07 MUTUAL COOPERATION.Owner shall cooperate with
Manager to the extent Manager may reasonably require, and Manager
shall cooperate with Owner to the extent Owner may reasonably
require in connection with the prosecution or defense of any
action or proceeding arising out of, or for the collection of any
insurance proceeds and will execute and deliver to Owner or
Manager, as the case may be, such instruments as may be properly
required to facilitate the recovery of any insurance proceeds
(including the endorsement by Owner or Manager over to the
Trustee of all checks evidencing said insurance proceeds).
SECTION 10.08 DELIVERY OF INSURANCE POLICIES. Owner shall
deliver, as applicable, promptly after the execution and delivery
of this Agreement the original or duplicate policies or
37
certificates of insurers satisfactory to Manager evidencing all
the insurance which is then required to be maintained by Owner
hereunder. Owner shall, within thirty (30) days prior to the
expiration of any such insurance, deliver to Manager original or
duplicate policies or other certificates of the insurers
evidencing the renewal of such insurance.
SECTION 10.09 INDEMNIFICATION BY MANAGER. Manager
covenants and agrees that it will protect, keep and defend Owner
forever harmless and indemnified against and from any penalty or
damage or charges imposed for any violation of any laws or
ordinances including, but not limited to, gaming statutes and
regulations, whether occasioned by the neglect of Manager or
those holding under Manager, and that Manager will at all times
protect, indemnify and save and keep Owner harmless against and
from any and all claims and against and from any and all loss,
cost, damage or expense, including reasonable attorneys' fees,
arising out of any failure of Manager in any respect to comply
with and perform all the requirements and provisions hereof
except where any penalty, damage, charges, loss, cost or expense
is caused by the sole or negligent or the wanton or willful acts
of Owner's directors, officers, employees, agents or
stockholders. Without limiting the generality of the foregoing
and with the inclusion of the same exceptions as set forth above,
Manager covenants and agrees that it will protect, keep and
defend Owner forever harmless and indemnified against any and all
debt, claim, demand, suit or obligation of every kind, character
38
and description which may be asserted, claimed, filed or brought
against Owner where such claim arises out of or is asserted in
connection with Manager's management of the Casino, including any
claim by any subtenant, guest, licensee or invitee of Manager.
This indemnity does not apply to loss or damage occasioned by
defects in the Riverboat.
SECTION 10.10 INDEMNIFICATION BY OWNER. Owner covenants
and agrees that it will protect, keep and defend Manager forever
harmless and indemnified against and from any penalty or damage
or charges imposed for any violation of any laws or ordinances
including, but not limited to, gaming statutes and regulations,
whether occasioned by the neglect of Owner or those holding under
Owner, and that Owner will at all times protect, indemnify,
defend and save and keep harmless Manager against and from any
and all claims and against and from any and all loss, cost,
damage or expense, including reasonable attorneys' fees, arising
out of any failure of Owner in any respect to comply with and
perform all the requirements and provisions hereof except where
any penalty, damage, charges, loss, cost or expense is caused by
the negligent or the wanton or willful acts of Manager's
officers, agents, employees or stockholders. Without limiting
the generality of the foregoing, and with the inclusion of the
same exceptions as set forth above, Owner covenants and agrees it
will protect, keep and defend Manager forever harmless and
indemnified against any and all debt, claim, demand, suit or
obligation of every kind, character and description which may be
asserted, claimed, filed or brought against Manager where such
claim arises out of or is asserted in connection with Owner's
39
ownership of the Riverboat. This indemnity does not apply to
loss or damage occasioned by defects in the Riverboat.
SECTION 10.11 SELECTION OF COUNSEL/CONDUCT OF LITIGATION.
Defense counsel engaged by Manager or Owner, as indemnitor, shall
be reasonably acceptable to Manager and Owner, as indemnitee.
Without limiting the generality of the foregoing, indemnitee
shall be promptly provided with copies of all claims and
pleadings (as well as correspondence, memos, documents and
discovery with respect thereto, unless within the scope of any
applicable privilege) relating to any such matters. Indemnitee
shall be given prior written notice of all meetings, conferences
and judicial proceedings and shall be afforded an opportunity to
attend and participate in same. Indemnitee shall have the right
to engage independent counsel, at its sole expense, to represent
indemnitee as additional and/or co-counsel in all such
proceedings, trials, appeals and meetings with respect thereto.
ARTICLE 11. CASUALTY
In case of any damage or loss to the Riverboat by reason of
fire or otherwise, Manager shall give immediate notice thereof to
Owner. If the Riverboat shall at any time be damaged or
destroyed by fire or otherwise, Owner shall at its sole option
either (i) promptly repair or rebuild same at Owner's expense, so
as to make the Riverboat at least equal in value to the Riverboat
existing immediately prior to such occurrence and as nearly
similar to it in quality and character as shall be practicable
40
and reasonable or (ii) if dockside gaming is permitted under the
laws of the state of Missouri, promptly construct a barge in
compliance with all regulations of the Riverboat Authorities.
Owner shall submit for Manager's approval, which approval Manager
shall not unreasonably withhold or delay, complete detailed plans
and specifications for such rebuilding or construction. Promptly
after receiving Manager's approval of said plans and
specifications, Owner shall begin such repairs and rebuilding and
shall prosecute the same to completion with diligence, subject,
however, to strikes, lockouts, acts of God, embargoes,
governmental restrictions, and other foreseeable causes beyond
the reasonable control of Owner. Insofar as a certificate of
occupancy may be necessary with respect to such repairs or
construction, Owner shall obtain a temporary or final certificate
of occupancy or similar certificate before the Riverboat shall be
occupied by Manager. Such repairs, rebuilding or construction
shall be completed free and clear of mechanics' or other liens,
in accordance with the building code and all applicable laws,
ordinances, regulations or orders of any state, municipal or
other public authority affecting the same.
ARTICLE 12. TAKING OF THE RIVERBOAT
SECTION 12.01 DEFINITIONS.
(a) "Permanent Taking" means the permanent taking
(more than one year) of, or permanent damage to, property as a
result of the exercise of a power of eminent domain or purchase
under the threat of the exercise.
41
(b) "Temporary Taking" means the temporary taking (one
year or less) of, or temporary damage to, property as a result of
the exercise of a power of eminent domain or purchase under the
threat of the exercise.
(c) "Taking Date" means the date on which a condemning
authority shall have the right of possession of property pursuant
to a Permanent Taking or a Temporary Taking.
(d) "Award" means the award for, or proceeds of, a
taking less all fees and expenses incurred in connection with
collecting the award or proceeds including the reasonable fees
and disbursements of attorneys, appraisers, and expert witnesses.
SECTION 12.02 ENTIRE TAKING OF THE SUPPORT AREAS. The
following shall apply if all or a part of the Riverboat are taken
pursuant to a Permanent Taking or a Temporary Taking:
(a) Owner shall be entitled to any Award.
(b) If all of the Riverboat is taken pursuant to a
Permanent Taking, this Agreement shall be terminated as of the
Taking Date.
(c) If all or such portion of the Riverboat is taken
pursuant to a Permanent Taking which renders it uneconomic to
continue operation of the Riverboat in Manager's reasonable
judgment, Manager shall have the option to terminate this
Agreement by giving Owner notice of termination within ten (10)
days after Owner gives Manager notice of the Permanent Taking.
This Agreement will terminate five (5) days after Manager
delivers its written termination notice to Owner.
42
(d) If all or a part of the Riverboat is taken
pursuant to a Temporary Taking, Manager shall have the option to
terminate this Agreement by giving Owner notice of termination
within ten (10) days after Owner gives Manager notice of the
Temporary Taking. This Agreement will terminate five (5) days
after Manager delivers its written termination notice to Owner.
SECTION 12.03 DUTY TO RESTORE. If part of the Riverboat is
taken pursuant to a Permanent Taking and this Agreement is not
terminated, then Owner shall restore the Riverboat to an
architectural unit as near as possible to its function and
condition immediately prior to the Permanent Taking. The
restoration shall begin promptly after the Taking Date and shall
be prosecuted diligently. If a party shall have a option to
terminate with respect to the Permanent Taking, then Owner may
delay the beginning of the restoration until the option is waived
or until the time within which the option may be exercised
expires.
ARTICLE 13. DISPOSITION OF INSURANCE PROCEEDS AND AWARDS
SECTION 13.01 TRUSTEE. If the Riverboat is encumbered by an
Institutional Mortgage, the "Trustee" shall be the Institutional
Mortgagee or a national bank designated by such mortgagee. If
the Riverboat is not encumbered by an Mortgage, the "Trustee"
shall be a commercial bank which maintains an office in the
greater Kansas City metropolitan area and the total assets of
which exceed $1 billion, and the Trustee shall be selected by
Owner subject to the reasonable approval of Manager. An
"Institutional Mortgage" is a Mortgage granted to an Institution.
An "Institution" is a bank, insurance company, trust company,
43
savings and loan association, real estate investment trust,
pension trust, governmental entity or similar institution. An
"Institutional Mortgagee" is the holder of Mortgage of Owner's
interest in the Riverboat.
SECTION 13.02 DEPOSITS OF INSURANCE PROCEEDS AND AWARDS.
In the event this Agreement is not terminated all insurance
proceeds and Awards shall be paid to the Trustee. If this
Agreement is terminated, all Insurance Proceeds and Awards shall
be paid to Owner and Manager as their interests may apply. All
funds paid to the Trustee shall be held by the Trustee, and the
Trustee shall disburse them solely in accordance with this
Article.
SECTION 13.03 PROCEDURE FOR DISTRIBUTION OF INSURANCE
PROCEEDS AND AWARDS. The following shall apply unless this
Agreement is terminated and the termination is not nullified.
(a) The Trustee shall make payments to Owner or
Manager, as appropriate, out of the insurance proceeds or Awards
to be applied to the cost of repair or restoration. The payments
shall be made as the repair or restoration progresses.
(b) The Trustee shall comply with the following
requirements which shall be contained in escrow instructions, if
required by the Trustee, with respect to the payments:
(i) The Trustee shall not make payments more
frequently than once each month.
(ii) Until the repair or restoration is complete,
the Trustee shall make no payment unless the sum of the payment
44
requested and all previous payments shall be less than ninety
percent (90%) of the cost of the repair or restoration to date.
(iii) The Trustee shall make no payment unless
the balance of the insurance proceeds or Awards shall be at least
sufficient to complete the repair or restoration.
(iv) The Trustee shall make no payment unless it
receives a certificate of Owner or Manager, as appropriate, and a
certificate of Owner's or Manager's architect or engineer, as
appropriate, in accordance with part (c) of this subsection.
(v) The Trustee shall receive, prior to any
payment, a certificate from the Title Insurance Company stating
that there are no liens filed of record.
(c) The certificate of Owner or Manager shall be
certified as true and correct by an officer of Owner or Manager
and shall set forth the following information:
(i) The estimated cost of the repair or
restoration.
(ii) The nature of the work to be done and the
materials furnished which form the basis for the requested
payments.
(iii) That the requested payment does not exceed
the reasonable cost of the work and materials.
(iv) That none of the work or materials has been
made the basis for any previous payment.
45
(v) That, insofar as the work has been completed,
the work complies with the requirements of this Agreement,
applicable legal requirements, and insurance requirements.
(vi) That all contractors, laborers, suppliers
and subcontractors that have performed work shall have been paid
any amount then payable to them.
(d) The architect's or engineer's certificates shall
be certified by an architect or engineer familiar with the work.
The certificate shall be certified as true and correct to the
best of the knowledge, information and belief of the architect or
engineer and shall be based upon periodic on-site inspections of,
and testing by, the architect or engineer. The architect or
engineer selected by one party shall be reasonably satisfactory
to the other party. The architect or engineer shall certify
that, in the opinion of the architect or engineer, the Trustee
shall have complied with the requirements of clauses (ii) and
(iii) of part (b) of this subsection; shall verify that the
statements set forth in clauses (iii), (iv) and (v) of part (c)
of this subsection are true; and shall set forth the information
required by clauses (i) and (ii) of part (c) of this subsection.
(e) Any balance of insurance proceeds or Awards after
the cost of any repair or restoration shall have been paid in
full shall be paid to Owner or Manager, as their interests
appear, and shall be the sole property of such party.
46
ARTICLE 14. ASSIGNMENT AND SUBLETTING
Except as provided in Section 4.14(c), neither Owner or
Manager shall assign this Agreement or any interest therein
without the prior written consent of the other party, which
consent shall not be unreasonably withheld. However, Manager may
assign or transfer this Agreement to any Affiliate, provided,
that a counterpart original of such assignment is delivered to
Owner on or before the effective date of such assignment, and
provided further that such Affiliate expressly assumes and
agrees to be bound by all of the terms and conditions of this
Agreement.
ARTICLE 15. AFFIRMATIVE COVENANTS OF MANAGER
Manager hereby covenants and agrees that so long as this
Agreement remains in effect:
SECTION 15.01 CORPORATE STATUS. Manager shall preserve and
maintain its corporate rights, franchises and privileges in
Nevada and Missouri.
SECTION 15.02 COMPLIANCE WITH LAWS. Manager shall comply
in all material respects with all applicable laws, rules,
regulations and orders of all states, counties, and
municipalities in which such party conducts business related to
the Riverboat, including, without limitation, any laws, rules,
regulations, orders and requests for information of the Riverboat
Authorities, the Nevada Gaming Authorities, the New Jersey Casino
Control Commission, and the New South Wales Casino Control
Authority. Manager shall also follow applicable federal laws,
rules, and regulations.
47
In connection with this Agreement, Manager acknowledges that
certain casino gaming licenses are currently issued to and held
by Owner's Affiliates, and Owner's Affiliates may in the future
apply for gaming licenses in additional states or foreign
countries. The laws of such jurisdictions may require Owner's
Affiliates to disclose private or otherwise confidential
information about Manager and its respective principals, lenders
and Affiliates. Manager agrees to refrain from all conduct that
may negatively affect such licenses or license applications.
Manager further agrees that this Agreement shall terminate
immediately at Owner's option if any representative, agent or
Affiliate of Manager is required to be licensed, qualified or
found suitable by any gaming authority where it is currently
licensed and is denied such status by such gaming authority;
provided, however, that upon the termination of any such
agreement, Owner shall be obligated to reimburse Manager
immediately for any Management Fees and all other amounts due to
Manager under this Agreement.
SECTION 15.03 GAMING APPROVALS. Manager shall use its best
efforts to obtain the approval of the Nevada Gaming Authorities,
the New Jersey Casino Control Commission, the Louisiana Gaming
Division of State Police, and the New South Wales Casino Control
Authority to permit it to conduct gaming operations in the state
of Missouri and shall use its best efforts to secure and maintain
such approvals necessary for the conduct of gaming operations at
the Casino.
48
SECTION 15.04 CONFIDENTIAL INFORMATION. Manager agrees for
itself and its Affiliates, agents, representatives and
consultants to hold in the strictest confidence and not to
disclose to any person, entity, party, firm or corporation (other
than agents or representatives of Manager who are also bound by
this section) without the prior express written consent of Owner
(except as such disclosures are required in applications or by
applicable securities or gaming laws) any of Owner's confidential
data, whether related to the Riverboat or to general business
matters, which shall come into their possession or knowledge. In
addition, Manager agrees that it shall cause all documents,
drawings, plans or other materials developed by Owner in
connection with the Riverboat to be returned to the Owner in the
event of termination of this Agreement and that Manager shall not
make use of such information in connection with the Riverboat or
any other undertaking by Manager without the prior express
written consent of Owner.
SECTION 15.05 GAMING APPLICATIONS. Manager agrees to use
its best efforts to expeditiously prepare and file all gaming
license applications necessary for it to perform its obligations
under this Agreement.
ARTICLE 16. AFFIRMATIVE COVENANTS OF OWNER
Owner hereby covenants and agrees that so long as this
Agreement remains in effect:
SECTION 16.01 CORPORATE STATUS. Owner shall preserve and
maintain its corporate rights, franchises and privileges in
49
Nevada and Missouri, including without limitation its right to
own a gaming establishment.
SECTION 16.02 MAINTENANCE OF INSURANCE. Owner shall, in
accordance with the provisions of Article 10 of this Agreement,
maintain insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks
as are usually carried by companies engaged in similar business
and owning similar properties in the same general area in which
Owner operates, and which may be necessary to satisfy the
requirements of Owner's lenders, as well as the mutual approvals
and agreements of the parties hereto as is specified in Article
10 hereof.
SECTION 16.03 COMPLIANCE WITH LAWS. Owner shall comply in
all material respects with all applicable laws, rules,
regulations and orders of all states, counties, and
municipalities in which such party conducts business related to
the Riverboat, including, without limitation, any laws, rules,
regulations, orders and requests for information of the Riverboat
Authorities, the Nevada Gaming Authorities, the New Jersey Casino
Control Commission, and the New South Wales Casino Control
Authority. Owner shall also follow applicable federal laws,
rules, and regulations.
In connection with this Agreement, Owner acknowledges that
certain casino gaming licenses are currently issued to and held
by Manager's Affiliates by the States of Nevada, Louisiana and
New Jersey, and the State of New South Wales, Australia, and
Manager or its Affiliates may in the future apply for gaming
licenses in additional states or foreign countries. The laws of
50
such jurisdictions may require Manager to disclose private or
otherwise confidential information about Owner and its respective
principals, lenders and Affiliates. Owner agrees to refrain from
all conduct that may negatively affect such licenses or license
applications. Owner further agrees that this Agreement shall
terminate immediately at Manager's option if any representative,
agent or Affiliate of Owner is required to be licensed, qualified
or found suitable by Nevada, New Jersey, Louisiana, New South
Wales or other gaming authority and is denied such status by such
gaming authority; provided, however, that upon the termination of
any such agreement, Owner shall be obligated to reimburse Manager
immediately for any Management Fees and all other amounts due to
Manager under this Agreement.
SECTION 16.04 COOPERATION WITH GAMING AUTHORITIES. Owner
shall use its best efforts to cause its officers, directors,
employees and stockholders to provide any gaming authority which
governs or may govern gaming facilities of Affiliates of Manager
with necessary documents and information.
SECTION 16.05 CONFIDENTIAL INFORMATION. Owner agrees for
itself and its Affiliates, agents, representatives and
consultants to hold in the strictest confidence and not to
disclose to any person, entity, party, firm or corporation (other
than agents or representatives of Owner who are also bound by
this section) without the prior express written consent of
Manager (except as such disclosures are required in applications
or by applicable securities or gaming laws) any of Manager's
51
confidential data, whether related to Riverboat or to general
business matters, which shall come into their possession or
knowledge. In addition, Owner agrees that it shall cause all
documents, drawings, plans or other materials developed by
Manager in connection with the Riverboat to be returned to the
Manager in the event of termination of this Agreement and that
Owner shall not make use of such information in connection with
the Riverboat or any other undertaking by Owner without the prior
express written consent of Manager.
SECTION 16.06 COMPLIANCE WITH LOAN COVENANTS. Owner shall
comply with and be bound by and shall not breach or default under
any of the terms, covenants or provisions of any mortgage, loan,
financing or debt covenant applicable to it.
SECTION 16.07 NON-INTERFERENCE. Owner agrees and shall use
its best efforts to cause its shareholders, directors, officers,
and employees to not interfere with or attempt to influence
Casino day-to-day operations (except in accordance with this
Agreement).
SECTION 16.08 GAMING APPLICATIONS. Owner agrees to use its
best efforts to expeditiously prepare and file all gaming license
applications necessary for it to perform its obligations under
this Agreement.
ARTICLE 17. REPRESENTATIONS AND WARRANTIES
SECTION 17.01 OWNER CORPORATE STATUS. Owner represents and
warrants that it is a corporation duly organized, validly
existing and in good standing under the laws of the state of
Nevada and qualified to do business in Missouri, that Owner has
full corporate power and authority to enter into this Agreement
52
and perform its obligations hereunder, and that the officers of
Owner who executed this Agreement on behalf of Owner are in fact
officers of Owner and have been duly authorized by Owner to
execute this Agreement on its behalf.
SECTION 17.02 MANAGER CORPORATE STATUS. Manager represents
and warrants that it is a corporation duly organized, validly
existing and in good standing under the laws of the state of
Nevada, and qualified to do business in the State of Missouri,
that Manager has full corporate power and authority to enter into
this Agreement and perform its obligations hereunder, and that
the officers of Manager who executed this Agreement on behalf of
Manager are in fact officers of Manager and have been duly
authorized by Manager to execute this Agreement on its behalf.
SECTION 17.03 AUTHORIZATION/NO CONFLICT. The execution,
delivery and performance by Owner and Manager, as applicable, of
this Agreement has been duly authorized by all necessary
corporate action (including any necessary stockholder action) on
the part of Owner and Manager, as applicable, and no further
action or approval is required in order to constitute this
Agreement as the valid and binding obligations of Owner and
Manager, enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by Owner
and Manager, as applicable, does not and will not (a) violate or
conflict with any provisions of their respective articles of
incorporation or bylaws, or of any law, rule, regulation of the
Riverboat Authorities, or any order, writ, judgment, decree,
determination, or award presently in effect having applicability
53
to Owner or Manager; (b) result in a breach of any condition or
provision of, or constitute a default under, any indenture, loan
or credit agreement or any other agreement or instrument to which
Owner or Manager is a party or by which Owner or Manager may be
bound or affected; or (c) result in, or require, the creation or
imposition of any lien, claim, charge or encumbrance of any
nature upon or with respect to any of the properties now owned or
hereafter acquired by Owner or Manager.
SECTION 17.04 PERMITS/APPROVALS. Owner and Manager possess
adequate franchises, licenses, permits, orders and approvals of
all federal, state and local governmental or regulatory bodies
required for them to carry on their businesses as presently
conducted; all of such franchises, licenses, permits, orders and
approvals are in full force and effect, and no suspension or
cancellation of any of them is threatened; and none of such
franchises, licenses, permits, orders or approvals will be
adversely affected by the consummation of the transactions
contemplated by this Agreement.
SECTION 17.05 ACCURACY OF REPRESENTATIONS. No
representation or warranty of Owner or Manager in this Agreement
nor any information, exhibit, memorandum, schedule or report
furnished by Owner or Manager in connection with this Agreement
contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements of fact
contained therein not misleading.
SECTION 17.06 DEVELOPMENT PLANS. Unless Owner is prevented
or delayed from disclosing any such report or study by law or by
54
any applicable rules or regulations of governmental agencies or
bodies, Owner covenants to make available immediately or at the
expiration of the restriction to Manager, or to Manager's
authorized agents, any and all reports and feasibility studies
related to the development of the Riverboat. Owner shall make
such reports and studies available for copying by Manager, at
Manager's expense. Unless Manager is prevented or delayed from
disclosing any such report or study by law or by any applicable
rules or regulations of governmental agencies or bodies, Manager
covenants that it shall make available for copying by Owner any
report or feasibility studies related to the Casino upon
completion of the same upon the request of Owner.
SECTION 17.07 MAINTENANCE OF GAMING AND OTHER LICENSES.
Owner and Manager agree to provide the other party with copies of
all applications, reports, letters, and other documents filed or
provided to the Riverboat Authorities. Both parties agree to use
their best efforts to secure and maintain any license needed for
the operation of the Casino.
SECTION 17.08 FINANCINGS; GOVERNMENTAL APPROVAL. Owner
will use its best efforts to obtain financing and all necessary
licenses, permits and approvals from various governmental
authorities with respect to the construction of the Riverboat, if
applicable.
SECTION 17.09 CONDITION OF RIVERBOAT DURING TERM. During
the Term of this Agreement, Owner shall maintain the Riverboat in
first-class condition and repair. All areas of the Riverboat
55
shall be adequately illuminated and adequately patrolled by
security guards.
SECTION 17.10 UTILITIES. At the time Manager takes
possession of the Riverboat, all necessary utilities, including
electricity, water, sewerage and gas, will be available.
SECTION 17.11 IMPAIR REPUTATION. Owner will do nothing to
embarrass or impair Manager's good name and reputation. Manager
will do nothing to embarrass or impair Owner's good name and
reputation.
ARTICLE 18. ARBITRATION
SECTION 18.01 APPOINTMENT OF ARBITRATORS. IF ANY DISPUTE
SHALL ARISE OR IF ANY ISSUE LEFT OPEN HEREUNDER CANNOT BE
RESOLVED BETWEEN THE PARTIES HERETO, SUCH DISPUTE IS TO BE
REFERRED FIRST TO A COMMITTEE OF FOUR PERSONS WHO SHALL MEET IN
AN ATTEMPT TO RESOLVE SAID DISPUTE OR OPEN ISSUE. THE COMMITTEE
SHALL CONSIST OF TWO PERSONS APPOINTED BY OWNER AND TWO PERSONS
APPOINTED BY MANAGER. IF AN AGREEMENT CANNOT BE REACHED TO
RESOLVE THE DISPUTE BY THE COMMITTEE, THE DISPUTE OR OPEN ISSUE
WILL BE RESOLVED BY BINDING ARBITRATION BEFORE ARBITRATORS HAVING
NOT LESS THAN 10 YEARS EXPERIENCE IN THE GAMING INDUSTRY. ANY
AWARD OF THE ARBITRATORS MAY BE FILED IN A COURT OF LAW AS A
FINAL JUDGMENT. ANY SUCH ARBITRATION SHALL BE IN ACCORDANCE WITH
THE RULES AND REGULATIONS ADOPTED BY THE AMERICAN ARBITRATION
ASSOCIATION OR AS THE PARTIES OTHERWISE AGREE. EITHER PARTY MAY
SERVE UPON THE OTHER PARTY A WRITTEN NOTICE OF THE DEMAND DISPUTE
OR APPRAISAL TO BE RESOLVED PURSUANT TO THIS ARTICLE. WITHIN
THIRTY (30) DAYS AFTER THE GIVING OF SUCH NOTICE, EACH OF THE
56
PARTIES HERETO SHALL NOMINATE AND APPOINT AN ARBITRATOR (OR
APPRAISER, AS THE CASE MAY BE) AND SHALL NOTIFY THE OTHER PARTY
IN WRITING OF THE NAME AND ADDRESS OF THE ARBITRATOR SO CHOSEN.
UPON THE APPOINTMENT OF THE TWO ARBITRATORS AS HEREINABOVE
PROVIDED, SAID TWO ARBITRATORS SHALL FORTHWITH, WITHIN FIFTEEN
(15) DAYS AFTER THE APPOINTMENT OF THE SECOND ARBITRATOR, AND
BEFORE EXCHANGING VIEWS AS TO THE QUESTION AT ISSUE, APPOINT IN
WRITING A THIRD ARBITRATOR ("SELECTED ARBITRATOR") AND GIVE
WRITTEN NOTICE OF SUCH APPOINTMENT TO EACH OF THE PARTIES HERETO.
IN THE EVENT THAT THE TWO ARBITRATORS SHALL FAIL TO APPOINT OR
AGREE UPON THE SELECTED ARBITRATOR WITHIN SAID FIFTEEN (15) DAY
PERIOD, THE SELECTED ARBITRATOR SHALL BE SELECTED BY THE PARTIES
THEMSELVES IF THEY SO AGREE UPON SUCH SELECTED ARBITRATOR WITHIN
A FURTHER PERIOD OF TEN (10) DAYS. IF A SELECTED ARBITRATOR
SHALL NOT BE APPOINTED OR AGREED UPON WITHIN THE TIME HEREIN
PROVIDED, THEN EITHER PARTY ON BEHALF OF BOTH MAY REQUEST SUCH
APPOINTMENT BY THE AMERICAN ARBITRATION ASSOCIATION (OR ITS
SUCCESSOR OR SIMILAR ORGANIZATION IF THE AMERICAN ARBITRATION
ASSOCIATION IS NO LONGER IN EXISTENCE). OWNER AND MANAGER SHALL
SHARE EQUALLY THE COST OF THE SELECTED ARBITRATOR. SAID
ARBITRATORS SHALL BE SWORN FAITHFULLY AND FAIRLY TO DETERMINE THE
QUESTION AT ISSUE. THE ARBITRATORS SHALL AFFORD TO OWNER AND
MANAGER A HEARING AND THE RIGHT TO SUBMIT EVIDENCE, WITH THE
PRIVILEGE OF CROSS-EXAMINATION, ON THE QUESTION AT ISSUE, AND
SHALL WITH ALL POSSIBLE SPEED MAKE THEIR DETERMINATION IN WRITING
AND SHALL GIVE NOTICE TO THE PARTIES HERETO OF SUCH
DETERMINATION. THE CONCURRING DETERMINATION OF ANY TWO OF SAID
57
THREE ARBITRATORS SHALL BE BINDING UPON THE PARTIES, OR, IN CASE
OF NO TWO OF THE ARBITRATORS SHALL RENDER A CONCURRING
DETERMINATION, THEN THE DETERMINATION OF THE SELECTED ARBITRATOR
SHALL BE BINDING UPON THE PARTIES HERETO. EACH PARTY SHALL PAY
THE FEES OF THE ARBITRATOR APPOINTED BY IT, AND THE FEES OF THE
SELECTED ARBITRATOR SHALL BE DIVIDED EQUALLY BETWEEN OWNER AND
MANAGER.
SECTION 18.02 INABILITY TO ACT. In the event that an
arbitrator appointed as aforesaid shall thereafter die or become
unable or unwilling to act, his successor shall be appointed in
the same manner provided in this Article for the appointment of
the arbitrator so dying or becoming unable or unwilling to act.
ARTICLE 19. DEFAULT/STEP-IN RIGHTS
SECTION 19.01 DEFINITION. The occurrence of any one or
more of the following events which is not cured within the time
permitted shall constitute a default under this Agreement
(hereinafter referred to as a "Default" or an "Event of Default")
as to the party failing in the performance or effecting the
breaching act.
SECTION 19.02 MANAGER'S DEFAULTS. If Manager shall (a)
fail to perform or materially comply with any of the covenants,
agreements, terms or conditions contained in this Agreement
applicable to Manager (other than monetary payments) and such
failure shall continue for a period of thirty (30) days after
written notice thereof from Owner to Manager specifying in detail
the nature of such failure, or, in the case such failure is of a
58
nature that it cannot, with due diligence and good faith, be
cured within thirty (30) days, if Manager fails to proceed
promptly and with all due diligence and in good faith to cure the
same and thereafter to prosecute the curing of such failure to
completion with all due diligence within ninety (90) days
thereafter, or (b) take or fail to take any action to the extent
required of Manager under this Agreement that creates a default
under or breach of any Loan Document, any related contract or any
requirement of the Riverboat Authorities, unless Manager cures
such default or breach prior to the expiration of applicable
notice, grace and cure periods, if any; provided, however, that
Manager shall only be required to cure any defaults with respect
to which Manager has a duty hereunder. If the only result of the
failure by Manager to act is a monetary loss to Owner which is
not otherwise capable of being cured by Manager, then Manager
shall not be in Default if Manager reimburses Owner for such
losses within ten (10) Business Days of incurring such loss or
otherwise protects Owner against such loss in a manner reasonably
acceptable to Owner.
SECTION 19.03 STEP-IN RIGHTS. (a) If Owner funds are
available, and Manager fails to pay when due any amount which it
is Manager's responsibility to pay pursuant to this Agreement,
then Owner, after five (5) Business Days written notice to
Manager with respect to any Operating Expense, and with respect
to non-Operating Expense with such notice, if any, as may be
reasonable under the circumstances (except in the event that
Manager has exposure to potential liability in connection with
making such payments in which case Owner shall give Manager two
59
(2) days written notice), and without waiving or releasing
Manager from any responsibility of Manager hereunder, Owner may
(but shall not be required to) pay such amounts (including fines,
penalty, interest and late payment fees) and take all such action
as may be necessary in respect thereof. Manager shall, following
such payments by Owner, promptly reimburse Owner from the Bank
Accounts to the extent funds are available the amount which
Manager failed to pay when due. In addition, unless Manager has
not acted with reasonable diligence in failing to make such
payments then, to the extent that Manager's lack of reasonable
diligence in this connection has resulted in fines, penalty,
interest or late payment fees in excess of Twenty-Five Thousand
Dollars ($25,000) in any twelve (12) month period, then Manager
shall immediately disburse to Owner from Gross Revenue, following
such payments by Owner, such amounts as may be necessary to
reimburse Owner for such payments and Manager shall promptly
deposit into the appropriate Bank Accounts, from Manager's own
funds, the full amount of any fines, penalty, interest or late
payment fees paid in connection therewith.
(b) If Manager fails to take any action which it is
Manager's responsibility under this Agreement to take and the
result is to expose the Riverboat to a material loss or Riverboat
patrons to a material risk of physical safety, then Owner, upon
five (5) days written notice to Manager (except in any emergency
in which case Owner shall give Manager such notice, if any, as is
reasonable under the circumstances), without saving or releasing
60
Manager from any obligation of Manager hereunder, may (but shall
not be required to) take such actions as may be necessary to
preserve Owner's assets from such a material loss and/or to
protect the Riverboat patrons. Manager shall, following any
payments by Owner made with respect to such actions, promptly
reimburse Owner from the Bank Accounts, to the extent funds are
available, the amount which Owner has expended. In addition,
unless Manager has acted with reasonable diligence in failing to
take such action then, to the extent that Manager's lack of
reasonable diligence in this connection has resulted in fines or
late payment fees in excess of Twenty-Five Thousand Dollars
($25,000) in any twelve month period, then Manager shall
immediately disburse to Owner from Gross Revenue, following
payment of such amounts by Owner, such amounts as are necessary
to reimburse Owner for any fines or late payment fees by Owner in
connection with taking such action on Manager's behalf and
Manager shall also deposit into the appropriate Bank Account,
from Manager's own funds, the full amount of such payment made to
Owner.
SECTION 19.04 OWNER'S DEFAULT. If Owner shall (a) fail to
make any monetary payment required under this Agreement,
including, but not limited to, debt service, Management Fee or
Owner's Advances, on or before the due date recited herein and
said failure continues for five (5) Business Days after written
notice from Manager specifying such failure, or (b) fail to
perform or materially comply with any of the other covenants,
agreements, terms or conditions contained in this Agreement
applicable to Owner (other than monetary payments) and such
61
failure shall continue for a period of thirty (30) days after
written notice thereof from Manager to Owner specifying in detail
the nature of such failure, or, in the case such failure is of a
nature that it cannot, with due diligence and good faith, cure
within thirty (30) days, if Owner fails to proceed promptly and
with all due diligence and in good faith to cure the same and
thereafter to prosecute the curing of such failure to completion
with all due diligence within ninety (90) days thereafter.
SECTION 19.05 BANKRUPTCY. If either party (i) applies for
or consents to the appointment of a receiver, trustee or
liquidator of itself or any of its property, (ii) makes a general
assignment for the benefit of creditors, (iii) is adjudicated a
bankrupt or insolvent, or (iv) files a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization or
an arrangement with creditors, takes advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or
liquidation Law, or admits the material allegations of a petition
filed against it in any proceedings under any such law.
SECTION 19.06 REORGANIZATION/RECEIVER. If an order,
judgment or decree is entered by any court of competent
jurisdiction approving a petition seeking reorganization of
Manager or Owner, as the case may be, or appointing a receiver,
trustee or liquidator of Manager or Owner, as the case may be, or
62
of all or a substantial part of any of the assets of Manager or
Owner, as the case may be, and such order, judgment or decree
continues unstayed and in effect for a period of sixty (60) days
from the date of entry thereof.
SECTION 19.07 DELAYS AND OMISSIONS. No delay or omission
as to the exercise of any right or power accruing upon any Event
of Default shall impair the non-defaulting party's exercise of
any right or power or shall be construed to be a waiver of any
Event of Default or acquiescence therein.
SECTION 19.08 DISPUTES IN ARBITRATION. Notwithstanding the
provisions of this Article 19, any occurrence which would
otherwise constitute an Event of Default hereunder shall not
constitute an Event of Default for so long as such dispute is
subject to arbitration pursuant to the arbitration provisions of
Article 18.
ARTICLE 20. TERMINATION
SECTION 20.01 TERMINATION EVENTS. This Agreement shall
terminate upon the occurrence of the following:
(a) on April 1, 1996, in the event that Owner has not
completed construction of the Riverboat in accordance with the
regulations and specifications required by the Riverboat
Authorities;
(b) Owner fails to secure all appropriate licenses for
itself and any of its employees for whom licenses are required
prior to April 1, 1996;
(c) Manager fails to secure all appropriate licenses
for itself and any of its employees for whom licenses are
required prior to April 1, 1996;
63
(d) failure of all of the "Purchase Price" to be paid
to Owner pursuant to the terms of the Stock Purchase Agreement
and the Escrow Agreement dated January 25, 1995;
(e) upon the effective date of passage of legislation
making it unlawful to operate a riverboat casino in the state of
Missouri or the entry of an order or judgment from a court of
appropriate jurisdiction declaring such legislation
unconstitutional or invalid under the laws of the state of
Missouri (the termination shall be delayed if any court order is
duly appealed and its effectiveness is suspended);
(f) upon the occurrence of an Event of Default under
this Agreement and the time to cure has lapsed;
(g) upon Manager's failure to maintain all approvals
from any gaming authority permitting Manager or its affiliates to
conduct gaming in the state of Missouri;
(h) upon the occurrence of a taking as specified in
Article 12.
SECTION 20.02 NOTICE OF TERMINATION. In the event of an
occurrence specified in Section 20.01(a)-(h), either Manager or
Owner, as appropriate, shall terminate this Agreement by giving
five (5) days written notice, and the Term of this Agreement
shall expire by limitation at the expiration of said last day
specified in the notice as if said date was the date herein
originally fixed for the expiration of the Term.
64
SECTION 20.03 REMEDIES UPON TERMINATION.
(a) Prior to Commencing Gaming Operations. In the
event that this Agreement is terminated prior to commencing
gaming operations and if the termination is not the result of an
Event of Default caused by Manager, Owner shall reimburse Manager
all Manager's Pre-Opening Expenses.
(b) After Commencement of Gaming Operations. Owner
shall pay to Manager all earned Management Fees.
SECTION 20.04 DELIVERY OF RIVERBOAT. Upon termination of
this Agreement for any reason, Manager shall assign and transfer
to Owner all of Manager's rights, title, and interest in and to
all transferable licenses and permits with respect to the
operation of the Riverboat, save and except the name "Showboat"
which will and shall remain the property of Manager. Manager
shall peacefully vacate the Riverboat. No signs or personalized
property bearing the name "Showboat" shall be purchased or used
by Owner without prior written arrangements between Owner and
Manager, which may need a license from its parent company,
Showboat, Inc. Upon surrender, any exterior signs inscribed with
the name "Showboat" shall be removed as soon as is practicable,
and in any event within fifteen (15) days of the date of
termination. Additionally, any personalized property bearing the
name "Showboat" (including without limitation, ashtrays, office
supplies, linen, glassware, paper goods, promotional items, guest
checks, uniforms, carpets, and upholstery) shall also be removed
as soon as practicable, and in any event within thirty (30) days
of the date of termination.
65
ARTICLE 21. HAZARDOUS MATERIALS
SECTION 21.01 NO HAZARDOUS MATERIALS. Except as described
in (a) the Environmental Site Assessment Phase I Investigation
prepared by Roth Asbestos and Environmental Consultants Inc.
relating to the Kansas City Landing Project, (b) the Phase I
Environmental Site Assessment dated November 11, 1993 prepared by
Terracon Environmental, Inc., (c) the Addendum to Environmental
Site Assessment dated February 22, 1994 prepared by Terracon
Environmental, Inc. Owner represents and warrants, without any
further inquiry and investigation, that: (i) any handling,
removing, transportation, storage, treatment or usage of
Hazardous Materials or toxic substances that has occurred in the
Riverboat to date has been in compliance with all applicable
federal, state and local laws, regulations and ordinances; (ii)
no leak, spill, release, discharge, emission or disposal of
Hazardous Materials or toxic substances has occurred in the
Riverboat to date; and (iii) the Riverboat is free of asbestos,
toxic or Hazardous Materials as of the date that the term of this
Agreement commences.
SECTION 21.02 COMPLIANCE WITH LAWS. Owner agrees to comply
with all federal, state and local environmental and real estate
laws, including the Americans With Disabilities Act relating to
Owner's construction, ownership, management and operation of the
Riverboat. Manager agrees to comply with all federal, state and
local environmental and real estate laws, including the Americans
With Disabilities Act relating to Manager's management and
66
operation of the Riverboat. All expenses incurred in such
compliance shall be Operating Expenses.
SECTION 21.03 INDEMNIFICATION. Owner agrees to indemnify,
defend and hold Manager and its officers, employees and agents
harmless from any claims, judgments, damages, penalties, fines,
costs, liabilities (including sums paid in settlements of claims)
or loss including reasonable attorneys' fees, consultant fees,
and expert fees (consultants and experts to be selected by
Manager) which arise during or after the Term as a result of any
breach of Owner's representation and warranty contained in
Section 21.01 or as a result of Owner's failure to perform its
covenant contained in Section 21.02. Without limiting the
generality of the foregoing, the indemnification provided by this
Section shall specifically cover costs incurred in connection
with any investigation of site conditions or any clean-up,
remedial, removal or restoration work required by any federal,
state or local governmental agency or political subdivision
because of the presence or suspected presence of asbestos, other
toxic or Hazardous Material in the Riverboat, or the soil,
groundwater or soil vapor on or under the Riverboat, unless the
Hazardous Materials are present solely as a result of the actions
of Manager, its officers, shareholders, employees or agents. The
foregoing indemnity shall survive the expiration or earlier
termination of this Agreement.
SECTION 21.04 HAZARDOUS MATERIAL DEFINED. "Hazardous
Material," as used in this Agreement, shall be any substance or
material if defined or designated as a hazardous or toxic
67
substance, or other similar term, by any federal, state or local
law, statute, regulation, or ordinance affecting the Riverboat or
the Support Areas.
ARTICLE 22. NOTICES
All notices provided for in this Agreement or related to
this Agreement, which either party desires to serve on the other,
shall be in writing, and any and all notices or other papers or
instruments related to this Agreement shall be deemed
sufficiently served or delivered on the date of mailing if sent
(i) by United States registered or certified mail (return receipt
requested), postage prepaid, in an envelope properly sealed, (ii)
by a facsimile transmission where written acknowledgement of
receipt of such transmission is received, or (iii) by a
nationally recognized overnight delivery service provided for
receipted delivery, addressed as follows:
Owner: Troy Herbst, President
Randolph Riverboat Company, L.L.C.
5195 Las Vegas Boulevard South
Las Vegas, Nevada 89119
with a copy to: Sean T. Higgins, General Counsel
Randolph Riverboat Company, L.L.C.
5195 Las Vegas Boulevard South
Las Vegas, Nevada 89119
and
The Stolar Partnership
Attention: Jay Levitch
911 Washington Avenue
St. Louis, Missouri 63101
Manager: J. Kell Houssels, III, President
Showboat Operating Company
2800 Fremont Street
Las Vegas, Nevada 89104
68
with a copy to: John N. Brewer, Esq.
Kummer Kaempfer Bonner & Renshaw
3800 Howard Hughes Parkway
Seventh Floor
Las Vegas, Nevada 89109
Either Owner or Manager may change the address or name of
addressee applicable to subsequent notices (including copies of
said notices as hereinafter provided) or instruments or other
papers to be served upon or delivered to the other party, by
giving notice to the other party as aforesaid, provided that
notice of such change shall not be effective until the fifth
(5th) day after mailing or facsimile transmission.
ARTICLE 23. MISCELLANEOUS
SECTION 23.01 TIME OF THE ESSENCE. Time is of the essence
with respect to all time periods set forth in this Agreement.
SECTION 23.02 HEIRS, SUCCESSORS, ASSIGNS. Except as
otherwise provided herein, each provision hereof shall extend to
and shall, as the case may require, bind and inure to the benefit
of the parties' heirs, executors, administrators, permitted
successors, permitted assigns and legal representatives.
SECTION 23.03 CONSTRUCTION. All of the provisions of this
Agreement shall be deemed and construed to be conditions as well
as covenants as though in words specifically expressing or
importing covenants and conditions for use in each separate
provision hereof. The language in all parts of this Agreement
shall be in all cases construed simply according to its fair
meaning, and not strictly for or against Owner or Manager. This
Agreement shall be construed without regard to any presumption or
69
other rule requiring construction against the party causing the
same to be drafted.
SECTION 23.04 GOVERNING LAW. This Agreement shall be
governed by, construed and enforced in accordance with the laws
of the State of Nevada without reference to its choice of law
provisions.
SECTION 23.05 SEVERABILITY. Should any portion of this
Agreement be declared invalid or unenforceable, then such portion
shall be deemed to be severed from this Agreement and shall not
affect the remainder thereof.
SECTION 23.06 RELATION OF THE PARTIES. Nothing in this
Agreement shall be construed as creating a tenancy, ownership,
limited partnership, joint venture, or any other relationship
between the parties hereto other than as principal and agent.
All debts and liabilities incurred by Manager within the scope of
the authority granted and permitted hereunder in the course of
its management and operation of the Riverboat shall be the debts
and liabilities of Owner only, and Manager shall not be liable
for such debts and liabilities except as specifically stated to
the contrary herein.
SECTION 23.07 NO BROKER OR FINDER. Each party represents
to the other that it has not engaged any finder, broker or agent
for whose commission or fee the other party could be liable.
Each party covenants and agrees to indemnify and hold the other
party free and harmless at all times in respect of any and all
liabilities, actions, suits, proceedings, demands, assessments,
70
judgments, costs and expenses, including attorneys fees, arising
from, by reason of, or in connection with any fees, commissions
or other compensation which shall be alleged to be due to any
finder, broker, agent or other similar representative in
connection with this transaction, if the person is found to have
been engaged by either party or if such services are found to
have been provided at the request of either party.
SECTION 23.08 DEFAULT INTEREST RATE. Any sum accruing to
Owner or Manager under this Agreement which shall not be paid
when due shall bear interest at the rate of twelve percent (12%)
per annum from the date such payment becomes due and payable
until it is paid in full with said interest.
SECTION 23.09 ATTORNEYS' FEES. Should either party
institute an arbitration, action or proceeding to enforce any
provisions hereof or for other relief due to an alleged breach of
any provision of this Agreement, the prevailing party shall be
entitled to receive from the other party all costs of the action
or proceeding and reasonable attorneys fees.
SECTION 23.10 ENTIRE AGREEMENT. This Agreement covers in
full each and every agreement of every kind or nature whatsoever
between the parties hereto concerning this Agreement, and all
preliminary negotiations and agreements, whether verbal or
written, of whatsoever kind or nature are merged herein. No oral
agreement or implied covenant shall be held to vary the
provisions hereof, any statute, law or custom to the contrary
notwithstanding.
71
SECTION 23.11 COUNTERPARTS. This Agreement may be executed
in two or more counterparts and shall be deemed to have become
effective when and only when all parties hereto have executed
this Agreement, although it shall not be necessary that any
single counterpart be signed by or on behalf of each of the
parties hereto, and all such counterparts shall be deemed to
constitute but one and the same instrument.
SECTION 23.12 FORCE MAJEURE. Whenever this Agreement
requires an act to be performed within a specified time period or
to be completed diligently, such periods are subject to
"unavoidable delays." Unavoidable delays include delays caused
by acts of God, acts of war, civil commotions, riots, strikes,
lockouts, acts of government in either its sovereign or
contractual capacity, perturbation in telecommunications
transmissions, inability to obtain suitable labor or materials,
accident, fire, water damages, flood, earthquake, or other
natural catastrophes.
SECTION 23.13 NO WARRANTIES. Manager shall use its best
efforts to render the services contemplated by this Agreement in
good faith to Owner, but hereby explicitly disclaims any and all
warranties, express or implied, including but not limited to the
success or profitability of the Riverboat.
SECTION 23.14 HEADINGS. Headings or captions have been
inserted for convenience of reference only and are not to be
construed or considered to be a part hereof and shall not in an
way modify, restrict or amend any of the terms or provisions
hereof.
72
SECTION 23.15 WAIVER. The waiver by one party of any
default or breach of any of the provisions, covenants or
conditions hereof of the part of the other party to be kept and
performed shall not be a waiver of any preceding or subsequent
breach or any other provisions, covenants or conditions contained
herein.
DATED as of the day first above written.
"Manager" "Owner"
SHOWBOAT OPERATING COMPANY, Randolph Riverboat Company,
a Nevada corporation L.L.C., a limited
liability company
By:/s/Leann Schneider By:/s/Troy Herbst
Troy Herbst, Manager
Its: VP Finance/CFO
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ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement ("Agreement"), dated
as of the 25th day of January, 1995, between Showboat Operating
Company, a Nevada corporation whose principal office is located
at 2800 Fremont Street, Las Vegas, Nevada 89104 ("Showboat"), and
Randolph Riverboat Company, L.L.C., a Nevada limited liability
company whose principal office is located at 5195 Las Vegas
Boulevard South, Las Vegas, Nevada 89119 ("Randolph").
W I T N E S S E T H:
WHEREAS, Showboat and its management are experienced in
providing corporate administrative services to riverboat casinos
and restaurant operations; and
WHEREAS, Randolph has applied for a gaming license from the
Missouri Gaming Commission ("MGC") to manage and operate a
riverboat casino and ancillary facilities (collectively, the
"Riverboat") on the Missouri River in or near Randolph, Missouri;
and
WHEREAS, Randolph has appointed Showboat as the manager and
operator of the Riverboat; and
1
WHEREAS, Randolph desires to engage Showboat to render
certain corporate administrative services to Randolph in order
for Randolph to manage and operate the Riverboat all as more
fully described herein; and
WHEREAS, Showboat desires to render such services to
Randolph; and
WHEREAS, the parties hereto are desirous of setting forth
the terms of compensation for the services to be rendered by
Showboat hereunder; and
WHEREAS, pursuant to the Riverboat Gambling Act (Missouri
1993), Randolph is permitted to enter into an Agreement with
Showboat, providing for the payment of a percentage of revenues
to be derived from the operation of the Riverboat; and
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties herein contained, the parties agree as
follows:
ARTICLE 1.0 - SERVICES TO BE PROVIDED
1.1 THE SERVICES. Upon the terms and conditions
described herein, Showboat shall provide to Randolph the
2
corporate administrative services (the "Services") set forth in
Exhibit A, which is attached hereto and made a part hereof.
1.2 CONTINUED RANDOLPH PERFORMANCE. Any Services to be
performed by Showboat hereunder shall not be performed as a
substitute for Randolph performance, but shall assist, support or
supplement the routine functions and responsibilities of the
employees, officers and Managers of Randolph.
1.3 SHOWBOAT PERSONNEL. All Showboat personnel engaged
to render the Services shall remain the employees of Showboat,
and Showboat shall be responsible for their compensation and for
withholding federal or state income taxes. The costs and
expenses incurred by Showboat for consultants, agents and
independent contractors selected and engaged to perform Services
for Randolph shall be engaged directly by Randolph and paid
directly by Randolph or reimbursed to Showboat upon demand at any
time following the close of escrow under that certain Escrow
Agreement of even date hereof between Randolph, Showboat
Development Company and First Interstate Bank of Nevada, N.A.
Any such consultants, agents and independent subcontractors shall
separately invoice and account for Services to Randolph. To the
extent that Showboat itself or any Showboat personnel, other than
consultants, agents and independent contractors, must be licensed
or approved by the MGC, however, Randolph shall bear the expense
of obtaining such regulatory
3
approvals and Showboat shall cooperate fully in order to obtain all necessary
regulatory approvals.
1.4 SHOWBOAT PERFORMANCE/RESPONSIBILITY. Showboat
undertakes to provide the Services hereunder with the same degree
of care and diligence it uses in providing such Services for its
own operations. In providing the Services hereunder, Showboat
shall not be liable to Randolph for errors or omissions hereunder
except to the extent that such errors and omissions constitute
gross negligence or willful misconduct. Under no circumstances
shall any of Showboat's employees, officers, agents, directors,
or stockholders be liable to Randolph for any errors or omissions
by Showboat hereunder.
ARTICLE 2.0 - PAYMENT OF COMPENSATION
2.1 FEES. Randolph shall pay to Showboat fees for the
Services rendered hereunder equal to one percent (1%) of
Randolph's gross gaming revenue net of all gaming taxes.
Randolph shall pay such fees monthly on or before the twentieth
(20th) day of the following month. "Gross gaming revenue" shall
mean all revenue from the operation of the Casino (which is taxed
by the State of Missouri), including, but not limited to, table
games, electronic games of chance, and electronic games of skill.
"Gaming taxes" shall mean any tax imposed by the State of
Missouri on gross gaming revenue, including, without limitation,
any state admissions tax
4
(currently 20% of gross gaming revenue and $2.00 per customer). Casino shall
mean those areas reserved for the operation of slot machines, table games and
any other legal forms of gaming permitted under applicable law, and
ancillary service areas, including reservations and admissions,
cage, vault, count room, surveillance room and any other room or
areas or activities therein regulated or taxed by the Missouri
Gaming Commission by reason of gaming operations. Showboat and
Randolph agree that the fees provided for by this Section 2.1
constitute their good faith determination of the fair market
value of such services.
2.2 PARTIAL YEARS. Fees for partial fiscal years and
months hereunder shall be prorated.
2.3 TAXES.
(a) Randolph shall be responsible for the payment when due,
if any, of all property taxes and assessments, including, without
limitation, assessments for benefits from public works or
improvements, levies, fees, and all other governmental charges,
general or special, ordinary or extraordinary, foreseen or
unforeseen, together with interest and penalties thereon, which
may heretofore or hereafter be levied upon or assessed against
the Riverboat.
(b) In the event of the enactment, adoption or enforcement
by any governmental authority (including the United States, any
state and any political or governmental subdivision) of any
assessment,
5
levy or tax, whether sales, use or otherwise, on or in respect of the fees
payable to Showboat pursuant to Section 2.1 herein, Showboat shall pay such
assessment levy or tax.
(c) Nothing contained in this Agreement shall be construed
to require Randolph to pay any estate, inheritance or succession
tax, any capital levy, corporate franchise tax or any net income
or excess profits tax of Showboat.
2.4 FISCAL YEAR; BOOKS AND RECORDS. Randolph shall keep
at its usual place of business books and records relating to
gross revenues and the payment to be made hereunder containing
such true entries as may be necessary or proper to ascertain the
amount of payments to be made to Showboat hereunder. Randolph
shall produce, during normal business hours, said books and
records and make them available for inspection or audit by duly
authorized agents of Showboat, shall permit such agents to make
copies thereof, and shall give such information as may be
necessary or proper to enable the amount of payment due hereunder
to be ascertained and verified.
ARTICLE 3.0 - TERM AND TERMINATION
3.1 TERM. The term of this Agreement shall begin as of
the date hereof and shall continue until Showboat or its
affiliates no longer hold an equity position in Randolph or its
successor.
3.2 FORCE MAJEURE. Neither party shall be liable in any
manner for failure or delay of performance of all or any part of
6
this Agreement, directly or indirectly, owing to an act of God,
governmental orders or restrictions, strikes or other labor
disturbances, riots, embargoes, revolutions, wars (declared or
undeclared), sabotage, fires, floods, or any other causes or
circumstances beyond the control of the parties. The party
suffering such delay or failure shall give prompt notice to the
other party and shall exert its best efforts to remove the causes
or circumstances of nonperformance with all possible dispatch.
If any of the causes or circumstances above continue for more
than six (6) months, either party hereto may elect to terminate
this Agreement by written notice to the other party.
3.3 ACCRUED PAYMENTS. Termination of the Agreement
pursuant to Section 3.2 hereof shall not affect the right of
Showboat to any fees accrued hereunder prior to the date of such
termination.
3.4 REMEDIES. In the event that either party commits a
material default of its obligations hereunder, the nondefaulting
party may notify the defaulting party of such default. In the
event that such default is not cured within thirty (30) days
thereafter, the nondefaulting party shall be entitled to pursue
any remedies available to it, including but not limited to, the
termination of the Agreement upon notice to the defaulting party.
7
ARTICLE 4.0 - GENERAL PROVISIONS
4.1 OTHER SERVICES. Nothing in this Agreement shall be
construed to prohibit Showboat from undertaking to provide
additional services to Randolph not described in this Agreement
or in the exhibits hereto on terms and conditions (including the
fees therefore) satisfactory to each of Showboat and Randolph.
4.2 INDEPENDENT PARTIES. Nothing in this Agreement shall
be construed as creating a partnership or a joint venture between
Showboat and Randolph, or making either party an agent or
employee of the other party, but in all of its operations
hereunder Showboat shall be an independent contractor for
Randolph. No employee of Showboat who renders any service
hereunder shall be considered, construed, or deemed to be an
employee of Randolph as a result thereof.
4.3 INTEGRATION, MODIFICATION AND WAIVER. This Agreement
constitutes the entire agreement between Showboat and Randolph
pertaining to the subject matter hereof and supersedes all prior
understandings of the parties. No supplement, modifications or
amendment of this Agreement shall be binding upon either Showboat
or Randolph unless executed in writing by each of them. No
waiver of any of the provisions of this Agreement shall be deemed
to be or shall constitute a continuing waiver. No waiver shall
be binding unless executed in writing by the party making the
waiver.
8
4.4 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the state
of Nevada without giving effect to the conflict of laws
principles thereof.
4.5 NOTICES. Any notice or other communication required
or permitted under this Agreement shall be deemed given when: (a)
it is personally delivered; (b) it is transmitted by telecopy,
telex, or telegram with confirmation of receipt; (c) the day
after it is sent by a nationally recognized overnight courier
service; or (d) five (5) days after it is sent by United States
mail with postage prepaid, addressed to the respective party at
its address set forth in the first paragraph of this Agreement,
attention: President if for Showboat or Manager if for Randolph.
Either party may change the address or telecopy number to which
notices or other communications are to be given under this
Agreement by furnishing the other party with written notice of
such change in accordance with this Section 4.5.
4.6 BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns. Neither party may
assign this Agreement or any of its rights or obligations under
this Agreement without the prior written consent of the other
party.
9
4.7 HEADINGS. The headings used in this Agreement are
for convenience of reference only and are not intended to affect
the interpretation of this Agreement.
4.8 SEVERABILITY. If any provision of this Agreement or
the application of any provision to any party or circumstance
shall, to any extent, be adjudged invalid or unenforceable, the
application of the remainder of such provision to such party or
circumstance, the application of such provision to other parties
or circumstances, and the application of the remainder of this
Agreement shall not be affected thereby. Each provision of this
Agreement shall be valid and enforceable to the fullest extent
permitted by law.
4.9 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 shall constitute one and the
same instrument.
4.10 NO THIRD PARTY BENEFICIARIES. Nothing expressed or
implied in this Agreement is intended, or shall be construed, to
confer upon or give any person or entity, other than the parties
hereto, any rights or remedies under or by the reason of the
Agreement.
10
4.11 NO WARRANTIES. Showboat shall use its best efforts
to provide the services in good faith to Randolph, but disclaims
any and all warranties, express or implied, including, but not
limited to, the success or profitability of the business
conducted by Randolph. Nothing contained herein shall be deemed
to confer on Showboat the right or ability to manage Randolph's
business. Management of Randolph's business shall solely be the
function and responsibility of Randolph.
11
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their representatives thereunto duly
authorized.
SHOWBOAT OPERATING COMPANY, a Nevada
corporation
By:/s/ Leann Schneider
Name: LEANN SCHNEIDER
Title: VP Finance/CFO
RANDOLPH RIVERBOAT COMPANY, L.L.C.,
a Nevada limited liability company
By:/s/___________________________
Name:
Title: Manager
12
EXHIBIT A
SERVICES TO BE PROVIDED
Pursuant to the Administrative Services Agreement entered into by
the Parties, Randolph engages Showboat to render, or cause to be
rendered, the following corporate administrative services in
connection with Randolph's operations.
1. Human Resource services, including: provision of
policy development and operating guidelines for standardization
of operation philosophy and principles for employee management;
and establishment of uniform controls for selection and licensing
of key management personnel, compensation and benefits.
2. Accounting and financial services, including:
development of standards and procedures for internal audits and
supervision; review and evaluation of internal audits; assistance
with the development of policies, standards and procedures for
accounting and supervision; and, provision of technical
accounting advisory services and review of financial statements
and other accounting records maintained by Randolph.
3. Tax planning and compliance, including: review of
federal and state income tax returns; review of estimated tax
13
payments; and assistance in the coordination of Internal Revenue
Service and state agency examinations.
4. General administrative services, including:
consultation on selection of consultants for strategic planning
efforts; assistance in the evaluation and acquisition of
insurance policies and establishment of standards and policies
related to all insurance-related matters; assistance in the
development of standards and policies related to safety programs
and supervision of such programs; and such other administrative
services as may be appropriate.
14
TRADEMARK LICENSE AGREEMENT
THIS TRADEMARK LICENSE AGREEMENT (this "Agreement")
made as of February __, 1995, by and between Showboat, Inc., a
Nevada corporation ("Licensor"), and Randolph Riverboat Company,
L.L.C., a Nevada limited liability company ("Licensee").
RECITALS
A. Licensor is the owner of the trademark "Showboat," its
logos, trademarks, tradenames, service marks, and any variation
or extension of such name ("Trademark").
B. Licensor and Licensee desire that the Licensee be
permitted to use the Trademark in connection with the operation
of a gaming riverboat (the "Riverboat") to be located on the
Missouri River in or near Randolph, Missouri (the "Territory").
Licensee is the owner of the Riverboat.
OPERATIVE PROVISIONS
In consideration of the recitals, covenants and
conditions contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the Licensor and Licensee agree as follows:
1. LICENSE. The Licensor grants to the Licensee the
non-exclusive, personal and nontransferable right to use the
Trademark in the Territory in connection with the operation of
the Riverboat.
2. OPERATION OF THE RIVERBOAT. The Licensee shall operate
the Riverboat in a first-rate manner, consistent with the quality
of other riverboat gaming operations in Missouri, and shall use
the Trademark only in connection with the operations of the
Riverboat, and the quality of the operations of the Riverboat
shall be satisfactory to the Licensor, as determined in its sole
discretion.
3. INSPECTION. The Licensee will permit duly authorized
representatives of the Licensor to inspect, at all reasonable
times, the operations of the Riverboat.
4. USE OF TRADEMARK. Whenever the Licensee uses the
Trademark in advertising or in any other manner in connection
with the Riverboat, the Licensee shall clearly indicate the
Licensor's ownership of the Trademark. The Licensee shall
provide the Licensor with samples of all signs, advertising,
promotional material, literature, packages and labels prepared by
or for the Licensee and intended to be used by Licensee. When
using the Trademark under this Agreement, the Licensee undertakes
to comply with all laws pertaining to trademarks in force at any
time in the Territory.
5. REGISTRATION OF LICENSEE. If the law requires, or if
requested by the Licensor or its duly authorized representative,
the Licensee shall execute any such documents and to take such
action as may be necessary to implement an application to
register the Licensee as a Permitted User or to retain, enforce
or defend the Trademark.
6. ASSIGNMENT OF LICENSE. The right granted in
Paragraph 1 hereof shall not be transferable without the
Licensor's prior written consent, which consent may be granted or
withheld in Licensor's sole discretion.
7. INDEMNITY.
(a) The Licensor assumes no liability to the Licensee or to
third parties with respect to the operations of the Riverboat,
and the Licensee hereby agrees to defend, indemnify and hold
harmless the Licensor against all losses, damages and expenses,
including attorneys' fees, incurred as a result of or related to
claims of third persons arising out of the operations of the
Riverboat.
(b) The Licensor hereby agrees to defend, indemnify and
hold harmless the Licensee against all losses, damages and
expenses, including attorneys' fees, incurred as a result of or
related to claims to third persons arising out of the Licensee's
use of the Trademark in the Territory pursuant to this Agreement.
8. TERM.
(a) The term of this Agreement shall begin as of the date
hereof and shall continue until Licensor or its affiliates no
longer holds an equity position in Licensee or its successor.
(b) If the Licensee or any sublicensee makes any assignment
of assets or business for the benefit of creditors, or if a
trustee or receiver is appointed to administer or conduct its
business or affairs, or if it is adjudged in any legal proceeding
to be either voluntary or involuntary bankrupt, then all the
rights granted herein shall forthwith cease and terminate without
prior notice or legal action by the Licensor and without any
further obligation or liability to Licensor.
(c) Should the Licensee fail to comply with any provision
of this Agreement or Licensee's actions or failure to act in any
way threaten, jeopardize or harm the Trademark, the Licensor may
2
terminate this Agreement without prior notice or legal action and
without any further obligation or liability to Licensor.
9. FEES. Licensee shall pay to Licensor fees for the use
of the Trademark equal to one percent (1%) of Licensee's gross
gaming revenue net of all gaming taxes. Licensee shall pay such
fee monthly on or before the twentieth (20th) day of the
following month. "Gross gaming revenue" shall mean all revenue
from the operation of the casino (which is taxed by the State of
Missouri), including, but not limited to, table games, electronic
games of chance, and electronic games of skill. "Gaming taxes"
shall mean any tax imposed by the State of Missouri on gross
gaming revenue, including, without limitation, any state
admissions tax (currently 20% of gross gaming revenue and $2.00
per customer). "Casino" shall mean those areas of the Riverboat
reserved for the operation of slot machines, table games and any
other legal forms of gaming permitted under applicable law, and
ancillary service areas, including reservations and admissions,
cage, vault, count room, surveillance room and any other room or
areas or activities therein regulated or taxed by the Missouri
Gaming Commission by reason of gaming operations. Showboat and
Randolph agree that the fees provided for by this Section 9
constitute their good faith determination of the fair market
value of the use of the Trademark.
10. OWNERSHIP OF TRADEMARK. The Licensee acknowledges the
Licensor's exclusive right, title, and interest in and to the
Trademark including its trademarks, logos, service marks, and any
variation or extensions thereof (collectively, "Showboat
Intellectual Property" and will not at any time do or cause to be
done any act or thing contesting or in any way impairing or
tending to impair any part of such right, title, and interest.
In connection with the use of the Trademark, the Licensee shall
not in any manner represent that it has any ownership in the
Trademark or registration hereof, and the Licensee acknowledges
that use of the Trademark shall not create in the Licensee's
favor any right, title, or interest in or to the Trademark, but
all uses of the Trademark by the Licensee shall inure to the
benefit of the Licensor. Upon termination of this Agreement in
any manner provided herein, the Licensee will cease and desist
from all use of the Trademark in any way (and will deliver up to
the Licensor, or its duly authorized representatives, all
material and papers upon which the Trademark appears), and the
Licensee shall at no time adopt or use, without the Licensor's
prior written consent, any word or mark which is likely to be
similar to or confusing with the Trademark.
3
11. NOTICES. Any notices required or permitted to be given
under this Agreement shall be deemed sufficiently given if mailed
by certified mail, postage prepaid, addressed to the party to be
notified at its address shown at the beginning of this Agreement,
or at such other address as may be furnished in writing to the
notifying party.
IN WITNESS WHEREOF this Agreement has been executed as
of the day and year first above written.
"Licensor" "Licensee"
SHOWBOAT, INC., RANDOLPH RIVERBOAT COMPANY,
a Nevada corporation L.L.C., a Nevada limited
liability company
By:/s/R. Craig Bird By:/s/Troy Herbst
Its: Executive VP/Finance & Its: ________________________
Development
4
EX-10.41
9
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is entered into as of the 4th day of January,
1995 by and between:
BELLE OF ORLEANS, L.L.C., a Louisiana limited liability
company (hereinafter referred to as "Purchaser"), and
SHOWBOAT STAR PARTNERSHIP, a Louisiana partnership
(hereinafter referred to as "Seller").
W I T N E S S E T H
WHEREAS, the Seller is engaged in the riverboat gaming
business on Lake Pontchartrain in the Parish of Orleans, State of
Louisiana;
WHEREAS, in the furtherance of such riverboat gaming
business Seller owns certain leasehold improvements and other
property situated on leased premises located at "Southshore
Harbor", on the south shore of Lake Pontchartrain, the lessor
being The Board of Commissioners of the Orleans Levee District
(hereinafter referred to as "Levee Board");
WHEREAS, Seller wishes to sell to Purchaser its leasehold
improvements and certain of the property situated thereon, and
assign to Purchaser its rights under leases with the Levee Board;
WHEREAS, Purchaser wishes to purchase said leasehold
improvements and other property of Seller, and acquire Seller's
rights under said leases; and
WHEREAS, the parties desire to reduce their agreement to
writing and have reached an understanding of the specific terms
of this sale and purchase of those rights and property;
NOW THEREFORE, in consideration of the premises and of the
mutual representations, warranties, promises and covenants
contained herein, the parties hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.1 SALE. Subject to the terms and conditions herein
stated, including but not limited to the receipt of all necessary
regulatory approvals, including, without limitation, the release
of Purchaser by the Dock Board from the Julia Street berth, and
the approval thereof by The Louisiana Riverboat Gaming Commission
("LRGC"), as well as a title insurance commitment reasonably
satisfactory to Purchaser, the sale shall take place (the
"Closing") at the offices of Lemle & Kelleher, L.L.P., 21st
Floor, 601 Poydras Street, New Orleans, Louisiana 70130, at 10:00
o'clock a.m., local time, on January 17, 1995. In the event LRGC
does not meet between the date hereof and January 17, 1995, the
parties agree to extend the Closing until the day following the
next meeting of the LRGC at which the approvals described in this
1
paragraph 1.1 and in Article XIII hereof are either granted or
denied, provided, however, that if such approvals are not granted
by February 21, 1995, this Agreement shall terminate and the
parties hereto shall have no further obligations hereunder.
1.2 LEASEHOLD RIGHTS AND ASSETS. Seller hereby agrees to
sell to Purchaser and Purchaser hereby agrees to purchase from
Seller the following:
(a) All rights of the Seller under that certain Lease
Agreement dated February 18, 1993, as amended by instrument dated
August 27, 1993, between the Seller and the Levee Board, and that
certain Lease Agreement dated February 1, 1994 between the Seller
and the Levee Board covering certain real property rights on Lake
Pontchartrain, Southshore Harbor, Orleans Parish, Louisiana
(hereinafter sometimes collectively referred to as the "Leases"),
copies of which are attached hereto as collective Exhibit A.
Anything contained herein to the contrary notwithstanding, there
is specifically excluded from this transaction any and all of
Seller's rights to receive payments from the Levee Board as a
result of Purchaser's riverboat docking at Southshore Harbor.
(b) All leasehold improvements owned by Seller which
are situated on the premises subject to the Leases.
(c) The furniture, fixtures, equipment, computers,
food and beverage service equipment, restaurant and bar supplies,
maintenance equipment, television, video cameras, surveillance
equipment, any and all rolling stock, and other movable property
which Seller placed or caused to have placed on the leasehold
improvements.
The property described hereinabove shall be conveyed to Purchaser
at the Closing.
1.3 ASSUMPTION OF LEVEE BOARD LEASES. Purchaser shall
assume all obligations of Seller under the Leases as of the
Closing, and, thereafter, Seller shall have no further liability
to the Levee Board under the Leases, but Seller shall remain
fully liable to Purchaser for all obligations thereunder during
the term of the Sublease between Purchaser and Seller as
hereinafter described. Seller agrees to indemnify and hold
Purchaser harmless against any loss resulting from the removal of
Seller's riverboat from Southshore Harbor prior to the
termination of the Sublease.
1.4 PURCHASE PRICE. The total purchase price for the
property to be bought and sold pursuant to this Agreement, as
described in Paragraph 1.2, is SIX MILLION AND NO/100 DOLLARS
($6,000,000.00), in addition to the assumption of Seller's
obligations under the Leases.
The purchase price shall be payable to the Seller at the
Closing by wire transfer.
In the event the Closing is extended beyond January 17,
1995, Purchaser shall deposit the purchase price into an account
in
2
Purchaser's name at First National Bank of Commerce on
January 17, 1995, provide Seller with evidence reasonably
satisfactory to Seller that such deposit has been effected, and
maintain said funds in such account until the Closing.
ARTICLE II
AUTHORITY OF THE PARTIES
2.1 SELLER'S AUTHORITY. The execution, delivery and
performance by the Seller of this Agreement, and each of the
other agreements contemplated hereby to which Seller is a party
have been duly authorized and approved by Seller's Management
Committee. Neither the execution, delivery nor performance of
this Agreement or any of such other agreements by the Seller
shall (i) conflict with any other agreements by the Seller, (ii)
conflict with any provision of Seller's Articles of Partnership,
(iii) result in a violation or breach of any term or provision or
constitute a default or accelerate the performance required under
any contract or agreement to which the Seller is a party or by
which the Seller or any of its respective assets and properties
are bound, or (iv) violate any order, writ, injunction or decree
of any court, administrative agency or governmental body.
2.2 PURCHASER'S AUTHORITY. The execution, delivery and
performance by the Purchaser of this Agreement, and each of the
other agreements contemplated hereby to which Purchaser is a
party have been duly authorized by Purchaser's members and its
manager. Neither the execution, delivery nor performance of this
Agreement or any of such other agreements by the Purchaser shall
(i) conflict with any other agreements by the Purchaser, (ii)
result in a violation or breach of any term or provision or
constitute a default or accelerate the performance required under
any contract or agreement to which the Purchaser is a party or by
which the Purchaser or any of its respective assets and
properties are bound, or, (iii) violate any order, writ,
injunction or decree of any court, administrative agency or
governmental body.
ARTICLE III
LEASEHOLD PREMISES AND ASSETS
The Seller conveys the purchased assets without any warranty
of fitness for a particular purpose, it being understood that the
Purchaser takes the purchased assets "AS IS" and "WHERE IS", the
Purchaser hereby acknowledging reliance solely on its own
inspection of the purchased assets, and not on any warranties or
representations from the Seller. In addition, the Purchaser
acknowledges that the Seller has made no representations or
warranties with respect to the purchased assets (including,
without limitation, the value thereof, the income to be derived
therefrom or expenses to be incurred with respect thereto), or
with respect to information or documents previously furnished to
the Purchaser, except as expressly provided in this Agreement to
the contrary. All implied warranties with respect to the
purchased assets, including those related to merchantability or
fitness for a particular purpose, are hereby disclaimed by the
Seller and expressly waived by the Purchaser. Without limiting
the generality of the
3
foregoing, the Seller does not warrant that the purchased assets
are free from redhibitory or latent defects or vices. The
Purchaser hereby expressly waives all rights in redhibition and
for reduction of purchase price pursuant to Louisiana Civil Code
Article 2520, et seq., and the warranty imposed by Louisiana
Civil Code Article 2476. The Purchaser hereby releases the Seller
from any liability for redhibitory or latent defects or vices
under Louisiana Civil Code Article 2520 through 2548. The
Purchaser further declares and acknowledges that the foregoing
waivers have been brought to its attention and explained in
detail to it and that the Purchaser has voluntarily and knowingly
consented to the foregoing waivers.
ARTICLE IV
CONVEYANCE OF PROPERTY
At Closing, Seller and Purchaser shall mutually execute and
deliver to the other party such instruments of conveyance,
transfer and assignment as shall be necessary or appropriate to
transfer to the Purchaser all the Seller's right, title and
interest in and to the leases and leasehold improvements
described in paragraph 1.2 hereof, including, without limitation,
an Assignment of Leases instrument in the form annexed hereto as
Exhibit B. Subsequent to Closing, Seller shall execute and
deliver upon the request of Purchaser any and all such further
instruments of conveyance, transfer and assignment as may be
reasonably requested by the Purchaser to transfer and vest in the
Purchaser all of Seller's right, title and interest in and to all
of the purchased assets and the Leases.
ARTICLE V
TAXES
5.1 PRORATION OF TAXES AND EXPENSES. The Seller and the
Purchaser agree that all personal property and real estate taxes
attributable to the property described in paragraph 1.2 hereof
shall be prorated as of the date of the Closing.
5.2 SALES AND OTHER TAXES. All sales, use, excise,
transfer, stamp, recording and other taxes and fees incurred as a
result of the transactions contemplated hereby shall be borne and
timely paid by Purchaser.
ARTICLE VI
LEASES
Each of the Leases has been duly executed by the lessor and
lessee and to the best of Seller's knowledge are currently in
effect, valid and binding upon the parties thereto and are
enforceable in all material respects in accordance with their
terms and conditions. Seller is not aware of any adverse
conditions that would prevent the performance of either of the
Leases. The Leases are not in default. The Seller has committed
no act and there has been no omission which has, or will with the
passage of time, result in a breach of the Leases. Anything
contained in this Agreement to the contrary notwithstanding,
Purchaser acknowledges that
4
Southshore Harbor has been closed by order of the Levee Board,
and Purchaser agrees to consummate the transaction contemplated
by this Agreement under such circumstances.
ARTICLE VII
LITIGATION AND COMPLIANCE WITH LAWS AND REGULATIONS
There are no actions, suits or proceedings pending or to the
knowledge of Seller threatened against or affecting the Seller
(other than claims covered by insurance) except (i) a proceeding
instituted against the Seller by the State of Louisiana, through
the Riverboat Gaming Enforcement Division, Office of State
Police, pending before Luther F. Cole, Administrative Law Judge,
and (ii) a Petition for Writ of Injunction and Temporary
Restraining Order filed by Seller against the State of Louisiana,
through the Riverboat Gaming Enforcement Division of the
Louisiana State Police, which is pending in proceeding bearing
No. 412,256 on the docket of the l9th Judicial District Court for
the Parish of East Baton Rouge, State of Louisiana.
Seller has complied, or has made adequate provision for
compliance to the reasonable satisfaction of the Purchaser, with
all applicable laws and regulations.
ARTICLE VIII
TITLE
Seller certifies that it will be the true and lawful owner
as of the Closing by good title, free and clear from all security
interests, mortgages, liens, claims, and encumbrances, of the
property described in paragraph 1.2 hereof.
ARTICLE IX
SUBLEASE
At the Closing, Purchaser and Seller shall execute a
Sublease in favor of Seller providing for Seller's continued
possession of the premises subject to the Leases, the leasehold
improvements situated thereon, and the property described in
paragraph 1.2(c) hereof from the date of Closing through the
later of (a) April 1, 1995, or (b) the date forty-five (45) days
after the date on which the Purchaser gives Seller notice of
Purchaser's election to terminate the Sublease, but in no event
later than April 30, 1995.
During the Sublease, Seller shall continue to pay, on behalf
of Purchaser, all rental and any and all head charges which are
required to be paid under the Leases.
Under the Sublease, Seller shall also continue to be
responsible for all obligations of the lessee under the Leases.
A copy of the form of this Sublease is attached hereto as
Exhibit C.
5
ARTICLE X
DUE DILIGENCE AND ACCESS
Upon execution of this Agreement, Seller agrees to cooperate
with Purchaser in Purchaser's conduct of a reasonable due
diligence review with respect to the leasehold and assets subject
to this Agreement. Purchaser shall be entitled to review such
records and documents as are reasonably requested to confirm the
status of the leasehold and assets as represented herein.
After the Closing, Seller shall grant to Purchaser the right
of access to the property for architectural, engineering and
construction planning purposes in order to allow Purchaser to
commence construction and renovations to the purchased property
as soon as possible after termination of the Sublease. In
addition, Purchaser shall be entitled to perform limited
renovations to the leasehold improvements, such as painting and
carpeting, construct a gangway and connect said gangway to the
existing gangway, and perform such other work as may be
reasonably requested by Purchaser. Purchaser agrees that all such
activities shall be done in a manner and fashion which is not
unreasonably intrusive to Seller's ongoing business activities.
Purchaser shall give Seller advance written notice of the nature
and location of any such activity, shall cordon off in an
appropriate manner the site of such activity, and shall provide
to Seller in advance of any such activity evidence reasonably
satisfactory to Seller that Purchaser or its contractors, agents,
or representatives are adequately insured against damage to
property or injury or death to persons, and Seller shall be named
as an additional insured on all such policies of insurance.
ARTICLE XI
RESOLUTIONS
Seller and Purchaser shall mutually deliver to the other
appropriate evidence that the parties are duly authorized to
execute this Agreement and consummate the transaction
contemplated herein.
ARTICLE XII
TITLE POLICY
Purchaser shall obtain a lessee's policy of title insurance
covering the Purchaser's interest in the Leases from a title
insurance company satisfactory to the Purchaser. In lieu of said
title insurance, Purchaser may accept warranties or guaranties
from the Levee Board.
ARTICLE XIII
CONDITION TO OBLIGATION OF SELLER TO CLOSE
The obligation of the Seller to consummate the transaction
contemplated by this Agreement shall be subject to Seller's
obtaining the consent and approval of (a) The Levee Board to (i)
the assignment of the Leases by Seller to Purchaser, and (ii) the
Sublease, and, further, receiving from the Levee Board a release
of all
6
liability under the Leases and the right to cure any default by
Purchaser under the Leases during the term of the Sublease; and
(b) LRGC to the Assignment of the Leases by Seller to Purchaser
and the Sublease (to the extent required) and further, receiving
from LRGC the approval of the termination of Seller's riverboat
gaming business at Southshore Harbor and the approval of a new
site for Seller to resume its riverboat gaming business.
ARTICLE XIV
SELLER'S EMPLOYEES
On or about January 25, 1995 Seller shall notify its
employees and appropriate governmental agencies and officials
pursuant to the Worker Adjustment and Retraining Notification
Act, as amended, 29 U.S.C. 2101 et. seq. that said employees'
employment by Seller will be terminated in April of 1995. During
the three week period immediately following January 25, 1995,
Purchaser will conduct job fairs for Seller's employees on the
leasehold improvements or in close proximity thereto, and will
individually interview those of Seller's employees who wish to be
interviewed. Notwithstanding the fact that Purchaser shall have
no obligations to Seller's employees, Purchaser shall use its
best efforts to give due consideration to hiring Seller's
employees. On March 1, 1995 Purchaser shall provide to Seller by
hand delivery a list of those employees of Seller to whom
Purchaser has offered employment.
ARTICLE XV
LIENS
Prior to Closing, any liens, mortgages or other encumbrances
to which any of the property described in paragraph 1.2 hereof
are subject shall have been released, and the Purchaser shall be
provided with evidence that such releases have been filed in the
appropriate government offices in each jurisdiction where such
filing is necessary in accordance with applicable law.
ARTICLE XVI
INDEMNITY AND HOLD HARMLESS
Seller shall indemnify and hold Purchaser harmless from and
against any and all claims, losses, costs, damages and expenses,
including reasonable attorney's fees, arising out of or in
connection with the Seller's activities or operations under the
Leases prior to the Closing. This obligation shall survive the
Closing and be interpreted to cover any and all types of
liability to all persons and entities, including but not limited
to governmental agencies, patrons, employees and vendors.
ARTICLE XVII
EXPENSES
Each party hereto shall pay its own expenses, including
without limitation, counsel and accounting fees and expenses
incident to preparing and carrying out this Agreement and the
consummation of the transaction contemplated hereby.
7
ARTICLE XVIII
SUCCESSORS AND ASSIGNS
The terms of this Agreement shall be binding upon the
parties hereto and their respective successors. Neither party
shall assign its rights hereunder without the written consent of
the other.
ARTICLE XIX
GOVERNING LAWS
This Agreement, and all the rights and duties of the parties
arising from or relating in any way to the subject matter of this
Agreement or the transaction contemplated hereby, shall be
governed by and construed and enforced in accordance with the
laws of the State of Louisiana.
ARTICLE XX
ENTIRE AGREEMENT
This Agreement embodies the entire Agreement between the
Parties. There are no agreements, representations or warranties
between the parties other than those set forth herein. NO
provision in this Agreement is intended to or shall constitute
anyone a third party beneficiary of this Agreement or of any
provisions hereof.
ARTICLE XXI
BROKERS
Neither Seller nor Purchaser has employed a broker in
connection with this transaction, and each party indemnifies the
other against any loss resulting from the breach of this
representation. This representation shall survive the Closing.
ARTICLE XXII
ATTORNEYS' PEES
Should either party fail to perform its obligations under
this Agreement, such party shall pay all costs and expenses,
including reasonable attorney's fees, incurred by the other party
in enforcing or attempting to enforce this Agreement.
ARTICLE XXIII
NOTICES
All notices shall be sent:
(a)If to Seller: With Copy to:
Showboat Star Partnership Mr. Louie J. Roussel,III
No. 1 Star Casino Blvd. 414 Northline Avenue
New Orleans, LA 70126 Metairie, La 70005
8
(b)If to Purchaser: With Copy to:
Belle of Orleans, L.L.C. Bally's Park Place, Inc.
400 Poydras Street Park Place and Boardwalk
Suite 2600 Atlantic City, NJ 08401
New Orleans, La 70130 Attn: Dennis P. Venuti,
Attn: Norbert Simmons Esq.
Any party may designate a different address by written
notice given to the other party. All notices shall be deemed
given when mailed by certified U.S. mail with proper postage.
ARTICLE XXIV
AMENDMENTS
This Agreement may be amended only by an instrument in
writing executed by the parties hereto.
ARTICLE XXV
COUNTERPARTS
This 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.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties as of the date and year first written above.
SELLER: SHOWBOAT STAR PARTNERSHIP
BY: STAR CASINO, INC.
By: /s/Louie J. Roussel, III
Louie J. Roussel, III,
President
BY: SHOWBOAT LOUISIANA, INC.
BY: /s/Keith Wallace
Keith Wallace, President
PURCHASER: BELLE OF ORLEANS, L.L.C.
BY:METRO RIVERBOAT ASSOCIATES, INC.
Member and Manager
By: /s/Norbert A. Simmons
Norbert A. Simmons,
President
BY: BALLY LOUISIANA, INC.
Member
By: /s/Wallace R. Barr
Wallace R. Barr, President
9
EXHIBIT B
ASSIGNMENT OF LEASES
For the consideration recited in the Purchase and Sale Agreement
dated as of January 4, 1995 by and between Showboat Star
Partnership ("Assignor") and Belle of Orleans, L.L.C.
("Assignee"), the receipt of which is hereby acknowledged,
Assignor hereby assigns to Assignee all of Assignor's right,
title and interest under that certain Lease Agreement dated
February 18, 1993, as amended by instrument dated August 27,
1993, with respect to which Assignor is the lessee and The Board
of Commissioners of the Orleans Levee District (the "Levee
Board") is the lessor, and that certain Lease Agreement dated
February 1, 1994 between Assignor and the Levee Board (the
"Marina Center Lease"), both covering certain real property
rights on Lake Pontchartrain, Southshore Harbor, Orleans Parish,
Louisiana. The leases referred to above are attached hereto as
collective Exhibit A and are hereinafter collectively referred to
as the "Leases". Assignee, being here present, accepts such
assignments and binds itself to perform all of the obligations of
the lessee under the Leases.
AND NOW TO THESE PRESENTS comes and intervenes the Levee Board,
appearing herein by and through Robert G. Harvey, Sr., its
President, duly authorized by resolutions of the Board of
Directors of the Levee Board, which appears herein to (a)
acknowledge and consent to the foregoing assignments; (b)
acknowledge that the Marina Center Lease has been renewed for a
one year term commencing February 1, 1995; (c) consent to the
sublease by Assignee to Assignor of the premises covered by the
Leases and grant to Assignor the right to cure any default by the
Assignee under the Leases during the term of such sublease; (d)
acknowledge that Assignor is not in default under the Leases as
of the date of this Assignment; and (e) release Assignor from any
obligation or liability to the Levee Board under the Leases from
and after this date.
IN WITNESS WHEREOF, this Assignment of Leases has been duly
executed this ____ day of January, 1995.
SHOWBOAT STAR PARTNERSHIP
BY: STAR CASINO, INC.
By:__________________________
Louie J. Roussel, III, President
BY: SHOWBOAT LOUISIANA, INC.
By:__________________________
J. Keith Wallace, President
BELLE OF ORLEANS, L.L.C.
BY: METRO RIVERBOAT ASSOCIATES,
INC. Member and Manager
By:__________________________
Norbert A. Simmons, President
BY: BALLY LOUISIANA, INC.
Member
By:__________________________
Wallace R. Barr, President
THE BOARD OF COMMISSIONERS OF THE
ORLEANS LEVEE DISTRICT
By:__________________________
Robert G. Harvey, President
2
SUBLEASE
THIS AGREEMENT OF SUBLEASE is entered into on this 15th day
of February, 1995, by and between Belle of Orleans, L.L.C., a
Louisiana limited liability company (hereinafter referred to as
"Sublessor") and Showboat Star Partnership, a Louisiana
partnership (hereinafter referred to as "Sublessee").
In consideration of the mutual representations and covenants
contained herein, the parties agree as follows:
1. SUBLEASED AND LEASED PROMISES. Sublessor hereby
subleases to Sublessee the premises leased under that certain
Lease Agreement dated February 18, 1993, as amended by instrument
dated August 27, 1993, and as further amended by instrument dated
contemporaneously herewith, with respect to which, prior to the
assignment instrument executed earlier this date, Sublessee was
the lessee and The Board of Commissioners of the Orleans Levee
District (hereinafter referred to as "Levee Board") is the
lessor, and that certain Lease Agreement dated February 1, 1994
initially between Sublessee and the Levee Board, both covering
certain real property rights on Lake Pontchartrain, Southshore
Harbor, Orleans Parish (hereinafter collectively referred to as
the "Leases"), and leases to Sublessee all of the leasehold
improvements previously placed upon the premises covered by the
Leases by Sublessee -(the "Leasehold Improvements"). The premises
covered by the Leases and the Leasehold Improvements are
hereinafter sometimes collectively referred to as the "Subleased
Premises". Although the parties recognize that the premises
covered by the Leases are leased by Sublessor and, consequently,
are subleased to Sublessee, while the Leasehold Improvements are
owned by Sublessor, and, consequently are leased to Sublessee,
for convenience, both said sublease and said lease are referred
to herein as the "Sublease", as is the title of this Agreement.
The interest of Sublessee as lessee under the Leases, and as
owner of the Leasehold Improvements, were assigned and sold,
respectively, to Sublessor earlier this date.
2. LEASED ASSETS. Sublessor hereby leases to Sublessee
throughout the term of this Sublease those assets described in
paragraph 1.2(c) of that certain Purchase and Sale Agreement
between Sublessor and Sublessee (the "Leased Assets") dated as of
January 4, 1995.
3. OBLIGATIONS OF THE SUBLESSEE. During the term of this
Sublease, Sublessee shall be obligated to Sublessor for the
performance of all of the obligations of the lessee under the
Leases, and, in connection therewith, shall pay on behalf of
Sublessor directly to the Levee Board the rental payable under
the Leases. In addition, Sublessee shall pay to Sublessor, a lump
sum rental in the amount of $100 for the Leased Assets.
4. TERM. The term of this Sublease shall commence on the
date hereof and terminate on April 30, 1995.
5. DELIVERY OF POSSESSION OF THE SUBLEASED PREMISES AND
LEASED ASSETS AT TERMINATION. Sublessee acknowledges that time
is of the essence with respect to the need of the Sublessor to
have immediate delivery of possession of the Subleased Premises
and Leased Assets at the termination of this Sublease. Sublessee
agrees that the Sublessor, in addition to all other remedies at
law or in equity, shall be entitled to receive from the Sublessee
upon reach of its obligation to immediately vacate the Subleased
Premises and Leased Assets at the termination of this Sublease
any and all losses incurred by the Sublessor because of any delay
in commencing its gaming operations.
6. CONDITION OF THE SUBLEASED PREMISES AND LEASED ASSETS.
Sublessee acknowledges that it is fully familiar with the
Subleased remises and Leased Assets and accepts them "as is,
where is", and Sublessor makes no warranty of merchantability or
fitness for a particular purpose in connection therewith. At the
termination of this Sublease, Sublessee will return the Subleased
Premises and Leased Assets in the same physical and operational
condition as on the date hereof, ordinary wear and tear excepted.
7. LEASES. Sublessee is fully aware of all the terms and
conditions of the Leases and will commit no act or omission which
will result in a breach thereof.
8. ACCESS TO SUBLEASED PREMISES BS SUBLESSOR. Sublessee
hereby grants to the Sublessor the right of access to the
Subleased Premises during the term of this Sublease for
architectural, engineering and construction planning purposes in
order to allow Sublessor to commence construction and renovation
to the Subleased Premises as soon as possible after termination
of this Sublease. In addition, Purchaser shall be entitled to
perform limited renovations to the leasehold improvements, such
as painting and carpeting, construct a gangway and connect said
gangway to the existing gangway, and perform such other work as
may be reasonably requested by Sublessor. Sublessor agrees that
all such activities shall be done in a manner and fashion which
is not unreasonably intrusive to Sublessee's ongoing business
activities.
Sublessor shall give Sublessee advance written notice of the
nature and location of any such activity, shall cordon off in an
appropriate manner the site of such activity, and shall provide
to Sublessee in advance of any such activity evidence reasonably
satisfactory to Sublessee that Sublessor or its contractors,
agents, or representatives are adequately insured against damage
to property or injury or death to persons, and Sublessee. shall
be named as an additional insured on all such policies of
insurance.
9. INSURANCE. Sublessee shall provide at its expense
throughout the term of this Sublease property, general liability
and other insurance covering the Subleased Premises and the
Leased Assets with limits and deductibles identical to those in
effect prior to the sale of the Leasehold Improvements and Leased
Assets by Sublessee to Sublessor. Sublessor shall be named in all
such policies as the first insured, with Sublessee being named
therein as the second insured. The original policies shall be
delivered by Sublessee to Sublessor at the Closing.
10. INDEMNITY AND HOLD HARMLESS. Sublessee shall indemnify
and hold Sublessor harmless from and against any and all claims,
losses, costs, damages and expenses, including reasonable
attorney's fees, arising out of or in connection with the
Sublessee's activities or operations relating to or at the
Subleased Premises . This obligation shall be interpreted to
cover any and all types of liability to all persons and entities,
including but not limited to governmental agencies, patrons,
employees and vendors.
11. SUCCESSORS AND ASSIGNS. The terms of this Sublease
will be binding upon the parties hereto and their respective
successors. The Sublessee shall not assign its rights hereunder
without the written consent of the Sublessor.
12. GOVERNING LAWS. This Agreement, and all the rights and
duties of the parties arising from or relating in any way to the
subject matter hereof, shall be governed by, and construed and
enforced under, the laws of the State of Louisiana.
13. BROKERS. Neither Sublessor nor Sublessee has employed
a broker in connection with this transaction, and each party
indemnifies the other against any loss resulting from the breach
of this representation.
14. NOTICES. All notices shall be sent:
(A) If to the Sublessor:
With Copy to:
Belle of Orleans, L.L.C. Bally's Park Place, Inc.
400 Poydras Street, Suite 2600 Park Place and Boardwalk
New Orleans, Louisiana 70130 Atlantic City, NJ 08401
Attn: Norbert Simmons Attn: Dennis P. Venuti, Esq.
(B) If to the Sublessee:
With Copy to:
Showboat Star Partnership Mr. Louie J. Roussel, III
No. 1 Star Casino Blvd. 414 Northline Avenue
New Orleans, Louisiana 70126 Metairie, LA 70005
Any party may designate a different address by written
notice given to the other party. All notices shall be deemed
given when mailed by certified U.S. mail with proper postage.
15. ENTIRE AGREEMENT. This Sublease embodies the entire
agreement between the parties concerning the subject matter
hereof. There have been no agreements, representations or
warranties between the parties with respect to the subject matter
hereof other than those set forth herein and this Agreement may
not be modified or terminated orally. No provisions in this
Agreement is intended to or should constitute anyone a third
party beneficiary of this Agreement or of any of the provisions
hereof.
16. ATTORNEYS FEES. Should either party fail to perform
its obligation under this Sublease, such party shall pay all
costs and expenses, including reasonable attorney's fees,
incurred by the other party in enforcing or attempting to enforce
this Agreement.
17. COUNTERPARTS. This Sublease 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, this Sublease has been duly executed by
the parties as of the date and year first written above.
SUBLESSOR:
BELLE OF ORLEANS, L.L.C.
BY: METRO RIVERBOAT ASSOCIATES, INC.,
Member and Manager
By: /s/
Norbert A. Simmons, President
BY: BALLY'S LOUISIANA, INC.,
Member
By: /s/
C. Richard Cook, Vice President
SUBLESSEE:
BY: STAR CASINO, INC.
By: /s/
Louis J. Roussel, III, President
BY: SHOWBOAT LOUISIANA, INC.
By: /s/
J. Keith Wallace, President
EX-10.42
10
NON NEGOTIABLE MORTGAGE PROMISSORY NOTE
$8,850,000.00 Manchester, New Hampshire
December 28 , 1994
FOR VALUE RECEIVED, the undersigned, ROCKINGHAM
VENTURE, INC., a New Hampshire corporation having its principal
office at Rockingham Park, Rockingham Park Boulevard, Salem, New
Hampshire (the "Borrower"), unconditionally promises to pay to
the order of SHOWBOAT, INC., a Nevada corporation having its
principal office at 2800 Fremont Street, Las Vegas, Nevada (the
"Lender"), at such office or other place as the Lender or other
holder hereof (the "Holder") may from time to time direct in
writing, in lawful money which, at the time or times of payment,
is the legal tender for public and private debts in the United
States of America, the principal sum of EIGHT MILLION EIGHT
HUNDRED FIFTY THOUSAND AND 00/100THS DOLLARS ($8,850,000.00),
plus interest thereon, in the manner and at the rate hereinafter
set forth.
1. DEFINITIONS
The terms used herein are defined or are incorporated by
reference in the Mortgage (as hereinafter defined) and have the
meanings specified therein unless expressly otherwise defined
herein.
As used herein:
"Business Day" means a day on which banks are open for
business in Manchester, New Hampshire.
"Default Rate" means the optional rate of interest which the
Holder may charge following the occurrence of an Event of
Default and failure by Borrower to cure within the applicable
grace period, if any, and shall equal the rate of interest then
in effect under this Note plus 5% per annum.
"Indebtedness" means the principal sum of $8,850,000.00, or s
o much thereof as may be outstanding from time to time, together
with interest thereon at the rate stated herein, and any other
amounts which may become due and payable under this Note, the
Mortgage or any other Loan Document.
"Loan Documents" means this Note, the Mortgage, the Assignme
nt of Leases and Rents of even date between the Borrower and
the Lender and any other instrument or document evidencing,
securing, guarantying or otherwise delivered to the Lender in
connection with the obligations hereunder.
"Mortgage" means the Mortgage and Security Agreement of even
date granting a second mortgage on certain real property and
improvements thereon known as Rockingham Park located in Salem,
New Hampshire (the "Property"), which Mortgage was granted by
Borrower to Lender as security for this Note.
2. INTEREST RATE.
The outstanding principal balance of the Indebtedness shall
bear interest at a fixed rate equal to 8.3% per annum. Interest
shall be calculated daily on the basis of a 360-day year and
actual number of days elapsed.
3. TERM; PAYMENTS OF PRINCIPAL AND INTEREST.
The term of this Note shall be for a period of sixty (60)
months commencing on the date first above written (the "Term").
During the Term, Borrower shall make payments as follows: Twenty
(20) consecutive blended quarterly principal and interest
payments, commencing April 1, 1995 and continuing on the first
day of each July, October, and January thereafter, the first 19
such installments to be in the amount of $259,000.00 each and the
final installment to be in the amount of the entire unpaid
principal balance plus accrued interest thereon; provided that
Borrower at its election may extend the maturity of this Note an
additional twelve (12) months if Lender has extended on or before
December 31, 1999 the gaming option of Borrower and Lender for a
corresponding period as provided in the Letter Agreement dated
December 22, 1994 AND ACCEPTED DECEMBER 23, 1994, between Lender
and Borrower, as such agreement may be hereafter modified,
amended or replaced by more definitive documentation as provided
therein (the "Letter Agreement"), and Borrower may further extend
the maturity of this Note an additional twelve (12) months if
Lender has extended on or before December 31, 2000 the gaming
option of Borrower and Lender for a corresponding period. If the
term is extended as herein provided, the quarterly blended
payments of principal and interest shall continue on the dates
and in the amounts stated above. EACH INSTALLMENT PAYMENT SHALL
BE APPLIED FIRST TO ACCRUED INTEREST AND THE BALANCE TO THE
UNPAID PRINCIPAL SUM.
4. INTEREST BASIS.
If payment of any principal amount is received after THE
CLOSE OF BUSINESS (LAS VEGAS, NEVADA TIME) on any Business Day,
interest on such principal amount shall be due and payable for
the day of payment and each day thereafter up to the next
Business Day.
5. METHOD OF PAYMENT.
All payments of interest and principal hereunder shall be
made to the Lender at the address specified above or such other
address as indicated by the Lender or any other Holder of this
Note. Whenever any payment hereunder becomes due on a day which
is not a Business Day, the due date thereof shall be extended to
the next succeeding Business Day and interest thereon shall
accrue at the applicable rate during such extension.
2
6. INTEREST RATE.
The outstanding principal balance of the Indebtedness shall
bear interest at a fixed rate equal to 8.3% per annum. Interest
shall be calculated daily on the basis of a 360-day year and
actual number of days elapsed.
7. TERM; PAYMENTS OF PRINCIPAL AND INTEREST.
The term of this Note shall be for a period of sixty (60)
months commencing on the date first above written (the "Term").
During the Term, Borrower shall make payments as follows: Twenty
(20) consecutive blended quarterly principal and interest
payments, commencing April 1, 1995 and continuing on the first
day of each July, October, and January thereafter, the first 19
such installments to be in the amount of $259,000 Lender of
leases a respecting the Property and any other collateral
granted, pledged or assigned to the Lender under the Loan
Documents.
8. SECURITY INTEREST IN DEPOSITS.
As additional collateral, the Borrower hereby (a) grants a
security interest in, pledges, assigns, and delivers to the
Lender, and any subsequent Holder as appropriate, all deposits,
credits or other property now or hereafter due from the Lender,
or any subsequent Holder, to the Borrower; and (b) grants the
right to set-off and apply (and a security interest in said
right) from time to time hereafter and without demand or notice
of any nature, all, or any portion, of such deposits, credits and
other property, against the Indebtedness, whether the Collateral
(as defined hereinabove) is deemed adequate or not.
9. EVENTS OF DEFAULT.
Any of the following shall constitute an Event of Default
hereunder:
a) The failure of the Borrower to make any payment
required under the terms of this Note within a period of ten
(10) days after the due date;
b) The occurrence of any Event of Default as
specified in the Mortgage or any other Loan Document;
c) Failure by Lender and Borrower to prepare and
agree upon definitive Joint Venture, Management and
Development and Preopening Services Agreements on or before
June 21, 1995, unless such parties agree in writing to
extend such period, and failure to repay the Indebtedness in
full within six (6) months thereafter;
d) Failure by Borrower to limit-track management fees
in the aggregate to $800,000 per year, subject to 58 annual
increases commencing June 1, 1995, or to observe the
subordination requirements respecting such fees contained in
Paragraph 2(i) of the Letter Agreement; or
3
e) Failure by Borrower to observe the allocation
requirements for excess cash flow as provided in Paragraph
2(1) of the Letter Agreement.
10. REMEDIES ON DEFAULT.
Upon the occurrence of any Event of Default (and at the
option of any Holder of this Note which may be exercised
immediately or at any time thereafter so long as the Event of
Default continues), all obligations of the Borrower evidenced
hereby shall become immediately due and payable without notice or
demand and such Holder shall then have, in any jurisdiction where
enforcement thereof is sought, in addition to all other rights
and remedies provided herein, in the Mortgage or any other Loan
Document or other instrument given by the Borrower to the Lender
to secure this Note, the rights and remedies of a secured party
under the Uniform Commercial Code as enacted in the State of New
Hampshire and all other rights and remedies available at law or
in equity. The foregoing notwithstanding, the Holder shall not
enforce the terms of this Note in a manner which would in any way
materially impair the security afforded by the Lien Hereof (as
defined in the Senior Indenture).
11. DEFAULT RATE.
Upon the occurrence of an Event of Default and failure by
Borrower to cure within the applicable grace period, if any, this
Note at the Holder's election shall bear interest at the Default
Rate until the default is cured to the Holder's satisfaction. In
any event, the Note shall bear interest at the Default Rate from
and after maturity, whether or not resulting from acceleration.
12. LATE CHARGE.
As to any quarterly payment or portion thereof not received
by the Holder within ten (10) days after each Payment Date, the
Borrower shall pay an additional charge equal to five percent
(5%) of the amount of such payment so delinquent.
13. NO RIGHTS OF SET-OFF BY BORROWER.
No payment of principal hereof or interest hereon shall be
subject to set-off, reduction or recoupment by Borrower for any
cause whatsoever relating to or based on dealings between
Borrower and the Lender or any subsequent Holder.
14. COSTS OF COLLECTION.
Should the Indebtedness or any part thereof be collected by
action at law, or in bankruptcy, receivership or other court
proceedings, or should this Note be placed in the hands of an
attorney for collection after default, whether or not suit is
filed hereon Borrower agrees to pay, upon demand by the Holder,
in addition to principal and interest and other sums, if any, due
and payable hereon, court costs and reasonable attorney's fees
and other collection charges.
4
15. APPLICATION OF PAYMENTS.
Every payment hereunder received pursuant to collection
actions described in Paragraph 14 above shall be applied first to
costs of collection; second to amounts (other than principal and
interest) due hereunder, under the Mortgage or under any other
Loan Document; third to interest accrued hereon; and the balance,
if any, to principal.
16. EQUITY CONVERSION. This Note is subject to certain
provisions contained in the Letter Agreement whereby the then
current outstanding principal balance evidenced hereby may be
converted into Lender's equity contribution to the Joint Venture
(as defined in the Letter Agreement).
17. WAIVER OF DEFENSES.
a) Borrower and every endorser of this Note (other
than a person transferring this Note by endorsement) by
becoming such endorser hereby (i) waives, except as
otherwise provided herein, (to the fullest extent allowed by
law) all requirements of diligence in collection,
presentment, notice of non-payment, protest, notice of
protest, suit and all other conditions precedent in
connection with the collection and enforcement of this Note
or the realization of any security for this Note, (ii)
waives any right to the benefit of, or to direct the
application of any security for this Note until all the
obligations of the Borrower represented hereby have been
paid in full, (iii) waives the right to require the Holder
to proceed against any other person or to pursue any other
remedy before proceeding against him, and (iv) agrees that,
if consented to by Borrower, no renewal or extension of this
Note, including a renewal or extension in which this Note is
surrendered, nor change in the rate of interest payable
hereon, nor release, surrender or substitution of security
for this Note or the Indebtedness, nor modification or
waiver of the terms hereof or of any instrument referred to
herein or any other agreement now or hereafter directly
relating to this Note or the Indebtedness nor delay in the
enforcement of payment of this Note or any security for this
Note or the Indebtedness nor, whether or not consented to by
Borrower, delay or omission in exercising any right of power
under this Note or any security for this Note or the
Indebtedness shall affect Borrower's or such endorser's
liability.
b) No delay or omission on the part of the Holder in
exercising any right, privilege or remedy shall impair such
right, privilege or remedy or be construed as a waiver
thereof or of any other right, privilege or remedy. No
waiver of any right, privilege or remedy or any amendment or
modification to or extension or renewal of this Note shall
be effective unless made in writing and signed by the
Holder. Under no circumstances shall an effective waiver of
5
any right, privilege or remedy on any one occasion
constitute or be construed as a bar to the exercise of or a
waiver of such right, privilege or remedy on any future
occasion. The acceptance by the Holder of any payment after
any default hereunder shall not operate to extend the time
of payment of any amount then remaining unpaid hereunder or
constitute a waiver of any rights of the Holder under this
Note.
c) All rights and remedies of the Holder, whether
granted herein or otherwise, shall be cumulative and may be
exercised singularly or concurrently, and the Holder shall
have, in addition to all other rights and remedies, the
rights and remedies of a secured party under the Uniform
Commercial Code of New Hampshire. The Holder shall have no
duty as to the collection or protection of the Collateral or
of any income thereon, or as to the preservation of any
rights pertaining thereto beyond the safe custody thereof.
Surrender of this Note, upon payment or otherwise, shall not
affect the right of the Holder to retain the Collateral as
security for the payment and performance of any other
liability of the undersigned to the Holder.
18. MISCELLANEOUS.
a) In the event any payment of principal or interest
received upon this Note and paid by the Borrower, or
endorser, shall be deemed by final order of a court of
competent jurisdiction to have been a voidable preference or
fraudulent conveyance under the bankruptcy or insolvency
laws of the United States, or otherwise; then in such event,
to the extent thereof, the obligation of the Borrower, or
endorser shall, jointly and severally, survive as an
obligation due hereunder and shall not be discharged or
satisfied by said payment or payments, or by the return (by
the payee or holder hereof) to said parties of such payment
or payments, or of this Note or-any endorsement or the like:
b) Except as otherwise provided herein, notices to be
given hereunder shall be made in the manner and with the
effect provided in the Mortgage;
c) This Note shall be governed by and interpreted in
accordance with the laws of the State of New Hampshire;
d) No part of this Note may be changed orally but
only by an agreement in writing signed by the party against
whom enforcement of any change, waiver, modification or
discharge is sought;
e) Paragraph captions are not a part hereof;
f) If there is more than one maker of this Note, each
maker shall be jointly and severally obligated hereunder;
and
6
g) The invalidity of any of the provisions of this
Note, as determined by a court of competent jurisdiction,
shall in no way affect the validity of any other provision
hereof.
Executed under seal on the day and year first above written.
Witness: ROCKINGHAM VENTURE, INC.
/s/David j. Callaghan By:/s/Joseph E. Carney, Jr.
Joseph E. Carney, Jr.,
President
7
MORTGAGE AND SECURITY AGREEMENT
KNOW ALL MEN BY THESE PRESENTS that ROCKINGHAM VENTURE,
INC., a New Hampshire corporation having its principal office at
Rockingham Park, Rockingham Park Boulevard, Salem, New Hampshire
(hereinafter collectively with its successors, legal
representatives, and assigns referred to as the "Mortgagor") for
consideration paid by SHOWBOAT, INC., a Nevada corporation having
its principal office at 2800 Fremont Street, Las Vegas, Nevada
(hereinafter collectively with its successors, legal
representatives, assigns and participants, if any, referred to as
"Mortgagee"), the receipt and sufficiency of which Mortgagor does
hereby acknowledge, hereby grants, bargains, sells, conveys and
assigns to Mortgagee, with MORTGAGE COVENANTS:
All those tracts or parcels of land, together with all
buildings and other improvements now or hereafter situated
thereon located in Salem, County of Rockingham, New Hampshire,
all as more particularly described in Exhibit A attached hereto
and made a part hereof, together with all rents, issues, profits,
privileges, easements, rights of way, licenses, appurtenances and
other appurtenant rights thereto; all right, title and interest
of Mortgagor in and to the land lying within any street or
roadway adjoining the subject property and all right, title and
interest of Mortgagor in and to any vacated or hereafter vacated
streets or roads adjoining the subject property and all right,
title and interest of Mortgagor in and to all riparian rights
associated with, belonging to or inuring to the benefit of the
subject property (all of the foregoing collectively, the
"Premises"), subject and subordinate to the mortgage, assignment
of leases and rents and security interests granted pursuant to
the Loan and Trust Agreement dated as of December 1, 1983 (the
"Senior Indenture") among The Industrial Development Authority of
the State of New Hampshire (the "SIDA"), and Rockingham Venture
and Rockingham Venture, Inc. and The First National Bank of
Boston, as Trustee (the "Trustee"), recorded in the Rockingham
County Registry of Deeds in Book 2473, Page 1764 and amended by
First Amendment dated as of September 30, 1992;
AND transfers, assigns, sets over and grants a second
priority security interest in the following (collectively, the
"Personal Property" );
(1) All fixtures, machinery, equipment and all other
tangible personal property intended for use in the buildings and
other improvements on the Premises and/or the operation of any
business or other activities conducted by the Mortgagor thereon,
whether now or hereafter owned by the Mortgagor and now affixed
or to be affixed, or now or hereafter located upon the Premises,
including all appurtenant easements. The foregoing shall include,
without limitation, all machinery, non-titled vehicles, plant,
plumbing, heating, lighting, refrigerating, ventilating and air
conditioning apparatus and equipment, elevators and elevator
machinery, boilers, tanks, motors, sprinkler and fire
extinguishing systems, alarm systems, screens, awnings, screen
doors, storm and other detachable windows and doors, perennial
flowers, signage, and other equipment, machinery, furniture and
furnishings, fixtures, and articles of personal property now and
hereafter owned by the Mortgagor and now and hereafter affixed
to, placed upon or used in connection with the operation of the
Premises or any business or other activities thereon, and all
other purposes whether or not included in the foregoing
enumeration, together with cash proceeds and non-cash proceeds of
all of the foregoing, all of which are covered by this Mortgage,
whether or not such property is subject to prior conditional
sales agreements, chattel mortgages or other liens, excepting
inventory and personal property to be consumed or sold in the
normal course of business of the Mortgagor. If the lien hereof on
any fixtures or personal property is subject to a conditional
sales agreement or chattel mortgage or security agreement
covering such property, then in the event of any default
hereunder all the rights, title and interest of the Mortgagor in
and to any and all deposits made thereon or therefor are hereby
assigned to the Mortgagee, together with the benefit of any
payments now or hereafter made thereon. There are also
transferred, set over and assigned to the Mortgagee, its
successors and assigns, all concessions and other agreements
relating to operation of Mortgagor's business or other activities
on the Premises, and all conditional sales agreements, leases,
and use agreements of machinery, equipment and other personal
property of the Mortgagor in the categories hereinabove set forth
and now and hereafter affixed to, placed upon or used in
connection with the operation of the Premises or any business or
other activity and respecting which the Mortgagor is the owner,
lessee, or licensee of, and the Mortgagor agrees to execute and
deliver to the Mortgagee specific separate assignments thereof to
the Mortgagee of such leases and agreements when requested by the
Mortgagee; and nothing herein shall obligate the Mortgagee to
perform any obligations of the Mortgagor under such leases or
agreements, unless it so chooses, which obligations the Mortgagor
hereby covenants and agrees to well and punctually perform;
(2) All of the Mortgagor's right, title and interest in
and to any governmental approvals, licenses, franchises, permits,
grants, etc. with respect to the Premises, including, but not
limited to, all approvals, licenses, and permits for the use and
occupancy of the Premises, to the extent assignable;
(3) All eminent domain awards made and insurance
proceeds paid with respect to the Premises;
2
(4) All trade names associated with the use or
occupancy of the Premises;
(5) All books, records, contracts and other general
intangibles relating to Mortgagor's operation of the Premises;
(6) Any and all additions, accessions, substitutions or
replacements to or for any of the foregoing;
(7) Any and all products and proceeds of any or all of
the foregoing, including, without limitation, cash and cash
equivalents, tax refunds and the proceeds, including interest, of
insurance policies providing coverage against the loss or
destruction of or damage to any of such collateral;
(8) All of the Mortgagor's after-acquired property of
the kinds and types described in the foregoing paragraphs:
(9) All rents, instruments, security deposits, fees,
issues and profits, revenues, royalties, bonuses, rights and
benefits under any and all leases, tenancies or licenses now
existing or hereafter created with respect to the Mortgaged
Property or any part thereof; and
(10) All judgments, awards of damages, insurance
proceeds and settlements hereafter made as a result or in lieu of
any taking of the Mortgaged Property or any interest therein or
part thereof under the power of eminent domain or for any damage
or casualty (whether caused by such taking or otherwise) to the
Mortgaged Property or any part thereof, including any award for
change of grade of streets. The Mortgagee may apply all such sums
or any part thereof so received on the indebtedness secured
hereby in such manner as it elects, or, at its option, the entire
amount or any part thereof so received may be released. The
Mortgagor hereby irrevocably authorizes and appoints the
Mortgagee its attorney-in-fact to collect and receive any such
judgments, awards, proceeds, and settlements from the authorities
or entities making the same, to appear in any proceeding
therefor, to give receipts and acquittances therefor, and to
apply the same to payment on account of the debt secured hereby,
whether then matured or not, provided such power shall be
exercised subject to and in accordance with Paragraphs 3(b) and
(c) below. The Mortgagor will execute and deliver to the
Mortgagee on demand such assignments and other instruments as the
Mortgagee may require for said purposes and will reimburse the
Mortgagee for its costs and expenses (including reasonable
counsel fees) in the collection of such judgments and
settlements,(collectively, the Premises and the Personal Property
3
are hereinafter sometimes referred to as the "Mortgaged
Property");
FOR THE PURPOSE OF SECURING the following obligations
of Mortgagor to Mortgagee:
(1) Payment of the principal sum of $8,850,000.00 (the
"Loan"), together with interest and other charges thereon as
provided in Mortgagor's promissory note of even date evidencing
such Loan (such note, together with any subsequent extensions,
renewals, modifications, substitutions or replacements thereof,
is hereinafter referred to as the "Note"):
(2) Payment of such sums expended or advanced by
Mortgagee in accordance herewith to protect the security,
priority or validity of this Mortgage; and
(3) Due, prompt and complete observance, performance,
fulfillment and discharge by Mortgagor of each and every
obligation, covenant, condition, warranty, agreement and
representation contained in the Note, this Mortgage, an
assignment of leases and rents respecting the Premises of even
date between the Mortgagor and the Mortgagee, or any other
document, instrument or agreement given by Mortgagor as
additional security for the payment of the indebtedness hereby
secured, or otherwise executed in connection therewith (all of
the foregoing, together with any extensions, renewals,
modifications, amendments, substitutions or replacements thereof,
are hereinafter collectively referred to as the "Loan
Documents");
PROVIDED, NEVERTHELESS, and this Mortgage is granted upon
the express condition, that if the Mortgagor pays to the
Mortgagee all amounts due under the Note, this Mortgage and the
other Loan Documents, complies with and performs fully and
satisfactorily all terms and obligations as set forth in this
Mortgage, the Note and the other Loan Documents, and the
Mortgagee no longer has any obligation to advance funds under the
Loan Agreement, then this Mortgage shall be void. Otherwise it
shall remain in full force and effect.
1. REPRESENTATIONS. WARRANTIES AND COVENANTS OF THE
MORTGAGOR. In addition to the MORTGAGE COVENANTS, the Mortgagor
represents, warrants, covenants, and agrees with the Mortgagee as
follows:
(a) POWER AND AUTHORITY. The Mortgagor is a
corporation duly organized, validly existing and in standing
under the laws of the State of New Hampshire, has full power
and authority to own real estate in New Hampshire, and the
officers of the Mortgagor have full power, authority, and
legal right to execute and deliver the Mortgage and the
other Loan Documents and to consummate the transactions
4
contemplated herein without the consent or approval of any
beneficiary, court or governmental body or other third
party; and, the execution and delivery of the Mortgage and
the other Loan Documents and the consummation of the
transactions contemplated herein will not conflict with or
result in a breach of the terms of any agreement or law or
order of any court or governmental body respecting any party
who has executed this Mortgage as the Mortgagor;
(b) TITLE. Until the delivery hereof, Mortgagor is the
lawful owner of the Mortgaged Property seized and possessed
thereof in its own right in fee simple, has full power and
lawful authority to grant and convey the same in manner
aforesaid; the Mortgaged Property is free and clear from any
encumbrance whatsoever except for the mortgage, assignment
of leases and rents and security interests granted under the
Senior Indenture and the liens and encumbrances shown on
Exhibit B attached hereto (collectively, the "Permitted
Encumbrances"); Mortgagor shall warrant and defend the same
to the Mortgagee against the lawful claims and demands of
any person or persons whatsoever, and Mortgagor will not
cause or permit any lien to arise against the Mortgaged
Property which is superior to the lien or security interest
granted herein except for the Permitted Encumbrances and the
mortgage, security interests and assignment of leases and
rents granted to secure a refinancing of the indebtedness
incurred under the Senior Indebtedness in an amount not to
exceed $7,000,000;
(c) PAYMENT AND PERFORMANCE. Mortgagor shall pay the
Note hereby secured and interest thereon as the same shall
become due and payable, and also any other indebtedness that
may accrue to the Mortgagee under the terms of this Mortgage
and the other Loan Documents, and shall perform all other
covenants, undertakings and agreements set forth herein and
in the other Loan Documents;
(d) INSURANCE. Mortgagor shall obtain and keep in
force, with one or more insurers acceptable to Mortgagee,
such insurance as Mortgagee may from time to time specify by
notice to Mortgagor, including, as a minimum, insurance
providing (i) comprehensive general liability (including
bodily injury and property damage coverage) with a broad
form coverage endorsement and a combined single limit of at
least $5,000,000, and (ii) protection against fire,
"extended coverage" and other "All Risk" perils, including,
if specifically required by Mortgagee, earthquake and flood,
with a full replacement cost endorsement (such cost to be
subject to annual review and increased if necessary so as to
provide coverage at all times in an amount necessary to
restore the Mortgaged Premises to the condition existing
just prior to the destruction or damage) and a waiver of
subrogation endorsement. All fire and casualty insurance
5
policies shall include the standard mortgagee clause in the
State of New Hampshire naming Mortgagee as the second
mortgagee with loss payable to Mortgagee as such mortgagee
and all other policies shall name Mortgagee as an additional
insured. All insurance policies shall not be cancellable or
modifiable without 20 days prior written notice to Mortgagee
and shall not have more than a $5,000.00 deductible for any
single Casualty. Mortgagor shall provide Mortgagee with
evidence of compliance with this Paragraph, in such forms
(including original policies and certificates) as required
from time to time by Mortgagee, upon notice from Mortgagee
or at least 15 days prior to the expiration date of any
policy required hereunder, each bearing notations evidencing
the prior payment of premiums or accompanied by other
evidence satisfactory to Mortgagee that such payment shall
be delivered by Mortgagor to Mortgagee.
Mortgagor shall keep, observe and satisfy, and not
suffer violations of, the requirements of insurance
companies and any bureau or agency which establishes
standards of insurability affecting the Mortgaged Property,
and pertaining to acts committed or conditions existing
thereon.
Upon foreclosure of this Mortgage or other transfer of
title or assignment of the Mortgaged Property in discharge,
in whole or part, of the indebtedness secured hereby, all
right, title and interest of Mortgagor in and to all
policies of insurance required by this Paragraph shall inure
to the benefit of and pass to Mortgagee;
(e) TAXES AND ASSESSMENTS. The Mortgagor will pay,
before the same become delinquent or any penalty attached
thereto for nonpayment, all taxes, assessments and charges
of every nature that may now or hereafter be levied or
assessed, upon the Premises or any part thereof, or upon the
rents, issues, income or profits thereof, whether any or all
of said taxes, assessments or charges be levied directly or
indirectly, and will pay, before the same become delinquent
or any penalty attached thereto for the nonpayment, all
taxes which by reason of nonpayment create a lien prior to
the lien of the Mortgage; and will thereupon submit to the
Mortgagee such evidence of the due and punctual payment of
such taxes, etc. as the Mortgagee may require;
(f) MAINTENANCE OF THE PREMESIS. The Personal Property
is in good working order and condition, and the Premises are
free from structural defects. The Mortgagor will keep the
Mortgaged Property protected in good order, repair and
condition (reasonable wear and tear and casualty insured
against excepted) at all times, promptly replacing any part
thereof which may become lost, destroyed or unsuitable for
use; and will not commit or suffer any strip or waste of the
Mortgaged Property, or any violation of any law, regulation,
6
ordinance or contract affecting the Mortgaged Property, will
not commit or suffer any demolition, removal or material
alteration of the Mortgaged Property without the written
consent of the Mortgagee, and will afford the Mortgagee the
opportunity to inspect the Mortgaged Property from time to
time upon reasonable prior notice to Mortgagor, and
Mortgagor, its officers, agents, and representatives shall
fully cooperate with Mortgagee, its agents, and
representatives in conducting such inspection. The Mortgagor
shall maintain and preserve the parking areas, passageways
and drives, now or hereafter existing on the Premises, and,
without prior written consent of the Mortgagee, no building
or other structure other than those currently in existence
on the Premises shall be erected thereon and no additions to
existing buildings shall be erected without the prior
written consent of the Mortgagee:
(g) TAX ESCROW. The Mortgagor shall, upon request
therefor by the Mortgagee, which request may be withdrawn
and remade from time to time at the discretion of the
Mortgagee, pay to the Mortgagee on a quarterly basis as
hereafter set forth a sum equal to the municipal and other
governmental real estate taxes, personal property taxes,
other assessments next due on the Mortgaged Property and all
premiums next due for fire and other casualty insurance
required of the Mortgagor hereunder, less all sums already
paid therefor, divided by the number of months to lapse not
less than one (1) month prior to the date when said taxes
and assessments will become delinquent and when such
premiums will become due, and such resultant multiplied by
three (3), provided such request shall only be made
following the occurrence of an Event of Default hereunder.
Such sums as estimated by the Mortgagee shall be paid with
quarterly payments of principal and interest due pursuant to
the terms of the Note and such sums shall be held by the
Mortgagee to pay said taxes, assessments and premiums before
the same become delinquent. The Mortgagor agrees that should
there be insufficient funds so deposited with the Mortgagee
for said taxes, assessments and premiums when due, it will
upon demand by the Mortgagee promptly pay to the Mortgagee
amounts necessary to make such payments in full; any surplus
funds may be applied toward the payment of the indebtedness
secured by the Mortgage or credited toward future such
taxes, assessments and premiums. If the Mortgagee shall have
commenced foreclosure proceedings, the Mortgagee may apply
such funds toward the payment of the Mortgage indebtedness
without causing thereby a waiver of any rights, statutory or
otherwise, and specifically such application shall not
constitute a waiver of the right of foreclosure hereunder.
The Mortgagor hereby assigns to the Mortgagee all the
foregoing sums so held hereunder for such purposes;
(h) BOOKS AND RECORDS. The Mortgagor shall maintain
full and correct books and records showing in detail the
7
earnings and expenses of the Mortgaged Property in
accordance with generally accepted accounting principles,
and full and accurate entries of all dealings and
transactions relating to the Mortgaged Property, and will
permit the Mortgagee and its agents, accountants and
representatives to examine said books and records and all
supporting vouchers and data any time from time to time upon
request by the Mortgagee;
(i) FINANCIAL STATEMENTS AND COVENANTS. The Mortgagor
shall provide audited annual financial statements in form
and content and within the time frame required in Section 28
of the Senior Indenture and management-prepared quarterly
financial statements, to include a balance sheet as at the
end of the quarter and statement of income through such
quarter, within 45 days after the end of each quarter.
Furthermore, the Mortgagor's covenants contained in
Paragraph 2(i) of the Letter Agreement dated December 22,
1994, and accepted December 23, 1994, between Mortgagor and
Mortgagee, as such Letter Agreement may be hereafter
amended, modified or replaced with definitive documentation
as contemplated therein, are hereby incorporated by
reference into this Mortgage, as if fully stated herein;
(j) OTHER PROCEEDINGS. If any action or proceeding
shall be commenced, excepting an action to foreclose the
Mortgage or to collect the debt hereby secured, to which
action or proceeding the Mortgagee is made a party by reason
of the execution of the Mortgage or the Note, or in which it
becomes necessary to defend or uphold the lien of the
Mortgage, all reasonable sums paid by the Mortgagee for the
expense of any litigation to prosecute or defend the rights
and lien created hereby, including attorneys' fees, shall be
paid by the Mortgagor, together with interest thereon from
date of payment at the rate specified in the Note, and any
such sum, and the interest thereon, shall be immediately due
and payable and be secured hereby, having the benefit of the
lien hereby created, as a part thereof and of its priority.
The Mortgagee shall give the Mortgagor prompt notice of the
initiation of any such action or proceeding;
(k) CONSENT TO RELEASE. ETC. Without affecting the
liability of the Mortgagor or any other person (except any
person expressly released in writing) for payment of any
indebtedness secured hereby or for performance of any
obligation contained herein or in the other Loan Documents,
and without affecting the rights of the Mortgagee with
respect to any security not expressly released in writing,
the Mortgagee may at any time and from time to time, either
before or after the maturity of the Note and without notice
or consent:
(i) Release any person liable for payment of all
or any part of the indebtedness evidenced by the Note
or for performance of any obligation contained in the
8
other Loan Documents;
(ii) Make any agreement extending the time or
otherwise altering the terms of payment of all or any
part of the Note indebtedness, or modifying or waiving
any obligation in the Loan Documents, or subordinating,
modifying or otherwise dealing with the lien or charge
hereof;
(iii) Exercise or refrain from exercising or waive
any right the Mortgagee may have hereunder, in the
other Loan Documents, or by law;
(iv) Accept additional security of any kind; or
(v) Release or otherwise deal with any property,
real or personal, securing the indebtedness, including
all or any part of the Premises;
(l) LEASES. The Mortgagee's prior written approval
(which approval will not be unreasonably withheld) shall be
required prior to execution, delivery and commencement
thereof, of all leases, tenancies and occupancies of the
Premises entered into by the Mortgagor; and the Mortgagor at
its cost and expense, upon request of the Mortgagee, shall
cause any parties in possession of the Premises under any
such leases, tenancies and occupancies, not so approved, to
vacate the Premises immediately; and the Mortgagor
acknowledges that the Mortgagee may from time to time at its
option enter upon the Premises and take any other action in
court or otherwise to cause such parties to vacate the
Premises; the costs and expenses of the Mortgagee in so
doing shall be paid by the Mortgagor to the Mortgagee on
demand thereof and shall be part of the indebtedness secured
by the Mortgage as costs and expenses incurred to preserve
and protect the security; such rights of the Mortgagee shall
be in addition to all its other rights as the Mortgagee,
including the right of foreclosure, for breach by the
Mortgagor in the requirements of this paragraph;
(m) DUE ON SALE. This Mortgage is not assignable or
assumable and if all or any part of the Premises or the
Personal Property is sold, transferred, or otherwise
conveyed, or if there is a change in the legal or beneficial
ownership of 10% or more of the capital stock or any class
of voting stock of Mortgagor, except for a testamentary
devise or a transfer between or among such stockholders as
existing on the date of recordation of this Mortgage, then
the Mortgagee may, at its option, require immediate payment
in full of all sums secured by this Mortgage (for purposes
of this paragraph, a net lease having a term of 50 years or
more shall constitute a sale).
9
(n) LIENS AND OTHER MORTGAGES. The Mortgagor shall
not, without the prior written consent of the Mortgagee,
grant any other mortgage, lien or security interest in the
Mortgaged Property or any portion thereof, except for a
refinancing of the then current balance of the indebtedness
incurred under the Senior Indenture in an amount not to
exceed $7,000,000;
(o) UNDERGROUND TANKS. The Mortgagor will comply with
New Hampshire Water Supply and Pollution Control Commission
Regulation WS-411, et seq. relating to the inspection and
replacement of underground fuel storage tanks located on the
Premises;
(p) FLOOD HAZARD: HAZARDOUS WASTE. The Premises are
not located in an "area of Special Flood Hazard", as that
term is defined in the National Flood Insurance Act of 1968
(as amended and supplemented by the Flood Disaster
Protection Act of 1973), and that to the best of Mortgagor's
knowledge the Premises do not contain any oil, hazardous
wastes, hazardous substances, hazardous materials, toxic
substances or toxic pollutants (collectively, "Hazardous
Materials"), as those terms are used in the Resource
Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the
Hazardous Materials Transportation Act and the Toxic
Substances Control Act, the Clean Air Act, the Clean Water
Act, or any similar state or local law (including, but not
limited to, New Hampshire Revised Statutes Annotated
Chapters 147-A, 147-B, and 147-C), or in any regulations
promulgated pursuant thereto, or in any other applicable law
(collectively, "Hazardous Waste Laws"). The Mortgagor
further represents and warrants that to the best of its
knowledge no asbestos is present in or has been used in the
construction of the Premises. The Mortgagor covenants to
strictly comply with the requirements of all Hazardous Waste
Laws and to promptly notify the Mortgagee of the presence in
or on the Premises of any materials, the use, storage,
transportation or disposal of which is regulated by the
Hazardous Waste Laws (and immediately to notify Mortgagee if
at any time there is a discharge, deposit, injection,
dumping, spilling, leaking, incineration or placing of any
Hazardous Materials into or on the Premises or if, at any
time, the use, generation, storage, treatment, disposal, or
transportation of any Hazardous Materials in, on, to, or
from the Premises is in violation of any law). The Mortgagor
hereby covenants to protect, indemnify, and hold the
Mortgagee harmless from and against all loss, cost, damage
and liability, including attorneys' fees and costs of
litigation, suffered or incurred by the Mortgagee on account
of the presence of any Hazardous Materials in, on, or under
the Premises, including, without limitation, any such loss,
cost, damage or liability arising from a violation of any
Hazardous Waste Laws. The Mortgagor covenants not to permit
10
any tenants or other occupants of the Premises to use any
portion or all of the Premises for the use, generation,
treatment, storage, disposal, or transportation of Hazardous
Materials, except with the prior written consent of the
Mortgagor and in compliance with all applicable laws and
regulations. The Mortgagee, at its election and in its sole
discretion and without notice, may (but shall not be
obligated to) cure any failure on the part of Mortgagor or
any occupant of the Premises so as to comply with the
foregoing and any all applicable laws in furtherance
thereof, including, without limitation (i) arrange for the
clean up or containment of Hazardous Materials found in, on,
or near the Premises and pay for such clean up and
containment costs and costs associated therewith; (ii) pay
on behalf of Mortgagor or any occupant of the Premises, any
fines or penalties imposed on Mortgagor or any occupant by
any federal, state, or local governmental agency or
authority in connection with such Hazardous Materials; and
(iii) make any other payment or perform any other act which
may prevent a release of Hazardous Materials, facilitate the
clean up thereof, and/or prevent a lien from attaching to
the Premises. Any partial exercise by Mortgagee of the
remedies hereinabove set forth or any partial undertaking on
the part of Mortgagee to cure Mortgagor's failure or any
failure by an occupant of the Premises to comply with all
applicable laws, shall not obligate Mortgagee to complete
the actions taken or require Mortgagee to expend further
sums to cure Mortgagor's or any such occupants'
non-compliance; neither shall the exercise of any remedy
operate to place upon the Mortgagee any responsibility for
the operation, control, care, management or repair of the
Premises, or make the Mortgagee the "operator" or
"generator" of the Premises within the meaning of the
Hazardous Waste Laws. The Mortgagee, by making any such
payment or incurring any such costs, shall be subrogated to
any rights of the Mortgagor or any occupant on the Premises
to seek reimbursement from any third parties, including
without limitation, the predecessor in interest to the
Mortgagor's title or a predecessor to the occupant's use of
the Premises who may be a "responsible party" under the
Hazardous Waste Laws, in connection with the presence of
such materials in, on or near the Premises. The Mortgagee,
in the reasonable exercise of its discretion and with
reasonable notice under the circumstances, may, at any time
after the occurrence and continuance of an Event of Default,
or otherwise not more than once every two (2) years, cause
one or more environmental assessments of the Premises to be
undertaken. Environmental assessments may include a detailed
visual inspection of the Premises, including, without
limitation, all storage areas, storage tanks, drains,
drywells, and leaching areas, as well as the taking of soil
samples, surface water samples, and ground water samples,
and such other investigation or analysis as is necessary or
11
appropriate for a complete assessment of the compliance of
the Premises and the use and operation thereof with all
Hazardous Waste Laws;
(q) FUTURE ADVANCES. Future advances from the
Mortgagee, if any, shall be secured by this Mortgage as
evidenced by the Note secured hereby;
(r) COMPLIANCE WITH LAWS. ETC. The Premises and the
Mortgagor's use and occupancy thereof comply in all respects
with all applicable zoning, building, environmental, and
other laws, ordinances, and regulations. The Mortgagor has
no knowledge of any claim of any violation of any such legal
requirements. The Mortgagor will comply, and will cause any
tenant or person occupying the Premises to comply, with all
applicable laws, regulations, covenants, rules, ordinances,
statutes, codes, permits, orders and decrees applicable to
the Mortgagor, the Mortgaged Property, or the use, occupancy
or condition of the Premises. The Mortgagor, if an entity
other than a natural person, will, so long as the
indebtedness secured hereby remaining outstanding, do all
things necessary to preserve and keep in full force and
effect its existence, franchises, rights and privileges as
such an entity under the laws of the state of its
incorporation or creation including, without limitation, the
payment of all fees and other charges required in connection
therewith. The Mortgagor shall have the right to contest by
appropriate legal proceedings, but without cost or expense
to the Mortgagee, the validity of any laws, ordinances,
orders, rules, regulations and assessments affecting the
Mortgagor or the Mortgaged Property if compliance therewith
may legally be held in abeyance without the sufferance of
any charge, lien or liability against the Mortgaged
Property, and the Mortgagor may postpone compliance
therewith until the final determination of any such
proceedings, provided they shall be prosecuted with due
diligence and dispatch, and if any lien or charge is
incurred, the Mortgagor may, nevertheless, make the contest
and delay compliance, provided the Mortgagee is furnished
with security reasonably satisfactory to it against any loss
or injury by reason of such noncompliance or delay;
(s) MECHANICS LIENS. ETC. The Mortgagor will pay, as
the same shall become due, all lawful claims and demands of
mechanics, materialmen, laborers and others which, if
unpaid, might result in, or permit the creation of, a lien
on the Mortgaged Property or on the revenues, rents, issues,
income and profits arising therefrom. The Mortgagor will not
create or permit to be created and will promptly discharge
any mortgage, lien, or charge on the Mortgaged Property or
on the interest of the Mortgagor or the Mortgagee therein,
and the Mortgagor will do or cause to be done everything
necessary so that the lien hereof shall be fully preserved,
at the cost of the Mortgagor, without expense to the
Mortgagee;
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(t) NO HOMESTEAD INTEREST. The Premises are commercial
property and there is no homestead interest in the Premises;
(u) FURTHER ASSURANCES. Mortgagor shall promptly upon
request of Mortgagee: (i) correct any defect, error or
omission which may be discovered in the contents of this
Mortgage or any other Loan Document or in the execution or
acknowledgment thereof; and/or (ii) execute, acknowledge,
deliver and record or file such further instruments and do
such further acts, in either case as may be necessary,
desirable or proper in Mortgagee's opinion to (x) protect
and preserve the second and valid lien and security interest
of this Mortgage on the Mortgaged Property or to subject
thereto any property intended by the terms thereof to be
covered thereby, including, without limitation, any
renewals, additions, substitutions or replacements thereto;
or (y) protect the interest and security interest of
Mortgagee in the Mortgaged Property against the rights or
interests of third parties. Mortgagor hereby appoints
Mortgagee as its attorney-in-fact, coupled with an interest,
to take the above actions and to perform such obligations on
behalf of Mortgagor, at Mortgagor's sole expense, if
Mortgagor fails to comply fully with this Paragraph; and
(v) INDEMNITY. Mortgagor shall indemnify, defend and
hold harmless Mortgagee from and against, and, upon demand,
reimburse Mortgagee for, all claims, demand, liabilities,
losses, damages, judgments, penalties, costs and expenses,
including, without limitation, reasonable attorneys' fees
and disbursements, which may be imposed upon, asserted
against or incurred or paid by Mortgagee by reason of, on
account of or in connection with, any bodily injury or death
or property damage occurring in, upon or in the vicinity of
the Mortgaged Property through any cause whatsoever, or
asserted against Mortgagee on account of any act performed
or omitted to be performed under the Loan Documents or on
account of any transaction arising out of or in any way
connected with the Mortgaged Property or the Loan Documents,
except as a result of the willful misconduct or gross
negligence of Mortgagee. Mortgagor shall indemnify and repay
Mortgagee immediately upon demand for any expenditures or
amounts advanced (other than advances of principal under the
Note) by Mortgagee at any time under the Loan Documents;
2. PAYMENTS BY THE MORTGAGEE. If the Mortgagor shall
neglect or refuse to keep the Property in good repair, to
maintain and pay the premiums for insurance which may be required
under Paragraph l(d) or to pay and discharge all taxes,
assessments, charges and liens of every nature and to whomever
assessed, as provided for in Paragraphs l(e) and l(s), the
Mortgagee may, at its election, cause such repairs to be made,
obtain such insurance or pay said taxes, assessments, charges and
liens, and any amounts paid as a result thereof, together with
13
interest thereon at the default rate of interest specified in the
Note secured hereby from the date of payment, shall be
immediately due and payable by the Mortgagor to the Mortgagee,
and until paid shall be added and become part of the principal
debt secured hereby, and the same may be collected as a part of
said principal debt in any suit herein or upon the Note; or the
Mortgagee, by the payment of any tax, assessment or charge, may,
if it sees fit if allowed by law, be thereby subrogated to the
rights of the state, county, village and all political or
governmental subdivisions. No such advances shall be deemed to
relieve the Mortgagor of any default hereunder or impair any
right or remedy consequent thereon, and the exercise of the
rights to make advances granted in this paragraph shall be
optional with the Mortgagee and not obligatory, and the Mortgagee
shall not in any case be liable to the Mortgagor for a failure to
exercise any such right. The Mortgagee shall have no
responsibility with respect to the legality, validity and
priority of any such claim, lien, encumbrance, tax, assessment
and premium, and of the amount necessary to be paid in
satisfaction thereof.
3. CASUALTIES AND TAKINGS.
(a) NOTICE TO MORTGAGEE. In the case of any act or
occurrence of any kind or nature which results in damage,
loss or destruction to the Mortgaged Property (a
"Casualty"), or commencement of any proceedings or actions
which might result in a condemnation or other taking for
public or private use of the Mortgaged Property or which
relates to injury, damage, benefit or betterment thereto (a
"Taking"), Mortgagor shall immediately notify Mortgagee
describing the nature and the extent of the Casualty or the
Taking, as the case may be. Mortgagor shall promptly
furnish to Mortgagee copies of all notices, pleadings,
determinations and other papers in any such proceedings or
negotiations.
(b) REPAIR AND REPLACEMENT. In case of a Casualty or
Taking, Mortgagor shall promptly (at Mortgagor's sole cost
and expense and regardless of whether the insurance or other
proceeds, if any, shall be sufficient or made available by
Mortgagee for the purpose) restore, repair, replace and
rebuild the Mortgaged Property as nearly as possible to its
quality, utility, value, condition and character immediately
prior to the Casualty or the Taking, as the case may be.
However, upon a Casualty or Taking resulting in a
restoration cost that exceeds 25% of the then replacement
value of the improvements on the Premises or a Taking of
more than 25% of the area of the Premises, and application
by Mortgagee of the Insurance Proceeds or of the Taking
Proceeds to reduction of the indebtedness secured hereby,
Mortgagor shall be obligated only to remove any debris from
the Premises and take such actions as are necessary to make
the undamaged or non-taken portion of the Premises into a
functional economic unit, insofar as is possible under the
circumstances.
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(c) PROCEEDS.
(i) Collection. Mortgagor shall use its best
efforts to collect the maximum amount of insurance
proceeds payable on account of any Casualty ("Insurance
Proceeds"), and the maximum award or payment or
compensation payable on account of any Taking ("Taking
Proceeds"). In the case of a Casualty, Mortgagee may,
at is sole option, make proof of loss to the insurer,
if not made promptly by Mortgagor. Mortgagor shall not
settle or otherwise compromise any claim for Insurance
Proceeds or Taking Proceeds without Mortgagee's prior
written consent.
(ii) Assignment to Mortgagee. Subject to the rights
of the IDA and the Trustee under the Senior Indenture,
Mortgagor hereby assigns, sets over and transfers too
Mortgagee all Insurance Proceeds and Taking Proceeds
and authorizes payment of such Proceeds to be made
directly to Mortgagee which may, in its sole unfettered
discretion, apply such Proceeds to either of the
following, or any combination thereof: (x) payment of
the indebtedness secured hereby, either in whole or in
part, in any order determined by Mortgagee in its sole
unfettered discretion; or (y) repair or replacement,
either partly or entirely, of any part of the Mortgaged
Property so destroyed, damaged or taken, in which case
Mortgagee may impose such terms, conditions and
requirements for the disbursement of proceeds for such
purposes as it, in its sole unfettered discretion,
deems advisable. Mortgagee shall not be a trustee with
respect to any Insurance Proceeds or Taking Proceeds,
and may commingle Insurance Proceeds or Taking Proceeds
with its funds without obligation to pay interest
thereon. If any portion of the indebtedness secured
hereby shall thereafter be unpaid, Mortgagor shall not
be excused from the payment thereof in accordance with
the terms of the Loan Documents. Mortgagee shall not,
in any event or circumstance, be liable or responsible
for failure to collect or exercise diligence in the
collection of any Insurance Proceeds or Taking
Proceeds.
4. EVENTS OF DEFAULT. The following events shall be deemed
"Events of Default" hereunder:
(a) Failure by Mortgagor to make any payment when due
or within the applicable grace period, if any, under the
Note;
(b) Mortgagor defaults in the observance or
performance of any covenant, warranty, or agreement required
to be observed or performed by it under this Mortgage (other
than a payment default referenced in subparagraph (a) above)
15
and fails to cure such default within thirty (30) days after
notice from Mortgagee;
(c) Any representation or warranty or statement of
fact made to Mortgagee at any time by Mortgagor is false or
misleading or becomes false or misleading in any material
respect;
(d) The occurrence of a default or an event of default
under any other Loan Document and lapsing of the applicable
grace period, if any;
(e) Mortgagor shall be in default under any other
obligation owed to Mortgagee or shall be in default under
any obligation owed to a third party which default has a
material adverse effect on the financial condition of
Mortgagor or on the value of the Mortgaged Property;
(f) Uninsured loss, theft, damage, or destruction of
any substantial portion of any of the Mortgaged Property; or
(g) The occurrence of an Event of Default (as defined
in the Senior Indenture) under the Senior Indenture, and the
lapsing of any applicable grace period;
(h) The Mortgagor's license from the State of New
Hampshire's Pari-Mutuel Commission to conduct Thoroughbred
horse racing at the Premises lapses, expires and is not
renewed;
(i) Mortgagor refinances the indebtedness incurred
under the Senior Indenture for an amount in excess of
$7,000,000;
(j) The Mortgagor shall (1) apply for or consent to
the appointment of a receiver, trustee or liquidator of it
or any of its property, (2) make a general assignment for
the benefit of creditors, (3) be adjudicated as bankrupt or
insolvent, (4) file a voluntary petition in bankruptcy, or a
petition or an answer seeking reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation
under any law or statute, or an answer admitting the
material allegations of a petition filed against it in any
proceeding under any such law or statute, or (5) offer or
enter into any composition, extension or arrangement seeking
relief or extension of its debts;
(k) Proceedings shall be commenced or an order,
judgment or decree shall be entered, without the
application, approval or consent of the Mortgagor, in or by
any court of competent jurisdiction, relating to the
bankruptcy, dissolution, liquidation, reorganization or the
appointment of a receiver, trustee or liquidator of the
Mortgagor, or of all or a substantial part of its assets,
16
and such proceedings, order, judgment or decree shall
continue undischarged or unstayed for a period of sixty (60)
days;
(l) Mortgagor ceases to exist for any reason;
(m) The Mortgagor is unable to pay its debts as they
mature or the occurrence of any other event of insolvency,
however defined, and determined by the Mortgagee in its sole
discretion; or
(n) A final unappealable judgment not covered by
insurance for the payment of money in an amount greater than
$50,000.00 shall be rendered against the Mortgagor and the
same shall remain undischarged for a period of thirty (30)
days, during which period execution shall not be effectively
stayed.
Upon the occurrence of any Event of Default, then the full
principal sum or unpaid balance of the debt secured hereby,
together with interest and all advances, if any, shall, at the
option of the Mortgagee, or its successors or assigns,
immediately become due and payable, whereupon the Mortgagee, or
its successors or assigns, may forthwith exercise all of the
rights and remedies provided in this Paragraph and Paragraphs 5,
6, and 7 hereinbelow, as well as in any of the other Loan
Documents, or available to the Mortgagee at law or in equity,
including without limitation the STATUTORY POWER OF SALE.
Notwithstanding any other provisions set forth herein and without
limitation thereof, this Mortgage is upon the STATUTORY
CONDITIONS, for any breach of which the Mortgagee shall have the
STATUTORY POWER OF SALE.
The foregoing provisions of this Paragraph notwithstanding,
and notwithstanding the provisions of Paragraphs 5 through 7
below, Mortgagee shall not enforce the terms of this Mortgage in
a manner which would in any way materially impair the security
afforded by the Lien Hereof (as defined in the Senior Indenture).
In addition, the Mortgagee agrees as long as there is any
indebtedness outstanding under the Senior Indenture, not to
accelerate the maturity of the Note and not to exercise its
rights and remedies respecting the Mortgaged Property (i) upon
the occurrence of any of the Events of Default listed in
subparagraphs (b)-(n) above until the Trustee has commenced
foreclosure proceedings or other action to realize upon the
Mortgaged Property or (ii) upon the occurrence of an Event of
Default listed in subparagraph (a) above for 120 days following
the giving of notice of the default to the Trustee; provided,
however, Mortgagee shall not enforce the provisions of this
sentence in a manner which would in any way materially impair the
security afforded by the Lien Hereof.
17
5. POSSESSION BY MORTGAGEE.
(a) If the Mortgagee shall take possession of the
Mortgaged Property as permitted hereby, then in addition to,
and not in limitation of, the Mortgagee's STATUTORY POWER OF
SALE, the Mortgagee may, subject to any requisite
governmental approvals:
(i) hold, manage, operate, and lease the
Mortgaged Property to the Mortgagor or to any other
entity on such terms and for such period(s) of time as
the Mortgagee may deem proper, and the provisions of
any lease made by the Mortgagee pursuant hereto shall
be valid and binding upon the Mortgagor notwithstanding
the fact that the Mortgagee's right of possession may
terminate or this Mortgage may be satisfied of record
prior to the expiration of the term of such lease;
(ii) make such alterations, additions,
improvements, renovations, repairs, and replacements to
the Mortgaged Property as the Mortgagee may deem
necessary;
(iii) remodel such improvements so as to make the
same available in whole or in part for business
purposes;
(iv) collect the rents, issues, and profits
arising from the Mortgaged Property, past due and
thereafter becoming due, and apply the same, in such
order of priority as the Mortgagee may determine, to
the payment of all charges and commissions incidental
to the collection of rents, the management of the
Mortgaged Property, and thereafter to the obligations
secured hereby, and all sums or charges required to be
paid by the Mortgagor hereunder; and
(v) take any other action the Mortgagee deems
necessary or appropriate in its sole discretion to
preserve, protect, or improve the Mortgaged Property;
(b) All monies advanced by the Mortgagee for the above
purposes and not repaid out of the rents collected shall
immediately and without demand be repaid by the Mortgagor to
the Mortgagee, together with interest thereon at the same
rate as provided in the Note, and shall be added to the
principal indebtedness secured hereby;
(c) The taking of possession and the collection of
rents by the Mortgagee as described above shall not be
construed to be an affirmation of any lease of the Mortgaged
Property or any part thereof, and the Mortgagee, or any
purchaser at any foreclosure sale, may terminate any such
lease at any time, whether or not such taking of possession
and collection of rents has occurred; and
18
(d) Mortgagor hereby indemnifies and holds Mortgagee
harmless from and against any liability or damage which
Mortgagee may incur with respect to taking possession of the
Mortgaged Property and in the exercise and performance, and
good faith, of its rights and duties otherwise set forth in
this Paragraph.
6. FORECLOSURE OF PREMISES PURSUANT TO STATUTORY
POWER OF SALE.
(a) Upon an Event of Default, the Mortgagee or its
legal representatives or assigns may, on such terms and
conditions as the Mortgagee deems appropriate in its sole
discretion and pursuant to the STATUTORY POWER OF SALE, sell
the Premises by public sale to the highest or most
responsible bidder as provided herein and in N.H. RSA 479:25
27-a, as such statutes may be amended from time to time;
(b) If the Mortgagee invokes the POWER OF SALE, the
Mortgagee shall without further demand upon the Mortgagor,
auction the Premises or any estate therein, in one or more
parcels, to the highest or most responsible bidder for cash
or other consideration acceptable to the Mortgagee, such
auction to be held upon the Premises or at any other place
within or without the State of New Hampshire as the
Mortgagee may designate;
(c) The deed given by reason of such sale shall convey
to the purchaser an indefeasible title to the Premises or
tracts, parcels or other interests therein sold, discharged
of all rights of redemption with respect to this Mortgage by
the Mortgagor, or any person claiming from or under
Mortgagor. The Mortgagee shall apply the proceeds of such
sale first to any prior encumbrance (unless sold subject to
such prior encumbrance), then to all costs of notice and
sale of the Premises, including reasonable attorneys',
accountants' and appraisers' fees, then to any and all
accrued but unpaid interest due to the Mortgagee, and
thereafter to the principal indebtedness evidenced by the
Note and to any other indebtedness secured hereby. Any
excess may, unless objected to by the Mortgagor, be paid to
others having a lien on the Premises not having priority
over this Mortgage and, if none, then to the Mortgagor. If
objected to by Mortgagor, Mortgagee may interplead such
excess with a court of competent jurisdiction for a judicial
determination of the party or parties entitled to payment of
such excess, with Mortgagee's costs of the interpleader
action (including attorneys' fees) to be paid by Mortgagor
and secured hereby. The Mortgagor shall be liable for any
deficiency;
19
(d) In the event of foreclosure, at the option of the
Mortgagee, the interest of each of the Mortgagor and the
Mortgagee herein may be sold as a single unit together with
such personal property, furniture, furnishings, fixtures,
machinery, and equipment as may secure the Note or be
secured by the Loan Documents;
(e) If the provisions of the Uniform Commercial Code
apply to any property or security given to secure the
indebtedness secured hereby which is sold with or as a part
of the Premises, or any part thereof, at one or more
foreclosure sales, any notice required under such provisions
shall be deemed commercially reasonable and fully satisfied
by the notice provided to be given hereby in execution of
the POWER OF SALE; and
(f) The Mortgagee may resort to any remedies and the
security given by the Loan Documents in whole or in part,
and in such portions and in such order as may seem best to
Mortgagee in its sole discretion, and Mortgagor waives all
rights to a marshalling of its assets.
7. UCC SALE OF PERSONAL PROPERTY. The Mortgage is intended
to be and is a security agreement and financing statement with
respect to the Personal Property pursuant to, and in accordance
with, the terms of the Uniform Commercial Code as adopted by the
State of New Hampshire ("UCC"). Upon an Event of Default, the
Mortgagee may, at its discretion, require the Mortgagor to
assemble the Personal Property and make it available to the
Mortgagee at a place reasonably convenient to both parties to be
designated by the Mortgagee. The Mortgagee shall give the
Mortgagor notice, by registered mail, postage prepaid, of the
time and place of any public sale of any of the Personal Property
or of the time any private sale or other intended disposition
thereof is to be made by sending notice to the Mortgagor at least
ten (10) days before the time of the sale or other disposition,
which provisions for notice the Mortgagor and the Mortgagee agree
are reasonable; PROVIDED, HOWEVER, that nothing herein shall
preclude the Mortgagee from proceeding as to both the Personal
Property and the Premises, in accordance with the Mortgagee's
rights and remedies in respect of the Premises. The Mortgagee
shall have all of the remedies of a secured party under the
Uniform Commercial Code as now in effect in the State of New
Hampshire, and such further remedies as may from time to time
hereafter be provided in New Hampshire for a secured party. The
Mortgagor agrees that all rights of the Mortgagee as to the
Personal Property and the Premises may be exercised together or
separately and further agrees that in exercising its power of
sale as to the Personal Property and the Premises, the Mortgagee
may sell the Personal Property or any part thereof, either
separately from or together with the sale of the Premises or any
part thereof, all as the Mortgagee may in its discretion elect.
20
Mortgagor warrants, for UCC purposes, that its principal place of
business is in Salem, New Hampshire and that Mortgagor has no
other place of business in New Hampshire.
8. JOINT AND SEVERAL LIABILITY. If the Mortgagor be more
than one party, such parties shall be jointly and severally
liable under any and all obligations, covenants and agreements of
the Mortgagor contained herein or in any of the other Loan
Documents, and any reference herein to "Mortgagor" shall mean and
refer to such parties individually and collectively.
9. GENERAL PROVISIONS. The Mortgagor and the Mortgagee
further agree that:
(a) WAIVERS.
(i) Except as otherwise specifically provided in
this Mortgage, the Note and the other Loan Documents,
the Mortgagor waives demand, notice of any action taken
in reliance on this Mortgage, and all other demands and
notices of any description;
(ii) No delay or omission on the part of the
Mortgagee in exercising any right or remedy hereunder
shall operate as a waiver of such right or remedy or of
any other right or remedy under this Mortgage. A waiver
on any one occasion shall not be construed as a bar to
or waiver of any such right and/or remedy on any future
occasion. No single or partial exercise of any power
hereunder shall preclude other or future exercise
thereof or the exercise of any other right; and
(iii)That receipt and disposition of rents, income
of the Mortgaged Property, insurance proceeds, eminent
domain awards, or any other sums under the provisions
of the Loan Documents by the Mortgagee shall not be a
waiver or release of any rights of the Mortgagee,
including but not limited to, the right of foreclosure
or acceleration of the Note, whether such receipt or
disposition shall be before or after exercise of any
such rights.
(b) BINDING AGREEMENT. This Mortgage shall inure to
the benefit of and shall be binding upon the parties hereto
and their respective heirs, legal representatives,
successors, and permitted assigns; provided, however, that
any assumption of any obligations of Mortgagor hereunder
shall not constitute a release of the party whose obligation
is being assumed without the Mortgagee's prior written
consent.
(c) AMENDMENT. This Mortgage shall not be changed in
any respect except by written instrument signed by the
parties hereto.
21
(d) GOVERNING LAW. This Mortgage and all rights and
obligations hereunder, including matters of construction,
validity, and performance, shall be governed by the laws of
the State of New Hampshire.
(e) SEVERABILITY. If any term, condition, or provision
of this Mortgage or the application, thereof to any person
or circumstance shall, to any extent, be held invalid or
unenforceable according to law, then the remaining terms,
conditions, and provisions of this Mortgage, or the
application of any such invalid or unenforceable term,
condition or provision to persons or circumstances other
than those to which it is held invalid or unenforceable,
shall not be affected thereby, and each term, condition, and
provision of this Mortgage shall be valid and enforced to
the fullest extent permitted by law.
(f) HEADINGS. The descriptive headings of the sections
of this Mortgage have been inserted for convenience and
reference only and shall not control or affect the meaning
or construction of any of the contents hereof.
(g) ESTOPPEL CERTIFICATE. The Mortgagor, within five
(5) days after being given notice as provided below, will
furnish to the Mortgagee a written statement duly
acknowledged by the Mortgagor or its representative
certifying the principal amount then outstanding on the Note
and certifying that no offsets or defenses exist against the
Mortgage indebtedness.
(h) NOTICES. All notices, requests, demands and other
communications provided for hereunder shall be in writing
and shall be either mailed by certified or registered mail,
return receipt requested, or delivered by a regularly
scheduled overnight express carrier ("Overnight Carrier"),
to the applicable party at the following addresses:
If to the Mortgagor, to:
Rockingham Venture, Inc.
Rockingham Park
Rockingham Park Boulevard
Salem, NH 03079
Attention: Joseph E. Carney, Jr.
If to the Mortgagee, to:
Showboat, Inc.
2800 Fremont Street
Las Vegas, Nevada 89104
Attention: Leann Schneider, Vice President-Finance
22
With a copy to:
Showboat Development Company
6601 Ventnor Avenue
Ventnor, NJ 08406
Attention: R. Craig Bird, Executive Vice President
Finance & Development
or, as to each party, at such other address as shall be
designated by such parties in a written notice to the other party
complying as to delivery with the terms of this Paragraph. All
such notices, requests, demands and other communication shall be
deemed given and received on the earlier of:
(i) the date received;
(ii) if mailed as provided above, the date of
delivery, attempted delivery or refusal of delivery, as
indicated on the return receipt; or
(iii) if given to an Overnight Carrier for
delivery, the first business day after being received
by the Overnight Carrier.
(i) GENDER AND NUMBER. All words denoting gender or
number shall be construed to include any other gender or
number as the context and facts require.
(j) CONFLICT WITH OTHER LOAN DOCUMENTS. In the event
of any conflict between the terms, covenants, conditions and
restrictions contained in the Loan Documents, the term,
covenant and condition or restriction which grants the
greater benefit upon the Mortgagee shall control. The
determination as to which term, covenant, condition or
restriction is the more beneficial shall be made by the
Mortgagee in its sole discretion.
(k) WAIVER OF RIGHT OF EXEMPTION. The Mortgagor, for
the consideration aforesaid, hereby waives all rights of
exemption in the Mortgaged Property as the same are now or
here after provided by virtue of the Bankruptcy provisions
of the United States Code, including, without limitation, 11
U.S.C. 522.
(l) RIGHTS CUMULATIVE. All rights and remedies set
forth herein and in the Loan Documents shall be cumulative
and concurrent, and may be pursued, singly, successively, or
together, at the Mortgagee's sole discretion, and may be
exercised as often as occasion therefor shall occur;
Mortgagor expressly waives the application of any doctrine
of marshalling of assets.
IN WITNESS WHEREOF, the Mortgagor and the Mortgagee
have executed and delivered this Mortgage and Security
Agreement as of this 28th day of December, 1994.
Witness: ROCKINGHAM VENTURE, INC.
/s/David J. Callaghan By:/s/Joseph E. Carney
Joseph E. Carney, President
SHOWBOAT, INC.
/s/Henry C. Copeland By:/s/R Craig Bird
R. Craig Bird, Executive
Vice President
STATE OF NEW HAMPSHIRE
COUNTY OF HILLSBOROUGH
On this, the 28th Day of December, 1994, before me, the
undersigned officer, personally appeared JOSEPH E. CARNEY, JR.,
who acknowledged himself to be the President of ROCKINGHAM
VENTURE, INC., a New Hampshire corporation, and that he, as such
officer, being authorized so to do, executed the foregoing
instrument for the purposes therein contained.
Before me,
/s/John E. Lucas
Notary Public
JOHN E. LUCAS, NOTARY PUBLIC
MY COMMISSION EXPIRES
FEBRUARY 28, 1995
STATE OF NEW JERSEY
COUNTY OF ATLANTIC
On this, the 27 day of December, 1994, before me, the
undersigned officer, personally appeared R. CRAIG BIRD, who
acknowledged himself to be the Executive Vice President of
SHOWBOAT, INC., a Nevada corporation, and acknowledged that he,
as such officer, being authorized so to do, executed the
foregoing instrument for the purposes therein contained.
Before me,
/s/Deanna M. Petersen
Notary Public
DEANNA M. PETERSEN
NOTARY PUBLIC OF NEW JERSEY
MY COMISSION EXPIRES
JUNE 15, 1998
SCHEDULE/EXHIBIT A
Three certain tracts of parcels of land, with the buildings
and improvements located thereon, situate in Salem, Rockingham
County, New Hampshire, described as follows:
TRACT 1 (Map 98, Lot 7887)
A certain lot shown on "Subdivision Plan, Rockingham
Venture, Rockingham Park Boulevard, Salem, NH" prepared by
Kimball Chase Company, Inc. and recorded in the Rockingham County
Registry of Deeds as Plan D-20211, said tract shown as 169.906
acres and described as follows:
Commencing at a point on the easterly side of Central Street
at a point near the northerly end of the property at a point near
the northerly end of the property; thence
1. North 76 degrees 00' 21" east a distance of 286.97 feet to a
point; thence
2. South 33 degrees 40' 18" east a distance of 428.53 feet to a
point; thence
3. South 31 degrees 41' 21" east a distance of 210.68 feet to a
point; thence
4. North 60 degrees 49' 47" east a distance of 35.31 feet to a
point; thence
5. South 31 degrees 57' 35" east a distance of 183.68 feet to a
point; thence
6. South 26 degrees 49' 28" east a distance of 2,040.60 feet to a
point; thence
7. South 63 degrees 10' 32" west [L39] a distance of 21.70 feet
to a point; thence
8. South 27 degrees 35' 55" east [L38] a distance of 7.87 feet to
a point; thence
9. North 65 degrees 06' 29" east [L37] a distance of 14.78 feet
to a point; thence
10. South 26 degrees 48' 13" east [L36] a distance of 9.99 feet to
a point; thence
11. North 63 degrees 11' 47" east [L35] a distance of 27.12 feet
to a point; thence
12. South 26 degrees 48' 13" east a distance of 424.43 feet to a
point; thence
13. In a generally southeasterly direction along a curve
with a radius of 11,532.86 feet a distance of 500.25 feet to a
point; thence
14. South 29 degrees 17' 20" east a distance of 567.04 feet to a
point (courses No. 2 through 14 being along land now or formerly
of Boston & Maine Corporation); thence
15. South 60 degrees 44' 59" [L34]] west a distance of 23.79 feet
to a point; thence
16. South 30 degrees 27' 10" [L33] east a distance of 38.98 feet
to a point; thence
17. South 03 degrees 39' 12" west a distance of 235.67 feet to a
point; thence
18. South 20 degrees 29' 12" west a distance of 190.10 feet to a
point; thence
19. South 32 degrees 53' 59" west a distance of 185.30 feet to a
point; thence
20. South 48 degrees 16' 59" west a distance of 172.85 feet to a
point; thence
21. South 66 degrees 28' 02" west a distance of 71.98 feet to a
point; thence
22. South 60 degrees 24' 14" west a distance of 122.61 feet to a
point; thence
23. Along a curve to the right with a radius of 140.00 feet
a distance of 151.23 feet to a point; thence
24. South 60 degrees 24' 13" west a distance of 115.06 feet to a
point; thence
25. Along a curve to the right with a radius of 190.00 feet
a distance of 113.20 feet to a point; thence
26. South 60 degrees 24' 14" west a distance of 563.55 feet to a
point; thence
27. South 65 degrees 02' 13" west [L32] a distance of 49.93 feet
to a point; thence
28. South 77 degrees 37' 15" west [L31] a distance of 167.40 feet
to a point; thence
29. North 88 degrees 48' 42" west [L30] a distance of 171.10 feet
to a point; thence
30. North 74 degrees 20' 45" west [L29] a distance of 79.11 feet
to a point; thence
31. South 00 degrees 22' 54" east [L28] a distance of 23.22 feet
to a point (courses 15 through 31 above being along land now or
formerly of the State of New Hampshire and known as Rockingham
Park Boulevard); thence
32. North 41 degrees 54' 04" west a distance of 434.83 feet to a
point; thence
33. Along a curve to the right with a radius of 400.00 feet
a distance of 163.25 feet to a point; thence
34. North 18 degrees 31' 00" west a distance of 762.60 feet to a
point; thence
35. Along a curve to the right with a radius of 400.00 feet
a distance of 208.05 feet to a point; thence
36. North 11 degrees 17' 05" east a distance of 287.39 feet to a
point; thence
37. Along a curve to the left with a radius of 430.00 feet
a distance of 180.00 feet to a point; thence
38. North 12 degrees 41' 58" west [L27] a distance of 236.20 feet
to a point; thence
39. North 12 degrees 41' 58" west [L26] a distance of 56.80 feet
to a point; thence
40. Along a curve to the right with a radius of 472.21 feet
a distance of 191.04 feet to a point; thence
41. North 10 degrees 28' 51" east [L25] a distance of 182.87 feet
to a point; thence
42. Along a curve to the left with a radius of 400.00 feet
a distance of 139.63 feet to a point; thence
43. North 09 degrees 31' 09" west [L24] a distance of 149.47 feet
to a point; thence
44. North 09 degrees 14' 08" west [L23] a distance of 104.22 feet
to a point; thence
45. North 10 degrees 22' 35" west [L22] a distance of 30.09 feet
to a point; thence
46. North 09 degrees 00' 56" west a distance of 412.28 feet to a
point; thence
47. North 07 degrees 47' 20" west [L21] a distance of 113.88 feet
to a point; thence
48. North 06 degrees 33' 38" west [L20] a distance of 67.22 feet
to a point; thence
49. Along a curve with a radius of 225.07 feet a distance
of 62.00 feet to a point; thence
50. North 10 degrees 06' 50" west a distance of 761.65 feet along
Pleasant Street to a point; thence
51. North 79 degrees 13' 15" east a distance of 159.12 feet to a
point; thence
52. North 13 degrees 58' 46" west [L19] a distance of 88.87 feet
to a point; thence
53. North 14 degrees 44' 40" west [L18] a distance of 60.49 feet
to a point; thence
54. North 79 degrees 35' 50" west [L17] a distance of 33.62 feet
to a point; thence
55. North 10 degrees 18' 10" west [L16] a distance of 138.90 feet
to a point; thence
56. North 74 degrees 03' 46" east [L15] a distance of 22.50 feet
to a point; thence
57. North 14 degrees 24' 16" west [L14] a distance of 133.08 feet
to a point; thence
58. North 14 degrees 07' 46" west a distance of 486.27 feet to a
point; thence
59. North 14 degrees 00' 56" west [L13] a distance of 31.93 feet
to a point; thence
60. North 82 degrees 38'38" east [L5] a distance of 136.84 feet to
a point; thence
61. South 10 degrees 29' 37" east [L4] a distance of 152.00 feet
to a point; thence
62. South 13 degrees 59' 31" east [L3] a distance of 165.00 feet
to a point; thence
63. North 76 degrees 00' 27" east [L2] a distance of 50.00 feet to
a point; thence
64. North 13 degrees 59' 32" west [L1] a distance of 60.94 feet to
the point of beginning.
Containing 169.906 acres, more or less.
TRACT 2 (Map 89, Lot 11106) Municipal Parking Area
Said tract being shown as Lot 11106, Map 89 on the
above-referenced D-20211: said tract being more particularly
described as follows:
Commencing at the southeasterly corner of said lot on the
westerly side of Central Street; thence
1. South 82 degrees 38' 38" west [L5] a distance of 136.84 feet
to a point; thence
2. North 14 degrees 00' 56" west [L12] a distance of 19.00 feet
to a point; thence
3. South 77 degrees 49' 28" west [Lll] a distance of 5.49 feet to
a point; thence
4. North 10 degrees 08' 53" west [L10] a distance of 99.44 feet
to a point; thence
5. North 78 degrees 01' 46" east [L9] a distance of 20.00 feet to
a point; thence
6. North 10 degrees 49' 02" west [L8] a distance of 140.00 feet
to a point; thence
7. South 81 degrees 36' 28" east [L7] a distance of 130.51 feet
to a point; thence
8. South 10 degrees 29' 37" east [L6] a distance of 224.00 feet
to the point of beginning.
Shown to contain 0.735 acres, more or less.
TRACT 3 (Map 108, Lot 846)
A certain tract or parcel of land shown to contain 0.398
acres, more or less, and shown on a plan entitled "Subdivision
Plan, Rockingham Venture, Route 28/Rockingham Park Boulevard,
Salem, NH" prepared by Kimball Chase Company, Inc., said plan
having been recorded in the Rockingham County Registry of Deeds
as Plan D-20210; said tract being more particularly bounded and
described as follows:
Commencing at the northwesterly corner of the tract on the
easterly side of land now or formerly of the Boston & Maine
Railroad; thence
1. North 61 degrees 31' 16" east a distance of 62.00 feet to a
point at South Broadway (Route 28); thence
2. South 21 degrees 40' 38" east a distance 340.93 feet to a
point; thence
3. South 27 degrees 01' 16" east a distance of 303.24 feet to a
point; thence
4. South 60 degrees 42' 40" west a distance of 6.00 feet to a
point; thence
5. North 29 degrees 17' 20" west a distance of 478.00 feet along
land now or formerly of the Boston & Maine Railroad to a point:
thence
6. Along a curve with a radius of 11,512.86 feet a
distance of 163.81 feet along said Boston & Maine Railroad land
to the point of beginning.
Containing 0.398 acres, more or less.
For source of title see Deed of The New Hampshire Jockey
Club, Inc. to Rockingham Venture recorded August 22, 1983 at Book
2457, Page 805; see also Affidavit at Book 3079, Page 258.
SCHEDULE/EXHIBIT B
PERMITTED ENCUMBRANCES
THE ABOVE DESCRIBED PROPERTY IN SCHEDULE/EXHIBIT A IS
SUBJECT TO:
1. Covenants, restrictions and obligations contained in Deed of
Boston and Maine Railroad to The New Hampshire Jockey Club,
Inc. dated December 20, 1957, recorded at Book 1456, Page
18.
2. Covenants, restrictions and obligations contained in Deed of
Boston and Maine Corporation to said The New Hampshire
Jockey Club, Inc., dated October 27, 1965, recorded at Book
1802, Page 340, and easements for pipes, drainage, ditches,
poles and wires contained in said Deed.
3. Easement granted by Boston and Maine Corporation to Granite
State Electric Company dated November 18, 1965, recorded at
Book 1798, Page 297.
4. Terms and provisions of Agreement between William F. Smith
and the Town of Salem (Water Department of the Town of
Salem) dated March 6, 1934, recorded at Book 894, Page 369.
5. Rights and easements granted to New England Telephone and
Telegraph Company and Granite State Electric Company dated
May 9, 1949, recorded at Book 1148, Page 221.
6. Easements referred to in Deed of Andrew Miller to New
England Breeders Club dated November 20, 1905, recorded with
said Deeds in Book 613, Page 283.
7. Flowage rights, if any, referred to in the following deeds:
a. Isaac Woodbury to Andrew Miller, dated June 10, 1905, at
Book 609, Page 411;
b. Lester Hall to Andrew Miller, dated June 10, 1905, at
Book 609, Page 369;
c. Charles E. Kimball to Andrew Miller, dated June 10, 1905,
at Book 609, Page 372.
NOTE: See deeds purporting to assign said rights of flowage
from Methuen Company to Arlington Mills dated March 22,
1927, at Book 830, Page 258.
8. Two Easements for the transmission of electricity granted to
Rockingham County Light and Power Company by deeds of George
Woodbury recorded at Book 592, Pages 170 and 405.
9. Rights and easement granted by New Hampshire Jockey Club,
Inc. to New England Telephone and Telegraph Company dated
December 27, 1965, recorded at Book 1859, Page 560.
10. Rights of the State of New Hampshire, including rights of
access, slope, embankment and drainage easements under the
following instruments:
a. Commissioners Return of Highway Layout for Section Two,
Interstate Route 93, recorded at Book 1541, Page 97, and
dated April 4, 1960.
b. Commissioners Return of Highway Layout dated September 8,
1980, recorded at Book 2371, Page 1086.
c. Deed of Quitclaim from William F. Smith to State of New
Hampshire dated June 15, 1960, recorded at Book 1563, Page
201.
11. Possible rights of the public in streets and paved parking
areas on the insured premises.
12. Rights of the Town of Salem under a Sewer Easement from
Rockingham Venture dated December 21, 1983 and recorded
December 22, 1983 at Book 2473, Page 1752.
13. Rights and easements granted by George Woodbury to the
Hudson, Pelham and Salem Electric Railway Company, recorded
at Book 592, Page 420.
14. UCC Financing Statement from National Electronics Sale,
Service and Financial Co., Inc. to Arlington Trust Company.
Recorded May 21, 1984 at Book 2491, Page 1738 wherein the
property owners are recited to be Rockingham Venture and
Rockingham Venture, Inc.
15. Parking easements granted in the Deed of Rockingham Venture
to NED Rockingham Limited Partnership dated 2828, Page 1485.
16. Easement Agreement regarding a gate, a pathway and parking,
among Rockingham Venture, the Town of Salem, NED Rockingham
Limited Partnership, Raymond Kellett, Jr. and Laurel G.
Kellett dated March 29, 1990 and recorded at Book 2838, Page
1514.
17. Lease between Rockingham Venture (Lessor) and the Town of
Salem (Lessee) for parking for a term of 50 years notice of
which lease has been recorded at Book 2898, Page 1041, and
supplemented by an affidavit at Book 3063, Page 1925.
18. Terms of the Quitclaim Deed and Flyover Easement of
Rockingham Venture to NED Rockingham Limited Partnership
dated February 27, 1990 recorded at Book 2834, Page 383, and
the Amendment of Easement from Rockingham Venture to the
State of New Hampshire, as successor in interest to NED
Rockingham Limited Partnership, dated April 5, 1991,
recorded at Book 2886, Page 2523.
19. Encroachment Agreement, regarding the "Flyover Easement",
between Rockingham Venture and the State of New Hampshire,
dated August 9, 1991 and recorded at Book 2898, Page 2325.
20. Loan and Trust Agreement among Rockingham Venture and
Rockingham Venture, Inc. to Industrial Development Authority
of the State of New Hampshire and First National Bank of
Boston, Trustee in the original principal amount of
$22,960,000. dated December 1, 1983 and recorded at Book
2473, Page 1764.
21. Those matters disclosed by a Plan entitled A.L.T.A./A.C.S.M.
Land Title Survey, Boundary & Existing Conditions Plan of
Rockingham Park Racetrack in Rockingham County on Main Str.,
Mall Rd., Route 38 & Rockingham Blvd." dated May, 1994 and
certified on December 27, 1994, prepared by Kimball Chase
Company, Inc. and the accompanying Surveyor's Report dated
December 23, 1994.
22. Facts, details and terms of the following recorded plans:
a. 16856 (2 sheets). Consolidation and Subdivision Plan for
Rockingham Venture prepared by Kimball Chase. Dated July,
1987. Recorded August 20, 1987.
b. 19425 (2 sheets). Lot Line Adjustment Plan for Rockingham
Venture prepared by Kimball Chase. Dated January, 1989.
Recorded June 5, 1989.
c. 20157. Easement Plan. NED Salem Realty Trust prepared by
Kimball Chase. Dated February, 1990. Recorded February 28,
1990.
d. 20210. Subdivision Plan. Rockingham Venture. Dated
January, 1990. Prepared by Kimball Chase. (Depicts, among
other things, Route 28 Road Widening Area.) Recorded April
2, 1990.
e. 20211. Subdivision Plan. Rockingham Venture. Dated
January, 1990 by Kimball Chase. (Depicts, among other
things, Rockingham Park Boulevard Road Widening Area,
Municipal Parking Area, Storm Water Discharge Points and 45
Food Access Easement Area.) Recorded April 2, 1990.
f. 20247. Easement Plan. Rockingham Venture. Dated February,
1990 and prepared by Kimball Chase and depicts the flyover
easement area. Recorded April 19, 1990.
23. The following U.C.C. filings recorded in the Office of the
Secretary of State:
a. Filings #161639 and #161640 recorded 12/22/83 and
continued thereafter running to First National Bank of
Boston, as Trustee;
b. Filing #340647 recorded 2/26/90 and running to
Jordan-Milton Machiner, Inc.; and
c. Filing #383911 recorded 4/27/92 and running to R.C.
Hazelton Co., Inc.
24. The following U.C.C. filings recorded in the Office of the
Town Clerk of Salem, New Hampshire:
a. Filing #20,186 recorded 12/22/83 and continued thereafter
and running to First National Bank of Boston, as Trustee;
b. Filing #24,970 recorded 2/26/90 and running to
Jordan-Milton Machinery, Inc.; and
c. Filing #26,393 recorded 4/28/92 and running to R.C.
Hazelton Co., Inc.
25. All purchase money security interests in personal property,
whether now existing, or hereafter created.
EX-10.43
11
PROMISSORY NOTE
$27,905,388.00 as of March 1, 1994
FOR VALUE RECEIVED, Showboat Louisiana, Inc., a
corporation organized and existing under the laws of the State of
Nevada ("Maker"), promises to pay to Showboat, Inc., a
corporation organized and existing under the laws of the State of
Nevada, or order ("Holder"), at 2800 Fremont Street, Las Vegas,
Nevada 89104, or at such other place as Holder may designate in
writing, up to the principal balance of Twenty-Seven Million Nine
Hundred Five Thousand Three Hundred Eighty-Eight and no/one-
hundredths Dollars ($27,905,388.00), plus interest as hereinafter
provided. Interest shall be calculated on a daily basis (based
on a 365-day year), at 10.25% ("Base Rate"). Principal and
interest shall be payable upon the earlier to occur of
(i) demand or (ii) December 31, 1994 (the "Maturity Date").
All payments on this Promissory Note shall be applied
first to discharge all accrued but unpaid interest on the unpaid
principal balance hereof, and the remainder to be applied to the
principal balance. The Holder's acceptance of any payment less
than the amount then due shall not, in any manner, effect or
prejudice the rights of the Holder to receive the unpaid balance
then due and payable.
The failure to pay the unpaid principal sum on the
Maturity Date or the failure to pay any other sum when the same
shall become due and payable shall constitute an ("EVENT OF
DEFAULT") hereunder, and upon the occurrence of an Event of
Default, all sums evidenced hereby, including the entire
principal balance, all accrued and unpaid interest and all other
amounts due hereunder shall, at the election of Holder, and
without demand or notice to Maker, become immediately due and
payable and the Holder may exercise its rights under this Note,
and any other rights under applicable law.
Upon the occurrence of an Event of Default by Maker,
the unpaid principal balance, and all accrued and unpaid interest
due hereunder and all other costs shall together be treated as
the principal balance of this Promissory Note and shall bear
interest at the rate of three (3) percentage points per annum
greater than the Base Rate (the "DEFAULT RATE"), from the date of
the Event of Default until the entire principal sum and such
interest and costs have been paid in full.
Maker shall have the right to prepay at any time all or
any portion of this Promissory Note without penalty.
It is not the intent of Holder to collect interest or
other loan charges in excess of the maximum amount permitted by
Nevada law. If interest or other loan charges collected or to be
collected by the Holder exceed any applicable permitted limits
then (i) any such interest or other loan charges shall be reduced
by the amount necessary to reduce the interest or other loan
charges to the permitted limits, and (ii) any sums already
collected from the Maker which exceeded permitted limits will be
refunded to the Maker. The Holder may choose to make such refund
by reducing the principal balance of the indebtedness hereunder
or by making a direct payment to the Maker.
Maker agrees to waive demand, diligence, presentment
for payment and protest, notice of acceleration, extension,
dishonor, maturity, protest, and default hereunder. The Holder
may accept late or partial payments even though they are marked
"payment in full," without losing, prejudicing or waiving any
rights hereunder.
Maker agrees to pay all costs of collection, and all
costs of suit and preparation for such suit (whether at trial or
appellate level), in the event the unpaid principal sum of this
Promissory Note, or any payment of principal or interest is not
paid when due.
No amendment, modification, change, waiver or discharge
shall be effective unless evidenced by an instrument in writing
and signed by the party against whom enforcement of any waiver,
amendment, change, modification or discharge is sought. If any
provision hereof is invalid, or unenforceable, the other
provisions hereof shall remain in full force and effect and shall
be construed to effectuate the provisions hereof. The provisions
of this Promissory Note shall be binding and inure to the benefit
of the successors and assigns of the parties hereto.
2
A waiver by Holder or failure to enforce any covenant
or condition of this Promissory Note, or to declare any default
hereunder, shall not operate as a waiver of any subsequent
default or affect the right of Holder to exercise any right or
remedy not expressly waived in writing.
This Promissory Note shall be construed in accordance
with and governed by Nevada law.
All payments of principal and interest are hereby
required to be made in the form of lawful money of the United
States of America.
Time is of the essence with respect to this Promissory
Note and each and every covenant, condition, term and provision
hereof.
Whenever the context requires or permits, the singular
shall include the plural, the plural shall include the singular
and the masculine, feminine and neuter shall be freely
interchangeable.
IN WITNESS WHEREOF, Maker has executed this Promissory
Note at Las Vegas, Nevada as of the day first above written.
Maker:
SHOWBOAT LOUISIANA, INC., a
Nevada corporation
By:/s/Leann Schneider
Its: Treasurer
3
PROMISSORY NOTE
$23,807,832.11 as of January 1, 1995
FOR VALUE RECEIVED, Showboat Louisiana, Inc., a
corporation organized and existing under the laws of the State of
Nevada ("Maker"), promises to pay to Showboat, Inc., a
corporation organized and existing under the laws of the State of
Nevada, or order ("Holder"), at 2800 Fremont Street, Las Vegas,
Nevada 89104, or at such other place as Holder may designate in
writing, up to the principal balance of Twenty-Three Million
Eight Hundred Seven Thousand Eight Hundred Thirty-Two and
eleven/one-hundredths Dollars ($23,807,832.11), plus interest as
hereinafter provided. Interest shall be calculated on a daily
basis (based on a 365-day year), at 10.25% ("Base Rate").
Principal and interest shall be payable upon the earlier to occur
of (i) demand or (ii) December 31, 1995 (the "Maturity Date").
All payments on this Promissory Note shall be applied
first to discharge all accrued but unpaid interest on the unpaid
principal balance hereof, and the remainder to be applied to the
principal balance. The Holder's acceptance of any payment less
than the amount then due shall not, in any manner, effect or
prejudice the rights of the Holder to receive the unpaid balance
then due and payable.
The failure to pay the unpaid principal sum on the
Maturity Date or the failure to pay any other sum when the same
shall become due and payable shall constitute an ("EVENT OF
DEFAULT") hereunder, and upon the occurrence of an Event of
Default, all sums evidenced hereby, including the entire
principal balance, all accrued and unpaid interest and all other
amounts due hereunder shall, at the election of Holder, and
without demand or notice to Maker, become immediately due and
payable and the Holder may exercise its rights under this Note,
and other rights under applicable law.
Upon the occurrence of an Event of Default by Maker,
the unpaid principal balance, and all accrued and unpaid interest
due hereunder and all other costs shall together be treated as
the principal balance of this Promissory Note and shall bear
interest at the rate of three (3) percentage points per annum
greater than the Base Rate (the "DEFAULT RATE"), from the date of
the Event of Default until the entire principal sum and such
interest and costs have been paid in full.
Maker shall have the right to prepay at any time all or
any portion of this Promissory Note without penalty.
It is not the intent of Holder to collect interest or
other loan charges in excess of the maximum amount permitted by
Nevada law. If interest or other loan charges collected or to be
collected by the Holder exceed any applicable permitted limits
then (i) any such interest or other loan charges shall be reduced
by the amount necessary to reduce the interest or other loan
charges to the permitted limits, and (ii) any sums already
collected from the Maker which exceeded permitted limits will be
refunded to the Maker. The Holder may choose to make such refund
by reducing the principal balance of the indebtedness hereunder
or by making a direct payment to the Maker.
Maker agrees to waive demand, diligence, presentment
for payment and protest, notice of acceleration, extension,
dishonor, maturity, protest, and default hereunder. The Holder
may accept late or partial payments even though they are marked
"payment in full," without losing, prejudicing or waiving any
rights hereunder.
Maker agrees to pay all costs of collection, and all
costs of suit and preparation for such suit (whether at trial or
appellate level), in the event the unpaid principal sum of this
Promissory Note, or any payment of principal or interest is not
paid when due.
No amendment, modification, change, waiver or discharge
shall be effective unless evidenced by an instrument in writing
and signed by the party against whom enforcement of any waiver,
amendment, change, modification or discharge is sought. If any
provision hereof is invalid, or unenforceable, the other
provisions hereof shall remain in full force and effect and shall
be construed to effectuate the provisions hereof. The provisions
of this Promissory Note shall be binding and inure to the benefit
of the successors and assigns of the parties hereto.
2
A waiver by Holder or failure to enforce any covenant
or condition of this Promissory Note, or to declare any default
hereunder, shall not operate as a waiver of any subsequent
default or affect the right of Holder to exercise any right or
remedy not expressly waived in writing.
This Promissory Note shall be construed in accordance
with and governed by Nevada law.
All payments of principal and interest are hereby
required to be made in the form of lawful money of the United
States of America.
Time is of the essence with respect to this Promissory
Note and each and every covenant, condition, term and provision
hereof.
Whenever the context requires or permits, the singular
shall include the plural, the plural shall include the singular
and the masculine, feminine and neuter shall be freely
interchangeable.
IN WITNESS WHEREOF, Maker has executed this Promissory
Note at Las Vegas, Nevada as of the day first above written.
Maker:
SHOWBOAT LOUISIANA, INC., a
Nevada corporation
By:/s/Leann Schneider
Its: Treasurer
3
PROMISSORY NOTE
$18,600,000.00 as of January 1, 1994
FOR VALUE RECEIVED, Showboat Louisiana, Inc., a
corporation organized and existing under the laws of the State of
Nevada ("Maker"), promises to pay to Showboat, Inc., a
corporation organized and existing under the laws of the State of
Nevada, or order ("Holder"), at 2800 Fremont Street, Las Vegas,
Nevada 89104, or at such other place as Holder may designate in
writing, up to the principal balance of Eighteen Million Six
Hundred Thousand and no/one-hundredths Dollars ($18,600,000.00),
plus interest as hereinafter provided. Interest shall be
calculated on a daily basis (based on a 365-day year), at 10.25%
(the "Base Rate"). Principal and interest shall be payable the
earlier to occur of (i) demand or (ii) December 31, 1994 (the
"Maturity Date").
All payments on this Promissory Note shall be applied
first to discharge all accrued but unpaid interest on the unpaid
principal balance hereof, and the remainder to be applied to the
principal balance. The Holder's acceptance of any payment less
than the amount then due shall not, in any manner, effect or
prejudice the rights of the Holder to receive the unpaid balance
then due and payable.
The failure to pay the unpaid principal sum on the
Maturity Date or the failure to pay any other sum when the same
shall become due and payable shall constitute an ("EVENT OF
DEFAULT") hereunder, and upon the occurrence of an Event of
Default, all sums evidenced hereby, including the entire
principal balance, all accrued and unpaid interest and all other
amounts due hereunder shall, at the election of Holder, and
without demand or notice to Maker, become immediately due and
payable and the Holder may exercise its rights under this Note,
and any other rights under applicable law.
Upon the occurrence of an Event of Default by Maker,
the unpaid principal balance, and all accrued and unpaid interest
due hereunder and all other costs shall together be treated as
the principal balance of this Promissory Note and shall bear
interest at the rate of three (3) percentage points per annum
greater than the Base Rate (the "DEFAULT RATE"), from the date of
the Event of Default until the entire principal sum and such
interest and costs have been paid in full.
Maker shall have the right to prepay at any time all or
any portion of this Promissory Note without penalty.
It is not the intent of Holder to collect interest or
other loan charges in excess of the maximum amount permitted by
Nevada law. If interest or other loan charges collected or to be
collected by the Holder exceed any applicable permitted limits
then (i) any such interest or other loan charges shall be reduced
by the amount necessary to reduce the interest or other loan
charges to the permitted limits, and (ii) any sums already
collected from the Maker which exceeded permitted limits will be
refunded to the Maker. The Holder may choose to make such refund
by reducing the principal balance of the indebtedness hereunder
or by making a direct payment to the Maker.
Maker agrees to waive demand, diligence, presentment
for payment and protest, notice of acceleration, extension,
dishonor, maturity, protest, and default hereunder. The Holder
may accept late or partial payments even though they are marked
"payment in full," without losing, prejudicing or waiving any
rights hereunder.
Maker agrees to pay all costs of collection, and all
costs of suit and preparation for such suit (whether at trial or
appellate level), in the event the unpaid principal sum of this
Promissory Note, or any payment of principal or interest is not
paid when due.
No amendment, modification, change, waiver or discharge
shall be effective unless evidenced by an instrument in writing
and signed by the party against whom enforcement of any waiver,
amendment, change, modification or discharge is sought. If any
provision hereof is invalid, or unenforceable, the other
provisions hereof shall remain in full force and effect and shall
be construed to effectuate the provisions hereof. The provisions
of this Promissory Note shall be binding and inure to the benefit
of the successors and assigns of the parties hereto.
2
A waiver by Holder or failure to enforce any covenant
or condition of this Promissory Note, or to declare any default
hereunder, shall not operate as a waiver of any subsequent
default or affect the right of Holder to exercise any right or
remedy not expressly waived in writing.
This Promissory Note shall be construed in accordance
with and governed by Nevada law.
All payments of principal and interest are hereby
required to be made in the form of lawful money of the United
States of America.
Time is of the essence with respect to this Promissory
Note and each and every covenant, condition, term and provision
hereof.
Whenever the context requires or permits, the singular
shall include the plural, the plural shall include the singular
and the masculine, feminine and neuter shall be freely
interchangeable.
IN WITNESS WHEREOF, Maker has executed this Promissory
Note at Las Vegas, Nevada as of the day first above written.
Maker:
SHOWBOAT LOUISIANA, INC., a
Nevada corporation
By:/s/Leann Schneider
Its:Treasurer
3
EX-10.44
12
PROMISSORY NOTE
$25,000,000.00 as of March 2nd, 1995
FOR VALUE RECEIVED, Showboat Louisiana, Inc., a
corporation organized and existing under the laws of the State of
Nevada, and Lake Pontchartrain Showboat, Inc., a corporation
organization and exists under the laws of the State of Nevada
("Makers"), promise to pay to Showboat, Inc., a corporation
organized and existing under the laws of the State of Nevada, or
order ("Holder"), at 2800 Fremont Street, Las Vegas, Nevada
89104, or at such other place as Holder may designate in writing,
up to the principal balance of Twenty-Five Million and no/one-
hundredths Dollars ($25,000,000.00), plus interest as hereinafter
provided. Interest shall be calculated on a daily basis (based
on a 365-day year), at 11% ("Base Rate"). Principal and interest
shall be payable upon the earlier to occur of (i) demand or
(ii) December 31, 1995 (the "Maturity Date").
All payments on this Promissory Note shall be applied
first to discharge all accrued but unpaid interest on the unpaid
principal balance hereof, and the remainder to be applied to the
principal balance. The Holder's acceptance of any payment less
than the amount then due shall not, in any manner, effect or
prejudice the rights of the Holder to receive the unpaid balance
then due and payable.
The failure to pay the unpaid principal sum on the
Maturity Date or the failure to pay any other sum when the same
shall become due and payable shall constitute an ("EVENT OF
DEFAULT") hereunder, and upon the occurrence of an Event of
Default, all sums evidenced hereby, including the entire
principal balance, all accrued and unpaid interest and all other
amounts due hereunder shall, at the election of Holder, and
without demand or notice to Makers, become immediately due and
payable and the Holder may exercise its rights under this Note,
and any other rights under applicable law.
Upon the occurrence of an Event of Default by Makers,
the unpaid principal balance, and all accrued and unpaid interest
due hereunder and all other costs shall together be treated as
the principal balance of this Promissory Note and shall bear
interest at the rate of three (3) percentage points per annum
greater than the Base Rate (the "DEFAULT RATE"), from the date of
the Event of Default until the entire principal sum and such
interest and costs have been paid in full.
Makers shall have the right to prepay at any time all
or any portion of this Promissory Note without penalty.
It is not the intent of Holder to collect interest or
other loan charges in excess of the maximum amount permitted by
Nevada law. If interest or other loan charges collected or to be
collected by the Holder exceed any applicable permitted limits
then (i) any such interest or other loan charges shall be reduced
by the amount necessary to reduce the interest or other loan
charges to the permitted limits, and (ii) any sums already
collected from the Makers which exceeded permitted limits will be
refunded to the Makers. The Holder may choose to make such
refund by reducing the principal balance of the indebtedness
hereunder or by making a direct payment to the Makers.
Makers agree to waive demand, diligence, presentment
for payment and protest, notice of acceleration, extension,
dishonor, maturity, protest, and default hereunder. The Holder
may accept late or partial payments even though they are marked
"payment in full," without losing, prejudicing or waiving any
rights hereunder.
Makers agree to pay all costs of collection, and all
costs of suit and preparation for such suit (whether at trial or
appellate level), in the event the unpaid principal sum of this
Promissory Note, or any payment of principal or interest is not
paid when due.
No amendment, modification, change, waiver or discharge
shall be effective unless evidenced by an instrument in writing
and signed by the party against whom enforcement of any waiver,
amendment, change, modification or discharge is sought. If any
provision hereof is invalid, or unenforceable, the other
provisions hereof shall remain in full force and effect and shall
be construed to effectuate the provisions hereof. The provisions
of this Promissory Note shall be binding and inure to the benefit
of the successors and assigns of the parties hereto.
A waiver by Holder or failure to enforce any covenant
or condition of this Promissory Note, or to declare any default
hereunder, shall not operate as a waiver of any subsequent
default or affect the right of Holder to exercise any right or
remedy not expressly waived in writing.
This Promissory Note shall be construed in accordance
with and governed by Nevada law.
All payments of principal and interest are hereby
required to be made in the form of lawful money of the United
States of America.
Time is of the essence with respect to this Promissory
Note and each and every covenant, condition, term and provision
hereof.
Whenever the context requires or permits, the singular
shall include the plural, the plural shall include the singular
and the masculine, feminine and neuter shall be freely
interchangeable.
2
IN WITNESS WHEREOF, Makers have executed this
Promissory Note at Las Vegas, Nevada as of the day first above
written.
Makers:
SHOWBOAT LOUISIANA, INC.,
a Nevada corporation
By:/s/J. Keith Wallace
Its: President and CEO
LAKE PONTCHARTRAIN
SHOWBOAT, INC.,
a Nevada corporation
By:/s/J. Keith Wallace
Its: President and CEO
3
EX-10.45
13
$15,000,000.00 U.S. Atlantic City, New Jersey
March 19, 1995
PROMISSORY NOTE
On March 18, 1996, for value received, Atlantic City
Showboat, Inc. ("ACSI") promises to pay to the order of Showboat,
Inc. ("SI") at 2800 Fremont Street, Las Vegas, Nevada or such
other place as SI shall designate in writing to ACSI, the sum of
Fifteen Million and no/one-hundredths Dollars ($15,000,000.00)
(or such lesser principal sum which is the aggregate unpaid
principal amount of all loans made by SI AND ACSI as indicated on
the Schedule of Advances attached as page 4 of this note). ACSI
also promises to pay interest to SI on the unpaid principal
amount outstanding from time-to-time prior to maturity at an
annual rate equal to the average prime rate for money center
banks as published on the first business day of each calendar
month in the WALL STREET JOURNAL called "daily composite rates"
("prime rate"), plus one percent (1%) the ("Contract Rate"). The
Contract Rate shall be adjusted on the first day of each calendar
month to reflect the prime rate, but shall not be adjusted at any
other time during the calendar month. In no event shall the
interest rate be in excess of the maximum rate of interest
permitted under applicable law. Interest at the Contract Rate or
Default Rate (as hereinafter defined) shall be paid by ACSI on
the first day of each month commencing on the first day of the
month occurring after the date of said note. If any payment
becomes due on any day which is not a business day, such payment
shall be made on the next succeeding business day. The term
"business day" means Monday through Friday excepting national
(federal) legal holidays.
Interest hereunder shall be calculated for the actual
number of days elapsed on the basis of a 360-day year.
All payments of principal and/or interest shall be paid
in lawful money of the United States of America.
ACSI hereby expressly authorizes SI to record on the
schedule to this note the amount and date of all/any such loan(s)
made hereunder and the date and amount of each payment of
principal thereon. All such notations shall be presumed to be
correct and the aggregate unpaid amount of all/any loan(s) set
forth on the schedule shall be presumed to be the aggregate
unpaid principal amount due under this note.
Any loan may be prepared in whole or in part at any
time and from time to time without premium or penalty together
with interest accrued on the amount prepaid to the date of any
such prepayment. Upon ACSI's (i) failure to pay when due any
accrued interest or principal or (ii) failure to duly keep,
perform and observe each and every term, condition, covenant,
agreement or provision of this note, or (iii) assignment for the
benefit of creditors, declaration of bankruptcy (either voluntary
or involuntary) or initiation of proceedings in any court seeking
or acquiescing to any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief with its
creditors, in any manner, in or for the payment of its debts when
due under any state or federal law including, without limitation,
the seeking, consenting to, or acquiescing to or being subject to
the appointment of any trustee, receiver, assignee, custodian,
master or liquidator of itself or any of its property or any of
the rent, revenue, issue, earnings, profits or income thereof, SI
may, at its option, and without notice to ACSI, declare
immediately due and payable the entire unpaid aggregate balance
of principal, together with all accrued interest thereon, so that
the same shall become immediately due and payable. The foregoing
shall be events of default and any singular one shall be a
default. In the event of a default or an event of default,
interest shall accrue from time thereof until such default or
event of default is cured, at a default rate of interest
("Default Rate") which shall be calculated as that rate of
interest equal to the prime rate plus two percent (2%) from the
date of default or event of default. Payment thereof may be
enforced and recovered in whole or in part at any time by one or
more of the remedies provided in this note or available to SI
either at law or in equity.
Each and every right and remedy granted to SI or
allowed to it by law shall be cumulative and not exclusive for
one or the other. No delay, failure or omission by SI upon any
default of ACSI to exercise any right or remedy granted to it or
allowed to it by law shall constitute a waiver by SI of the right
to exercise any such right or remedy upon such default or upon
any subsequent default.
2
ACSI hereby waives and releases all errors, defects and
imperfections in any proceedings instituted by SI under the terms
of this note.
ACSI hereby waives presentment for payment, demand,
notice of demand, notice of nonpayment or dishonor, protest and
notice of protest of this note, and all other notices in
connection with the delivery, acceptance, performance, default or
enforcement of this note.
Any demand or notice if made or given shall be
sufficiently made upon or given to ACSI if made in writing and
mailed to ACSI by certified mail, return receipt requested, to
the last address of ACSI known to SI.
This note shall be governed by and construed in
accordance with the laws of the State of Nevada. If any
provision of this note shall be prohibited by or invalid under
such laws, such provisions shall be ineffective to the extent of
such prohibition or invalidity only, without invalidating the
remainder of such provision or the remaining provisions of this
note.
3
IN WITNESS WHEREOF, ACSI has caused this note to be
executed by its duly authorized officers and its corporate seal
affixed hereto the day and year written on the first page of this
note.
ATLANTIC CITY SHOWBOAT, INC.
By:/s/Mark J. Miller
Mark J. Miller
President and Chief Executive
Officer
Attest:
/s/John N. Brewer
John N. Brewer
Assistant Secretary
SCHEDULE OF
ADVANCES
DATE AMOUNT OF AMOUNT OF AGGREGATE
ADVANCE PAYMENT AMOUNT DUE
EX-10.46
14
LEASE
THIS INDENTURE of Lease is made this 22nd day of December,
1994, by and between HOUSING AUTHORITY AND URBAN REDEVELOPMENT
AGENCY OF THE CITY OF ATLANTIC CITY, located at P.O. Box 1258,
227 N. Vermont Avenue, Atlantic City, New Jersey 08404 (the
"Landlord") and ATLANTIC CITY SHOWBOAT, INC., located at 801
Boardwalk, Atlantic City, New Jersey (the "Tenant").
WITNESETH:
Article 1: DEFINITIONS.
In addition to other terms defined herein, the following
terms shall have the meaning set forth in this Article 1 unless
the context otherwise requires.
1.1. "Agreement" means that certain Contract for Sale of
Land for Private Redevelopment by and between Landlord and Tenant
dated June 11, 1993 as amended May 26, 1994.
1.2. "Commencement Date" means January 1, 1995.
1.3. "Demised Premises" shall mean the lands and premises,
together with all abutting sidewalks, buildings and improvements
located and to be located thereon, situate, lying and being in
the City of Atlantic City, County of Atlantic and State of New
Jersey, known as a portion of the Uptown Urban Renewal Tract
("UURT") as more particularly described on Exhibit "A" annexed
hereto and expressly made a part hereof.
1.4. "Governmental Authorities" shall mean all federal,
state, county, municipal, and local governments, and all
departments, commissions, boards, agencies, bureaus and offices
thereof, having or claiming jurisdiction over the Demised
Premises.
1.5. "Impositions" shall mean all taxes, assessments,
(including but not limited to, all assessments for public
improvements or benefit), water and sewer rents, rates and
charges,
1
charges for public utilities, excises, levies, license
and permit fees or other governmental charges, general and
special, ordinary and extraordinary, foreseen and unforeseen, of
any kind and nature whatsoever, which at any time during the term
of this Lease may have been or may be assessed, levied,
confirmed, imposed upon, or grow or become due or payable out of
or in respect of, or become a lien on, the Demised Premises or
any part thereof or any appurtenance thereof, the Personal
Property (as hereafter defined) and any use or occupation of the
Demised Premises.
1.6. "Landlord" shall mean, at any given time, only the
then owner of Landlord's interest in the Demised Premises.
1.7. "Person" shall mean and include an individual,
corporation, partnership, unincorporated association,
syndication, trust and any governmental entity or other entity.
1.8. "Personal Property" shall mean all lighting fixtures
and other personal property affixed to the Demised Premises or
substitutions or replacements for any of the foregoing.
1.9. Intentionally deleted.
1.10. "Rent" shall mean annual Rent and all fees, sums and
charges payable by Tenant to Landlord under this Lease.
1.11. "Tenant" shall mean, at any given time, the Tenant
named herein and its legal representatives, successors and
assigns as Tenant under this Lease.
1.12. "Term of this Lease" shall mean the term of this
Lease provided for in Article 3 hereof.
Any capitalized term not specifically defined herein shall
have the meaning given such terms in the Agreement unless the
context requires otherwise.
Article 2: DEMISED PREMISES.
Landlord, for and in consideration of the Rent hereinafter
reserved by Landlord and the
2
covenants and agreements hereinafter contained on the part of the Tenant,
its legal representatives, successors and assigns, to be paid, kept and
performed, has leased, rented, let and demised and by these presents,
does hereby lease, rent, let and demise the Demised Premises to the
Tenant and the Tenant does hereby take and hire the Demised
Premises upon and subject to the terms and conditions hereinafter
set forth including such items of Personal Property situate at
the Demised Premises, all of which are subject to the terms and
conditions of this Lease.
Together with all right and interest, if any, of Landlord in
and to the land lying in the streets and roads in front of and
adjoining the Demised Premises, to the center line thereof, and
in and to any easement appurtenant to the Demised Premises, but
no limitation or termination of any such right or interest shall
affect this Lease or any of Tenant's obligations hereunder.
Article 3: TERM.
3.1. The Term hereof shall commence on the Commencement
Date described in Paragraph 1.2 and shall end at either 11:59
p.m. five years thereafter or when Forest City Ratner Companies,
a New York General Partnership, or its successors or assigns
("FCR") receives a temporary or permanent Certificate of
Occupancy permitting the Tenant to occupy at least 385 parking
spaces in the parking facility to be constructed by FCR on Block
13, whichever occurs first.
Article 4: ANNUAL RENT.
4.1. The Tenant covenants and agrees to pay to the
Landlord during the Term, without demand, setoff, or deduction of
any kind, an annual Rent of Seven Hundred and Fifty Thousand
($750,000.00) Dollars. Commencing with the first quarter of the
term of the Lease, the Rent shall be paid by the Tenant to the
Landlord in equal quarterly installments of One Hundred Eighty
Seven Thousand, Five Hundred ($187,500.00) Dollars in advance on
the first day of each
3
quarter during the Term commencing as of the Commencement Date as
mentioned in Paragraph 1.2 of this Lease.
4.2. At the Commencement Date of the Lease, and on each
anniversary thereafter, or as soon thereafter as the CPI-U is
available to the Landlord, the Rent shall be adjusted thereafter
to reflect increases in the Consumer Price Index in the
Philadelphia, Wilmington, Trenton Region (All Urban Consumers -
CPI-U) (hereinafter CPI-Philadelphia) (1982-84=100) using January
1995 as the base year. The index numbers referred to in
Subsection (a) below will be taken from this Consumer Price
Index, except as set forth in Subsection (b) below.
(a) The adjustments in the annual Rent shall be determined
by multiplying $750,000.00 by a fraction, the numerator
of which is the index number for the anniversary month
and the denominator of which is the index number for
January 1995. If the product of this multiplication is
greater than $750,000.00, Tenant shall pay this greater
amount as the yearly Rent until the time of the next
rental adjustment as called for in this section. If the
product of this multiplication is less than
$750,000.00, there shall be no adjustment in the annual
Rent at that time and Tenant shall pay the same annual
Rent, until the time of the next rental adjustment as
called for in this Lease. In no event shall any rental
adjustment called for in this section result in an
annual Rent less than $750,000.00
(b) If the CPI-Philadelphia is discontinued during the term
of this lease, the remaining rental adjustments called
for in this section shall be made using the formula set
forth in Subsection (a) above, but substituting the
index numbers for the Consumer Price Index-Seasonally
Adjusted U.S. City Average For All Items for All Urban
Consumers (CPI-U) for the index numbers for the CPI-U.
4
If both the CPI-Philadelphia and the CPI-U are
discontinued during the terms of this lease, the
remaining rental adjustments called for in this section
shall be made using the statistics of the Bureau of
Labor Statistics of the United States Department of
Labor that are most nearly comparable to the
CPI-Philadelphia. If the Bureau of Labor Statistics of
the United States Department of Labor ceases to exist
or ceases to publish statistics concerning the
purchasing power of the consumer dollars during the
term of this lease, the remaining rental adjustments
called for in this section shall be made using the most
nearly comparable statistics published by a recognized
financial authority selected by Landlord.
4.3. The Rent shall be paid by the Tenant to the Landlord
at the Landlord's address specified in the opening paragraph of
this Lease, or to such other person and/or at such other address
as the Landlord may direct by notice to the Tenant, in such coin
or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and
private debts, or by check of the Tenant (subject to collection).
The Rent shall be paid without notice or demand, and without
abatement, deduction or setoff as set forth above.
4.4. If the Tenant shall fail to make payment of any
installment of Rent hereunder within ten (10) days after the date
when due, then, and in such event, the Tenant shall pay to the
Landlord on demand, as Additional Rent, a late fee of five (5%)
percent of said quarterly payment . The late payment fee required
to be paid by the Tenant pursuant to this Paragraph 4.4 shall be
in addition to all the rights and remedies provided herein to
Landlord for the nonpayment of Rent and the payment of any such
fee by the Tenant and acceptance of the same by the Landlord
shall not restrict the Landlord in any respect in the exercise of
5
any other or further such right or remedy nor shall the same be
deemed, by Landlord, to be a waiver of or release from any of the
obligations of Tenant contained in this Lease.
Article 5: PAYMENT OF IMPOSITIONS.
5.1. Tenant shall pay and discharge as Additional Rent all
Impositions and all other charges or payment of every kind and
nature whatsoever, whether or not now within the contemplation of
the parties, imposed by any and all Governmental Authorities as
shall, during the Term, be imposed or become a lien upon all or
any portion of the Demised Premises, and any and all assessments
or other charges imposed upon the Demised Premises in lieu of or
in addition to the foregoing, under or by virtue of any present
or future laws or regulations of any and all Governmental
Authorities.
5.2. Tenant shall pay and discharge as Additional Rent all
charges for electricity, and all other public and private utility
service or services furnished to or for the benefit of the
Demised Premises during the Term.
5.3. The Tenant shall also pay and discharge, as
Additional Rent, all taxes and assessments which shall or may,
during the Term, be imposed or become a lien upon the Demised
Premises or the Personal Property of Landlord or Tenant employed
in the operation of the Demised Premises or in connection with
the Tenant's conduct of business on the Demised Premises.
Article 6: SURRENDER OF THE DEMISED PREMISES.
6.1. The Tenant shall and will on the last day of the Term
of this Lease or upon any earlier termination of this Lease, or
upon any re-entry by the Landlord upon the Demised Premises, will
surrender and deliver the Demised Premises, clean and in good
order, into the possession and use of the Landlord without fraud
6
or delay and in good order, condition and repair, free and clear
of all liens and encumbrances except those existing as of the
date of the Agreement including those contained in the Agreement
and those placed, suffered or created by the Landlord upon or
against the Demised Premises and those for which the Tenant is
not responsible.
6.2. The provisions of this Article 6 shall survive the
expiration or sooner termination of this Lease.
Article 7: USE, MAINTENANCE, ALTERATIONS AND REPAIRS, ETC.
7.1. Tenant has leased the Demised Premises after a full
and complete examination thereof as well as its present uses and
non-uses. Landlord represents and warrants however that the use
described in Section 7.3 below is a permitted use in accordance
with the Urban Renewal Plan and this Lease. Except for the
foregoing, Tenant accepts the Demised Premises without any
representation or warranty, express or implied, in fact or by
law, by Landlord and without recourse to Landlord as to the
nature, condition, or useability thereof or the use or uses to
which the Demised Premises or any part thereof may be put.
7.2. Throughout the Term, Landlord shall not be required
to furnish any services or facilities, nor to make any repairs or
alterations, in or to the Demised Premises. The Tenant hereby
assumes the full and sole responsibility for the condition,
operation, repair, replacement, maintenance and management of the
entire Demised Premises.
7.3. The Demised Premises may be used only for an interim
surface parking facility for personal passenger motor vehicles of
the Tenant's employees, casino and hotel guests. For the purposes
of this subsection, the term "personal passenger motor vehicle"
shall include minivans, but shall not include such vehicles as
recreation vehicles, trailers, buses, trucks and commercial
vehicles, or other like vehicles of any kind.
7
7.4.
(a) Notwithstanding the foregoing, the Tenant shall not
use or occupy nor permit the Demised Premises to be used or
occupied, nor do, suffer or permit anything to be done in or on
the Demised Premises, in whole or in part, in a manner which
would in any way: (i) violate any certificate of occupancy
affecting the Demised Premises; (ii) make void or voidable any
insurance then in force with respect to the Demised Premises;
(iii) make it impossible to obtain fire or other insurance
required to be furnished by the Tenant hereunder; (iv) cause
injury to all or any portion of the Demised Premises; (v)
constitute a public or private nuisance; or (vi) violate any
present or future law, regulation, or requirement of any
governmental, public or quasi-public authority at any time having
jurisdiction of or over the Demised Premises.
(b) Tenant shall, at its own cost and expense, comply
with all: (i) requirements of law; (ii) laws, ordinances, orders,
rules, requirements, and regulations of all Governmental
Authorities affecting the Demised Premises or having jurisdiction
thereover; (iii) requirements of the Fire Insurance Exchange or
similar body, and of any liability insurance company insuring the
Landlord against liability for accidents on, or connected with
the Demised Premises including without limitation all laws,
ordinances, orders, rules and regulations which apply to the
Demised Premises or the structural parts thereof, whether
ordinary or extraordinary foreseen or unforeseen.
7.5. Tenant shall, at its sole cost and expense, take good
care of the Demised Premises and make all repairs necessary
thereto in order to restore all improvements on the Demised
Premises at least to the extent of their value and as practicable
to their original quality and character as in existence
immediately prior to the occurrence necessitating the repair,
whether interior or exterior, nonstructural, ordinary or
8
extraordinary, and foreseen or unforeseen. Further, Tenant shall
maintain and keep the Demised Premises, and the lawns, sidewalks,
ramps, driveways, curbs and areas adjacent thereto in good order,
repair and condition. The Landlord makes no warranties or
representations with respect to the condition of the Demised
Premises or the sidewalks, ramps, driveways and curbs. The Tenant
shall maintain and keep the Personal Property, if any, in good
order, repair and condition. Tenant shall also, at its sole cost
and expense, keep sidewalks, ramps and driveways free and clear
from rubbish, ice and snow and in good condition and repair and
shall not encumber, or obstruct the same nor allow the same to be
encumbered or obstructed in any manner.
7.6. Tenant may, at its sole cost and expense, make
additions, alterations and changes in and to the Demised Premises
provided that the Tenant is not then in default in the
performance of any of the Tenant's covenants, obligations, duties
or agreements in this Lease. The Tenant shall provide at its sole
cost and expense paving, landscaping, utilities, drainage,
lighting, security and off-site improvements, if any, for the
Demised Premises. The Tenant shall also be responsible to remove
any underground storage tanks of any kind and shall perform any
site remediation which may be required by any governmental
entity, at its sole cost and expense. The Tenant shall, however,
receive a credit in accordance with Section 28.1. All
improvements shall be done in accordance with plans approved by
the Landlord and any other governmental entity having
jurisdiction. The Demised Premises occupies a prominent location
in the City. As a result, a high standard of design will be
required. Chain link fencing will not be permitted. All existing
and proposed overhead utility lines on the Demised Premises shall
be placed underground prior to the use of the Demised Premises
for parking. All erections, alterations, additions and
improvements, if any, whether temporary or permanent in
character, which may be made upon the Demised Premises by any
9
person, shall, at the Landlord's sole option, either become the
property of the Landlord, and shall remain upon and be
surrendered with the Demised Premises at a part thereof at the
termination of this Lease without any compensation whatsoever to
Tenant or to anyone else or at the Landlord's option be removed
by Tenant at the Tenant's expense at the expiration of the Lease
and the property restored to its original condition, normal wear
and tear excepted. If Tenant fails to remove the improvements
within thirty (30) days of Landlord's written request to do so,
Landlord may remove such improvements at Tenant's expense.
Article 8. INDEMNIFICATION OF LANDLORD: MUTUAL WAIVER OF
SUBROGATION.
8.1. Landlord shall not be responsible or liable for any
damage or injury to any property or to any one or more persons at
any time on or about the Demised Premises arising from any cause
whatsoever. Tenant shall not hold Landlord in any way responsible
or liable therefor, and hereby releases and remises Landlord
therefor. Tenant will indemnify and hold Landlord harmless from
and against: (i) any and all claims, liabilities, penalties,
damages, expenses and judgments arising from injury to persons or
property of any nature in and upon the Demised Premises, and the
streets, sidewalks and curbs adjacent thereto; and (ii) any and
all of the foregoing arising from Tenant's occupation of and its
conduct of business upon, the Demised Premises and the streets,
sidewalks and curbs adjacent thereto. The foregoing shall not
apply to matters involving Landlord's gross negligence or willful
misconduct or that of the Landlord's agents, servants or
employees.
8.2
(a) Tenant hereby waives all rights of recovery against
the Landlord, its agents, employees and representatives. Neither
Tenant nor Landlord nor their respective agents, employees or
representatives shall be liable to the other for loss or damage
covered by any insurance policy. The liability of the Tenant to
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indemnify the Landlord as set forth in Paragraph 8.1 hereof shall
not extend to any matter to the extent Landlord actually receives
insurance coverage or proceeds therefor; provided however, that
if any such liability shall exceed the amount of the effective
and collectable insurance in question, the Tenant shall be liable
for such excess.
(b) All insurance policies required under this Lease
shall contain waivers by the carriers insuring same of all
subrogation rights as against Landlord and Tenant.
Article 9. INSURANCE.
9.1. During the term, Tenant shall, at its sole cost and
expense and for the benefit of the Landlord, and any and all
mortgagee of the Demised Premises, carry and maintain the
following types of insurance in the amounts herein specified:
(a) Comprehensive public liability insurance including
property damage insuring Landlord and Tenant against liability
for injury or damage to persons or property occurring in or about
the Demised Premises or arising out of the ownership,
maintenance, use or occupancy thereof. The liability under such
insurance shall not be less than: (i) $5,000,000.00 for any one
person injured or ldlled; (ii) $5,000,000.00 for any one
accident; and (iii) $1,000,000.00 for personal property damage
per accident;
(b) Such other insurance in such amounts as may from time
to time be required by the Landlord against other insurable
hazards which at the time are commonly insured against in the
case of premises similarly situated to the Demised Premises.
9.2. All policies of insurance (except liability
insurance) carried or maintained hereunder shall provide by
endorsement that any loss shall be payable to Landlord or Tenant,
as their respective interests may appear. All such insurance
shall be in a form, and maintained with carriers satisfactory
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to Landlord.
9.3. All policies of insurance carried or maintained
hereunder shall contain an agreement by the insurer that each
such policy shall not be cancelled without at least thirty (30)
days' written notice to Landlord.
9.4. At least ten (10) days prior to the Commencement
Date, Tenant shall deliver to Landlord evidence of the above
mentioned insurance coverage including a Certificate of Insurance
and Policy naming the Landlord as an additional insured
satisfactory to the Landlord. At least ten (10) days prior to the
expiration of any policy, Tenant shall provide the Landlord with
replacement coverage in accordance with this Article 9. Upon
Tenant's failure to comply in full with this Article 9, Landlord
shall have the immediate right to: (i) obtain the aforesaid
insurance coverage; (ii) pay the premiums monthly installment of
Annual Rent next due, which amount shall be paid by the Tenant to
the Landlord as Additional Rent.
Article 10: DAMAGE OR DESTRUCTION BY FIRE OR OTHER CASUALTY.
10.1. If, at any time during the term, the building or
improvement on the Demised Premises shall be wholly or partially
damaged or destroyed by fire or other casualty (including any
casualty for which insurance coverage was not obtained) of any
nature whatsoever, regardless of whether said damage or
destruction resulted from an act of God, the fault of Tenant or
Landlord or from any other cause whatsoever, then Tenant shall
promptly replace, repair and/or rebuild the damaged or destroyed
buildings and improvements on the Premises at least to the extent
of the value, and as near as practicable to their original
quality and character, of all such buildings and improvements as
in existence immediately prior to the damage or destruction. Such
rebuilding shall be made in accordance with plans and
specifications therefor which shall first be submitted to and
approved in writing by Landlord prior to commencement of any
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repair or rebuilding.
10.2.
(a) All insurance money collected by Landlord from any
policy of insurance on account of such damage or destruction,
less the cost, if any, incurred in connection with the adjustment
of the loss and the collection thereof (herein sometimes referred
to as the "insurance proceeds"), shall be applied to the payment
of the cost of the rebuilding. The insurance proceeds shall be
paid out to or for the account of Tenant from time to time as
such work progresses, upon Tenant's presentation to Landlord of
valid bills for invoices for repair or reconstruction of the
Premises. All sums so paid to Tenant, and any other insurance
proceeds received or collected by or for the account of Tenant
(other than by way of reimbursement to Tenant for sums
theretofore paid by Tenant), shall be held by Tenant in trust for
the purpose of paying the cost of such reconstruction.
(b) Upon Landlord's receipt of evidence reasonably
satisfactory to it that the repair or reconstruction has been
completed and paid for in full, and that there are no liens on
the Premises as a result thereof, Landlord shall pay to Tenant
any remaining balance of said insurance proceeds. If the
insurance proceeds received by Landlord shall be insufficient to
pay the entire cost of repair or reconstruction, Tenant shall
supply the amount of any such deficiency and shall apply such
monies to the payment of the cost or repair or reconstruction as
such becomes necessary for the prompt completion of the repair or
reconstruction, and before calling upon Landlord for the
disbursement of any remaining insurance proceeds held by
Landlord.
(c) Under no circumstances shall Landlord be obligated to
make any payment, disbursement or contribution towards the cost
of the work, except to the extent of the insurance proceeds
actually received by Landlord.
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10.3. No provisions of this Article shall be construed to
entitle Tenant to any abatement, reduction, allowance against or
suspension of Rent for any reason whatsoever. If any Personal
Property is damaged or lost as a result of such fire or other
casualty, Tenant shall likewise, at its own sole cost and
expense, and whether or not any insurance proceeds are available
or adequate for such purpose, repair or replace the Personal
Property so damaged or lost. Such repairing, restoring and
replacement required by this Paragraph 10.3 shall be without
cost, charge or expense of any kind to Landlord.
10.4. No destruction of or damage to the Demised Premised
or the Personal Property or any part thereof, including any
buildings or improvements, by fire or other casualty whatsoever,
whether such damage or destruction be partial or total or
otherwise, shall entitle or permit the Tenant to surrender to
terminate this Lease or shall relieve the Tenant for its
liability to pay the full Annual Rent and Additional Rent and
other sums and charges payable by the Tenant hereunder or form
any of its other obligations under this Lease; and the Tenant
hereby waives any rights now or hereafter conferred upon it by
statute or otherwise to surrender this Lease or quit or surrender
the Demised Premises or any part hereof, or to receive any
suspension, diminution, abatement or reduction of the Annual
Rent, Additional Rent or other sums and charges payable by the
Tenant hereunder on account of any such destruction or damage.
Nothing contained herein shall alter or diminish Tenant's right
to terminate this Lease under Section 3.1 hereof.
Article 11: CONDEMNATION; TAKING BY EMINENT DOMAIN.
11.1. If the entire Demised Premises shall be taken under
the exercise of the power of eminent domain (or any similar
governmental power in the nature thereof) by any competent
governmental authority, this Lease shall terminate as of the date
of such taking. In that event, all Rent reserved hereunder shall
14
be apportioned as of the date of such taking and all prepaid
rentals, if any, not theretofore applied toward the payment of
Rent, in accordance with the provisions hereof, shall be refunded
promptly to the Tenant.
11.2. If less than the entire Demised Premises shall be
taken under the exercise of the power of eminent domain or any
similar power, Tenant shall pay to the Landlord a pro rata
portion of the Rent and taxes, and other charges and the Tenant
shall make such repairs and restorations as may be necessary to
fully restore all remaining portions of the Demised Premises at
least to the extent of their value, and as near as practicable to
their original quality and character as in existence immediately
prior to the taking. During the time such repairs or restorations
are being made, Tenant shall only be required to pay that
proportion of the aggregate Rent, costs and expenses reserved
hereunder as the area of the portion of the Demised Premises
remaining tenantable bears to the entire area of the Demised
Premises prior to said taking. Upon completion of said
restoration, the Rent reserved hereunder shall be reduced for the
remainder of the term and thereafter, Tenant shall be required to
pay that proportion of the Rent as the area of the restored
Demised Premises bears to the area of the entire Demised Premises
prior to said taking.
11.3. In the event of any taking, whether total or partial,
the Tenant shall have no claim in or to any award of damages for
such taking except to the extent that such award specifically
represents compensation for damages to the Tenant's Leasehold.
Except for the foregoing, Tenant hereby expressly assigns any and
all of its right, title and interest in and to all such awards to
the Landlord. Landlord shall give Tenant (10) days notice of the
taking. From the date the Tenant receives the notice of taking,
Tenant shall have 90 days to terminate this Lease. If Tenant
exercises its rights to terminate this Lease within 90 days of
15
receipt of the notice of taking, Tenant shall not be obligated to
repair or restore pursuant to Article 11.2 and Landlord shall be
entitled to any award or payment due to Tenant from the taking
Authority.
Article 12: DISCHARGE OF LIENS.
12.1. Tenant shall not create or permit to be created or to
remain and shall discharge any lien, encumbrance or charge levied
on account of any Imposition or any mechanic's, laborer's,
contractor's or material man's liens or any other encumbrance
which might or does constitute a lien, encumbrance or charge upon
the Demised Premises, or any part thereof, of the income
therefrom whereupon the Personal Property, having a priority or
preference over or ranking on a priority with the estate, rights
or interest of the Landlord in the Demised Premises or the
Personal Property, or any part thereof, or the income therefrom,
and Tenant will not suffer any other matter or thing whereby the
estate, rights and interests of the Landlord in the Demised
Premises or the Personal Property or any part thereof might be
impaired.
12.2. If any mechanic's, laborer's, contractor's or
material man's lien or notice of intention to lien shall at any
time be filed against the Demised Premises or any part thereof,
Tenant, within thirty (30) days after the notice of the filing
thereof shall cause the same to be discharged of record by
payment, deposit, bond, Order of a Court of competent
jurisdiction or otherwise. If the Tenant shall fail to cause such
lien to be discharged within the aforementioned period, then in
addition to any other right or remedy, Landlord may, but shall
not be obligated to, discharge the same either by paying the
amount claimed to be due or by procuring the discharge of such
lien by deposit or by bonding proceedings and in any such event,
Landlord shall be entitled, if Landlord so elects, to compel the
prosecution of an action for the foreclosure of such lien by the
lienor and to pay the amount of the judgment in favor of the
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lienor, with interest, costs and allowances. In any event, if
any suit, action or proceedings shall be brought to foreclose or
enforce any such lien (whether or not the prosecution thereof was
so compelled by Landlord), Tenant shall, at its own sole cost and
expense, promptly pay, satisfy and discharge any final judgment
entered therein, in default of which, Landlord, at its sole
option may do so. Any and all amounts so paid by Landlord in this
Paragraph 12.2 as provided herein, and all costs and expenses
paid or incurred by the Landlord in connection with any or all of
the foregoing matters, including, without limitation, reasonable
attorneys' fees shall be paid by Tenant to Landlord on demand as
Additional Rent hereunder.
Article 13: ASSIGNMENT, SUBLETTING.
13.1. The Tenant shall not assign, mortgage, pledge,
encumber or in any manner transfer this Lease or any portion
thereof or any interest herein nor sublease all or any portion of
the Demised Premises.
13.2. In the event of any voluntary or involuntary
bankruptcy arrangement, plan of reorganization, assignment for
the benefit of creditors or other insolvency or related
proceeding filed, instituted or conducted by law, against or
otherwise on behalf of Tenant, the Leasehold created hereby shall
not be assigned nor the Premises sublet, nor shall either this
leasehold or the Premises be otherwise or transferred, in whole
or in part, to any party.
13.3. The Landlord shall have the right to assign pledge or
encumber or in any manner assign or transfer its interest in this
Lease without the consent of the Tenant. If the Landlord assigns
or transfers its interest in this Lease to Forest City Ratner
Companies or any successor thereto ("FCR"), the assignment or
transfer shall not effect any obligation that FCR may have to
reimburse the Tenant for any improvements to the Demised Premises
that the Tenant may have constructed notwithstanding the
17
provisions of Article 7.6 which gives the Landlord the option to
retain Tenant improvements at the termination or expiration of
the Lease.
Article 14: DEFAULT PROVISIONS.
14.1. The occurrence of any of the foregoing events,
(Events of Default) shall constitute a default under this Lease:
(a) Tenant fails to make lawful and timely payment within
ten (10) days of the date due of any installment of
annual Rent or Additional Rent or another sum or charge
payable by the Tenant to the Landlord or to any
Government Authority with respect to the Demised
Premises.
(b) Tenant fails to perform or observe any covenant, term
or condition of this Lease to be performed or observed
by the Tenant (other than defaults covered by (a)
above) and such failure continues for a period of
fifteen (15) days after written notice by Landlord to
Tenant; provided that if Tenant, through no fault of
Tenant, is unable to cure such failure within such
period and Tenant has commenced cure within such period
and is diligently pursuing such cure, Tenant shall have
an additional period of time to cure not to exceed
fifteen (15) days.
(c) Tenant ceases to do business as a going concern or
filed any petition with respect to its own financial
condition under any bankruptcy law or any amendment
thereto including without limitation a petition for
reorganization, arrangement or extension), or under any
other insolvency law or laws providing for the relief
of debtors.
(d) (i) A receiver, trustee, conservator or liquidator is
appointed for Tenant or all of a substantial portion of
its assets, and the underlying proceeding is not
discharged within ninety (90) days after its
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commencement, (ii) this Lease, the estate hereby
granted or the unexpired balance of the Term would, by
operation of law or otherwise, except for this
provision, pass to any person, firm or corporation
other than Tenant, or (iii) Tenant shall be adjudicated
bankrupt or insolvent or in need of any relief provided
to debtors by any court; or
(e) Tenant shall cause or permit the Demised Premises to
become vacant or abandoned for any period of time
whatsoever.
Article 15: LANDLORD'S REMEDIES.
15.1. Upon the occurrence of an Event of Default specified
in Article 14 above, Landlord may exercise any one or more of the
following remedies:
(a) Landlord shall give Tenant a notice (the Termination
Notice) of this intention to terminate this Lease
specifying a date not less than ten (10) days
thereafter upon which date this Lease, the term and
estate hereby granted and all rights of the Tenant
hereunder shall expire and terminate. Notwithstanding
the foregoing: (i) Tenant shall remain liable for
damages as hereinafter set forth; and (ii) Landlord may
institute dispossess proceedings for nonpayment of
Rent, distraint or other proceedings to enforce the
payment without giving the termination notice; (iii)
any unpaid Rent for the quarter in which the Event of
Default occurs shall be accelerated and shall be due
from Tenant to Landlord on Landlord's demand.
(b) Upon any such termination or expiration of this Lease,
Tenant shall peaceably quit and surrender the Demised
Premises to the Landlord, and the Landlord may without
further notice enter upon, reenter, possess and
repossess itself thereof, by force, summary
19
proceedings, ejectment or otherwise and may have, hold
and enjoy the Demised Premises and the right to receive
all rental and other income of and from the same.
15.2. Landlord may, at Landlord's sole option (without
imposing any duty upon Landlord to do so), and Tenant hereby
authorizes and empowers Landlord to: (i) re-enter the Demised
Premises as Tenant's agent or for any occupant of the Demised
Premises under Tenant, or for its own account or otherwise; (ii)
relet the same for any term; (iii) remodel the same if necessary
or desirable for such reletting purposes; and (iv) receive and
apply the Rent so received to pay all fees and expenses incurred
by Landlord as a result of such Event of Default, including,
without limitation, any legal fees and expenses arising therefor,
the cost of reentry, repair, remodeling and reletting and the
payment of the Rent and other charges due hereunder. No entry,
reentry or reletting by Landlord, whether by summary proceedings,
termination or otherwise, shall discharge Tenant from any of its
liability to Landlord as set forth in this Lease.
15.3. Regardless of whether Landlord relets the Premises,
or enters or re-enters the same, whether by summary proceedings,
termination or otherwise, Tenant will pay Landlord, and be liable
to Landlord for Rent for the quarter in which the Event of
Default occurs on demand, and any additional quarter(s) or
part(s) thereof that the Tenant holds over, on the days
originally fixed herein for payment thereof.
15.4. Tenant shall be liable for all costs, charges and
expenses, except expenses of remodeling or reletting, including
without limitation attorney's fees and disbursements, incurred by
Landlord by reason of the occurrence of any Event of Default or
the exercise of the Landlord's remedies with respect thereto.
20
15.5. Tenant, for itself and on behalf of any and all
persons claiming through or under it, including without
limitation creditors or every kind, hereby waives and surrenders
all rights and privileges which they or any of them may have
under or by reason of any present or future law to redeem the
Premises, or to have a continuance of this Lease for the
remainder of the Term, are being dispossessed or ejected
therefrom by process of law or after the termination of this
Lease as herein provided.
Article 16: LANDLORD'S RIGHT TO PERFORM; CUMULATIVE
REMEDIES: WAIVERS. ATTORNEY'S FEES.
16.1. If the Tenant shall fail to pay any taxes or make any
other payment required to be made under this Lease, or shall
default in the performance of any covenant, agreement, term,
provision or condition herein contained, Landlord may, without
being under any obligation to do so and without thereby waiving
such default, make such payment and/or remedy such other default
for the account and at the sole expense of Tenant. Tenant shall
pay to Landlord, on demand, the amount of all sums so paid and
all expenses so incurred by Landlord together with interest on
such sums and expenses from the date of payment by Landlord until
payment in full at the rate of ten (10%) percent per annum.
16.2. Landlord may by appropriate Court action restrain any
breach or threatened breach of any covenant, agreement, term,
provision or condition herein contained. However, the mention
herein of any particular remedy shall not preclude the Landlord
from any other remedy it may have, either at law or in equity.
The failure of Landlord to insist upon the strict performance of
any one of the terms of this Lease, or to exercise any right,
remedy or election herein contained or permitted by law, shall
not constitute or be constructed as a waive or relinquishment for
the future of such term, right, remedy or election, but the same
shall continue and remain in full force and effect. Any rights
21
and remedies of Landlord, whether created hereunder or existing
at law, in equity or otherwise upon breach by Tenant of any
covenant contained in this Lease, shall be distinct, separate and
cumulative rights or remedies, and no one of them, whether
exercised by Landlord or not, shall be deemed to be in exclusion
of any other. No term of this Lease shall be deemed to have been
waived by Landlord unless such waiver is in writing, signed by
Landlord or its agent duly authorizing in writing. Receipt or
acceptance of Annual Rent and Additional Rent by Landlord shall
not be deemed a waiver of any default under this Lease, nor of
any right which Landlord may be entitled to exercise under this
Lease.
16.3. In the event of any Event of Default by Tenant under
this Lease, Landlord shall be entitled in addition to any other
rights and remedies hereunder, to the reimbursement by Tenant of
attorney's fees incurred by Landlord in the exercise of its
rights and remedies. All such attorney's fees shall become due
and payable as Additional Rent within thirty (30) days of demand
by the Landlord.
Article 17: TENANT'S OBLIGATIONS ON DEFAULT BY LANDLORD.
17.1. Landlord shall not be deemed to be in default under
this Lease unless: (i) Tenant have given Landlord notice
specifying the default claimed; (ii) Landlord has failed for
thirty (30) days to cure such default, if curable, or to
institute and diligently pursue reasonable corrective or
ameliorative efforts toward a non-curable default.
Article 18: QUIET ENJOYMENT; TRANSFER OF LANDLORD'S
INTEREST.
18.1. Landlord covenants that if and for so long as Tenant
keeps and performs each and every covenant herein required to be
kept and performed by it, Tenant shall peacefully and quietly
enjoy the Premises without hindrance or molestation by Landlord,
subject to the covenants, agreements, terms, provisions and
conditions of this Lease.
18.2. In the event of a sale, assignment or transfer by the
Landlord of its interest in all or any portion of the Demised
22
Premises, Landlord shall thereupon be released and discharged
from all covenants and obligations of Landlord thereafter
accruing with respect to the portion of the Demised Premises so
transferred. Such covenants and obligations shall be binding upon
each new owner for the time being of the Demised Premises or any
portion thereof.
Article 19: LANDLORD'S RIGHT TO SHOW AND ENTER DEMISED
PREMESIS; AND EXPIRATION OF LEASE.
19.1. Landlord shall have the right to show the Demised
Premises at any time during the Term to any prospective purchaser
of the same, and may enter upon the Demised Premises or any
portion thereof for the purpose of ascertaining the condition
thereof and whether the Tenant is observing and performing the
obligations imposed upon it under this Lease, or without
hindrance or molestation from the Tenant.
19.2. The Landlord, its employees and its designees, shall
have the right to enter the Demised Premises for the purpose of
conducting soil borings, other tests and for other purposes
provided that the Tenant's use of the Demised Premises shall not
be unreasonably interfered with. Landlord shall indemnify, defend
and hold Tenant harmless against loss, claim or expenses incurred
as a result thereof. Landlord shall also restore the Demised
Premises.
19.3. Upon the expiration of the Term of the sooner
termination thereof:
(a) Tenant shall peaceably and quietly leave, surrender and
yield up unto Landlord the entire Demised Premises free
of occupants. Any removable property of Tenant
remaining in or upon the Demised Premises after the
expiration of the Term or sooner termination thereof
and the removal of Tenant from the Demised Premises
may, at the option of Landlord, be deemed to have been
abandoned, and may either be retained by Landlord as
23
its property, or disposed of at the Tenant's expense,
in such manner as Landlord may in its sole discretion
deem appropriate; and
(b) If Tenant shall remain in the Demised Premises without
having executed and delivered a new Lease with
Landlord, such holding over shall not constitute a
renewal or extension of this Lease Landlord may, at its
sole option, elect to: (i) treat Tenant as one who has
not removed at the end of its Term, and thereupon be
entitled to all the remedies against Tenant provided
for by Law or under this Lease regarding such
situation; or (ii) construe such holding over as a
tenancy from month to month, subject to all the terms
and conditions of this Lease, except the duration
thereof. In that event, Tenant shall pay monthly Rent
in advance at the rate provided herein for the last
month of the term.
Article 20: SUBORDINATION, NON-DISTURBANCE.
20.1. This Lease is and shall be subject and subordinate at
all times to the lien of any and all mortgages now or hereafter
on the Demised Premises, and to all advances heretofore or
hereafter made under any one or more such mortgages provided that
such mortgage(s) contain(s) the non-disturbance provisions
contained in Article 20.2. The aforesaid provisions shall be
self-operative and no further instrument shall be required to
subordinate this Lease to any such mortgage or mortgages.
However, Tenant will execute and deliver such further instrument
or instruments evidencing said subordination as may be desired by
Landlord or any mortgagee or proposed mortgagee. Tenant hereby
irrevocably appoints Landlord as Tenant's attorney-in-fact to
execute and deliver any such instrument or instruments for
Tenant.
24
20.2. Notwithstanding the foregoing, Landlord hereby
covenants that any mortgage hereinafter given on the Demised
Premises ("mortgage") shall contain a "non-disturbance" clause,
so-called, providing that for so long as Tenant complies in full
with all terms and conditions of this Lease, Tenant's possession,
occupation and use of the Demised Premises hereunder shall not be
disturbed or interfered with due to any non-compliance or default
of Landlord under any mortgage. Absent a default in this Lease by
Tenant, Tenant shall not be named as a Defendant in any
foreclosure proceeding.
20.3. In the event any mortgagee prevails in a foreclosure
action regarding the Demised Premises, Tenant agrees to attorn to
such mortgagee as Landlord hereunder. If the mortgagee shall so
request, Tenant will promptly execute a written attornment
agreement.
Article 21: ESTOPPEL CERTIFICATE.
21.1. Within ten (10) days after either party hereto shall
have requested the same, the other party shall deliver a
certificate to it, certifying to the best of its knowledge that:
(a) This Lease has not been supplemented, amended or
modified in any respect, or specifying the manner in
which it has been supplemented, amended or modified;
(b) This Lease is in full force and effect, or, if it is
alleged that this Lease is not in full force and
effect, specifying the reasons therefor;
(c) There exists no default under this Lease, nor any event
which, with the giving of notice or lapse of time, or
both, would become a default under this Lease, or, if
there exists such default or event, specifying the
nature and extent of the same; and
(d) There are no defenses, set-offs, recoupments,
counterclaims or any nature whatsoever by or on behalf
of Tenant against Landlord with respect to this Lease.
25
Article 22: ADVANCE RENT: SECURITY DEPOSIT.
22.1. Simultaneously herewith, Tenant has deposited with
Landlord the sum of One Hundred and Fifty Thousand ($150,000.00)
Dollars as security for the faithful performance and observance
by Tenant of the terms, provisions and conditions of this Lease.
Landlord agrees to hold said security in an interest bearing
account. The Landlord agrees to invest the Security Deposit in
thirty day Certificates of Deposit or such other investments or
accounts that the Landlord and Tenant shall mutually agree upon.
It is agreed that in the event Tenant defaults in respect of any
of the terms, provisions, and conditions of this Lease, including
without limitation the payment of Annual Rent and Additional
Rent, Landlord may use, apply or retain all or any portion of the
security so deposited, to the extent so required pursuant to the
Lease for the payment of any Annual Rent and Additional Rent and
all other sums as to which Tenant is in default, and for all sums
which Landlord has expended or may be required to expend by
reason of Tenant's default in respect of any of the terms,
covenants, and conditions of this Lease, excluding costs of
reletting or remodeling whether such damages or deficiencies
arose before, during or after summary proceedings or other
reentry by Landlord or otherwise. The Landlord may also assess a
twenty (20%) percent administrative fee in addition to all sums
the Landlord spends or incurs, by reason of Tenant's default in
any of the terms, covenants, and conditions of this Lease. In the
event the Security Deposit is exhausted or for any reason
inadequate, the Landlord may use as an additional security
deposit, the Tax Escrow hereinafter provided in the same manner
as the Security Deposit.
22.2. In the event that Tenant shall fully and faithfully
comply with all of the terms, provisions, covenants and
conditions of this Lease, the security, together with interest,
if any, earned thereon shall be returned to Tenant thirty (30)
days after the expiration of the Term, and after delivery of
26
entire possession of the Demised Premises to Landlord pursuant to
the terms of this Lease. In the event that the Landlord retains
or uses any portion of the Security Deposit in accordance with
this Lease, the unused portion of the Security Deposit, together
with interest, if any earned thereon, shall be refunded to the
Tenant thirty (30) days after the expiration of the Term, and
after delivery of entire possession of the Demised Premises to
the Landlord pursuant to the terms of this Lease provided the
costs of curing the Tenant's default(s) are known at that time.
22.3. In the event of a sale, assignment or transfer of
Landlord's interest in the Demised Premises, Landlord shall have
the right to deliver the security to the transferee of the
Premises, and Landlord shall thereupon be released by Tenant from
all liability for the return of such security. Tenant agrees in
such event to look solely to the new Landlord for the return of
said security. Landlord shall provide written notice to Tenant of
the new Landlord's name and address at the time of the sale,
assignment or transfer.
22.4. Tenant further covenants that it will not assign or
encumber the monies deposited herein as security, and that
neither Landlord nor its successors or assigns shall be bound by
any such actual or attempted assignment or encumbrance. Provided
the Tenant is not in default, Landlord shall not encumber the
security deposit or the tax escrow.
Article 23: PAYMENT OF TAXES; TAX ESCROW.
23.1. At the time of the execution of the Lease, Tenant
shall deposit 135% of the estimated 1995 real estate taxes with
the Landlord as security (hereinafter "Tax Escrow") for the
payment by the Tenant of the real estate taxes which may become
due and payable by the Landlord as a result of the occupancy by
the Tenant of the Demised Premises after the Lease terminates.
The Landlord and the Tenant agree that for the purposes of this
Lease, the 1995 estimated taxes shall be $300,000, including the
27
value of the anticipated improvements.
23.2. The Tax Escrow shall be held by the Landlord either
in a separate interest bearing account or may be held by the
Landlord, in whole or in part, through an irrevocable assignment
of a Certificate of Deposit in a financial institution licensed
in New Jersey and acceptable to the Landlord (hereinafter "Tax
Escrow Account"). Any assignment of a Certificate of Deposit
shall be in accordance with the Assignment Agreement annexed
hereto as Exhibit "B". The interest earned shall remain in the
Tax Escrow Account.
23.3. The Tenant and Landlord recognize that the Demised
Premises are, as of the date of the execution of this Lease, tax
exempt for real estate tax purposes. In the event that the
Demised Premises is for any reason no longer treated as tax
exempt for real estate tax purposes, the Tenant shall also pay to
the Landlord as Additional Rent at least 15 days prior to the
quarterly real estate tax due date (i.e., February 1, May 1,
August 1, November 1) or within five (5) days of receiving notice
from the Landlord as to the amount of taxes that are due the
amount of the then current taxes in excess of $75,000 on a
quarterly basis or $300,000 on an annual basis as such figures
shall be adjusted in accordance with Article 4.2 to reflect
increases in the CPI-U. The Tenant shall also pay to the Landlord
as Additional Rent at least 15 days prior to the due date any
taxes that are due as a result of any added or omitted assessment
placed on the Demised Premises which, in addition to the regular
assessment creates a tax liability in excess of $75,000 on a
quarterly basis or $300,000 on an annual basis as such figures
shall be adjusted in accordance with Article 4.2 to reflect the
increase in the CPI-U. These amounts, when paid to the Landlord,
shall be paid by the Landlord to the City of Atlantic City. The
Tenant shall be obligated to pay real estate taxes to the
Landlord beyond the term of the Lease Agreement or any
termination date if, as a result of the occupancy of the Demised
28
Premises by the Tenant, the property loses its tax exempt status
after the Lease is terminated and is not restored to its tax
exempt status. The Tenant's obligation to pay real estate taxes
shall continue until the happening of any of the following
events: (i) the effective date of the restoration of the Demised
Premises to tax exempt status; or (ii) the subsequent sale or
lease of the Demised Premises to another party who would not be
exempt from the payment of real estate taxes. Within thirty (30)
days of either of these events, the unused balance of the Tax
Escrow shall be returned to the Tenant.
23.4. The Tenant shall not, without the prior written
consent of the Landlord, which consent may be withheld, file any
appeal with the County Board of Taxation, the New Jersey State
Tax Court or any successor agency or court seeking to alter the
assessment on the demised premises.
Article 24: BROKERAGE COMMISSION
24.1. Each party warrants and represents to the other that
no brokerage commission is due to any person, firm or entity with
respect to this Lease of the Demised Premises except as set forth
above and each party agrees to indemnify and hold the other party
harmless with respect to any judgment, damages, legal fees, court
costs and any and all liabilities of any nature whatsoever
arising from a breach of said representation.
Article 25: LIMITATION ON LANDLORD'S LIABILITY.
25.1. If Landlord or any successor(s) in interest or
assignee(s) shall be an individual, joint venture, tenancy in
common, firm or partnership, general or limited, or a trust, it
is specifically understood and agreed that there shall be no
personal liability upon such individual or the members of the
joint venture, tenancy in common, firm or partnership, or the
trustee(s) under such trust or the beneficiaries thereunder, or
upon such joint venture, tenancy in common, firm, partnership or
trust, in respect to any of the covenants or conditions of this
Lease. Tenant shall look solely to Landlord's equity in the
29
Premises for the satisfaction of the remedies of Tenant in the
event of a breach by Landlord of any of the terms, covenants and
conditions of the Lease to be performed by Landlord.
Article 26: MISCELLANEOUS PROVISIONS.
26.1. The Landlord makes no representation or warranty with
regard to the number of parking spaces the Demised Premises can
accommodate or be approved for by the governmental entities
having jurisdiction over it. Tenant's proposed use is a permitted
use under the Urban Renewal Plan for the UURT.
26.2. The parties acknowledge the mutually shared desire to
provide certified Minority Business Enterprises with the
opportunity to participate in the construction of the
improvements on the Demised Premises. Tenant agrees that it will
require its construction manager for the improvements to solicit
bids and award contracts or subcontracts for the various elements
constituting the improvements in accordance with 24 C.F.R.,
Appendix to Part 135, Section III, Paragraph 2, pertaining to
procurement by sealed bids, as set forth at page 33890, Federal
Register, Volume 59, Number 125, June 30, 1994, a true copy of
which is attached hereto as Exhibit "C" and incorporated herein,
with the exception that for purposes of this Agreement, the term
"Section 3 business concern" as referenced in said regulations
shall mean, for the purposes of this Paragraph, Minority Business
Enterprise ("MBE") as appropriately certified by the State of New
Jersey, City of Atlantic City or other agency acceptable to ACHA.
In order to promote MBE/WBE participation, the Tenant agrees to
require its construction manager to bid, at a minimum, as
separate elements the following subcontracts: Fencing,
landscaping, paving, electrical and signs. In addition, in the
event the bid of a qualified Atlantic City based MBE/WBE is
within three (3%) percent of the next lowest MBE bidder, Tenant
shall require its construction manager to award the contract to
the Atlantic City based MBE/WBE. For the purposes of this
30
Paragraph, WBE shall mean a Women's Business Enterprise as
certified by the State of New Jersey, City of Atlantic City or
any other agency acceptable to ACHA. For the purposes of this
Paragraph, "Atlantic City based" shall mean an enterprise which
maintains a bona fide place of business in Atlantic City prior to
January 1, 1995 withing thirty (30) days of the start of
construction of the improvements and again fifteen (15) days are
the completion of construction, Tenant shall furnish to Landlord
written reports setting forth its good faith efforts to comply
with the provisions hereof, including the total amount of
contracts awarded, identity of all certified MBE/WBE contractors
and the dollar amount of contracts awarded thereto.
Article 27. LAND USE APPROVALS.
The Landlord and the Tenant recognize that it will be
necessary for the Tenant to secure Conceptual and Final Plan
approval from the Landlord ("ACHA Approval") and Site Plan
approval or a positive review and recommendation as the case may
be from the Atlantic City Planning Board ("Planning Board
Approval") for the Tenant's use of the Demised Premises as a
parking lot.
The Tenant warrants and represents:
A. It is familiar with the provisions of the Urban Renewal
Plan for the Uptown Urban Renewal Project
("Redevelopment Plan") applicable to a parking lot.
B. It is familiar with the landscaping requirements of the
Redevelopment Plan and the Atlantic City Developmental
Ordinance and recognize that a Landscape Plan similar
to that utilized by the Tenant for Block 109 does not
conform with the requirements of the Redevelopment Plan
and the Atlantic City Developmental Ordinance.
C. It is aware that the Redevelopment Plan requires that
all utilities be placed underground. All costs
associated with placement of utilities underground
shall be borne by the Tenant unless the Tenant secures
31
funding from sources other than the ACHA.
D. The Tenant agrees to comply with all lawful
requirements that Atlantic City imposes for on and off
site improvements.
The Tenant shall diligently pursue the ACHA Approval and Planning
Board Approval. For the purposes of this Article "diligently
pursue" shall include, but not be limited to the following
actions by the Tenant:
A. File a complete application on or before January 10,
1995 with the Landlord for ACHA Approval of Conceptual
and Final Plans containing all of the information
referred to in EXHIBIT D annexed hereto. The Conceptual
and Final Plans submitted shall comply in all respects
with the provisions of the current Redevelopment Plan
applicable to the Demised Premises and the Atlantic
City Developmental Ordinance and the Tenant shall not
seek any waivers or variances of any kind except as
provided in "B" below.
B. File a complete preliminary and final application,
except for a traffic study, with the Atlantic City
Planning Board for Planning Board Approval on or before
January 10, 1995. The application shall conform with
all of the requirements of the Atlantic City
Developmental Ordinance as determined to be applicable
by the staff of the Atlantic City Planning Department
and the application requirements of the Atlantic City
Department of Planning and the Tenant shall not seek
any waivers or variances of any kind with the exception
of a waiver from the sight triangle requirement similar
to the waiver which was granted for Block 109. The
traffic study, if required, shall be submitted on or
before January 31, 1995.
C. Promptly and completely respond to any requests by the
ACHA staff or the staff of the Atlantic City Planning
Department and the City Engineers Department for
additional information or revisions. For the purposes
of this paragraph, promptly respond shall mean within
ten business days of receiving a request for additional
information or revisions.
D. The Tenant shall promptly provide the Landlord with
copies of all documents submitted to and received from
the Atlantic City Planning Department and the Atlantic
32
City Engineering Department.
E. Otherwise cooperate, work diligently and do anything
necessary and proper to obtain the ACHA Approval and
Planning Board Approval as expeditiously as possible.
Time shall be of the essence with regard to all dates and time
frames indicated above.
The Landlord covenants that its staff will review the Tenant's
complete application and furnish the Tenant with any comments
within ten (10) business days of receipt by the Landlord.
In the event that the Tenant, through no fault of the
Tenant, fails to receive the ACHA Approval on or before March 30,
1995, the Tenant shall have the option to terminate this Lease by
providing the Landlord with written notice on or before March 31,
1995. If the Tenant fails to provide the Landlord with written
notice of its exercise of its option to terminate, the option
shall be waived. If the Tenant elects to exercise its option to
terminate as a result of failing to receive ACHA Approval in
accordance with this Article, the Tenant shall not thereafter
have any further obligation to the Landlord except as provided in
this Article and Articles 6, 12, 22 and 23. The Tenant shall not
be entitled to any refund of any rent previously paid by the
Tenant.
In the event that the Tenant's application, through no fault
of the Tenant, is denied by the Planning Board, the Tenant shall
promptly appeal that denial by instituting a suit In Lieu of
Prerogative Writ ("Appeal") and by diligently pursuing that
Appeal until either the Tenant receives Planning Board Approval
or its Appeal is denied in a final, judgment of the Superior
Court Law Division. From April 1, 1995 to the time, if ever, that
the Tenant's Appeal is denied in a final judgment, or the denial
of the Planning Board is reversed by a Court of competent
jurisdiction, the Tenant shall not be obligated to pay any Annual
33
Rent pursuant to this Lease. The Tenant shall, however, while its
Appeal is pending, comply with all of the other provisions of
this Lease. If the Tenant's Appeal is denied, then, as of the
effective date of any final judgment, the Lease shall terminate.
If the Tenant, as a result of its Appeal, receives Planning Board
Approval, the Tenant's obligation to pay Annual Rent shall
immediately resume.
In the event that this Lease is terminated pursuant to this
Article, the Tenant's liability pursuant to Article 28 shall be
limited to the Tenant paying up to $300,000 of the cost of
removal. The Tenant shall not, however, receive any credit
against this obligation for rent paid to the Landlord.
The Tenant shall be permitted to make application to other
agencies prior to receiving ACHA Approval. The Landlord, however,
shall not be bound by any conditions or requirements imposed by
other agencies.
Notwithstanding anything else in this Lease to the contrary,
in the event that the tenant does not "diligently pursue" its
ACHA Approval and its Planning Board Approval, the Tenant shall
not have any right whatsoever or option whatsoever to terminate
this Lease pursuant to this Article.
The Tenant requests permission to enter the Demised Premises
for the purposes of conducting the environmental tests referred
to in Article 28. This right of entry is requested for the period
December 23, 1994 through and including December 31, 1994.
In consideration of the Landlord's granting the right of
entry requested by Tenant, Tenant agrees to assume the risk of
loss or damage to the subject property, and to defend, indemnify
and hold the Landlord harmless from and against any and all loss,
damages, or expenses of any kind (including reasonable attorneys
fees) by reason of injury (including death) to persons and/or
property arising in any manner or under any circumstances related
to Tenant's entry upon and occupancy of the subject property for
the purposes described above, or for any other purposes for which
Tenant or its agents or representative shall use such property.
34
Tenant also agrees that it shall restore the premises to the
condition in which Tenant found them at the time of Tenant's
original entry.
Article 28: Environmental Provisions.
28.1. On or before January 15, 1995, Tenant shall, at its
sole cost and expense, conduct an environmental investigation by
a consultant to be approved by the Landlord's Executive Director
of the Demised Premises, to determine whether there are any
hazardous contamination or underground storage tanks on the
Demised Premises. The Tenant shall provide the Landlord with a
copy of the investigation promptly after it is received by the
Tenant. If this investigation reveals any contamination or tanks,
it shall be Tenant's obligation to have those materials removed
in accordance with applicable State and Federal Laws and
Regulations. The Tenant shall provide the Landlord with proof
acceptable to the Landlord that these materials have been
removed. The first $200,000 of the cost of removal shall be paid
by the Tenant. If the cost of removal is greater than $200,000,
the Tenant shall receive a credit of up to $450,000 per year up
to a maximum of $900,000 against future rent obligations pursuant
to this Lease. If the cost of removal exceeds $ 1,100,000, all
costs over $1,100,000 shall be the Tenant's responsibility. If
the cost of removal exceeds $200,000, the Tenant shall provide
the Landlord with a Certification by a licensed professional
engineer of the State of New Jersey as to the actual costs
incurred and their reasonableness together with true copies of
invoices, contracts and other documents relating to the costs
incurred. No credit shall be applied unless and until the
Landlord reviews and approves the reasonableness and necessity of
all costs. If the Lease is terminated before the credit is
satisfied, the Tenant's right to any further credit shall also
terminate.
28.2. Thirty days prior to the termination or expiration of
this Lease, Tenant shall, at its sole cost and expense, have a
Phase I Environmental Site Assessment ("ESA") prepared by a
consultant to be approved by the Executive Director of the
35
Landlord with regard to the Demised Premises. If the ESA shows
any contamination, the Tenant shall remove the contamination
promptly.
Article 29: RIGHT OF FIRST REFUSAL.
29.1. In the event that, at the expiration of the term of
this Lease, the Landlord desires to lease the Demised Premises
for use as a parking lot to any other person or entity other than
the Tenant for use as a parking lot which use is not in
conjunction with or ancillary to any other property in the
currently undeveloped portions of all or portions of Blocks 7,
10, 11, 13, 15 and/or 16, the Tenant shall have thirty (30) days
are receiving notice from the Landlord to exercise its right of
first refusal to lease the Demised Premises on the same terms and
conditions. If the Tenant elects to exercise this right, it shall
do so in writing. If the Tenant fails to exercise its right, it
shall be deemed to have waived any rights it may have pursuant to
this Article 29. Nothing contained in this Article 29 shall
restrict or prevent the Landlord from leasing the Demised
Premises at the expiration of this Lease to a tenant who intends
to use the Demised Premises for surface parking in conjunction
with or ancillary to any other property in the currently
undeveloped portions of all or portions of Blocks 7, 10, 11, 13,
15 and/or 16 or for any use other than surface parking on the
Demised Premises. In addition, nothing contained in this Article
29 shall prevent or restrict the Landlord from selling the
Demised Premises at the expiration of the Lease.
Article 30: SUCCESSORS AND ASSIGNS.
30.1. This Agreement shall inure to the benefit of and
shall be binding upon, the parties hereto and their respective
successors and assigns.
Article 31: ENTIRE AGREEMENT.
31.1. This Lease constitutes the entire agreement of the
parties hereto.
36
Article 32: NOTICE.
32.1. All notices and other communications hereunder shall
be sent by certified mail, return receipt request, and shall be
deemed to have been duly given when sent in the foregoing manner
to the parties at their respective addresses and set forth above,
or to such other address as either party shall notify the other
by notice under this Article.
Article 33: GOVERNING LAW.
33.1. This Lease shall be governed by and construed in
accordance with the laws of the State of New Jersey and if
litigation shall be undertaken or otherwise necessary concerning
this Lease or any portion thereof, said litigation shall be
venued in Atlantic County, New Jersey.
Article 34: MODIFICATION.
34.1. Any modification or amendment of this Lease shall be
effective only if in writing and executed by each party hereto.
Article 35: PRONOUNS.
35.1. Any pronoun used in this Lease shall be deemed to
include singular and plural, and masculine and feminine gender,
as the sense and circumstances of the context may require.
Article 36: COUNTERPARTS.
36.1. This Lease may be executed in several counterparts,
each of which shall be deemed to be an original copy, and all of
which taken together shall constitute one agreement binding on
all parties hereto, notwithstanding that the parties shall not
have signed the same counterpart.
Article 37: INVALIDITY OF PARTICULAR PROVISIONS.
37.1. If any term or provision of this Lease or the
application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Lease
or the application of such term or provision to persons or
37
circumstances other than those as to which it is held invalid or
unenforceable shall not be effected thereby, and each term and
provision of this Lease shall be valid and enforced to the
fullest extent permitted by law.
ATTEST: LANDLORD: HOUSING AUTHORITY AND
URBAN REDEVELOPMENT AGENCY OF THE
CITY OF ATLANTIC CITY
/s/ John J. McAvaddy, Jr. BY: /s/ John P. Whittington
John J. McAvaddy, Jr. John P. Whittington, Chairman
Secretary
TENANT: Atlantic City Showboat, Inc.
/s/ Luther Anderson BY: /s/ Herbert R. Wolfe
Luther Anderson Herbert R. Wolfe, Executive Vice
Assistant Secretary President and Chief Operating
Officer
38
STATE OF NEW JERSEY, COUNTY OF ATLANTIC SS.:
I CERTIFY that on December 22, 1994,
John J. McAvaddy, Jr., personally came before me and stated
under oath to my satisfaction that:
(a) this person was the subscribing witness to the signing of
the attached instrument;
(b) this instrument was signed by John P. Whittington, .who is
the Chairman of the Housing Authority and Urban
Redevelopment Agency of the City of Atlantic City, the
entity named in this instrument, and was fully authorized to
and did execute this instrument on its behalf; and,
(c) the subscribing witness signed this proof under oath to
attest to the truth of these facts.
/S/ John J. McAvaddy, Jr.
John J. McAvaddy, Jr., Secretary
Signed and sworn to before
me on December 22, 1994
/S/_______________________
39
STATE OF NEW JERSEY, COUNTY OF ATLANTIC SS.:
I CERTIFY that on December 22, 1994,
Luther Anderson, personally came before me and stated under
oath to my satisfaction that:
(a) this person was the subscribing witness to the signing of
the attached instrument;
(b) this instrument was signed by Herbert R. Wolfe, who is the
Executive Vice President and Chief Operating Officer of
Atlantic City Showboat, Inc., the entity named in this
instrument, and was fully authorized to and did execute this
instrument on its behalf; and,
(c) the subscribing witness signed this proof under oath to
attest to the truth of these facts.
/S/ Luther Anderson
Luther Anderson, Assistant Secretary
Signed and sworn to before
me on December 22, 1994
/S/ Marta L. Hill
Marta L. Hill
Notary Public of New Jersey
My Commission Expires July 12, 1998
40
ARTHUR W. PONZIO CO. & ASSOCIATES. INC.
SURVEYORS, PLANNERS, ENGINEERS
400 N. DOVER AVENUE
IN CHELSEA HEIGHTS
ATLANTIC CITY, NEW JERSEY 08401
TELEPHONE: 609/344-8194
FAX: 609/344-1594
December 7, 1994
METES AND BOUNDS DESCRIPTION
ALL that certain lot, tract or parcel of land and premises
situate, lying and being in the City of Atlantic City, County of
Atlantic and State of New Jersey bounded and described as
follows:
BEGINNING at the southeasterly corner of Atlantic Avenue (100.00'
wide) and Maryland Avenue (60.00' wide) and extending from said
beginning point; thence
(1) North 62 degrees 32' 00" East, in and along the southerly
line of Atlantic Avenue, a distance of 350.00' to the
westerly line of Delaware Avenue (82.00' wide); thence
(2) South 27 degrees 28' 00" East, in and along the westerly
line of Delaware Avenue, a distance of 100.00' to a point of
curve; thence
(3) Curving to-the left in the arc of a circle having a radius
of 429.00' and in and along the westerly line of Delaware
Avenue, the arc length of 104.82' to a point of tangent;
thence
(4) South 41 degrees 28' 00" East, in and along the westerly
line of Delaware Avenue, a distance of 152.53' to a point of
curve; thence
(5) Curving to the right in the arc of a circle having a radius
of 315.00' and in and along the westerly line of Delaware
Avenue, the arc length of 76.97' to a point of tangent;
thence
(6) South 27 degrees 28' 00" East, in and along the westerly
line of Delaware Avenue, a distance of 122.01' to the
northerly line Pacific Avenue; thence
(7) South 62 degrees 32' 00" West, in and along the northerly
line of Pacific Avenue, a distance of 409.00' to the
easterly line of Maryland Avenue; thence
(8) North 27 degrees 28' 00" West, in and along the easterly
line of Maryland Avenue, a distance of 550.00' to the point and
place of BEGINNING.
BEING KNOWN AS Block l5 as shown on the current official
taxing plan of the City of Atlantic City, with a proposed
vacation of United States Avenue and realignment of Delaware
Avenue.
CONTAINING an area of 209,013.13 square feet, or 4.80 Acres
DIAGRAM OF BLOCK 15
EXHIBIT "B"
IRREVOCABLE ASSIGNMENT OF CERTIFICATE OF DEPOSIT
THIS IRREVOCABLE ASSIGNMENT OF CERTIFICATE OF DEPOSIT made
this ___ day of December, 1994, by Atlantic City Showboat, Inc.
located at 801 Boardwalk, Atlantic City, New Jersey 08401
("Assignor") to the Housing Authority and Urban Redevelopment
Agency of the City of Atlantic City ("Assignee").
BACKGROUND
WHEREAS, the Assignor and the Assignee are about to enter
into a Lease Agreement dated December ___, 1994, to lease a
portion of the Uptown Urban Renewal Tract ("UURT") as more
particularly described in Exhibit "A" annexed to the Lease
Agreement (the "Demised Premises"); and
WHEREAS, pursuant to the Lease Agreement, the Assignor has
agreed to deposit a tax escrow in accordance with Article 23 of
the Lease Agreement in the amount of $405,000 (the "Tax Escrow");
and
WHEREAS, the Assignor is the owner of a certain Certificate
of Deposit in the sum of $405,000 which Certificate is drawn on
National Westminster Bank, Bank No. __ , having an interest rate of
percent and having a term of months, a copy of which is attached
hereto as Exhibit "A" (the "Certificate"); and
WHEREAS, the Assignor desires to assign the Certificate to
the Assignee to satisfy the Assignor's obligation to deposit
funds to allow the Assignee to maintain a Tax Escrow in
accordance with the Lease Agreement;
NOW, THEREFORE, in consideration of the covenants herein
described and for other good and valuable consideration, the
Assignor agrees as follows:
1. The Assignor assigns the Certificate to the Assignee to
serve as the Tax Escrow pursuant to Article
1
23 of the Lease Agreement. Any interest earned on the Certificate
shall remain with the Certificate as part of the Tax Escrow.
2. In the event that the Assignor fails to pay real estate
taxes and assessments to the Assignee in accordance with the
terms of the Lease Agreement or fails to carry out any other
obligations pursuant to the Lease Agreement which the Tax Escrow
may be used to satisfy, the Assignee may redeem the Certificate,
without regard to penalty thereunder, upon five days' written
notice to the Assignor and to National Westminster Bank, to pay
said real estate taxes, special assessments, any interest or
penalties incurred as a result of the Assignor's failure to pay
said real estate taxes and/or special assessments and to carry
out any of the Assignor's other obligations in accordance with
the Lease Agreement. National Westminster Bank shall permit the
Assignee to redeem the Certificate regardless of any objection
made by the Assignor or any third party.
3. The Assignor will extend the term of the Certificate for
an additional fifteen (15) months following the expiration or
termination of the Lease Agreement until such time as the
Assignee determines that the Certificate is no longer necessary
to ensure the availability of funds for the payment of real
estate taxes and/or special assessments, interest or penalties
and any other obligations in accordance with the Lease Agreement.
4. National Westminster Bank will hold the Certificate or
any renewals thereof in escrow in accordance with the terms of
this Irrevocable Assignment of Certificate of Deposit.
5. All notices required to be given under this Assignment
shall be given by Certified Mail/Return Receipt Requested or by
personal service to the following individuals:
Assignor: General Counsel - Atlantic City Showboat
801 Boardwalk
Atlantic City, New Jersey 08401
2
Assignee: Executive Director - Housing Authority and Urban
Redevelopment
Agency of the City of Atlantic City
Atlantic City Housing Authority &
227 N. Vermont Avenue
P.O. Box 1258
Atlantic City, New Jersey 08404
Bank: National Westminster Bank
1300 Atlantic Avenue
Atlantic City, New Jersey 08401
ATTEST: ATLANTIC CITY SHOWBOAT, INC.
/S/ Luther Anderson BY:/S/ Herbert R. Wolfe
LUTHER ANDERSON, HERBERT R. WOLFE, Executive
Assistant Secretary Vice President & Chief
Operating Officer
HOUSING AUTHORITY AND URBAN
REDEVELOPMENT AGENCY OF THE
CITY OF ATLANTIC CITY
/S/ John J. McAvaddy, Jr. BY: /S/ John P. Whittington
JOHN J. MCAVADDY, JR, JOHN P. WHITTINGTON,
Secretary Chairman
NATIONAL WESTMINSTER BANK HEREBY CONSENTS TO THE TERMS AND
CONDITIONS OF THIS IRREVOCABLE ASSIGNMENT OF CERTIFICATE OF
DEPOSIT.
NATIONAL WESTMINSTER BANK
BY:_______________________
3
EXHIBIT C
33890 Federal Register/Vol. 59, No. 125/Thursday, June 30, 1994/Rules
and Regulations
of solicitation (ii) Award. (A) Where section 3 business
provides for the section 3 covered concerns. The
participation by a contract is to be purchase order shall
reasonable number of awarded based upon the be awarded to the
competitive sources. lowest price, the responsible firm whose
At the time of contract shall be quotation is the most
solicitation, the awarded to the qualified advantageous,
parties must be section 3 business considering price and
informed of: concern with the lowest all other factors
-the section 3 covered responsive quotation, if specified in the
contract to be awarded it is reasonable and no rating system.
with sufficient more than 10 percent (2) Procurement by
specificity; higher than the sealed bids
-the time within which quotation of the lowest (Invitations for
quotations must be responsive quotation Bids). Preference in
submitted; and from any qualified the award of section 3
-the information that source. If no covered contracts that
must be submitted with responsive quotation by are awarded under a
each quotation. a qualified section 3 sealed bid (IFB)
(B) If the method business concern is process may be
described in paragraph within 10 percent of the provided as follows:
(i)(A) is utilized, lowest responsive (i) Bids shall be
there must be an quotation from any solicited from all
attempt to obtain qualifies source, the businesses (section 3
quotations from a award shall be made to business concerns, and
minimum of three the source with the non-section 3 business
qualified sources in lowest quotation. concerns). An award
order to promote (B) Where the section shall be made to the
competition. Fewer 3 covered contract is to qualified section 3
than three quotations be awarded based on business concern with
are acceptable when the factors other than the highest priority
contracting party has price, a request for ranking and with the
attempted, but has been quotations shall be lowest responsive bid
unable, to obtain a issued by developing the if that bid-
sufficient number of particulars of the (A) is within the
competitive quotations. solicitation, including maximum total contract
In unusual a rating system for the price established in
circumstances, the assignment of points to the contracting
contracting party may evaluate the merits of party's budget for the
accept the sole each quotation. The specific project for
quotation received in solicitation shall which bids are being
response to a identify all factors to taken, and
solicitation provided be considered, including (B) is not more than
the price is price or cost. The "X" higher than the
reasonable. In cases, rating system shall total bid price of the
the contracting party provide for a range of lowest responsive bid
shall document the 15 to 25 percent of the from any responsible
circumstances when it total number of bidder. "X" is
has been unable to available rating points determined as follows:
obtain at least three to be set aside for the
quotations. provision of preference
for
x=lesser of:
When the lowest responsive bid is 10% of that bid or $9,000
less than $100,000
When the lowest responsive bid is:
At least $100,000, but less than 9% of that bid, or $16,000
$200,000
At least $200,000, but less than 8% of that bid, or $21,000
$300,000
At least $300,000, but less than 7% of that bid, or $24,000
$400,000
At least $400,000, but less than 6% of that bid, or $25,000
$500,000
At least $500,000, but less than 5% of that bid, or $40,000
$1 million
At least $1 million, but less 4% of that bid, or $60,000
than $2 million
At least $2 million, but less 3% of that bid, or $80,000
than $4 million
At least $4 million, but less 2% of that bid, or $105,000
than $7 million
$7 million or more 1 1/2 %of the lowest responsive bid,
with no dollar limit
(ii) If no responsive (iii) The component of Office of the
bid by a section 3 this evaluation factor Secretary
business concern meets designed to address the
the requirements of preference for these 24 CFR Subtitle A and
paragraph (2)(i) of business concerns in the Parts 92, 219, 280,
this section, the order of priority 570, 572, 574, 576,
contract shall be ranking as described in 583, 882, 889, 890,
awarded to a 24 CFR 135.36. 905, 961, and 963
responsible bidder with (iv) With respect to
the lowest responsive the second component [Docket No.R-94-
bid. (the acceptability of 1678;RF-3536-F-01]
(3) Procurement under the section 3 strategy), RIN 2501-AB64
the compe-titive the RFP shall required Economic Opportunities
proposals method of the disclosure of the for Low and Very Low-
procure-ment (Request contractor's section 3 Income Persons-
for Proposals (RFP)). strategy to comply with Conforming Amendments
(i) For contracts and the section 3 training AGENCY: Office of the
subcontracts awarded and employment Secretary, HUD
under the competitive preference, or ACTION: Final rule.
proposals method of contracting preference, ______________________
procurement (24 CFR or both, if applicable. ____________
85.36(d)(3)), a Request A determination of the SUMMARY: Section 3 of
for Proposals (RFP) contractor's the Housing and Urban
shall identify all responsibility will Development Act of
evaluation factors (and include the submission 1968 (section 3), as
their relative of an acceptable section amended by the Housing
importance) to be used 3 strategy. The and Community
to rate proposals. contract award shall be Development Act of
ii) One of the made to the responsible 1992, requires that
evaluation factors firm (either section 3 the economic
shall address both the or non-section 3 opportunities
preference for section business concern) whose generated by HUD
3 business concerns and proposal is determined financial assistance
the acceptability of most advantageous, for housing (including
the strategy for considering price and public and Indian
meeting the greatest all other factors housing) and community
extent feasible specified in the RFP. development programs
requirement (section 3 Dated: June 27, 1994 shall, to the greatest
strategy), as disclosed Roberta Achtenberg, extent feasible, be
in proposals submitted Assistant Secretary for given to low and very
by all business Fair Housing and Equal low-income persons,
concerns (section 3 and Opportunity particularly those who
non-section 3 business [FR Doc. 94-1595 Filed 6- are recipients of
concerns). This factor 29-94; 8:45 am) government assistance
shall provide for a BILLING CODE 4210-28-P for housing and to
range of 15 to 25 businesses that
percent of the total provide economic
number of available opportunities for
points to be set aside these persons.
for the evaluation of
these two components.
EXHIBIT D
HOUSING AUTHORITY &
URBAN REDEVELOPMENT AGENCY
OF THE CITY OF ATLANTIC CITY NEW JERSEY
P 0. Box 1258 227 Vermont North Atlantic City. NJ 08404 609-
344-1107
REQUIREMENTS
FOR MAKING APPLICATION FOR
DEVELOPMENT PLAN APPROVAL
The attached package contains an application for Development Plan
Approval, along with all requirements necessary when making
application for such approval. The Applicant shall submit the
enclosed form, all Conceptual and/or Final Submission
Requirements, and the appropriate fee to the Housing Authority.
Checks to be made payable to the Atlantic City Housing Authority.
Please refer any additional requests for information or
clarification to the Housing Authority and Urban Redevelopment
Agency of the City of Atlantic City at (609) 344-1107.
Note: all references to the Atlantic City Land Use Ordinance
refer to Chapter 163 (Land Use Development) from the Code of the
City of Atlantic City (last amended 6/15/88}.
Package Revised 3/8/88 12/14/89
4/1/89 8/4/90
5/5/89 9/6/90
9/29/89 8/5/92
ATTACHMENT I - ARCHITECT'S RENDERING OF PROPOSED STRUCTURE
HOUSING AUTHORITY &
URBAN REDEVELOPMENT AGENCY
OF THE CITY OF ATLANTIC CITY NEW JERSEY
P O. Box 1258 227 Vermont North Atlantic City, NJ 08404 609-344-
1107
APPLICATION FOR DEVELOPMENT PLAN APPROVAL
Conceptual:
Final:
Fee Received:
Applicant's Name: Phone: ( ) -
Applicant's Address:
Owner's Name:
Owner's Address:
Owner's Signed Consent: Date:
Name and Address of Professional Consultants:
Project Contact: Phone: ( ) -
Street Address of Property:
Legal Description of Property: Block(s): Lot(s):
Land Use Classification:
Present Use:
Proposed Use:
Applicant's Signature: Date:
*****************************************************************
OFFICE USE ONLY
PROJECT APPROVAL DATE: RESOLUTION NO:
HOUSING AUTHORITY &
URBAN REDEVELOPMENT AGENCY
OF THE CITY OF ATLANTIC CITY NEW JERSEY
P 0. Box 1258 227 Vermont North Atlantic City. NJ 08404
609-344-1107
MEMORANDUM:
TO: INTERESTED DEVELOPERS
FROM: ATLANTIC CITY HOUSING AUTHORITY
RE: COMMUNITY MEETING(S)
Contained in the list of Submission Requirements for
Development Plan Approval is an item titled "Date of Community
meeting" (# 21. m. Conceptual Plan Submission Requirements and #
40. Final Plan Submission Requirements). The Atlantic City
Housing Authority highly recommends that any party undertaking
development in Atlantic City make a good-faith effort to meet
with members of the community. It is the intention that the
developer and members of the community be afforded the
opportunity to meet, to ask questions, to have concerns
addressed, and to otherwise get to know each other as new
neighbors.
Below is a list of some of the community groups who hold
regular meetings, together with phone numbers and contact people.
The Authority notes that this is not a complete list, and urges
developers to meet with any additional groups deemed appropriate.
GROUP CONTACT PHONE
First Ward Civic Assoc. William Marsh (609) 344-8809
(after 2:00 pm.)
Bungalow Park Civic Assoc. C.C. Davenport (609) 344-2907
Inlet Private Public Assoc. Daniel Ojserkis (609) 348-4515
Chelsea Neighborhood Civic Louise (609) 344-8555
Assoc. Palmentieri
Midtown Business & Citizens John Schultz (609) 345-5322
Assoc.
CONCEPTUAL SUBMISSION REQUIREMENTS
1. U.S.G.S. or equivalent site location map.
2. Flood Plain Map.
3. Municipal block and lot map with site outlined.
4. Site survey with scale and northpoint showing utility
easements and area in s.f.
5. Proposed subdivision or consolidation map drawn in
accordance with the Map Filing Act.
6. Two (2) recent color photos of site.
7. All four (4) building elevations and roof (if flat) of
existing and proposed in color. Proposed is to be outlined
in red or other contrasting color. Scale
1 " = 30' or larger.
8. Color perspective rendering indicating proposed project in
relation to adjacent and or adjoining properties (both
existing and proposed) depicting two (2) sides of
building/project one of which includes the primary entrance
to the facility. Scale to be sufficient to include entire
subject area (see Attachment I for sample).
9. (INTENTIONALLY DELETED)
10. Site Plan in scale 1" = 60' or larger showing:
a: street lighting k: building lines
b: project lighting l: set-backs
c: curb cuts m: open space (by
category)
d: driveways n: height
e: off-street parking o: off-street loading
areas
f: on-street parking p: Land Use Zone/Tract
9: service areas q: permitted use(s)
h: sidewalks r: discretionary use(s)
i: pedestrian bridges s: public use(s)
j: landscaped areas
Plan also to indicate proposed project in relation to
properties, improvements (both existing and proposed), and
public Rights-of-way directly contiguous to the project site.
The proposed project, including on and off site improvements
to be accomplished by developer, to be outlined in red or
other contrasting color.
11. Floor layouts of unique and repetitive dwelling units and
non-residential space with an indication of proposed use(s)
for each area. Scale 1/8" = 1' or larger. if exceeding 1,000
sq. ft.
12. Two (2) sections through building if exceeding 1,000 sq.
feet.Scale 1" = 30' or larger.
13. Grading plan of existing and proposed contours, including
perimeter elevations, at a maximum of 10' intervals
referenced to U.S.G.S. datum.
14. Sun shadows. if any building or sign exceeds 35 feet in
height.
15. a. Transportation plans indicating intended
circulation patterns for vehicles, service vehicles,
public transportation, pedestrians, bicycles and on and
off street public parking. Scale to match Site Plan.
b. Transportation plans indicating intended circulation
patterns along (to and from) all primary materials and
major access roads into the City. Plan to be
superimposed on a map of the City. Scale to be 1" =
250'.
16. Utilities survey map showing existing and proposed in scale
of 1" = 40'.
17. Outline specifications of major exterior materials,
landscaping and paving materials.
18. a. Sketch of major items of street furniture with
color indicated.
b. Location and sketch of ail exterior signs and
lighting standards.
19. Landscaping plans indicating items to remain, planting
schedule, specimen lists, location, irrigation and non-
vegetative treatments.
20. Accompanying schedules indicating:
a: Percentage of lot coverage for building(s), including
breakout of permitted, discretionary and public uses.
b: F.A.R.
c: Number of dwelling units by size, type, category and
g.s.f. of habitable living area.
d: Area of all other spaces by category: ie. paved area,
individual open space and common open space, service
areas, commercial/ retail areas (gross and net).
e: Density expressed as D.U.s per acre.
f: Total gross square feet of building. Floor area of
nonresidential uses and accessory uses.
g: Proposed number of off-street parking and loading
spaces for each type of use proposed.
h: Height.
i: Setbacks.
21. Alternative scheme or layout to plan considered.
22. Proposed construction schedule.
For each portion, element or sub-element of the project,
complete the construction schedule on the following page,
with dates for commencement and completion indicated. Should
an item not apply, indicate N/A (do not leave any item
blank). Additional items may be added should the project
warrant. A timeline format is preferred.
ATTACHMENT I - ARCHITECT'S RENDERING OF PROPOSED STRUCTURE
PROPOSED CONSTRUCTION SCHEDULE
DEVELOPMENTAL APPLICATIONS(per item 28)
1. Initial Submission
2. Additional information
3. Findings & Final Approvals
ACQUISITION
4. Appraisals
5. Offers to Owners
6. Date of Complete Site Ownership(100% of Site)
7. Date of Complete Site Control and Occupancy.
PRE-CONSTRUCTION
8. Mobilization
9. Demolition
10. Fill & Surcharge
11. Site Consolidation
CONSTRUCTION
12. Excavation
13. Setting of Footings, Foundations and/or Pilings
14. Setting and/or Framing of Structures
15. Exterior Walls
16. Roof
17. Exterior Doors & Windows
18. Waterproofing(date project to become watertight and/or
dampproof)
a. Caulking
b. Sealing
c. Insulation
19. Rough Mechanical/Electrical/Plumbing/HVAC
20. Exterior Facades
21. Interior Finishing
a. Drywall
b. Flooring
c. Finish Carpentry
d. Cabinets/Appliances
e. Painting and Finishing
22. Finish Mechanical/Electrical/Plumbing/HVAC
23. Site Utilities (complete the following for
each utility: Electric, Gas, Cable, Phone,
Sewer. Water. Storm Water, Other}
a. Engineering
b. Engineering Review
c. Bidding
d. Bid Award
e. Construction
f. Hookup and Activation(component ready for use)
24. Sidewalks and Other Paving
25. Off-Street Parking/Loading Areas
a. Aprons
b. Lots
26. Site Fencing
27. Street Reconstruction and Other Off-Site Improvements
28. Landscaping, Roofscaping and/or Other Exterior Treatments,
including but not limited to Street Furniture; Building,
Traffic and Directional Signage; Project and Street
Lighting.
29. Demobilization
COMPLETION
30. Certificate of Completion
31. Certificate of Occupancy
32. Occupancy
CONCEPTUAL SUBMISSION REQUIREMENTS
23. Narrative indicating:
a: Site and proposed facility.
b: Conformance with Urban Renewal Plan objectives, land
use and building requirements.
c: Support services: ie. public transportation,
recreation, schools, cultural and historical.
d: Target market, marketing plan.
e: Project impact on adjacent and adjoining properties
and/or improvements.
f: Determination of conformance with Redeveloper's
Agreement (if applicable).
g: Determination of conformance with Approved Schematic
Plans (if applicable).
h: (If residential) number of low and moderate income
units and schedule of proposed rents or sales prices.
i: Estimated number of construction jobs created.
j: Estimated number of permanent jobs created.
k: Current total assessed value.
l: Estimated total assessed value after completion.
m: Details of Community meeting (see memo), including
date(s), group(s) and pertinent information.
24. Estimated development costs.
25. Financing plan or documented history of prior success in
completing a similar development.
26. Street address and legal description of the subject
property.
27. Evidence of site control.
28. Status of other developmental applications, including, but
not limited to CAFRA, DOT, ACTA, Municipal Government.
29. Name of applicant. Name of address and phone number of
Contact.
30. Filing fees.
31. Table of Contents indicating where each requirement can be
found on plans, narrative or supplements. Pagination of
narrative to be in numerical order.
32. All plans and supplements must be dated, signed and sealed
by the appropriate design professional.
33. Other submission requirements deemed necessary and
appropriate. The Executive Director reserves the right to
amend or adjust these requirements to better achieve the
overall objectives of the Urban Renewal Plan, and/or should
the proposal be of such character to warrant change. These
Submission Requirements are those of the Housing Authority,
and do not substitute for submissions that may be required
for any other permit, approval, registration, license or
certificate necessary to effectuate the proposed
development.
FINAL PLAN SUBMISSION REQUIREMENTS
1. U.S.G.S. or equivalent site location map.
2. Flood Plain Map.
3. Site survey with scale and northpoint showing utility
easements, drainage, conservation and area in s.f.
4. Final subdivision or consolidation map drawn in accordance
with the Map Filing Act.
5. Soil Erosion and Sediment Control (SCD) Plan.
6. All four (4) building elevations and roof (if flat) of
existing and proposed in color. Proposed is to be outlined
in red or other contrasting color. Scale 1" = 30t or larger.
7. Color perspective rendering indicating proposed project in
relation to adjacent and adjoining properties (both existing
and proposed} depicting two (2) sides of building/project
one of which includes the primary entrance to the facility.
Scale to be sufficient to include entire subject area (see
Attachment I for sample).
8. (INTENTIONALLY DELETED)
9. Site Plan in scale 1" = 60' or larger showing:
a: street lighting k: building lines
b: project lighting l: set-backs
c: curb cuts m: open space (by
category)
d: driveways n: height
e: off-street parking o: off-street loading
areas
f: on-street parking p: Land Use Zone/Tract
9: service areas q: permitted use(s)
h: sidewalks r: discretionary use(s)
i: pedestrian bridges s: public use(s)
j: landscaped areas
10. Floor layouts of unique and repetitive dwelling units and
non-residential space with an indication of proposed use(s)
for each area. Scale 1/8" = 1' or larger.
11. Two (2) sections through site and buildings if exceeding
1,000 sq. ft. scale 1" = 30' or larger.
12. Grading plan of existing and proposed contours, including
perimeter elevations, at a maximum of 5' intervals
referenced to U.S.G.S. datum.
13. Sun shadows. if any building or sign exceeds 35 feet in
height.
14. Utilities survey map showing on and off site existing and
proposed in scale of 1" = 40'. Also show reconstruction
details if any.
FINAL PLAN SUBMISSION REQUIREMENTS
15. a. Transportation plan in scale to match Site Plan
showing on and off site circulation patterns for
vehicles, service vehicles, public transportation,
pedestrians, bicycles and on and off street public
parking.
b. Transportation plan indicating intended circulation
patterns along (to and from) all primary materials and
major access roads into the City. Plan to be
superimposed on a map of the City. Scale to be 1" =
250'.
16. Outline specifications, color and hard samples of major
exterior materials, landscaping and paving materials;
outline specifications for living landscaping materials.
17. Color Landscaping Plan (including roofscape) in scale to
match Site Plan with materials key showing items of
landscaping to remain, items to be added and all other
landscaping proposals, terraces, retaining walls, at grade
parking, irrigation, and any non-vegetative treatment with
specifications and hard samples.
18. Detailed drawings of major items of street furniture,
signage and lighting standards or catalogue reproduction
with color indicated.
19. Accompanying schedules indicating:
a: Percentage of lot coverage for building(s), including
permitted, discretionary and public uses.
b: F.A.R.
c: Number of dwelling units by size, type, category and
g.s.f. of habitable living area.
d: Area of all other spaces by category: ie. paved area,
individual and common open space, service areas,
commercial/retail areas (gross and net).
e: Density expressed as D.U.s per acre.
f: Total gross square feet of building. Floor area of non-
residential uses and accessory uses.
g: Number of off-street parking & loading spaces for each
type of use.
h: Height.
i: Setbacks.
j: (If residential) number of low and moderate income
units and schedule of proposed rents or sales prices.
k: Estimated number of construction jobs created.
l: Estimated number of permanent jobs created.
m: Current total assessed value. n: Estimated total
assessed value after completion.
20. Construction schedule, phasing plan.
For each portion, element or sub-element of the project,
complete the following construction schedule, with dates for
commencement and completion indicated. Should an item not
apply, indicate N/A (do not leave any item blank).
Additional items may by added should the project warrant. A
timeline format is preferred.
FINAL PLAN SUBMISSION REQUIREMENTS
21. Narrative of site and proposed facility, conformance with
Urban Renewal Plan objectives, land use and building
requirements and Conceptual Submission. Determination of
conformance with Redeveloper's Agreement (if applicable).
22. Narrative of support services: ie. public transportation,
recreation, schools, cultural, religious, historical etc.
23. Status of Utility service guarantees.
24. Status of other developmental applications/approvals,
including, but not limited to CAFRA, DOT, ACTA, Municipal
Government and other State bodies.
25. Storm sewer and street reconstruction plans.
26. Access ways for handicapped and public shall be shown on the
plans.
27. Statement that parking area design is in accordance with the
Urban Renewal Plan.
28. Statement that loading area design is in accordance with the
Urban Renewal Plan.
29. Statement of conformance as to treatment of structural
surfaces in accordance with the Urban Renewal Plan.
30. Statement of conformance as to performance standards in
accordance with the Urban Renewal Plan.
31. Statement that signage and lighting details are in
accordance with the Urban Renewal Plan.
32. The applicant's name, address and phone number and his
interest in the subject property. Name, address and phone
number of Contact Person if different than the applicant.
33. Owners name and address, if different than the applicant,
and the owner's signed consent to the filing of the
application.
34. Names and addresses of all professional consultants advising
the applicant with respect to the proposed development.
35. Street address and legal description of the subject
property.
36. Evidence of site control.
37. Tax Certificate or current Municipal lien search.
38. Estimated development costs and financing plans, including
status of such financing.
39. Filing fees.
40. Details of Community meeting (see memo), including date(s),
group(s) and pertinent information.
41. Table of Contents indicating where each requirement can be
found on plans, narrative or supplements. Pagination of
narrative to be in numerical order.
42. All plans and supplements must be dated, signed and sealed
by the appropriate design professional .
43. Other submission requirements deemed necessary and
appropriate. The Executive Director reserves the right to
amend or adjust these requirements to better achieve the
overall objectives of the Urban Renewal Plan, and/or should
the proposal be of such a character to warrant such changes.
These Submission Requirements are those of the Housing
Authority only and do not substitute for submissions that
may be required for any other permits, approvals,
registrations, licenses or certificates necessary to
effectuate the proposed development.
Revised 12/16/94
HOUSING AUTHORITY &
URBAN REDEVELOPMENT AGENCY
OF THE CITY OF ATLANTIC CITY NEW JERSEY
P.O. Box 1258 227 Vermont North Atlantic City, NJ 08404
609-344-1107 FAX 609-344 1015
FEE SCHEDULE FOR REDEVELOPMENT AREAS
UNDER THE JURISDICTION OF THE
HOUSING Authority AND URBAN REDEVELOPMENT
AGENCY OF THE CITY OF ATLANTIC CITY
1.0 CONCEPTUAL/SCHEMATIC PLAN SUBMISSION FEE
1.1 RESIDENTIAL PROJECTS. $1,000 + $25 per D.U. + $2,000
Reserve Fund.
1.2 NON-RESIDENTIAL AND MIXED-USE PROJECTS: $1,500 + $25
per D.U. (where applicable) + $25 per 1,000 g.s.f. of
floor area and paved surface parking area for non-
residential areas, or any part thereof exceeding 25,000
g.s.f. + $5,000 Reserve Fund.
1.3 RESUBMISSION DUE TO DENIAL: 50% of original fee +
Reserve Fund replenished to $2,000.
2.0 PRELIMINARY PLAN (WHERE APPLICABLE) SUBMISSION FEE
2.1 RESIDENTIAL PROJECTS: $1,500 + $25 pa D.U.+ $3,500
Reserve Fund.
2.2 NON-RESIDENTIAL AND MIXED-USE PROJECTS: $2,000 + $25
per D.U. (where applicable) + $25 per 1,000 g.s.f. of
floor area and paved surface parking area for non-
residential areas, or any past thereof exceeding 25,000
g.s.f. + $5,000 Reserve Fund.
2.3 RESUBMISSION DUE TO DENIAL: 50% of original fee +
Reserve Fund replenished to $2,000.
3.0 FINAL PLAN SUBMISSION FEE
3.1 RESIDENTIAL PROJECTS: $2,000 + $25 per D.U. + $5,000
Reserve Fund.
3.2 NON-RESIDENTIAL AND MIXED-USE PROJECTS: $2,500 + $25
per D.U. (where applicable) + $25 per 1,000 g.s.f. of
floor area and paved surface parking area for non-
residential areas, or any part thereof exceeding 25,000
g.s.f. + $5,000 Reserve Fund.
3.3 RESUBMISSION DUE TO DENIAL: 50% of original fee +
Reserve Fund replenished to $5,000.
4.0 AMENDMENTS
4.1 MINOR AMENDMENT TO FINAL PLAN APPROVAL: 25% of the
current Final Application Fee including 25% of the
Reserve Fund. A Minor Amendment is any change in use,
density, or F.A.R of less than 10%; any change to the
circulation element; change in final grade of less than
10%; change in landscaping location, type or quality of
less than 10%, delays or acceleration of construction
schedule of more than one year and less than 18 months;
change in number or area of signage of less than 10%;
any change to the exterior facade treatment. The above
notwithstanding, the Agency reserves the right to view
any change as a "Major Amendment" if such change is, in
the sole opinion of the Agency, of such significance as
to materially alter the design scheme or any essential
element of the project.
4.2 MAJOR AMENDMENT TO PLAN APPROVAL: 50% of the Final
Application Fee including 50% of the Reserve Fund. A
Major Amendment is any change beyond the thresholds
stated in section 4.1 of this Fee Schedule, or any
change which, in the sole opinion of the Agency, is of
such significance as to materially alter the design
scheme or any essential element of the project.
5.0 FEES COVERING MINOR REVIEWS FOR CERTIFICATE
OF REDEVELOPMENT PLAN CONFORMANCE
5.1 The fee covering minor reviews for Certificate of
Redevelopment Plan Conformance will be the only fee
required for existing buildings seeking approval under
the following categories: new business, new use, home
occupation, temporary use, ground sign, other sign,
building addition including porch of less than 2,S00
g.s.f. or 50% of existing building g.s.f. whichever is
less; rehabilitations renovation, or restoration of 14
unit residential structures or mixed-use/commercial
structures of less than 2,500 g.s.f.; the following
accessory uses or structures: fences and walls; storage
structures of less than 100 g.s.f; garages of less than
100 g.s.f.; decks; patios; off-street parking areas.
Said fees are as follows:
RESIDENTIAL PROJECTS: $40.00
NON-RESIDENTIAL OR MIXED-USE PROJECTS: $100.00
6.0 OTHER
6.1 NEW CONSTRUCTION OF 14 UNIT RESIDENTIAL PROJECTS OR NON-
RESIDENTIAL MIXED-USE PROJECTS OF LESS THAN 5,000
G.S.F.; $500 fee due at time of submission plus any
"attendant costs" incurred by the Agency for
professional consultants, attorneys, extraordinary time
expended by Agency staff, etc. The Agency shall be paid
in full prior to Plan Certification for all such
"attendant costs". One step processing is to be used
for this category.
6.2 Any improvements to be owned by a public body and
intended solely for occupancy by low and very low
income individuals or families will be subject to the
applicable Reserve Fund only.
6.3 The Reserve Fund shall be used for Engineering,
Architectural. Planning and such other consultants,
and for Attorney fees, notices, etc., as may be
required by the Agency in conjunction with processing
the application and for extraordinary time expended by
Agency staff spent on reviews. These costs shall be
itemized and any balance returned to the Applicant.
The Applicant shall earn no interest on the Reserve
Fund. The remainder, if any, of the Reserve Fund shall
be returned to the Applicant within 60 days of Plan
Certification or the satisfaction of any and all terms
and/or conditions imposed by the Agency, whichever is
the latter, except that, in instances where a
contractual relationship requires that a Certificate of
Completion be issued by the Authority, the Reserve Fund
shall be used to cover any legal or other fees incurred
in connection with the issuance of the Certificate of
Completion. When the Reserve Fund has been reduced to
20% of the original amount deposited, and the Agency
determines that additional Reserve Funds are needed to
complete the processing of the Application, the Agency
shall require an additional deposit in an amount
sufficient in the Agency's opinion, to cover the cost
of completing its review.
6.4 Transient residential and condo/hotel (Condotel) uses
shall be considered non-residential uses.
6.5 For projects receiving approval prior to the effective
date of this Fee Schedule, fees for amendments and
additional plan submissions shall be based on the fees
that would have been applied under this Fee Schedule.
6.6 Should the Applicant request a one-step review, a
combined charge will apply.
6.7 The Executive Director of the Agency reserves the right
to amend or adjust this Fee Schedule and bill the
Applicant according to Stafftime and professional
services actually expended in the review of any
application should the fee be more appropriate and
necessary to better achieve the overall objectives of
the Redevelopment Plan and/or should the proposal be of
a unique character and/or require extraordinary staff
time. In such instances, the most appropriate minimum
fee shall be due at time of submission and time as
billed (plus an administrative factor) shall be due
prior to Plan Certification. The Agency's blended rate
for such circumstances shall be $75 per hour or any
part thereof.
6.8 The application and interpretation of any provision of
this Fee Schedule shall be the sole and exclusive right
of the Agency.
6.9 All development approvals shall expire if after one
year of the stated development date for the start of
construction pursuant to the approved Final
Construction Schedule the Applicant fails to secure the
required building permits, or fails to begin or
diligently pursue construction. In such cases of
expiration, the Applicant shall be required to resubmit
their Final Plans to the Agency. The resubmission fee
shall be 100% of the Final Plan Fee in existence at the
time of resubmission. The Applicant has the right to
seek an amendment to their construction schedule
subject to Sections 4.1 and (4.2 of this Fee Schedule
within one year of Final approval by the Agency.
6.10 All fees, including the Reserve Fund, are due at the
time of application. Please make checks payable to "The
Atlantic City Housing Authority".
6.11 All references to "The Agency" refer to the Housing
Authority and Urban Redevelopment Agency of the City of
Atlantic City.
6.12 Any submission or application still deemed incomplete
for review after initial notification and receipt of
supplemental information, shall be subject to a 10%
surcharge.
6.13 "Extraordinary time": The applicant will be billed for
extraordinary time whenever the amount of time actually
expended by Agency staff in the review of any
submission exceeds the number of hours derived by
dividing the normal submission fee by 75. All
extraordinary time shall be billed at a rate of $75 per
hour or any part thereof.
/S/ John J. McAvaddy, Jr.
JOHN J. McAVADDY,JR.
Executive Director
Effective Date: December 16, 1994
TRI-PARTY AGREEMENT AMONG HOUSING
AUTHORITY AND URBAN REDEVELOPMENT AGENCY OF THE
CITY OF ATLANTIC CITY, FOREST CITY RATNER COMPANIES,
AND ATLANTIC CITY SHOWBOAT, INC., REGARDING DEVELOPMENT
OF A PORTION OF THE UPTOWN URBAN RENEWAL TRACT
MAY 26, 1994
TABLE OF CONTENTS
PARAGRAPH PAGES
1. SCOPE, INTENT AND BINDING NATURE
OF THIS AGREEMENT 3
2. LANDS AFFECTED 5
3. TRACT 1 DEVELOPMENT 7
(A) Tract l/Phase I Tower 7
(B) 80 FT. EASEMENT 8
4. TRACT 2 8
5. TRACT 3 10
6. PARCEL 11 11
7. PARCEL 15 11
8. TIMING OF CONVEYANCES/TAXES 12
9. PARKING 14
(A) Parking Deck One 14
(B) Parking Deck Two 15
(C) Parking Exit Impacts 17
(D) Connecting Bridges 18
(E) Alternate Garage Site 20
(F) Cost Allocation 20
(G) Ownership, Use & Maintenance 21
(H) Taxes 22
10. ENTRANCE DRIVE ISSUES 24
(A) Transfer of Land 25
(B) Use 26
(C) Cost of Combined Service Drive 28
i
(D) Loading Dock 28
(E) Configuration & Construction of
the Combined Service Drive 29
11. PHASE II HOTEL TOWER 30
12. VACATION OF RECONVEYED TRACTS BY SHOWBOAT 35
13. DISPUTE RESOLUTION 38
14. ASSIGNMENT 40
(A) Assignment By FCRC and Showboat 40
(B) Assignment By ACHA 40
(C) Binding Effect 41
15. MISCELLANEOUS 41
(A) Entertainment Complex 41
(B) Pedestrian Bridges 42
(C) Relocation of Utilities 42
(D) ACHA Approval 43
(E) Submission of Plans 43
(F) Notices 43
(G) Governing Law 43
(H) Entire Agreement 43
(I) Execution of Agreement 44
ii
EXHIBITS
(A) Ponzio Plan of Tracts 1, 2 and 3 and 80'
Easement
(B) Plan Showing "Triangular Portion"
(C) Plan Showing "Unoccupied" Portion of
Tract 1
(D) Plan Showing Showboat Parking
(E) Parking Cost Allocation Formula
(F) Plan Showing Combined Service Drive
(G) Plan Showing "Phase II Tower" Location
(H) Site Plan for Overall FCRC Project
iii
TRI-PARTY AGREEMENT AMONG HOUSING AUTHORITY AND URBAN
REDEVELOPMENT AGENCY OF THE CITY OF ATLANTIC CITY, FOREST CITY
RATNER COMPANIES, AND ATLANTIC CITY SHOWBOAT, INC., REGARDING
DEVELOPMENT OF A PORTION OF THE UPTOWN URBAN RENEWAL TRACT
THIS AGREEMENT by and among Housing Authority and Urban
Redevelopment Agency of the City of Atlantic City (hereinafter
"ACHA"), Forest City Ratner Companies (hereinafter "FCRC") and
Atlantic City Showboat, Inc. (hereinafter "Showboat") dated
May __, 1994 sets forth the agreement among those parties with
respect to a portion of the Uptown Urban Renewal Tract in the
City of Atlantic City (hereinafter "UURT").
WHEREAS, ACHA, FCRC, and Showboat have previously entered
into various memoranda and agreements specifically identified as:
(1) a Memorandum of Understanding dated May 24, 1993 between FCRC
and ACHA (hereinafter "the FCRC MOU"), (2) a Memorandum of
Understanding by and among Showboat, FCRC and ACHA dated May 24,
1993 also known as the "tripartite" Memorandum of Understanding
(hereinafter "the Tripartite MOU"), and (3) a Contract For The
Sale Of Land For Private Development entered into between ACHA
and Showboat dated June 11, 1993 along with all Parts, Riders,
and Exhibits annexed thereto and amendments (hereinafter "The
Showboat Development Agreement"), and
WHEREAS, the parties were granted certain rights, accepted
certain responsibilities and reached non-binding understandings
with respect to the UURT pursuant to the aforementioned Memoranda
and Agreements regarding the development of land within the UURT
by both FCRC and Showboat, and
WHEREAS, certain development has taken place within the UURT
by Showboat in a manner consistent with the aforementioned
Agreements and Memoranda, and
WHEREAS, FCRC intends to develop certain portions of the
UURT pursuant to the aforementioned Memoranda of Understanding,
and
WHEREAS, the parties have been conducting negotiations and
discussions regarding their respective rights and
responsibilities under the aforementioned documents and have
further discussed their needs and requirements with respect to
the future development of the land within the UURT, and
WHEREAS, it is the intention of ACHA, FCRC and Showboat to
reach a tri-party agreement with regard to the future development
of certain portions of the land within the UURT which will
determine all rights and responsibilities therein, and
WHEREAS, pursuant to the aforementioned discussions, ACHA,
FCRC and Showboat have reached agreement as to their respective
rights and responsibilities regarding certain portions of the
UURT and desire to memorialize those agreements in writing in
order to clearly establish those rights and responsibilities, and
WHEREAS, this document (hereinafter referred to as "this
Agreement") is intended to set forth the aforementioned rights
and responsibilities of both FCRC and Showboat with regard to
future development within the UURT and to establish for the ACHA
its corresponding rights and obligations with respect to the
portions of the UURT identified in this Agreement.
2
IT IS HEREBY AGREED AS FOLLOWS:
1. SCOPE. INTENT AND BINDING NATURE OF THIS AGREEMENT
ACHA, FCRC and Showboat (hereinafter collectively referred
to as "the parties") hereby agree that this Agreement shall
determine the future rights and obligations of the parties with
respect to certain portions of the UURT as more specifically
defined herein. The parties hereby acknowledge and agree that
this Agreement is to be known as the Tri-Party Agreement and
shall take into account matters set forth in documents previously
executed by the parties by and amongst themselves and more
specifically identified as the FCRC MOU, the Tripartite MOU, and
the Showboat Development Agreement. Based on that understanding,
the parties acknowledge and agree that they will be bound by the
following purposes and provisions of this Agreement.
(A) These parties acknowledge and agree that this Agreement
has taken into account, addresses and resolves certain master
planning issues among them with respect to the portions of the
UURT affected hereby, and which have previously been identified
in the Showboat Development Agreement, the Tripartite MOU and the
FCRC MOU.
(B) This Agreement shall resolve certain master planning
issues between FCRC and Showboat with respect to the rights and
responsibilities each may have within the portions of the UURT
affected by this Agreement.
3
(C) This Agreement shall amend and modify certain rights
and responsibilities of Showboat and ACHA that have previously
been set forth in the Showboat Development Agreement between
Showboat and ACHA. However, the Showboat Development Agreement
shall remain in full force and effect, and shall be binding on
Showboat and ACHA with regard to any provisions not superseded or
modified by the terms of this Agreement.
(D) This Agreement, where applicable, shall supersede the
Showboat Development Agreement to the extent that any provisions
of this Agreement conflict with the provisions of the Showboat
Development Agreement.
(E) This Agreement also provides a framework for the
resolution of master planning issues between Showboat and FCRC
and between FCRC and ACHA but is contingent upon the occurrence
of all of the events described below in paragraphs 1 (F) through
1(I).
(F) The provisions of this Agreement shall not be binding
on any party hereto unless and until FCRC Commences Development
by January 31, 1995, as that term is defined in the Showboat
Development Agreement.
(G) The provisions of this Agreement shall not be binding
on any party hereto unless and until FCRC enters into a more
detailed agreement with ACHA, by January 31, 1995, (hereinafter
referred to as "The FCRC Development Agreement") which shall be
binding on both parties and which shall detail the rights and
responsibilities of
4
FCRC within the UURT and incorporate the provisions of this
Agreement.
(H) Should FCRC and ACHA enter into the FCRC Development
Agreement, they both agree that such agreement will incorporate
the provisions of this Agreement.
(I) The provisions of this Agreement shall not be binding
on any party hereto unless and until Showboat and ACHA enter into
an amendment to The Showboat Development Agreement which shall
incorporate the terms and provisions of this Agreement.
(J) Notwithstanding the foregoing provisions of this
paragraph 1, any provision of this Agreement which requires
action by any of the parties before January 31, 1995 shall be
binding on the parties although FCRC has not yet Commenced
Development.
(K) Except as set forth in such paragraph 1 (J) above,
should FCRC not Commence Development, as that term is defined in
The Showboat Development Agreement by January 31, 1995, the
provisions of this Agreement shall have no effect and shall be
considered null and void. In that event, the rights and
responsibilities of Showboat and ACHA shall be governed by The
Showboat Development Agreement unaffected by the provisions of
this Agreement and any rights which FCRC may have to development
within the UURT as set forth in this Agreement shall cease.
2. LANDS AFFECTED
This Agreement shall govern the following portions of the
UURT with regard to future development within those areas:
5
(A) the unoccupied portion (as set forth on Exhibit C and
as defined in the Showboat Development Agreement hereinafter
referred to as the "Unoccupied Portion") and the triangular
portion (as set forth on Exhibit B. hereinafter referred to as
the "Triangular Portion") which are portions of Block 13 in the
City of Atlantic City identified as portions of Tract 1 on the
Plan prepared by Arthur W. Ponzio Company & Associates, dated
April 12, 1993 (hereinafter "the Plan"), annexed hereto as
Exhibit A, also known as Block 13, Lot 144.03.
(B) Tract 2 identified on the Plan (Exhibit A), also known
as Block 13, Lot 144.04.
(C) Tract 3 identified on the Plan (Exhibit A) , also known
as Block 13, Lots 144.05 and 144.06.
(D) all portions known as the 80 easement identified on the
Plan (Exhibit A), also known as Block 13, Lot 144.06.
(E) all portions of Block 13, Lots 144.01 and 144.02.
(F) all portions of Parcel 11, bounded by Atlantic Avenue
on the North, New Jersey Avenue on the East, Pacific Avenue on
the South and Delaware Avenue on the West, as shown on Exhibit F
of the Showboat Development Agreement, also known as Block 11,
Lots 77 and 78, as well as all portions thereof affected by
realigned Delaware Avenue.
(G) all portions of Parcel 15, bounded by Atlantic Avenue
on the North, Delaware Avenue on the East, Pacific Avenue on the
South and Maryland Avenue on the West, as shown on Exhibit F of
the Showboat Development Agreement, also known as Block 15, Lots
80, 81, 82 83, 84 and 85 and
6
United States Avenue, as well as all portions thereof affected
by realigned Delaware Avenue.
3. TRACT 1 DEVELOPMENT
(A) Tract l\Phase I Tower
It is acknowledged by all parties that pursuant to previous
agreements and memoranda, Showboat has developed and is in the
process of constructing a Hotel Tower on a portion of Tract 1,
identified on Exhibit A. Said Tract 1 was conveyed by ACHA to
Showboat pursuant to the Showboat Development Agreement. Showboat
hereby agrees that it shall reconvey the Unoccupied Portion (as
identified in Exhibit C) of Tract 1 to ACHA. Showboat agrees that
it shall also reconvey to ACHA that portion of Tract 1 identified
on Exhibit B as the Triangular Portion of Tract 1 which it
currently owns and which will include within it a portion of the
Combined Service Drive referred to in paragraph 10. ACHA agrees,
that it shall convey the rights to the reconveyed portions of
Tract 1 (as set forth above) to FCRC for purposes of the
development of its proposed casino hotel, retail entertainment
complex and the Combined Service Drive (hereinafter "The FCRC
Project"). The form, nature and terms for such conveyance to FCRC
by ACHA of the reconveyed portions of Tract 1 shall be more
specifically defined in the FCRC Development Agreement. FCRC
shall be permitted to use such Unoccupied Portion of Tract 1 for
the development and construction of the FCRC Project pursuant to
the FCRC Development Agreement. The portions so to be conveyed in
accordance with this paragraph are
7
more specifically identified on Exhibits A, B and C.
(B) 80 FT. EASEMENT
Pursuant to the Showboat Development Agreement and the
Tripartite MOU, Showboat has obtained easement rights to an area
known as the "80' easement" which has been described in the
Showboat Development Agreement as an area solely for pedestrian
and/or vehicular ingress and egress to and from Tract 1. Said 80'
easement is more particularly described on the Plan attached as
Exhibit A. Said 80' easement, pursuant to the Showboat
Development Agreement, had been deemed part of Tract l for all
purposes except certain ones provided for in Section 9 of the
Rider thereto. In consideration of providing Showboat an easement
to the Combined Service Drive, Showboat's rights to the 80'
easement shall cease and to the extent necessary shall be
reconveyed by Showboat back to ACHA in order to accomplish the
intent of this Agreement. ACHA in turn, shall convey the rights
to the area identified as the 80' easement to FCRC for purposes
of the development and construction of the FCRC Project subject
to the terms and conditions of the FCRC Development Agreement
which shall set forth the form, nature and terms of such
conveyance.
4. TRACT 2
The parties acknowledge that pursuant to the Showboat
Development Agreement and the Tripartite MOU, Showboat has been
conveyed an area within the UURT identified as Tract 2 and more
specifically identified as
8
part of Block 13, Lot 144.04 in the City of Atlantic City
identified as Tract 2 on the Plan attached as Exhibit A. The
purpose of that conveyance was to provide to Showboat an area
within the UURT on which it could stage the construction of the
Phase I Tower and, furthermore, provide interim surface parking
on the site. In addition, Tract 2 was to provide to Showboat a
portion of the UURT for a potential multi- level parking garage
of between 750 and 1,000 vehicles in the event that the FCRC
Project did not Commence Development by January 31, 1995.
Furthermore, the use of Tracts 1 and 2 by Showboat may have also
included the construction of a second Hotel Tower to contain up
to 300 hotel rooms with a corresponding casino expansion. The
parties further acknowledge that in the S event the FCRC Project
was developed, Showboat's rights under the Showboat Development
Agreement to Tract 2 were to be modified such that Showboat was
to receive a location for the parking of 300 vehicles within the
FCRC Project. Pursuant to the agreements reached herein, the
parties agree and acknowledge that such rights as defined in the
Showboat Development Agreement are hereby modified. Consistent
with the Showboat Development Agreement, Showboat shall reconvey,
without monetary consideration, Tract 2 to ACHA. ACHA agrees that
it shall convey the rights to the reconveyed Tract 2 to FCRC for
purposes of the development of the FCRC Project, the form, nature
and terms for such conveyance to FCRC of the reconveyed Tract 2
shall be more specifically defined in the FCRC Development
Agreement which shall be consistent with the
9
terms of this Agreement. The parties agree that the previously
defined rights of Showboat for its use of Tract 2 are hereby
terminated and any rights which Showboat may have in Tract 2
pursuant to this Agreement are further defined below in
paragraphs 9, 10, 11 and 12.
5. TRACT 3
The parties acknowledge and agree that the portion of the
UURT identified as Tract 3 on the Plan attached hereto as Exhibit
A shall be conveyed by ACHA to FCRC subject to the terms and
conditions of the FCRC Development Agreement which shall set
forth the form, nature and terms of such conveyance. Showboat
herein acknowledges and agrees that it relinquishes any rights
which it may have had, or could have claimed, with respect to
Tract 3. Such rights shall include, but not be limited to, those
rights identified in the Showboat Development Agreement, Section
8 wherein special provisions are identified for the possible
lease of Tract 3 by Showboat. To the extent that there is any
claim, or may be any claim, that the 80' easement previously
identified in paragraph 3 (B.) is appurtenant to, part of, or
within Tract 3, the parties hereby recognize that FCRC shall have
the exclusive right to develop and construct the FCRC Project
within the areas of the 80' easement and that Showboat hereby
acknowledges and agrees that it relinquishes all rights that it
may have in that 80' easement, subject to the terms of this
Agreement.
10
6. PARCEL 11
ACHA and FCRC acknowledge and agree that, subject to the
approval of the FCRC Development Agreement by ACHA, FCRC shall
have the exclusive right to develop the FCRC project within an
area known as Parcel 11 and which is also known as Block 11, Lot
77 and 78 and which is bounded by Atlantic Avenue on the North,
realigned Delaware Avenue on the West, Pacific Avenue on the
South and New Jersey Avenue on the East. Showboat herein
specifically relinquishes any and all rights which it may have to
develop Parcel 11 for surface and/or structured parking pursuant
to any provision of the Showboat Development Agreement. This
provision shall encompass those rights identified in the Showboat
Development Agreement , which refers to the rights of Showboat
contained therein with respect to the location of "additional
parking" within Parcel 11. ACHA acknowledges and agrees that by
entering into this Agreement, Showboat and FCRC have resolved the
parking issues between them including the location of and the
number of spaces of such parking within the portions of the UURT
affected by this Agreement.
7. PARCEL 15
ACHA and FCRC acknowledge and agree that, subject to the
approval of the FCRC Development Agreement by ACHA, FCRC shall
have the exclusive right to develop the FCRC project within an
area known as Parcel 15 and which is also known as Block 15, Lots
80, 81, 82 , 83, 84 and 85 and United States Avenue, and which is
bounded by Atlantic Avenue on the North, Maryland Avenue on the
11
West, Pacific Avenue on the South and realigned Delaware Avenue
on the East. Showboat herein specifically relinquishes any and
all rights which it may have to develop Parcel 15 for surface
and/or structured parking pursuant to any provision of the
Showboat Development Agreement. This provision shall encompass
those rights identified in the Showboat Development Agreement ,
which refer to the rights of Showboat contained therein with
respect to the location of "additional parking" within Parcel 15.
ACHA acknowledges and agrees that by entering into this
Agreement, Showboat and FCRC have resolved the parking issues
between them including the location of and the number of spaces
of such parking within the portions of the UURT affected by this
Agreement.
8. TIMING OF CONVEYANCES/TAXES
The parties acknowledge and agree that the conveyances of
property set forth above in paragraphs 3 through 7 are contingent
upon FCRC commencing development and executing the FCRC
Development Agreement by January 31, 1995. In addition, the
parties agree that for any parcels or tracts which must be
conveyed from Showboat to ACHA and, thereafter, from ACHA to
FCRC, such conveyances shall be accomplished by means of
simultaneous conveyances on the same date. Such conveyances of
parcels from Showboat to ACHA to FCRC and any conveyances from
ACHA to FCRC directly, whether by fee, lease or other means,
shall take place after the FCRC Development Agreement is
consummated which shall set forth the timing
12
of such conveyances. Showboat shall not be obligated to vacate
such parcels or tracts prior to the time that Showboat is
required to convey such parcels or tracts. The FCRC Development
Agreement shall also set forth the exact consideration for and
the form of any conveyances to FCRC by ACHA. It is understood,
acknowledged and agreed by the parties that with regard to any
tracts or parcels conveyed between the parties pursuant to this
Agreement, ACHA shall have no real estate tax liability. It shall
be the obligation and responsibility of both Showboat and FCRC to
pay all real estate taxes on any parcels affected by this
Agreement. Such taxes shall be paid by Showboat on all parcels
which it owns up to and including the time of conveyances to
ACHA. Except as otherwise set forth in this Agreement, Showboat
shall not, after conveyance to ACHA, have any obligation to pay
taxes on the parcels or Tracts conveyed to ACHA. Thereafter, the
real estate taxes on any such parcels conveyed by Showboat to
ACHA and then to FCRC, plus any parcels currently owned by ACHA
and conveyed to FCRC, shall be paid by FCRC commencing from the
time of conveyance to FCRC. Showboat and FCRC herein acknowledge
that ACHA is a tax exempt public entity which shall have no
obligation for any real estate taxes. Nothing herein shall be
construed nor operate to limit the obligation of Showboat to pay
real estate taxes with regard to its parking as set forth in
paragraph 9 and with respect to the Phase II Tower as set forth
in paragraph 11.
13
9. PARKING
The parties acknowledge and agree that FCRC and Showboat
have reached a final resolution of each party's respective rights
with respect to the use, availability, construction and cost of
parking within the designated portions of the UURT affected by
this Agreement. Therefore, the parties agree as follows:
(A) PARKING DECK ONE
Subject to payments to be made by Showboat to FCRC pursuant
to sub-paragraph 9 (F.) herein, FCRC shall make available to
Showboat, for its exclusive use, between 385 and 400 parking
spaces (hereinafter "Showboat Deck One Parking") located within
Deck One of a parking facility to be constructed by FCRC on
portions of the UURT which will become available to it for the
development and the construction of the FCRC Project pursuant to
this Agreement. Deck One shall be located above the ground level
within the structure to be built by FCRC known as the FCRC
Project. Such parking facility shall be hereinafter referred to
as the FCRC Parking Garage". The specific number of spaces and
location of the Showboat Deck One Parking shall be subject to
final design determinations of the FCRC Project but, generally,
shall be located within the area identified on a Plan for FCRC's
First Level Parking Deck which is attached hereto as Exhibit D.
FCRC agrees that Showboat shall be permitted to prepare a
preferred layout of the location of the Showboat Deck One Parking
which shall be transmitted to FCRC by July 1, 1994. FCRC agrees
that it shall work in good faith with Showboat to accommodate its
14
preferred layout such that it will be compatible with the overall
FCRC Parking Garage design. However, Showboat acknowledges and
agrees that its preferred layout of the Showboat Deck One Parking
must be coordinated with FCRC's parking consultant, Edison
Parking Corporation or its successor, who shall have
responsibility to determine a final layout for the design of the
Showboat Deck One Parking in concert with the overall design of
the FCRC Parking Garage which shall be determined and
communicated to Showboat by August 1, 1994. Showboat acknowledges
and agrees that it will agree to any reasonable changes to its
preferred layout required by the FCRC garage consultant in order
to coordinate the Showboat Deck One Parking within the overall
design of the FCRC Parking Garage. Any dispute with respect to
the reasonableness of the requirements of the FCRC parking
consultant shall be resolved through the dispute resolution
provision of this Agreement contained in paragraph 13.
(B) PARKING DECK TWO
The parties agree that Showboat shall have the option to be
granted exclusive rights to an additional number of parking
spaces within the FCRC Parking Garage on condition of payments to
be made by Showboat for those spaces pursuant to sub-paragraph 9
(F) herein. Such additional spaces (hereinafter referred to as
"Showboat Deck Two Parking'') shall be generally located on a
second level of parking to be located on a roof deck of parking
within the FCRC Parking Garage. The Showboat Deck
15
Two parking spaces shall be located on such second level within
the same general area designated on Exhibit D, and shall consist
of between 385 and 400 parking spaces which shall be generally
configured in the same fashion as the Showboat Deck One Parking.
The location of the Deck Two Parking shall also be subject to
reconfiguration based on FCRC's design requirements for the Deck
Two level and the time for submitting such design. The procedure
set forth in paragraph 9 (A) with respect to the determination of
the number of spaces and location of the Showboat Deck One
Parking by the FCRC parking consultant shall also apply to the
Showboat Deck Two Parking. Showboat agrees that it will notify
FCRC and ACHA, in writing, not later than November 30, 1994 of
Showboat's desire to exercise its option for the Showboat Deck
Two Parking. If Showboat fails to notify FCRC and ACHA by the
above date, then Showboat's right to parking spaces within the
FCRC Parking Garage shall be limited to the Showboat Deck One
Parking described in paragraph 9 (A). The parties agree that the
purpose of the above notification date is to permit FCRC to
properly design the FCRC Parking Garage to accommodate Showboat's
parking needs as well as its own needs for the FCRC Project.
Should Showboat exercise its option for the Showboat Deck Two
Parking, it shall be responsible to pay to FCRC the costs of such
Deck Two Parking in accordance with sub-paragraph 9 (F) herein
and, in addition, shall pay all costs associated with any
additional ramps to the Deck Two level which may be necessary to
accommodate Showboat's Deck Two Parking within the FCRC Parking
Garage design. Showboat hereby acknowledges and agrees that the
addition of any such
16
ramps may result in the loss of some of its parking spaces,
either within Deck One or Deck Two and agrees that should that
occur, it shall not be entitled to any additional spaces as
compensation for such lost spaces either within the FCRC Parking
Garage or elsewhere as surface parking within the FCRC Project,
including those areas North of Pacific Avenue.
(C) PARKING EXIT IMPACTS
The parties acknowledge that Showboat has indicated a desire
to have the vehicles using the parking areas described in sub
paragraphs 9 (A) and (B.) exit through FCRC's Parking Garage.
Showboat acknowledges and agrees that if it ultimately determines
to have its vehicles exit in such fashion, certain impacts and
costs associated therewith may arise. Those kinds of impacts may
include, but are not limited to, such things as the need for an
additional cashier booth, the need for an additional exit lane or
other currently unknown or unidentified impacts which may require
changes to, additions to or deletions from the current intended
design, construction or cost of the FCRC Parking Garage or FCRC
Project in order to accommodate the desire of Showboat to exit
through the FCRC Parking Garage. FCRC acknowledges and agrees
that it will promptly evaluate any such impacts which result from
Showboat's desire to exit through the FCRC Parking Garage and any
additional design changes, construction changes, facilities or
costs that may be needed to address those impacts. Showboat
agrees that if it decides to proceed with having the
17
vehicles using its parking spaces exit through the FCRC Parking
Garage, that it will negotiate an agreement with FCRC to bear
all reasonable costs arising from any changes, additions or
deletions to the FCRC Project design or construction which may be
required to accommodate Showboat's decision. If Showboat is
unwilling to bear the cost of such impact costs or if ACHA does
not approve the use by Showboat of the FCRC exit(s), Showboat
shall redirect the exiting of the vehicles parking within the
FCRC Parking Garage through Showboat's existing garage. Both
FCRC and Showboat acknowledge and agree that the issue regarding
where Showboat's parking will exit must be resolved as soon as
possible. Accordingly, both parties agree to cooperate and
resolve this issue during the schematic design phase of the
drawing development for the FCRC Parking Garage. In any event,
Showboat herein agrees that it will make a final decision with
regard to the location of the exit for the cars using parking
within the FCRC Parking Garage and communicate that decision, in
writing, to FCRC and ACHA no later than July 31, 1994, provided
that FCRC notifies Showboat in writing fourteen (14) days prior
thereto of the estimated costs of such impacts which Showboat
will be responsible to pay. Both FCRC and Showboat acknowledge
and agree that any use by Showboat of the FCRC exits shall be
subject to the review and approval of ACHA.
(D) CONNECTING BRIDGES
The parties acknowledge and agree that in order for Showboat
to utilize the Showboat Deck One Parking and/or the Showboat Deck
Two Parking, it will be necessary to
18
construct bridge(s) for vehicular and pedestrian use connecting
its existing parking facility with the FCRC Parking Garage. The
parties further acknowledge and agree that the location of such
connecting bridges must be designed in coordination with the
design of the FCRC Parking Garage and the FCRC Project in
consultation with FCRC's garage consultant and Project designers.
Showboat and FCRC agree to cooperate during the schematic design
phase of the FCRC Parking Garage and the FCRC Project in order to
identify the locations and elevations of such bridges. However,
Showboat acknowledges and agrees that FCRC shall have the right,
subject to the approval of ACHA, to ultimately determine the
location and elevations of any bridges connecting the existing
Showboat parking facility with the FCRC Parking Garage. It shall
be the sole responsibility of Showboat to design, construct and
bear the cost of any bridges connecting the existing Showboat
Parking Garage and the FCRC Parking Garage or the FCRC Project.
Such responsibility shall include, but not be limited to, the
design and construction of any supporting or foundation
structures on Showboat's property as well as the connecting
bridges themselves. Showboat shall coordinate its design efforts
with FCRC and its garage consultants and designers such that the
Showboat connecting bridges accommodate the FCRC Parking Garage
design in an acceptable manner and in sufficient time to allow
FCRC to design and construct its Project without any delay caused
by such coordinated efforts.
19
(E) ALTERNATE GARAGE SITE
Showboat acknowledges and agrees that, pursuant to the
agreements reached herein with respect to the parking to be
provided to Showboat within the FCRC Parking Garage, it hereby
waives and has no further rights to any alternative site North of
Pacific Avenue within Parcels 11 and 15 as may have been
identified in the Showboat Development Agreement. The parties
acknowledge and agree to the extent that the above referenced
agreement requires amendments to clarify this issue, they will
enter into such amendments.
(F) COST ALLOCATION
FCRC and Showboat have held discussions with regard to the
costs associated with the Showboat Deck One Parking and the
Showboat Deck Two Parking to be provided to Showboat pursuant to
this Agreement. Pursuant to those discussions, Showboat agrees to
reimburse FCRC for the cost of the garage spaces to be
constructed by FCRC for Showboat within the FCRC Parking Garage
pursuant to the other sections of this Agreement. Such costs
shall be determined pursuant to a formula herein agreed upon by
Showboat and FCRC which shall take into account all aspects of
the design and construction of the Showboat Deck One Parking and,
if applicable, the Showboat Deck Two Parking as well as any
facilities needed to be constructed in order to accommodate the
Showboat Deck One Parking and/or the Showboat Deck Two Parking
including any connecting bridges, ramps and upgrading foundations
and structures applicable. The parties acknowledge and
20
agree that there shall be no profit made by FCRC on the
construction and ongoing maintenance of the Showboat Deck One
and Deck Two Parking and associated facilities but that it is the
intention of the parties that Showboat pay its percentage share
of the construction costs and/or maintenance of such parking and
facilities (pursuant to the formula) which shall include
reasonable overhead to FCRC for construction or maintenance work
which it undertakes. The cost allocation formula which shall be
used to determine the cost of the Showboat parking is set forth
in detail on Exhibit E. To the extent that there may be any
dispute between FCRC and Showboat with respect to the application
of the cost allocation formula as set forth on Exhibit E, the
dispute resolution provisions of paragraph 13 shall be used to
exclusively determine with finality the cost of such parking.
(G) OWNERSHIP, USE AND MAINTENANCE
Prior to the completion of the FCRC Parking Garage
containing within it the Showboat Deck One and Showboat Deck Two
Parking, along with associated ramps, bridges and other
facilities, FCRC and Showboat agree they will enter into a
subsequent agreement which will identify Showboat's form of
ownership and/or use of the Showboat Deck One or Showboat Deck
Two Parking and the associated rights, responsibilities and costs
with respect to the maintenance of said parking. The parties
agree that, to the extent permitted by law and subject to FCRC's
financing requirements, such ownership shall be in the form of a
condominium wherein Showboat will own its parking spaces and
associated facilities and have full
21
responsibility therefor. Such agreement shall set forth in
detail the rights and responsibilities of both FCRC and Showboat
with respect to all areas of the FCRC Parking Garage which are
being provided to Showboat pursuant to this Agreement, for its
parking uses. The parties agree that such an agreement shall be
negotiated and executed as soon as possible but, in any event, no
later than November 30, 1994.
(H) TAXES
(i) Showboat shall be responsible for its share of the
real estate property taxes assessed against the FCRC Project
including land and improvements, containing the Deck One Parking
and, if applicable, Deck Two Parking, including associated ramps,
bridge connections and appurtenances related thereto ("Showboat
Parking") pursuant to this subsection (H). The parties
acknowledge that the Showboat Parking will be contained in a
portion of a multi-level parking structure and such parking
structure will be a part of the FCRC Project. The parties also
recognize that it is the intent of Showboat and FCRC, to the
extent permitted by law and subject to FCRC's financing
requirements, to create a condominium ownership for the Showboat
Parking (the Showboat Condominium"). Showboat shall be
responsible for the taxes assessed to the Showboat Condominium.
The parties further recognize that small portions of the Showboat
Parking may not be part of the Showboat Condominium because such
portions may be shared with the structured parking component of
the FCRC Project; for example, the
22
exit from the Showboat Condominium may be through the FCRC
structured parking facility. To the extent that the Showboat
Parking not otherwise contained within the Showboat Condominium
creates an increase in the tax liability for the FCRC Project,
Showboat shall also be responsible for the resulting increase in
the tax liability. It is the intent of this subsection (H) that
the taxes associated with the FCRC Project including land portion
and improvement portion of the taxes imposed, shall be the sole
responsibility of FCRC except that Showboat shall pay that
portion of the taxes imposed upon: (1) the Showboat Condominium;
and (2) any increase in the FCRC Project taxes, including any
taxes on the underlying land, resulting from components of the
Showboat Parking, if any, not contained within the Showboat
Condominium. To the extent there is a dispute as to an increase
in tax liability created by the Showboat Parking, such dispute
shall be resolved in accordance with section 13 of this
Agreement.
(ii) FCRC expressly acknowledges that Showboat shall
not be responsible for any taxes imposed as the result of the
loss of any benefit to FCRC or the FCRC Project, including tax
exemptions or abatements, as a result of the Showboat Parking or
Showboat Condominium. For purposes of calculating taxes owed to
FCRC for tax consequences created from the existence of Showboat
Parking, the loss of any tax benefit shall be ignored.
(iii) FCRC and Showboat hereby acknowledge that the ACHA
shall have no liability for taxes imposed upon the FCRC Project
or the Showboat Condominium. FCRC and
23
Showboat further agree that they shall indemnify and hold ACHA
harmless from any claims by any taxing authority for any
liability for taxes relating to the FCRC Project, including the
land and improvements, and/or the Showboat Parking or Showboat
Condominium.
10. ENTRANCE DRIVE ISSUES
The parties acknowledge and agree that the FCRC Project
contemplates a combined fire and service access drive located on
the Westerly portion of the FCRC Project and, more specifically
identified on the proposed site plan attached hereto as Exhibit
F. This driveway shall be hereinafter referred to as the
"Combined Service Drive." The parties also acknowledge and agree
that the Combined Service Drive is being provided for purposes of
providing access to the FCRC Project for the delivery of various
items needed to service that facility. Likewise, the Combined
Service Drive will be used by Showboat to accommodate the
delivery needs of a portion of its facility located adjacent to
the Service Drive and to provide fire access and emergency egress
for the Showboat Phase I Tower. More specifically, this facility
includes, but is not limited to, the Phase I Hotel Tower
currently under construction, and may, in the future, also
include a Phase II Hotel Tower constructed pursuant to paragraph
11. The parties acknowledge and agree that construction of this
Combined Service Drive to be utilized by both FCRC and Showboat
shall require the revision of certain rights and facilities which
may have been previously
24
agreed to pursuant to the Tripartite MOU, the FCRC MOU and the
Showboat Development Agreement. Therefore, pursuant to the
resolution of issues in this Agreement, the parties agree as
follows:
(A) TRANSFER OF LAND
The parties acknowledge and agree that it will be necessary
to transfer certain parcels currently owned or under the control
of Showboat in order to accomplish the construction of the
Combined Service Drive. These specific parcels are referred to in
paragraph 3 (A) as the Unoccupied Portion of Tract 1, in
paragraph 3 (B) as the 80' easement, in paragraph 4 as Tract 2,
and in paragraph 3 (A) as the Triangular Portion of Tract 1 which
includes within it a portion of the Combined Service Drive. All
of these parcels are more specifically identified on a Plan
attached hereto as Exhibits A, B. C and F. The parties
acknowledge and agree that the transfer of these parcels shall be
accomplished such that they are transferred by Showboat to ACHA.
There shall be no monetary consideration for the reconveyance of
such parcels to ACHA. Subsequent thereto, the parties acknowledge
and agree that the rights to the parcels identified herein shall
be conveyed from ACHA to FCRC; the form, nature and terms of such
conveyance which shall be identified in the FCRC Development
Agreement. These conveyances shall be consistent with the terms
of this Agreement. The conveyance of these parcels shall be
conveyed by Showboat to ACHA upon (7) days written notice from
ACHA provided that the conveyance date shall not
25
precede FCRC Commencing Development , as that term is defined in
the Showboat Development Agreement, in order to permit the
orderly conveyance of such parcels by ACHA to FCRC for purposes
of the development and the construction of the FCRC Project. To
the extent that the reconveyance of Tract 2, the Unoccupied
Portions of Tract 1, the 80' easement and the Triangular Portion
of Tract 1 require a subdivision in order to effectuate such
transfer, the parties agree that they will work together to
facilitate the granting of such subdivision either as an
independent subdivision application or through the site plan
application process undertaken by FCRC for the development of the
FCRC Project. Such subdivision shall be at FCRC's sole cost. In
accordance with the agreed upon transfer of these parcels and the
subdivision obtained in conjunction therewith, Showboat shall
execute such documents including deeds and other associated
documents which may be necessary to effectuate such transfer.
(B) USE
The Combined Service Drive shall be constructed by FCRC and
shall be owned and used by FCRC for purposes of providing access
for deliveries and other service requirements to the FCRC
Project. As stated above, Showboat shall also have use of the
Combined Service Drive for purposes of providing entry for
delivery and service to a portion of its facility. In accordance
with such agreement, FCRC shall give to Showboat a non-exclusive
easement to use such Combined Service Drive for Showboat's
purposes. Such easement, although non-exclusive, shall permit the
Combined Service Drive to
26
be used by both FCRC and Showboat and shall have no other uses
other than those required by law or by any governmental entity
for purposes such as fire or emergency access or the maintenance
and repair of utilities or other public improvements including
beach and boardwalk maintenance. Such easement shall be conveyed
to Showboat by FCRC upon completion of construction of the
Combined Service Drive or at such earlier time that may be agreed
upon by and between FCRC and Showboat. Showboat shall not be
obligated to vacate the 80' easement until FCRC provides, at its
sole expense, a suitable interim access to Showboat to
accommodate its delivery, fire and emergency access needs until
the Combined Service Drive is available for use. In the event of
a dispute as to what constitutes suitable interim delivery access
(excluding fire and emergency access), FCRC and Showboat agree
that that dispute shall be submitted to ACHA for final, binding
resolution. FCRC agrees that it shall make a good faith effort to
limit deliveries for the retail portion of the FCRC Project using
the Combined Service Drive to normal weekday business hours
(Monday through Friday, 7:00 a.m. to 5:30 p.m.) except for
emergency or extraordinary circumstances. Such efforts shall be
undertaken by FCRC by enforcement of its rules and regulations
for the tenants in the retail portion of the FCRC Project which
shall limit times of delivery as set forth above.
27
(C) COST OF COMBINED SERVICE DRIVE
It shall be the sole responsibility of FCRC to own,
construct and bear the cost of the Combined Service Drive as is
identified herein and more specifically on Exhibit F. Such costs
shall include any taxes assessed and relocation of utilities
required to accommodate FCRC's construction. In the event that a
regulatory authority requires a design change in the Combined
Service Drive for purposes of providing adequate fire access and
emergency egress for the Showboat Phase I Tower, FCRC shall bear
the cost for such design changes. Except as set forth in the
preceding sentence, any modification of the design and
construction of the Combined Service Drive at the request of
Showboat which differs from that design shown on Exhibit F. shall
be at the sole cost and expense of Showboat. Showboat shall be
responsible for its reasonable allocation, based on usage, of the
costs of repair and maintaining the Combined Service Drive, but
in no event shall such share exceed 50% of the total costs of
such maintenance.
(D) LOADING DOCK
The parties acknowledge and agree, pursuant to the previous
memoranda and agreements entered into by them, that Showboat was
permitted to have access to its loading dock located next to its
facility in the vicinity of the Phase I Hotel Tower currently
under construction. Pursuant to these previous agreements,
Showboat was to reconfigure such loading dock to accommodate the
concerns of both Showboat and FCRC in the development of the FCRC
28
Project and the service entrances to be used therewith. Pursuant
to this Agreement, the parties acknowledge that the proposed FCRC
Project will be constructed such that Showboat will have access
to its loading dock through the Combined Service Drive. However,
to the extent that Showboat requires that its current or proposed
loading dock be relocated as a result of the design of the FCRC
Project, it is the sole obligation of Showboat to undertake any
such redesign, reconstruction and cost of relocating or
reconfiguring its loading dock. FCRC shall have no responsibility
to contribute to the cost of any such reconfiguration but agrees
to work in concert with Showboat in order to accommodate any
reconfiguration which may be necessary during the construction of
the FCRC Project.
(E) CONFIGURATION AND CONSTRUCTION OF
THE COMBINED SERVICE DRIVE
The parties acknowledge and agree that the Combined Service
Drive shall be located such that it is immediately adjacent to
(east of) the current entrance driveway to the Showboat Casino
Hotel and Parking Garage. FCRC acknowledges and agrees that since
this is Showboat's primary entrance for the public, it is
concerned that the configuration and construction of the Combined
Service Drive be accomplished in such a way as to minimize
impacts upon Showboat's primary entrance. Accordingly, FCRC and
Showboat agree that they will cooperate with each other and
coordinate their design efforts for the intersection of the
proposed Combined Service Drive with Pacific Avenue, in order to
develop screening and entry features that are compatible with the
29
designs and operational needs of each party's facility. Showboat
agrees that any screening feature which it constructs will be
limited in height to the height of the FCRC Project building
height in front of which it is constructed. Showboat shall bear
the sole cost and expense of any screening erected on its
property. To the extent that Showboat and FCRC cannot agree to
any particular item involved in the development of the designs
for the Combined Service Drive or the screening and entry
features contained within that area, such disputes shall be
conclusively determined by the dispute resolution procedure set
forth in paragraph 13 to this Agreement.
11. PHASE II HOTEL TOWER
(A) The parties acknowledge and agree that the prior
memoranda and agreements discuss and give certain rights to
Showboat with respect to the construction of a second hotel tower
adjacent to the tower currently under construction (Phase I
Tower). This second tower shall be hereinafter referred to as the
"Phase II Tower". Pursuant to agreements reached herein, FCRC,
Showboat and ACHA agree that the Phase II Tower location will be
north of the existing Showboat Phase I Tower addition on air
rights above the FCRC Project, on the currently unoccupied
portions of Tract 1. Showboat may, at its option, specifically
reserve the air rights to accommodate the building of the Phase
II Tower in its conveyance of the portions of Tract 1 to be
reconveyed to ACHA pursuant to this Agreement. Such reservation
shall automatically extinguish should Showboat not exercise its
30
option to build the Phase II Tower by the date set forth in
subparagraph 11 (D). The precise location of the Phase II Tower
is more specifically described on Exhibit G attached to this
Agreement. Showboat and FCRC agree to cooperate to develop
additional specifics concerning the location of the Phase II
Tower. Such specific items shall include, but not be limited to,
the foundations required for and the other facilities needed for
the eventual construction of the Phase II Tower. Showboat and
FCRC acknowledge and agree that the design issues regarding the
Phase II Tower are critical for the overall development and
construction of the FCRC Project. Accordingly, FCRC and Showboat
agree to work in consultation with one another in an effort to
identify and agree upon those matters which shall affect the
location, construction and interface between the Phase II Tower
and the FCRC Project. To that end, based upon the discussions
between Showboat and FCRC FCRC shall provide to Showboat no later
than August 1, 1994 written design, construction and cost
information sufficient to allow Showboat to make a review and
determine whether or not it wishes to proceed with the Phase II
Tower. After receiving such information, Showboat shall, no later
than September 15, 1994, make a decision as to whether or not it
wishes to proceed with the development and construction of the
Phase II Tower and communicate that decision, in writing, to FCRC
and ACHA by that date. It is acknowledged by the parties that
such communication will enable FCRC to make the appropriate
accommodations within the FCRC Project to permit the future
development
31
of the Phase II Tower by Showboat. Should Showboat determine not
to proceed with the Phase II Tower and communicate such decision
to FCRC and ACHA or, should Showboat fail to communicate, in
writing, any decision with regard to this issue by September 15,
1994, Showboat's rights under this Agreement or the Showboat
Development Agreement to a location for a Phase II Tower shall
terminate and Showboat shall not have the right to build the
Phase II Tower.
(B) Should Showboat exercise its option to construct the
Phase II Tower, Showboat acknowledges and agrees that additional
or modified foundation structures will be required to be designed
and constructed within the FCRC Project in order to accommodate
the eventual erection of the Phase II Tower. Accordingly,
Showboat agrees to pay to FCRC the additional costs attributable
to the construction within the FCRC Project for purposes of
accommodating the construction of the Phase II Tower by Showboat.
Showboat shall pay the actual design, construction trade and soft
costs of these modifications or additions to FCRC at the time
that FCRC commences construction of the foundations on the FCRC
Project that relates to the foundation structures being installed
to accommodate the future Phase II Tower. Should any dispute
arise regarding the costs to be included, the timing of payment
or any other issue with respect to such payment, the dispute
resolution provisions of paragraph 13 shall be used to
conclusively determine any disputes between Showboat and FCRC.
32
(C) (i) In the event Showboat reserves air rights for the
Phase II Tower, Showboat shall be responsible for its share of
the real estate property taxes assessed against the FCRC Project
that may result from the existence of such air rights. In the
event Showboat constructs the Phase II Tower, Showboat shall also
be responsible for its share of the real estate property taxes
assessed against the FCRC Project resulting from the Phase II
Tower, including any taxes assessed or imputed to the underlying
land. Upon the expiration of Showboat's right to develop the
Phase II Tower, Showboat shall have no further obligation for any
taxes that may result from the reservation of air rights for the
Phase II Tower. To the extent there is a dispute as to the tax
liability created by the reservation of air rights or the
termination of such liability or the tax liability resulting from
the Phase II Tower, such dispute shall be resolved in accordance
with section 13 of this Agreement.
(ii) FCRC expressly acknowledges that Showboat shall
not be responsible for any taxes imposed as a result of the loss
of any tax benefit to FCRC or the FCRC Project, including tax
exemption or abatements, as a result of the existence of the
Phase II Tower, the air rights for the Phase II Tower or the
foundations for the Phase II Tower. For purposes of calculating
taxes owed to FCRC for tax consequences created from the
existence of the Phase II Tower, the air rights for the Phase II
Tower or the foundations for the Phase II Tower, the loss of any
tax benefit shall be ignored.
33
(iii) FCRC and Showboat hereby acknowledge that ACHA
shall have no liability for taxes imposed upon the FCRC Project
or to Showboat for the Phase II Tower. FCRC and Showboat further
agree that they shall indemnify and hold ACHA harmless from any
claims by any taxing authority for any liability for taxes
relating to the FCRC Project (including land and improvements) or
the Showboat Phase II Tower (including land and improvements).
(D) If Showboat elects to build the Phase II Tower and
complies with the notice requirements as set forth in sub
paragraph 11 (C), the construction of such Phase II Tower shall
not be permitted any earlier than the time that the FCRC Project
is substantially completed and utilized for its intended purpose.
Showboat acknowledges and agrees that the purpose of this
provision is to provide sufficient time for FCRC to construct and
complete whatever portions of the FCRC Project are needed prior
to the construction of the Phase II Tower. In addition, if
Showboat elects to proceed with the Phase II Tower as set forth
above, its right to Commence Construction of such Phase II Tower
shall extend only until December 31, 1998, after which date, any
rights which Showboat may have had to build the Phase II Tower on
the location agreed upon herein shall cease. In the event that
construction of the Phase II Tower is commenced by Showboat, it
shall be completed no later than December 31, 2000. For purposes
of this Agreement, Commence Construction of the Phase II Tower
shall be defined as the point at which Showboat has, with respect
to the Phase II Tower: (i) secured the permits and
34
approvals necessary to commence the work described in clause
(iii), below; (ii) awarded a contract to a general contractor;
and (iii) begun excavation and forming for foundations, or begun
driving of pilings in areas designated as "B." and "C" on Exhibit
F. Construction, once commenced, shall be diligently pursued
until completion.
12. VACATION OF RECONVEYED TRACTS BY SHOWBOAT
(A) In recognition of the agreements reached herein with
regard to the use of the various portions of the UURT by FCRC,
Showboat acknowledges that it shall be required to vacate certain
portions of the UURT which will be reconveyed to ACHA pursuant to
the terms of this Agreement as set forth in paragraphs l and 3
through 8. It is acknowledged by all parties that certain
portions of those Tracts to be reconveyed are currently in use by
Showboat for construction staging of the Phase I Tower. Such uses
are consistent with the provisions of the Showboat Development
Agreement and the Tripartite MOU. Consistent with the provisions
and acknowledgements herein, FCRC and/or ACHA shall notify
Showboat, in writing, at least ninety (90) days in advance of the
date by which Showboat is required to vacate the portions of the
UURT which are to be reconveyed to ACHA pursuant to this
Agreement. At the expiration of the notification time period set
forth above, Showboat shall reconvey the Tracts identified in
this Agreement for reconveyance to ACHA. At the time of
reconveyance by Showboat, the parcels so reconveyed shall be
cleared by Showboat of all improvements or personal property
prior thereto. Showboat agrees that it shall not have any claim
against FCRC or ACHA for the loss of value of any such
improvements or
35
personal property remaining on the property after the date for
reconveyance. FCRC agrees to accept from ACHA the parcels in the
same condition as ACHA received them from Showboat.
12. (B.) (i) The parties agree that, subject to
negotiating a lease, development agreement or other agreement
with regard to the fee or rent and other terms acceptable to all
parties, Showboat shall be permitted to utilize Block 15 for
interim surface patron and employee parking. In order to
effectuate the use of Block 15 for this purpose, Showboat shall
be permitted to apply for all necessary approvals for such
interim parking to the appropriate governmental entities. Such
applications shall be at Showboat's own risk and expense.
Showboat further agrees that such application shall be prepared
in cooperation with FCRC and shall be coordinated with FCRC's
application process for the FCRC Project in order to insure that
the approval process for and the construction of the FCRC Project
shall not be adversely affected. FCRC shall have the right to
review and approve all applications and plans submitted by
Showboat for the approval of the interim parking.
(ii) In the event that Showboat constructs a surface
parking lot on Block 15 for its interim use, such lot shall be
constructed to FCRC's design and specifications in coordination
with the FCRC Project. FCRC shall provide to Showboat a site plan
design by
36
August 15, 1994, which shall set forth the design and
specifications of the surface parking lot to be constructed on
Block 15. Such site plan and any other documents which may be
required by ACHA shall also be submitted by Showboat to ACHA on
or before September 1, 1994 for review and conceptual approval.
Showboat shall not submit an application to any other
governmental entity for approval prior to receiving conceptual
approval of ACHA. The agreement referred to in subparagraph 12
(B)(i) above shall set forth, among other things, the terms and
amount of reimbursement by FCRC to Showboat for the cost of the
design and construction of the surface parking lot to be
constructed on Block 15.
(iii) The right of Showboat to use Block 15 for interim
parking shall terminate upon: (a) the availability for use of the
Showboat Deck One Parking within the FCRC Project or (b) the
passage of five (5) years from the date of possession under the
lease or agreement by Showboat for all or any portion of Block
15, for interim parking, whichever is earlier. Showboat shall
vacate Block 15 within thirty (30) days written notice by FCRC
that the Showboat Deck One Parking is available for its use.
(iv) If Showboat is required to vacate Tract 3 by ACHA
prior to the receipt of the Certificate of Completion (as such
term is defined in the Showboat Development Agreement) for the
Phase I Tower, Showboat
37
shall also be permitted, with approval by ACHA as to size,
location, design and timing, to utilize a portion of Block 15 for
construction staging, subject to the terms of the Use and
Occupancy Agreement between Showboat and ACHA dated July 7, 1993.
Such use of Block 15 by Showboat shall terminate at the earlier
of sixty (60) days after receipt of the Certificate of Completion
for the Phase I Tower or August 31, 1995. Showboat shall bear all
costs associated with the use of Block 15 for construction
staging and shall remove all personal property and debris prior
to its vacation thereof.
13. DISPUTE RESOLUTION
FCRC and Showboat acknowledge that this Agreement calls for
their cooperation with regard to various issues. Accordingly,
should such cooperation with respect to any one issue not result
in an agreement between FCRC and Showboat as to how to resolve
that issue, FCRC and Showboat are herein providing for a
methodology to resolve any disputes which cannot be determined by
their cooperation. Except as otherwise provided herein, any
dispute which cannot be resolved by FCRC and Showboat shall be
conclusively determined by a third-party expert in the particular
discipline involved. Such third-party expert shall be agreed upon
by and between Showboat and FCRC. Should Showboat and FCRC be
unable to choose a third-party expert which is acceptable to both
of them, ACHA shall have the authority to pick such expert from a
list of up to three such experts provided to ACHA by both FCRC
and Showboat. Upon notification to the expert that
38
he (she) has been chosen as a third-party expert to make a
determination under this Agreement, and upon acceptance by that
expert of that responsibility, the following procedure shall
apply:
(1) Upon presentation of the issue in dispute to the
third-party expert to make a determination, the expert shall be
designated as a arbitrator of the outstanding issues between FCRC
and Showboat.
(2) Within seven (7) days of notification to said
arbitrator that he (she) shall be called upon to decide any issue
in dispute, FCRC and Showboat shall present to said arbitrator
and to each other their respective positions in writing,
including an explanation of how each party's position was
calculated and any written documentation to support such
position.
(3) Within seven (7) days of receiving the information
set forth in paragraph 2, the arbitrator shall meet with FCRC and
Showboat to discuss the issues, at which time, the arbitrator may
request any additional information which he (she) feels is needed
to render a decision. Such meeting shall be informal and shall
not be conducted as an adversarial proceeding nor shall the Rules
of Evidence under the laws of the State of New Jersey apply. At
this meeting, FCRC and Showboat may also present any additional
information which they feel is relevant.
(4) Within seven (7) days of conducting the meeting as
set forth in paragraph 3, the arbitrator shall render his (her)
decision in writing to both FCRC and Showboat, with a copy to
ACHA. Said decision shall be
39
binding and unappealable as to both FCRC and Showboat and shall
be considered a final decision reached through binding
arbitration under the laws of the State of New Jersey.
(5) When appropriate, Showboat and FCRC may agree to
an alternative form of dispute resolution if such alternative
form is identified in writing and agreed to by both FCRC and
Showboat.
(6) FCRC and Showboat shall share equally the costs of
conducting any dispute resolution procedure pursuant to this
paragraph.
14. ASSIGNMENT
(A) ASSIGNMENT BY FCRC AND SHOWBOAT
Showboat and FCRC acknowledge and agree that each has the
right to assign this Agreement, in whole or in part, subject to
the prior written approval of ACHA.
(B) ASSIGNMENT BY ACHA
Subject to the provisions of the following sentence, ACHA
may assign this Agreement, or any interest therein, without the
prior written consent of FCRC and Showboat. Notwithstanding the
foregoing, ACHA may not assign, delegate, sub-contract or
otherwise dispose of any of its "ACHA Functions' (as hereinafter
defined) unless such disposition is to a governmental entity and
any attempt to do so in violation of the foregoing shall be null
and void. For purposes of this section 14 (B), the term "ACHA
Functions" shall mean any rights, remedies, responsibilities or
obligations under this Agreement with
40
respect to: (i) resolution of disputes or disagreements between
Showboat and FCRC as provided for in this Agreement; (ii) review
and approval of Showboat and FCRC's plans, designs, finishes and
materials for any improvements; (iii) the issuance of
Certificate(s) of Completion for any improvements; (iv)
determination of when or whether FCRC has Commenced Development;
and (v) enforcement of the Urban Renewal Plan as it relates to
the parcels or tracts, or any part thereof, or of the affirmative
action requirements of the Urban Renewal Plan. Notwithstanding
the foregoing, ACHA reserves the right to delegate or
sub-contract, to one or more parties acting on ACHA's behalf,
anything other than the ultimate responsibility for and decision
making with respect to the ACHA Functions.
(C) BINDING EFFECT
This Agreement shall be binding upon and inure to the
benefit of ACHA, FCRC and Showboat and their respective heirs,
executors, administrators, successors and assigns. However, in
the event that after FCRC Commences Development, ACHA terminates
the FCRC Development Agreement, ACHA or its successor or assigns
shall have the right but not the obligation to complete the FCRC
Project and/or fulfill any of FCRC's obligations pursuant to this
Agreement.
15. MISCELLANEOUS
(A) Showboat herein acknowledges and agrees that it has
reviewed the proposed FCRC Project, as described on Exhibit H.
and is basically familiar with the nature
41
of that Project to be constructed by FCRC. Based upon that
understanding, Showboat acknowledges and agrees that said Project
constitutes an entertainment complex as set forth in the Showboat
Development Agreement.
(B) It is also acknowledged and agreed that there may be a
desire by FCRC and Showboat to construct a connecting pedestrian
bridge between the proposed FCRC Project and the existing
Showboat Casino Hotel facility to permit patrons to move between
those facilities. The location of any pedestrian bridge(s)
connecting the two facilities (other than for parking purposes
pursuant to paragraph 9) shall be mutually agreed upon by FCRC
and Showboat subject to approval by ACHA. The cost of such
pedestrian bridge(s), if constructed, shall be borne equally by
FCRC and Showboat.
(C) To the extent that any utilities or other facilities or
improvements may need to be relocated as a result of the
reconveyance of the Tracts and the 80' easement identified herein
by Showboat to ACHA and the subsequent conveyance by ACHA to
FCRC, and in order to accommodate the FCRC Project, the expense
for such relocation shall be the sole and exclusive obligation of
FCRC. However, this responsibility shall not include any utility
or facility relocation required to be undertaken as a result of
any decision by Showboat, pursuant to paragraph 11 hereof, to
construct the Phase II Tower. Showboat shall have the right to
review and approve the design, the method and timing of the
relocation of any
42
utilities that are tied into the Showboat facilities in order to
insure that such relocation will not unreasonably interrupt
utility service to the Showboat Casino Hotel.
(D) Nothing in this Agreement shall alter the right of ACHA
to approve the design, construction plans and other various
aspects of the development conducted within the UURT as more
specifically set out in the previously executed Showboat
Development Agreement, this Agreement and the Urban Renewal Plan
or any amendments thereto.
(E) Any submissions of plans or applications to ACHA by
FCRC with respect to any exterior design or planning issues on
the FCRC Project shall also be provided to Showboat at the time
of such submissions.
(F) Any notices which are required to be given with respect
to any portion of this Agreement shall be given by the party
giving such notice to both other parties to this Agreement.
(G) This Agreement shall be governed by and construed under
the laws of the State of New Jersey.
(H) This Agreement constitutes the entire understanding
among the parties and may only be amended by a writing executed
by all the parties. The parties affirm that there are no other
agreements between or among them, with respect to the issues
addressed herein, other than the Showboat Development Agreement
and any amendments thereto.
43
(I) This Agreement may be executed in counterparts at
different locations or by signature of any of the parties
transmitted by an electronic means such as telecopier (fax), and
execution by such means shall bind the parties in the same manner
as if executed in person on the date of this Agreement.
ATTEST: ATLANTIC CITY SHOWBOAT, INC.
/S/ THOMAS C. BONNER BY: /S/ Mark J. Miller
Asst. Secretary MARK J. MILLER, Executive
Vice President and Chief
Operating Officer
STATE OF NEW JERSEY :
: SS
COUNTY OF ATLANTIC :
BE IT REMEMBERED, that on this 26th day of May, 1994, before
me, the subscriber, personally appeared Mark J. Miller, Executive
Vice President, who I am satisfied is the person who signed the
within instrument as Vice President and COO of Atlantic City
Showboat, Inc., the corporation named therein, and he
acknowledged that he signed, sealed with the corporate seal and
delivered the same as such officer aforesaid, and that the within
instrument is the voluntary act and deed of such corporation,
made by virtue of a Resolution of its Board of Directors.
/S/ Luther G. Anderson
Luther G. Anderson
Attorney at Law
State of New Jersey
44
TRI-PARTY AGREEMENT SIGNATURE PAGE
ATTEST: HOUSING AUTHORITY
AND URBAN DEVELOPMENT AGENCY OF
THE CITY OF ATLANTIC CITY
/S/ BY: /S/ John P. Whittington
Secretary JOHN P.WHITTINGTON, CHAIRMAN
STATE OF NEW JERSEY :
: SS
COUNTY OF :
BE IT REMEMBERED, that on this 26th day of May, 1994, before
me, the subscriber, personally appeared John P. Whittington who I
am satisfied is the person who signed the within instrument as
Chairman of ATLANTIC CITY HOUSING AUTHORITY AND URBAN
REDEVELOPMENT AGENCY, the Agency named therein, and he
acknowledged that he signed, sealed with the Agency's seal and
delivered the same as such officer aforesaid, and that the within
instrument is the voluntary act and deed of such Agency, made by
virtue of a Resolution of its Members.
/S/
Notary Public
TRI-PARTY AGREEMENT SIGNATURE PAGE
ATTEST: FOREST CITY RATNER
COMPANIES
By Ratner Group, Inc.,
GENERAL PARTNER
/S/ Bruce C. Ratner BY: /S/ Bruce C. Ratner
Secretary BRUCE C. RATNER, President
STATE OF NEW YORK :
: SS
COUNTY OF KINGS :
BE IT REMEMBERED, that on this 25th day of May, 1994,
before me, the subscriber, personally appeared Bruce C. Ratner,
who I am satisfied is the person who signed the within instrument
as President of Ratner Group, Inc., a corporation which is
general partner of Forest City Ratner Companies, and he
acknowledged that he signed, sealed and delivered the same as
aforesaid officer and that the within instrument is the voluntary
act and deed of such corporation, made by virtue of a Resolution
of its Board of Directors.
/S/ Kathleen A. McCarthy
Kathleen McCarthy
Notary Public
TRI-PARTY AGREEMENT EXHIBITS
MAY 26, 1994
PARKING DIAGRAM
"UNOCCUPIED PORTION" DIAGRAM
DIAGRAM SHOWING TRACTS 1,2 AND 3
TRIANGULAR PORTION DIAGRAM
EXHIBIT "E"
SHOWBOAT PARKING COST ALLOCATION FORMULA
Pursuant to paragraph 9(F) of the Tri-party Agreement, the
following formula shall determine the costs to be paid by
Showboat to FCRC as reimbursement for the provision by FCRC to
Showboat of the Showboat Deck One and/or Deck Two Parking:
(A) All expenses directly attributable to the construction
of a garage construction consisting of an expoxied protected
structural steel frame with a metal deck supporting a
pre-stressed, high strength concrete deck for parking, which
parking spaces are herein referred to as "Structured Parking
Spaces", including the design and construction costs of the
Structured Parking Spaces within the FCRC Project (as that term
is defined in the Tri-party Agreement). Such costs shall be
identified by FCRC and totalled in order to determine the total
cost of the Structured Parking Spaces within the FCRC Project.
Structured Parking Spaces shall be defined herein to include all
parking spaces within the FCRC Project on Deck One and Deck Two,
which are currently anticipated to total approximately 2400
parking spaces, subject to final design and construction
requirements. Such expenses shall include, but shall not be
limited to, expenses related to those items set forth below in
Section C as Trade Costs and Soft Costs, but only to the extent
that such costs are directly or indirectly attributed to the
construction of the Structured Parking Spaces. In no event will
such expenses include items not related to or included within
those Structured Parking Spaces to be provided to and paid for by
Showboat (hereinafter the "Showboat Parking Spaces"), such as, by
way of example only and not by way of limitation, the cost of
passenger elevators or systems or structures that are included in
the FCRC Project to exclusively serve or support components of
the FCRC Project other than the Showboat Parking Spaces.
(B) Upon identification of the total cost of the design and
construction of the Structured Parking Spaces within the FCRC
Project, including the Showboat Deck One and, if applicable, Deck
Two parking spaces, such cost
1
number shall be multiplied by a fraction which shall have as its
numerator the total number of parking spaces being provided to
Showboat within the FCRC Project (the Showboat Parking Spaces),
and as its denominator the total number of Structured Parking
Spaces overall within the FCRC Project. The product of that
equation shall be the cost of the Showboat Parking Spaces which
shall be paid by Showboat to FCRC in accordance with the method
established in subparagraph (D) of this allocation formula. The
parking cost allocation formula shall be
Total Number of
Showboat Parking Spaces
Within FCRC Project
Total Cost of Cost of Showboat
_____________ X Structured Parking = Parking Spaces To
Spaces Within FCRC Be Paid By
Project Showboat to FCRC
Total Number of Structured
Parking spaces Within
FCRC Project on Decks
One and Two
(C) Garage Cost Items; if applicable:
TRADE COSTS - DESCRIPTION
Excavation
Concrete/Foundations
Structural Steel Frame
Facade Lintel-support system
Precast Concrete Facade
Masonry
Miscellaneous Metals
Metal Deck
Structural Studs
Post Tensioned
Concrete Deck
Parking Deck Striping
Stair Shafts
Drywall Partitions
External Facade
Ceilings
Flooring
Steel Stair/Railings
Elevators and Shafts
Drywall Partitions
External Facade
Ceilings
Flooring
Louvers & Vents
Signage
Parking Equipment & Fencing
Plumbing & Drainage Systems
Fire Protection
HVAC & Ventilation
Electrical & Fixtures
Landscaping & Roof/Deck Top Treatment
CONSTRUCTION SOFT COSTS
General Conditions
2
Sales Tax (if not in trade cost)
Architectural & Engineering Services & Reimbursables
Garage Consultant Fees & Reimbursables
Applications & Permits
Construction Management Fees
Payment & Performance Bonds (if not in trade cost)
Testing & Inspections
Financing
Legal Costs
Site Management/Overhead Costs
Insurance
(D) Payment by Showboat of the sums determined to be owed
by Showboat to FCRC pursuant to this cost allocation formula
shall be paid as follows:
(1) At least twenty (20) calendar days prior to FCRC's
Commencement of Development (as that term is defined in
the Showboat Development Agreement) FCRC will prepare
and deliver to Showboat and ACHA its then current
estimate (hereinafter the "Interim Estimate") of the
total costs of design and the construction of the
Showboat Parking Spaces. Such Interim Estimate shall be
considered an interim cost number only, subject to
later revision as described in (5) below. Such Interim
Estimate shall be calculated by FCRC using the methods
set forth in this cost allocation formula;
(2) Within five business days of Showboat's receipt of
notice that FCRC has Commenced Development (as that
term is defined in the Showboat Development Agreement),
Showboat shall deliver to an escrow agent an amount
equal to the Interim Estimate (hereinafter referred to
as the "Initial Deposit"). The parties tentatively
appoint the firm of Kozlov, Seaton, Romanini and Brooks
as such escrow agent (hereinafter the "Escrow Agent").
The Initial Deposit shall be deposited by the Escrow
Agent in an interest bearing account with a New Jersey
bank acceptable to Showboat (hereinafter the "Escrow
Account");
(3) Within five business days of FCRC Commencing
Construction as defined below, Showboat and FCRC will
authorize the Escrow Agent in writing to
3
release seven and one half percent (7 1/2%) of the
Initial Deposit to FCRC and or its contractors or
assignees for the purpose of funding the initial costs
of constructing the Showboat Parking Spaces.
"Commencing Construction" for purposes of this cost
allocation agreement shall be defined as follows: the
point at which FCRC has, with respect to the Structured
Parking Spaces: (a) secured permits and approvals
necessary to commence the work described in (c) below;
(b) awarded a contract to a general contractor and/or
construction manager; and (c) begun excavation and work
on site utilities;
(4) Not later than 180 days after Commencing Development as
heretofore defined, Showboat and FCRC will agree upon a
final total cost for the Showboat Parking Spaces as
calculated in accordance with this cost allocation
formula by using the most current information then
available to FCRC and Showboat based on construction
documents and actual costs known at that point. Based
on FCRC's calculation of costs and Showboat's review of
those costs and using this cost allocation formula,
FCRC and Showboat shall agree on a final cost for the
Showboat Parking Spaces (hereinafter the "Final Cost");
(5) Within thirty (30) days of Showboat and FCRC's
determination of the Final Cost, Showboat and FCRC
shall cause an appropriate adjustment to be made in the
amount of monies being held by the Escrow Agent in
order to conform the amount of such monies being held
at that time, inclusive of any accrued interest, to the
Final Cost. With the exception of the financing costs
adjustment described below, Showboat shall have no
obligation to pay any amounts for the Showboat Parking
Spaces in addition to the Final Cost unless such
additional cost, if any, is related to specific changes
in the Showboat Parking Spaces requested in writing by
Showboat and agreed upon by FCRC. Nothing herein shall
be interpreted as relieving Showboat of the
4
obligation to pay any cost for items separately
identified in the Tri-Party Agreement which exclusively
or predominantly benefit the Showboat Parking Spaces,
Showboat Condominium, the Phase II Tower site, the
Phase II Tower and the Showboat Hotel and Casino
facility, including by way of example and without
limitation, pedestrian walkways and vehicular
connections between the Showboat Parking Spaces and the
Showboat Hotel and Casino facility. Notwithstanding the
foregoing, the parties recognize that subsequent to
calculation of and agreement upon the Final Cost, the
actual cost to FCRC of the financing attributable to
the Showboat Parking Spaces (hereinafter the "Actual
Financing Cost") may differ from that originally
assumed in calculation of the Final Cost (hereinafter
the "Assumed Financing Costs"). In recognition thereof,
the parties agree that upon completion of the Showboat
Parking Spaces as defined below, either party may
perform or cause to be performed a calculation of the
Actual Financing Cost. In the event that such Actual
Financing Cost is greater or less than the Assumed
Financing Cost, Showboat will pay to FCRC or FCRC to
Showboat, as the case may be, within thirty days of
receipt of written demand therefor and of a certified
copy of the other party's calculation work product, a
sum equal to the difference between the Actual
Financing Costs and the Assumed Financing Cost;
(6) Within five business days of completion of the Showboat
Parking Spaces as hereinafter defined, Showboat will
authorize the Escrow Agent to disburse to FCRC from the
Escrow Account the balance of funds due FCRC pursuant
to this cost allocation formula, being the Final Cost
less the 7 1/2% of the Initial Deposit previously
disbursed. Any accrued interest shall be remitted by
the Escrow Agent to Showboat contemporaneous with
disbursement to FCRC as described herein. For purposes
of this cost
5
allocation formula, completion of the Showboat Parking
Spaces shall be defined as the earlier of the date on
which either: (1) Showboat begins to utilize the
Showboat Parking for their intended use; or (2) the
building authority having jurisdiction has issued the
necessary certificate of occupancy permitting use of
the Showboat Parking Spaces. FCRC shall notify the ACHA
in writing contemporaneously of the occurrence of
Showboat's utilization of, or the issuance of a
certificate of occupancy for, the Showboat Parking
Spaces as provided for in the preceding sentence.
(E) Any matter in dispute between Showboat and FCRC which
relates to any item at issue arising out of or related to this
cost allocation formula shall be resolved by application of the
dispute resolution provisions of paragraph 13 of the Tri-Party
Agreement.
(F) The ACHA shall be contemporaneously copied on all
notices, payments, demands, and correspondence between FCRC and
Showboat related to and/or provided for in this Exhibit E.
6
TRACT 1 ALLOCATION DIAGRAM - EXHIBIT F
PHASE II TOWER LOCATION - EXHIBIT G
FCIC PROJECT SITE PLAN - EXHIBIT H
U.S. DEPARTMENT of HOUSING AND URBAN DEVELOPMENT
URBAN RENEWAL PROGRAM
TERMS AND CONDITIONS
Part II
of
Contract for
SALE of LAND FOR PRIVATE REDEVELOPMENT
By and Between
Housing Authority & Urban Redevelopment Agency of the City of
Atlantic City
and
Atlantic City Showboat, Inc.
PART II
C O N T E N T S
SECTION PAGE
ARTICLE I. PREPARATION of PROPERTY FOR
REDEVELOPMENT
101. Work to Be performed by Agency 1
102. Expenses, Income, and Salvage 1
103. Agency's Responsibilities for Certain Other Actions 2
104. Waiver of Claims and Joining in Petitions by
Redeveloper 3
ARTICLE II. RIGHTS of ACCESS to PROPERTY
201. Right of Entry for Utility Service 3
202. Redeveloper Not to Construct Over Utility Easements 3
203. Access to Property 3
ARTICLE III. CONSTRUCTION PLANS;
CONSTRUCTION of IMPROVEMENTS;
CERTIFICATE of COMPLETION
301. Plans for Construction of Improvements 4
302. Changes in Construction Plans 5
303. Evidence of Equity Capital and Mortgage Financing 5
304. Approvals of Construction Plans and Evidence of
Financing As Conditions Precedent to Conveyance 5
305. Commencement and Completion of Construction of
Improvements 5
306. Progress Reports 6
307. Certificate of Completion 6
i
PART II
C O N T E N T S
SECTION PAGE
ARTICLE IV. RESTRICTIONS UPON USE of PROPERTY
401. Restrictions on Use 7
402. Covenants; Binding Upon Successors in Interest;
Period of Duration 7
403. Agency and United States Rights to Enforce 8
ARTICLE V. PROHIBITIONS AGAINST ASSIGNMENT
AND TRANSFER
501. Representations As to Redevelopment 8
502. Prohibition Against Transfer of Shares of Stock;
Binding Upon Stockholders Individually 9
503. Prohibition Against Transfer of Property and
Assignment of Agreement 10
504. Information As to Stockholders 12
ARTICLE VI. MORTGAGE FINANCING; RIGHTS
of MORTGAGEES
601. Limitation Upon Encumbrance of Property 12
602. Mortgagee Not Obligated to Construct 13
603. Copy of Notice of Default to Mortgagee 13
604. Mortgagee's Option to Cure Defaults 13
605. Agency's Option to Pay Mortgage Debt or Purchase
Property 14
606. Agency's Option to Cure Mortgage Default 15
607. Mortgage and Holder 15
ARTICLE VII. REMEDIES
701. In General 15
702. Termination by Redeveloper Prior to Conveyance 15
703. Termination by Agency Prior to Conveyance 16
ii
PART II
C O N T E N T S
SECTION PAGE
704. Revesting Title in Agency Upon happening of
Event Subsequent to Conveyance to Redeveloper 17
705. Resale of Reacquired Property; Disposition of Proceeds 18
706. Other Rights and Remedies of Agency; No Waiver by
Delay 19
707. Enforced Delay in Performance for Causes Beyond
Control of Party 19
708. Rights and Remedies Cumulative 20
709. Party in Position of Surety With Respect to
Obligations 20
ARTICLE VIII. MISCELLANEOUS
801. Conflict of Interests; Agency Representatives Not
Individually 21 Liable 21
802. Equal Employment Opportunity 21
803. Provisions Not Merged With Deed 22
804. Titles of Articles and Sections 22
iii
ARTICLE I. PREPARATION of PROPERTY FOR REDEVELOPMENT
SEC. 101. [Deleted]
SEC. 102. [Deleted]
1
SEC. 103. AGENCY'S RESPONSIBILITIES FOR CERTAIN OTHER ACTIONS.
The Agency, without expense to the Redeveloper or assessment or
claim against the Property and prior to completion of the
Improvements (or at such earlier time or times as the Redeveloper
and the Agency may agree in writing), shall, in accordance with the
Urban Renewal Plan, provide or secure or cause to be provided or
secured, the following:
(a) VACATION OF STREETS, ETC. The closing and vacation of
all existing streets, alleys, and other public rights-of-
way within or abutting on the Property.
2
SEC. 104. WAIVER OF CLAIMS AND JOINING IN PETITIONS BY
REDEVELOPER. The Redeveloper hereby waives (as the purchaser of the
Property under the Agreement and as the owner after the conveyance
of the Property provided for in the Agreement) any and all claims
to awards or damages, if any, to compensate for the closing,
vacation, or change of grade of any street, alley, or other public
right-of-way within or fronting or abutting on, or adjacent to, the
Property which, pursuant to subdivision (a) of Section 103 hereof,
is to be closed or vacated, or the grade of which is to be changed,
and shall upon the request of the Agency subscribe to, and join
with, the Agency in any petition or proceeding required for such
vacation, dedication, change of grade, and, to the extent
necessary, rezoning, and execute any waiver or other document in
respect thereof.
ARTICLE II. RIGHTS OF ACCESS TO PROPERTY
SEC. 201. RIGHT OF ENTRY FOR UTILITY SERVICE. The Agency
reserves for itself, the City, and any public utility company, as
may be appropriate, the unqualified right to enter upon the
Property at all reasonable times and upon reasonable notice
(except in case of emergency) for the purpose of reconstructing,
maintaining, repairing, or servicing the public utilities
located within the Property boundary lines and provided for in
the easements described or referred to in Paragraph (a), Section
2 of Part I hereof.
SEC. 202. REDEVELOPER NOT TO CONSTRUCT OVER UTILITY EASEMENTS.
Redeveloper shall not construct any building or other structure or
improvements on, over, or within the boundary lines of any easement
for public utilities described or referred to in Paragraph (a),
Section 2 of Part I hereof, unless such construction is provided
for in such easement or has been approved by the City or other
Grantee of any such easement. If approval for such construction is
requested by the Redeveloper, the Agency shall use its best efforts
to assure that such approval shall not be withheld unreasonably.
SEC. 203. ACCESS TO PROPERTY. Prior to the conveyance or the
Property by the Agency to the Redeveloper, the Agency shall permit
representatives of the Redeveloper to have access to any part of
the Property as to which the Agency holds title, at all reasonable
times and upon reasonable notice (except in case of emergency)for
the purpose of obtaining data and making various tests
3
concerning the Property necessary to carry out the Agreement. After
the conveyance of the Property by the Agency to the Redeveloper,
the Redeveloper shall permit the representatives of the Agency, the
City, and the United States of America access to the Property at
all reasonable times which any of them deems necessary for the
purposes of the Agreement, including, but not limited to,
inspection of 911 work being performed in connection with the
construction of the Improvements. No compensation shall be payable
nor shall any charge be made in any form by any party for the
access provided for in this Section; provided, that the party
entering upon the Property does and shall indemnify, defend and
hold harmless the owner of such Property from any loss, cost,
claim, damage or expense arising from or in connection with such
Party's entry upon the Property. In addition, each party shall use
its best efforts to ensure that no unnecessary interference with
the other party's operations on the Property results form such
access to the Property.
ARTICLE III. CONSTRUCTION PLANS; CONSTRUCTION OF
IMPROVEMENTS; CERTIFICATE of COMPLETION
SEC. 301. PLANS FOR CONSTRUCTION OF IMPROVEMENTS. Plans and
specifications with respect to the redevelopment of the Property
and the construction of improvements thereon shall be in conformity
with the Urban Renewal Plan, the Agreement, and all applicable
State and local laws and regulations. No later than the
time(s)specified therefor in Paragraph (a), Section 5 of Part I
hereof, the Redeveloper shall submit to the Agency, for approval by
the Agency, plans, drawings, specifications, and related documents,
and the proposed construction schedule in accordance with Exhibit
"K" which shall include at submission all conceptual and final plan
submission requirements (which plans, drawings, specifications,
related documents, and progress schedule, together with any and all
changes therein that may thereafter be made and submitted to the
Agency as herein provided, are, except as otherwise clearly
indicated by the context, hereinafter collectively called
"Construction Plans") with respect to the improvements to be
constructed by the Redeveloper n the Property, in sufficient
completeness and detail in accordance with Exhibit "K" to show that
such improvements and construction thereof will be in accordance
with the provisions of the Urban Renewal Plan and the Agreement.
The Agency shall, if the Construction Plans originally submitted
conform to the provisions of the Urban Renewal Plan and the
Agreement, approve in writing such Construction Plans and no
further filing by the Redeveloper or approval by the Agency thereof
shall be required except with respect to any material change. Such
Construction Plans shall, in any event, be deemed approved unless
rejection thereof in writing by the Agency, in whole or in part,
setting forth in detail the reasons therefor, shall be made within
sixty (60) days after the date of their receipt by the Agency. If
the Agency so rejects the Construction Plans in whole or in part as
not being in conformity with the Urban Renewal Plan or the
Agreement, the Redeveloper shall submit new or corrected
Construction Plans which are in conformity with the Urban Renewal
Plan and the Agreement, within the time specified therefor in
Paragraph (b), Section 5 of Part I hereof, after written
notification to the
4
Redeveloper of the rejection. The provisions of this Section
relating to approval, rejection, and resubmission of corrected
Construction Plans hereinabove provided with respect to the
original Construction Plans shall continue to apply until the
Construction Plans have been approved by the Agency: PROVIDED, That
in any event the Redeveloper shall submit Construction Plans which
are in conformity with the requirements of the Urban Renewal Plan
and the Agreement, as determined by the Agency, no
later than the time specified therefor in Paragraph (c), Section 5
of Part I hereof. All work with respect to the improvements to be
constructed or provided by the Redeveloper on the Property shall be
in conformity with the Construction Plans as approved by the
Agency. The term "Improvements", as used in this Agreement with
respect to any Tract shall also be deemed to have reference to the
improvements as provided and specified in the Construction Plans
for such Tract, as so approved.
SEC. 302. CHANGES IN CONSTRUCTIONS PLANS. If the Redeveloper
desires to make any change in the Construction Plans after their
approval by the Agency, the Redeveloper shall submit the proposed
change to the Agency for its approval. If the Construction Plans,
as modified by the proposed change, conform to the requirements of
Section 301 hereof with respect to such previously approved
Construction Plans, the Agency shall approve the proposed change
and notify the Redeveloper in writing of its approval. Such change
in the Construction Plans shall, in any event, be deemed approved
by the Agency unless rejection thereof, in whole or in part, by
written notice thereof by the Agency to the Redeveloper, setting
forth in detail the reasons therefor, shall be made within the
period specified therefor in Paragraph (d), Section 5 of Part I
hereof.
SEC. 303. EVIDENCE OF EQUITY CAPITAL AND MORTGAGE FINANCING.
As promptly as possible after approval by the Agency of the
Construction Plans, and, in any event, no later than the time
specified therefor in Paragraph (e), Section 5 of Part I hereof,
the Redeveloper shall submit to the Agency evidence satisfactory to
the Agency that the Redeveloper has the equity capital and
commitments for mortgage financing necessary for the construction
of the Improvements.
SEC. 304. APPROVALS OF CONSTRUCTION PLANS AND EVIDENCE OF
FINANCING AS CONDITIONS PRECEDENT TO CONVEYANCE. The submission of
evidence of equity capital and commitments for mortgage financing
as provided in Section 303 hereof, are conditions precedent to the
obligation of the Agency to convey either the Additional Garage
Site or the Phase II Tower Alternate Site to the Redeveloper.
SEC. 305. COMMENCEMENT AND COMPLETION OF CONSTRUCTION OF
IMPROVEMENTS. The Redeveloper agrees for itself, its successors
and assigns, and every successor in interest to the Property, or
any part thereof, and the Deed shall contain covenants on the part
of the Redeveloper for itself and such successors and assigns, that
the Redeveloper, and such successors and assigns, shall promptly
begin and diligently prosecute to completion, pursuant to the
timetable contemplated under the various provisions of Part I of
the Agreement, the redevelopment of the Property through the
construction of the Improvements thereon, and that such
construction shall in any event be begun within the respective
period(s) specified in Section 4 of Part I hereof and be completed
within the respective period(s) specified in such Section 4. It is
intended and agreed, and the Deed shall so expressly provide, that
such agreements and covenants shall be covenants running with the
land and that they shall, in any event, and without regard to
technical classification or designation, legal or otherwise, and
except only as otherwise specifically provided in the Agreement
itself, be, to the fullest extent permitted by law and equity,
binding for the benefit of the Agency and enforceable by the Agency
against the Redeveloper and its successors and assigns to or of the
Property or any part thereof or any interest therein.
5
SEC. 306. PROGRESS REPORTS. Subsequent to conveyance of the
Property, or any part thereof, to the Redeveloper, and until
construction of the Improvements has been completed, the
Redeveloper shall make reports, in such detail and at such times as
may reasonably be requested by the Agency, as to the actual
progress of the Redeveloper with respect to such construction. At a
minimum, such reports shall be in writing, and shall be delivered
to the Agency on or before the 15th day of each month.
SEC. 307. CERTIFICATE OF COMPLETION.
(a) Promptly after completion of the Improvements for any
Tract in accordance with those provisions of the
Agreement relating solely to the obligations of the
Redeveloper to construct the Improvements on such Tract
(including the dates for beginning and completion
thereof), the Agency will furnish the Redeveloper with an
appropriate instrument so certifying. Such certification
by the Agency shall be (and it shall be so provided in
the Deed and in the certification itself) a conclusive
determination of satisfaction and termination of the
agreements and covenants in the Agreement and in the Deed
with respect to the obligations of the Redeveloper, and
its successors and assigns, to construct the Improvements
and the dates for the beginning and completion thereof:
PROVIDED, That if there is upon the Property a mortgage
insured, or held or owned, by the Federal Housing
Administration and the Federal Housing Administration
shall have determined that all buildings constituting a
part of the Improvements and covered by such mortgage
are, in fact, substantially completed in accordance with
the Construction Plans and are ready for occupancy, then,
in such event, the Agency and the Redeveloper shall
accept the determination of the Federal Housing
Administration as to such completion of the construction
of the Improvements in accordance with the Construction
Plans, and, if the other agreements and covenants in the
Agreement obligating the Redeveloper in respect of the
construction and completion of the Improvements have been
fully satisfied, the Agency shall forthwith issue its
certification provided for in this Section. Such
certification and such determination shall not constitute
evidence of compliance with or satisfaction of any
obligation of the Redeveloper to any holder of a
mortgage, or any insurer of a mortgage, securing money
loaned to finance the Improvements, or any part thereof.
(b) With respect to such individual parts or parcels of the
Property which, if so provided in Part I hereof, the
Redeveloper may convey or lease as the Improvements to be
constructed thereon are completed, the Agency will also,
upon proper completion of the Improvements relating to
any such part or parcel, certify to the Redeveloper that
such Improvements have been made in accordance with the
provisions of the Agreement. Such certification shall
mean and provide, and the Deed shall so state, (1) that
any party purchasing or leasing such individual part or
parcel pursuant to the authorization herein contained
shall not (because of such purchase or lease) incur any
obligation with respect to the construction of the
Improvements relating to such part or parcel or to any
other part or parcel of the Property; and (2) that
neither the Agency nor any other party shall thereafter
have or be entitled to exercise with respect to any such
individual part or parcel so sold (or, in the case of
lease, with respect to the leasehold interest) any rights
or remedies or controls
6
that it may otherwise have or be entitled to exercise
with respect to the Property as a result of a default in
or breach of any provisions of the Agreement or the Deed
by the Redeveloper or any successor in interest or
assign, unless (i) such default or breach be by the
purchaser or lessee, or any successor in interest to or
assign of such individual part or parcel with respect to
the covenants contained and referred to in Section 401
hereof, and (ii) the right, remedy, or control relates to
such default or breach.
(c) Each certification provided for in this Section 307 shall
be in such form as will enable it to be recorded in the
proper office for the recordation of deeds and other
instruments pertaining to the Property, including the
Deed. If the Agency shall refuse or fail to provide any
certification in accordance with the provisions of this
Section, the Agency shall, within thirty (30) days after
written request by the Redeveloper, provide the
Redeveloper with a written statement, indicating in
adequate detail in what respects the Redeveloper has
failed to complete the Improvements in accordance with
the provisions of the Agreement, or is otherwise in
default, and what measures or acts it will be necessary,
in the opinion of the Agency, for the Redeveloper to take
or perform in order to obtain such certification.
ARTICLE IV. RESTRICTIONS UPON USE of PROPERTY
SEC. 401. RESTRICTIONS ON USE. The Redeveloper agrees for
itself, and its successors and assigns, and every successor in
interest to the Property, or any part thereof, and the Deed shall
contain covenants on the part of the Redeveloper for itself, and
such successors and assigns, that the Redeveloper, and such
successors and assigns, shall:
(a) Devote the Property to, and only to and in accordance
with, the uses specified in the Agreement and the Urban
Renewal Plan; and
(b) Not discriminate upon the basis of age, religion, sex,
disability, familial status, race, color, creed, or race,
color, creed, or national origin in the sale, lease, or
rental or in the use or occupancy of the Property or any
improvements erected or to be erected thereon, or any
part thereof.
SEC. 402. COVENANTS; BINDING UPON SUCCESSORS IN Interest;
Period of Duration. It is intended and agreed, and the Deed shall
so expressly provide, that the agreements and covenants provided in
Section 401 hereof shall be covenants running with the land and
that they shall, in any event, and without regard to technical
classification or designation, legal or otherwise, and except only
as otherwise specifically provided in the Agreement, be binding, to
the fullest extent permitted by law and equity, for the benefit and
in favor of, and enforceable by, the Agency, its successors and
assigns, the City and any successor in interest to the Property, or
any part thereof, and the owner of any other land (or of any
interest in such land) in the Project Area which is subject to the
land use requirements and restrictions of the Urban Renewal Plan,
and the United States (in the
7
case of the covenant provided in subdivision (b) of Section 401
hereof), against the Redeveloper, its successors and assigns and
every successor in interest to the Property, or any part thereof or
any interest therein, and any party in possession or occupancy of
the Property or any part thereof. It is further intended and agreed
that the agreement and covenant provided in subdivision (a) of
Section 401 hereof shall remain in effect for the period of time,
or until the date, specified or referred to in Section 6 of Part I
hereof (at which time such agreement and covenant shall terminate)
and that the agreements and covenants provided in subdivision (b)
of Section 401 hereof shall remain in effect without limitation as
to time: PROVIDED, That such agreements and covenants shall be
binding on the Redeveloper itself, each successor in interest to
the Property, and every part thereof, and each party in possession
or occupancy, respectively, only for such period as such successor
or party shall have title to, or an interest in, or possession or
occupancy of, the Property or part thereof. The terms "uses
specified in the Urban Renewal Plan" and "land use" referring to
provisions of the Urban Renewal Plan or similar language, in the
Agreement shall include the land and all building, housing, and
other requirements or restrictions of the Urban Renewal Plan
pertaining to such land.
SEC. 403. AGENCY AND UNITED STATES RIGHTS TO ENFORCE. In
amplification, and not in restriction of, the provisions of the
preceding Section, it is intended and agreed that the Agency and
its successors and assigns shall be deemed beneficiaries of the
agreements and covenants provided in Section 401 hereof, and the
United States shall be deemed a beneficiary of the covenant
provided in subdivision (b) of Section 401
hereof, both for and in their or its own right and also for the
purposes
of protecting the interests of the community and other parties,
public or private, in whose favor or for whose benefit such
agreements and covenants have been provided. Such agreements and
covenants shall (and the Deed
shall so state) run in favor of the Agency and the United States,
for the entire period during which such agreements and covenants
shall be in force and effect, without regard to whether the Agency
or the United States has at any time been, remains, or is an owner
of any land or interest therein to or in favor of which such
agreements and covenants relate. The Agency shall have the right,
in the event of any breach of any such agreement or covenant, and
the United States shall have the right in the event of any
breach of the covenant provided in subdivision (b) of Section 401
hereof, to exercise all the rights and remedies, and to maintain
any actions or suits at law or in equity or other proper
proceedings to enforce the curing of such breach of agreement or
covenant, to which it or any other beneficiaries of such agreement
or covenant may be entitled.
ARTICLE V. PROHIBITIONS AGAINST ASSIGNMENT AND TRANSFER
SEC. 501. REPRESENTATIONS AS TO REDEVELOPMENT. The Redeveloper
represents and agrees that its purchase of the Property, and its
other undertakings pursuant to the Agreement, are, and will be
used, for the purpose of
8
redevelopment of the Property and not for speculation in land
holding. The Redeveloper further recognizes that, in view of
(a) the importance of the redevelopment of the Property to
the general welfare of the community;
(b) the substantial financing and other public aids that have
been made available by law and by the Federal and local
Governments for the purpose of making such redevelopment
possible; and
(c) the fact that a transfer of the stock in the Redeveloper
or of a substantial part thereof, or any other act or
transaction involving or resulting in a significant
change in the ownership or distribution of such stock is
for practical purposes a transfer or disposition of
the Property then owned by the Redeveloper, the
qualifications and identity of the Redeveloper,
the qualifications and identify of the Redeveloper, are of
particular concern to the community and the Agency. The Redeveloper
further recognizes that it is because of such qualifications and
identity that the Agency is entering into the Agreement with the
Redeveloper, and, in so doing, is further willing to accept and
rely on the obligations of the Redeveloper for the faithful
performance of all undertakings and covenants hereby by it to be
performed without requiring in addition a surety bond or similar
undertaking for such performance of all undertakings and covenants
in the Agreement.
SEC. 502. PROHIBITION AGAINST TRANSFER OF SHARES OF STOCK;
BINDING UPON STOCKHOLDERS INDIVIDUALLY. For the foregoing reasons,
the Redeveloper represents and agrees for itself, its stockholders,
and any successor in interest of itself and its stockholders,
respectively, that: Prior to completion of the Improvements as
certified by the Agency, and without the prior written approval of
the Agency, (a) there shall be no transfer by any party owning 10
percent or more of the stock in the Redeveloper (which term shall
be deemed for the purposes of this and related provisions to
include successors in interest of such stock or any part thereof or
interest therein), (b) nor shall any such owner suffer any such
transfer to be made, (c) nor shall there be or be suffered to be by
the redeveloper, or by any owner of 10 percent or more of the stock
therein, any other similarly significant change in the ownership of
such stock or in the relative distribution thereof, by any other
method or means, whether by increased capitalization, merger
with another corporation, corporate or other amendments, issuance
of additional or new stock or classification of stock, or
otherwise. With respect to this provision, the Redeveloper and the
parties signing the Agreement on behalf of the Redeveloper
represent that they have the authority of all of its existing
stockholders to agree to this provision on their behalf and to bind
them with respect thereto. Notwithstanding the foregoing, and
notwithstanding any other provision of the Agreement to the
contrary, neither this Agreement nor the Urban Renewal Plan shall
impose any restriction on transferability or any reporting
requirement with respect to the stock and stock ownership of any
parent entity of Redeveloper, except as otherwise specifically
provided in Section 504 hereof.
9
503. PROHIBITION AGAINST TRANSFER OF PROPERTY AND ASSIGNMENT
OF
AGREEMENT. Also, for the foregoing reasons the Redeveloper
represents and agrees for itself, and its successors and assigns,
that:
(a) Except only
(1) [Deleted]
(2) as to any individual parts or parcels of the
Property on which the Improvements to be constructed
thereon have been completed, and which, by the terms
of the Agreement, the Redeveloper is authorized to
convey or lease as such Improvements are completed,
the Redeveloper (except as so authorized) has not made or created,
and that it will not, prior to the proper completion of the
Improvements as certified by the Agency, make or create, or suffer
to be made or created, any total or partial sale, assignment,
conveyance, or lease, or any trust or power, or transfer in any
other mode or form of or with respect to the Agreement or the
Property, or any part thereof or any interest therein, or any
contract or agreement to do any of the same, without the prior
written approval of the Agency: PROVIDED, That, prior to the
issuance by the Agency of the certificate provided for in Section
307 hereof as to completion of construction of the Improvements,
the Redeveloper may enter into any agreement to sell, lease, or
otherwise transfer, after the issuance of such certificate, the
Property or any part thereof or interest therein, which agreement
shall not provide for payment of or on account of the purchase
price or rent for the Property, or the part thereof or the interest
therein to be so transferred, prior to the issuance of such
certificate. However, Agency acknowledges and agrees that the
leasehold mortgage securing Redeveloper's obligations with respect
to its parent entity is 9 1/4% bonds, issued pursuant to a
Registration Statement dated May 11, 1993, shall encumber the
Property and any Improvements thereon, together with Redeveloper's
other properties, but Redeveloper represents, and warrants that the
same shall not impair and shall be subordinate to the Agency's
rights under Article VII hereof.
(b) The Agency shall be entitled to require, except as
otherwise provided in the Agreement, as conditions to any
such approval that:
(1) Any proposed transferee shall have the
qualifications and financial responsibility, as
determined by the Agency, necessary and adequate to
fulfill the obligations undertaken in the Agreement
by the Redeveloper (or, in the event the transfer is
of or relates to part of the Property, such
obligations to the extent that they relate to such
part).
(2) Any proposed transferee, by instrument in writing
satisfactory to the Agency and in form recordable
among the land records, shall, for itself and its
successors and assigns, and expressly for the
benefit of the Agency; have expressly assumed all of
the obligations of the Redeveloper under
10
the Agreement and agreed to be subject to all the
conditions and restrictions to which the Redeveloper
is subject (or, in the event the transfer is of or
relates to part of the Property, such obligations,
conditions, and restrictions to the extent that they
relate to such part): PROVIDED, That the fact that
any transferee of, or any other successor in
interest whatsoever to, the Property, or any part
thereof, shall, whatever the reason, not have
assumed such obligations or so agreed, shall not
(unless and only to the extent otherwise
specifically provided in the Agreement or agreed to
in writing by the Agency) relieve or except such
transferee or successor of or from such obligations,
conditions, or restrictions, or deprive or limit the
Agency of or with respect to any rights or remedies
or controls with respect to the Property or the
construction of the Improvements; it being the
intent of this, together with other provisions of
the Agreement, that (to the fullest extent permitted
by law and equity and excepting only in the manner
and to the extent specifically provided otherwise in
the Agreement) no transfer of, or change with
respect to, ownership in the Property or any part
thereof, or any interest therein, however
consummated or occurring, and whether voluntary or
involuntary, shall operate, legally or practically,
to deprive or limit the Agency of or with respect to
any rights or remedies or controls provided in or
resulting from the Agreement with respect to the
Property and the construction of the Improvements
that the Agency would have had, had there been no
such transfer or change.
(3) There shall be submitted to the Agency for review
all instruments and other legal documents involved
in effecting transfer; and if approved by the
Agency, its approval shall be indicated to the
Redeveloper in writing.
(4) The consideration payable for the transfer by the
transferee or on its behalf shall not exceed an
amount representing the actual cost (including
carrying charges) to the Redeveloper of the Property
(or allocable to the part thereof or interest
therein transferred) and the Improvements, if any,
theretofore made thereon by it; it being the intent
of this provision to preclude assignment of the
Agreement or transfer of the Property (or any parts
thereof other than those referred to in subdivision
(2), Paragraph (a) of this Section 503) for profit
prior to the completion of the Improvements and to
provide that in the event any such assignment or
transfer is made (and is not canceled), the Agency
shall be entitled to increase the Purchase Price to
the Redeveloper by the amount that the consideration
payable for the assignment or transfer is in excess
of the amount that may be authorized pursuant to
this subdivision (4), and such consideration shall,
to the extent it is in excess of the amount so
authorized, belong to and forthwith be paid to the
Agency. The foregoing shall not apply with respect
to transfer of any Tract(s) as to which Redeveloper
has obtained a certificate of completion for the
Improvements constructed thereon.
11
(5) The Redeveloper and its transferee shall comply with such
other conditions as the Agency may find appropriate in
order to achieve and safeguard the purposes of the Urban
Renewal Act and the Urban Renewal Plan.
PROVIDED, That in the absence of specific written agreement by the
Agency to the contrary, no such transfer or approval by the Agency
thereof shall be deemed to relieve the Redeveloper, or any other
party bound in any way by the Agreement or otherwise with respect
to the construction of the Improvements, from any of its
obligations with respect thereto.
SEC. 504. INFORMATION AS TO STOCKHOLDERS. In order to
assist in the effectuation of the purposes of this Article V and
the statutory objectives generally, the Redeveloper agrees that
during the period between execution of the Agreement and completion
of the Improvements as certified by the Agency, (a) the Redeveloper
will promptly notify the Agency of any and all changes whatsoever
in the ownership of stock, legal or beneficial, or of any other act
or transaction involving or resulting in any change in the
ownership of such stock or in the relative distribution thereof, of
which it or any of its officers have been notified or otherwise
have knowledge or information; and (b) the Redeveloper shall, at
such time or times as the Agency may request, furnish the Agency
with a complete statement, subscribed and sworn to by the President
or other executive officer of the Redeveloper, setting forth a11 of
the stockholders of the Redeveloper and the extent of their
respective holdings, and in the event any other parties have a
beneficial interest in such stock their names and the extent of
such interest, all as determined or indicated by the records of the
Redeveloper, by specific inquiry made by any such officer, of all
parties who on the basis of such records own 10 percent or more of
the stock in the Redeveloper, and by such other knowledge or
information as such officer shall have. Such lists, data, and
information shall in any event be furnished the Agency immediately
prior to the delivery of the Deed to the Redeveloper and as a
condition precedent thereto, and annually thereafter on the
anniversary of the date of the Deed until the issuance of a
certificate of completion for all the property. The foregoing shall
not apply to the stock or stock ownership of any parent entity of
Redeveloper, except that Redeveloper shall promptly provide the
Agency with a copy of any SEC filing made by a stockholder of
Redeveloper's parent, with respect to a change in the ownership
interest of such stockholder in Redeveloper or its corporate
parent. If the SEC cease to require such filing(s) at the level of
not more than 10% ownership, Redeveloper shall nonetheless notify
the Agency whenever Redeveloper learns of the acquisition of an
interest of at least 10%.
ARTICLE VI. MORTGAGE FINANCING; RIGHTS OF MORTGAGEES
SEC. 601. LIMITATION UPON ENCUMBRANCE OF PROPERTY. Prior to
the completion of the Improvements upon any Tract, as certified by
the Agency, neither the Redeveloper nor any successor in interest
to the Property or any part thereof shall engage in any financing
or any other transaction creating any mortgage or other encumbrance
or lien upon such Tract, whether by express agreement or operation
of law, or suffer any encumbrance or lien to be made on or attach
to such Tract subject to the prior written approval of the Agency,
solely for the purposes of obtaining (a) funds only to the extent
necessary for making the Improvements and (b) such additional
funds, if any, in an amount not to exceed the Purchase Price paid
by the Redeveloper to the Agency. The Redeveloper (or successor in
interest) shall notify the Agency in advance of any financing,
secured by mortgage
12
or other similar lien instruments, it proposes to enter into with
respect to the Property, or any part thereof, and in any event it
shall promptly notify the Agency of any encumbrance or lien that
has been created on or attached to the Property, whether by
voluntary act of the Redeveloper or otherwise. For the purposes of
such mortgage financing as may be made pursuant to the Agreement,
the Property may, at the option of the Redeveloper (or successor in
interest), be divided into several parts or parcels, provided that
such subdivision, in the opinion of the Agency, is not inconsistent
with the purposes of the Urban Renewal Plan and the Agreement and
is approved in writing by the Agency. However, Agency acknowledges
and agrees that the leasehold mortgage securing Redeveloper's
obligations with respect to its parent entity's 9 1/4% bonds,
issued pursuant to a Registration Statement dated May 11, 1993,
shall encumber the Property and any Improvements thereon, together
with Redeveloper's other properties, but Redeveloper represents and
warrants that the same shall not impair and shall be subordinate to
the Agency's rights under Article VII hereof.
SEC. 602. MORTGAGEE NOT OBLIGATED TO CONSTRUCT.
Notwithstanding any of the provisions of the Agreement, including
but not 14 limited to those which are or are intended to be
covenants running with the land, the holder of any mortgage
authorized by the Agreement (including any such holder who obtains
title to the Property or any part thereof as a result of
foreclosure proceedings, or action in lieu thereof, but not
including (a) any other party who thereafter obtains title to the
Property or such part from or through such holder or (b) any other
purchaser at foreclosure sale other than the holder of the mortgage
itself, shall in no wise be obligated by the provisions of the
Agreement to construct or complete the Improvements or to guarantee
such construction or completion; nor shall any covenant or any
other provision in the Deed be construed to so obligate such
holder: PROVIDED, That nothing in this Section or any other
Section or provision of the Agreement shall be deemed or construed
to permit or authorize any such holder to devote the Property or
any part thereof to any uses, or to construct any improvements
thereon, other than those uses or improvements provided or
permitted in the Urban Renewal Plan and in the Agreement.
SEC. 603. COPY OF NOTICE OF DEFAULT TO MORTGAGEE. Whenever the
Agency shall deliver any notice or demand to the Redeveloper with
respect to any breach or default by the Redeveloper in its
obligations or covenants under the Agreement, the Agency shall at
the same time forward a copy of such notice or demand to each
holder of any mortgage authorized by the Agreement at the last
address of such holder shown in the records of the Agency.
SEC. 604. MORTGAGEE'S OPTION TO CURE DEFAULTS. After any
breach or default referred to in Section 603 hereof, each such
holder shall (insofar as the rights of the Agency are concerned)
have the right, at its option, to cure or remedy such breach or
default (or such breach or default to the extent that it relates to
the part of the Property covered by its mortgage) and to add the
cost thereof to the mortgage debt and the lien of its mortgage:
PROVIDED, That if the breach or default is with respect to
construction of the Improvements, nothing contained in this Section
or any other Section of the Agreement shall be deemed to permit or
authorize such holder, either before or after foreclosure or action
in lieu thereof, to undertake or continue the construction or
completion of the Improvements (beyond the extent necessary to
conserve or protect Improvements or construction already made)
without first having expressly assumed the obligation to the
Agency, by written agreement satisfactory to the Agency, to
complete, in the
manner provided in the Agreement, the Improvements on the
13
Property or the part thereof to which the lien or title of such
holder relates. Any such holder who shall properly complete the
Improvements relating to the Property or applicable part thereof
shall be entitled, upon written request made to the Agency, to a
certification or certifications by the Agency to such effect in the
manner provided in Section 307 of the Agreement, and any such
certification shall, if so requested by such holder, mean and
provide that any remedies or rights with respect to recapture of or
reversion or revesting of title to the Property that the Agency
shall have or be entitled to because of failure of the Redeveloper
or any successor in interest to the Property, or any part thereof,
to cure or remedy any default with respect to the construction of
the Improvements on other parts or parcels of the Property, or
because of any other default in or breach of the Agreement by the
Redeveloper or such successor, shall not apply to the part or
parcel of the Property to which such certification relates.
SEC. 605. AGENCY'S OPTION TO PAY MORTGAGE DEBT OR PURCHASE
PROPERTY. In any case, where, subsequent to default or breach by
the Redeveloper (or successor in interest) under the Agreement, the
holder of any mortgage on the Property or part thereof
(a) has, but does not exercise, the option to construct or
complete the Improvements relating to the Property or
part thereof covered by its mortgage or to which it has
obtained title, and such failure continues for a period
of sixty (60) days after the holder has been notified or
informed of the default or breach; or
(b) undertakes construction or completion of the Improvements
but does not complete such construction within the period
as agreed upon by the Agency and such holder (which
period shall in any event be at least as long as the
period prescribed for such construction or completion in
the Agreement), and such default shall not have been
cured within sixty (60) days after written demand by the
Agency so to do,
the Agency shall (and every mortgage instrument made prior to
completion of the Improvements with respect to the Property by the
Redeveloper or successor in interest shall so provide) have the
option of paying to the holder the amount of the mortgage debt and
securing an assignment of the mortgage and the debt secured
thereby, or, in the event ownership of the Property (or part
thereof) has vested in such holder by way of foreclosure or action
in lieu thereof, the Agency shall be entitled, at its option, to a
conveyance to it of the Property or part thereof (as the case may
be) upon payment to such holder of an amount equal to the sum of:
(i) the mortgage debt at the time of foreclosure or action in lieu
thereof (less all appropriate credits, including those resulting
from collection and application of rentals and other income
received during foreclosure proceedings); (ii) all expenses with
respect to the foreclosure; (iii) the
net expense, if any (exclusive of general overhead), incurred by
such holder in and as a direct result of the subsequent management
or the Property; (iv) the costs of any Improvements made by such
holder; and (v) an amount equivalent to the interest that would
have accrued on the
14
aggregate of such amounts had all such amounts become part of the
mortgage debt and such debt had continued in existence.
SEC. 606. AGENCY'S OPTION TO CURE MORTGAGE DEFAULT. In the
event of a default or breach prior to the completion of the
Improvements by the Redeveloper, or any successor in interest, in
or of any of its obligations under, and to the holder of, any
mortgage or other instrument creating an encumbrance or lien upon
the Property or part thereof, the Agency may at its option cure
such default or breach, in which case the Agency shall be entitled,
in addition to and without limitation upon any other rights or
remedies to which it shall be entitled by the Agreement, operation
of law, or otherwise, to reimbursement from the Redeveloper or
successor in interest of all costs and expenses incurred by the
Agency in curing such default or breach and to a lien upon the
Property (or the part thereof to which the mortgage, encumbrance,
or lien relates) for such reimbursement: PROVIDED, That any such
lien shall be subject always to the lien of (including any lien
contemplated, because of advances yet to be made, by) any then
existing mortgages on the Property authorized by the Agreement.
SEC. 607. MORTGAGE AND HOLDER. For the purposes of the
Agreement: The term "mortgage" shall include a deed of trust or
other instrument creating an encumbrance or lien upon the Property,
or any part thereof, as security for a loan. The term "holder" in
reference to a mortgage shall include any insurer or guarantor of
any obligation or condition secured by such mortgage or deed of
trust, including, but not limited to, the Federal Housing
Commissioner, the Administrator of Veterans Affairs, and any
successor in office of either such official. The terms "mortgagee"
or "holder" shall include the Trustee under the Indenture with
respect to the Redeveloper's Bonds referenced above.
ARTICLE VII. REMEDIES
SEC. 701. IN GENERAL. Except as otherwise provided in the
Agreement, in the event of any default in or breach of the
Agreement, or any of its terms or conditions, by either party
hereto, or any successor to such party, such party (or successor)
shall, upon written notice from the other, proceed immediately to
cure or remedy such default or breach, and, in any event, within
sixty (60) days after receipt of such notice. In case such action
is not taken or not diligently pursued, or the default or breach
shall not be cured or remedied within a reasonable time, the
aggrieved party may institute such proceedings as may be necessary
or desirable in its opinion to cure and remedy such default or
breach, including, but not limited to, proceedings to compel
specific performance by the party in default or breach of its
obligations. Notwithstanding the foregoing, upon a default, the
Agency's sole remedy as to any Tract on which construction has not
been commenced, shall be limited to the exercise of the Agency's
rights to revesting of title to such Tract(s).
SEC. 702. TERMINATION BY REDEVELOPER PRIOR TO CONVEYANCE. In
the event that
(a) the Agency does not tender conveyance of the Property, or
possession thereof, in the manner and condition, and by
the date, provided in the Agreement, and any such failure
shall not be
15
cured within thirty (30) days after the date of written
demand by the Redeveloper provided Redeveloper is not in
default at such time;
(b) [Deleted]
then the Agreement shall, at the option of the Redeveloper, be
terminated by written notice thereof to the Agency, and, except
with respect to the return of the Deposit as provided in Paragraph
(e), Section 3 of part I
hereof, neither the Agency nor the Redeveloper shall have any
further rights against or liability to the other under the
Agreement.
SEC. 703. TERMINATION BY AGENCY PRIOR TO CONVEYANCE. In the
event that
(a) prior to conveyance of the Property or any Tract to the
Redeveloper and in violation of the Agreement
(i) the Redeveloper (or any successor in interest)
assigns or attempts to assign the Agreement or any
rights therein, or in the Property, or
(ii) there is any change in the ownership or distribution
of the stock of the Redeveloper except for such
changes in ownership of any parent entity of
Redeveloper; or
(b) the Redeveloper does not submit Construction Plans for
Tract 1, as required by the Agreement, or for Tract 3,
the Additional Garage Site or the Phase II Tower
Alternate Site (if the deadline under Section 5(a) of
Part I hereof falls prior to the date for such
conveyance) evidence that it has the necessary equity
capital and mortgage financing, in satisfactory form in
the manner and by the dates respectively provided in the
Agreement therefor; or
(c) the Redeveloper does not pay the Purchase price and take
title to the Property upon tender of conveyance by the
Agency pursuant to the Agreement, and if any default or
failure referred to in subdivisions (b) and (c) of this
Section 703 shall not be cured within thirty (30) days
after the date of written demand by the Agency, then the
Agreement, and any rights
16
of the Redeveloper, or any assignee or transferee, in the
Agreement, or arising therefrom with respect to the
Agency or the Property, shall, at the option of the
Agency, be terminated by the Agency, in which event, as
provided in Paragraph (d), Section 3 of Part I hereof,
the Deposit shall be retained by the Agency as liquidated
damages and as its property without any deduction,
offset, or recoupment whatsoever, and neither the
Redeveloper (or assignee or transferee) nor the Agency
shall have any further rights against or liability to the
other under the Agreement.
SEC 704. REVESTING TITLE IN AGENCY UPON HAPPENING OF EVENT
SUBSEQUENT TO CONVEYANCE TO REDEVELOPER. In the event that
subsequent to conveyance of the Property or any part thereof to the
Redeveloper and prior to completion of the Improvements as
certified by the Agency
(a) the Redeveloper (or successor in interest) shall default
in or violate its obligations with respect to the
construction of the Improvements (including the nature
and the dates for the beginning and completion thereof),
or shall abandon or substantially suspend construction
work, and any such default, violation, abandonment, or
suspension shall not be cured, ended, or remedied within
three (3) months (six (6) months, if the default is with
respect to the date for completion of the Improvements)
after written demand by the Agency so to do; or
(b) the Redeveloper (or successor in interest) shall fail to
pay real estate taxes or assessment son the Property or
any part thereof when due, or shall place thereon any
encumbrance or lien unauthorized by the Agreement, or
shall suffer any levy or attachment to be made, or any
materialmen's or mechanics' lien, or any other
unauthorized encumbrance or lien to attach, and such
taxes or assessments shall not have been paid, or the
encumbrance or lien removed or discharged or provision
satisfactory to the Agency made for such payment,
removal, or discharge, within ninety (90) days after
written demand by the Agency so to do; or
(c) there is, in violation of the Agreement, any transfer of
the Property or any part thereof, or any change in the
ownership or distribution of the stock of the
Redeveloper, and such violation shall not be cured within
sixty (60) days after written demand by the Agency to the
Redeveloper,
then the Agency shall have the right to re-enter and take
possession of any and all parts of the Property for which a
certificate of completion has not been issued, notwithstanding any
provision of Section 701 to the contrary, and to terminate (and
revest in the Agency) the estate conveyed by the Deed to the
Redeveloper, it being the intent of this provision, together with
other provisions of the Agreement, that the conveyance of the
Property to the Redeveloper shall be made upon, and that the Deed
shall contain, a condition subsequent to the effect that in the
event of any default, failure, violation, or other action or
inaction by the Redeveloper specified in subdivisions (a), (b), and
(c) of this Section 704, failure on the part of the Redeveloper to
17
remedy, end, or abrogate such default, failure, violation, or other
action or inaction, within the period and in the manner stated in
such subdivisions, the Agency at its option may declare a
termination in favor of the Agency of the title, and of all the
rights and interests in and to the Property conveyed by the Deed to
the Redeveloper, and that such title and all rights and interests
of the Redeveloper, and any assigns or successors in interest to
and in the Property, shall revert to the Agency: PROVIDED, That
such condition subsequent and any revesting of title as a result
thereof in the Agency
(1) shall be free and clear of, and shall defeat and
terminate, as to the Tract(s) so revested, (i) the lien
of any mortgage encumbering such Tract(s) and (ii) any
rights or interests provided in the Agreement for the
protection of the holders of such mortgages; and
(2) shall not apply to individual parts or parcels of the
Property on which the Improvements to be constructed
thereon have been completed in accordance with the
Agreement and for which a certificate of completion is
issued therefor as provided in Section 307 hereof.
In addition to and without in any way limiting the Agency's rights
to reentry as provided for in the preceding sentence, the Agency
shall have the right to retain the Deposit, as provided in
Paragraph (d), Section 3 of Part I hereof, without any deduction,
offset or recoupment whatsoever, in the event of a default,
violation or failure of the Redeveloper as specified in the
preceding sentence.
SEC 705. RESALE OF REACQUIRED PROPERTY; DISPOSITION OF
PROCEEDS. Upon the revesting in the Agency of title to the
Property or any part thereof as provided in Section 704, the Agency
shall, pursuant to its responsibilities under State law, use its
best efforts to resell the Property or part thereof as soon an in
such manner as the Agency shall find reasonably feasible and
consistent with the objectives of such law and of the Urban Renewal
Plan to a qualified and responsible party or parties (as determined
by the Agency) who will assume the obligation of making or
completing the Improvements or such other improvements in their
stead as shall be satisfactory to the Agency and in accordance with
the uses specified for such Property or part thereof in the Urban
Renewal Plan. Upon such resale of the Property, the proceeds
thereof shall be applied:
(a) First, to reimburse the Agency, on its own behalf or on
behalf of the City, for all costs and expenses incurred
by the Agency, including but not limited to salaries of
personnel, in connection with the recapture, management,
and resale of the Property or part thereof (but less any
income derived by the Agency from the Property or part
thereof in connection with such management); all taxes,
assessments, and water and sewer charges with respect to
taxes, assessments, and water and sewer charges with
respect to the Property or part thereof (or, in the event
the Property is exempt from taxation or assessment or
such charges during the period
18
of ownership thereof by the Agency, an amount, if paid,
equal to such taxes, assessments, or charges (as
determined by the City assessing official) as would have
been payable if the Property were not so exempt); any
payments made or necessary to be made to discharge any
encumbrances or liens existing on the Property or part
thereof at the time of revesting of title thereto in the
Agency or to discharge or prevent from attaching or being
made any subsequent encumbrances or liens due to
obligations, defaults, or acts of the Redeveloper, its
successors or transferees; any expenditures made or
obligations incurred by the Agency with respect to the
making or completion of the Improvements or any part
thereof on the Property or part thereof; and any amounts
otherwise owing the Agency by the Redeveloper and its
successor or transferee; and
(b) Second, to reimburse the Redeveloper, its successor or
transferee, up to the amount equal to (1) the sum of the
purchase price paid by it for the Property (or allocable
to the part thereof) and the cash actually invested by it
in making any of the Improvements on the Property or part
thereof, less (2) any gains or income withdrawn or made
by it from the Agreement or the Property (or from the
subject part thereof).
Any balance remaining after such reimbursements shall be retained
by the Agency as its property.
SEC 706. OTHER RIGHTS AND REMEDIES OF AGENCY; NO WAIVER BY
DELAY. The Agency shall have the right to institute such actions
or proceedings as it may deem desirable for effectuating the
purposes of this Article VII, including also the right to execute
and record or file among the public land records in the office in
which the Deed is recorded a written declaration of the termination
of all the right, title, and interest of the Redeveloper, and
(except for such individual parts or parcels upon which
construction of that part of the Improvements required to be
constructed thereon has been completed, in accordance with the
Agreement, and for which a certificate of completion as provided in
Section 307 hereof is to be delivered, and subject to such mortgage
liens and leasehold interests as provided in Section 704 hereof)
its successors in interest and assigns, in the Property, and the
revesting of title thereto in the Agency: PROVIDED, That any delay
by the Agency in instituting or prosecuting any such actions or
proceedings or otherwise asserting its rights under this Article
VII shall not operate as a waiver of such rights or to deprive it
of or limit such rights in any way (it being the intent of this
provision that the Agency should not be constrained (so as to avoid
the risk of being deprived of or limited in the exercise of the
remedy provided in this Section because of concepts of waiver,
laches, or otherwise) to exercise such remedy at a time when it may
still hope otherwise to resolve the problems created by the default
involved); nor shall any waiver in fact made by the Agency with
respect to any specific default by the Redeveloper under this
Section be considered or treated as a waiver of the rights of the
19
Agency with respect to any other defaults by the Redeveloper under
this Section or with respect to the particular default except to
the extent specifically waived in writing.
SEC. 707. ENFORCED DELAY IN PERFORMANCE FOR CAUSES BEYOND
CONTROL OF PARTY. For the purposes of any of the provisions of the
Agreement, neither the Agency nor the Redeveloper, as the case may
be, nor any successor in interest, shall be considered in breach
of, or default in, its obligations beginning and completion of
construction of the Improvements, or progress in respect thereto,
in the event of enforced delay in the performance of such
obligations due to unforeseeable causes beyond its control and
without its fault or negligence, including, but not restricted to,
acts of God, acts of the public enemy, acts of the Federal
Government, acts of the other party, fires, floods, epidemics,
quarantine restrictions, strikes, freight, embargoes, and unusually
severe weather or delays of subcontractors due to such causes; it
being the purpose and intent of this provision that in the event of
the occurrence of any such enforced delay, the time or times for
performance of the obligations of the Agency with respect to the
preparation of the Property for redevelopment or of the Redeveloper
with respect to construction of the Improvements, as the case may
be, shall be extended for the period of the enforced delay as
determined by the Agency: PROVIDED, That the party seeking the
benefit of the provisions of this Section shall, within ten (10)
days after the beginning of any such enforced delay, have first
notified the other party thereof in writing, and of the cause or
causes thereof, and requested an extension for the period of the
enforced delay.
SEC. 708. RIGHTS AND REMEDIES CUMULATIVE. The rights and
remedies of the parties to the Agreement, whether provided by law
or by the Agreement, shall be cumulative, and the exercise by
either party of any one or more of such remedies shall not preclude
the exercise by it, at the same or different times, of any other
such remedies for the same default or breach or of any of its
remedies for any other default or breach by the other party. No
waiver made by either such party with respect to the performance,
or manner or time thereof, or any obligation of the other party or
any condition to its own obligation under the Agreement shall be
considered a waiver of any rights of the party making the waiver
with respect to the particular obligation of the other party or
condition to its own obligation beyond those expressly waive in
writing and to the extent thereof, or a waiver in any respect in
regard to any other rights of the party making the waiver or any
other obligations of the other party.
SEC. 709. PARTY IN POSITION OF SURETY WITH RESPECT TO
OBLIGATIONS. The Redeveloper, for itself and its successors and
assigns, and for all other persons who are or who shall become,
whether by express or implied assumption or otherwise, liable upon
or subject to any obligation or burden under the Agreement, hereby
waives, to the fullest extent permitted by law and equity, any and
all claims or defenses otherwise available on the ground of its (or
their) being or having become a person in the position of a surety,
whether real, personal, or otherwise or whether by agreement or
operation of law, including, without limitation on the generality
of the foregoing, any and all claims and defenses based upon
extension of time, indulgence, or modification of terms of
contract.
20
ARTICLE VIII. MISCELLANEOUS
SEC. 801. CONFLICT OF INTERESTS; AGENCY REPRESENTATIVES NOT
INDIVIDUALLY LIABLE. No member, official, or employee of the
Agency shall have any personal interest, direct or indirect, in the
Agreement, nor shall any such member, official, or employee
participate in any decision relating to the Agreement which affects
his personal interests or the interests of any corporation,
partnership, or association in which he is, directly or indirectly,
interested. No member, official, or employee of the Agency shall
be personally liable to the Redeveloper, or any successor in
interest, in the event of any default or breach by the Agency or
for any amount which may become due to the Redeveloper or successor
or on any obligations under the terms of the Agreement.
SEC 802. EQUAL EMPLOYMENT OPPORTUNITY. The Redeveloper, for
itself and its successors and assigns, agrees that during the
construction of the Improvements provided for in the Agreement:
(a) The Redeveloper will not discriminate against any
employee or applicant for employment because of race,
color, religion, disability, age, sex, or national
origin. The Redeveloper will take affirmative action to
insure that applicants are employed, and that employees
are treated during employment without regard to their
race, color, religion, disability, age, sex, or national
origin. Such action shall include, but not be limited
to, the following: employment, upgrading, demotion, or
transfer; recruitment or recruitment advertising; layoff
or termination; rates of pay or other forms of
compensation; and selection for training, including
apprenticeship. The Redeveloper agrees to post in
conspicuous places, available to employees and applicants
for employment, notices to be provided by the Agency
setting forth the provisions of this nondiscrimination
clause.
(b) The Redeveloper will, in all solicitations or
advertisements for employees placed by or on behalf of
the Redeveloper, state that all qualified applicants will
receive consideration for employment without regard to
race, color, religion, disability, age, sex, or national
origin.
(c) The Redeveloper will send to each labor union or
representative of workers with which the Redeveloper has
a collective bargaining agreement or other contract or
understanding, a notice, to be provided, advising the
labor union or workers' representative of the
Redeveloper's commitments under Section 202 of Executive
Order 11246 of September 24, 1965, and shall post copies
of the notice in conspicuous places available to
employees and applicants for employment.
(d) The Redeveloper will comply with all provisions of
Executive Order 11246 of September 24, 1965, and of the
rules, regulations, and relevant orders of the Secretary
of Labor.
21
(e) The Redeveloper will furnish all information and reports
require by Executive Order 11246 of September 24, 1965,
and by the rules, regulations, and orders of the
Secretary of Labor or the Secretary of Housing and Urban
Development pursuant thereto, and will permit access to
the Redeveloper's books, records, and accounts by the
Agency, the Secretary of Housing and Urban Development,
and the Secretary of Labor for purposes of investigation
to ascertain compliance with such rules, regulations, and
orders.
(f) In the event of the Redeveloper's noncompliance with the
nondiscrimination clauses of this Section, or with any of
the said rules, regulations, or orders, the Agreement may
be canceled, terminated, or suspended in whole or in part
and the Redeveloper may be declared ineligible for
further Government contracts or federally assisted
construction contracts in accordance with procedures
authorized in Executive Order 11246 of September 24,
1965, and such other sanctions may be imposed and
remedies invoked as provided in Executive Order 11246 of
September 24, 1965, or by rule, regulation, or order of
the Secretary of Labor, or as otherwise provided by law.
(g) The Redeveloper will include the provisions of Paragraphs
(a) through (g) of this Section in every contract or
purchase order, and will require the inclusion of these
provisions in every subcontract entered into by any of
its contractors, unless exempted by rules, regulations,
or orders of the Secretary of Labor issued pursuant to
Section 204 of Executive Order 11246 of September 24,
1965, so that such provisions will be binding upon each
such contractor, subcontractor, or vendor, as the case
may be. The Redeveloper will take such action with
respect to any construction contract, subcontract, or
purchase order as the Agency or the Department of Housing
and Urban Development may direct as a means of enforcing
such provisions, including sanctions for noncompliance:
PROVIDED, HOWEVER, That in the event the Redeveloper
becomes involved in, or is threatened with, litigation
with a subcontractor or vendor as a result of such
direction by the Agency or the Department of Housing and
Urban Development, the Redeveloper may requested the
United States to enter into such litigation to protect
the interests of the United States. For the purpose of
including such provisions in any construction contract,
subcontract, or purchase order, as required hereby, the
first three lines of this Section shall be changed to
read "During the performance of this Contract, the
Contractor agrees as follows:" and the term
"Redeveloper" shall be changed to "Contractor."
SEC. 803. PROVISIONS NOT MERGED WITH DEED. None of the
provisions of the Agreement are intended to or shall be merged by
reason of any deed transferring title to the Property from the
Agency to the Redeveloper or any successor in interest, and any
such deed shall not be deemed to affect or impair the provisions
and covenants of the Agreement.
SEC. 804. TITLES OF ARTICLES AND SECTIONS. Any titles of the
several parts, Articles, and Sections of the Agreement are inserted
for convenience of reference only and shall be disregarded in
construing or interpreting any of its provisions.
22
RIDER TO
CONTRACT FOR
SALE OF LAND FOR PRIVATE REDEVELOPMENT
By and Between
Housing Authority and
Urban Redevelopment Agency
of the City of Atlantic City
and
Atlantic City Showboat, Inc.
TABLE OF CONTENTS
1. COOPERATION. . . . . . . . . . . . . . . . . . . 1
2. MASTER PLAN. . . . . . . . . . . . . . . . . . . 1
3. DEVELOPMENT BY FCR . . . . . . . . . . . . . . . 6
(a) Re-Transfer. . . . . . . . . . . . . . . . . 7
(b) Loading Dock . . . . . . . . . . . . . . . . 8
(c) Master Plan. . . . . . . . . . . . . . . . . 1O
(d) Agreement Termination. . . . . . . . . . . . 1O
(e) Vacation . . . . . . . . . . . . . . . . . . 1O
(f) Application Filings. . . . . . . . . . . . . 1O
(g) Environmental. . . . . . . . . . . . . . . . 11
4. FCR'S FAILURE TO COMMENCE DEVELOPMENT. . . . . . 12
5. PHASE II TOWER: ALTERNATE SITE . . . . . . . . . 13
(a) Sale and Purchase. . . . . . . . . . . . . . 13
(b) Alternate Site Configuration . . . . . . . . 13
6. ADDITIONAL GARAGE. . . . . . . . . . . . . . . . 14
(a) Sale and Purchase. . . . . . . . . . . . . . 14
(b) Additional Garage Site Configuration . . . . 14
7. VACATION OF TRACTS . . . . . . . . . . . . . . . 15
(a) Agency's Right to Terminate. . . . . . . . . 15
(b) Vacation Date: Required Notice . . . . . . . 15
(c) Vacation and Conveyances . . . . . . . . . . 16
(d) Taxes. 18
8. PEDESTRIAN ACCESS. . . . . . . . . . . . . . . . 19
9. 8O' EASEMENT TAXES . . . . . . . . . . . . . . . 2O
i
RIDER TO CONTRACT FOR SALE OF LAND
FOR PRIVATE REDEVELOPMENT
1. COOPERATION. From and after the date of this Agreement,
Redeveloper and FCR shall cooperate with each other, in
consultation with the Agency, in the development of Redeveloper's
Phase I Tower; it being the intent of the parties to this
Agreement that they will each have an opportunity to review and
promptly provide comments on the plans for such Phase I Tower,
and shall have a full understanding of how the Phase I Tower will
impact upon and be integrated with FCR's proposed Entertainment
Complex (as hereinafter defined). In furtherance of the
foregoing, Redeveloper agrees to provide FCR with copies of all
plans for the Phase I Tower, as such plans are developed. Agency
reserves the right to approve during the design and construction
phases the quality of materials and finishes and all
architectural designs. FCR and Redeveloper agree to reimburse
Agency for Agency's actual costs incurred in this review process
in accordance with the Agency's normal fee schedule.
2. MASTER PLAN.
(a) Redeveloper acknowledges that FCR intends to develop an
entertainment complex upon the Project Area, pursuant to Atlantic
City Housing Authority Resolution Number 4609 (the "Entertainment
Complex"). In connection therewith, Redeveloper and FCR shall
cooperate to design
1
a master plan for the use and development of the Project Area, as
it pertains to Tracts 2 and 3 (the "Master Plan"). The Master
Plan shall include: (i) the development by FCR of the
Entertainment Complex; (ii) development by Redeveloper, at its
option, of the Phase II Tower upon a "Phase II Tower Alternate
Site" (as hereinafter defined); (iii) provision by FCR, at
Redeveloper's option, of parking for 300 vehicles for the
exclusive use and benefit of Redeveloper and its invitees, agents
and/or customers, on Tracts 2 and 3 ("Showboat Parking") ; and
(iv) development jointly by Redeveloper and FCR, at Redeveloper's
option, of additional parking on the balance of the Project Area
to be acquired by FCR, with the express understanding and
agreement that at least 700 parking spaces (in addition to the
Showboat Parking) shall be allocated for the exclusive use and
benefit of Redeveloper, its invitees, agents and customers (the
"Additional Showboat Parking"). The Master Plan shall be subject
in all events to the review and prior approval of the Agency, and
shall be developed in consultation with the Agency. The Showboat
Parking and the Additional Showboat Parking shall not be used by
Redeveloper's employees without the written consent of the
Agency. In the event of a dispute between Redeveloper and FCR
concerning any aspect of the Master Plan not otherwise
specifically addressed in the Agreement, Redeveloper and FCR
agree that the Agency shall have the final decision to resolve
such dispute.
2
(b) The Master Plan shall also provide for the use by or
conveyance to FCR (after FCR commences development (as
hereinafter defined)) of the unoccupied portion(s) of Tract 1
and/or the Phase II Tower Alternate Site (as hereinafter
defined), as jointly determined by Redeveloper and FCR, to
accommodate FCR's development of the Entertainment Complex;
subject, in all events, to the 80' Easement which will
nonetheless remain in favor of Redeveloper for the benefit of
Tract 1. In the event of a dispute between Redeveloper and FCR
over which area(s) of Tract 1 or the Phase II Tower Alternate
Site are unoccupied, and/or over which portions of such
unoccupied areas should be conveyed or otherwise made available
to accommodate FCR's development of the Entertainment Complex,
the Agency shall determine exactly which portion(s) of Tract 1
and/or the Phase II Tower Alternate Site shall be available for
use by, or conveyance to FCR; provided, however, no portions of
Tract 1 may be so designated by the Agency for use by or
conveyance to FCR, other than in those areas designated as the
"Unoccupied Portion" on Exhibit "C", annexed hereto and by this
reference made a part hereof. Redeveloper shall not be
responsible for the costs of subdivision or conveyance of such
unoccupied portion, nor for any taxes on such unoccupied portion
occurring beyond the date of such conveyance. Redeveloper's
obligation to reconvey to the Agency the unoccupied portions of
Tract 1 as provided in
3
this subparagraph (b) shall survive the issuance of a Certificate
of Completion for Tract 1.
(c) Redeveloper and FCR shall jointly develop a cost
allocation formula, under which Redeveloper shall pay for the
costs of the Showboat Parking, if requested by Redeveloper, and
(if applicable) the Additional Showboat Parking.
(d) If Redeveloper and FCR are unable to agree on a joint
plan for the development of the Additional Showboat Parking by
January 31, 1995, Redeveloper shall have the right and option to
itself acquire additional land from the Agency, selected jointly
by FCR and Redeveloper, (and, provided that Tract 2 has been
reconveyed to the Agency in accordance with Rider Section 3(a)
hereof, the Agency hereby agrees promptly upon request to convey
same without cost to Redeveloper), and develop thereon an
additional parking garage facility (the "Additional Garage") for
parking of 700-1,000 vehicles. Any such parcel ("Additional
Garage Site") shall comply with the requirements of Rider Section
6(b) hereof. If Redeveloper and FCR cannot agree on a mutually
acceptable Additional Garage Site by January 31, 1995, then the
Agency shall select one of the parcels shown on the plan attached
as Exhibit "D" hereto, and by this reference made a part hereof,
and the parcel so selected shall be the Additional Garage Site
for all purposes hereunder. Redeveloper's development of the
Additional Garage shall be subject to the prior review and
approval of the
4
Agency, as provided in this Agreement, and in accordance with the
Urban Renewal Plan.
(e) If Redeveloper and FCR are unable to agree by January
31, 1995 on an alternate site for development of the Phase II
Tower, then the Agency shall select and convey a Phase II Tower
Alternate Site in accordance with the provisions of Rider
Sections 3(a) and 5 hereof.
(f) Redeveloper and FCR shall begin development of the
Master Plan on or before December 31, 1993, and shall complete
same by January 31, 1995. No reversions shall apply if the
parties are unable to meet such deadlines. Redeveloper shall
authorize Redeveloper's design consultant, at Redeveloper's cost
and expense, to work with FCR and FCR's design consultants in the
preparation of the Master Plan. The parties will cooperate to
design the Master Plan to satisfy the requirements of all parties
to this Agreement, and all such parties shall provide development
information requested by any other party prior to and during the
preparation of the Master Plan. Without limiting the generality
of the foregoing, the parties to this Agreement shall cooperate
to ensure that each development component in the Master Plan will
have adequate ingress and egress for construction, and an
adequate area for construction staging. In the event of a dispute
between Redeveloper and FCR, the Agency shall determine the
nature and extent of the ingress and egress
5
for construction, and an adequate area for construction staging,
for the development of any component of the Master Plan.
(g) The Master Plan shall only be effective if FCR
commences development (as hereinafter defined) of the
Entertainment Complex by the Third Party Development Deadline.
Therefore, notwithstanding any other provision of this Agreement
to the contrary, Redeveloper, the Agency and FCR hereby
specifically acknowledge and agree that the Master Plan, and any
obligations of the parties thereunder, shall automatically
terminate on the Third Party Development Deadline and be of no
further force or effect whatsoever, unless FCR commences
development (as hereinafter defined) on or prior to the Third
Party Development Deadline.
3. DEVELOPMENT BY FCR. Redeveloper's accommodations to FCR
and FCR's development plans under the provisions of this
Agreement, or in favor of any substitute developer designated by
the Agency in writing to Redeveloper, shall only extend to and be
effective through January 31, 1995 (the "Third Party Development
Deadline"), which deadline is and shall be of the essence of this
Agreement, subject to no extension without the prior written
consent of Redeveloper. For purposes of this Agreement, the term
"FCR" shall be deemed to include any substitute developer
designated by the Agency on or before the Third Party Development
Deadline. However, no such substitution of developer by the
Agency shall alter or extend the Third Party Development
Deadline. Therefore, FCR must commence development of the
6
Entertainment Complex prior to the Third Party Development
Deadline. For purposes of this Rider Section 3 and any other
reference to FCR's progress with respect to the Entertainment
Complex, the term "commence development" means FCR's development
progressing to the point at which: (i) the Agency shall have
approved, FCR's Entertainment Complex, as well as FCR's schedule
for the construction thereof; and (ii) the Agency shall have
determined that FCR has obtained a commitment for financing the
development of the Entertainment Complex. If FCR commences
development of the Entertainment Complex prior to the Third Party
Development Deadline, the following provisions shall thereafter
apply:
(a) RE-TRANSFER. Redeveloper shall re-convey ownership of
and title to Tract 2 to the Agency. Such reconveyance shall be
made subject to the provisions of Section 2(a) of Part I of the
Agreement, with respect to the condition of title thereto. In
consideration of Redeveloper's re-conveyance of Tract 2 to the
Agency, and as a condition precedent to Redeveloper's obligation
to do so, the Agency shall convey to Redeveloper in fee simple,
without additional cost: i) an alternate site selected by
Redeveloper and FCR jointly under the Master Plan (or, failing
such Agreement, by Agency pursuant to Rider Section 2(e) hereof)
for Redeveloper's Phase II Tower, such site ("Phase II Tower
Alternate Site") being in compliance with the requirements of
Rider Section 5(b)
7
hereof; and ii) at Redeveloper's request, if Redeveloper and FCR
are unable to agree prior to the Third Party Development Deadline
upon joint development of the Additional Showboat Parking, one of
the Additional Garage Sites for the Additional Garage, more
particularly described in Exhibit "D" hereto, said site to be
chosen by the Agency. If Redeveloper and FCR cannot agree prior
to the Third Party Development Deadline upon a suitable Phase II
Tower Alternate Site, the Agency shall identify and convey to
Redeveloper without additional cost a Phase II Tower Alternate
Site which complies with the requirements of Rider Section 5(b)
hereof. The Agency's decision shall be binding on Redeveloper,
the Agency and FCR and shall be final for all purposes hereunder.
Thereafter, development of the Phase II Tower upon the Phase II
Tower Alternate Site shall be subject to the provisions of Rider
Section 5, below; and development of the Additional Garage on the
Additional Garage Site shall be subject to the provisions of
Rider Section 6, below. Redeveloper shall have no liability for
any taxes, municipal utility charges, assessments or similar
costs with respect to Tract 2, which accrue from and after the
date on which Redeveloper vacates Tract 2 in accordance with the
provisions of this Agreement.
(b) LOADING DOCK. Following the conveyance (including by
lease) of a portion of Tract 1 (if applicable) and of Tract 2 and
Tract 3 (if applicable) to FCR by the Agency for the
Entertainment Complex,
8
Redeveloper shall reconfigure, at its own cost and expense, the
loading dock then existing for the Phase I Tower, in order to
accommodate FCR's planned development of a "platform
approximately level with the elevation of the Boardwalk.
Reconfiguration shall include, if determined to be necessary by
the Agency, the lowering of said loading dock and all or a
portion of the related service/loading drive, below grade, at
Redeveloper's cost and expense. Redeveloper will cooperate with
FCR in the development of a common loading area. Redeveloper
shall also cooperate with FCR to relocate or reconfigure, at
Redeveloper's expense, Redeveloper's pedestrian egress required
under Fire Code within the 8O' Easement, subject to the
requirements of Fire Code, in order to accommodate and be
integrated with FCR's Entertainment Complex. Redeveloper's
intended use of the 80' Easement for loading and fire egress
lanes is more particularly shown on Exhibit "E", annexed hereto
and by this reference made a part hereof. If there is a dispute
between Redeveloper and FCR with respect to the foregoing
matters, the Agency shall make the final determination with
respect to any relocation or reconfiguration which is so
disputed. The maximum elevation of the 8O' Easement shall be
reduced to an elevation of 1O.29 feet above Mean Seal Level if
and when (i) the Agency has conveyed or leased either the
Unoccupied Portion of Tract 1 (if applicable), or Tract 2 (if
applicable) or Tract 3 (if applicable) to FCR and (ii) the Agency
determines in its sole discretion that
9
FCR's planned development of a "platform' approximately level
with the elevation of the Boardwalk requires the reconfiguration
or relocation of the said loading dock and/or all or a portion of
the related service/loading drive and/or pedestrian egress.
(c) MASTER PLAN. Redeveloper and FCR shall implement the
Master Plan with respect to Tract 2 and Tract 3.
(d) AGREEMENT TERMINATION. Redeveloper's lease for Tract 3
and Lot 144.02, if applicable, if any, and the Use and Occupancy
Agreement for any of the Tracts, shall be terminated.
(e) VACATION. Notwithstanding any provision to the contrary
herein contained, Redeveloper shall not be required to vacate any
of the Tracts prior to the date therefor provided under Rider
Section 7 hereof.
(f) APPLICATION FILINGS. Redeveloper shall provide its
consent as lessee or fee owner of any of the Tracts, to the
filing or submission of any application by FCR for development
permits and approvals with regard to Tract 2, the Unoccupied
Portion of Tract 1, Tract 3 and Lot 144.02. Such consent shall
not preclude Redeveloper from objecting to the substance of any
such application.
(g) ENVIRONMENTAL.
(i) Redeveloper, at its sole cost and expense, shall
have a Phase I Environmental Site Assessment prepared with
respect to Tracts 1, 2, 3 and Proposed Lot
10
144.02, and shall deliver a copy thereof to the Agency on or
before June 3O, 1993 (the "Phase one Report").
(ii) If the Phase One Report discloses any
contamination on the aforesaid Tracts, having an aggregate
projected remediation cost of over $250,000.00, then Redeveloper
may terminate this Agreement as provided in Section 2(j) Part I
of the Agreement.
(iii) If this Agreement is not terminated as
provided in clause (ii) hereof, or if Redeveloper waives its
right to terminate the Agreement, then after settlement,
Redeveloper shall remediate the subject Tract(s) as and to the
extent required under applicable law. In addition, from and after
settlement, Redeveloper shall indemnify and hold the Agency
harmless from and against any and all loss, cost, damage, claim
or expense from the contamination of such Tract(s); provided,
however, that, with respect to any contamination which did not
arise during the period of Redeveloper's ownership or occupancy
of the subject Tract(s), such indemnity shall automatically
terminate, as to any such Tract, on the date Redeveloper vacates
or reconveys such Tract pursuant to the provisions of this
Agreement.
(iv) Prior to the later of Redeveloper's vacation or
reconveyance to the Agency of Tract 2, Tract 3 and/or Lot 144.O2,
as applicable, Redeveloper shall provide to the Agency either, at
Redeveloper's option: (1) an ECRA Letter of Non-Applicability for
Tract 2,
11
Tract 3 and/or Lot 144.02, as applicable; or (2) a Phase I
Environmental Site Assessment Report for Tract 2, Tract 3 and/or
Lot 144.O3 as applicable, showing no material contamination of
Tract 2, Tract 3 and/or Lot 144.02, as applicable, other than
such contamination as was shown in the Phase One Report obtained
prior to settlement, and was not required to be remediated by
Redeveloper under clause (iii), above.
4. FCR'S FAILURE TO COMMENCE DEVELOPMENT. If FCR (or any
substitute developer) fails to commence development of the
Entertainment Complex by the Third Party Development Deadline,
then the provisions of Rider Section 3 hereof shall automatically
be of no further force or effect, and Redeveloper shall have no
obligation to re-convey Tract 2 to the Agency pursuant to the
provisions of Rider Section 3, and Redeveloper's Lease for Tract
3 shall continue in full force and effect, without any
termination right of the Agency except as otherwise provided in
Redeveloper's Lease, except if Agency exercises its option to
convey fee title to Tract 3 to the Redeveloper. Upon any such
failure by FCR or any substitute developer to commence
development by the Third Party Development Deadline, determined
by the Agency as provided in Rider Section 3 hereof, any and all
of Redeveloper's remaining obligations hereunder to accommodate
the development of the Entertainment Complex shall automatically
terminate and be of no further force or effect, without the need
for notice or any other action on the part of any party hereto.
Redeveloper shall
12
thereupon have the right to begin Redeveloper's development of
the Tract 2 Garage, at any time after the Third Party Development
Deadline, on thirty (30) days' notice to the Agency but not later
than October 1, 1997. Redeveloper shall also have the right, if
Redeveloper so elects, to develop the Phase II Tower upon Tracts
1 and/or 2, as provided under Section 2(h) of Part I of this
Agreement. The Agency and FCR acknowledge and consent to
Redeveloper's development, use and occupancy as contemplated
under this Rider Section 4.
5. PHASE II TOWER; ALTERNATE SITE. If FCR commences
development of the Entertainment Complex by the Third Party
Development Deadline, then Section 2(h) of Part I of this
Agreement shall not govern development of the Phase II Tower
(except that the definition of the "Phase II Tower" shall
nonetheless apply). Rather, the following provisions shall apply
to the development of the Phase II Tower:
(a) SALE AND PURCHASE. The Agency's conveyance of the Phase
II Tower Alternate Site shall be made without the need for
additional consideration from Redeveloper, and shall be otherwise
subject to the provisions of Section 2 of Part I of this
Agreement.
(b) ALTERNATE SITE CONFIGURATION. The parties hereto
acknowledge and agree that any Phase II Tower Alternate Site
shall be approximately 30,000 square feet in area, having
dimensions of approximately 100 feet x 300 feet, and shall be
contiguous with the Showboat Site in a manner which allows for a
reasonably practicable direct
13
physical connection between the Phase II Tower's casino floor and
the Redeveloper's then existing casino floor, to enable
Redeveloper to comply with the New Jersey Casino Control Act and
the then prevailing regulations of the New Jersey Casino Control
Commission. If Redeveloper determines to develop, as part of
Phase II Tower, space available for casino expansion of less than
20,000 square feet, then the size of the Phase II Tower Alternate
Site may be reduced, at the Agency's option, by 1.5 square feet
for each square foot by which the size of such casino expansion
space to be developed by Redeveloper as part of the Phase II
Tower falls below 20,000 square feet.
6. ADDITIONAL GARAGE. If FCR commences development by the
Third Party Development Deadline, then the following provisions
shall govern the development of the Additional Garage on any
Additional Garage Site:
(a) SALE AND PURCHASE. The Agency's conveyance of the
Additional Garage Site shall be made without the need for
additional consideration from Redeveloper, and shall be otherwise
subject to the provisions of Section 2 of this Agreement.
(b) ADDITIONAL GARAGE SITE CONFIGURATION. The Additional
Garage Site shall be approximately 60,600 square feet in area
with dimensions of approximately 166 feet x 365 feet. If
Redeveloper and FCR cannot agree upon an Additional Garage Site,
the Agency shall select one of
14
the Sites for the Additional Garage shown on Exhibit "D" hereto.
7. VACATION OF TRACTS.
(a) AGENCY'S RIGHT TO TERMINATE.
(i) BEFORE DEADLINE. At any time before the Third
Party Development Deadline, the Agency may, by written notice to
Redeveloper as hereinafter provided ("Notice to Vacate"),
terminate the Redeveloper's Lease or Use and Occupancy Agreement,
and thereby require Redeveloper to vacate Tract 2, and/or Tract 3
(exclusive of the 80' Easement) and/or Lot 144.02 in accordance
with the provisions of this Rider Section 7. Such written notice
must specify the date ("Vacation Date") by which Redeveloper must
vacate the subject Tract(s), and must comply with the
requirements of subparagraph (b) hereof. Prior to the Third Party
Development Deadline, the Agency may terminate an existing Notice
to Vacate and issue a new one; provided such new Notice to Vacate
must itself comply with the provisions of this Section 7.
(ii) AFTER DEADLINE. If FCR has commenced development of the
Entertainment Complex by the Third Party Development Deadline,
the Agency may deliver Notice to Vacate after the Third Party
Development Deadline.
(b) VACATION DATE; REQUIRED NOTICE. The Notice to Vacate
must comply with the following requirements:
15
(i) MINIMUM NOTICE. The Notice to Vacate must specify
a Vacation Date which provides Redeveloper at least one hundred
twenty (120) days' prior written notice to vacate, if the subject
Tract(s) are then being used by Redeveloper for construction
staging, and at least ninety (90) days' prior written notice to
vacate, if the subject Tract(s) are then being used for interim
surface parking.
(ii) THIRD PARTY DEVELOPMENT DEADLINE. If the Vacation
Date falls prior to the Third Party Development Deadline,
Redeveloper shall not be forced to vacate or reconvey the subject
Tract(s) by such Vacation Date, unless FCR has already commenced
development of the Entertainment Complex. If FCR fails to
commence development by such Vacation Date, but subsequently
commences development prior to the Third Party Development
Deadline, the date of such subsequent commencement of development
shall be the Vacation Date, without the need for a further Notice
to Vacate. Notwithstanding the foregoing, if FCR fails to
commence development of the Entertainment Complex by the Third
Party Development Deadline, then upon such failure any Notice to
Vacate then pending shall automatically be null and void and of
no force or effect, and no further Notice to Vacate may be given.
(c) VACATION AND CONVEYANCES.
(i) REQUIRED ACTIONS. On the Vacation Date,
Redeveloper shall vacate the Tract(s) covered by the
16
Notice to Vacate, and shall reconvey Tract 2 to the Agency as
contemplated under Rider Section 3(a), above; provided, however,
that Redeveloper's obligation to reconvey Tract 2 and/or to
vacate any of the Tracts or portions thereof, shall be expressly
conditioned upon: (i) the Agency conveying to Redeveloper the
Phase 2 Tower Alternate Site and the Additional Garage Site in
accordance with the provisions contained in this Agreement,
including those set forth in Section 8(c) Part I of the
Agreement; and (ii) the Agency or FCR providing Redeveloper with
"additional suitable space" (as hereinafter defined) to
accommodate Redeveloper's construction staging and/or interim
surface parking, as the case may be, then existing on the
Tract(s) so vacated and/or reconveyed. Redeveloper shall be
responsible for any costs associated with the relocation of
construction staging or interim surface parking as contemplated
under this subparagraph (c).
(ii) ADDITIONAL SUITABLE SPACE. The term "additional
suitable space" as used in this Rider Section 7 shall mean space
of approximately equal size to accommodate Redeveloper's
construction staging operations, or to allow Redeveloper the same
number of interim surface parking spaces, as the case may be, as
then existing on Tract 2, Tract 3, and/or Proposed Lot 144.02, as
applicable. Redeveloper acknowledges that additional suitable
space hereunder shall likely be located on the north side of
Pacific Avenue.
17
(iii) AGREEMENTS. Redeveloper's Lease and/or Use
and Occupancy Agreement shall terminate on and as of the Vacation
Date established in the Notice to Vacate, or on such later date,
if any, determined in accordance with subsections (b) and (c)
hereof, by which Redeveloper must vacate the subject Tract(s) in
accordance with the provisions of this Rider Section 7.
Redeveloper and the Agency shall enter into a lease for interim
surface parking, or a use and occupancy agreement for
construction staging, as applicable, substantially the same as
those attached as Exhibits "J" and "B-2" hereto, respectively,
for the additional suitable space provided to Redeveloper.
(d) TAXES.
(i) Provided both the Notice to Vacate and the
Vacation Date are in compliance with the requirements of this
Agreement, if Redeveloper fails to vacate the Tract(s) covered by
the Notice to Vacate on or before the Vacation Date specified
therein, then Redeveloper shall be liable for any and all
additional real property taxes on the subject Tract(s), caused by
Redeveloper's failure timely to vacate, including, without
limitation, those accruing or falling due after Redeveloper's
vacation of the subject Tract(s).
(ii) If Redeveloper vacates the Tract(s) subject to the
Notice to Vacate on or before the Vacation Date (adjusted, if
necessary, to comply with the provisions of subsection (b)(ii)
hereof), then Redeveloper shall not be
18
liable for any real property taxes accrued on the subject
Tract(s) beyond the Vacation Date (so adjusted if necessary).
8. PEDESTRIAN ACCESS.
(a) Redeveloper's use of Tract 3 and Proposed Lot 144.O2
for construction staging hereunder shall be subject, during the
Construction Staging Period, to the reservation of a 30'
pedestrian egress/ingress lane along New Jersey Avenue, for the
nonexclusive use of FCR and its employees, agents and customers,
for access to Proposed LOT 144.01, as shown on Exhibit "D",
annexed hereto and by this reference made a part hereof.
Notwithstanding the foregoing, Redeveloper's obligation hereunder
shall automatically terminate and be of no further force or
effect, if FCR fails to commence development on or before the
Third Party Development Deadline.
(b) Prior to the completion of FCR's Entertainment Complex,
Redeveloper shall provide reasonable access to FCR across Tracts
2 and 3, and Proposed Lot 144.02, which access shall continue
until the Third Party Development Deadline, at which point said
right of access shall expire, unless by the Third Party
Development Deadline FCR shall have commenced development of the
Entertainment Complex, in which event such right to access shall
continue, as may be reasonably required by FCR, until development
of the Entertainment Complex is completed. In no event shall the
access right granted to FCR hereunder be allowed to displace or
interfere with the
19
Redeveloper's proposed developments, uses and operations upon the
Tracts as more particularly described in this Agreement.
9. 80' EASEMENT TAXES.
(a) If the City assesses real estate taxes on the 80'
Easement notwithstanding the fact that the Agency is the fee
owner thereof, Redeveloper shall be solely liable for such taxes.
(b) Whether or not a Certificate of Completion has been
issued for the 80' Easement, if Redeveloper fails to pay all real
property taxes upon the 80' Easement, subject to applicable
notice and/or cure periods, the Agency may terminate the 8O'
Easement and pursue all rights and remedies available under this
Agreement, including but not limited to those specified under
Section 704 hereof with respect to any of the Tracts for which a
Certificate of Completion has not then been issued.
20
EXHIBIT "A-1" Plan: Diagram of Tracts 1,2 & 3; 80' Easement
[Artur W. Ponzio letterhead]
SHOWBOAT EXPANSION
METES AND BOUNDS DESCRIPTIONS
---------------------------------------------------------
BLOCK 13, LOT 144.03
BEGINNING at a point being South 27 degrees, 98 minutes, 00
seconds east a distance of 445.00' from the southerly line of
Pacific Avenue (6O' wide ), and South 62 degrees, 32 minutes, 00
seconds west a distance of 140.00' from the westerly line of New
Jersey Avenue (5O' wide), and extending from said beginning
point; thence
1. South 27 degrees, 28 minutes, 00 seconds east a
distance of 497.00' to a point; thence
2. South 62 degrees, 32 minutes, 00 seconds west a
distance of 126.00' to a point; thence
3. North 27 degrees, 28 minutes, 00 seconds west a
distance of 497.00' to a point; thence
4. North 62 degrees, 32 minutes, CO seconds east a
distance of 126.00' to the point and place of BEGINNING,
CONTAINING an area of 62,622 square feet
EXHIBIT "A-2" Legal Description - Tract 1
BLOCK 13, LOT 144.06
BEGINNING at a point in the westerly line of New Jersey Avenue
(5O' wide), South 27 degrees, 28 minutes, 00 seconds east a
distance of 862.00' from the southerly line of Pacific Avenue
(60' wide), and extending from said beginning point; thence
1. South 27 degrees, 28 minutes, 00 seconds east in and
along the westerly line of New Jersey Avenue a distance of
80.00' to a point; thence
2. South-62 degrees, 32 minutes, 00 seconds west a
distance of 140.00' to a point; thence .
3. North 27 degrees, 28 minutes, 00 seconds west a
distance of 80.00' to a point; thence
4. North 62 degrees, 32 minutes, 00 seconds east a
distance of 140.00' to the point and place of BEGINNING
CONTAINING. an area of 11200 square feet
SAID EASEMENT AREA BEING LIMITED IN HEIGHT TO Elevation 23 FEET
ABOVE MEAN SEA LEVEL, WHICH IS SUBJECT TO AUTOMATIC Reduction TO
A MAXIMUM Elevation OF 10.29 FEET ABOVE MEAN SEA LEVEL. IN
ACCORDANCE WITH THE TERMS CONTAINED IN THE DEED.
EXHIBIT "A-3" Legal Description - 80' Easement
BLOCK 13; LOT 144.04
BEGINNING at a point being South 27 degrees, 28 minutes, 00
seconds east a distance of 80. 00 ' from the southerly line of
Pacific Avenue (5C' wide), and South 62 degrees, 32 minutes, 00
seconds west a distance or 100.00' from the westerly line of New
Jersey Avenue (50' wide), and extending from said beginning
point; thence
1. South 27 degrees, 28 minutes, 00 seconds east a
distance of 583. 00 ' to a point; thence
2. South 62 degrees, 32 minutes, 00 seconds west a
distance of 40.00' to a point; thence
3. North 27 degrees, 28 minutes, 00 seconds west a
distance of 218.00' to a point; thence
4. South 62 degrees, 32 minutes, 00 seconds west a
distance of 126.00' to a point; thence
5. North 27 degrees, 28 minutes, 00 seconds west a
distance of 365.00' to a point; thence
6. North 62 degrees, 32 minutes, 00 seconds east a
distance of 166.00' to the point and place of BEGINNING.
CONTAINING an area of 6931O square feet
EXHIBIT "A-4" Legal Description - Tract 2
TRACT 3
BEGINNING at the intersection of the southerly line of Pacific
Avenue (6O' wide) with the westerly line of New Jersey Avenue (
50 ' wide), and extending from said beginning point; thence
1. South 27 degrees, 28 minutes, 00 seconds east in and
along the westerly line of New Jersey Avenue a distance of 942.
00 ' to a point; thence
2. South 62 degrees, 32 minutes, 00 seconds west a
distance of 140.00' to a point; thence
3. North 27 degrees, 28 minutes, 00 seconds west a
distance of 279.00' to a point; thence
4. North 62 degrees, 32 minutes, 00 seconds east a
distance of 40.00' to a point; thence
5. North 27 degrees, 28 minutes, 00 seconds west a
distance of 583.00' to a point; thence
6. South 62 degrees, 32 minutes, 00 seconds west a
distance of 166. 00 ' to a point; thence
7. North 27 degrees, 28 minutes, 00 seconds west a
distance of 80.00' to the southerly line of Pacific Avenue,
thence
8. North 62 degrees, 32 minutes, 00 seconds east in and
along the southerly line of Pacific Avenue a distance of 266.00'
to the point and place of BEGINNING.
CONTAINING an area of 11864O square feet
BEING PROPOSED LOTS 144.15 AND 144.06 IN BLOCK 13.
EXHIBIT "A-S" Legal Description - Tract 3
DIAGRAM OF PROPOSED LOTS
CONSTRUCTION STAGING PLAN
EXHIBIT "B-1"
EX-21.01
15
EXHIBIT 21.01
LIST OF SUBSIDIARIES
State of
Incorpora- Names Used In
Name tion/ Doing Business
Organiza-
tion
Showboat Operating Nevada Showboat; Showboat
Company Hotel, Casino & Bowling
Center; Showboat Motel;
Las Vegas Showboat
Showboat Development Nevada Showboat Development
Company Company
Lake Pontchartrain Nevada Lake Pontchartrain
Showboat, Inc. Showboat; Showboat Star
Casino
Showboat Indiana, Inc. Nevada Showboat Marina
Partnership
Showboat Louisiana, Inc. Nevada Showboat Star Casino
Showboat Missouri, Inc. Nevada Randolph Riverboat
Showboat Indiana Nevada Showboat Marina
Investment, L.P. Partnership
Showboat Star Partnership Louisiana Showboat Star Casino
Ocean Showboat, Inc. New Jersey Ocean Showboat
Atlantic City Showboat, New Jersey Showboat; Showboat
Inc. Hotel and Casino;
Atlantic City Showboat
Ocean Showboat Finance New Jersey Ocean Showboat Finance
Corporation Corporation
Showboat Australia Pty Australia Sydney Harbour Casino
Limited
EX-23.01
16
CONSENT OF KPMG PEAT MARWICK
Independent Auditor's Consent
To Shareholders and Board of Directors
Showboat, Inc.
We consent to incorporation by reference in the registration statements
(Nos. 33-36048, 33-56044 and 33-47945) on Form S-8 of Showboat, Inc. of
our report dated March 10, 1995, relating to the consolidated balance
sheets of Showboat, Inc. and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of income, shareholders'
equity and cash flows and related schedule for each of the years in the
three-year period ended December 31, 1994, which report appears in the
December 31, 1994 annual report on Form 10-K of Showboat, Inc.
Our report refers to a change in method of accounting to adopt the
provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES.
KPMG Peat Marwick LLP
Las Vegas, Nevada
March 30, 1995
EX-27
17
5
0000089966
SHOWBOAT, INC
1000
YEAR
DEC-31-1994
DEC-31-1994
37091
53338
11290
2400
2591
143521
506199
168531
623691
50310
389992
15795
0
0
141666
623691
393534
401333
0
213175
149158
0
24580
27248
11549
15699
0
0
0
15699
1.02
1.02