EXHIBIT 10.27
AGREEMENT
This Agreement (this "AGREEMENT") is entered into this 1st day of
August, 1996, by and between HWCC-LOUISIANA, INC., a Louisiana corporation
("HWCC-LOUISIANA"), and ▇▇▇▇▇▇▇▇▇ ENTERTAINMENT LOUISIANA GAMING, INC., a
Louisiana corporation ("▇▇▇▇▇▇▇▇▇").
RECITALS
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1. Pursuant to the terms of that certain (a) Option Agreement dated
June 16, 1995, between H&H Contracting Co., Inc. ("H&H") and ▇▇▇▇▇
Environmental, Inc. (whose interest in such Option Agreement has been assigned
to HWCC-Louisiana), as amended by that certain First Amendment to Option
Agreement dated March 29, 1996 (as amended, "OPTION AGREEMENT #1"), and (b)
Option Agreement No. 2 dated October 3, 1995, between H&H and HWCC-Louisiana,
as amended by that certain First Amendment to Option Agreement No. 2 dated
March 29, 1996 (as amended, "OPTION AGREEMENT #2") (Option Agreement #1 and
Option Agreement #2 are collectively referred to herein as the "OPTION
AGREEMENTS"), HWCC-Louisiana possesses the right to acquire certain real
property described in the Option Agreements (the "HWCC PROPERTY") upon terms
and conditions described in the Option Agreements.
2. On August 28, 1995, HWCC-Louisiana filed (a) an Amended and
Restated Level I Riverboat License Application Part A (the "DIVISION
APPLICATION") with the Riverboat Gaming Enforcement Division of the Gaming
Enforcement Section of the Office of the Louisiana State Police, Department of
Public Safety and Corrections (the "DIVISION") and (b) an Amended and Restated
Application for Certificate of Preliminary Approval (the "COMMISSION
APPLICATION") (the Division Application and the Commission Application are
collectively referred to as the "APPLICATIONS") with the Gaming Division of
the Louisiana Department of Justice (the "DEPARTMENT OF JUSTICE") for review
by the Louisiana Riverboat Gaming Commission.
3. The Department of Justice has issued formal notice that all
previous applicants for the remaining riverboat license in Louisiana must
submit amendments to any application for such license by no later than August
2, 1996 (the "APPLICATION DEADLINE").
4. HWCC-Louisiana and ▇▇▇▇▇▇▇▇▇ (collectively the "PARTIES" and
individually a "PARTY") desire to enter into this Agreement in order to
jointly develop, own and operate a world-class casino and entertainment
project on the Property (as defined in Section 1.03(b)), subject to the terms
and conditions contained in this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in consideration of the
covenants and agreements set forth below, HWCC-Louisiana and ▇▇▇▇▇▇▇▇▇ agree
as follows:
AGREEMENT
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ARTICLE I
PREDEVELOPMENT ACTIVITY AND FORMATION OF LLC
1.01 PRE-DEVELOPMENT ACTIVITY. Commencing immediately upon the
execution of this Agreement, the Parties will act in good faith and use all
commercially reasonable efforts to promote the granting of the Licenses (as
defined in Section 1.03(b)). In connection therewith, the Parties agree to
work together to file by no later than the Application Deadline any amendments
to the Applications (the "APPLICATION AMENDMENTS") or any other documentation
or materials necessitated by the Parties entering into this Agreement or
otherwise mandated by the Division, the State of Louisiana Gaming Control
Board, the Department of Justice or any other applicable authority (the
"APPLICABLE AUTHORITIES"). Except as otherwise set forth in Sections 9.02 and
10.04, all other expenses incurred by either of the Parties or the LLC (as
defined in Section 1.02) in connection with such pre-development activity
(including all such expenses incurred by HWCC-Louisiana prior to the date of
this Agreement) (the "SHARED EXPENSES") shall be borne (a) prior to the
Closing (as defined in Section 4.01) equally by the Parties and (b) after the
Closing, by the LLC. Simultaneous with the execution of this Agreement,
▇▇▇▇▇▇▇▇▇ shall remit to HWCC-Louisiana cash in an amount equal to one-half of
the Shared Expenses incurred by HWCC-Louisiana prior to the date of this
Agreement and that have been capitalized by HWCC-Louisiana. That portion of
the Shared Expenses incurred by HWCC-Louisiana prior to the date of this
Agreement and not capitalized by HWCC-Louisiana shall constitute a portion of
HWCC-Louisiana's capital contribution to the LLC.
1.02 FORMATION OF LLC. Commencing immediately upon execution of
this Agreement, the Parties shall take any and all action necessary to form a
Louisiana limited liability company to be owned on a 50-50 basis by each of
HWCC-Louisiana and ▇▇▇▇▇▇▇▇▇ (the "LLC"). In the event that any Applicable
Authority or any law, rule or regulation prevents, or fails to consent to,
formation of the LLC and/or the granting of the Licenses to the LLC, the
Parties hereby agree to work in good faith and to use their best efforts to
develop a structure or organizational form that will lawfully achieve the
terms and conditions of this Agreement.
1.03 CAPITAL CONTRIBUTIONS TO THE LLC; PROJECT FINANCING.
(a) The LLC will be initially capitalized with the minimum capital
required to capitalize the LLC. Each of the Parties will contribute its fifty
percent (50%) share of such minimum required capital. In addition, HWCC-
Louisiana will contribute any and all of its rights to, and the LLC will
expressly assume, indemnify and release HWCC-Louisiana from any of its
obligations under, the Option Agreements.
(b) Commencing immediately upon the issuance of all licenses and
permits required for the LLC to legally conduct casino gaming on the Property
("LICENSES"), each of the Parties and their affiliates will use their contacts
in the capital markets and their respective experience in raising capital to
enable the LLC to obtain a long-term credit facility (the "PROJECT FINANCING")
on the most favorable terms available to the LLC in an amount adequate to
provide the LLC with sufficient funds for the development of a world-class
casino entertainment project (the "PROJECT") consisting of (i) a riverboat,
(ii) a pavilion situated on the HWCC Property at which the riverboat will be
docked, (iii) an 18-hole golf course, a portion of which shall be on the HWCC
Property and the remainder of which shall be on property owned by the City of
Bossier City (the "BOSSIER CITY PROPERTY") (the HWCC Property and the Bossier
City Property are collectively referred to herein as the "PROPERTY"), (iv) a
retail mall built, and operated by the Simon/▇▇▇▇▇▇▇▇▇ REIT on a portion of
the HWCC Property leased to it by the LLC, and (v) related surface and
structured parking, hotel, dining,
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retail and entertainment facilities also located on the Property. The Parties
estimate that the total development cost of the Project will be in the range
of $200 million. The ultimate nature, scope and size of the Project will be
determined in good faith by mutual agreement of the Parties based upon the
then-prevailing physical, financial, economic, zoning and competitive
constraints and considerations.
(c) Notwithstanding anything to the contrary in this Agreement
providing for a different capital structure, to the extent that the lenders
under the Project Financing require HWCC-Louisiana and ▇▇▇▇▇▇▇▇▇ to contribute
additional equity into the LLC in order to obtain the Project Financing, each
of HWCC-Louisiana and ▇▇▇▇▇▇▇▇▇ agrees to contribute such equity on a 50-50
basis.
ARTICLE II
MANAGEMENT
2.01 EXECUTIVE COMMITTEE. The LLC will be managed by an Executive
Committee (the "EXECUTIVE COMMITTEE") comprised of four (4) managers. The
authority of the Executive Committee will be specified in the organizational
documentation for the LLC (the "LLC DOCUMENTATION"). No member of the LLC
will have the right to bind the LLC or to incur any obligation on behalf of
the LLC unless approved by the Executive Committee. HWCC-Louisiana will
appoint two (2) members to the Executive Committee who will represent HWCC-
Louisiana, and ▇▇▇▇▇▇▇▇▇ will appoint two (2) members to the Executive
Committee who will represent ▇▇▇▇▇▇▇▇▇. The LLC Documentation will contain
mandatory (but nonbinding) mediation procedures to resolve management
stalemates in a manner acceptable to both Parties, with mutually acceptable
buy/sell procedures in the event a stalemate cannot be resolved through
mediation.
2.02 CASINO AND HOTEL MANAGEMENT. All facilities and amenities
owned by the LLC with respect to the Project will be operated and managed by
one or more affiliates of HWCC-Louisiana (the "MANAGER"), pursuant to a
management contract with a term coterminous with the Licenses (including any
renewals thereof); provided, however, the HWCC-Louisiana-affiliate may retain
a third-party to conduct such services with respect to the proposed golf
course. The management contract will provide for (a) an initial term of 20
years, with 3 successive 10-year renewal periods, (b) the LLC's payment to the
managing entity of a management fee (the "MANAGEMENT FEE") equal to 4% of the
sum of (i) the net gaming revenues from the casino operations (i.e., gross
casino revenues less promotional allowances) and (ii) the gross revenues of
the hotel operations and all other facilities and amenities managed by the
Manager, each calculated in accordance with custom in their respective
industry, and (c) such other terms and conditions substantially similar to
those set forth in Exhibit "A" attached to this Agreement. As part of the
management service package to be provided by HWCC-Louisiana or its affiliates,
the LLC will benefit from the use of certain accounting and proprietary
marketing software systems provided by Advanced Casino Systems Corporation
("ACSC") and trademarks and other intellectual property rights necessary to
operate under the "Hollywood Casino" name. The applicable royalties for use
of the ACSC software or related to the intellectual property rights will be
deemed to be included in the Management Fee; provided, however, the direct
costs incurred by ACSC in providing such software to the LLC will be an
additional responsibility of the LLC.
2.03 INDEMNIFICATION. The LLC will indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the LLC) by
reason of the fact that such person is or was an Executive Committee member or
officer of the LLC, against expenses (including attorney's fee), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit and/or proceeding. The
termination of any action,
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suit or proceeding by judgment, order, settlement or conviction will not, of
itself, create a presumption that the person did not act in good faith and in
a manner which such person reasonably believed to be in or not opposed to the
best interests of the LLC, and, with respect to any criminal action or
proceeding, that such person had reasonable cause to believe that his or her
conduct was unlawful. Expenses incurred by a director or officer in defending
a civil or criminal action, suit or proceeding may be paid by the LLC in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it is ultimately determined that such person is not entitled to
be indemnified by the LLC. Such expenses incurred by other officers,
employees and agents may be so paid upon such terms and conditions, if any, as
the Executive Committee deems appropriate.
ARTICLE III
DISTRIBUTIONS AND FINANCIAL MATTERS
3.01 Distribution Policy. The distribution policy of the LLC will
be established by the Executive Committee taking into account (a) the
requirements of applicable law, (b) the terms and conditions of the Project
Financing, and (c) the capital and operating needs of the LLC.
3.02 Additional Capital. To the extent that capital in addition to
the Project Financing is needed to operate the LLC or fund certain maintenance
or expansion of the Project, the LLC will raise such funds according to the
following priorities; first, the LLC will seek to borrow such funds; second,
the Parties may loan such funds to the LLC, with appropriate dilution of the
non-lending Parties' membership interest in the LLC should the funds not be
repaid within an appropriate period of time; and third, equity contributions
will be made by each of the Parties on a pro rata basis in accordance with
such Parties' membership interest in the LLC.
3.03 Financial and Accounting Matters. The Parties will cause the
LLC to perform the following.
(a) Keep true and accurate books of account and records in
accordance with usual accounting practices and procedures and cause the books
and records of the LLC to be audited as soon as possible after the end of each
fiscal year by a recognized accounting firm acceptable to the Parties.
(b) Allow the members of the LLC and their authorized
representatives to inspect, during normal business hours, the books and
accounting records of the LLC to make extracts and copies therefrom at their
own expense, and to have full access to all the property and assets of the
LLC.
(c) Supply to the members of the LLC any financial information they
may from time to time reasonably require.
ARTICLE IV
CLOSING AND CONDITIONS TO CLOSING
4.01 THE CLOSING. The transactions prescribed in Section 1.02
shall be consummated at the earliest practicable date after the satisfaction
of all conditions to the Parties' respective obligations, or at such other
time as the Parties mutually agree (the "CLOSING"). The Closing will occur at
the executive offices of HWCC-Louisiana, or at such other location as the
Parties mutually agree.
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4.02 CONDITIONS OF ▇▇▇▇▇▇▇▇▇'▇ OBLIGATIONS TO CLOSE. The
obligation of ▇▇▇▇▇▇▇▇▇ to consummate the transactions prescribed in Section
1.02 shall be subject to the satisfaction of the following conditions:
(a) The representations and warranties of HWCC-Louisiana set forth
in Article VII shall be true and correct in all material respects at and as of
the Closing, as though made as of such date.
(b) HWCC-Louisiana shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing.
(c) There shall not be any injunction, judgment, order, decree,
ruling or charge issued by any court or governmental entity with jurisdiction
over any of the Parties in effect preventing consummation of any of the
transactions contemplated by this Agreement.
4.03 CONDITIONS TO HWCC-LOUISIANA'S OBLIGATIONS TO CLOSE. The
obligation of HWCC-Louisiana to consummate the transactions prescribed in
Section 1.02 shall be subject to the satisfaction of the following conditions:
(a) The representations and warranties of ▇▇▇▇▇▇▇▇▇ set forth in
Article VII shall be true and correct in all material respects at and as of
the Closing, as though made as of such date.
(b) ▇▇▇▇▇▇▇▇▇ shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing.
(c) There shall not be any injunction, judgment, order, decree,
ruling or charge issued by any court or governmental entity with jurisdiction
over any of the Parties in effect preventing consummation of any of the
transactions contemplated by this Agreement.
ARTICLE V
SALE OF MEMBERSHIP INTERESTS
5.01 PRIOR WRITTEN CONSENT REQUIRED FOR THE SALE OF MEMBERSHIP
INTERESTS
(a) Commencing immediately upon consummation of the Closing, no LLC
member may sell, transfer or otherwise dispose of all or any its membership
interest in the LLC without either (i) obtaining the prior written consent of
the other LLC members, which consent will not be unreasonably withheld, or
(ii) in the case of a proposed sale, transfer or disposition by ▇▇▇▇▇▇▇▇▇,
complying with the provisions of Section 5.01(b), and in the case of a
proposed sale, transfer or disposition by HWCC-Louisiana, complying with the
provisions of Section 5.01(c). Notwithstanding the foregoing, no written
consent of the other LLC members or compliance with Section 5.01(b) or Section
5.01(c) will be required in the event of (x) an assignment or transfer of any
membership interest in the LLC from an LLC member to its parent corporation or
to another directly or indirectly wholly-owned subsidiary or holding company
of the LLC member or its parent company or to an affiliate or subsidiary of
such holding company or (y) a collateral pledge of or grant of a security
interest in a membership interest in the LLC in order to secure indebtedness.
Any sale, transfer or other disposal of any membership interest in the LLC
(whether or not requiring the prior written consent of the other LLC members)
will not be or become effective until the assignee or transferee has executed
appropriate documentation in favor of the other LLC members and to the LLC
whereby such assignee or transferee agrees to be bound by the terms and
conditions of this Agreement and any other third party contracts entered into
by the Parties.
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(b) As a condition to ▇▇▇▇▇▇▇▇▇'▇ right to sell, transfer or
otherwise dispose of all or a portion of its membership interest in the LLC
(other than as permitted in Section 5.01(a)), ▇▇▇▇▇▇▇▇▇ will first comply with
the following conditions:
(i) ▇▇▇▇▇▇▇▇▇ will first inform HWCC-Louisiana in writing (the
"▇▇▇▇▇▇▇▇▇ NOTICE OF SALE") of the prices, terms and conditions upon which it
proposes to sell, transfer or otherwise dispose of all or any of its
membership interest in the LLC, will identify the prospective purchaser or
transferee of such membership interest, and will offer HWCC-Louisiana the
opportunity to irrevocably elect to either (x) in the event that HWCC-
Louisiana's membership interest in the LLC constitutes less than 50%,
participate in such sale, transfer, or other disposition to the extent of
HWCC-Louisiana's membership interest in the LLC (the "HWCC TAG-A-LONG RIGHTS")
or (y) acquire ▇▇▇▇▇▇▇▇▇'▇ membership interest in the LLC (the "HWCC ROFR
RIGHTS"). HWCC-Louisiana will have the preferential right to exercise either
its HWCC Tag-a-Long Rights or its HWCC ROFR Rights as of the date of the
▇▇▇▇▇▇▇▇▇ Notice of Sale.
(ii) In the event that HWCC-Louisiana exercises its HWCC Tag-a-Long
Rights, ▇▇▇▇▇▇▇▇▇ will use its best efforts to cause the prospective purchaser
or transferee to purchase both its and HWCC-Louisiana's membership interest in
the LLC according to the terms set forth in the ▇▇▇▇▇▇▇▇▇ Notice of Sale so
that HWCC-Louisiana would be entitled to receive the same value and nature of
consideration for its proportionate membership interest in the LLC as is
received by ▇▇▇▇▇▇▇▇▇ with respect to its membership interest in the LLC . If
after giving effect to the proposed sale, the proposed purchaser intends to
terminate, or replace the manager under, the management agreement referred to
in Section 2.02 with someone other than an affiliate of HCC, then (I) HWCC-
Louisiana will first be entitled to that portion of the proceeds of such sale
that equals the fair market value of the management fee paid or to be paid
under the management agreement and (II) ▇▇▇▇▇▇▇▇▇ and HWCC-Louisiana each
would then be entitled to for their respective membership interests in the LLC
an amount equal to the product of (A) the remainder of (1) the price in such
▇▇▇▇▇▇▇▇▇ Notice of Sale divided by ▇▇▇▇▇▇▇▇▇'▇ membership interest in the LLC
minus (2) the fair market value of the management fee paid or to be paid under
such management agreement, multiplied by (B) the respective Party's membership
interest in the LLC. If an affiliate of HCC would continue as manager
according to terms substantially similar to those set forth in Exhibit "A",
then ▇▇▇▇▇▇▇▇▇ and HWCC-Louisiana would be entitled to for their respective
membership interests in the LLC an amount equal to the product of (aa) the
price in such ▇▇▇▇▇▇▇▇▇ Notice of Sale divided by ▇▇▇▇▇▇▇▇▇'▇ membership
interest in the LLC, multiplied by (bb) the respective Party's membership
interest in the LLC. In the event that such prospective purchaser or
transferee will not agree to purchase all such membership interests in the LLC
in accordance with the foregoing, ▇▇▇▇▇▇▇▇▇ may not proceed with such sale
without the prior written consent of HWCC-Louisiana, which consent may be
withheld by HWCC-Louisiana in its sole discretion.
(iii) It will be deemed that the HWCC Tag-a-Long Rights and the
HWCC ROFR Rights have been waived if such rights have not been exercised in
writing within thirty (30) calendar days after receipt of the ▇▇▇▇▇▇▇▇▇ Notice
of Sale.
(iv) ▇▇▇▇▇▇▇▇▇ may, within a period of sixty (60) calendar days after
the HWCC Tag-a-Long Rights and the HWCC ROFR Rights have been refused or
waived by HWCC-Louisiana, sell, transfer or otherwise dispose of such
membership interest to the prospective purchaser or transferee previously
identified in the ▇▇▇▇▇▇▇▇▇ Notice of Sale, but not at a price less than nor
upon terms and conditions more favorable to the purchaser or transferee than
the price, terms and conditions first offered to HWCC-Louisiana.
(v) If no such transaction of ▇▇▇▇▇▇▇▇▇'▇ membership interest in the
LLC is consummated by ▇▇▇▇▇▇▇▇▇ within the same period of sixty (60) calendar
days, ▇▇▇▇▇▇▇▇▇ will
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not thereafter make any sale, transfer or other disposal without again
offering the same to HWCC-Louisiana in accordance with the provisions of this
Section 5.01(b).
(c) As a condition to HWCC-Louisiana's right to sell, transfer or
otherwise dispose of all or a portion of its membership interest in the LLC
(other than as permitted in Section 5.01(a)), HWCC-Louisiana will first comply
with the following conditions:
(i) HWCC-Louisiana will first inform ▇▇▇▇▇▇▇▇▇ in writing (the "HWCC
NOTICE OF SALE") of the prices, terms and conditions upon which it proposes to
sell, transfer or otherwise dispose of all or any of its membership interest
in the LLC, will identify the prospective purchaser or transferee of such
membership interest, and will offer ▇▇▇▇▇▇▇▇▇ the opportunity to irrevocably
elect to either (x) participate in such sale, transfer, or other disposition
to the extent of ▇▇▇▇▇▇▇▇▇'▇ membership interest in the LLC (the "▇▇▇▇▇▇▇▇▇
TAG-A-LONG RIGHTS") or (y) acquire HWCC-Louisiana's membership interest in the
LLC (the "▇▇▇▇▇▇▇▇▇ ROFR RIGHTS"). ▇▇▇▇▇▇▇▇▇ will have the preferential right
to exercise either its ▇▇▇▇▇▇▇▇▇ Tag-a-Long Rights or its ▇▇▇▇▇▇▇▇▇ ROFR
Rights as of the date of the HWCC Notice of Sale.
(ii) In the event that ▇▇▇▇▇▇▇▇▇ exercises its ▇▇▇▇▇▇▇▇▇ Tag-a-Long
Rights, HWCC-Louisiana will use its best efforts to cause the prospective
purchaser or transferee to purchase both its and ▇▇▇▇▇▇▇▇▇'▇ membership
interest in the LLC according to the terms set forth in the HWCC Notice of
Sale so that ▇▇▇▇▇▇▇▇▇ would be entitled to receive the same value and nature
of consideration for its proportionate membership interest in the LLC as is
received by HWCC-Louisiana with respect to its membership interest in the LLC.
If after giving effect to the proposed sale the proposed purchaser intends to
terminate, or replace the manager under, the management agreement referred to
in Section 2.02 with someone other than an affiliate of HCC, then such amount
that ▇▇▇▇▇▇▇▇▇ would be entitled to would be equal to the product of (x) the
remainder of (I) the price in such HWCC Notice of Sale divided by HWCC-
Louisiana's membership interest in the LLC minus (II) the fair market value of
the management fee paid or to be paid under such management agreement,
multiplied by (y) ▇▇▇▇▇▇▇▇▇'▇ membership interest in the LLC. If an affiliate
of HCC would continue as manager according to terms substantially similar to
those set forth in Exhibit "A", then such amount that ▇▇▇▇▇▇▇▇▇ would be
entitled to would be equal to the product of (aa) the price in such HWCC
Notice of Sale divided by HWCC-Louisiana's membership interest in the LLC,
multiplied by (bb) ▇▇▇▇▇▇▇▇▇'▇ membership interest in the LLC. In the event
that such prospective purchaser or transferee will not agree to purchase all
such membership interests in the LLC in accordance with the foregoing, HWCC-
Louisiana may not proceed with such sale without the prior written consent of
▇▇▇▇▇▇▇▇▇, which consent may be withheld by ▇▇▇▇▇▇▇▇▇ in its sole discretion.
(iii) It will be deemed that the ▇▇▇▇▇▇▇▇▇ Tag-a-Long Rights and
the ▇▇▇▇▇▇▇▇▇ ROFR Rights have been waived if such rights have not been
exercised in writing within thirty (30) calendar days after receipt of the
HWCC Notice of Sale.
(iv) HWCC-Louisiana may, within a period of sixty (60) calendar days
after the ▇▇▇▇▇▇▇▇▇ Tag-a-Long Rights and the ▇▇▇▇▇▇▇▇▇ ROFR Rights have been
refused or waived by ▇▇▇▇▇▇▇▇▇, sell, transfer or otherwise dispose of such
membership interest to the prospective purchaser or transferee previously
identified in the HWCC Notice of Sale, but not at a price less than nor upon
terms and conditions more favorable to the purchaser or transferee than the
price, terms and conditions first offered to ▇▇▇▇▇▇▇▇▇.
(v) If no such transaction of HWCC-Louisiana's membership interest in
the LLC is consummated by HWCC-Louisiana within the same period of sixty (60)
calendar days, HWCC-Louisiana will not thereafter make any sale, transfer or
other disposal without again offering the same to ▇▇▇▇▇▇▇▇▇ in accordance with
the provisions of this Section 5.01(c).
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(d) Notwithstanding any of the provisions of this Article V, no LLC member
may sell, transfer or otherwise dispose of all or any of its membership
interest in the LLC, and no non-offering LLC member will be required to
purchase such membership interest pursuant to Section 5.01(b) and Section
5.01(c), until the person, entity, group or other recipient which will
purchase, receive or otherwise obtain such membership interest (i) satisfies
the applicable provisions of Section 5.01 and (ii) complies with and satisfies
any and all regulatory requirements provided under Section 9.02 of this
Agreement.
5.02 CHANGE OF CONTROL. In the event of a change in control (as
defined below) of HWCC-Louisiana or Hollywood Casino Corporation ("HCC"), then
▇▇▇▇▇▇▇▇▇ shall have the right to require that HWCC-Louisiana purchase from
▇▇▇▇▇▇▇▇▇ all of the right, title and interest held by ▇▇▇▇▇▇▇▇▇ in the LLC in
accordance with the terms set forth herein. A change in control with respect
to HWCC-Louisiana shall be deemed to occur upon any loss of voting control of
HWCC-Louisiana by HCC (or a wholly-owned subsidiary of HCC), including without
limitation, the failure of HCC (or a wholly-owned subsidiary of HCC) to hold a
majority of the outstanding stock of HWCC-Louisiana. A change in control with
respect to HCC shall be deemed to occur in the event that HCC becomes aware of
(by way of a report or any other filing pursuant to Section 13(d) of the
Securities Exchange Act of 1934 (as amended, the "EXCHANGE ACT"), proxy vote,
written notice or otherwise) the acquisition by any person or related group
(within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange
Act, or any successor provision to either of the foregoing, including any
"group" acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act),
other than the ▇▇▇▇▇ Holders (as defined below), in a single transaction or in
a related series of transactions, by way of merger, consolidation or other
business combination or purchase of beneficial ownership (within the meaning
of Rule 13d-3 under the Exchange Act, or any successor provision) of 30% or
more of the total voting power entitled to vote in the election of the Board
of Directors of HCC or such other person surviving the transaction and, at
such time, the ▇▇▇▇▇ Holders collectively shall fail to beneficially own,
directly or indirectly, securities representing greater than the combined
voting power of HCC's or such other person's voting stock as is beneficially
owned by such person or group. "▇▇▇▇▇ HOLDERS" means (a) ▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III, their respective estates and members of the immediate
family (including adopted children) of any such individuals who acquire voting
stock of HCC from any such estates, (b) ▇.▇. ▇▇▇▇▇ Co. No. 1, E.T. ▇▇▇▇▇ Co.
▇▇. ▇, ▇.▇. ▇▇▇▇▇ ▇▇. ▇▇. ▇, each a Texas general partnership, (c) C.A. ▇▇▇▇▇
Partners, Ltd., a Texas limited partnership, and (d) ▇.▇. ▇▇▇▇▇ Family Trust,
▇. ▇▇▇▇▇ Family Trust and ▇.▇. ▇▇▇▇▇ Family Trust. HWCC-Louisiana shall
promptly give written notice to ▇▇▇▇▇▇▇▇▇ of the occurrence of any change in
control described in this Section 5.02. ▇▇▇▇▇▇▇▇▇ will have a period of sixty
(60) days following the date on which such notice is deemed given, within
which to exercise the rights given to it hereunder by written notice ("PUT
NOTICE") given to HWCC-Louisiana. Payment of the entire purchase price for
▇▇▇▇▇▇▇▇▇'▇ interest in the LLC shall be made within one hundred fifty (150)
days after the date on which the Put Notice is deemed given by wire transfer
to an account designated by ▇▇▇▇▇▇▇▇▇. The purchase price for the interest in
the LLC purchased hereunder shall be equal to the fair market value of the LLC
(including the management agreement referred to in Section 2.02 but deducting
therefrom the fair market value of the management fees paid or to be paid
thereunder) multiplied by ▇▇▇▇▇▇▇▇▇'▇ membership interest in the LLC. The
fair market value of the LLC shall be determined by an independent United
States investment banking firm of national standing as selected by the mutual
agreement of HWCC-Louisiana and ▇▇▇▇▇▇▇▇▇ or, if they cannot agree, then each
of ▇▇▇▇▇▇▇▇▇ and HWCC-Louisiana shall select an independent United States
investment banking firm to establish a good faith valuation of the LLC
hereunder and the value of the LLC for purposes of this Section 5.02 shall
equal the average of the two values. All costs attributable to obtaining any
valuation under this Section 5.02 shall be borne equally by HWCC-Louisiana and
▇▇▇▇▇▇▇▇▇.
8
ARTICLE VI
TERMINATION
6.01 GENERAL. This Agreement will continue in effect until terminated
pursuant to this Article VI. The Parties agree that the LLC Documentation
will contain provisions similar to the provisions in this Article VI.
6.02 TERMINATION BY NOTICE. Either Party may give written notice of
termination of this Agreement to the other Party upon the happening of any of
the following:
(a) If the Parties, for whatever reason, lose the Licenses and the LLC
is no longer able to commercially operate the Project as a gaming and casino
establishment; or
(b) If either Party in good faith determines that by entering into this
Agreement and consummating the transactions described herein the review and
analysis of the Applications has been or will be delayed or the chances of
HWCC-Louisiana or the LLC being granted the Licenses has been or will be
impaired; or
(c) If the Licenses have not been granted to the LLC by December 31,
1997.
6.03 Responsibility for Expenses. In the event either Party terminates this
Agreement pursuant to Section 6.02 prior to the Closing, each of the Parties
shall remain responsible for one-half of the Shared Expenses.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Each Party (and its respective permitted successors and assignees)
hereunder represents and warrants the matters set forth below to the other
Party as of the date hereof.
7.01 AUTHORITY. It is validly existing and duly organized under the laws of
the jurisdiction of its formation, and it (and the persons acting in its
behalf) have all the requisite power and authority to execute, deliver and
comply with the terms and provisions hereof and consummate the transactions
contemplated herein.
7.02 APPROVALS AND ENFORCEABILITY. Its execution, delivery and performance
of this Agreement do not require the consent or approval of any governmental
body or regulatory authority or other entity; is not in material contravention
of or in material conflict with any applicable law or regulation; and, this
Agreement is the valid, binding and legally enforceable obligation of such
Party in accordance with its terms, except as the enforceability thereof may
be limited by the effect of any bankruptcy or similar laws affecting
creditors' rights generally.
7.03 COMPLIANCE WITH LAWS. It is not in violation or default under any
agreement with any person, or under any law, judgement, order, decree,
license, permit, approval, rule or regulation of any court, arbitrator,
administrator, administrative agency or other governmental authority to which
it may be subject which might have a material adverse impact on its ability to
perform its obligations hereunder, or on the other Party.
7.04 EXCLUSIVITY. It is not now pursuing any activity that would violate
the provisions of Section 8.01, except as otherwise described in Section 8.01.
Neither Party has any existing or prospective business relationship in the
State of Louisiana in connection with the subject matter of this Agreement.
9
7.05 SUITABILITY. Neither it nor any of its affiliates is likely to be
determined by any applicable regulatory authority to be unsuitable to conduct
the operation of a casino gaming enterprise, has had any application for any
gaming license or permit rejected, or has had any gaming license or permit,
once having been issued, rescinded, suspended, revoked or not renewed or
reinstated, and such Party has no knowledge that its affiliation with any
person or entity will threaten or adversely affect the plans of the Parties'
to obtain any requisite license or that could otherwise threaten or cause a
possible revocation of such license.
7.06 ACCURACY OF INFORMATION. All of the factual information regarding such
Party contained herein (including all information set forth in the Recitals to
this Agreement) or provided during the course of the Parties' negotiation is
true, complete and accurate in all materials respects, and such Party has not
omitted to disclose any material fact or detail pertinent to itself or the
transactions contemplated hereunder which, in light of all of the facts and
circumstances involved in the negotiation hereof, should have been disclosed
to prevent any other information from being untrue, incomplete or inaccurate.
ARTICLE VIII
SPECIAL COVENANTS
8.01 EXCLUSIVE AGREEMENT. The Parties hereby agree that this Agreement will
encompass their exclusive arrangements for pursuing and conducting riverboat
casino gaming activities (exclusive of any existing arrangements between
affiliates of ▇▇▇▇▇▇▇▇▇ and Casino America which are exempted from this
Section 8.01) in either Bossier Parish or Caddo Parish, Louisiana (the
"VENTURE AREA"). In this regard, each of the Parties covenants on behalf of
itself and its owners, officers, members, partners, agents, family members
(excluding, with respect to ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ York) and affiliates that,
regardless of whether or not the Parties form or own the LLC, and
notwithstanding any termination of this Agreement, for a period of twelve (12)
months from the date of termination of this Agreement no Party or any owner,
officer, member, partner, agent, family member or affiliate thereof will
pursue or possess (either directly or indirectly through affiliates,
associates or family members) any pecuniary, proprietary, operational or
financial interest in any business or entity engaged in riverboat casino
gaming in the Venture Area other than with the other Party hereto on terms
substantially similar to those set forth in this Agreement.
8.02 CONFIDENTIALITY. All information designated in writing by any Party as
confidential and proprietary at the time it is disclosed to the other Party
(or such other Party's representatives and agents) during the term of this
Agreement will be deemed to be confidential and proprietary (provided that for
purposes hereof, any information provided by any Party pursuant to this
Agreement which is generally available or was available to such other Party on
a non-confidential basis prior to its disclosure in connection with this
Agreement will not be deemed to be "confidential and proprietary") and will be
treated as such. The Parties agree not to disclose any of the confidential
and proprietary information (except as required by law) to any third party or
use or permit the use of any such information in a manner detrimental to the
other. Upon termination of this Agreement, each Party will promptly return to
the other such materials (including all documents, memoranda, notes, any other
writings whatsoever and electronic data prepared by the Parties or their
advisors based on such materials) furnished to the other without retaining any
copies thereof (except as otherwise required by law). This obligation will
survive the termination of this Agreement for two (2) years from the date of
termination. Notwithstanding the foregoing, such Party will be permitted to
make use of or disclose confidential and proprietary information (a) which is
in or comes into the public domain otherwise than through the default of
either of the Parties, (b) which was already in the possession of such Party
prior to the negotiations between the Parties leading to the execution of this
Agreement as evidence by documentation in such Parties' possession at the date
hereof, (c) as is required by law, (d) that is required to be disclosed by a
court or governmental agency, (e) as may be authorized by both Parties in
10
writing, and (f) to its financial advisors, attorneys and accountants to the
extent necessary to effect the purpose and intent of this Agreement. Each
Party will cause its subsidiaries and affiliates to observe the restrictions
contained in the foregoing provisions.
ARTICLE IX
REGULATORY MATTERS
9.01 REGULATORY INFORMATION. Each Party shall provide all information
pertaining to its organization, business, ownership, assets, management,
financial sources and associations as shall be required by any federal or
state regulatory authority with jurisdiction over the LLC or one or more of
the Parties, including without limitation regulatory authorities in the States
of Louisiana, Illinois, New Jersey and Mississippi.
9.02 REGULATORY COMPLIANCE. The Parties must each independently comply with
all regulations promulgated by any regulatory authority with jurisdiction over
the LLC or one or more of the Parties. Without limiting the generality of the
foregoing, the Parties shall submit to and cooperate in any attendant
background investigations required by any of the foregoing jurisdictions by
virtue of the Party's participation in the LLC. The Parties will each bear
all of their own costs which they incur in connection with such compliance.
9.03 EFFECT OF UNSUITABILITY DETERMINATION. If the applicable casino
regulatory organization in any jurisdiction in which either Party to this
Agreement (or any of its affiliates) holds a license to own or operate a
casino compels such Party (the "AFFECTED PARTY") to discontinue its
relationship with such other Party (the "UNSUITABLE PARTY") hereto for any
reason whatsoever relating to the unsuitability of the Unsuitable Party or its
affiliates, then the Parties agree to negotiate with such casino regulatory
organization in an attempt to rescind or stay such order or otherwise afford
the Unsuitable Party relief from such order. If the Parties are unsuccessful
in obtaining the rescission, stay or other relief within ninety (90) days of
such occurrence (or other shorter period mandated by the casino regulatory
organization), then the Unsuitable Party's rights in the LLC shall immediately
cease, and the Affected Party shall have the right to acquire all of the
Unsuitable Party's right, title and interest in and to the Unsuitable Party's
interest in the LLC and any projects developed by the LLC for the one-time
termination payment set forth below:
(a) The amount of the termination payment shall be the lesser of (i) 75
percent of the Appraised Value (as defined below), and (ii) that amount
approved by the applicable casino regulatory organization.
(b) Payment of the termination payment shall be made by wire transfer to
an account designated by the Unsuitable Party within 120 days after the
cessation of the Unsuitable Party's rights in the LLC.
11
(c) The "APPRAISED VALUE" shall be the net present value of all future
distributions attributable to the Unsuitable Party's interest in the LLC, as
determined by an independent United States investment banking firm of national
standing chosen by the Affected Party. All costs (including investment
banking fees) attributable to obtaining the foregoing investment banking
valuation shall reduce the termination payment. If either Party disputes the
Appraised Value as determined above, such Party may retain a second
independent investment banking firm of national standing to perform a second
valuation of the Unsuitable Party's interest. The average of the initial
valuation and any such subsequent valuation shall be the Appraised Value and
shall be binding on all Parties. All costs (including investment banking
fees) attributable to obtaining any subsequent investment banking valuation
shall be paid solely by the Party disputing the initial valuation.
9.04 INCLUSION IN ARTICLES AND BYLAWS. The Parties hereby agree to cause
the LLC Documentation to include provisions that are equivalent to the
provisions set forth in Sections 9.01, 9.02 and 9.03 of this Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.01 BOARD APPROVAL. Each of the Parties represents and warrants
that it is duly authorized and empowered to enter into and perform its
obligations under this Agreement.
10.02 FURTHER ACTIONS. The Parties to this Agreement will take
any and all further actions and execute and deliver any and all documents that
may be necessary to give full effect to the terms and intent of this
Agreement.
10.03 COOPERATION. Each of the Parties acknowledges that this
Agreement is entered into between them and will be performed in a spirit of
mutual cooperation, trust and confidence and that its intention is that the
business, profitability and reputation of the LLC will be maximized by all
reasonable and proper means. Each of the Parties undertakes to use all
reasonable commercial efforts to promote the business undertaken in this joint
venture.
10.04 FEES AND EXPENSES. Each Party to this Agreement will pay
its own fees and expenses incurred in connection with the negotiation and
execution of this Agreement and the LLC Documentation, including, without
limitation, attorneys' fees.
10.05 NOTICES. Unless otherwise provided in this Agreement, all
notices, approvals, consents, or other communications purporting to affect the
rights of the Parties hereunder will be in writing and will be given
personally or by facsimile or express overnight courier to the other Party
entitled thereto at the proper address as set forth below or at such other
address as such Party will notify to the other Party to this Agreement.
If to HWCC-Louisiana: HWCC-Louisiana, Inc.
Two Galleria Tower, Suite 2200
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Copy to: General Counsel
Telecopy Number: ▇▇▇-▇▇▇-▇▇▇▇
12
If to ▇▇▇▇▇▇▇▇▇: ▇▇▇▇▇▇▇▇▇ Entertainment Louisiana
Gaming, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Telecopy Number: ▇▇▇-▇▇▇-▇▇▇▇
Any such notice or communication (a) sent by express overnight courier or
facsimile will be considered given on the first business day following the
date of dispatch and (b) delivered personally will be considered given on the
date of such delivery. Nothing contained in this Section 10.05 will excuse
failure to give prompt or immediate oral notice for purposes of informing the
other Party of an event that requires such notice, but such oral notice will
not satisfy the requirements of written notice set forth in this Section
10.05.
10.06 WAIVER. No failure or delay by any Party in exercising any
right, power or remedy under this Agreement will operate as a waiver thereof,
nor will any single or partial exercise of the same preclude any further
exercise thereof or the exercise of any other right, power or remedy. No
waiver by any Party of any breach of any provision hereof will be deemed to be
a waiver of any subsequent breach of that or any other provision thereof. If
at any time any provision of this Agreement is or becomes illegal, invalid or
unenforceable in any respect, the legality, validity and enforceability of the
remaining provisions of this Agreement will not be affected or impaired
thereby.
10.07 AMENDMENTS. No amendment, addition to, or deletion of any
of the provisions of this Agreement will be effective unless made in writing
and signed by an authorized representative of each of the Parties.
10.08 ASSIGNMENT. No Party will assign this Agreement or its
rights or obligations hereunder except as expressly provided herein.
10.09 GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of Louisiana (except for
its conflict of law provisions).
10.10 JURISDICTION. Any legal action or proceeding with respect
to this Agreement must be brought in the state courts of Bossier Parish, State
of Louisiana, or in the federal courts of the United States of America for the
Western District of Louisiana. Each of the Parties accepts and submits to,
for themselves and in respect of their property, generally and
unconditionally, the jurisdiction of the aforesaid courts, and irrevocable
waives, in connection with any such action or proceeding any objection based
upon the laying of venue or forum non conveniens, which they may now or
hereafter have to the bringing of any such action or proceeding in such
respective jurisdictions.
10.11 HEADINGS; SECTION REFERENCES. The headings in this
Agreement are for convenience and reference only and are not part of the
substance of this Agreement. References in this Agreement to Sections and
Articles are references to the Sections and Articles of this Agreement unless
otherwise specified.
13
10.12 ATTORNEYS' FEES, ETC. If any action at law or equity is
brought to interpret or enforce this Agreement, the prevailing party or
parties will be entitled to recover reasonable attorneys' fees, costs and
necessary disbursements from the other party or parties in addition to any
other relief to which he or they may be entitled.
10.13 COUNTERPARTS. This Agreement may be executed in any number
of counterparts. Each counterpart shall be deemed to be an original, and all
counterparts together shall constitute one document.
* * * *
14
IN WITNESS whereof this Agreement has been executed on the day and year
first above written.
HWCC-LOUISIANA, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
President
▇▇▇▇▇▇▇▇▇ ENTERTAINMENT
LOUISIANA GAMING, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Title: President
15
EXHIBIT "A"
FORM OF MANAGEMENT AGREEMENT
[See attached]
Exhibit "A" - Page 1
_______________________________________
MANAGEMENT SERVICES AGREEMENT
_______________________________________
THIS MANAGEMENT SERVICES AGREEMENT ("AGREEMENT") is made and entered
into as of the _____ day of __________, 199__, by and between [INSERT NAME OF
HWCC-LOUISIANA/▇▇▇▇▇▇▇▇▇ JOINT VENTURE], a Louisiana limited liability company
("OWNER") and [INSERT HWCC-LOUISIANA AFFILIATE WHO IS OPERATOR], a
_____________ Corporation ("OPERATOR").
W I T N E S S E T H:
-------------------
WHEREAS, Owner is or will become the owner in fee of those certain
premises located on or adjacent to the Red River commonly known as Cane's
Landing in the City of Bossier City, Parish of Bossier and State of Louisiana
more particularly described on Exhibit "A" which is attached hereto and made a
part hereby by reference (the "PROPERTY"), and that certain riverboat to be
located in a basin on the Property which shall be licensed to conduct gaming
activity thereon (collectively referred to as the "COMPLEX"); and
WHEREAS, Operator has extensive experience in casino operations and
management and has the knowledge and expertise to manage and operate the
Complex on behalf of Owner; and,
WHEREAS, Owner desires to benefit from the Operator's expertise in
the management and operation of the Complex and Operator is willing to manage
and operate the Complex on behalf of Owner, all in accordance with the terms
and pursuant to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and of
the mutual promises, representations, warranties, understandings, undertakings
and covenants herein contained, and intending to be legally bound thereby,
Owner and Operator hereby covenant and agree as follows:
ARTICLE ONE
-----------
APPOINTMENT OF OPERATOR
-----------------------
1.01 APPOINTMENT AND TERM. Owner hereby appoints and employs
Operator to act as its sole and exclusive agent for the supervision, direction
and control of the management of the Complex (or any additions or expansions
thereto) on the Owner's behalf, upon the terms and conditions hereinafter set
forth for a term of twenty (20) years, commencing as of ___________, 199__
(the "COMMENCEMENT DATE") which date shall be the Commencement Date of the
initial term (the "INITIAL TERM") and unless this Agreement is terminated by
either party on not less than [SIX (6) MONTHS] prior written notice to the
other prior to the expiration of the Initial Term of this Agreement, this
Agreement shall be automatically renewed for three (3) consecutive additional
terms of ten (10) years each (the "RENEWAL TERMS"). The Initial Term and the
Renewal Terms are hereinafter referred to as the "TERM". Upon termination of
the Term or any early termination as provided herein, Owner shall forthwith
pay to Operator any and all amounts due to Operator as of such termination
date.
1.02 RELATION OF THE PARTIES. In taking any action pursuant to this
Agreement, Operator will be acting only as the appointed agent or
representative of Owner, and nothing in this Agreement shall be construed as
creating a tenancy, partnership, joint venture or any other relationship
between the parties hereto, except that of principal and agent. All debts and
liabilities properly incurred by Operator in the course of its management and
operation of the Complex hereunder shall be the debts and obligations of the
Owner only, and Operator shall not be liable therefor, except as specifically
stated to the contrary herein.
2
ARTICLE TWO
-----------
PRE-OPENING PROGRAM
-------------------
2.01 REFURBISHING OF THE COMPLEX. Owner hereby warrants and
represents that it is presently preparing for the construction of the Complex,
in accordance with those certain plans and specifications tendered by Owner to
Operator. During such construction, and prior to the Commencement Date of
this Agreement, Operator shall perform the following project development
services for Owner, provided Owner separately provides Operator reimbursement
of (i) all expenses incurred by Operator under the provisions of this Section
2.01, and (ii) the compensation (including any and all salaries, expenses,
benefits, and the like) paid to Operator's employees or those employees of
Operator's affiliates assigned to the Complex on a full-time basis for the
purpose of providing the following project development services until the
Commencement Date of this Agreement:
(a) Pre-opening sales office set-up, together with a pre-opening
marketing plan to be approved in advance by Owner, which approval shall
not be unreasonably withheld or unduly delayed; and,
(b) Hiring of personnel in accordance with the provisions of this Agreement;
and,
(c) Coordination of initial inventories purchases; and,
(d) Establishment of operating policies and procedures for the entire
Complex; and,
(e) Establishment of Complex security systems for assets, personnel and
patrons; and,
(f) Establishment of accounting and internal control systems and
procedures; and,
(g) Establishment of a preventative maintenance program; and,
(h) Establishment of risk management policies and procedures; and,
(i) Training of all staff.
Notwithstanding the foregoing, Operator shall not provide project development
services for Owner at a cost in the aggregate to Owner in excess of the Pre-
Opening Budget described in Section 4.10(a)(i).
3
2.02 CONSTRUCTION, FURNISHINGS AND EQUIPMENT OF THE COMPLEX. Owner
warrants and represents:
(a) That the Complex will be constructed of and will consist of those items
specifically set forth in Exhibit "B", which is attached hereto and made a
part hereof by reference;
(b) That the Complex will be professionally designed, fully-furnished and
provided with all necessary accessories, including but not limited to casino
equipment and supplies, and will meet all fire, security and alarm
requirements of all applicable building codes; and,
(c) That Owner will provide, initially and throughout the Term, and at
Owner's sole cost and expense, full and adequate initial inventories of food
and beverage and of consumable items utilized in operating the Complex, such
as soap, cleaning materials, matches, stationery and all other similar items;
and,
(d) That Owner will provide, initially and throughout the Term, and at
Owner's sole cost and expense, sufficient working capital, as contemplated in
Section 4.09 for the operation of the Complex.
2.03 TITLE TO COMPLEX. Owner covenants and agrees that it has and
throughout the Term of this Agreement it will maintain:
(a) Full fee simple absolute possessory interest in the Property and full
ownership of and title to the improvements of the Complex, except for such
mortgages or other encumbrances related to Owner's financing of the purchase
and refurbishment of the Complex and the retail mall to be constructed on the
Property; and,
(b) Full ownership of the furnishings, fixtures and equipment located on
the Property ("FF&E"), free and clear of any liens, encumbrances, covenants,
charges, burdens or claims, except: (i) such as do not materially and
adversely affect the use thereof by Operator; (ii) mortgages or other
encumbrances related to the financing of the Complex; (iii) leases of personal
property and equipment; and (iv) purchase money mortgages. This Agreement
shall not be subject to forfeiture or termination under any financing
documents relating to the Complex, except in accordance with the provisions of
this Agreement, notwithstanding that there shall be a default under such
financing documents. Owner further covenants and agrees to pay and
4
discharge any ground rents, any other rental payments, concession charges or
any other charges payable by Owner in respect of the Complex, and, at its own
expense, to undertake and prosecute all appropriate actions, judicial or
otherwise, required to assure the quiet and peaceable operation of the Complex
by Operator. Owner also agrees to pay, prior to delinquency, all taxes and
assessments of whatever type which may become a lien on the Complex and which
may be due and payable during the Term, unless (i) payment thereof is in good
faith being contested by Owner, (ii) enforcement of any purported lien is
stayed, and (iii) Owner maintains adequate reserves in a separate account with
a reputable financial institution in order to discharge any such lien upon
five (5) days notice of the existence of such lien.
5
ARTICLE THREE
-------------
NOTICES
-------
Any and all written notices required by this Agreement shall be either
hand-delivered or mailed, certified mail, return receipt requested, telexed,
telecopied, or sent via commercial courier, addressed to:
TO OPERATOR:
---------------------------
---------------------------
---------------------------
---------------------------
---------------------------
Telecopier No.
------------
WITH COPY TO:
---------------------------
---------------------------
---------------------------
---------------------------
---------------------------
Telecopier No.
------------
TO OWNER:
---------------------------
---------------------------
---------------------------
---------------------------
---------------------------
Telecopier No.
------------
WITH COPY TO:
---------------------------
---------------------------
---------------------------
---------------------------
---------------------------
Telecopier No.
------------
All notices hand-delivered shall be deemed delivered as of the date actually
delivered. All notices mailed shall be deemed delivered as of five (5)
business days after the date postmarked. All notices telecopied shall be
deemed delivered as of the business day immediately following the date receipt
of the telecopy is confirmed. All notices sent via commercial courier shall
be deemed delivered as of the business day immediately following the date the
notice is entrusted to the commercial courier service with directions for
service within one (1) day. Any changes in any of the addresses listed herein
shall be made by notice as provided in this Article Three.
6
ARTICLE FOUR
------------
OPERATION
---------
4.01 STANDARDS.
(a) With respect to the operation of the Complex pursuant to this and every
other applicable Section of this Agreement, Operator shall manage the Complex
in a manner consistent with both a first class entertainment complex and the
standards and procedures exercised by Operator, its subsidiaries and
affiliates, in the management of other casinos owned and operated by
affiliates of Operator in the United States of America of the same or similar
type, class and quality as the Complex, as such standards and procedures may
be reasonably modified or revised by Operator from time to time, all in a
professional manner and in the exercise of good faith.
(b) In order for Operator to meet or exceed the aforementioned standards
and procedures in a professional manner, and to comply with any legal
requirements, Owner hereby agrees that (i) Operator shall have uninterrupted
control and operation of the Complex during the Term of this Agreement, (ii)
Owner will not interfere or involve itself with the day-to-day operation of
the Complex, and (iii) Operator may operate the Complex free of molestation,
eviction or disturbance by Owner or any third party claiming by, through or
under Owner. Examples of the matters which Operator in its sole and exclusive
discretion shall determine from time to time hereunder include, but shall not
be limited to: rates; prices; charges to guests for other services performed
by Operator at the Complex; the issuance of credit or other like decisions;
the granting of complementaries or other like decisions; the terms of
admittance to the Complex for purposes of entertainment; the labor policies of
the Complex; and the type and character of publicity and promotion.
4.02 PERMITS. Owner, with the assistance of Operator, shall obtain and
maintain in full force and effect all necessary licenses and permits as may be
required for the operation of the Complex by Operator including, without
limitation, casino, liquor, bar, restaurant, sign and hotel licenses. All
licenses and permits are to be in effect as of the Commencement Date of this
Agreement. Operator undertakes to comply fully with any and all reasonably
imposed conditions set out in any such licenses and permits.
7
4.03 PERSONNEL.
(a) All personnel of the Complex, except those mentioned in Section
4.03(b), shall be personnel of Owner. As agent for Owner, Operator shall have
the sole and absolute discretion to hire, supervise, direct the work of,
discharge and determine the compensation and other benefits of all personnel
working in the Complex. Owner shall not interfere with or give orders or
instructions to personnel employed at the Complex. Operator, in its sole and
absolution discretion, shall determine the fitness and qualification of such
personnel. Operator shall in no way be liable to said personnel or to Owner
for any and all claims for wages, compensation or other benefits (including,
without limitation, severance, pension, superannuation, retirement and
termination pay) asserted by or on behalf of such personnel. The salaries,
other compensation and benefits of such personnel shall be either paid by
Owner or paid by Operator's check and reimbursed to Operator by Owner,
depending upon which procedure Operator and Owner agree is most feasible.
(b) Operator shall employ, in Operator's name but as agent of Owner and at
Owner's sole expense, all key personnel as deemed reasonably necessary to be
employed by Operator for the successful operation of the Complex. Operator
shall pay the salaries, other compensation and benefits of such key personnel
described above, for which Operator shall be reimbursed by Owner each month as
a charge against Complex operations. Upon any termination of this Agreement,
Operator shall have the right, but not the obligation, to remove or terminate
said personnel from their duties at the Complex simultaneously with the
termination hereof; Owner hereby covenants and agrees that it shall not hire
or otherwise retain any such key personnel either prior to or after removal by
Operator, without Operator's prior written consent thereto, which consent may
be unreasonably withheld. As an expense of Complex operations, Operator shall
have the right to grant such key personnel (i) such complimentary privileges
usual and customary in the industry to similar positions, (ii) housing and
meal allowances, including complimentary housing and meals at or near the
Complex as is usual and customary in the hospitality industry for similar
positions, or (iii) both (i) and (ii).
8
(c) Operator shall employ and pay, and Owner shall reimburse Operator for,
such reasonable pro rata wages and other reasonable compensation of Operator's
own employees and those of subsidiaries and affiliates of Operator not
employed on the premises of the Complex on a permanent basis who are engaged
in the performance of duties imposed under this Agreement. Owner shall pay
monthly to Operator all reasonable travel, lodging and meal costs and expenses
incurred by Operator's employees, and those of subsidiaries and affiliates of
Operator, prior to and after the Complex is opened to the public as the same
are incurred in the performance of duties imposed under this Agreement.
Operator shall have the right, which right shall not be unreasonably
exercised, to determine the advisability of such travel. Operator's employees
shall be furnished and provided with rooms and food, as an expense of Complex
operations, whenever such employees are located at the Complex in the
performance of this Agreement.
(d) Operator shall, as agent for Owner and at Owner's sole expense, employ
specialists to perform services for the Complex related to the operation,
maintenance and/or protection of the Complex, such as engineers, designers,
attorneys, independent accountants and the like.
4.04 SALES AND PROMOTIONS.
(a) Operator shall cause the Complex to participate in sales and
promotional campaigns and, as appropriate, activities involving complimentary
items to hotels, casinos, travel agents, tourist officials and airline
representatives and other hospitality industry representatives. Operator shall
have the sole right to entitle the key personnel and the personnel employed by
Owner and Operator to grant complimentary items when the same is customary in
the travel, hospitality or gaming industry or in Operator's standard practice
or policy.
(b) Owner agrees that no influence will be brought on Operator or the
General Manager of the Complex relating to the granting or extension of
credit. Credit facilities shall be granted by Operator in its sole reasonable
discretion and in accordance with Operator's standard procedures.
(c) Operator, on behalf of Owner, shall institute and supervise a sales and
marketing program and shall coordinate and cooperate with the local and
international sales and marketing programs of Operator and shall also
coordinate with tour programs marketed by airlines, travel
9
agents and government tourist departments when Operator determines such
programs are in the best interest of Owner.
4.05 MAINTENANCE AND CAPITAL REPLACEMENT.
(a) Owner recognizes the necessity of a program of replacement of FF&E and
the need to cause the Complex to continue to be furnished, equipped and
landscaped in accordance with the standards described herein. Both parties
recognize that the particular properties or particular articles of FF&E may
not require expenditure for maintenance and repairs in any given year, but
average costs thereof shall be reflected in the Budgets (as defined in Section
4.10(a)). During the first year of operations hereunder, a reserve of not
less than one and one-half percent (1.5%) of the gross revenues of the Complex
shall be established for replacements, substitutions and additions to FF&E,
such reserve to be established by setting aside each month from operating
profits an amount equal to one and one-half percent (1.5%) of the gross
revenues of the Complex for such month; for the second operating year (and for
each operating year thereafter), the respective percentages shall be increased
to two percent (2%), respectively. In determining the Annual Budget (as
defined in Section 4.10(a)(iii)) of the second operating year (and for each
operating year thereafter), Owner and Operator shall mutually agree as to
whether such reserve should be increased, it being understood that the account
of such reserve must always be sufficient to meet the standards established
hereunder.
(b) Operator, as agent of Owner, is authorized to make and enter into such
agreements as are in Operator's reasonable opinion necessary for the
operation, supply and maintenance of the Complex as required by this
Agreement. Notwithstanding the foregoing, Operator may not enter into
agreements for the provision of goods and/or services to the Complex from
Operator's affiliated entities, unless such agreements are at or below the
fair market value of the goods and/or services provided or rendered; for
purposes of this Agreement, the term "Operator's affiliated entities" shall
mean any entity in which Operator, either directly or indirectly, has the
power to control or vote a significant part of the outstanding securities or
equity interest of such entity.
10
(c) Operator shall have the right to make such alterations, additions or
improvements in or to the Complex as are consistent with the standards
established hereunder. The cost of such alternations, additions or
improvements shall be charged directly to current expenses of the Complex or
shall be capitalized and amortized on the books of account of the Complex in
accordance with Operator's standard accounting practices consistently applied.
(d) In the event that, at any time during the Term of this Agreement,
repairs or additions to or changes in the Complex shall be required by reason
of any laws, ordinances, rules or regulations now or hereafter in force, or by
proper and lawful order of any governmental or municipal power, department,
agency, authority, or officer, such repairs or changes shall be made at the
discretion of Operator, without the prior approval of Owner; provided that
Operator shall use its best efforts to consult, in advance, with Owner with
respect to such changes, additions or repairs.
4.06 ACCOUNTING SERVICES.
(a) Operator, at Owner's sole cost and expense, shall maintain a complete
accounting system in connection with the management of the Complex. The books
and records shall be kept in accordance with generally accepted accounting
principles consistently applied, as applied by Operator or its subsidiaries or
affiliates in other gaming operations similar to the Complex. Books and
accounts shall be maintained at the Complex. Title to such books and accounts
shall vest jointly in Owner and Operator, while possession of such books and
records shall vest solely in Operator; provided, however, that upon proper
termination of this Agreement and proper and timely payment to Operator of all
sums due to or accrued for the benefit of Operator under this Agreement, title
to and possession of such books and accounts shall vest in Owner. Owner shall
have the right and privilege of examining and copying said books and records
at any reasonable time during regular business hours.
(b) Operator, at Owner's sole cost and expense, shall cause a certified
audit of the Complex to be performed annually by such reputable accounting
firm mutually acceptable to Owner and Operator, and at least three (3) copies
thereof shall be furnished to each party not later than ninety (90) days from
the end of Owner's fiscal year. Nothing herein contained shall
11
prevent Owner, at its sole expense, from designating a reputable accounting
firm to, upon reasonable prior written notice, examine the books and records
of the Complex during regular business hours.
(c) On or before the twenty-fifth (25th) day of each month, Operator shall
furnish Owner with an unaudited operating statement for the prior calendar
month detailing (i) Statistical Data, (ii) Gaming Revenue Data (broken down by
departmental or revenue source), (iii) Gaming Operating Expense Data (broken
down by departmental or expense source) (iv) Food & Beverage Department Data,
(v) Other Income Data, (vi) Overhead Departments Data, (vii) Fixed Charges,
(viii) Gross Operating Profit, and (ix) Net Income or Loss, including
management fees and other amounts paid to Operator. Any adjustment required
to make up an underpayment or to refund an overpayment of the monthly payments
to Owner or to Operator, as revealed in any monthly operating statement, shall
be made by way of an adjustment in the payment during the month following the
furnishing of said monthly operating statement. Likewise, any adjustments
predicated on the annual audited statements for the Complex, will be made
during the first month following completion of the annual audit.
12
4.07 BANK ACCOUNTS.
(a) Operator shall establish at reputable financial institution(s)
reasonably approved by Owner such Complex bank accounts as Operator deems
necessary for the operation of the Complex. The accounts shall be styled
"name of Complex-type of account (e.g., operations, payroll)", and all bank
accounts shall provide that Operator's designees shall be the only parties
authorized to draw upon said accounts. At least thirty (30) days prior to the
Commencement Date, Owner shall deposit the amount of _____________
($___________) into the operating bank account, as designated by Operator, to
serve as a minimum bank account to use as the Complex's initial operating
capital in accordance with the approved Budgets. After the Commencement Date,
Operator shall deposit, not less frequently than monthly, any cash on hand in
excess of its reasonably anticipated operating capital needs for the next
thirty (30) days and of any reserves required hereunder in such bank accounts
or other depositories as may be designated by Owner. It is understood that
Operator shall maintain funds at the Complex and shall make payments therefrom
as the same are usually and customarily made in the hospitality and gaming
industry.
(b) During the Term hereof, Owner shall furnish to Operator true and
correct copies of all property tax statements and insurance policies and all
financing documents (including notes and mortgages) relating to the Complex.
Without in any way diminishing Owner's responsibility hereunder, Operator
shall be authorized, if Owner so requests in writing, to pay from the Complex
bank accounts the amounts indicated by said statements and/or documents,
provided sufficient funds are in such Complex accounts.
4.08 CONCESSIONS. Operator shall have the exclusive right to consummate,
in the name of and for the benefit of Owner, arrangements and leases with
concessioners, licensees, tenants and other users of any commercial space in
the Complex, at then-prevailing commercially reasonable rates.
4.09 EXPENSES.
(a) All costs, expenses, funding of operating deficits and working capital,
and other obligations and liabilities hereunder ("OWNER'S FINANCIAL
OBLIGATIONS") shall be the sole and
13
exclusive responsibility and obligation of Owner, except for those instances
herein where it is expressly and specifically stated that such item shall be
for the accounts of Operator. It is understood that statements herein
indicating that Operator shall "furnish", "provide" or otherwise supply,
present or contribute items or services hereunder shall not be interpreted or
construed to mean that Operator is liable or responsible to fund or pay for
such items or services, except in those specific instances mentioned above.
(b) With respect to Owner's Financial Obligations, the same shall be funded
and/or paid for as follows: (i) First, from monies which may be available in
the Complex accounts maintained by Operator hereunder; and (ii) Second, if
such Complex accounts maintained by Operator hereunder do not contain monies
sufficient to fund and/or pay Owner's Financial Obligations, from monies which
shall be deposited by Owner in such Complex accounts within fifteen (15) days
after request therefor by Operator in writing. If such monies are not so
deposited by Owner in the amounts requested by Operator within such fifteen
(15) day period, Operator shall have the right, but not the obligation, to
terminate this Agreement upon ten (10) days prior written notice to Owner and,
in the event of two (2) consecutive such defaults in any calendar year,
regardless of Owner's cure thereof.
(c) It is understood and agreed that Operator shall have no obligation or
duty to fund and/or pay for any of Owner's Financial Obligations.
4.10 BUDGETS.
(a) Operator shall be obligated to furnish Owner with the following budgets
(collectively "BUDGETS") during the Term hereof:
(i) A pre-opening budget ("PRE-OPENING BUDGET") on or prior to the
Commencement Date, which Pre-Opening Budget shall detail all costs and
expenses reasonably anticipated by Operator for the actions described
in Section 2.01.
(ii) A commencement budget ("COMMENCEMENT BUDGET") within sixty (60)
days prior to the Commencement Date to be updated within thirty (30)
days after the Commencement Date, which Commencement Budget shall
detail all costs, expenses and reserves reasonably anticipated by
Operator, or contemplated in this Agreement, during the remainder of
the first calendar year of the Term of this Agreement, including but
not limited to, working capital, initial operating equipment and
supplies, expenditures for
14
recruiting, training, advertising and promotion and other similar
costs and expenses.
(iii) An annual budget ("ANNUAL BUDGET") at least sixty (60) days
prior to the end of the first calendar year after the Commencement
Date and each succeeding calendar year of the Term hereunder. Each
Annual Budget shall detail all costs, expenses and reserves reasonably
anticipated by Operator, or contemplated in this Agreement, for the
next succeeding year. Annual Budgets may be amended from time to
time, after submission by Operator to Owner of such amendments.
(b) Operator makes no guarantee, warranty or representation whatsoever in
regard to Budgets, same being intended as reasonable estimates only.
(c) With respect to any deficits which may arise as a result of operations
hereunder, Owner shall be obligated to fund and pay such deficits which are not
covered by Complex income within fifteen (15) days after written request
therefor by Operator. If Owner fails or delays in furnishing funds to cover
deficits as aforesaid (by failure to approve or delay in approving Budgets in a
timely manner or otherwise), Operator shall have no responsibility or liability
therefor, and Owner shall indemnify and hold harmless Operator with respect to
any liability, however arising, which may arise out of or relate to, directly or
indirectly, such failure or delay in funding such obligations.
(d) All Budgets submitted by Operator to Owner under this Section 4.10
shall (i) be prepared generally in accordance with generally accepted accounting
principles, (ii) be presented substantially in the format of the operating
statements required of Operator pursuant to Section 4.06(c) of this Agreement,
(iii) include detailed business and market plans, and (iv) be subject to Owner's
prior express approval, which approval shall not be unreasonably withheld or
unduly delayed. In the event Owner and Operator are unable to agree on any
given Budget within two (2) months from the end of a fiscal year, Owner and
Operator, hereby appoint ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. as an independent arbiter which
shall determine a Budget no later than four (4) weeks after its receipt of
written notice of such a dispute. The arbiter's Budget shall be binding upon
Owner and Operator. All expenses incurred as a result of the invocation of such
independent arbiter provision shall be borne solely by the Complex, subordinated
to the payment of all fees and expenses due to or accrued for the benefit of
Operator pursuant to this Agreement. The provisions of this Section 4.10(d) are
15
to be carried out in tandem with, and not as an alternative for, the arbitration
provisions of Section 13.07 of this Agreement.
(e) The foregoing notwithstanding, Operator may incur expenses in excess of
the amounts set forth in the Budgets provided:
(i) the actual total expenditures for the operating department within
which any given expense is allocable will not exceed one hundred ten
(110%) percent of the total budgeted expenditures for such operating
department approved in the then-applicable Budget; or
16
(ii) such expenditure is expressly authorized in this Agreement; or,
(iii) Operator obtains Owner's prior approval of such expenditure,
which approval shall not be unreasonably withheld or unduly delayed;
or,
(iv) such expenditure is warranted by increased levels of business;
or,
(v) such expenditure is required to meet emergency conditions and
Owner is promptly advised thereof; or,
(vi) additional expenditures are incurred by reason of the occurrence
of an event or events not reasonably foreseeable by Operator; or,
(vii) such expenditure is caused by the occurrence of an event or
events outside Operator's reasonable control.
4.11 APPROVALS. In approving or consenting to any matter hereunder, Owner
shall act in a reasonable manner; however, Owner shall take into account
Operator's advises stemming from its experience as a manager of complex gaming
properties, and taking into account conditions prevailing generally in the
hospitality and gaming industry.
17
ARTICLE FIVE
------------
COMPENSATION OF OPERATOR
------------------------
5.01 FORMS OF COMPENSATION. For and in consideration of the services
rendered by Operator pursuant to this Agreement, Owner agrees to pay to Operator
the Management Fee (defined below) and all reimbursables set forth elsewhere in
this Agreement.
5.02 MANAGEMENT FEE DEFINED. For purposes of this Article Five, the term
"MANAGEMENT FEE" shall mean a fee equal to four percent (4%) of all gross
revenues of the Complex, including without limitation, all revenues and proceeds
from business interruption or other loss of income insurance. In computing the
Management Fee, there shall first be deducted the following:
(a) Any gratuities, or service charges added to a customer's ▇▇▇▇ or
statement in lieu of gratuities, which are payable to Complex
employees;
(b) An amount equal to all credits or refunds made to customers,
guests or patrons;
(c) All sums and credits received in settlement of claims for loss or
damage of FF&E or to the physical plant of the Complex;
(d) All gaming taxes, sales taxes, excise taxes, gross receipt taxes,
admission taxes, entertainment taxes, tourist taxes or charges;
(e) Any and all income from the sale of FF&E;
(f) Any compensation payments for claims against third parties arising
out of or during the course of the operation of the Complex.
The Management Fee shall (i) be computed monthly before the payment of any and
all income, franchise, federal, state or municipal taxes (other than gaming
taxes), and (ii) shall be paid monthly in arrears on the tenth (10th) day of
each month. The Management Fee shall be included in all operating statements
which Operator furnishes to Owner hereunder, and adjusted annually in accordance
with the audited Financial Statements for the Complex.
5.03 LOSSES. Except to the extent set forth in Section 5.03, losses in
any year shall be borne
18
exclusively by Owner and shall not reduce the amount of any compensation which
Operator may be entitled to receive hereunder for any prior, present, or
subsequent years. No part of such losses shall be charged against, recaptured
out of or otherwise serve to diminish or affect the Gross Operating Profit of
the Complex for prior, present, or subsequent years.
ARTICLE SIX
-----------
INSURANCE AND INDEMNITY
-----------------------
6.01 PROPERTY INSURANCE. Operator shall procure and maintain, and Owner
shall pay for, from the Commencement Date and thereafter at all times during the
Term hereof property insurance, equal to at least one hundred percent (100%) of
the insurable value thereof on a replacement cost basis, or such lesser amount
to which Operator, in its sole and exclusive discretion, may determine, against
loss or damage to the Complex and its contents from fire, boiler explosion and
such other extended coverage risks and casualties as Operator shall deem
necessary. Operator shall also procure and maintain, and Owner shall pay for,
business interruption insurance against loss or damage by fire and other hazards
customarily included in an extended coverage endorsement, including riot, civil
commotion and insurrection, all of said business interruption insurance to be
effective from the Commencement Date of this Agreement and during the Term
hereof. Such liability and property insurance coverage shall list Operator as
an additional insured, with a right to thirty (30) days prior written notice in
the event of cancellation or modification of coverage.
6.02 LIABILITY INSURANCE/MISCELLANEOUS COVERAGES. Operator shall procure
and maintain, and Owner shall pay for, during the Term hereof, the following
insurance, which insurance shall list Operator and Operator's subsidiaries,
affiliates, officers, directors, agents, servants, workmen, and employees (all
collectively referred to herein as "OPERATOR") as additional insures, with a
right to thirty (30) days prior written notice in the event of cancellation or
modification of coverage:
(a) Comprehensive General Liability Insurance at a limit of at least
$1 million per occurrence/$2 million aggregate, including, but not
limited to, liquor liability and innkeepers liability coverage to
protect against theft of or damage to guests' property;
(b) Automobile Liability and Physical Damage Insurance for at least
$1 million combined single limit to include broad form drive other car
coverage;
19
(c) Comprehensive Crime Insurance including, but not limited to,
Employee Dishonesty and Depositor's Forgery Coverages;
(d) Such ▇▇▇▇▇▇▇'▇ Compensation, Employer's Liability or similar
insurance as may be required by law;
(e) Group Benefits Insurance including major medical and
hospitalization for Complex employees;
(f) Any insurance which Owner or Operator may be required to obtain
pursuant to any franchise covering the Complex;
(g) Umbrella (Excess Liability) Insurance in an amount of not less
than $100 million; and
(h) Insurance against such other operating risks which it is now or
may hereafter be customary to insure in the operation of gaming
complexes.
6.03 INSURANCE STANDARDS AND REQUIREMENTS.
(a) It is agreed that all insurance hereunder shall fully and adequately
protect Owner and Operator, and shall meet or exceed any requirements of
applicable laws, rules or regulations, insurance underwriters, or other third
parties having the right to determine insurance requirements for the Complex.
Owner and Operator shall each approve all insurance required for the Complex
with respect to amount and types of coverage, and the terms and conditions
thereof; provided that, in making determinations hereunder with respect to
insurance, Owner and Operator shall take into account Operator's advice derived
from its experience as a casino and hotel manager. Insurance procured
hereunder shall be placed with reputable, financially sound insurance companies
acceptable to Owner and Operator, and shall be obtained in the name of Owner or
Operator (as agent for Owner), as the parties may mutually agree. All insurance
hereunder shall name Operator and Owner as co-insureds and/or additional
insureds. If Owner should refuse or delay in approving the procuring or
maintaining of insurance which Operator reasonably deems to be advisable to
obtain for the Complex, Operator shall have (i) the right, upon five (5) days
prior written notice to Owner, to procure such insurance in Operator's own name
but at Owner's sole cost and expense, and (ii) the right to terminate this
Agreement upon sixty (60) days prior written notice to Owner, unless such
insurance is procured by Owner within such notice period.
(b) Operator and Owner shall submit to each other each year a summary of
the insurance
20
coverage maintained by each with respect to the Complex, and each party shall
have thirty (30) days thereafter to give its comments thereon to the other. If
a submitting party receives no written comments from the other party within said
period, the insurance program shall be deemed approved for that year.
6.04 INDEMNITY. Owner agrees:
(a) To indemnify and hold Operator free and harmless from any liability for
injury or death to persons or damage or destruction of property due to any cause
whatsoever, either in or about the Complex or elsewhere, as a result of the
performance of this Agreement by Operator, its agents, workmen, servants,
officers, directors or employees, irrespective of whether caused, wholly or
partially, by the negligence of Operator, its agents, officers, directors or
employees; and,
(b) To reimburse Operator upon demand for any money or other property which
Operator is required to pay out for any reason whatsoever in performing its
duties hereunder or as a consequence thereof, whether the payment is required by
law to settle labor claims, for operating expenses or any other charges or debts
incurred or assumed by Operator or any other party, or judgments, settlements,
or expenses in defense of any claim, civil or criminal action, proceeding,
charge, or prosecution made, instituted or maintained against Operator or Owner,
jointly or severally, because of the condition or use of the Complex, or acts of
failures to act of Operator, its employees, officers, directors or agents,
Owner, its employees, officer or agents, or arising out of or based upon any
law, regulation, requirement, contract or award; and,
(c) To defend any claim, action, suit or proceeding brought against
Operator or Owner, jointly or severally, arising out of or connected with any of
the foregoing, and to hold harmless and fully indemnify Operator from any
judgment, loss or settlement on account thereof, regardless of the jurisdiction
in which any such claims, actions, suits or proceedings may be brought.
(d) Notwithstanding the foregoing, Owner shall not be liable to indemnify
and hold Operator harmless from any liability described above which results from
the gross negligence or willful misconduct of Operator, its agents, employees,
officers or directors.
21
ARTICLE SEVEN
-------------
GROUP SERVICES BY OPERATOR
--------------------------
7.01 GROUP SERVICES. Operator shall provide to the Complex, from other
offices or casinos managed by Operator or its affiliates or subsidiaries, the
following services:
(a) General Administrative Service, in connection with:
(i) Operation:
Quality Control and Inspection;
General Supervision;
Supervision of Employee Hiring and Training;
Sales Coordination;
Coordination of a System-wide Preventive Maintenance
Program;
Coordination of Advertising and Promotional Program;
Renovating and Redecoration of Complex;
Purchasing of Furnishings and Equipment.
(ii) Accounting:
Coordination of the Accounting System, and the
procuring of a Computer Program (Software) for the
same;
General Supervision of Accounting Reports;
Internal Audits.
(b) Specific services, whereby personnel might be loaned to the Complex as
may be deemed reasonable by Operator from other hotel and/or casinos from time
to time for the Complex's benefit.
7.02 COSTS OF SERVICES. The cost of the services referred to in Section
7.01 shall be reimbursed to Operator as a Complex operating expenses on a direct
cost bases. Such costs for services include:
(a) Actual out-of-pocket telecommunication and travel expenses for the
personnel necessary to coordinate the above services directly attributable
to the Complex operation; and
22
(b) The direct cost to Operator in preparing payrolls, computer time and
financial statements for the Complex; and
(c) The proportional cost attributable to the Complex of the overall
advertising and promotion budget undertaken by Operator or its affiliates
or subsidiaries; and
(d) In the case of specific services described in Section 7.01(b), the actual
pro rata compensation cost and out-of-pocket reimbursable travel expenses
of personnel while loaned to the Complex for its benefit.
7.03 SOFTWARE.
(a) Software. Operator and Owner acknowledge that, through the experience
of Operator's affiliates, Operator has developed or directed the development of
data processing computer software for hotel operations (the "SOFTWARE"). As
part of the services furnished by Operator under this Agreement, Operator shall
procure for the Complex, at Owner's sole cost and expense, Operator's data
processing computer software for the operation of the Complex from Operator's
affiliates. Owner agrees that Operator shall purchase, at Owner's sole cost and
expense, the necessary data processing hardware equipment to use the computer
software in the operation of the Complex. Owner further agrees that, as an
operating expense of the Complex and at Owner's sole cost and expense, Operator
shall procure such installation, training, retraining and maintenance assistance
from Operator's affiliates as Operator, in its sole discretion, deems advisable.
For purposes of this Section 7.03(a), the term "Owner's cost and expense" is
defined as a cost which is cost competitive in the marketplace with other
comparable available date processing software and hardware.
(b) Title to the Software. Owner hereby acknowledges that the exclusive
right of ownership in the Software, as well as any subsequent improvements,
modifications or updates to the Software, vests solely in Operator. Owner
hereby disclaims any right to ownership, possession or use of the Software and
related materials. Owner hereby acknowledges the unique proprietary nature of
the Software and does hereby covenant that Owner shall maintain the strict
confidential nature of the Software and related materials provided for use
pursuant to this Agreement and Owner shall not disseminate such Software or
related materials to any other person or entity without the express written
consent of Operator thereto. Owner hereby further covenants that it shall not,
and it shall not suffer any other person or entity to, violate the provisions of
this Section 7.03(b), which Owner
23
hereby consents shall be enforceable in equity, in a summary fashion, by
Operator or its assignees without proof of harm other than an unauthorized
disclosure.
(c) Return of the Software. Upon termination of this Agreement, for
whatever reason, Owner shall immediately discontinue the use of the Software
and/or related materials and shall, within sixty (60) days of such termination,
certify to Owner that (i) the use of the Software and related materials has been
discontinued, (ii) all originals and copies of the Software have been returned
to Operator, and (iii) no person or entity has retained any portion, in original
or duplicate, of the Software or related material. The provisions of Sections
7.03(b) and 7.03(c) of this Agreement shall survive any termination of this
Agreement.
7.04 INTELLECTUAL PROPERTY. Operator shall procure for the Complex the
use of the "Hollywood Casino" name and related trademarks, including those marks
which may from time to time be developed and implemented in operating Hollywood
Casino establishments in the United States (the "INTELLECTUAL PROPERTY") to the
extent that the use of such additional marks are appropriate (as determined by
the Operator) for use at the Complex. The cost and expense of such Intellectual
Property shall be deemed to be included within the Management Fee.
24
ARTICLE EIGHT
-------------
DAMAGE TO AND DESTRUCTION OF THE COMPLEX
----------------------------------------
8.01 OWNER TO RESTORE. Owner agrees, subject to the provisions of this
Article Eight, to repair, restore, rebuild or replace any insured damage to, or
impairment or destruction of the Complex from fire or other casualty. If Owner
fails to undertake such work within ninety (90) days after the fire or other
casualty, or shall fail to complete the same diligently, Operator may, but shall
not be obligated to, undertake or complete such work for the account of Owner
and shall be entitled to be repaid therefor, and proceeds of insurance shall be
made available to Operator.
8.02 LIMITATION ON RESTORATION. If the Complex shall be totally destroyed
or substantially destroyed during the Term of this Agreement by fire or other
casualty and (a) adequate insurance as required by Article Six of this Agreement
shall have been maintained, and (b) the cost of repairing, restoring, rebuilding
and replacing the same shall exceed one hundred percent (100%) of the proceeds
of the insurance collectible by Owner for and on account thereof, Owner shall
have the right and option, upon notice served upon Operator within sixty (60)
days after such fire or other casualty, to terminate this Agreement. If the
cost of repairing, restoring, rebuilding or replacing the damage, impairment or
destruction resulting from such fire or other casualty shall be less than one
hundred percent (100%) of the proceeds of the insurance collectible by Owner,
or, if greater, is the result of Owner not having maintained adequate insurance
as required by Article Six of this Agreement, Owner shall repair, restore,
rebuild or replace such damage, impairment or destruction, unless and to the
extent that Owner and Operator shall otherwise agree. If Owner fails to
undertake such work within ninety (90) days after a fire or other casualty, or
shall fail to complete the same diligently, Operator, without prejudice to its
rights to repair, restore, rebuild or replace such damage, impairment or
destruction for and on behalf of Owner and its rights and remedies upon
undertaking any such work provided for in this Article, may at its election,
terminate this Agreement upon notice to Owner.
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ARTICLE NINE
------------
CONDEMNATION
------------
9.01 TOTAL CONDEMNATION. If the whole of the Complex shall be taken
or condemned in any eminent domain, condemnation, compulsory acquisition or like
proceeding by any competent authority for any public or quasi-public use or
purpose, or if such a portion hereof shall be taken or condemned so as to make
it imprudent or unfeasible, in Operator's reasonable opinion, to use the
remaining portion as a Complex of type and class immediately preceding such
taking or condemnation, then, in either of such events, Operator, in its sole
discretion, may determine that the Term of this Agreement shall cease and
terminate as of the date of such taking or condemnation, and, in any such event,
Operator shall be paid from such award an amount equal to four percent (4%) of
such award or Operator's Management Fee earned during the year preceding the
date of termination of this Agreement, whichever is greater.
9.02 PARTIAL CONDEMNATION. If only a part of the Complex shall be
taken or condemned and the taking or condemnation of such part does not make it
unfeasible or imprudent, in Operator's reasonable opinion, to operate the
remainder as a Complex of the type and class immediately preceding such taking
or condemnation, this Agreement shall not terminate, but out of the award to
Owner, so much thereof as shall be reasonable necessary to repair any damage to
the Complex, or any part thereof, or to alter or modify the Complex, or any part
thereof, so as to render the Complex a complete and satisfactory architectural
unit as a Complex of the same type and class as it was immediately preceding the
taking or condemnation shall be used by Owner for that purpose. The balance of
the award, after deduction of the sum necessary for restoration, shall be fairly
and equitably apportioned between Owner and Operator so as to compensate
Operator for any loss of income resulting from or as the result of the taking or
condemnation.
ARTICLE TEN
-----------
RELATIONSHIP AND AUTHORITY
--------------------------
The provisions of this Agreement relating to the Management Fee
payable hereunder is included solely for the purpose of providing a method
whereby the said fees can be measured and ascertained. Operator and Owner shall
not be construed as joint venturers or partners of each other
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and neither shall have the power to bind or obligate the other except as set
forth in this Agreement. Operator is, however, clothed with such additional
authority and powers as agent of Owner as may be necessary to carry out the
spirit and intent of this Agreement.
ARTICLE ELEVEN
--------------
TERMINATION
-----------
11.01 RECIPROCAL TERMINATION. Notwithstanding any other provision of
this Agreement to the contrary, each party shall have the right to terminate
this Agreement on forty-five (45) days prior written notice to the other in the
event such other party shall cause, commit or suffer to exist with respect to:
(a) A material breach of this Agreement which is not cured within the
period of written notice thereof; or
(b) The institution of any statute, regulation, rule or ruling
rendering the conduct of gaming in the United States or at the
Complex illegal.
11.02 OPERATOR'S RIGHT TO FUND NECESSARY FUNDS OR TERMINATE. Upon the
failure of Owner to furnish the funds required for Operator to properly manage
the Complex as contemplated herein or the failure of Owner to either compensate
or reimburse Operator as stipulated in this Agreement, Operator shall have the
right, but not the obligation, to either (a) advance the necessary funds to the
Owner as a loan, which loan will bear interest at a market rate of interest, or
(b) terminate this Agreement, said termination to become effective upon the
expiration of the notice period otherwise provided in this Agreement, unless
cured by Owner within such period. In the event Operator elects to exercise
its rights under clause (a) of the preceding sentence, Owner will, if requested
by Operator, execute and deliver a negotiable promissory note in form and
substance satisfactory to Operator evidencing such obligation.
ARTICLE TWELVE
--------------
SUCCESSORS AND ASSIGNS
----------------------
12.01 Assignments by Operator. Owner's consent shall not be required for
Operator to assign this Agreement or its rights and interest in the operation of
the Complex to any entity in which Hollywood Casino Corporation, a Delaware
corporation, either directly or indirectly maintains a controlling interest and
such assignment shall serve to fully relieve and discharge Operator from
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any further duties or obligations pursuant to this Agreement. In addition,
Owner's consent shall not be required for Operator to collaterally assign this
Agreement or its rights and interest in the operation of the Complex to any
entity as security for indebtedness. Except as hereinabove provided, neither
Operator nor Owner shall assign this Agreement or in any manner sell, assign or
transfer its rights and interests in the Complex without the prior written
consent of the non-assigning party. It is understood and agreed that any consent
granted by the non-assigning party to any such assignment shall not be deemed a
waiver of the covenant herein contained against assignment in any subsequent
case.
12.02 TRANSFERS BY OWNER. If at any time during the term of this
Agreement (a) Owner shall be desirous of selling or assigning the whole or a
majority part of its interest in the Complex or (b) by virtue of the exercise of
rights by the holder of a mortgage or such similar encumbrance Owner shall be
required to part with the whole or a majority part of its interest in the
Complex, Owner shall so notify Operator in writing. The assignee, purchaser or
recipient in any such assignment or transfer by Owner of a whole or a majority
of its interest in this Agreement or the Complex shall be free to either attorn
to, and be bound by, this Agreement or terminate this Agreement; provided,
however, such assignee, purchaser or transferee shall be deemed to have attorned
to, and be bound by, this Agreement if it shall not have provided Operator with
written notice of termination within three (3) business days after the effective
date of such assignment or transfer. Operator shall have the absolute right to
require that any new owner or holder of less than a majority interest shall be
bound by the terms of this Agreement. Any assignment or transfer by Owner of
less than a majority interest in this Agreement or the Complex, whether
voluntary or involuntary, shall require that the assignee, purchaser or
recipient thereunder shall attorn to and be bound by this Agreement.
12.03 ASSIGNS BOUND. Subject to the provisions of this Agreement
regarding and/or restricting sale or assignments as set forth elsewhere in this
Agreement, the terms, provisions, covenants, undertakings, agreements,
obligations and conditions of this Agreement shall be binding upon and shall
inure to the benefit of the successors in interest and the assigns of the
parties hereto with the same effect as if mentioned in each instance where the
party hereto is named or referred to,
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except that no assignment, transfer pledge, mortgage, lease or sublease by or
through Operator or by or through Owner, as the case may be, in violation of the
provision of this Agreement shall vest any rights in the assignee, transferee,
mortgagee, pledge, lessee, sublessee or occupant.
ARTICLE THIRTEEN
----------------
GENERAL PROVISIONS
------------------
13.01 BEST EVIDENCE. This Agreement shall be executed in original and
"Xerox" or photostatic copies and each copy bearing original signatures of the
parties hereto in ink shall be deemed an original.
13.02 AMENDMENT OR MODIFICATION. This Agreement may not be amended or
modified except by a writing signed by all parties hereto.
13.03 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of _________ in effect on the date of the execution
of this Agreement. Notwithstanding the foregoing, this Agreement shall, as
required, be governed by and construed in accordance with the Louisiana Gaming
Control Act and the rules and regulations of the Louisiana Gaming Control Board
promulgated thereunder.
13.04 INTERPRETATION. The preamble recitals of this Agreement are
incorporated into and made a part of this Agreement; titles of Sections and
Articles are for convenience only and are not to be considered a part of this
Agreement. All references to years shall mean a year commencing as of the first
day of January of each year. All references to the singular shall include the
plural and all references to gender shall, as appropriate, include other
genders.
13.05 SEVERABILITY. In the event any one or more provisions of this
Agreement is judicially declared null and void or otherwise unenforceable, the
remainder of this Agreement shall survive, unless such survival vitiates the
intent of the parties hereto.
13.06 PROHIBITION ON RECORDATION/COVENANT OF DISCLOSURE.
(a) Operator hereby covenants and agrees that it shall take no action,
nor authorize or suffer any one to take any action, the result of which would be
to cause this Agreement, or a memorandum thereof, to be filed of record against
the realty of the Complex. This covenant prohibiting recordation shall not
apply to the filing of a judgment lien by reason of an action or cause
29
of action arising from this Agreement or the breach thereof.
(b) Owner hereby covenants and agrees that it shall disclose the
existence, terms, provisions and conditions of this Agreement to any and all
prospective purchasers and mortgagees of the realty of the Complex.
13.07 ARBITRATION. Any dispute, controversy or claim arising out of or
related to this Agreement, shall be resolved in the following manner; provided,
however, that any dispute, controversy or claim arising out of or related to the
intellectual property rights of Operator (or Operator's parent, subsidiary or
affiliates) will not be subject to arbitration. The parties hereto shall refer
the matter to their chief executive officers for the negotiation of a mutually
satisfactory resolution. If no such resolution is reached, then at any time
after fifteen (15) days following the date the matter was referred to the chief
executive officers of the parties, either party hereto may notify the other of
its intention to have the claim finally settled by confidential arbitration in
Dallas, Texas, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association and in accordance with the Federal Rules of
Civil Procedure and Evidence applicable thereto. This agreement to arbitrate
shall be specifically enforceable in any court of competent jurisdiction.
13.08 FORCE MAJEURE. With the exception of payment obligations imposed
under this Agreement (which obligations are not subject to suspension,
extinguishment or cancellation as a consequence of this Section 13.08 or
otherwise), the parties to this Agreement shall be excused from the performance
of any obligation under this Agreement in the event such performance is hindered
or prevented by strike, boycott, lockout or other labor trouble; and storm,
fire, earthquake or Act of God; any riot, civil disturbance, or any act of war
or of the public enemy; the shortage, unavailability or disruption in the supply
of labor, materials, fuels or the disruption of postal, electrical, telephone or
other utility service; any present or future governmental law, ordinance, order
rule or regulation; or any other cause or contingency beyond the respective
parties' control, but only during such time as such party is unable due to a
specified reason herein to perform its obligations hereunder.
13.09 WAIVER. None of the terms of this Agreement, including this Section
13.09, or any term, right or remedy hereunder shall be deemed waived unless such
waiver is in writing and signed
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by the party to be charged therewith and in no event by reason of any failure to
assert or delay in asserting any such term, right or remedy or similar term,
right or remedy hereunder.
13.10 GENERAL WARRANTIES. Each party hereto warrants and represents to
the other as follows:
(a) Each party is the holder of good standing of all necessary
governmental licenses and permits required to satisfy its obligations
under this Agreement; and,
(b) Each party has the right, power, title and authority to enter into
this Agreement.
13.11 PAROL. This Agreement constitutes the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof,
and this Agreement supersedes any prior understandings, agreements, or
undertakings.
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
ATTEST:
---------------------------------
By:
--------------------------------- ------------------------------
Name:
----------------------------
Title:
---------------------------
ATTEST:
---------------------------------
By:
--------------------------------- ------------------------------
Name:
----------------------------
Title:
---------------------------
Exhibits:
--------
A - Description of Complex
B - Furnishings and Equipment of the Complex
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