-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JDWAl03PEK0yi1dbGiWdeePuRpz89bavUxUc3wvptHk1KkSaRJP2z038Nq2uQeYf +kI3UqIOp88gGhY2EzhsJw== /in/edgar/work/20000801/0000863015-00-000026/0000863015-00-000026.txt : 20000921 0000863015-00-000026.hdr.sgml : 20000921 ACCESSION NUMBER: 0000863015-00-000026 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000801 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ISLE OF CAPRI CASINOS INC CENTRAL INDEX KEY: 0000863015 STANDARD INDUSTRIAL CLASSIFICATION: [7990 ] IRS NUMBER: 411659606 STATE OF INCORPORATION: DE FISCAL YEAR END: 0425 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-20538 FILM NUMBER: 683074 BUSINESS ADDRESS: STREET 1: 1641 POPPS FERRY RD STREET 2: N/A CITY: BILOXI STATE: MS ZIP: 39532 BUSINESS PHONE: 2283967000 MAIL ADDRESS: STREET 1: 1641 POPPS FERRY RD CITY: BILOXI STATE: MS ZIP: 39532 FORMER COMPANY: FORMER CONFORMED NAME: CASINO AMERICA INC DATE OF NAME CHANGE: 19930328 FORMER COMPANY: FORMER CONFORMED NAME: ANUBIS II CORP DATE OF NAME CHANGE: 19600201 10-K405/A 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED APRIL 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________________ TO ______________________ Commission File Number 0-20538 ------- ISLE OF CAPRI CASINOS, INC. --------------------------- (Exact name of registrant as specified in its charter)
Delaware 41-1659606 - -------------------------------- ---------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 1641 Popps Ferry Road, Biloxi, Mississippi 39532 - ------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (228) 396-7000
Securities Registered Pursuant to Section 12(b) Of The Act: None Securities Registered Pursuant to Section 12(g) Of The Act: Common Stock, $.01 Par Value Per Share (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No -- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting and non-voting stock held by non-affiliates1 of the Company is $269,021,585, based on the last reported sale price of $14.56 per share on July 14, 2000 on the Nasdaq Stock Market; multiplied by 18,472,951 shares of Common Stock outstanding and held by non-affiliates of the Company on such date. As of July 14, 2000, the Company had a total of 30,464,801 shares of Common Stock outstanding. 1 Affiliates for the purpose of this item refer to the directors, executive officers and/or persons owning 10% or more of the Company's common stock, both of record and beneficially; however, this determination does not constitute an admission of affiliate status for any of the individual stockholders. DOCUMENT INCORPORATED BY REFERENCE:
Document Part of Form 10-K into which Incorporated - -------- ----------------------------------------- Isle of Capri Casinos, Inc.'s Definitive Proxy Part III Statement for its Annual Meeting of Stockholders to be held September 15, 2000.
PAGE ---- PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 - ------ ITEM 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . 1 ITEM 2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . 25 ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . 27 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . 29 PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 - ------- ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS' MATTERS. . . . . . . . . . . . . 30 ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . 31 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . 32 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. . . . . . . . . . . . . . . 38 ITEM 8. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS. . . . . . 39 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . 73 PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 - -------- ITEM 10. DIRECTOR AND EXECUTIVE OFFICERS OF THE REGISTRANT. . 73 ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . 73 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. . . . . . . . . . . . . . . . . . 73 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . 73 PART IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 - ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . 73 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
PART I ------ ITEM 1. BUSINESS. OVERVIEW We are a leading developer, owner and operator of branded gaming and related lodging and entertainment facilities in growing markets in the United States. We were incorporated in Delaware in February 1990 under the name Kana Corporation. In 1992 our name was changed to Casino America, Inc. On September 28, 1998 our name was changed to Isle of Capri Casinos, Inc. We conduct our business through subsidiaries, and our principal asset is the stock of those subsidiaries, which in turn hold substantially all of the assets of our businesses. Our principal executive offices are located at 1641 Popps Ferry Road, Biloxi, MS 39532, and our telephone number is 228/396-7000. On March 2, 2000, we merged with Lady Luck Gaming Corporation ("Lady Luck"). Lady Luck wholly owned the Lady Luck Casino and Hotel facilities in Lula, Mississippi, Natchez, Mississippi and Marquette, Iowa, and owned a 50% interest in the Lady Luck Casino & Hotel in Bettendorf , Iowa (collectively, the "Lady Luck properties"). In addition, on March 2, 2000 we acquired Bettendorf Riverfront Development Corporation ("BRDC") which was owned by family members of Bernard Goldstein, our chairman of the board and chief executive officer, including Robert Goldstein, and which owned the remaining 50% interest in the Lady Luck Casino & Hotel in Bettendorf, Iowa. The Lady Luck acquisition was funded through our Senior Secured Credit Facility, which was amended and restated in connection with the acquisition (the "Senior Secured Credit Facility"). In connection with the BRDC acquisition, we issued 6.3 million shares of common stock to BRDC's shareholders. On June 6, 2000, we acquired the Kansas City Flamingo Casino (the "Isle-Kansas City") from a subsidiary of Hilton Hotels Corporation. The acquisition was funded through our Senior Secured Credit Facility. As a result of the Lady Luck, BRDC and Isle-Kansas City acquisitions, we now wholly own and operate 10 gaming facilities located in Lake Charles and Bossier City, Louisiana, Biloxi, Vicksburg, Tunica, Natchez and Lula, Mississippi, Bettendorf and Marquette, Iowa and Kansas City, Missouri. We also own a 57% interest in and operate a gaming facility in Black Hawk, Colorado. The gaming facilities in Lake Charles, Bossier City, Biloxi, Vicksburg, Tunica and Black Hawk operate under the name "Isle of Capri" and feature our distinctive tropical island theme. The former Lady Luck properties and the Isle-Kansas City are being converted to "Isle of Capri" branded properties, and the Company anticipates that the conversion of these properties will be completed by December 2000. In addition, we wholly own and operate a pari-mutuel harness racing facility in Pompano Beach, Florida and own a 50% interest in and operate gaming activities aboard a cruise ship based in New Orleans, Louisiana. We have entered into contracts to acquire the Lady Luck Casino and Hotel in Las Vegas and the President Casino in Davenport, Iowa. Subject to receipt of all required approvals, we expect to complete both transactions this fall. We are also developing a casino in Boonville, Missouri which we expect to complete in the fall of 2001. Also, the Missouri Gaming Commission has recently selected our Jefferson County, Missouri project for development which we expect to complete in the spring of 2002. For the fiscal year ended April 30, 2000, we had total revenue of $684.9 million and EBITDA of $159.3 million. STRATEGY Our business strategy, which has been implemented in our existing operations, emphasizes the standardized operation and development of value-oriented gaming facilities and complementary amenities with a tropical island theme using the "Isle of Capri Casino" brand name. We believe that the consistent use of the Isle of Capri Casino name and associated theme has created a readily identifiable brand image connoting excitement, quality and value, complemented by an emphasis on customer service and non-gaming entertainment amenities. We seek to identify slot-oriented customers and active casino patrons through the use of database marketing and generate repeat visitors to our gaming facilities. We believe that our strategy fosters customer loyalty, enhances our ability to compete effectively in existing markets, and facilitates the consistent, efficient and cost-effective development of gaming facilities in new markets. We also believe that good community relations are fundamental to our success and, as a result, we take an active role in community activities in each jurisdiction in which we have gaming facilities. We have historically identified and entered new gaming markets which we believe provide attractive long-term opportunities. We anticipate that most of our near-term focus will be incorporating the "Isle of Capri" brand at the former Lady Luck properties and the Isle-Kansas City property expanding existing facilities and pursuing new development opportunities. We have recently added hotels at the Isle-Bossier City and the Isle-Vicksburg in order to compete effectively in our markets and provide customers with a complete resort experience designed to increase a customer's length of stay at and use of our facilities. We are currently constructing a hotel and two theaters at the Isle - - Tunica, a hotel at the Isle - Black Hawk and an additional hotel at the Isle - Lake Charles. We are also considering the construction of additional lodging facilities, casino improvements or other amenities at the Isle - Bossier City and the Isle - Biloxi. We are currently developing a casino in Boonville, Missouri and have been selected by the Missouri Gaming Commission to develop a casino and hotel facility in Jefferson County, Missouri, which will primarily serve the South St. Louis metropolitan area. We also expect to continue reviewing gaming opportunities in new markets on the basis of demographic, regulatory, competitive and other factors. MARKETING We attract customers to our casinos by designing and implementing marketing and promotional programs that emphasize our Isle Style tropical island theme and generate loyal customers. We have developed an extensive proprietary database of primarily slot-oriented customers that allows us to create effective targeted marketing and promotional programs, merchandise giveaways, game tournaments and other special events, such as Capri Cruises. These programs are designed to reward customer loyalty, attract new customers to our properties and maintain high recognition of our ''Isle of Capri'' brand. As of July 12, 2000, our database contained approximately 4.9 million members, of whom approximately 1.3 million receive regular mailings. To develop this database, we offer all of our customers membership in the Island Gold Players Club, which allows them to earn points based on play and redeem these points for casino cash tokens, prizes and complimentary services at any Isle of Capri casino. Island Gold Players Club members receive a card that, when inserted into a slot machine or presented at a gaming table at the issuing facility, allows us to track their gaming preferences, maximum, minimum and total amount wagered and frequency of visits. Players are classified in groups according to these characteristics. Our database is used for direct mailings, giveaways and other promotional events that are tailored to these specific groups of players. We have effectively used our database to encourage repeat visits, increase customers' length of stay and improve our operating results. We place significant emphasis on attracting local residents and seek to maintain a strong local identity in each market in which we operate by initiating and supporting community and special events. We use radio and television media to promote the ''Isle of Capri'' brand name and attract customers to our properties. To further enhance Isle Style, we have engaged a well-known actor to narrate our radio and television advertisements. CURRENT OPERATIONS Here is an overview of our existing casino properties:
ISLE ISLE ISLE ISLE ISLE ISLE LAKE CHARLES BOSSIER CITY BILOXI VICKSBURG BLACK HAWK TUNICA ------------ ------------ ---------- --------- ----------- ------ DATE OPENED. . . . . . . . JUL-95 MAY-94 AUG-92 AUG-93 DEC-98 JUL-99 Casino square footage 48,900 20,000 32,500 27,000 43,000 28,000 Slot machines . . . . 1,836 1,079 1,212 793 1,145 891 Table games . . . . . 90 45 40 28 12 15 Hotel rooms . . . . . 241 539 367 124 237 - Parking spaces. . . . 2,000 1,200 1,300 1,100 1,100 1,336 ISLE ISLE ISLE ISLE ISLE NATCHEZ LULA BETTENDORF MARQUETTE KANSAS CITY ------------ ------------ ---------- --------- ----------- DATE OPENED. . . . . . . . FEB-93 JUN-94 APR-95 DEC-94 OCT-96 Casino square footage 14,300 56,000 25,000 18,700 30,000 Slot machines . . . . 634 1,542 1,163 698 1,025 Table games . . . . . 16 41 44 36 46 Hotel rooms . . . . . 143 607 256 24 - Parking spaces. . . . 645 2,085 500 590 2,054
The Isle-Lake Charles The Isle-Lake Charles, which commenced operations on July 29, 1995, is one of two riverboat gaming facilities that operates two riverboats in the Lake Charles, Louisiana market and one of three gaming facilities in southwest Louisiana. Lake Charles is the closest gaming market to Houston, Texas, a metropolitan area with a population of approximately 4.2 million that is located approximately 140 miles west of Lake Charles. The Isle-Lake Charles is located on a 19-acre site along the Calcasieu River adjacent to Interstate 10 in Calcasieu Parish, one mile from the City of Lake Charles. Our Crown riverboat has 24,700 square feet of gaming space with 892 slot machines and 41 table games on three levels. Our Grand Palais riverboat has 24,200 square feet of gaming space with 944 slot machines and 49 table games on two levels. Each of our riverboats has a large bar and foyer and the Grand Palais riverboat has a top level which is not yet utilized. In the Lake Charles market, we are required to cruise. However, because we have two riverboats, one riverboat is always dockside, allowing us to offer our customers continuous boarding. The Isle-Lake Charles offers on-site accommodations to our customers through the Inn at the Isle, a 241-room hotel, and provides free valet and self-parking for more than 2,000 vehicles, including approximately 1,400 spaces in an attached parking garage from which patrons can access the pavilion by elevator. The lighted rooftop rotunda of the Isle-Lake Charles' pavilion is topped by the Isle of Capri parrot which is 145 feet above the ground and visible from Interstate 10. We believe that these amenities help us attract a significant portion of the overnight visitors from Texas. The Isle-Lake Charles also includes a 105,000 square foot land-based pavilion. The pavilion is based on a tropical island theme and includes rock formations, waterfalls, water arches with jets of water shooting up to 30 feet in the air, ponds with porcelain sea life, flower beds landscaped in the shape of playing card suits and an arcade. The pavilion provides panoramic views of the lake and the city of Lake Charles and has separate entrances to the riverboats. The pavilion offers customers a wide variety of non-gaming amenities, including a 80-seat Farraddays' restaurant, a 489-seat Calypso's buffet, a 40-seat Tradewinds deli, Caribbean Cove, which features free, live entertainment and can accommodate 180 customers, a Banana Cabana souvenir gift shop and an Island Gold Players Club booth. The pavilion also has a 16,000 square foot activity center comprised of a 1,100-seat special events center designed for live boxing, televised pay-per-view events, concerts, banquets and other events, meeting facilities and administrative offices. The Lake Charles market, excluding a nearby Native American-owned casino, had gaming revenues of $303 million in 1999. We believe that the Isle-Lake Charles attracts customers primarily from southeast Texas, including Houston, Beaumont, Galveston, Orange and Port Arthur and local area residents. Approximately 490,000 and 1.6 million people live within 50 and 100 miles, respectively, of the Isle-Lake Charles. We are building a new on-site 250-room deluxe hotel which is scheduled to be completed in the fall of 2000. The hotel will include a Kitts Kitchen & Rum Mill restaurant, and banquet and meeting facilities. We believe the availability of additional quality overnight accommodations will attract a different segment of customers and increase their length of stay at our facility. The Isle-Bossier City The Isle-Bossier City, which commenced operations on May 20, 1994, is one of four dockside gaming facilities currently operating in the Bossier City/Shreveport, Louisiana market. Bossier City/Shreveport is the closest gaming market to Dallas/Ft. Worth, Texas, a metropolitan area with a population of approximately 4.5 million that is located approximately 190 miles west of Bossier City/Shreveport. The Isle-Bossier City is located on a 38-acre site along the Red River approximately one-quarter mile off Interstate 20 and has a dockside riverboat casino, a land-based entertainment pavilion and a parking garage. We opened our new on-site 305-room deluxe hotel in late June 1999. We also own and operate a 234-room hotel two miles from the Isle-Bossier City. The casino has approximately 20,000 square feet of gaming space on three levels with 1,079 slot machines, 45 table games and a video poker bar. The approximately 72,200 square foot land-based pavilion features towering palm trees, exotic rock formations and a waterfall. The pavilion offers a wide variety of non-gaming amenities, including a 107-seat Farraddays' restaurant, a 352-seat Calypso's buffet, a 40-seat Tradewinds deli, Caribbean Cove, which features free, live entertainment and can accommodate 550 customers, a Banana Cabana souvenir gift shop, an entertainment lounge area, a large nine-screen television wall featuring sporting events, an Island Gold Players Club booth and administrative offices. The Isle-Bossier City has on-site parking for 1,200 cars, of which 940 are accommodated in an attached parking garage. Additional overflow parking is available nearby on weekends. The 305-room Isle of Capri Casino Bossier City Hotel facility is directly accessible from the casino through the atrium. The hotel offers spacious rooms and provides amenities, including banquet facilities, arcade, child care facilities, meeting rooms, a heated pool and exercise facilities with a hot tub. The Bossier City/Shreveport market had gaming revenue of $642 million in 1999. We believe that the Isle-Bossier City attracts customers primarily from the local area, northeastern Texas and the Dallas/Ft. Worth metropolitan area. Approximately 540,000 and 1.8 million people live within 50 and 100 miles, respectively, of the Isle-Bossier City. The Isle-Biloxi The Isle-Biloxi, which commenced operations on August 1, 1992, was the first gaming facility to open in Mississippi. Biloxi is the closest gaming market to Mobile, Alabama, a metropolitan area with a population of approximately 600,000, that is located approximately 60 miles east of Biloxi. The Isle-Biloxi is located at the eastern end of a cluster of facilities known as ''Casino Row'' and is the first property reached by visitors coming from Alabama, Florida and Georgia via Highway 90. The Isle-Biloxi's eight-acre facility consists of a 50,000 square foot dockside gaming facility containing 32,500 square feet of gaming space with 1,212 slot machines and 40 table games on two levels, an adjacent land-based pavilion, a 367-room hotel and on-site parking for 1,300 vehicles. The 32,000 square foot, 50-foot high pavilion offers a wide variety of non-gaming amenities, including a 119-seat Farraddays' restaurant, a 280-seat Calypso's buffet, an 88-seat Tradewinds deli, Caribbean Cove, an open-air lounge area that can accommodate 116 customers and a Fantasy Isle Arcade of arcade games for all ages. Calypso's and Farraddays' provide panoramic views of the Gulf of Mexico and Deer Island. Caribbean Cove is located at the center of the pavilion and is surrounded by a dramatic fountain and an entertainment stage. The entertainment area features a stage and sound system used for special events. Musical performances in the pavilion are scheduled six days a week providing a Caribbean feel to Calypso's, Tradewinds and the hotel lobby. Headliner entertainment appears monthly in the Flamingo Bay Ballroom with a portion of the seating reserved for loyal customers. The 367-room Isle of Capri Crowne Plaza Resort hotel facility is directly accessible from the casino through the atrium. The hotel is included in the Crowne Plaza and Holiday Inn Worldwide reservation system. The hotel offers spacious rooms, most with balconies overlooking a marina, and provides amenities, including meeting rooms, full room service, a heated pool and exercise facilities with a hot tub, a dry sauna and massage therapy. The Mississippi Gulf Coast market (which includes Biloxi, Gulfport and Bay St. Louis) had gaming revenue of $1.0 billion in 1999. We believe that the Isle-Biloxi attracts customers from the local area, Alabama, Florida, Georgia and southeastern Louisiana, including New Orleans and Baton Rouge. There are approximately 660,000 and 2.9 million people residing within 50 to 100 miles, respectively, of the Isle-Biloxi. The Mississippi Gulf Coast hotel market consists of approximately 16,000 hotel/motel rooms. The Isle-Biloxi's hotel occupancy is consistently in excess of 90%. A number of our competitors in the Mississippi Gulf Coast market have purchased existing hotels in the area, have built or are presently building or upgrading their facilities or have announced plans to build or upgrade additional hotels. We are currently evaluating possible expansion at the Isle - Biloxi which could include additional gaming space, hotel rooms and parking. The Isle-Vicksburg The Isle-Vicksburg, which commenced operations on August 9, 1993, was the first of four dockside gaming facilities to open in the Vicksburg, Mississippi market. Vicksburg is the closest gaming market to Jackson, Mississippi, a metropolitan area with a population of approximately 420,000 that is located approximately 40 miles east of Vicksburg. The Isle-Vicksburg is located on an 18-acre site along the Mississippi River, approximately one mile north of Interstate 20, and consists of a 27,000 square foot dockside casino, a new on-site 124-room hotel and a 12,000 square foot land-based pavilion. The casino has two levels with a total of 793 slot machines and 28 table games. The Isle-Vicksburg provides on-site parking for 900 vehicles. The land-based pavilion offers customers a wide variety of non-gaming amenities, including a 67-seat Farraddays' restaurant, a 277-seat Calypso's buffet, a Tradewinds deli, live entertainment, a Banana Cabana souvenir gift shop, an Island Gold Players Club booth and a reception area. Customers have easy access to the second level of the casino from the land-based pavilion by either escalator or a wide stairway, both of which provide panoramic views of the Mississippi River through a wall of windows. In February 1999, we opened a new on-site 124-room hotel at the Isle-Vicksburg, which has 69 deluxe rooms with balconies overlooking the Mississippi River. The hotel is located on the bank of the Mississippi River, adjacent to the casino. The Isle-Vicksburg's 67-space recreational vehicle park is located approximately one-half mile from the casino and provides off-site parking for 200 vehicles. The Vicksburg market had gaming revenue of $213 million in 1999. We believe that the Isle-Vicksburg attracts customers primarily from Vicksburg and Jackson, Mississippi, northeastern Louisiana and tourists from other locales. Approximately 530,000 and 1.5 million people live within 50 and 100 miles, respectively, of the Isle-Vicksburg. The Isle-Black Hawk On December 30, 1998, we opened our 57%-owned Isle-Black Hawk. This land-based casino is the first casino reached by customers arriving from Denver, Colorado, a metropolitan area with a population of approximately 2.2 million that is located approximately 40 miles east of Black Hawk/Central City. The Isle-Black Hawk is the largest gaming facility currently operating in the Black Hawk/Central City market. The Isle-Black Hawk is located on an approximately 9.4-acre site which is readily accessible from Highway 119 and contains 43,000 square feet of gaming space on a single floor with 1,145 slot machines, 12 table games and on-site covered parking for 1,100 vehicles. The Isle-Black Hawk offers customers a wide variety of non-gaming amenities, including a 52-seat Farraddays' restaurant, a 254-seat Calypso's buffet, a 36-seat Tradewinds deli, a Banana Cabana souvenir gift shop and a 4,000 square foot event center that can be used for meetings and entertainment. We manage the Isle-Black Hawk for a fee which is equal to two percent of revenue (after deducting one-half of gaming taxes) plus ten percent of operating income, not to exceed four percent of revenue, as defined. The Black Hawk/Central City market had gaming revenue of $355 million in 1999. We believe that the Isle-Black Hawk's customers are primarily ''day trippers'' from areas such as Denver, Boulder, Fort Collins and Golden, Colorado and Cheyenne, Wyoming. There are less than 200 hotel rooms in the Black Hawk/Central City market. We are currently in the process of opening an on-site 237-room hotel. The Isle - Tunica In July 1999, we opened the Isle-Tunica in Tunica County, Mississippi. The facility contains approximately 891 slots and 15 table games, a Farraddays' restaurant and Calypso's buffet. A 227 room hotel and two theaters are under construction and scheduled to be completed in the fall of 2000. The Tunica market includes 10 casinos and had gaming revenue of $1.2 billion in 1999. We believe the Isle-Tunica attracts customers primarily from Memphis, Tennessee, which is located approximately 40 miles north of the Isle-Tunica. The Isle - Lula The Lady Luck Casino in Lula commenced operations in June 1994 and is the only casino facility in Coahoma County, Mississippi. The facility is located next to the Helena Bridge, which crosses the Mississippi River between Arkansas and Mississippi. Coahoma County is located approximately 120 miles southeast of Little Rock, Arkansas, the property's primary market, and 60 miles southwest of Memphis, Tennessee. Isle-Lula is the closest gaming facility to Little Rock, Arkansas, and approximately 420,000 people live within the property's primary target market. The property consists of two casinos containing approximately 63,000 square feet of gaming space, 1,542 slot machines and 41 table games. The facility also includes two on-site hotels with a combined 487 rooms, plus an off-site 120-room hotel, an entertainment facility, movie theaters, an arcade, a Does' Steakhouse and other restaurant facilities and a gift shop. We are currently renovating and re-branding the Lady Luck-Lula as an "Isle of Capri" property. The conversion will include reconfiguring the pavilion, re-theming the casinos, and adding Calypso's Buffet, Banana Cabana gift shop and Tradewinds' Marketplace deli. The conversion is expected to be completed by December 2000. The Isle-Bettendorf Lady Luck-Bettendorf opened in April 1995 as a joint venture between Lady Luck and BRDC. The property serves the Quad Cities metropolitan area, including Bettendorf and Davenport, Iowa and Moline and Rock Island, Illinois, and is one of three gaming facilities serving that market. The facility is located off of Interstate 74 on the Mississippi River and is accessible from Interstate 74 and Interstate 80, the two interstate highways serving the Quad Cities metropolitan area. The Isle-Bettendorf consists of a riverboat containing approximately 25,000 square feet of gaming space, 1,163 slot machines, 44 table games, a 256-room hotel, a 500-car parking garage, approximately 16,000 square feet of convention space, a Farraddays' restaurant and a buffet. We are in the process of converting the Lady Luck-Bettendorf to an "Isle of Capri" property, and the conversion is scheduled to be completed by this fall. In addition to the recently completed Farraddays' restaurant, the conversion of the Lady Luck-Bettendorf will include the addition of Calypso's Buffet, Tradewinds Deli & Marketplace and re-theming of the property to the tropical "Isle of Capri" theme. The Isle-Natchez Lady Luck-Natchez commenced operations in February 1993, and is the only gaming facility serving the Natchez area. The facility includes a three-story, dockside casino containing approximately 14,300 square feet of gaming space, 634 slot machines and 16 table games. Isle-Natchez also owns and operates a 143-room hotel containing convention and banquet facilities which is located approximately 1 mile from the casino, as well as John Martin's, a gourmet restaurant, located near the casino facility. We have completed the conversion of the Isle-Natchez and began operating the facility as Isle of Capri Casino and Hotel-Natchez in July 2000. The conversion included the addition of Calypso's Buffet and an overall re-theming of the property. The Isle-Marquette The Miss Marquette Casino, which was acquired by Lady Luck in October 1999, is located approximately 140-miles north of the Isle-Bettendorf. The Isle-Marquette, which opened in December 1994, currently competes only minimally with another riverboat and a race track with slot machines both of which are in the Dubuque area, approximately 50 miles south of Marquette. The Isle-Marquette includes a riverboat containing approximately 18,700 square feet of gaming space, 698 slot machines and 36 tables games. The facility also includes a land-based facility containing a buffet restaurant, an entertainment showroom, as well as a 24-room hotel, a marina and parking for approximately 590 vehicles. We are re-theming the Isle-Marquette and adding Calypso's Buffet as part of the conversion of the facility to an "Isle of Capri". The conversion is scheduled to be completed by this fall. The Isle-Kansas City On June 6, 2000, we acquired the Flamingo Casino in Kansas City from a subsidiary of Hilton Hotels Corporation. The facility is one of four casinos in the Kansas City metropolitan area, and is the closest facility to downtown Kansas City. The property contains approximately 63,000 square feet of gaming space, 1,022 slot machines and 44 table games. The property has three restaurants and other non-gaming amenities, including an entertainment lounge and gift shop. We are renovating and re-theming the facility as an Isle of Capri and the conversion is scheduled to be completed by December 2000. We anticipate having all of our operating systems in place and expect to commence operation as an Isle of Capri by this fall. The facilities' conversion, which will include adding a Farraddays' restaurant, Calypso's Buffet and Tradewinds Deli & Marketplace is are expected to be completed by the end of 2000. OTHER OPERATIONS Pompano Park In 1995, we acquired Pompano Park, a harness racing track located in Pompano Beach, Florida, midway between Miami and West Palm Beach. Pompano Park is the only racetrack licensed to conduct harness racing in Florida. During fiscal year end 2000, Pompano Park conducted 172 live racing programs. Pompano Park also offers daily ''full card'' simulcasting and wagering on other harness races and operates a 15-table limited stakes poker room with a $10 maximum win. Pompano Park is conveniently located off of Interstate 95 and the Florida Turnpike on a 220-acre owned facility. Pompano Park can accommodate up to 14,500 customers and has 4,000 parking spaces and 980 horse stalls. The six-story, air-conditioned facility includes a box seat area, a 218,400 square foot clubhouse, a large grandstand, a 1,200-seat dining area from which the races can be viewed, five concession stands, five bars and a 165-seat Player's Lounge cafeteria. We believe that Pompano Park would be an attractive location for casino-style gaming if such gaming were to be legalized in Florida. Capri Cruises On April 20, 1998, Commodore Cruise Lines and we formed Capri Cruises as a joint venture. We own a 50% interest in the joint venture and operate the casino on the Enchanted Capri cruise ship, which is based in the Port of New Orleans. The cruise ship offers two and five night cruises for up to 550 passengers. We provide discounted and complimentary cruises on the Enchanted Capri to many of our Island Gold Players Club members. TRADEMARKS We own the following trademarks listed in this documents Isle of Capri, Tradewinds, Farraddays', Calypso's, Inn at the Isle, Island Gold, and Isle Style. We consider all of these marks and the name recognition associated with these marks, to be extremely valuable to us and to our operations and to further development and implementation of the "Isle of Capri" brand and theme. COMPETITION We face intense competition in each of the markets in which we operate. Our existing gaming facilities compete directly with other gaming properties in Louisiana, Mississippi, Colorado, Iowa and Missouri, and with gaming facilities located in bordering states, including Illinois. We expect this competition to increase as new gaming operators enter our markets, existing competitors expand their operations, gaming activities expand in existing jurisdictions and gaming is legalized in new jurisdictions. Several of our competitors may have better name recognition, marketing and financial resources than we do. We cannot predict with any certainty the effects of existing and future competition on our operating results. We also compete with other forms of gaming and entertainment such as online computer gambling, bingo, pull tab games, card parlors, sports books, pari-mutuel or telephonic betting on horse racing and dog racing, state-sponsored lotteries, jai-alai, video lottery terminals, video poker terminals and, in the future, may compete with in-flight gaming or gaming at other venues. We also compete with gaming operations in other gaming jurisdictions such as Las Vegas, Nevada and Atlantic City, New Jersey. Our competition also includes casinos located on Native American reservations throughout the United States, which have the advantages of being land-based and exempt from certain state and federal taxes. Some Native American tribes are either in the process of establishing or are considering the establishment of gaming at additional locations. Expansion of existing gaming jurisdictions and the development of new gaming jurisdictions and casinos on Native American-owned lands will increase competition for our existing and future operations. In addition, increased competition could limit new opportunities for us or result in the saturation of certain gaming markets. The gaming industry is subject to political and regulatory uncertainty. Legislatures in the states in which we operate often consider legislation, including without limitation, tax legislation, which could adversely affect our operations. In addition, regulatory bodies in states in which operate periodically consider regulations which could adversely affect our operations. In addition, in 1996 the federal government established the National Gambling Impact Study Commission to study gaming, including the casino industry. The Commission issued its report in June 1999 and we remain unable to determine at this time the ultimate impact of the Commission's report. RECENT TRANSACTIONS Lady Luck Acquisition On March 2, 2000, we acquired by merger Lady Luck Gaming Corp. ("Lady Luck"), a publicly traded company that owned 100% of the Lady Luck Casinos in Natchez and Lula, Mississippi and Marquette, Iowa, and a 50% interest in the Lady Luck Casino in Bettendorf, Iowa. The consideration for the merger was $12.00 per share of Lady Luck common stock, $23.5 million for the purchase of preferred stock, plus assumption of approximately $298.2 million in Lady Luck indebtedness. BRDC Acquisition On March 2, 2000, we acquired the 50% interest in the Lady Luck Casino and Hotel - Bettendorf which was owned by Bettendorf Riverfront Development, LC ("BRDC"), an entity which was owned by members of Bernard Goldstein's family including Robert Goldstein, one of our directors (the "BRDC Acquisition"). The Company issued 6.3 million shares of its common stock to the owners of BRDC as consideration for the transaction. The remaining 50% interest in the Lady Luck Casino and Hotel - Bettendorf was owned by Lady Luck, and was acquired by us as part of the Lady Luck merger on the same date. As a result, following the merger and the BRDC Acquisition, we own 100% of Lady Luck Casino & Hotel - Bettendorf. Gemini Acquisition In connection with the merger, Lady Luck entered into a First Amendment to Purchase Agreement with Lady Luck's Chairman, Andrew Tompkins, and entities owned by Mr. Tompkins, pursuant to which Lady Luck would acquire the Lady Luck Casino & Hotel in Las Vegas and various related intellectual property interests (the "Tompkins Assets") owned by Mr. Tompkins. The Tompkins Assets involves two closings. The first closing, in which we purchased for $31.0 million the intellectual property assets, occurred on March 2, 2000. The second closing will involve the purchase for $14.5 million of the Las Vegas casino and hotel and will occur upon receipt of approval of the Nevada Gaming Regulators and certain other conditions, which are expected to be met this fall. Flamingo Casino Acquisition On June 6, 2000, we acquired the Kansas City Flamingo Casino from a subsidiary of Hilton Hotels Corporation for $33.5 million. The acquisition was funded through the Senior Secured Credit Facility. We are currently converting the facility to an Isle of Capri, and expect the conversion to be completed by the end of 2000. Boonville Acquisition On May 3, 2000 we acquired for $11.5 million the stock of Davis Gaming Boonville, Inc., an affiliate of Davis Gaming. Davis Gaming Boonville had previously been selected by the Missouri Gaming Commission to develop a casino project in Boonville, Missouri, which is located on Interstate 70 between Kansas City and St. Louis. We are currently developing the facility, which will include a 28,000 square foot casino, Calypso's Buffet, Tradewinds Marketplace and an entertainment area. The facility is expected to be completed by the fall of 2001. Davenport Acquisition On July 18, 2000, we signed an agreement to purchase the Davenport, Iowa casino and hotel from President Casino et al for $58.2 million. The closing of the transaction is subject to a number of conditions including the satisfactory completion of a due diligence review and the necessary regulatory approvals. Amended and Restated Credit Facility. On March 2, 2000, in connection with the Lady Luck acquisition, we entered into a $600 million Senior Credit Facility (amending and restating our existing $175 million Senior Secured Credit Facility), consisting of a $125 million revolver with a 5-year term, a $100 million Term Loan with a 5-year term; a $200 million Term Loan with a 6-year term; and a $175 million Term Loan with a 7-year term. The Senior Credit Facility is secured by liens on substantially all of our assets and guaranteed by all of our significant restricted subsidiaries. We used the initial borrowings under the new Senior Credit Facility to complete the Lady Luck acquisition and retire certain Lady Luck indebtedness, to complete the Boonville and Flamingo acquisitions, for working capital and further general corporate purposes. We plan to use future borrowings under the Senior Credit Facility to complete the Gemini Acquisition, to develop the Boonville facility, to complete our expansion projects at our facilities, to complete the conversion of the Lady Luck and Flamingo facilities to "Isle of Capri" properties, to complete the Davenport acquisition, to finance additional expansion projects and for working capital and general corporate purposes. FUTURE DEVELOPMENTS Jefferson County The Missouri Gaming Commission has selected our Jefferson County, Missouri project for development. This project, which will primarily serve the South St. Louis metropolitan area, was selected over three other projects, including our proposed project at the Jefferson Barracks site in South St. Louis County. The project is expected to include a 35,000 square foot casino, our signature restaurants and a 200-room hotel. We expect to begin construction in late 2000 and to complete this project in the spring of 2002. Morgan City, Louisiana A joint venture in which we own 45% and have a management contract has applied to the Louisiana Gaming Commission for the issuance of a license to develop a project near Morgan City, Louisiana. The gaming commission is not expected to make a decision until early 2001. EMPLOYEES As of April 30, 2000, we employed approximately 10,000 people. None of our employees are subject to a collective bargaining agreement. We believe that our relationship with our employees is satisfactory. REGULATORY MATTERS Louisiana In July 1991, Louisiana enacted legislation permitting certain types of gaming activity on certain rivers and waterways in Louisiana. The legislation granted authority to supervise riverboat gaming activities to the Louisiana Riverboat Gaming Commission and the Riverboat Gaming Enforcement Division of the Louisiana State Police. The Louisiana Riverboat Gaming Commission was authorized to hear and determine all appeals relative to the granting, suspension, revocation, condition or renewal of all licenses, permits and applications. In addition, the Louisiana Riverboat Gaming Commission established regulations concerning authorized routes, duration of excursions, minimum levels of insurance, construction of riverboats and periodic inspections. The Riverboat Gaming Enforcement Division of the Louisiana State Police was authorized to investigate applicants and issue licenses, investigate violations of the statute and conduct continuing reviews of gaming activities. In May 1996, regulatory oversight of riverboat gaming was transferred to the Louisiana Gaming Control Board, which is comprised of nine voting members appointed by the governor. The Louisiana Gaming Control Board now oversees all licensing matters for riverboat casinos, land-based casinos, video poker and certain aspects of Native American gaming other than those responsibilities reserved to the Louisiana State Police. The Louisiana Gaming Control Board is empowered to issue up to 15 licenses to conduct gaming activities on a riverboat of new construction in accordance with applicable law. However, no more than six licenses may be granted to riverboats operating from any one parish. The Louisiana State Police continues to be involved broadly in gaming enforcement and reports to the Louisiana Gaming Control Board. Louisiana law permits the Louisiana State Police, among other things, to continue to (1) conduct suitability investigations, (2) audit, investigate and enforce compliance with standing regulations, (3) initiate enforcement and administrative actions and (4) perform ''all other duties and functions necessary for the efficient, efficacious, and thorough regulation and control of gaming activities and operations under the Louisiana Gaming Control Board's jurisdiction.'' Louisiana gaming law specifies certain restrictions relating to the operation of riverboat gaming, including the following: - - except in Bossier City/Shreveport, gaming is not permitted while a riverboat is docked, other than the 45 minutes between excursions and during times when dangerous weather or water conditions exist; - - except in Bossier City/Shreveport, each round-trip riverboat cruise may not be less than three nor more than eight hours in duration, subject to specific exceptions; - - agents of the Louisiana State Police are permitted on board at any time during gaming operations; - - gaming devices, equipment and supplies may only be purchased or leased from permitted suppliers; - - gaming may only take place in the designated gaming area while the riverboat is on a designated river or waterway; - - gaming equipment may not be possessed, maintained or exhibited by any person on a riverboat except in the specifically designated gaming area or in a secure area used for inspection, repair or storage of such equipment; - - wagers may be received only from a person present on a licensed riverboat; - - persons under 21 are not permitted in designated gaming areas; - - except for slot machine play, wagers may be made only with tokens, chips or electronic cards purchased from the licensee aboard a riverboat; - - licensees may only use docking facilities and routes for which they are licensed and may only board and discharge passengers at the riverboat's licensed berth; - - licensees must have adequate protection and indemnity insurance; - - licensees must have all necessary federal and state licenses, certificates and other regulatory approvals prior to operating a riverboat; and - - gaming may only be conducted in accordance with the terms of the license and Louisiana law. To receive a gaming license in Louisiana, an applicant must be found to be a person of good character, honesty and integrity and a person whose prior activities, criminal record, if any, reputation, habits and associations do not (1) pose a threat to the public interest of the State of Louisiana or to the effective regulation and control of gaming or (2) create or enhance the dangers of unsuitable, unfair or illegal practices, methods and activities in the conduct of gaming or the carrying on of business and financial arrangements of gaming activities. In addition, the Louisiana Gaming Control Board will not grant a license unless it finds that: - - the applicant can demonstrate the capability, either through training, education, business experience or a combination of the preceding, to operate a gaming operation; - - the proposed financing of the riverboat and the gaming operations is adequate for the nature of the proposed operation and is from a suitable and acceptable source; - - the applicant demonstrates a proven ability to operate a vessel of comparable size, capacity and complexity to a riverboat so as to ensure the safety of its passengers; - - the applicant submits with its application for a license a detailed plan of design of the riverboat; - - the applicant designates the docking facilities to be used by the riverboat; - - the applicant shows adequate financial ability to construct and maintain a riverboat; and - - the applicant has a good faith plan to recruit, train and upgrade minorities in all employment classifications. An initial license to conduct riverboat gaming operations is valid for a term of five years and legislation passed in the 1999 legislative session provides for renewals every five years thereafter. A gaming license is deemed to be a privilege under Louisiana law and, as such, may be denied, revoked, suspended, conditioned or limited at any time by the Louisiana Gaming Control Board. The Isle-Bossier City was issued its initial gaming license on December 22, 1993 and received a five-year renewal of the license on July 20, 1999. The Crown Vessel operated at the Isle-Lake Charles was issued its initial gaming license on March 14, 1995 and received a five-year renewal on July 20, 1999. The license to operate the Grand Palais was issued to a previous owner and the Grand Palais ceased operations as a result of its bankruptcy. Isle of Capri acquired the Grand Palais, which is operated at the Isle-Lake Charles, and was issued a five-year renewal on July 20, 1999. Louisiana gaming law provides that a renewal application for the period succeeding the initial five-year term of an operator's license must be made to the Louisiana Gaming Control Board and must include a statement under oath of any and all changes in information, including financial information, provided in the previous application. The transfer of a license or an interest in a license is prohibited. Certain persons affiliated with a riverboat gaming licensee, including directors and officers of the licensee, directors and officers of any holding company of the licensee involved in gaming operations, persons holding 5% or greater interests in the licensee and persons exercising influence over a licensee, are subject to the application and suitability requirements of Louisiana gaming law. The sale, purchase, assignment, transfer, pledge or other hypothecation, lease, disposition or acquisition by any person of securities which represent 5% or more of the total outstanding shares issued by a licensee is subject to the approval of the Louisiana Gaming Control Board. A security issued by a licensee must generally disclose these restrictions. Prior approval from the Louisiana Gaming Control Board is required for the sale, purchase, assignment, transfer, pledge or other hypothecation, lease, disposition or acquisition of any ownership interest of 5% or more of any non-corporate licensee or for the transfer of any ''economic interest'' of 5% or more of any licensee or affiliated gaming person. An ''economic interest'' is defined as any interest whereby a person receives or is entitled to receive, by agreement or otherwise, a profit, gain, thing of value, loan, credit, security interest, ownership interest or other benefit. Fees payable to the state for conducting gaming activities on a riverboat include (1) $50,000 per riverboat for the first year of operation and $100,000 per year per riverboat thereafter, plus (2) 18.5% of net gaming proceeds. A statute also authorizes local governing authorities to levy boarding fees. Isle of Capri has development agreements with the local governing authorities in the jurisdictions in which it operates pursuant to which it makes payments in lieu of boarding fees. A licensee must notify and/or seek approval from the Louisiana Gaming Control Board in connection with any withdrawals of capital, loans, advances or distributions in excess of 5% of retained earnings for a corporate licensee, or of capital accounts for a partnership or limited liability company licensee, upon completion of any such transaction. The Louisiana Gaming Control Board may issue an emergency order for not more than ten days prohibiting payment of profits, income or accruals by, or investments in, a licensee. Riverboat gaming licensees and their affiliated gaming persons must notify the Louisiana Gaming Control Board 60 days prior to the receipt by any such persons of any loans or extensions of credit or modifications thereof. The Louisiana Gaming Control Board is required to investigate the reported loan, extension of credit or modification thereof and to determine whether an exemption exists on the requirement of prior written approval and, if such exemption is not applicable, to either approve or disapprove the transaction. If the Louisiana Gaming Control Board disapproves of a transaction, the transaction cannot be entered into by the licensee or affiliated gaming person. Isle of Capri is an affiliated gaming person of its subsidiaries which hold the licenses to conduct riverboat gaming at the Isle-Bossier City and the Isle-Lake Charles. The failure of a licensee to comply with the requirements set forth above may result in the suspension or revocation of that licensee's gaming license. Additionally, if the Louisiana Gaming Control Board finds that the individual owner or holder of a security of a corporate license or intermediary company or any person with an economic interest in a licensee is not qualified under Louisiana law, the Louisiana Gaming Control Board may require, under penalty of suspension or revocation of the license, that the person not: - - receive dividends or interest on securities of the corporation; - - exercise directly or indirectly a right conferred by securities of the corporation; - - receive remuneration or economic benefit from the licensee; or - - continue its ownership or economic interest in the licensee. A licensee must periodically report the following information to the Louisiana Gaming Control Board, which is not confidential and is available for public inspection: (1) the licensee's net gaming proceeds from all authorized games, (2) the amount of net gaming proceeds tax paid and (3) all quarterly and annual financial statements presenting historical data, including annual financial statements that have been audited by an independent certified public auditor. During the 1996 special session of the Louisiana legislature, legislation was passed which provided for local option elections to be held in November 1996 which gave voters in each parish within the state the opportunity to decide whether the various forms of gaming permitted under Louisiana law, including riverboat gaming, were permissible in each parish. In November 1996, voters in Calcasieu and Bossier parishes, the parishes in which the Isle-Lake Charles and Isle-Bossier City are located, voted favorably to permit the continuation of riverboat gaming. During the 1996 special session of the Louisiana legislature, legislation was also enacted placing on the ballot for a state-wide election a constitutional amendment limiting the expansion of gaming. In October 1996, voters passed the constitutional amendment. As a result, local option elections are required before new or additional forms of gaming can be brought into a parish. Proposals to amend or supplement Louisiana's riverboat gaming statute are frequently introduced in the Louisiana State legislature. There is no assurance that changes in Louisiana gaming law will not occur or that such changes will not have a material adverse effect on Isle of Capri's business in Louisiana. Mississippi In June 1990, Mississippi enacted legislation legalizing dockside casino gaming for counties along the Mississippi River, which is the western border for most of the state, and the Gulf Coast, which is the southern border for most of the state. The legislation gave each of those counties the opportunity to hold a referendum on whether to allow dockside casino gaming within its boundaries. Gaming vessels in Mississippi must be located on the Mississippi River, on navigable waters in eligible counties along the Mississippi River or in the waters lying south of the counties along the Mississippi Gulf Coast. Mississippi law permits unlimited stakes gaming on permanently moored vessels on a 24-hour basis and does not restrict the percentage of space, which may be utilized for gaming. There are no limitations on the number of gaming licenses, which may be issued in Mississippi. The ownership and operation of gaming facilities in Mississippi are subject to extensive state and local regulation intended to: - - prevent unsavory or unsuitable persons from having any direct or indirect involvement with gaming at any time or in any capacity; - - establish and maintain responsible accounting practices and procedures for gaming operations; - - maintain effective control over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs and safeguarding of assets and revenues, providing reliable record keeping and making periodic reports; - - provide a source of state and local revenues through taxation and licensing fees; - - prevent cheating and fraudulent practices; and - - ensure that gaming licensees, to the extent practicable, employ Mississippi residents. The regulations are subject to amendment and interpretation by the Mississippi Gaming Commission. Changes in Mississippi laws or regulations may limit or otherwise materially affect the types of gaming that may be conducted in Mississippi and such changes, if enacted, could have an adverse effect on Isle of Capri and its Mississippi gaming operations. Isle of Capri is registered as a publicly traded holding company under the Mississippi Gaming Control Act. Isle of Capri's gaming operations in Mississippi are subject to regulatory control by the Mississippi Gaming Commission, the State Tax Commission and various other local, city and county regulatory agencies (collectively referred to as the ''Mississippi Gaming Authorities''). Subsidiaries of Isle of Capri have obtained gaming licenses from the Mississippi Gaming Authorities. Isle of Capri's future gaming operations outside of Mississippi are also subject to approval by the Mississippi Gaming Commission. The licenses held by Isle of Capri's Mississippi gaming operations have terms of two years and are not transferable. The Isle-Biloxi received a fourth gaming license in April 2000, the Isle-Vicksburg obtained a third gaming license in January 1999, and the Isle-Tunica obtained its initial license on May 20, 1999. The Isle-Natchez received a renewal license on May 18, 2000, and Isle-Lula received a renewal license in May 18, 2000. There is no assurance that new licenses can be obtained at the end of each two-year period of a license. Moreover, the Mississippi Gaming Commission may, at any time, and for any cause it deems reasonable, revoke, suspend, condition, limit or restrict a license or approval to own shares of stock in the subsidiaries of Isle of Capri that operate in Mississippi. Substantial fines for each violation of Mississippi's gaming laws or regulations may be levied against Isle of Capri, its subsidiaries and the persons involved. A violation under a gaming license held by a subsidiary of Isle of Capri operating in Mississippi may be deemed a violation of all the other licenses held by Isle of Capri. Isle of Capri and each of its Mississippi gaming subsidiaries must periodically submit detailed financial, operating and other reports to the Mississippi Gaming Commission and/or the State Tax Commission. Numerous transactions, including substantially all loans, leases, sales of securities and similar financing transactions entered into by any subsidiary of Isle of Capri operating a casino in Mississippi, must be reported to or approved by the Mississippi Gaming Commission. In addition, the Mississippi Gaming Commission may, at its discretion, require additional information about the operations of Isle of Capri. Certain officers and employees of Isle of Capri and the officers, directors and certain key employees of Isle of Capri's Mississippi gaming subsidiaries must be found suitable or be licensed by the Mississippi Gaming Commission. Isle of Capri believes that all required findings of suitability related to all Mississippi Isle of Capri properties have been applied for or obtained, although the Mississippi Gaming Commission at its discretion may require additional persons to file applications for findings of suitability. In addition, any person having a material relationship or involvement with Isle of Capri may be required to be found suitable or licensed, in which case those persons must pay the costs and fees associated with such investigation. The Mississippi Gaming Commission may deny an application for a finding of suitability for any cause that it deems reasonable. Changes in certain licensed positions must be reported to the Mississippi Gaming Commission. In addition to its authority to deny an application for a finding of suitability, the Mississippi Gaming Commission has jurisdiction to disapprove a change in a licensed position. The Mississippi Gaming Commission has the power to require Isle of Capri and any of its Mississippi gaming subsidiaries to suspend or dismiss officers, directors and other key employees or to sever relationships with other persons who refuse to file appropriate applications or whom the authorities find unsuitable to act in such capacities. Employees associated with gaming must obtain work permits that are subject to immediate suspension under certain circumstances. The Mississippi Gaming Commission will refuse to issue a work permit to a person who has been convicted of a felony, committed certain misdemeanors or knowingly violated the Mississippi Gaming Control Act, and it may refuse to issue a work permit to a gaming employee for any other reasonable cause. At any time, the Mississippi Gaming Commission has the power to investigate and require the finding of suitability of any record or beneficial stockholder of Isle of Capri. Mississippi law requires any person who individually or in association with others acquires, directly or indirectly, beneficial ownership of more than 5% of Isle of Capri's common stock to report the acquisition to the Mississippi Gaming Commission, and such person may be required to be found suitable. In addition, any person who, individually or in association with others, becomes, directly or indirectly, a beneficial owner of more than 10% of Isle of Capri's common stock, as reported to the U.S. Securities and Exchange Commission, must apply for a finding of suitability by the Mississippi Gaming Commission and must pay the costs and fees that the Mississippi Gaming Commission incurs in conducting the investigation. The Mississippi Gaming Commission has generally exercised its discretion to require a finding of suitability of any beneficial owner of more than 5% of a registered publicly-traded holding company's stock. However, the Mississippi Gaming Commission has adopted a policy that generally permits certain institutional investors to own beneficially up to 10% of a registered public company's stock without a finding of suitability. If a stockholder who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information, including a list of beneficial owners. Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Mississippi Gaming Commission may be found unsuitable. Isle of Capri believes that compliance by Isle of Capri with the licensing procedures and regulatory requirements of the Mississippi Gaming Commission will not affect the marketability of Isle of Capri's securities. Any person found unsuitable and who holds, directly or indirectly, any beneficial ownership of Isle of Capri's securities beyond such time as the Mississippi Gaming Commission prescribes may be guilty of a misdemeanor. Isle of Capri is subject to disciplinary action if, after receiving notice that a person is unsuitable to be a stockholder or to have any other relationship with Isle of Capri or its subsidiaries operating casinos in Mississippi, Isle of Capri: - - pays the unsuitable person any dividend or other distribution upon its voting securities; - - recognizes the exercise, directly or indirectly, of any voting rights conferred by its securities; - - pays the unsuitable person any remuneration in any form for services rendered or otherwise, except in certain limited and specific circumstances; or - - fails to pursue all lawful efforts to require the unsuitable person to divest himself of the securities, including, if necessary, the immediate purchase of the securities for cash at a fair market value. Isle of Capri may be required to disclose to the Mississippi Gaming Commission upon request the identities of the holders of any of Isle of Capri's debt securities. In addition, under the Mississippi Gaming Control Act, the Mississippi Gaming Commission may, in its discretion, (1) require holders of Isle of Capri's securities, including the notes, to file applications, (2) investigate such holders and (3) require such holders to be found suitable to own such securities. Although the Mississippi Gaming Commission generally does not require the individual holders of obligations such as the notes to be investigated and found suitable, the Mississippi Gaming Commission retains the discretion to do so for any reason, including but not limited to a default, or where the holder of the debt instrument exercises a material influence over the gaming operations of the entity in question. Any holder of debt securities required to apply for a finding of suitability must pay all investigative fees and costs of the Mississippi Gaming Commission in connection with such an investigation. The Mississippi regulations provide that a change in control of Isle of Capri may not occur without the prior approval of the Mississippi Gaming Commission. Mississippi law prohibits Isle of Capri from making a public offering of its securities without the approval of the Mississippi Gaming Commission if any part of the proceeds of the offering is to be used to finance the construction, acquisition or operation of gaming facilities in Mississippi, or to retire or extend obligations incurred for one or more such purposes. The Mississippi Gaming Commission has the authority to grant a continuous approval of securities offerings and has granted such approval for Isle of Capri, subject to an annual renewal. Regulations of the Mississippi Gaming Commission prohibit certain repurchases of securities of publicly traded corporations registered with the Mississippi Gaming Commission, including holding companies such as Isle of Capri, without prior approval of the Mississippi Gaming Commission. Transactions covered by these regulations are generally aimed at discouraging repurchases of securities at a premium over market price from certain holders of greater than 3% of the outstanding securities of the registered publicly traded corporation. The regulations of the Mississippi Gaming Commission also require prior approval for a ''plan of recapitalization'' as defined in such regulations. Isle of Capri must maintain in the State of Mississippi current stock ledgers, which may be examined by the Mississippi Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Mississippi Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. Isle of Capri must render maximum assistance in determining the identity of the beneficial owner. Mississippi law requires that certificates representing shares of Isle of Capri common stock bear a legend to the general effect that the securities are subject to the Mississippi Gaming Control Act and regulations of the Mississippi Gaming Commission. The Mississippi Gaming Commission has the authority to grant a waiver from the legend requirement, which Isle of Capri has obtained. The Mississippi Gaming Authorities, through the power to regulate licenses, have the power to impose additional restrictions on the holders of Isle of Capri's securities at any time. The Mississippi Gaming Commission has enacted a regulation requiring that, as a condition to licensure or license renewal, an applicant must provide a plan to develop infrastructure facilities amounting to 25% of the cost of the casino and a parking facility capable of accommodating 500 cars. In 1999, the Mississippi Gaming Commission approved amendments to this regulation that increased the infrastructure development requirement from 25% to 100% for new casinos (or upon acquisition of a closed casino), but grandfathered existing licensees and development plans approved prior to the effective date of the new regulation (including the Isle-Tunica and the Isle-Lula). ''Infrastructure facilities'' include any of the following: - - a 250-room or larger hotel of at least a two-star rating as defined by the current edition of the Mobil Travel Guide; - - theme parks; - - golf courses; - - marinas; - - entertainment facilities; - - tennis complexes; and - - any other facilities approved by the Mississippi Gaming Commission. Parking facilities, roads, sewage and water systems or civic facilities are not considered ''infrastructure facilities.'' The Mississippi Gaming Commission may reduce the number of rooms required in a hotel if it is satisfied that sufficient rooms are available to accommodate the anticipated number of visitors. License fees and taxes are payable to the State of Mississippi and to the counties and cities in which a Mississippi Gaming Subsidiary's respective operations will be conducted. The license fee payable to the state of Mississippi is based upon gross revenue of the licensee (generally defined as gaming receipts less payout to customers as winnings) and equals 4% of gross revenue of $50,000 or less per month, 6% of gross revenue over $50,000 and less than $134,000 per calendar month, and 8% of gross revenue over $134,000 per calendar month. The foregoing license fees are allowed as a credit against the licensee's Mississippi income tax liability for the year paid. Additionally, a licensee must pay a $5,000 annual license fee and an annual fee based upon the number of games it operates. The gross revenue tax imposed by the Mississippi communities and counties in which Isle of Capri's casino operations are located equals 0.4% of gross revenue of $50,000 or less per calendar month, 0.6% of gross revenue over $50,000 and less than $134,000 per calendar month and 0.8% of gross revenue over $134,000 per calendar month. These fees have been imposed in, among other cities and counties, Biloxi, Vicksburg, Tunica County and Coahoma County. Certain Local and Private Laws of the State of Mississippi may impose fees or taxes on the Mississippi Gaming Subsidiaries in addition to the fees described above. The Mississippi Gaming Commission requires, as a condition of licensure or license renewal, that casino vessels on the Mississippi Gulf Coast that are not self-propelled must be moored to withstand a Category 4 hurricane with 155 mile-per-hour winds and 15-foot tidal surge. Isle of Capri believes that all of its Mississippi Gaming Subsidiaries currently meet this requirement. A 1996 Mississippi Gaming Commission regulation prescribes the hurricane emergency procedure to be used by the Mississippi Gulf Coast casinos. The sale of food or alcoholic beverages at Isle of Capri's Mississippi gaming locations is subject to licensing, control and regulation by the applicable state and local authorities. The agencies involved have full power to limit, condition, suspend or revoke any such license, and any such disciplinary action could (and revocation would) have a material adverse effect upon the operations of the affected casino or casinos. Certain officers and managers of Isle of Capri and its Mississippi gaming subsidiaries must be investigated by the Alcoholic Beverage Control Division of the State Tax Commission in connection with liquor permits that have been issued. The Alcoholic Beverage Control Division of the State Tax Commission must approve all changes in licensed positions. During 1998, certain anti-gaming groups proposed referenda that, if adopted, would have banned gaming in Mississippi and required that gaming entities cease operations within two years after the ban. The referenda were declared illegal by Mississippi courts on constitutional and procedural grounds. A revised initiative has been submitted to the Secretary of State and could be placed on the ballot for the November 2000 election. Colorado The State of Colorado created the Division of Gaming (the ''Division'') within the Department of Revenue to license, implement, regulate and supervise the conduct of limited gaming under the Colorado Limited Gaming Act. The Director of the Division, under the supervision of a five-member Colorado Limited Gaming Control Commission (the ''Colorado Commission''), has been granted broad power to ensure compliance with the Colorado gaming regulations (the ''Colorado Regulations''). The Director may inspect, without notice, impound or remove any gaming device. He may examine and copy any licensee's records, may investigate the background and conduct of licensees and their employees, and may bring disciplinary actions against licensees and their employees. He may also conduct detailed background investigations of persons who loan money to Isle of Capri or its Colorado gaming subsidiaries. The Colorado Commission is empowered to issue five types of gaming and gaming-related licenses, and has delegated authority to the Director to issue certain types of licenses and approve certain changes in ownership. The licenses are revocable and non-transferable. The failure or inability of Isle of Capri or any of its Colorado gaming subsidiaries to maintain necessary gaming licenses will have a material adverse effect on the operating results of Isle of Capri. All persons employed by Isle of Capri and its Colorado gaming subsidiaries and involved, directly or indirectly, in gaming operations in Colorado also are required to obtain a Colorado gaming license. All licenses must be renewed annually, except those for key and support employees, which must be renewed every two years. As a general rule, under the Colorado Regulations, it is a criminal violation for any person to have an "ownership interest" or right to receive profits, in more than three retail gaming licenses in Colorado. The Colorado Commission has ruled that a person does not have an ownership interest in a retail licensee for purposes of the multiple license prohibition if: - - such person has less than a five percent (5%) ownership interest in an institutional investor which has an interest in a publicly traded licensee or publicly traded company affiliated with a licensee (such as Isle of Capri); - - a person has a five percent (5%) or more ownership interest in an institutional investor, but the institutional investor has less than a five percent (5%) ownership interest in a publicly traded licensee or publicly traded company affiliated with a licensee; - - an institutional investor has less than a five percent (5%) ownership interest in a publicly traded licensee or publicly traded company affiliated with a licensee; - - an institutional investor possesses voting securities in a fiduciary capacity for another person, and does not exercise voting control over five percent (5%) or more of the outstanding voting securities of a publicly traded licensee or of a publicly traded company affiliated with a licensee; - - a registered broker or dealer retains possession of voting securities of a publicly traded licensee or of a publicly traded company affiliated with a licensee for its customers in street name or otherwise, and exercises voting rights for less than five percent (5%) of the publicly traded licensee's voting securities or of a publicly traded company affiliated with a licensee; - - a registered broker or dealer acts as a market maker for the stock of a publicly traded licensee or of a publicly traded company affiliated with a licensee and possesses a voting interest in less than five percent (5%) of the stock of the publicly traded licensee or of a publicly traded company affiliated with a licensee; - - an underwriter is holding securities of a publicly traded licensee or of a publicly traded company affiliated with a licensee as part of an underwriting for no more than 90 days if it exercises voting rights of less than five percent (5%) of the outstanding voting securities of a publicly traded licensee or of a publicly traded company affiliated with a licensee; - - a stock clearinghouse holds voting securities for third parties, if it exercises voting rights with respect to less than five percent (5%) of the outstanding voting securities of a publicly traded licensee or of a publicly traded company affiliated with a licensee; or - - a person owns less than five percent (5%) of the voting securities of the publicly traded licensee or publicly traded company affiliated with a licensee. Hence, Isle of Capri's and its stockholders' business opportunities in Colorado are limited to such interests that comply with the statute and the Colorado Commission's rule. In addition, pursuant to the Colorado Regulations, no manufacturer or distributor of slot machines or associated equipment may, without notification being provided within ten days, knowingly have an interest in any casino operator, allow any of its officers or any other person with a substantial interest in such business to have such an interest, employ any person if such person is employed by a casino operator, or allow any casino operator or person with a substantial interest therein to have an interest in a manufacturer's or distributor's business. The Colorado Commission has ruled that a person does not have a ''substantial interest'' if such person's sole ownership interest in such licensee is through the ownership less than five percent (5%) of such voting securities of a publicly traded licensee or publicly traded affiliated company of a licensee. In other contexts, counsel for the Division has informed counsel for Isle of Capri that, for purposes of the three-license rule described above, the Division has taken the position that only a person deemed to have ''beneficial ownership'' (as defined in the rules and regulations of the U.S. Securities and Exchange Commission under Section 13(d) of the U.S. Securities Exchange Act of 1934) of shares of the publicly traded holding company (or licensee) will be deemed to have an ''ownership interest'' under the horizontal rule. However, the Division has not passed on this issue with respect to Isle of Capri, and neither the Colorado Commission nor the Colorado legislature has addressed this issue. As a result, there is no assurance that the Division, the Colorado Commission or the Colorado legislature will not apply a more restrictive interpretation in this instance. Under the Colorado Regulations, any person or entity having any direct or indirect interest in a gaming licensee or an applicant for a gaming license, including, without limitation, Isle of Capri and its stockholders, may be required to supply the Colorado Commission with substantial information, including background information, source of funding information, a sworn statement that such person or entity is not holding his interest for any other party, and fingerprints. Such information, investigation and licensing as an ''associated person'' automatically will be required of all persons (other than certain institutional investors discussed below) which directly or indirectly own ten percent (10%) or more of a direct or indirect legal, beneficial or voting interest in Black Hawk LLC, through their ownership in Isle of Capri. Such persons must report their interest within ten (10) days and file appropriate applications within 45 days after acquiring such interest. Persons directly or indirectly having a five percent (5%) or more interest (but less than 10%) in Black Hawk LLC, through their ownership in Isle of Capri, must report their interest to the Colorado Commission within ten (10) days after acquiring such interest and may be required to provide additional information and to be found suitable. If certain institutional investors provide certain information to the Colorado Commission, such investors, at the Colorado Commission's discretion, may be permitted to own up to 14.99% of Black Hawk LLC, through their ownership in Isle of Capri, before being required to be found suitable. All licensing and investigation fees will have to be paid by the person in question. The associated person investigation fee currently is $51 per hour. The Colorado Commission also has the right to request information from any person directly or indirectly interested in, or employed by, a licensee, and to investigate the moral character, honesty, integrity, prior activities, criminal record, reputation, habits and associations of (1) all persons licensed pursuant to the Colorado Limited Gaming Act; (2) all officers, directors and stockholders of a licensed privately held corporation; (3) all officers, directors and stockholders holding either a five percent (5%) or greater interest or a controlling interest in a licensed publicly traded corporation; (4) all general partners and all limited partners of a licensed partnership; (5) all persons which have a relationship similar to that of an officer, director or stockholder of a corporation (such as members and managers of a limited liability company); (6) all persons supplying financing or loaning money to any licensee connected with the establishment or operation of limited gaming and (7) all persons having a contract, lease or ongoing financial or business arrangement with any licensee, where such contract, lease or arrangement relates to limited gaming operations, equipment, devices or premises. In addition, under the Colorado Regulations, every person who is a party to a ''gaming contract'' of lease with an applicant for a license, or with a licensee, upon the request of the Colorado Commission or the Director, must promptly provide to the Colorado Commission or Director all information which may be requested concerning financial history, financial holdings, real and personal property ownership, interests in other companies, criminal history, personal history and associations, character, reputation in the community and all other information which might be relevant to a determination whether a person would be suitable to be licensed by the Colorado Commission. Failure to provide all information requested constitutes sufficient grounds for the Director or the Colorado Commission to require a licensee or applicant to terminate its ''gaming contract'' (as defined below) or lease with any person who failed to provide the information requested. In addition, the Director or the Colorado Commission may require changes in ''gaming contracts'' before an application is approved or participation in the contract is allowed. A ''gaming contract'' is defined as an agreement in which a person does business with or on the premises of a licensed entity. The Colorado Commission and the Division have interpreted the statute and regulations to permit the Colorado Commission to investigate and license any lenders to Isle of Capri or its Colorado gaming subsidiaries. In any event, such lenders may not be able to exercise certain of their rights and remedies without prior approval of the Colorado gaming authorities. An application for licensure or suitability may be denied for any cause deemed reasonable by the Colorado Commission or the Director, as appropriate. Specifically, the Colorado Commission and the Director must deny a license to any applicant who, among other things, (1) fails to prove by clear and convincing evidence that the applicant is qualified; (2) fails to provide information and documentation requested; (3) fails to reveal any fact material to qualification, or supplies information which is untrue or misleading as to a material fact pertaining to qualification; (4) has been, or is any director, officer, general partner, stockholder, limited partner or other person who has a financial or equity interest in the applicant who has been convicted of certain crimes, including the service of a sentence upon conviction of a felony in a correctional facility, city or county jail, or community correctional facility or under the state board of parole or any probation department within ten years prior to the date of the application, gambling-related offenses, theft by deception or crimes involving fraud or misrepresentation, is under current prosecution for such crimes (during the pendency of which license determination may be deferred), is a career offender or a member or associate of a career offender cartel, or is a professional gambler or (5) has refused to cooperate with any state or federal body investigating organized crime, official corruption or gaming offenses. If the Colorado Commission determines that a person or entity is unsuitable to own interests in Isle of Capri, then Isle of Capri and any of its Colorado gaming subsidiaries may be sanctioned, which may include the loss by Isle of Capri and its Colorado gaming subsidiaries of their respective approvals and licenses. The Colorado Commission does not need to approve in advance a public offering of securities but rather requires a filing of notice and additional documents with regard to such public offering prior to such public offering. Under the regulations, the Colorado Commission may, in its discretion, require additional information and prior approval of such public offering. In addition, the Colorado Regulations prohibit a licensee or affiliated company thereof, such as Isle of Capri, from paying dividends, interest or other remuneration to any unsuitable person, or recognizing the exercise of any voting rights by any unsuitable person. Further, Isle of Capri may repurchase the shares of anyone found unsuitable at the lesser of the cash equivalent to the original investment in Isle of Capri or the current market price. The Colorado Regulations also require anyone with a material involvement with a licensee, including a director or officer of a holding company such as Isle of Capri, to file for a finding of suitability if required by the Colorado Commission. Because of their authority to deny an application for a license or suitability, the Colorado Commission and Director effectively can disapprove a change in corporate position of a licensee and with respect to any entity which is required to be found suitable, or to indirectly cause the Isle of Capri and its Colorado gaming subsidiaries and other entities required to be found suitable to suspend or dismiss managers, officers, directors and other key employees or sever relationships with other persons who refuse to file appropriate applications or whom the authorities find unsuitable to act in such capacities. The sale, lease, purchase, conveyance or acquisition of a controlling interest in Isle of Capri is subject to the approval of the Colorado Commission. Under certain circumstances, Isle of Capri may not sell any interest in its Colorado gaming subsidiaries without the prior approval of the Colorado Commission. The Isle-Black Hawk must meet certain architectural requirements, fire safety standards and standards for access for disabled persons. The Isle-Black Hawk also must not exceed certain gaming square footage limits as a total of each floor and the full building. The casino at the Isle-Black Hawk may operate only between 8:00 a.m. and 2:00 a.m. and may permit only individuals 21 years or older to gamble in the casino. It may permit only slot machines, blackjack and poker, with a maximum single bet of $5.00. The Isle-Black Hawk may not provide credit to its gaming patrons. The Colorado Regulations permit gaming only in a limited number of cities and certain commercial districts. The Colorado Constitution permits a gaming tax of up to 40% on adjusted gross gaming proceeds, and authorizes the Colorado Commission to change the rate annually. The current gaming tax rate is .25% on adjusted gross gaming proceeds of up to and including $2 million, 2% over $2 million up to and including $4 million, 4% over $4 million up to and including $5 million, 11% over $5 million up to and including $10 million, 16% over $10 million up to and including $15 million and 20% on adjusted gross gaming proceeds in excess of $15 million. Black Hawk has imposed an annual device fee of $750 per gaming device and may revise the same from time to time. The Colorado Commission may revise the gaming tax or device fee at any time, but has been considering such provisions only annually. The sale of alcoholic beverages is subject to licensing, control and regulation by the Colorado Liquor Agencies. All persons who directly or indirectly own 10% or more of Black Hawk LLC, through their ownership of Isle of Capri, must file applications and possibly be investigated by the Colorado Liquor Agencies. The Colorado Liquor Agencies also may investigate those persons who, directly or indirectly, loan money to or have any financial interest in liquor licensees. All licenses are revocable and not transferable. The Colorado Liquor Agencies have the full power to limit, condition, suspend or revoke any such license and any such disciplinary action could (and revocation would) have a material adverse effect upon the operating results of Isle of Capri. The Isle-Black Hawk holds a retail gaming tavern license. Accordingly, a person with an interest in Black Hawk LLC may not have an interest in a hotel and restaurant license. Iowa Iowa Gaming Regulations In 1989, the State of Iowa legalized riverboat gaming on the Mississippi River and other waterways located in Iowa. The legislation authorized the granting of licenses to not-for-profit corporations which, in turn, are permitted to enter into operating agreements with qualified persons who also actually conduct riverboat gaming operations. Such operators must likewise be approved and licensed by the Iowa Racing and Gaming Commission (the "Iowa Gaming Commission"). On August 11, 1994, the Riverbend Regional Authority, a not-for-profit corporation organized for the purpose of facilitating riverboat gaming in Bettendorf, Iowa, entered into an operator's contract with the Lady Luck Bettendorf, L.C. authorizing Lady Luck Bettendorf, L.C. to operate riverboat gaming operations in Bettendorf. The initial term of the operator's contract was for three years. As successor in interest to Lady Luck Bettendorf, L.C., Isle-Bettendorf has the right to renew the contract for succeeding three-year periods as long as Scott County voters approve gaming in the jurisdiction. The operator's contract was renewed effective September 1, 1998. Under the operator's contract, Isle-Bettendorf pays the Riverbend Regional Authority a fee equal to 4.1 % of the adjusted gross receipts. Further, pursuant to statute, Isle-Bettendorf generally must pay a fee to the City of Bettendorf equal to 1.65% of adjusted gross receipts. On June 10, 1994, the Marquette Gaming Corporation n/k/a Upper Mississippi Gaming Corporation, a not-for-profit corporation organized for the purpose of facilitating riverboat gaming in Marquette, Iowa, entered into an management agreement for the Miss Marquette for a period of twenty-five years. Under the management agreement, the non-profit organization is to be paid a fee of $.50 per passenger. Further, pursuant to a dock site agreement (which also has a term of twenty-five years), Isle-Marquette is required to pay a fee to the City of Marquette in the amount of $1 per passenger, plus a fixed amount of $15,000 per month and 2.5% of gaming revenues (less state wagering taxes) in excess of $20,000,000 - $40,000,000; 5% of gaming revenues (less state wagering taxes) in excess of $40,000,000-$60,000,000; and 7.5% of gaming revenues (less state wagering taxes) in excess of $60,000,000. In 1994, Iowa amended the enabling legislation removing several previous restrictions including loss and wager limits and restrictions on the amount of space on a vessel that may be utilized for gaming. Current law permits gaming licensees to offer unlimited stakes gaming on games approved by the Iowa Gaming Commission on a 24-hour basis. Dockside casino gaming is authorized by the Iowa Gaming Commission although the licensed vessel is required to conduct at least one two-hour excursion cruise each day for at least 100 days during the excursion season. The legal age for gaming is 21. The enabling legislation gives each county the opportunity to hold a referendum on whether to allow casino gaming within its boundaries. A referendum was passed in Scott County on April 7, 1994, with 80% voting in favor of passage and authorizing casino gaming in Bettendorf for a period of nine years from the issuance date of the license. Similarly, a referendum was passed in Clayton County with approximately 60% voting in favor of passage. Another referendum cannot be held until 2002 and if approved, subsequent referenda will occur at eight-year intervals. On January 20, 2000 the Iowa Gaming Commission granted both Isle-Bettendorf and Isle-Marquette gaming licenses. Each license was for an initial term of thirteen months beginning on March 1, 2000, is not transferable and will need to be renewed in March 2001 and at the end of each annual renewal period. The ownership and operation of gaming facilities in Iowa are subject to extensive state laws, regulations of the Iowa Gaming Commission and various county and municipal ordinances (collectively, the "Iowa Gaming Laws"), concerning the responsibility, financial stability and character of gaming operators and persons financially interested or involved in gaming operations, Iowa Gaming Laws seek to: (1) prevent unsavory or unsuitable persons from having direct or indirect involvement with gaming at any time or in any capacity; (2) establish and maintain responsible accounting practices and procedures; (3) maintain effective control over the financial practices of licensees (including the establishment of minimum procedures for internal fiscal affairs, the safeguarding of assets and revenues, the provision of reliable record keeping and the filing of periodic reports with the Iowa Gaming Commission); (4) prevent cheating and fraudulent practices; and (5) provide a source of state and local revenues through taxation and licensing fees. Changes in Iowa Gaming Laws could have a material adverse effect on the Iowa gaming operations. Gaming licenses granted to individuals must be renewed every year, and licensing authorities have broad discretion with regard to such renewals. Licenses are not transferable. The Iowa gaming operations must submit detailed financial and operating reports to the Iowa Gaming Commission. Any contract in excess of $50,000 must be submitted to and approved by the Iowa Gaming Commission Missouri Conducting gambling games and operating a gaming riverboat in Missouri are subject to extensive regulation under the Missouri Riverboat Gambling Act (the "Act") and the rules and regulations promulgated thereunder. The Missouri Gaming Commission (the "Commission") is charged with such regulatory authority, including the issuance of riverboat gaming licenses. IOC-Kansas City, Inc., a subsidiary of the Company, has been issued a license in connection with our Kansas City operation, and we have additional applications pending in connection with the Boonville project and our development in Jefferson County. In order to obtain a gaming license, applicants must submit comprehensive application forms and undergo extensive background investigation by the Commission. An applicant will not receive a license to conduct gambling games and to operate an excursion gambling boat if the applicant has not established its good repute and moral character and no licensee shall either employ or contract with any person who has pled guilty to, or been convicted of, a felony, to perform any duties directly connected with the licensee's privileges under a license granted by the Commission. Each license granted entitles a licensee to conduct gambling games on an excursion gambling boat or to operate an excursion gambling boat and the equipment thereon from a specific location. The duration of the license initially runs for two one-year terms; thereafter, two-year terms. The Commission also licenses the serving of alcoholic beverages on riverboats and adjacent facilities. In addition, all local income, earnings, use, property and sales taxes are applicable to licensees. In determining whether to grant a license, the Commission considers the following factors, among other: (i) the integrity of the applicants; (ii) the types and variety of games the applicant may offer; (iii) the quality of the physical facility, together with improvements and equipment, and how soon the project will be completed; (iv) the financial ability of the applicant to develop and operate the facility successfully; (v) the status of governmental actions required by the facility; (vi) management ability of the applicant; (vii) compliance with applicable statutes, rules, charters, and ordinances; (viii) the economic, ecological and social impact of the facility as well as the cost of public improvements; (ix) the extent of public support or opposition; (x) the plan adopted by the home dock city or county; and (xi) effects on competition. A licensee is subject to the imposition of penalties, suspension or revocation of its license for any act that is injurious to the public health, safety, morals, good order, and general welfare of the people of the state of Missouri, or that would discredit or tend to discredit the Missouri gaming industry or the state of Missouri, including without limitation: (i) failing to comply with or make provision for compliance with the legislation, the rules promulgated thereunder or any federal, state or local law or regulation; (ii) failing to comply with any rules, order or ruling of the Commission or its agents pertaining to gaming; (iii) receiving goods or services from a person or business entity who does not hold a supplier's license but who is required to hold such license by the legislation or the rules; (iv) being suspended or ruled ineligible or having a license revoked or suspended in any state of gaming jurisdiction; (v) associating with, either socially or in business affairs, or employing persons of notorious or unsavory reputation or who have extensive police records, or who have failed to cooperate with any officially constituted investigatory or administrative body and would adversely affect public confidence and trust in gaming; (vi) employing in any Missouri gaming operation any person known to have been found guilty of cheating or using any improper device in connection with any gambling game; (vii) use of fraud, deception, misrepresentation or bribery in securing any license or permit issued pursuant to the legislation; (viii) obtaining any fee, charge, or other compensation by fraud, deception or misrepresentation; and (ix) incompetence, misconduct, gross negligence, fraud, misrepresentation or dishonesty in the performance of the functions or duties regulated by the Act. An ownership interest in a license or in a business entity which holds a license, other than a publicly held business entity, may not be transferred without the approval of the Commission. In addition, an ownership interest in a license or in a business entity which holds either directly or indirectly a license, other than a publicly held business entity, may not be pledged as collateral to other than a regulated bank or savings and loan association without the Commission's approval. Every employee participating in a riverboat gaming operation must hold an occupational license. In addition, the Commission issues supplier's licenses, which authorize the supplier licensee to sell or lease gaming equipment and supplies to any licensee involved in the operation of gaming operations. Even if continuously docked, licensed riverboats must establish and abide by a cruise schedule. Riverboat cruises are generally required to be a minimum of two hours. They may disembark at any time. Missouri law imposes a maximum loss per person per cruise of $500. Minimum and maximum wagers on games are set by the licensee and wagering may be conducted only with a cashless wagering system, whereby money is converted to tokens, electronic cards or chips which can only be used for wagering. Pursuant to a law which was passed during the 2000 legislative session, effective August 28, 2000, cash must be converted to electronic credits which may be utilized for wagering. No person under the age of 21 is permitted to wager, and wagers may only be taken from a person present on a licensed excursion gambling boat. The Act imposes a 20% wagering tax on adjusted gross receipts (generally defined as gross receipts less winnings paid to wagerers) from gambling games. The tax imposed is to be paid by the licensee to the Commission on the day after the day when the wagers were made. Of the proceeds of that tax, 10% goes to the local government where the home dock is located, and the remainder goes to the state education assistance fund. The Act also requires that licensees pay a $2.00 admission tax to the Commission for each person admitted to a gaming cruise. The licensee is required to maintain public books and records clearly showing amounts received from admission fees, the total amount of gross receipts and the total amount of adjusted gross receipts. Florida On June 15, 1995, the Florida Department of Business and Professional Regulation, acting through its division of pari-mutuel wagering (the ''Florida Division''), issued its final order approving Pompano Park as a pari-mutuel wagering permit holder for harness and quarter horse racing at Pompano Park. The Florida Division approved Pompano Park's license to conduct a total of 150 live evening performances for the season beginning July 1, 2000 to June 30, 2001. Although Isle of Capri does not presently intend to conduct quarter horse racing operations at Pompano Park, it may do so in the future, subject to Florida Division approval. The Florida Division must approve any transfer of 10% or more of stock of a pari-mutuel racing permit holder such as Pompano Park. Chapter 550 of the Florida Statute and the applicable rules and regulations thereunder (the ''Florida Statute'') establishes license fees, the tax structure on pari-mutuel permit holders and minimum purse requirements for breeders and owners. The Florida Division may revoke or suspend any permit or license upon the willful violation by the permit holder or licensee of any provision of the Florida Statute. Instead of suspending or revoking a permit or license, the Florida Division may impose various civil penalties on the permit holder or licensee. Penalties may not exceed $1,000 for each count or separate offense. Pursuant to a Florida Division order and recent enactments to the Florida Statute, Pompano Park is also authorized to conduct full-card pari-mutuel wagering on: (1) simulcast harness races from outside Florida throughout the racing season and (2) night thoroughbred races within Florida if the thoroughbred permit holder has decided to simulcast night races. Pompano Park has been granted the exclusive right in Florida to conduct full-card simulcasting of harness racing on days during which no live racing is held at Pompano Park. However, on non-race days, Pompano Park must offer to rebroadcast its simulcast signals to pari-mutuel facilities that are not thoroughbred parks. In addition, Pompano Park may transmit its live races into any dog racing or jai alai facility in Florida, including Dade and Broward counties, for intertrack wagering. The Florida Statute establishes the percentage split between Pompano Park and the other facilities receiving such signals. Recent legislation in Florida provided certain reductions in applicable tax and license fees related to intertrack wagering on broadcasts of simulcast harness racing and thoroughbred racing. Isle of Capri believes that simulcast rights at Pompano Park and the recent changes in the Florida Statute are important to Pompano Park's operating results. Effective January 1, 1997, the Florida Statute permits pari-mutuel facilities to be licensed by the Florida Division to operate card rooms in those counties in which a majority vote of the County Commission has been obtained and a local ordinance has been adopted. Card rooms can only be operated at pari-mutuel facilities on days that the facility is running live races. The hours of operation extend from two hours before post time of the first live race to two hours after the conclusion of the last live race. Thoroughbred racing facilities must choose between operating card rooms or simulcasting night races from outside the state, but may not do both. If racing facilities elect to simulcast night races, they are required to retransmit the night simulcast signal to certain other pari-mutuel facilities, including Pompano Park. The card room operator is the ''house'' and must deal the cards. The house can charge a fee per player or establish a ''rake'' for each game. The only card games that have been authorized are ''nonbanking'' games, such as games in which the house is not allowed to play against the players. The winnings of any player in a single round, hand or game may not exceed $10.00 and all card games must be played with tokens or chips. Card rooms may be operated and managed on behalf of the pari-mutuel permit holder by card room management companies that hold a special license from the Florida Division. All employees of the card room management company and the card room operator need to obtain a specific $50.00 occupational license from the Florida Division before they can work in the card room. There is no statutory limit on the number of card tables allowed in a card room. However, the annual license fee for the first card table is $1,000 and $500 for each table thereafter. A card room's annual occupational license fee is $250. Each card room operator is required to pay a tax of 10% of his monthly gross receipts from card room operations. ''Gross receipts'' is defined as the total amount of money received by a card room from any person to participate in authorized games. At least 50% of the monthly ''net proceeds,'' if any, at Pompano Park must be distributed as follows: 47% to supplement purses for harness racing and 3% to supplement breeders' awards during the next ensuing race meet. ''Net proceeds'' are the total amount of gross receipts received by a card room operator from card room operations, less direct operating expenses as defined in the Florida Statute. NON-GAMING REGULATION Isle of Capri is subject to certain federal, state and local safety and health, employment and environmental laws, regulations and ordinances that apply to non-gaming businesses generally, such as the Clean Air Act, Clean Water Act, Occupational Safety and Health Act, Resource Conservation Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act and the Oil Pollution Act of 1990. Isle of Capri has not made, and does not anticipate making, material expenditures with respect to such environmental laws and regulations. However, the coverage and attendant compliance costs associated with such laws, regulations and ordinances may result in future additional costs to Isle of Capri's operations. For example, in 1990 the U.S. Congress enacted the Oil Pollution Act of 1990 to consolidate and rationalize mechanisms under various oil spill response laws. The Department of Transportation has promulgated regulations requiring owners and operators of certain vessels to establish through the Coast Guard evidence of financial responsibility for clean-up of oil pollution. This requirement has been satisfied by proof of adequate insurance. Our riverboats operated in Louisiana and Iowa must comply with U.S. Coast Guard requirements as to boat design, on-board facilities, equipment, personnel and safety and hold U.S. Coast Guard Certificates of Documentation and Inspection. The U.S. Coast Guard requirements also set limits on the operation of the riverboats and require licensing of certain personnel involved with the operation of the riverboats. Loss of a riverboat's Certificate of Documentation and Inspection could preclude its use as a riverboat casino. Each of our riverboats is inspected annually and, every five years, is subject to drydocking for inspection of its hull, which could result in a temporary loss of service. Permanently moored vessels such as the casino barges utilized at our Mississippi and Missouri properties are not required to hold Certificates of Documentation and Inspection from the U.S. Coast Guard. However, the barges are inspected by a third party and certified with respect to stability and single compartment flooding integrity. Our casino barges in Mississippi must be inspected every two years and must also meet the fire safety standards of the Mississippi Fire Prevention Code and the Life Safety Code and the Standards for the Construction and Fire Protection of Marine Terminals, Piers and Wharfs of the National Fire Protection Association. We would incur additional costs if either of its Mississippi gaming facilities were not in compliance with one or more of these regulations. We are also subject to certain federal, state and local environmental laws, regulations and ordinances that apply to non-gaming businesses generally, such as the Clean Air Act, Clean Water Act, Resource Conservation Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act and the Oil Pollution Act of 1990. The coverage and attendant compliance costs associated with these laws, regulations and ordinances may result in future additional costs to our operations. Regulations adopted by the Financial Crimes Enforcement Network of the U.S. Treasury Department require us to report currency transactions in excess of $10,000 occurring within a gaming day, including identification of the patron by name and social security number. Substantial penalties can be imposed against Isle of Capri if it fails to comply with these regulations. All shipboard employees of Isle of Capri, even those who have nothing to do with its operation as a vessel, such as dealers, waiters and security personnel, may be subject to the Jones Act which, among other things, exempts those employees from state limits on workers' compensation awards. ITEM 2. PROPERTIES Isle-Lake Charles We own approximately 2.7 acres and lease approximately 16.25 acres of land in Calcasieu Parish, Louisiana for use in connection with the Isle-Lake Charles. This lease currently expires in March 2005 and we have the option to renew it for sixteen additional terms of five years each. Rent under the Isle-Lake Charles lease is currently $1.2 million per year and is subject to increases based on the Consumer Price Index and construction of hotel facilities on the property. Isle-Bossier City We own approximately 38 acres of land in Bossier City, Louisiana for use in connection with the Isle-Bossier City and own a 234-room hotel on approximately 10.5 acres of land located 2.5 miles east of the Isle-Bossier City. Isle-Biloxi We lease the Biloxi berth from the Biloxi Port Commission at an annual rent of the greater of $500,000 or 1% of the gross gaming revenue net of state and local gaming taxes. The lease terminates on July 1, 2004 and we have the option to renew it for seven additional terms of five years each subject to increases based on the cost of living index. We lease our land-based facilities from the City of Biloxi at an annual rent of $500,000 per year, plus 3% of the Isle-Biloxi's gross gaming revenues, net of state and local gaming taxes and fees, in excess of $25.0 million. The lease terminates on July 1, 2004, but it is renewable at our option for five additional terms of five years each and a sixth option renewal term, concluding on January 31, 2034, subject to rent increases based on the Consumer Price Index. In April 1994, we entered into an addendum to this lease which requires us to pay 4% of our gross non-gaming revenue, net of sales tax, complimentaries and discounts. In April 1994, in connection with the construction of a hotel, we entered into a lease for additional land adjoining the Isle-Biloxi. This lease with the City of Biloxi is for an initial term of 25 years, with options to renew for six additional terms of ten years each and a final option period concluding December 31, 2085. Annual rent is $404,000 plus 4% of gross non-gaming revenue, as defined in the lease, and renewals are subject to rent increases based on the Consumer Price Index. We are a party to a lease for the exclusive use of approximately 133 parking spaces and the additional use of 169 spaces in another parking lot on property adjacent to the Isle-Biloxi. This lease expires on November 30, 2000. We have also entered into a joint venture arrangement to sublease property containing a two-level parking garage next to the Isle-Biloxi. The annual rent under this lease is approximately $169,000. This lease terminates on November 30, 2000. Isle-Vicksburg We own approximately 13.1 acres of land in Vicksburg, Mississippi for use in connection with the Isle-Vicksburg. We own an additional 13 acres of land in Vicksburg on which we operate off-site parking and a recreational vehicle park. We also entered into a lease for approximately five acres of land adjacent to the Isle-Vicksburg to be used for additional parking. Isle-Black Hawk Black Hawk LLC owns approximately 9.1 acres of land in Black Hawk, Colorado for use in connection with the Isle-Black Hawk. Pompano Park We own approximately 220 acres at Pompano Park. Isle-Tunica We lease approximately 122 acres of land in Tunica County, Mississippi for use in connection with the Isle-Tunica. The initial lease term is five years and we have the option to renew the lease for seven additional terms of five years. Base rent for each lease year equals the greater of 2% of gross gaming revenue or $800,000. Once gross gaming revenue exceeds $40.0 million during any lease year, the base rent in the following months of such year shall be increased by an amount equal to 2% of such excess. The landlord is entitled to receive additional rent based on excess available cash, as defined in the lease. Isle-Lula We lease approximately 1,000 acres of land in Coahoma County, Mississippi and utilize approximately 50 acres in connection with the operations of Isle-Lula. Unless terminated by us at an earlier date, the lease expires in 2033. Rent under the lease is currently 5 1/2% of gross gaming revenue as established by the Mississippi Gaming Commission, as well as $3,333 per month for the Rhythm & Blues hotel. We also lease the property in Helena, Arkansas, upon which our off-site hotel is located. Rent under that lease is currently 3% of the revenue from the hotel. We also own approximately 100 acres in Coahoma County, which may be utilized for future development. Isle-Bettendorf We own approximately 24.6 acres of land in Bettendorf, Iowa used in connection with the operations of Isle-Bettendorf. We also lease approximately 8 acres of land from an entity owned by members of Bernard Goldstein's family, including Robert Goldstein, which we utilize for parking. The initial term of the lease expires 60 days after written notice is given to either party and rent under the lease is currently $20,000 per month. Isle-Natchez Through numerous lease agreements, we lease approximately 64 acres of land in Natchez, Mississippi which is used in connection with the operations of Isle-Natchez. Unless terminated by us at an earlier date, the lease expiration dates vary from 2001- 2037. Rents under the leases currently total approximately $60,000 per month. We also lease approximately 7.5 acres of land which is utilized for parking at the facility. We also own approximately 6 acres of property in Natchez, Mississippi, as well as the property upon which our hotel is located. Isle-Marquette We lease the dock site in Marquette, Iowa which is used in connection with the operations of the Isle-Marquette. The lease expires in 2019, and rent under the lease is currently $15,000 per month, plus $.50 per passenger, plus a percentage of gaming revenues less state wagering taxes that exceed $20,000 per year. We also lease approximately 5 acres of land used for the employee parking lot. That is a year-to-year lease which renews every August 15th, and rent is currently $833 per month. We also own approximately 25 acres of land for the pavilion, hotel, satellite offices, warehouse, lots by the marina, and other property. Isle-Kansas City We lease approximately 28 acres from the Kansas City Port Authority in connection with the operation of the Flamingo Casino. The term of the lease is 6 years and we have the option to renew the lease for 4 additional terms of 10 years each. Rent under the lease is currently $3,000,000 per year, subject to the higher of $3,000,000 (minimum rent) per year, or 3.25% of gross revenues, less complimentaries. Other We own all of the riverboats and barges utilized at our existing facilities. We also own or lease all of our gaming and non-gaming equipment. We lease our corporate office in Biloxi and our corporate office in Boca Raton, Florida. We also own an office in Baton Rouge, Louisiana which is utilized as a regional office for our Louisiana properties. The Company has various property leases and options to either lease or purchase property which are not directly related to our existing operations. The properties are in Lula, Vicksburg, Natchez, Gulfport and Biloxi, Mississippi, Lake Charles, and Bossier City, Louisiana, Boonville, St. Louis County and Jefferson County, Missouri, and may be utilized in the future in connection with expansion projects at our existing facilities or development of new projects. We own one additional riverboat casino, one floating pavilion, a partially completed vessel and several barges that are currently held for development or sale. ITEM 3. LEGAL PROCEEDINGS. One of our subsidiaries has been named, along with numerous manufacturers, distributors and gaming operators, including many of the country's largest gaming operators, in a consolidated class action lawsuit pending in Las Vegas, Nevada. These gaming industry defendants are alleged to have violated the Racketeer Influenced and Corrupt Organizations Act by engaging in a course of fraudulent and misleading conduct intended to induce people to play their gaming machines based upon a false belief concerning how those gaming machines actually operate and the extent to which there is actually an opportunity to win on any given play. The suit seeks unspecified compensatory and punitive damages. A motion for certification of the class is currently pending before the court and no discovery as to the merits of the alleged claims has begun. We are unable at this time to determine what effect, if any, the suit would have on our financial position or results of operations. However, the gaming industry defendants are committed to defend vigorously all claims asserted in the consolidated action. In November 1999, the Isle-Vicksburg was named as a defendant in an action brought by individuals who own property adjacent to the Big Black River in the eastern part of Warren County, Mississippi and several other parties. Also named as defendants in the action are two other operators in the Vicksburg market and one of the largest banks in the State of Mississippi. The complaint alleges that the defendants entered into an agreement to conduct a campaign opposing a gaming application for a site on the Big Black River. The plaintiffs allege that because of this agreement trade was improperly restrained and competition in the gaming business was reduced. The plaintiffs further allege that the defendants conspired for the purpose of injuring the plaintiffs' property rights. The Company has settled this lawsuit. In May 1998, we were named as a defendant in an action brought by several persons who had a contractual right to acquire property in Cripple Creek, Colorado which they sold to one of our subsidiaries in 1995. The plaintiffs allege that we breached our purported agreement to construct a casino facility on the property by the end of 1995. In December 1998, our motion to dismiss the complaint was granted by the United States District Court in Denver, Colorado. The plaintiffs have appealed this decision to the Tenth Circuit Court of Appeals. We intend to vigorously defend all claims and allegations in the action. In August 1997, a lawsuit was filed which seeks to nullify a contract to which Louisiana Riverboat Gaming Partnership is a party. Pursuant to the contract, Louisiana Riverboat Gaming Partnership pays a fixed amount plus a percentage of revenue to various local governmental entities, including the City of Bossier and the Bossier Parish School Board, in lieu of payment of a per-passenger boarding fee. Summary judgment in favor of Louisiana Riverboat Gaming Partnership was granted on June 4, 1998. That judgment was not appealed and is now final. On June 11, 1998, a similar suit was filed and judgment was rendered in our favor on September 16, 1999 by the lower court. The case has been appealed, and is currently pending. We intend to vigorously defend this suit. Lady Luck Gaming Corporation ("Lady Luck") - ------------------------------------------ Shareholder Class Action Lawsuits Lady Luck has been named as a defendant in a purported shareholder class action lawsuit alleging violations by Lady Luck of the Securities Act of 1933, as amended (the "Securities Act") and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for alleged material misrepresentations and omissions in connection with Lady Luck's 1993 prospectus and initial public offering of Common Stock. The complaint seeks, among other things, injunctive relief, rescission and unspecified compensatory damages. While the outcome of this matter cannot presently be determined, we intend to vigorously defend the claims asserted in this action. Greek Lawsuit Lady Luck and particular joint venture partners are defendants in a lawsuit brought by the country of Greece and its Minister of Tourism before the Greek Multi-Member Court of First Instance. The action alleges that the defendants failed to make specified payments in connection with the gaming license bid process for Patras, Greece. The payments the Company is alleged to have been required to make aggregate approximately 2.1 billion drachma (which was approximately $5.7 million as of April 30, 2000 based on published exchange rates). Although it is difficult to determine the damages being sought from the lawsuit, the action may seek damages up to that aggregate amount plus interest. The case is still in its preliminary stage and its outcome cannot be predicted with any degree of certainty. However, we intend to vigorously defend the claims asserted in this action. We are engaged in various other litigation matters and have a number of unresolved claims. Although the ultimate liability of this litigation and these claims cannot be determined at this time, we believe that they will not have a material adverse effect on our consolidated financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. A special meeting of Isle of Capri stockholders in connection with BRDC Acquisition. On February 16, 2000, a special meeting of stockholders was held to consider the BRDC Acquisition. The acquisition was approved by our stockholders with 17,849,728 voting for the acquisition and 104,992 voting against the acquisition. Special Meeting of Lady Luck Stockholders in connection with the Lady Luck Acquisition. - On February 8, 2000, a special meeting of Lady Luck stockholders was held in order to consider the Lady Luck acquisition. The acquisition was approved by the Lady Luck shareholders with not less than 4,010,480 voting for the acquisition. Annual Meeting of Stockholders - --------------------------------- The Annual Meeting of Stockholders was held September 22, 1999 at which time the following matters were submitted to a vote of the stockholders: (1) To elect seven persons to the Company's Board of Directors; (2) To approve an amendment to the Company's 1993 Stock Option Plan to increase the number of shares of the Company's common stock available for issuance thereunder by 1,150,000 shares; and (3) To approve the selection of Ernst & Young LLP as the Company's independent auditors for the fiscal year ending April 30, 2000. At the Annual Meeting of Stockholders, each of the following individuals were elected to serve as directors of the Company until his successor is elected and qualified or until his earlier death, resignation, removal or disqualification:
Name. For Withhold Against ---- --- -------- ------- Bernard Goldstein . 19,965,528 18,333 - John M. Gallaway. . 19,965,528 18,333 - Allan B. Solomon. . 19,965,528 18,333 - Robert S. Goldstein 19,958,475 25,386 - Allan J. Glazer . . 19,965,528 18,333 - Emanuel Crystal . . 19,965,528 18,333 - Randolph Baker. . . 19,965,528 18,333 -
The voting on the other matters as ordered at the Annual Meeting of Stockholders was as follows:
Matter For Withhold Against ------ --- -------- --------- Amendment to 1993 Stock Option Plan 17,010,875 542,329 2,430,657 Selection of Ernst & Young LLP. . . 19,943,389 32,740 7,282
PART II ------- ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS' MATTERS. (a) Market Information. The following table presents the high and low bid ------------------ quotations for our Common Stock as reported on the Nasdaq National Market for the fiscal periods indicated. The quotations reflect interdealer prices, without retail mark-up or commissions, and may not necessarily represent actual transactions.
Fiscal Year Ended April 25, 1999 . . . . . High Low ------ ------ First Quarter . . . . . . . . . . . . $ 4.13 $ 3.00 Second Quarter. . . . . . . . . . . . 3.63 1.75 Third Quarter . . . . . . . . . . . . 4.25 2.44 Fourth Quarter. . . . . . . . . . . . 6.50 3.88 Fiscal Year Ended April 30, 2000 First Quarter . . . . . . . . . . . . $ 8.69 $ 5.75 Second Quarter. . . . . . . . . . . . 13.00 7.50 Third Quarter . . . . . . . . . . . . 14.06 9.88 Fourth Quarter. . . . . . . . . . . . 16.25 10.38 Fiscal Year Ended April 29, 2001 First Quarter (through July 14, 2000) $17.75 $12.50
(b) Holders of Common Stock. As of July 14, 2000, there were 1,066 -------------------------- holders of record of the Common Stock. (c) Dividends. Isle of Capri has never paid any dividends with respect to --------- its Common Stock and the current policy of the Board of Directors is to retain earnings to provide for the growth of the company. In addition, our Senior Credit Facility and the indenture governing our Senior Subordinated Notes limits our ability to pay dividends. See "Item 8 - Index to Consolidated Financial Statements -Isle of Capri Casinos, Inc.-Notes to Consolidated Financial Statements - Note 7." Consequently, no cash dividends are expected to be paid on our Common Stock in the foreseeable future. Further, there can be no assurance that our current and proposed operations will generate the funds needed to declare a cash dividend or that we will have legally available funds to pay dividends. In addition, we may fund part of our operations in the future from indebtedness, the terms of which may prohibit or restrict the payment of cash dividends. If a holder of Common Stock is disqualified by the regulatory authorities from owning such shares, such holder will not be permitted to receive any dividends with respect to such stock. See "Item 1-Business-Regulatory Matters." ITEM 6. SELECTED FINANCIAL DATA. The following table presents our selected consolidated financial data for the five most recent fiscal years. This data is from our audited consolidated financial statements and the notes to those statements. Because the data in this table does not provide all of the data contained in our financial statements, including the related notes, you should read ''Management's Discussion and Analysis of Financial Condition and Results of Operations'' and the consolidated financial statements, including the related notes, contained elsewhere in this document, and other data we have filed with the U.S. Securities and Exchange Commission.
FISCAL YEAR ENDED APRIL 30, APRIL 25, APRIL 26, APRIL 27, APRIL 30, 2000 (1) 1999 (2) 1998 1997 (3) 1996 (3) --------- ----------- ----------- ----------- ----------- INCOME STATEMENT DATA: (dollars in millions, except per share data) Revenue. . . . . . . . . . . . $ 684.9 $ 480.4 $ 440.8 $ 373.4 $ 158.0 Operating income . . . . . . . 113.5 68.7 61.1 28.5 2.4 Net income (loss) before extraordinary item. . . . 32.1 12.1 7.5 (8.8) 1.6 Net income (loss). . . . . . . 31.1 (24.2) 7.5 (21.1) 1.6 Net income (loss) before extraordinary item per common share Basic. . . . . . . . . . . . . 1.22 0.51 0.32 (0.39) 0.10 Diluted. . . . . . . . . . . 1.15 0.51 0.32 (0.39) 0.10 Net income (loss) per common share Basic. . . . . . . . . . . . 1.18 (1.03) 0.32 (0.94) 0.10 Diluted. . . . . . . . . . . . 1.11 (1.01) 0.32 (0.94) 0.10 BALANCE SHEET DATA: Total assets . . . . . . . . . $1,305.5 $ 676.5 $ 615.7 $ 528.4 $ 226.5 Long-term debt, including current portion 962.9 532.8 442.1 379.5 139.8 Stockholders' equity . . . . . 155.5 62.0 86.1 78.0 50.3
(1) The data presented for fiscal years prior to fiscal 2000 is not comparable to other periods presented because they do not include the operating results of Isle-Tunica which opened July 26, 1999 and on March 2, 2000, we acquired Isle-Natchez, Isle-Lula, Isle-Bettendorf, and Isle-Marquette. (2) The data presented for fiscal years prior to fiscal 1999 are not comparable to other periods because they do not include the operating results of Isle-Black Hawk which opened December 30, 1998. (3) The operating results for fiscal years prior to fiscal 1998 are not comparable to other periods presented because the Isle-Bossier City and Isle-Lake Charles were accounted for under the equity method until August 6, 1996, when the remaining interests in these facilities were acquired by Isle of Capri. In addition, the earnings per share amounts prior to fiscal 1998 have been restated as required to comply with Statement of Financial Accounting Standards No. 128, Earnings Per Share. For further discussion of earnings per common share and the impact of Standards No. 128, see the notes to the consolidated financial statements. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. You should read the following discussion together with the financial statements, including the related notes and the other financial information in this Form 10-K. The following discussion includes "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In particular, statements concerning the effects of increased competition in the Company's markets, the effects of regulatory and legislative matters, the Company's plans to make capital investments at its facilities, including, without limitation, considerations to obtain approvals for a new project in the St. Louis metropolitan area, develop a casino as the Isle-Boonville in Boonville, Missouri, and to develop hotels at the Isle-Lake Charles, the Isle-Black Hawk, and the Isle-Tunica and the expansion of non-gaming amenities at all facilities, including the conversion of the recently acquired Lady Luck Gaming facilities and the Kansas City Flamingo Hilton Casino into Isle of Capri themed casinos, are forward-looking statements. Although the Company believes that the expectations are reasonable, there can be no assurance that such expectations are reasonable or that they will be correct. Actual results may vary materially from those expected. Important factors that could cause actual results to differ with respect to the Company's planned capital expenditures principally include a lack of available capital resources, construction and development risks such as shortages of materials and labor and unforeseen delays resulting from a failure to obtain necessary approvals. GENERAL Isle of Capri's results of operations for the fiscal year ended April 30, 2000 include approximately two months of operating results from the Lady Luck casinos in Bettendorf and Marquette, Iowa and Lula and Natchez, Mississippi. These casinos were acquired through Isle of Capri's acquisition of Lady Luck Gaming Corporation, BRDC, Inc. and other related assets on March 2, 2000. Prior to March 2, 2000, the results of operations reflect the consolidated operations of all of Isle of Capri's subsidiaries, including the Isle-Biloxi, the Isle-Vicksburg, Isle-Bossier City, the Isle-Lake Charles, the Isle-Black Hawk (which opened December 31, 1998) and the Isle-Tunica (which opened July 26, 1999). Isle of Capri believes that its historical results of operations may not be indicative of its future results of operations because of the substantial present and expected future increase in competition for gaming customers in each of Isle of Capri's markets, as new casinos open and existing casinos add to or enhance their facilities. Isle of Capri also believes that its operating results are affected by seasonality. Seasonality has historically caused the operating results for Isle of Capri's first and fourth fiscal quarters ending in July and April, respectively, to be notably better than the operating results for the second and third fiscal quarters ending October and January, respectively. RESULTS OF OPERATIONS Fiscal Year Ended April 30, 2000 Compared to Fiscal Year Ended April 25, 1999 Total revenue for the fiscal year ended April 30, 2000 was $684.9 million, which included $619.4 million of casino revenue, $12.4 million of rooms revenue, $22.1 million of pari-mutuel commissions and $31.0 million of food, beverage and other revenue. This compares to total revenue for the previous fiscal year ended April 25, 1999 of $480.4 million, which included $424.4 million of casino revenue, $10.8 million of room revenue, $21.4 million of pari-mutuel commissions and $23.8 million of food, beverage and other revenue. Casino revenue increased $195.0 million or 45.9% primarily as a result of the inclusion of approximately two months of operating results from the acquisition of Lady Luck, a full year of operations at the Isle-Black Hawk (which commenced operations on December 30, 1998), the opening of a 305-room hotel at the Isle-Bossier City, increased market share at the Isle-Lake Charles, the opening of the Isle-Tunica on July 26, 1999 and a full year of operating results from a 124-room hotel at the Isle-Vicksburg (which opened in March 1999). Room revenue and food, beverage and other revenue have increased primarily as a result of the Lady Luck acquisition and the increased number of hotel rooms. Pari-mutuel commissions and fees have increased slightly compared to the prior year as a result of adverse weather conditions in the prior fiscal year. Revenue does not reflect the retail value of any complimentaries. Casino operating expenses for the fiscal year ended April 30, 2000 totaled $116.1 million, or 18.7% of casino revenue, versus $77.7 million, or 18.3% of casino revenue, for the fiscal year ended April 25, 1999. These expenses are primarily comprised of salaries, wages and benefits and other operating expenses of the casinos. Casino operating expenses have increased slightly as a percentage of casino revenue due to weak operating results at the Isle-Tunica. Operating expenses for the fiscal year ended April 30, 2000 also included room expenses of $5.8 million from the hotels at the Isle-Lake Charles, Isle-Bossier City, Isle-Biloxi, Isle-Vicksburg and the Isle-Lula, Isle-Bettendorf, Isle-Natchez and Isle-Marquette. These expenses reflect those directly relating to the cost of providing these hotel rooms. Other costs of the hotels are shared with the casinos and are presented in their respective expense categories. Rooms operating expenses as a percentage of rooms revenue increased from 36.1% for the fiscal year ended April 25, 1999 to 46.8% for the fiscal year ended April 30, 2000. Room expenses and room expenses as a percentage of rooms revenue both increased primarily as a result of start up costs related to the opening of the new 305 room deluxe Isle-Bossier City hotel in late June 1999. Additionally, the hotels acquired through the Lady Luck acquisition currently have higher operating expenses than the Isle of Capri Casino hotels. State and local gaming taxes paid in Louisiana, Mississippi, Iowa and Colorado totaled $122.6 million, or 19.8% of casino revenue, for the fiscal year ended April 30, 2000, compared to $86.9, or 20.5% of casino revenue million for the fiscal year ended April 25, 1999, which is consistent with each state's gaming tax rate for the applicable fiscal years. Pari-mutuel operating costs of Pompano Park totaled $16.4 million in fiscal 2000 compared to $15.7 million in fiscal 1999. Such costs consist primarily of compensation, benefits, purses, simulcast fees and other direct costs of track operations. Pari-mutuel operating costs as a percentage of pari-mutuel revenues have increased from 73.7% for the fiscal year ended April 25, 1999 to 74.4% for the fiscal year ended April 30, 2000. This increase is primarily related to increased competition for simulcasting contracts at Pompano Park. Food, beverage and other expenses totaled $19.1 million for the fiscal year ended April 30, 2000, compared to $14.2 million for the fiscal year ended April 25, 1999. These expenses have increased as a result of the opening of the Isle-Black Hawk and the Isle-Tunica, as well as the Lady Luck acquisition. These expenses consist primarily of the cost of goods sold, salaries, wages and benefits and operating expenses of these departments. Food and beverage operating expenses as a percentage of food, beverage and other revenues increased from 59.6% for the fiscal year ending April 25, 1999 to 61.6% for the fiscal year ended April 30, 2000. Food and beverage operating margins were lower primarily due to increased food cost related to certain seafood items which are featured in most of the Company's restaurants. Marine and facilities expenses totaled $39.9 million for the fiscal year ended April 30, 2000, versus $28.2 million for the fiscal year ended April 25, 1999. These expenses include salaries, wages and benefits, operating expenses of the marine crews, insurance, housekeeping and general maintenance of the riverboats and floating pavilions. Marine and facilities expenses have increased due to the addition of several new and acquired facilities. Marine and facilities expenses as a percentage of total revenue have remained level at approximately 5.8%. Marketing and administrative expenses totaled $205.7 million, or 30.0% of total revenue, for the fiscal year ended April 30, 2000, versus $144.5 million, or 30.1% of total revenue, for the fiscal year ended April 25, 1999. Marketing expenses include salaries, wages and benefits of the marketing and sales departments, as well as promotions, advertising, special events and entertainment. Administrative expenses include administration and human resource department expenses, rent, new development activities, professional fees and property taxes. Marketing and administrative expenses have increased due primarily to the opening of the addition of several new and acquired casino facilities, while these expenses as a percentage of total revenue remains level as a result of management's expense containment programs. Preopening expenses of $3.4 million for the fiscal year ended April 30, 2000 represent salaries, benefits, training, marketing and other non-capitalizable costs, which were expensed in connection with the opening of the Isle-Tunica. Depreciation and amortization expense was $42.3 million for the fiscal year ended April 30, 2000 and $36.3 million for the fiscal year ended April 25, 1999. These expenses relate to property and equipment, berthing and concession rights and the amortization of intangible assets. The increase in depreciation and amortization expense is consistent with the increase in fixed assets placed into service or acquired. Interest expense was $55.6 million for the fiscal year ended April 30, 2000, net of capitalized interest of $2.4 million and interest income of $4.8 million, versus $45.7 million for the year ended April 25, 1999, net of capitalized interest of $7.2 million and interest income of $2.9 million. Interest expense primarily relates to indebtedness incurred in connection with the acquisition of property, equipment, leasehold improvements and berthing and concession rights. Additionally, interest expense of $9.7 million, net of capitalized interest of $1.1 million and interest income of $.4 million related to Black Hawk LLC is included in the fiscal year ended April 30, 2000. This compares to interest expense of $4.9 million, net of capitalized interest of $4.8 million and interest income of $0.8 million, for the fiscal year ended April 25, 1999. Isle of Capri's effective tax rate was 44.3% prior to extraordinary items for the fiscal year ended April 30, 2000 and 49.3% for the fiscal year ended April 25, 1999, which includes the effects of non-deductible goodwill amortization for income tax purposes. The effective tax rate decreased during fiscal 2000 compared to fiscal 1999, as a result of increased taxable income which offsets the fixed effects of the non-deductible goodwill amortization. Fiscal Year Ended April 25, 1999 Compared to Fiscal Year Ended April 26, 1998 Total revenue for the fiscal year ended April 25, 1999 was $480.4 million, which included $424.4 million of casino revenue, $10.8 million of rooms revenue, $21.4 million of pari-mutuel commissions and $23.8 million of food, beverage and other revenue. This compares to total revenue for the previous fiscal year ended April 26, 1998 of $440.8 million, which included $388.2 million of casino revenue, $9.5 million of room revenue, $22.6 million of pari-mutuel commissions and $20.5 million of food, beverage and other revenue. Casino revenue increased primarily as a result of increased market share at the Isle-Lake Charles, the commencement of operations at the Isle-Black Hawk on December 30, 1998 and the opening of a 124-room hotel at the Isle-Vicksburg. Room revenue and food, beverage and other revenue have increased as a result of the increased number of hotel rooms and the development of Isle of Capri's themed restaurant, branded Farraddays', which opened at each of Isle of Capri's casino properties during fiscal 1998 and were open a full year in fiscal 1999. Pari-mutuel commissions and fees decreased slightly compared to the prior year as a result of adverse weather conditions and increased competition for simulcasting contracts at Pompano Park. Revenue does not reflect the retail value of any complimentaries. Casino operating expenses for the fiscal year ended April 25, 1999 totaled $77.7 million, or 18.3% of casino revenue, versus $76.1 million, or 19.6% of casino revenue, for the fiscal year ended April 26, 1998. These expenses are primarily comprised of salaries, wages and benefits and other operating expenses of the casinos. Casino operating expenses have decreased primarily as a result of continued refinement of Isle of Capri's payroll and operating cost control programs. Operating expenses for the fiscal year ended April 25, 1999 also included room expenses of $3.9 million from the hotels at the Isle-Lake Charles, Isle-Bossier City, Isle-Biloxi and the Isle-Vicksburg. These expenses are those directly relating to the cost of providing hotel rooms. Other costs of the hotels are shared with the casinos and are presented in their respective expense categories. Rooms operating expenses as a percentage of rooms revenue increased from 34.3% for the fiscal year ended April 26, 1998 to 36.1% for the fiscal year ended April 25, 1999. Room expenses as a percentage of rooms revenue increased primarily as a result of start up costs related to the opening of the Isle-Vicksburg hotel in February 1999 and increased competition for the old Isle-Bossier City hotel. State and local gaming taxes paid in Louisiana, Mississippi and Colorado totaled $86.9 million for the fiscal year ended April 25, 1999, compared to $78.6 million for the fiscal year ended April 26, 1998, which is consistent with each state's gaming tax rate for the applicable fiscal years. Pari-mutuel operating costs of Pompano Park totaled $15.7 million in fiscal 1999 compared to $16.3 million in fiscal 1998. Such costs consist primarily of compensation, benefits, purses, simulcast fees and other direct costs of track operations. Pari-mutuel operating costs as a percentage of pari-mutuel revenues have increased from 72.3% for the fiscal year ended April 26, 1998 to 73.7% for the fiscal year ended April 25, 1999. The increase is primarily related to the decrease in revenues from simulcasting. Food, beverage and other expenses totaled $14.2 million for the fiscal year ended April 25, 1999, compared to $13.4 million for the fiscal year ended April 26, 1998. These expenses have increased as a result of the opening of the Isle-Black Hawk and were partially offset by Isle of Capri's payroll and inventory cost reduction efforts. These expenses consist primarily of the cost of goods sold, salaries, wages and benefits and operating expenses of these departments. Food and beverage operating expenses as a percentage of food, beverage and other revenues decreased from 65.3% for the fiscal year ending April 26, 1998 to 59.6% for the fiscal year ended April 25, 1999. Food and beverage operating margins have improved as a result of payroll and inventory cost reduction efforts. Marine and facilities expenses totaled $28.2 million for the fiscal year ended April 25, 1999, versus $26.2 million for the fiscal year ended April 26, 1998. These expenses include salaries, wages and benefits, operating expenses of the marine crews, insurance, housekeeping and general maintenance of the riverboats and floating pavilions. Marine and facilities expenses have increased due to the addition of the Isle-Black Hawk and the maturity of Isle of Capri's vessels and facilities. Marketing and administrative expenses totaled $144.5 million, or 30.1% of total revenue, for the fiscal year ended April 25, 1999, versus $132.3 million, or 30.0% of total revenue, for the fiscal year ended April 26, 1998. Marketing expenses include salaries, wages and benefits of the marketing and sales departments, as well as promotions, advertising, special events and entertainment. Administrative expenses include administration and human resource department expenses, rent, new development activities, professional fees and property taxes. Marketing and administrative expenses have increased due primarily to the opening of the Isle-Black Hawk, while these expenses as a percentage of total revenue remains level as a result of management's expense containment programs. Preopening expenses of $3.3 million for the fiscal year ended April 25, 1999 represent salaries, benefits, training, marketing and other non-capitalizable costs, which were expensed in connection with the opening of the Isle-Black Hawk. Isle of Capri's results of operations for the fiscal year ended April 25, 1999 include the reversal of an accrued litigation settlement of $4.2 million related to the boarding tax liability at the Isle-Bossier City, for which the courts have determined Isle of Capri is not liable. Isle of Capri has also recorded a write-down of the assets held for development or sale of $2.4 million related to its two original riverboat casino vessels and land that Isle of Capri was planning to develop in Cripple Creek, Colorado. During the third fiscal quarter of 1999, Isle of Capri entered into an agreement to sell one of its two original riverboats for less than the recorded value. This sale had not closed as of the fiscal year ended 1999. Based on the agreed upon sales price, Isle of Capri has adjusted the valuation allowance related to both original riverboats to reflect the fair value. Because Isle of Capri has delayed its plans to develop a casino on the land it owns in Cripple Creek, Isle of Capri has established a valuation allowance on the land to reflect the fair value of the land as the carrying value. Isle of Capri also established a reserve for a future obligation under an operating lease related to its Cripple Creek project at the discounted present value of $2.7 million. These items occurred during the third quarter of fiscal 1999. Depreciation and amortization expense was $36.3 million for the fiscal year ended April 25, 1999 and $33.6 million for the fiscal year ended April 26, 1998. These expenses relate to property and equipment, berthing and concession rights and the amortization of intangible assets. The increase in depreciation and amortization expense is consistent with the increase in fixed assets placed into service, including the assets placed into service upon the commencement of operations at the Isle-Black Hawk. Interest expense was $45.7 million for the fiscal year ended April 25, 1999, net of capitalized interest of $7.2 million and interest income of $2.9 million, versus $46.9 million for the year ended April 26, 1998, net of capitalized interest of $2.7 million and interest income of $4.7 million. Interest expense primarily relates to indebtedness incurred in connection with the acquisition of property, equipment, leasehold improvements and berthing and concession rights. Additionally, interest expense of $5.0 million, net of capitalized interest of $4.8 million and interest income of $.8 million related to Black Hawk LLC is included in the fiscal year ended April 25, 1999. This compares to interest expense of $2.0 million, net of capitalized interest of $2.3 million and interest income of $3.0 million, for the fiscal year ended April 26, 1998. Isle of Capri's effective tax rate was 49.3% prior to extraordinary items for the fiscal year ended April 25, 1999 and 49.8% for the fiscal year ended April 26, 1998, which includes the effects of non-deductible goodwill amortization for income tax purposes. LIQUIDITY AND CAPITAL RESOURCES At April 30, 2000, Isle of Capri had cash and cash equivalents of $168.0 million and short term investments of $39.0 million that mature within the next eight months, compared to $85.1 million at April 25, 1999. The increase in cash is primarily a result of cash flow from operating activities and excess proceeds from our March 2, 2000 refinancing. During the fiscal year ended April 30, 2000, Isle of Capri's operating activities provided $130.4 million of cash, compared to $65.2 million of cash provided by operating activities in the fiscal year ended April 25, 1999. Isle of Capri invested $104.6 million in property and equipment during the fiscal year ended April 30, 2000, primarily for the development of the Isle-Tunica, the development of a 305-room deluxe hotel at the Isle-Bossier City, a 250-room deluxe hotel at the Isle-Lake Charles, a 227-room hotel at the Isle-Tunica and the development of a 237-room hotel at the Isle-Black Hawk. This compares to $95.0 million invested in property and equipment during the fiscal year ended April 25, 1999, primarily related to the development of the Isle-Black Hawk, which commenced operations on December 30, 1998 and the development of a 124-room hotel at the Isle-Vicksburg. On March 2, 2000 Isle of Capri acquired Lady Luck in a merger transaction. Lady Luck's common stockholders received cash in the amount of $12.00 per share for an aggregate consideration of approximately $59 million. Isle of Capri intends to invest approximately $35.0 million over the next 12 months to convert the Lady Luck casinos into Isle of Capri casinos of which $1.6 million was incurred as of fiscal year end 2000. The Company funded the acquisition of Lady Luck using amounts drawn under its Amended and Restated Senior Credit Facility. Simultaneously with the Lady Luck acquisition discussed above, Isle of Capri acquired BRDC, Inc. which held the other 50% interest in Lady Luck's Bettendorf, Iowa facility not owned by Lady Luck, and related real estate, in exchange for 6.3 million shares of Isle of Capri common stock, subject to post-closing adjustment in certain circumstances. This interest was owned by members of the family of Bernard Goldstein, Isle of Capri's Chairman and Chief Executive Officer, including Robert Goldstein, a member of the Company's board of directors. On March 2, 2000 Isle of Capri Casinos, Inc. amended and restated its Senior Credit Facility in connection with its acquisition of Lady Luck Gaming Corporation and BRDC, Inc., as well as to provide financing for the pending acquisitions of the Flamingo Hilton Riverboat Casino in Kansas City, Missouri and of Davis Gaming Boonville, Inc. The previous $175.0 million Senior Credit Facility was expanded under the Amended and Restated agreement to a $600.0 million Senior Credit Facility, including a $125.0 million revolver, which is undrawn as of the date of this filing. On May 3, 2000, Isle of Capri acquired Davis Gaming Boonville, Inc., which has preliminary approval to develop a gaming facility in Boonville, Missouri. Isle of Capri intends to develop a casino project in Boonville with a total expected investment of approximately $75.0 million which includes the $11.5 million purchase price paid and to be paid for Davis Gaming Boonville, Inc. Isle of Capri has begun construction on this project and intends to fund this development through its Amended and Restated Senior Credit Facility. Additionally, on June 5, 2000, Isle of Capri acquired certain assets of the Flamingo Hilton Riverboat Casino in Kansas City, Missouri from Flamingo Hilton Riverboat, L.P., a subsidiary of Hilton Hotels Corporation for $33.5 million cash less certain assumed liabilities. Isle of Capri anticipates investing up to an additional $15.0 million in this project, primarily to re-theme the casino into an Isle of Capri Casino. Isle of Capri intends to fund the acquisition and improvements through cash from operations and its Amended and Restated Senior Credit Facility. Isle of Capri anticipates that a significant portion of its principal near-term capital requirements will relate to the expansion of the Isle-Tunica, the Isle-Lake Charles and the Isle-Black Hawk. Isle of Capri is in the process of investing an additional amount of $44.5 million to construct an on-site hotel at the Isle-Tunica with approximately 227 rooms and two live entertainment theaters with combined seating for approximately 1,800 people. The hotel is currently under construction and the site work necessary for the construction of the theaters has begun. Isle of Capri has also begun construction of an on-site 250-room deluxe hotel at the Isle-Lake Charles, with an estimated cost of approximately $33.0 million. Additionally, the Isle-Black Hawk is continuing the construction of a hotel containing 237 rooms at the Isle-Black Hawk for approximately $29.0 million. Isle of Capri is assisting Isle-Black Hawk with the financing of the development of this hotel and plans to loan $5.0 million with interest payable in cash and another $5.0 million with interest payable in kind (with additional notes). Additionally, Isle of Capri has agreed to contribute up to $10.0 million in additional equity to supplement funds generated from Isle-Black Hawk operations to complete the hotel, if necessary. The Missouri Gaming Commission has selected our Jefferson County, Missouri project for development. This project, which will primarily serve the South St. Louis metropolitan area, was selected over three other projects, including our proposed project at the Jefferson Barracks site in South St. Louis County. The project is expected to include a 35,000 square foot casino, our signature restaurants and a 200-room hotel. We expect to begin construction in late 2000 and to complete this approximately $105 million project in the spring of 2002. A joint venture in which we own 45% and have a management contract has applied to the Louisiana Gaming Commission for the issuance of a license. The gaming commission is not expected to make a decision until early 2001. On July 18, 2000 the Company signed an agreement to purchase the Davenport, Iowa casino and hotel from President Casinos et al for $58.2 million. The closing of the transaction is subject to a number of conditions including the satisfactory completion of a due diligence review and the necessary regulatory approvals. In June 1999, PPI, Inc. sold an option to purchase 135 acres of property, adjacent to its Pompano Park Harness Racing Track, for $16.3 million. The sale resulted in a gain on disposal of approximately $3.1 million. All of Isle of Capri's development plans are subject to obtaining permits, licenses and approvals from appropriate regulatory and other agencies and, in certain circumstances, negotiating acceptable leases. In addition, many of its plans are preliminary, subject to continuing refinement or otherwise subject to change. In addition to the $35.0 million Isle of Capri expects to invest to convert the Lady Luck casinos into Isle of Capri casinos, Isle of Capri anticipates that capital improvements approximating $27.0 million will be made during fiscal 2001 to maintain its existing facilities and remain competitive in its markets. Isle of Capri expects that available cash and cash from future operations, as well as borrowings under its Senior Credit Facility, will be adequate to fund future expansion, planned capital expenditures, service debt and meet working capital requirements. There is no assurance that Isle of Capri will have the capital resources to make all of the expenditures described above or that planned capital investments will be sufficient to allow Isle of Capri to remain competitive in its existing markets. In addition, the indenture governing the 8 3/4 % Senior Subordinated Notes restricts, among other things, Isle of Capri's ability to borrow money, create liens, make restricted payments and sell assets. Isle of Capri's Amended and Restated Senior Credit Facility limits, among other things, Isle of Capri's ability to borrow money, make capital expenditures, use assets as security in other transactions, make restricted payments or restricted investments, incur contingent obligations, sell assets and enter into leases and transactions with affiliates. In addition, the Senior Credit Facility requires Isle of Capri to meet certain financial ratios and tests, including: a minimum consolidated net worth test, a maximum consolidated total leverage test, a maximum consolidated senior leverage test and a minimum consolidated fixed charge coverage test. Isle of Capri must repay all amounts borrowed under its Amended and Restated Senior Credit Facility by March 2007. Isle of Capri is required to make quarterly principal payments on the $475.0 million term loan portion of its Senior Credit Facility which began in March 2000. Such payments are initially $3.4 million per quarter and will increase by $1.25 million per quarter in July of each year that the term loan is outstanding. In addition, Isle of Capri will be required to make substantial quarterly interest payments on the outstanding balance of its Senior Credit Facility and interest payments of $17.1 million semi-annually on its 8 3/4 % Senior Subordinated Notes. Isle of Capri is highly leveraged and may be unable to obtain additional debt or equity financing on acceptable terms. As a result, limitations on Isle of Capri's capital resources could delay or cause Isle of Capri to abandon certain plans for capital improvements at its existing properties and development of new properties. Isle of Capri will continue to evaluate its planned capital expenditures at each of its existing locations in light of the operating performance of the facilities at such locations. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss arising from adverse changes in market rates and prices, including interest rates, foreign currency exchange rates, commodity prices and equity prices. Isle of Capri's primary exposure to market risk is interest rate risk associated with its Amended and Restated Senior Credit Facility. We do not utilize these financial instruments for trading purposes. We manage our interest rate risk on long-term debt by managing the mix of our fixed-rate and variable-rate debt. There has been no change in how we manage our interest rate risk when compared to the prior fiscal year. Isle of Capri does not use interest rate derivative instruments to manage exposure to interest rate changes. The following table provides information at April 30, 2000, about our financial instruments that are sensitive to changes in interest rates. The table presents principal cash flows (in thousands) and related weighted average interest rates by expected maturity dates.
FISCAL YEAR (dollars in thousands). . . . . . . . . . . . . 2001 2002 2003 2004 - ----------------------------------------------- -------- ------------ --------- ------------ Liabilities Long-term Debt, including Current portion Fixed Rate . . . . . . . . . . . . . . . . $ 3,650 $ 3,052 $ 2,361 $ 2,321 Avg. interest rate . . . . . . . . . . . . 9.430% 9.432% 9.433% 9.432% Variable Rate. . . . . . . . . . . . . . . $13,750 $ 18,750 $ 23,750 $ 28,750 Avg. interest rate (1) . . . . . . . . . . - - - - FISCAL YEAR Fair Value (dollars in thousands). . . . . . . . . . . . . 2005 Thereafter Total 4/30/00 - ----------------------------------------------- -------- ------------ --------- ------------ Liabilities Long-term Debt, including Current portion Fixed Rate . . . . . . . . . . . . . . . . $ 2,531 $ 473,986 $487,901 $ 452,576 Avg. interest rate . . . . . . . . . . . . 9.430% 10.622% Variable Rate. . . . . . . . . . . . . . . $33,750 $ 356,250 $475,000 $ 475,000 Avg. interest rate (1) . . . . . . . . . . - -
(1) Interest is based upon, at our option, a one-, two-, three-, or six-month Eurodollar rate plus a margin ranging from 1.75% to 3.625%, or the prime rate plus a margin ranging from 0.75% to 2.625% for our term loan and revolving credit facility. The applicable margin is dependent upon Isle of Capri's outstanding indebtedness and operating cash flow. ITEM 8. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- ISLE OF CAPRI CASINOS, INC. Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Consolidated Balance Sheets, April 30, 2000 and April 25, 1999 . . . . . . . . . . . . . . . . . . . 41 Consolidated Statements of Operations, Years ended April 30, 2000, April 25, 1999 and April 26, 1998 42 Consolidated Statements of Stockholders' Equity, Years ended April 30, 2000, April 25, 1999 and April 26, 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Consolidated Statements of Cash Flows, Years ended April 30, 2000, April 25, 1999 and April 26, 1998 44 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Isle of Capri Casinos, Inc. We have audited the accompanying consolidated balance sheets of Isle of Capri Casinos, Inc. as of April 30, 2000 and April 25, 1999, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years ended April 30, 2000, April 25, 1999 and April 26, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Isle of Capri Casinos, Inc. at April 30, 2000 and April 25, 1999, and the consolidated results of their operations and their cash flows for the years ended April 30, 2000, April 25, 1999 and April 26, 1998, in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG LLP New Orleans, Louisiana June 15, 2000, except for Note 20, as to which the date is July 26, 2000
ISLE OF CAPRI CASINOS, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA) April 30, April 25, ASSETS 2000 1999 ------ ---------- ----------- Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 167,972 $ 85,117 Short term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,044 - Accounts receivable: Related party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307 41 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,343 5,894 Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7,509 Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,167 4,684 Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . 9,500 5,771 ---------- ----------- Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . 238,333 109,016 Property and equipment - net.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 699,246 411,176 Other assets: Investment in and advances to joint ventures. . . . . . . . . . . . . . . . . . 1,914 1,851 Property held for development or sale . . . . . . . . . . . . . . . . . . . . . 3,782 5,532 Licenses and other intangible assets, net of accumulated amortization of $11,896 and $8,960, respectively.. . . . . . . . . . . . . . . . . . . . . 91,100 63,408 Goodwill, net of accumulated amortization $11,721 and $8,644, respectively.. . . . . . . . . . . . . . . . . . . . . 228,530 52,818 Berthing, concession, and leasehold rights, net of accumulated amortization of $2,462 and $2,149, respectively. . . . . . . . . . . . . . . . . . . . . . 3,806 4,119 Deferred financing costs, net of accumulated amortization of $4,145 and $1,305, respectively.. . . . . . . . . . . . . . . . . . . . . . . . . . . 25,466 19,351 Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,556 5,480 Prepaid deposits and other. . . . . . . . . . . . . . . . . . . . . . . . . . . 7,781 3,733 ---------- ----------- Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,305,514 $ 676,484 ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Current maturities of long-term debt. . . . . . . . . . . . . . . . . . . . . . $ 17,400 $ 5,883 Accounts payable: Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,407 20,102 Related party.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 - Accrued liabilities: Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,010 2,033 Payroll and related.. . . . . . . . . . . . . . . . . . . . . . . . . . . 39,338 23,867 Property and other taxes. . . . . . . . . . . . . . . . . . . . . . . . . 16,096 11,700 Income tax payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,661 - Progressive jackpots and slot club awards.. . . . . . . . . . . . . . . . 9,033 5,351 Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,996 9,888 ---------- ----------- Total current liabilities.. . . . . . . . . . . . . . . . . . . . . . 162,036 78,824 Long-term debt, less current maturities. . . . . . . . . . . . . . . . . . . . . . . 945,501 526,873 Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,763 4,689 Other accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,851 - Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,843 4,143 Stockholders' equity: Preferred stock, $.01 par value; 2,050 shares authorized; none issued.. . . . . - - Common stock, $.01 par value; 45,000 shares authorized; shares issued and outstanding: 30,369 at April 30, 2000 and 23,569 at April 25, 1999.. . . . 304 236 Class B common stock, $.01 par value; 3,000 shares authorized; none issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 125,572 63,146 Retained earnings (deficit). . . . . . . . . . . . . . . . . . . . . . . . 29,644 (1,427) ---------- ----------- Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . 155,520 61,955 ---------- ----------- Total liabilities and stockholders' equity. . . . . . . . . . . . . . $1,305,514 $ 676,484 ========== ===========
See notes to consolidated financial statements
ISLE OF CAPRI CASINOS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) Fiscal Year Ended ------------------- April 30, April 25, April 26, 2000 1999 1998 ------------------- ----------- ----------- Revenue: Casino . . . . . . . . . . . . . . . . . $ 619,351 $ 424,379 $ 388,223 Rooms. . . . . . . . . . . . . . . . . . 12,444 10,829 9,528 Pari-mutuel commissions and fees . . . . 22,064 21,351 22,565 Food, beverage and other . . . . . . . . 30,991 23,818 20,500 ------------------- ----------- ----------- Total revenue . . . . . . . . . . . 684,850 480,377 440,816 Operating Expenses: Casino . . . . . . . . . . . . . . . . . 116,105 77,679 76,072 Gaming taxes . . . . . . . . . . . . . . 122,572 86,855 78,586 Rooms. . . . . . . . . . . . . . . . . . 5,824 3,914 3,271 Pari-mutuel. . . . . . . . . . . . . . . 16,406 15,741 16,315 Food, beverage and other . . . . . . . . 19,089 14,204 13,379 Marine and facilities. . . . . . . . . . 39,862 28,218 26,203 Marketing and administrative . . . . . . 205,730 144,541 132,300 Accrued litigation settlement (reversal) - (4,215) - Valuation charge . . . . . . . . . . . . - 5,097 - Preopening expenses. . . . . . . . . . . 3,420 3,320 - Depreciation and amortization. . . . . . 42,346 36,277 33,588 ------------------- ----------- ----------- Total operating expenses. . . . . . 571,354 411,631 379,714 ------------------- ----------- ----------- Operating income . . . . . . . . . . . . 113,496 68,746 61,102 Interest expense . . . . . . . . . . . . (60,413) (48,638) (51,579) Interest income. . . . . . . . . . . . . 4,780 2,907 4,702 Gain on disposal . . . . . . . . . . . . 3,106 - - Minority interest. . . . . . . . . . . . (3,700) 2,209 819 Equity in income (loss) of unconsolidated joint ventures . . . 259 (1,340) - ------------------- ----------- ----------- Income before income taxes and extraordinary item. . . . . . . 57,528 23,884 15,044 Income tax provision . . . . . . . . . . 25,473 11,775 7,497 ------------------- ----------- ----------- Income before extraordinary item.. . . . 32,055 12,109 7,547 Extraordinary loss on extinguishment of debt, net of applicable income tax benefit of $634, $19,538, and $0, respectively. . . . . . . . (984) (36,285) - ------------------- ----------- ----------- Net income (loss). . . . . . . . . . . . $ 31,071 $ (24,176) $ 7,547 =================== =========== =========== Earnings (loss) per share of common stock: Earnings (loss) per common share: Income before extraordinary item. . $ 1.22 $ 0.51 $ 0.32 Extraordinary loss, net.. . . . . . $ (0.04) $ (1.54) $ - ------------------- ----------- ----------- Net income (loss).. . . . . . . . . $ 1.18 $ (1.03) $ 0.32 =================== =========== =========== Earnings (loss) per common share - assuming dilution: Income before extraordinary item. . $ 1.15 $ 0.51 $ 0.32 Extraordinary loss, net . . . . . . $ (0.04) $ (1.52) $ - ------------------- ----------- ----------- Net income (loss) . . . . . . . . . $ 1.11 $ (1.01) $ 0.32 =================== =========== =========== Weighted average basic shares . . . 26,327 23,569 23,455 Weighted average diluted shares . . 27,925 23,859 23,465
See notes to consolidated financial statements
ISLE OF CAPRI CASINOS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA) Shares of Additional Retained Total Common Common Paid-in Earnings Stockholders' Stock Stock Capital (Deficit) Equity ---------- ------- ----------- ---------- --------------- Balance, April 27, 1997. . . . . . . . . . . . . 23,345,287 $ 233 $ 62,538 $ 15,202 $ 77,973 Exercise of stock options . . . . . . . . . 8,438 - 8 - 8 Issuance of stock for deferred financing costs . . . . . . . . . . . . . . . . . . 174,337 2 498 - 500 Issuance of stock for compensation. . . . . 40,500 1 102 - 103 Net income. . . . . . . . . . . . . . . . . - - - 7,547 7,547 ---------- ------- ----------- ---------- --------------- Balance, April 26, 1998. . . . . . . . . . . . . 23,568,562 236 63,146 22,749 86,131 Net loss. . . . . . . . . . . . . . . . . . - - - (24,176) (24,176) ---------- ------- ----------- ---------- --------------- Balance, April 25, 1999. . . . . . . . . . . . . 23,568,562 236 63,146 (1,427) 61,955 Exercise of stock options and warrants. . . 500,390 5 2,727 - 2,732 Issuance of common stock for acquisition. . 6,300,000 63 59,699 59,762 Net income. . . . . . . . . . . . . . . . . - - - 31,071 31,071 ---------- ------- ----------- ---------- --------------- Balance, April 30, 2000. . . . . . . . . . . . . 30,368,952 $ 304 $ 125,572 $ 29,644 $ 155,520 ========== ======= =========== ========== ===============
See notes to consolidated financial statements
ISLE OF CAPRI CASINOS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Fiscal Year Ended ------------------- April 30, April 25, April 26, 2000 1999 1998 ------------------- ----------- ----------- OPERATING ACTIVITIES: Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,071 $ (24,176) $ 7,547 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization. . . . . . . . . . . . . . . . . 42,346 36,277 33,588 Deferred income taxes. . . . . . . . . . . . . . . . . . . . . 17,410 (7,763) 5,303 Amortization of bond discount and deferred financing costs . . 2,969 2,317 1,926 Valuation charge . . . . . . . . . . . . . . . . . . . . . . . - 5,097 - Gain on disposal of assets.. . . . . . . . . . . . . . . . . . (3,106) 659 - Equity in (income) loss of unconsolidated joint ventures.. . . (259) 1,340 - Extraordinary item (net of taxes). . . . . . . . . . . . . . . 984 36,285 - Minority interest. . . . . . . . . . . . . . . . . . . . . . . 3,700 (2,209) (819) Changes in current assets and liabilities: Accounts receivable . . . . . . . . . . . . . . . . . . . 363 (278) 6,324 Income tax receivable . . . . . . . . . . . . . . . . . . 8,143 15,592 - Prepaid expenses and other assets.. . . . . . . . . . . . (1,665) (1,126) 1,168 Accounts payable and accrued expenses.. . . . . . . . . . 28,527 3,203 10,272 ------------------- ----------- ----------- Net cash provided by operating activities.. . . . . . . . . . . . . 130,483 65,218 65,309 INVESTING ACTIVITIES: Purchase of property and equipment. . . . . . . . . . . . . . . . . (104,569) (94,996) (65,455) Net cash paid for acquisitions. . . . . . . . . . . . . . . . . . . (119,355) - - Purchase of short-term investments. . . . . . . . . . . . . . . . . (39,044) - - Proceeds from disposals of property and equipment.. . . . . . . . . 6,134 202 251 Investments in and advances to joint ventures . . . . . . . . . . . 196 (1,482) (2,628) Restricted cash.. . . . . . . . . . . . . . . . . . . . . . . . . . 2,559 44,861 (50,341) Deposits and other. . . . . . . . . . . . . . . . . . . . . . . . . (3,879) (601) (1,555) ------------------- ----------- ----------- Net cash used in investing activities.. . . . . . . . . . . . . . . (257,958) (52,016) (119,728) FINANCING ACTIVITIES: Proceeds from debt. . . . . . . . . . . . . . . . . . . . . . . . . 475,061 447,088 75,000 Principal payments on debt and cash paid to retire debt . . . . . . (258,079) (414,136) (17,823) Deferred financing costs. . . . . . . . . . . . . . . . . . . . . . (9,384) (13,497) (2,152) Proceeds from exercise of stock options and warrants. . . . . . . . 2,732 - 8 ------------------- ----------- ----------- Net cash provided by financing activities . . . . . . . . . . . . . 210,330 19,455 55,033 Net increase in cash and cash equivalents . . . . . . . . . . . . . 82,855 32,657 614 Cash and cash equivalents at beginning of year. . . . . . . . . . . 85,117 52,460 51,846 ------------------- ----------- ----------- Cash and cash equivalents at end of year. . . . . . . . . . . . . . $ 167,972 $ 85,117 $ 52,460 =================== =========== ===========
See notes to consolidated financial statements
ISLE OF CAPRI CASINOS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (IN THOUSANDS) Fiscal Year Ended ------------------- April 30, April 25, April 26, 2000 1999 1998 ------------------- ---------- ----------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash payments (receipts) for: Interest . . . . . . . . . . . . . . . . . . . . . . $ (1,933) $ 63,297 $ 50,479 Income taxes - net of refunds. . . . . . . . . . . . - 3,140 (4,840) SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Notes Payable and Debt issued for: Property and equipment.. . . . . . . . . . . . . . . 61 8,369 - Capital Contributions: Land . . . . . . . . . . . . . . . . . . . . . . . . - - 7,504 Property and equipment . . . . . . . . . . . . . . . - - 1,615 Other: Deferred financing costs funded through issuance of common stock . . . . . . . . . . . . . (1,933) - 500 Construction costs funded through accounts payable . - 2,401 1,614 Acquisitions of businesses: Fair value of assets acquired. . . . . . . . . . . . 496,417 - - Less fair value of liabilities assumed . . . . . . . (317,300) - - Less stock issued. . . . . . . . . . . . . . . . . . (59,762) - - Net cash payment . . . . . . . . . . . . . . . . . . 119,355 - -
See notes to consolidated financial statements ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Isle of Capri Casinos, Inc., (the "Company" or "Isle of Capri"), was incorporated as a Delaware corporation on February 14, 1990. The Company, through its subsidiaries, is engaged in the business of developing, owning and operating riverboat, dockside and land-based casinos and related facilities. The Company has licenses to conduct and currently conducts gaming operations in Biloxi, Vicksburg, Tunica, Natchez and Lula, Mississippi, in Bossier City and Lake Charles, Louisiana, in Bettendorf and Marquette, Iowa and in Black Hawk, Colorado through its subsidiaries. The consolidated financial statements of the Company include the accounts of Isle of Capri Casinos, Inc. and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as revenues and expenses during the reporting period. Actual amounts when ultimately realized could differ from those estimates. Fiscal Year End Effective April 27, 1997, the Company changed from an April 30 fiscal year end to a fiscal year ending on the last Sunday in April. This fiscal year creates more comparability of the Company's quarterly operations, by generally having an equal number of weeks (13) and week-end days (26) in each quarter. Periodically this system necessitates a 53 week year. Fiscal 2000 commenced on April 26, 1999 and ended April 30, 2000 and had 14 weeks in its 4th quarter. Cash Equivalents The Company considers all highly liquid investments with a maturity at the time of purchase of three months or less to be cash equivalents. Cash equivalents are placed primarily with a high-credit-quality financial institution. At April 30, 2000, cash equivalents were invested primarily in short-term commercial paper and U.S. Treasury Bills. The carrying amount of cash equivalents approximates fair value because of the short maturity of these instruments. Revenue and Promotional Allowances Casino revenue is the net win from gaming activities which is the difference between gaming wins and losses. Casino revenues are net of accruals for anticipated payouts of progressive electronic gaming device jackpots. Revenue does not include the retail amount of food, beverage and other items provided gratuitously to customers, which totaled $74.9 million, $49.7 million, and $37.0 million for the years ended April 30, 2000, April 25, 1999 and April 26, 1998, respectively. The estimated cost of providing such complimentary services, which is included in casino expense, was $52.7 million, $33.1 million and $32.6 million for the years ended April 30, 2000, April 25, 1999 and April 26, 1998, respectively. Advertising Costs Advertising costs are expensed as incurred. Advertising expense for the years ended April 30, 2000, April 25, 1999 and April 26, 1998 totaled $14.7 million, $10.8 million and $10.7 million, respectively. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Earnings per Common Share The following table sets forth the computation of basic and diluted earnings (loss) per share:
Fiscal Year Ended ------------------- April 30, April 25, April 26, 2000 1999 1998 ------------------- ----------- ---------- Numerator: Income before extraordinary item.. . . . . . . . . . . . . . . . $ 32,055 $ 12,109 $ 7,547 Extraordinary loss, net. . . . . . . . . . . . . . . . . . . . . (984) (36,285) - ------------------- ----------- ---------- Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . 31,071 (24,176) 7,547 Numerator for basic earnings (loss) per share - income (loss) available to common stockholders . . . . . . . . . . 31,071 (24,176) 7,547 Effect of diluted securities.. . . . . . . . . . . . . . . . . . - - - ------------------- ----------- ---------- Numerator for diluted earnings (loss) per share- income (loss) available to common stockholders after assumed conversions. . . . . . . . . . . . . . . . . . $ 31,071 $ (24,176) $ 7,547 =================== =========== ========== Denominator: Denominator for basic earnings (loss) per share - weighted - average shares . . . . . . . . . . . . . . . . . 26,327 23,569 23,455 Effect of dilutive securities Employee stock options and warrants . . . . . . . . . . . . 1,598 290 10 ------------------- ----------- ---------- Dilutive potential common shares.. . . . . . . . . . . . . . . . 1,598 290 10 ------------------- ----------- ---------- Denominator for diluted earnings (loss) per share - adjusted weighted - average shares and assumed conversions. 27,925 23,859 23,465 =================== =========== ========== BASIC EARNINGS (LOSS) PER SHARE Income before extraordinary item. . . . . . . . . . . . . . $ 1.22 $ 0.51 $ 0.32 Extraordinary loss, net . . . . . . . . . . . . . . . . . . (0.04) (1.54) - ------------------- ----------- ---------- Net income (loss).. . . . . . . . . . . . . . . . . . . . . $ 1.18 $ (1.03) $ 0.32 =================== =========== ========== DILUTED EARNINGS (LOSS) PER SHARE Income before extraordinary item. . . . . . . . . . . . . . $ 1.15 $ 0.51 $ 0.32 Extraordinary loss, net . . . . . . . . . . . . . . . . . . (0.04) (1.52) - ------------------- ----------- ---------- Net income (loss).. . . . . . . . . . . . . . . . . . . . . $ 1.11 $ (1.01) $ 0.32 =================== =========== ==========
Stock Options The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the market value of the shares at the date of grant. The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" in accounting for its stock option plans and accordingly, does not recognize compensation cost. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. PROPERTY AND EQUIPMENT Property and equipment consists of the following:
April 30, April 25, 2000 1999 --------------- ---------- (In thousands) Property and equipment: Land and land improvements. . . . . $ 114,626 $ 60,776 Leasehold improvements. . . . . . . 98,473 98,120 Buildings and improvements. . . . . 307,116 123,845 Riverboats and floating pavilions . 98,448 97,332 Furniture, fixtures, and equipment. 171,364 98,145 Construction in progress. . . . . . 53,565 42,966 --------------- ---------- 843,592 521,184 Less: accumulated depreciation. . . 144,346 110,008 --------------- ---------- $ 699,246 $ 411,176 =============== ==========
The allocation of the purchase price of the Lady Luck and BRDC acquisitions is tentative pending completion of inventories on the facilities and equipment acquired. The allocation may change with the completion of these inventories. Property and equipment is recorded at cost. Depreciation is computed using the straight-line method over the following estimated useful lives:
YEARS ------- Slot machines. . . . . . . . . . . 3 Furniture, fixtures, and equipment 5-10 Leasehold improvements . . . . . . 10-39.5 Riverboats and floating pavilions. 25 Buildings and improvements . . . . 39.5
Interest capitalized during the fiscal years ended April 30, 2000, April 25, 1999, and April 26, 1998 totaled $2.4 million, $7.2 million and $2.7 million, respectively. Depreciation expense for the fiscal years ended April 30, 2000, April 25, 1999 and April 26, 1998 totaled $35.1 million, $30.4 million and $27.1 million, respectively. Effective April 26, 1999, Isle of Capri increased its estimate of the useful lives of all land-based buildings and improvements from 25 years to 39.5 years to more appropriately reflect the expected useful lives of those assets. Isle of Capri also reduced its estimate of the useful lives of slot machines from 5 years to 3 years due to technological changes. For the year ended April 30, 2000, the effect of these two changes was immaterial. 3. OTHER ASSETS Licenses and other intangible assets Licenses and other intangible assets represent the license value attributed to the Louisiana gaming licenses acquired through the Company's acquisition of St. Charles Gaming Company, Inc. ("SCGC"), Grand Palais Riverboat, Inc. ("GPRI") and Louisiana Riverboat Gaming Partnership ("LRGP") and the value of the Lady Luck trademarks, player database and workforce acquired in the acquisition of Lady Luck Gaming Corporation. These assets are being amortized over a twenty-five-year period using the straight-line method. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. OTHER ASSETS (CONTINUED) Long-lived Assets The Company periodically evaluates the carrying value of long-lived assets to be held and used, including goodwill in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived assets used in operations, including related goodwill when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Deferred Financing Costs The costs of issuing long-term debt are capitalized and are being amortized using the effective interest method over the term of the related debt. Berthing, Concession, and Leasehold Rights Berthing, concession and leasehold rights are recorded at cost and are being amortized over approximately twenty years using the straight-line method. Goodwill Goodwill reflects the excess purchase price the Company paid in acquiring the net identifiable tangible and intangible assets of SCGC, GPRI, LRGP, Lady Luck Gaming Corporation and BRDC, Inc. Goodwill is being amortized over a twenty-five-year period using the straight-line method. Restricted cash Restricted cash primarily represents cash restricted for a certificate of deposit in the amount of $1.5 million for the Greek Lawsuit (see footnote 12 for further details), deposit of $1.1 million held in trust to secure the letter of credit for Isle-Black Hawk (see footnote 9 for further details), gaming deposits totaling $1.1 million, workers' compensation in the amount of $0.3 million, and various other deposits totaling $1.6 million. 4. SHORT-TERM INVESTMENTS At April 30, 2000 short-term investments consist primarily of short-term commercial paper and certificates of deposits. The carrying amount of short-term investments approximates fair value because of the short maturity of these instruments. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. ISLE OF CAPRI BLACK HAWK, L.L.C. On April 25, 1997, a wholly-owned subsidiary of the Company, Casino America of Colorado, formed Isle-Black Hawk, a limited liability company, with Blackhawk Gold, Ltd., a wholly-owned subsidiary of Nevada Gold & Casinos, Inc. Isle-Black Hawk owns a casino in Black Hawk, Colorado, which opened on December 30, 1998. Isle-Black Hawk has begun to construct a hotel containing approximately 237 rooms at the site of the Isle-Black Hawk. The Company has a 57% ownership interest in Isle-Black Hawk. Prior to December 30, 1998, Isle-Black Hawk was a development stage company. 6. CAPRI CRUISES, L.L.C. On April 20, 1998, the Company signed an agreement with Commodore Holdings Limited, parent company of Commodore Cruise Line, to create a joint venture named Capri Cruises to operate cruise ships in strategic markets. Cruise operations began in early June 1998. As of April 30, 2000, the Company had invested $3.0 million into this 50/50 unconsolidated joint venture, which is operating one cruise ship from the Port of New Orleans. 7. MERGERS AND ACQUISITIONS Isle of Capri-Tunica In March 1999, the Company acquired the original Harrah's casino facility located in Tunica County, Mississippi for $9.5 million. The Company invested an additional $24.0 million to equip, renovate and open this facility as an Isle of Capri casino. The Company opened the Isle-Tunica on July 26, 1999 with approximately 875 slot machines, 15 table games and its two trademark restaurants. The Company also plans to invest an additional approximately $44.0 million to construct an on-site hotel with up to 227 rooms and two live entertainment theaters with combined seating for 1,800 people. Construction of the hotel is currently underway. Lady Luck Gaming Corporation On March 2, 2000 the Company acquired Lady Luck Gaming Corporation ("Lady Luck") in a merger transaction pursuant to which Lady Luck became a wholly-owned subsidiary of the Company. Lady Luck's common stockholders received cash in the amount of $12.00 per share for an aggregate share consideration of approximately $59 million. Lady Luck operated dockside riverboat casinos and hotels in Lula and Natchez, Mississippi; owned a 50% interest in the Lady Luck Casino and Hotel in Bettendorf, Iowa; and on October 29, 1999, acquired the Miss Marquette Casino in Marquette, Iowa for $41.7 million. In November 1999, the Company made a secured loan of approximately $21.0 million to Lady Luck in order to assist Lady Luck in consummating its acquisition of the Miss Marquette riverboat in Marquette, Iowa. The Company also completed the acquisition of certain intellectual property for $31.0 million contemporaneously with the merger. The Company expects to complete the acquisition of the Las Vegas casino and hotel upon receipt of regulatory approval in Nevada. The acquisition price for the Las Vegas facility is $14.5 million. BRDC, Inc. On March 2, 2000 the Company merged with BRDC, Inc. ("BRDC") which owned a 50% interest in Lady Luck's Bettendorf, Iowa facility that was not owned by Lady Luck and related real estate in exchange for 6.3 million shares of the Company's common stock, subject to post-closing adjustment in certain circumstances totaling approximately $153,000. BRDC was owned by members of the family of Bernard Goldstein, the Company's Chairman and Chief Executive Officer, including Robert Goldstein, a member of the Company's board of directors. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. MERGERS AND ACQUISITIONS (CONTINUED) The operations of Lady Luck and BRDC are included in the consolidated statements of operations from the date of acquisition. The transactions were accounted for as a purchase and the excess cost over fair value of the net assets acquired is being amortized on a straight-line basis over a twenty-five year period. The allocation of the purchase price of the Lady Luck and BRDC acquisitions is tentative pending completion of inventories on the facilities and equipment acquired. The allocation may change with the completion of these inventories. The pro forma unaudited results of operations for the years ended April 30, 2000, and April 25, 1999, assuming the purchase of Lady Luck and BRDC had been consummated as of April 27, 1998, follows:
April 30, April 25, 2000 1999 ----------- ----------- (In thousands, except per share data) Revenues. . . . . . . . . . . . . . $ 910,698 $ 733,879 Income before extraordinary item. . 13,820 6,580 Net income. . . . . . . . . . . . . 12,836 (29,705) Income per common share before extraordinary item: Basic . . . . . . . . . . . . . 0.52 0.22 Diluted . . . . . . . . . . . . 0.49 0.22 Net income (loss) per common share: Basic. . . . . . . . . . . . . 0.49 (0.98) Diluted. . . . . . . . . . . . 0.46 (0.97)
ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash equivalents - The carrying amounts approximate fair value because of the short maturity of these instruments. Short-term investments - The carrying amounts approximate fair value because of the short maturity of these instruments. Restricted cash - The carrying amounts approximate fair value because of the short maturity of these instruments. Long-term debt - The fair value of the company's long-term debt is estimated based on the quoted market price of the underlying debt issue or the discounted cash flow of future payments utilizing current rates available to the company for debt of similar remaining maturities. Debt obligations with a short remaining maturity are valued at the carrying amount. The estimated carrying amounts and fair values of the Company's financial instruments are as follows:
APRIL 30, 2000 APRIL 25, 1999 ---------------- ---------------- CARRYING CARRYING AMOUNT FAIR VALUE AMOUNT FAIR VALUE ------------ ---------- ----------- ------------ (IN THOUSANDS) ---------------- FINANCIAL ASSETS: Cash equivalents. . . . . $ 167,972 $ 167,972 $ 85,117 $ 85,117 Short-term investments. . 39,044 39,044 - - Restricted cash.. . . . . 5,556 5,556 5,480 5,480 FINANCIAL LIABILITIES: First mortage notes . . . $ 75,000 $ 80,625 $ 75,000 $ 81,375 Other long-term debt. . . 497,901 497,901 67,756 67,756 Senior subordinated notes 390,000 349,050 390,000 390,000
ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. LONG-TERM DEBT
April 30, April 25, 2000 1999 --------------- ---------- Long-term debt consists of the following: (In thousands) 8 3/4 % senior subordinated notes (described below) . . . . . . . . . . . . . . . . . $ 390,000 $ 390,000 Variable rate Term Loan (7.82% at April 30, 2000), due in quarterly installments ranging from $833,333 to $4,166,667, excluding interest, through April 2004. . . 475,000 50,000 12 1/2 % note payable, due in monthly installments of $125,000, including interest, beginning October 1997 through October 2005. . . . . . . . . . . . . . . . . . . 5,818 6,527 8 % note payable, due in monthly installments of $66,667, including interest, through July 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,587 2,283 8 % note payable, due in monthly installments of $11,365, including interest, through December 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,213 1,250 11% note payable, issued by Isle of Capri Black Hawk, L.L.C., due March 2001; non-recourse to Isle of Capri Casinos, Inc . . . . . . . . . . . . . . . . . . . 768 1,522 13% First Mortgage Notes, issued by Isle of Capri Black Hawk, L.L.C., due August 2004; non-recourse to Isle of Capri Casinos, Inc. . . . . . . . . . . . . 75,000 75,000 Variable rate TIF Bonds due to City of Bettendorf, due in quarterly installments of various amounts, not including interest, Tax Incremental Financing Payable - Interest of approximately 6.7% payments made through incremental property taxes to the City until paid in full, maturity no later than 2011. . . . . . . . 7,184 - Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,331 6,174 --------------- ---------- 962,901 532,756 Less: current maturities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,400 5,883 --------------- ---------- Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 945,501 $ 526,873 =============== ==========
On April 23, 1999, the Company issued $390,000,000 of 8 3/4% Senior Subordinated Notes due 2009 (the "Senior Subordinated Notes"). The Senior Subordinated Notes are guaranteed by all of the Company's significant subsidiaries, excluding the subsidiaries that own and operate the Isle-Black Hawk. Interest on the Senior Subordinated Notes is payable semi-annually on each April 15 and October 15 through maturity. The Senior Subordinated Notes are redeemable, in whole or in part, at the Company's option at any time on or after April 15, 2004 at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest to the applicable redemption date, if redeemed during the 12-month period beginning on April 15 of the years indicated below:
Year Percentage ---- ----------- 2004.. . . . . . . . 104.375% 2005.. . . . . . . . 102.917% 2006.. . . . . . . . 101.458% 2007 and thereafter. 100.000%
The Company issued the Senior Subordinated Notes under an indenture between the Company, the subsidiary guarantors and a trustee. The indenture, among other things, restricts the ability of the Company and its restricted subsidiaries to borrow money, make restricted payments, use assets as security in other transactions, enter into transactions with affiliates, or pay dividends on or repurchase its stock or its restricted subsidiaries' stock. The Company is also restricted in its ability to issue and sell capital stock of its subsidiaries and in its ability to sell assets in excess of specified amounts or merge with or into other companies. A substantial part of the proceeds from the Senior Subordinated Notes was used to prepay long-term debt, including all of the $315,000,000 of 12 1/2 % Senior Secured Notes due 2003. The proceeds were also used to pay prepayment premiums, accrued interest and other transaction fees and costs. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. LONG-TERM DEBT (CONTINUED) On March 2, 2000 Isle of Capri Casinos, Inc. amended and restated its Senior Credit Facility in connection with the acquisition of Lady Luck and BRDC, as well as, to provide financing for the pending acquisitions of the Flamingo Hilton Riverboat Casino in Kansas City, Missouri and of Davis Gaming Boonville, Inc. The previous $175.0 million Senior Credit Facility was expanded under the amended and restated agreement to a $600.0 million Senior Credit Facility, including a $125.0 million revolver, which was undrawn as of April 30, 2000. On March 2, 2000, Isle of Capri Casinos, Inc. drew $475.0 million under its Amended and Restated Senior Credit Facility in connection with the acquisition of Lady Luck and BRDC. A portion of the initial $475.0 million draw was also used to repay outstanding amounts under the existing credit facility and to fund the redemption of Lady Luck notes and preferred stock. The Amended and Restated Senior Credit Facility is secured by liens on substantially all of the Company's assets and guaranteed by all of its significant restricted subsidiaries, excluding Casino America of Colorado, Inc., Isle-Black Hawk, and their subsidiaries. Isle of Capri must repay all amounts borrowed under its Amended and Restated Senior Credit Facility by March 2007. Isle of Capri is required to make quarterly principal payments on the $475.0 million term loan portion of its Senior Credit Facility which began in March 2000. Such payments are initially $3.4 million per quarter and will increase by $1.25 million per quarter in July of each year that the term loan is outstanding. In addition, Isle of Capri will be required to make substantial quarterly interest payments on the outstanding balance of its Amended and Restated Senior Credit Facility and interest payments of $17.1 million semi-annually on its 8 3/4% Senior Subordinated Notes. On August 20, 1997, Isle-Black Hawk issued $75 million of 13% First Mortgage Notes due 2004 with Contingent Interest, which is non-recourse debt to the Company. Interest on the First Mortgage Notes is payable semi-annually on February 28 and August 31 of each year, commencing February 28, 1998. Additionally, contingent interest is payable on the First Mortgage Notes on each interest payment date, in an aggregate principal amount of 5% of the Consolidated Cash Flow (as defined in the Indenture governing the First Mortgage Notes). In February 2000, Isle-Black Hawk made its first contingent interest payment totaling $1.0 million as required by the Isle-Black Hawk's First Mortgage Notes. The amount of contingent interest expense recorded for the twelve months ended April 30, 2000, is $1,093,000. The First Mortgage Notes are redeemable at the option of Isle-Black Hawk, in whole or in part, at any time on or after August 1, 2001 at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest to the redemption date, if redeemed during the 12-month period beginning on August 31 of the years indicated below:
Year Percentage ---- ----------- 2001.. . . . . . . . 106.500% 2002.. . . . . . . . 103.200% 2003.. . . . . . . . 100.000% 2004 and thereafter. 100.000%
Beginning December 1999, Isle-Black Hawk is required to offer to purchase, at the price of 101% of the aggregate principal amount thereof, the maximum principal amount of the First Mortgage Notes that may be purchased with 50% of the Isle-Black Hawk's excess cash flow, as defined (See Subsequent Events). Isle of Capri has $4.5 million available in bank lines of credit other than the Senior Credit Facility. As of April 30, 2000, Isle of Capri had no outstanding balances under these lines of credit. Isle-Black Hawk obtained a letter of credit as a requirement to obtain a building permit from the City of Black Hawk (the "City"). The letter of credit, totaling $2.1 million, can be drawn upon by the City if for any reason Isle-Black Hawk fails to complete the hotel project. The letter of credit is secured by a deposit held in trust of $1.1 million, which was funded by Isle of Capri, and the balance is secured by Isle of Capri's open line of credit with the bank. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. LONG-TERM DEBT (CONTINUED) As part of the City of Bettendorf Development Agreement dated June 17, 1997, the City issued $9,500,000 in tax incremental financing bonds ("TIF Bonds"), $7,500,000 of which was used by Isle - Bettendorf to construct an overpass, parking garage, related site improvements and pay for disruption damages caused by construction of the overpass. To enable financing of the City's obligations, Isle - Bettendorf will pay incremental property taxes on the developed property assessed at a valuation of not less than $32,000,000 until the TIF Bonds mature. Additionally, the TIF Bonds will also be repaid from the incremental taxes on the developed property within the defined "TIF District" which includes Isle - Bettendorf and over 100 other tax paying entities. As the TIF District will repay the TIF Bonds, Isle - Bettendorf may not be required to fully repay the $7,500,000. In the event that the taxes generated by the project and other qualifying developments in the redevelopment district do not fund the repayment of the total TIF Bonds prior to their scheduled maturity, Isle - Bettendorf will pay the City $0.25 per person for each person entering the boat until the remaining balance has been repaid. Substantially all of Isle of Capri's assets are pledged as collateral for long-term debt under the Amended and Restated Senior Credit Facility. At April 30, 2000, Isle of Capri was in compliance with all debt covenants. The aggregate principal payments due on total long-term debt over the next five fiscal years and thereafter are as follows:
Fiscal Year Ending (In thousands) ------------------- 2001. . . . . . . . $ 17,400 2002. . . . . . . . 21,802 2003. . . . . . . . 26,111 2004. . . . . . . . 31,071 2005. . . . . . . . 36,281 Thereafter. . . . . 830,236 -------- $962,901 ========
ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. COMMITMENTS The Company has an agreement with the Biloxi Port Commission which provides the Company with certain docking rights. This agreement expires in July 2004, with seven renewal options of five years each. Annual rentals are the greater of $500,000 or 1% of gross gaming revenue, as defined. Annual rent during each renewal term is adjusted for increases in the Consumer Price Index, limited to 6% for each renewal period. In addition, the Company leases certain land, buildings, and other improvements from the City of Biloxi under a lease and concession agreement. This agreement expires in July 2004, with options to renew for six additional terms of five years each. Annual rent is $530,000 plus 3% of gross gaming revenue, as defined, in excess of $25.0 million. Annual rent during each renewal term is adjusted for increases in the Consumer Price Index, limited to 6% for each renewal period. In April 1994, the Company entered an Addendum to the lease with the City of Biloxi, which requires the Company to pay 4% of gross non-gaming revenues received as defined, net of sales tax, comps and discounts. Additional rent will be due to the City of Biloxi for the amount of any increase from and after January 1, 2016 in the rent due to the State Institutions of Higher Learning under a lease between the City of Biloxi and the State Institutions of Higher Learning (the "IHL Lease") and for any increases in certain tidelands leases between the City of Biloxi and the State of Mississippi. In April 1994, in connection with the construction of a hotel, the Company entered a lease for additional land. The Company first acquired the leasehold interest of Sea Harvest, Inc., the original lessee, for consideration of $8,000 per month for a period of ten years. The Company's lease is with the City of Biloxi, Mississippi, for an initial term of 25 years, with options to renew for six additional terms of 10 years each and a final option period with a termination date commensurate with the termination date of the IHL Lease, but in no event later than December 31, 2085. Annual rent (which includes payments to be made pursuant to the purchase of a related leasehold interest) is $444,400, plus 4% of gross non-gaming revenue, as defined. The annual rent is adjusted after each five-year period based on increases in the Consumer Price Index, limited to a 10% increase in any five-year period. The annual rent will increase 10 years after the commencement of payments pursuant to a termination of lease and settlement agreement, to an amount equal to the sum of annual rent as if it had been $500,000 annually plus adjustments thereto based on the Consumer Price Index. In February 1995, in conjunction with its planned Cripple Creek Colorado operation, the Company entered into a land lease. The lease has an initial term of 25 years, with options to renew for seven additional terms of 10 years each. The base rent is $250,000 per year increased by $10,000 each year until the annual rent is $300,000. After seven years, and every two years thereafter, the annual rent is adjusted based on increases in the Consumer Price Index, limited to a 4% increase in any two-year period. The Company leases approximately 16.25 acres of land in Calcasieu Parish, Louisiana for use in connection with the Isle-Lake Charles. The initial term of this lease expires in March 2005 and we have the option to renew it for sixteen additional terms of five years each. Rent under the Isle-Lake Charles lease is currently $1.2 million per year and is subject to increases based on the Consumer Price Index and construction of hotel facilities on the property. In March 1999, the Company entered into a lease for land in Tunica County, Mississippi for use in connection with the Isle-Tunica. The initial lease term is five years with the option to renew the lease for seven additional terms of five years. Base rent for each lease year equals the greater of 2% of gross gaming revenue or $800,000. Once gross gaming revenue exceeds $40.0 million during any lease year, the base rent in the following months of such year shall be increased by an amount equal to 2% of such excess. The landlord is entitled to receive additional rent based on excess available cash, as defined in the lease. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. COMMITMENTS (CONTINUED) The Company leases riverfront land from the City of Marquette, Iowa, under a lease agreement. This agreement expires in December 2019. Annual rent is $180,000 payable in equal monthly installments due on the first of each month. In addition to the base rent, the Company must also pay the following amounts: (1) $0.50 per customer per day due the 15th day following each month and (2) 2 1/2% of net gambling receipts, as defined, from $20 million to $40 million, plus 5% of net gambling receipts, as defined, from $40 million to $60 million, plus 7 1/2% of net gambling receipts, as defined, in excess of $60 million, due annually. The Company leases approximately 1,000 acres of land in Coahoma County, Mississippi and utilizes approximately 50 acres in connection with the operations of Isle-Lula. Unless terminated by the Company at an earlier date, the lease expires in 2033. Rent under the lease is currently 5 1/2% of gross gaming revenue as established by the Mississippi Gaming Commission, as well as $3,333 per month for the Rhythm & Blues hotel. The Company also leases the property in Helena, Arkansas, upon which the Company's off-site hotel is located. Rent under that lease is currently 3% of the revenue from the hotel. Through numerous lease agreements, the Company leases approximately 64 acres of land in Natchez, Mississippi, which is used in connection with the operation of Isle - Natchez. Unless terminated by the Company at an earlier date, the lease expiration dates vary from 2001 - 2037. Rents under the leases currently total approximately $60,000 per month. The Company also leases approximately 7.5 acres of land, which is utilized for parking at the facility. Future minimum payments under capital leases and noncancelable operating leases with initial terms of one year or more consisted of the following at April 30, 2000:
Capital Leases Operating Leases ---------------- ----------------- (In thousands) 2001 . . . . . . . . . . . . . . . . . . . . $ 322 $ 10,552 2002 . . . . . . . . . . . . . . . . . . . . 324 8,958 2003 . . . . . . . . . . . . . . . . . . . . 331 6,431 2004 . . . . . . . . . . . . . . . . . . . . 313 4,707 2005 . . . . . . . . . . . . . . . . . . . . 317 2,730 Thereafter . . . . . . . . . . . . . . . . . 5,264 66,536 ---------------- ----------------- Total minimum lease payments . . . . . . . . $ 6,871 $ 99,914 ================= Amounts representing interest. . . . . . . . (4,354) ---------------- Present value of net minimum lease payments. $ 2,517 ================
Rent expense for operating leases was approximately $19.6 million, $10.8 million and $6.8 million for the years ended April 30, 2000, April 25, 1999, and April 26, 1998, respectively. Such amounts include contingent rentals of $3.0 million $2.6 million and $2.7 million for the years ended April 30, 2000, April 25, 1999, and April 26, 1998, respectively. 11. RELATED PARTY TRANSACTIONS On January 2, 1998, the Company acquired approximately 0.7 acres of property (the "Acquired Property") contiguous to the property being developed by ICBH which was to be used for the expansion of the entrance and the signage of the Isle-Black Hawk. On January 2, 1998, ICBH, as Lessee, entered into a lease agreement with the Company for the Acquired Property and will utilize the Acquired Property in developing the Isle-Black Hawk. The lease payment consisted of $102,000 paid upon the inception of the lease and $17,000 per month, commencing July 15, 1998, and continuing until December 31, 2002, and thereafter on a year to year basis. During the term of the lease, ICBH purchased the property for $1.5 million plus all interest and out-of-pocket costs that the Company incurred in connection with the purchase and ownership of the land, less payments made by ICBH, as lessee. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. RELATED PARTY TRANSACTIONS (CONTINUED) The Company provides management services to all of its wholly-owned riverboat casino entities, pursuant to respective management agreements. Management fees for these services are based upon a percentage of each entity's revenue and operating income, as defined in the management agreements. The revenue under the management agreements is eliminated through consolidation. The Company also leases approximately 8 acres of land from an entity owned by members of Bernard Goldstein's family, including Robert Goldstein, which we utilize for parking. The initial term of the lease expires 60 days after written notice is given to either party and rent under the lease is currently $20,000 per month. 12. CONTINGENCIES One of the Company's subsidiaries has been named, along with numerous manufacturers, distributors and gaming operators, including many of the country's largest gaming operators, in a consolidated class action lawsuit pending in Las Vegas, Nevada. These gaming industry defendants are alleged to have violated the Racketeer Influenced and Corrupt Organizations Act by engaging in a course of fraudulent and misleading conduct intended to induce people to play their gaming machines based upon a false belief concerning how those gaming machines actually operate and the extent to which there is actually an opportunity to win on any given play. The suit seeks unspecified compensatory and punitive damages. A motion for certification of the class is currently pending before the court and no discovery as to the merits of the alleged claims has begun. The Company is unable at this time to determine what effect, if any, the suit would have on its financial position or results of operations. However, the gaming industry defendants are committed to defend vigorously all claims asserted in the consolidated action. In November 1999, the Isle-Vicksburg was named as a defendant in an action brought by individuals who own property adjacent to the Big Black River in the eastern part of Warren County, Mississippi and several other parties. Also named as defendants in the action are two other operators in the Vicksburg market and one of the largest banks in the State of Mississippi. The complaint alleges that the defendants entered into an agreement to conduct a campaign opposing a gaming application for a site on the Big Black River. The plaintiffs allege that because of this agreement trade was improperly restrained and competition in the gaming business was reduced. The plaintiffs further allege that the defendants conspired for the purpose of injuring the plaintiffs' property rights. The Company has settled this lawsuit. In May 1998, the Company was named as a defendant in an action brought by several persons who had a contractual right to acquire property in Cripple Creek, Colorado which they sold to one of the Company's subsidiaries in 1995. The plaintiffs allege that the Company breached its purported agreement to construct a casino facility on the property by the end of 1995. In December 1998, the Company's motion to dismiss the complaint was granted by the United States District Court in Denver, Colorado. The plaintiffs have appealed this decision to the Tenth Circuit Court of Appeals. The Company intends to vigorously defend all claims and allegations in the action. In August 1997, a lawsuit was filed which seeks to nullify a contract to which Louisiana Riverboat Gaming Partnership is a party. Pursuant to the contract, Louisiana Riverboat Gaming Partnership pays a fixed amount plus a percentage of revenue to various local governmental entities, including the City of Bossier and the Bossier Parish School Board, in lieu of payment of a per-passenger boarding fee. Summary judgment in favor of Louisiana Riverboat Gaming Partnership was granted on June 4, 1998. That judgment was not appealed and is now final. On June 11, 1998, a similar suit was filed and judgment was rendered in the Company's favor on September 16, 1999 by the lower court. The case has been appealed, and is currently pending. The Company intends to vigorously defend this suit. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12. CONTINGENCIES (CONTINUED) Lady Luck Gaming Corporation ("Lady Luck") - ------------------------------------------ Shareholder Class Action Lawsuits Lady Luck has been named as a defendant in a purported shareholder class action lawsuit filed alleging violations by Lady Luck of the Securities Act of 1933, as amended (the "Securities Act") and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for alleged material misrepresentations and omissions in connection with Lady Luck's 1993 prospectus and initial public offering of Common Stock. The complaint seeks, among other things, injunctive relief, rescission and unspecified compensatory damages. While the outcome of this matter cannot presently be determined, the Company intends to vigorously defend the claims asserted in this action. Greek Lawsuit Lady Luck and particular joint venture partners are defendants in a lawsuit brought by the country of Greece and its Minister of Tourism before the Greek Multi-Member Court of First Instance. The action alleges that the defendants failed to make specified payments in connection with the gaming license bid process for Patras, Greece. The payments the Company is alleged to have been required to make aggregate approximately 2.1 billion drachma (which was approximately $5.7 million as of April 30, 2000 based on published exchange rates). Although it is difficult to determine the damages being sought from the lawsuit, the action may seek damages up to that aggregate amount plus interest. The case is still in its preliminary stage and its outcome cannot be predicted with any degree of certainty; however, the Company intends to vigorously defend the claims asserted in this action. The Company is engaged in various other litigation matters and has a number of unresolved claims. Although the ultimate liability of this litigation and these claims cannot be determined at this time, the Company believes that they will not have a material adverse effect on the Company's consolidated financial position or results of operations. Environmental Matters - --------------------- The Company is subject to certain federal, state and local environmental protection, health and safety laws, regulations and ordinances that apply to businesses generally, and is subject to cleanup requirements at certain of its facilities as a result thereof. The Company has not made, and does not anticipate making, material expenditures or incurring delays with respect to environmental remediation or protection. However, in part because the Company's present and future development sites have, in some cases, been used as manufacturing facilities or other facilities that generate materials that are required to be remediated under environmental laws and regulations, there can be no guarantee that additional pre-existing conditions will not be discovered and that the Company will not experience material liabilities or delays. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. INCOME TAXES Income tax provision (benefit) consists of the following:
FISCAL YEAR ENDED ------------------- APRIL 30, APRIL 25, APRIL 26, 2000 1999 1998 ----------- ----------- ---------- (IN THOUSANDS) Current: Federal. . . . . $ 6,891 $ (485) $ 1,131 State. . . . . . 538 485 1,063 ----------- ----------- ---------- 7,429 - 2,194 Deferred: Federal. . . . . 15,928 (8,558) 4,841 State. . . . . . 1,482 795 462 ----------- ----------- ---------- 17,410 (7,763) 5,303 ----------- ----------- ---------- 24,839 (7,763) 7,497 Extraordinary Benefit (634) (19,537) - ----------- ----------- ---------- $ 25,473 $ 11,774 $ 7,497 =========== =========== ==========
A reconciliation of income tax provision (benefit) to the statutory corporate federal tax rate of 35% is as follows:
FISCAL YEAR ENDED APRIL 30, APRIL 25, APRIL 26, 2000 1999 1998 ---------- ----------- ------------- (IN THOUSANDS) Statutory tax provision (benefit) $ 19,569 $ (11,178) $ 5,265 Effects of : State taxes. . . . . . . . . 2,021 591 991 Goodwill . . . . . . . . . . 1,556 1,185 1,327 Valuation allowance. . . . . - - - Other--net . . . . . . . . . 1,693 1,639 (86) ---------- ----------- ----------- $ 24,839 $ (7,763) $ 7,497 ========== =========== ===========
ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. INCOME TAXES (CONTINUED) Significant components of the Company's net deferred income tax liability are as follows:
FISCAL YEAR ENDED ------------------- APRIL 30, APRIL 25, 2000 1999 ----------- ----------- (IN THOUSANDS) Deferred tax liabilities: Property and equipment. . . . . . . . $ 81,072 $ 28,996 Other . . . . . . . . . . . . . . . . 690 1,290 ----------- ----------- Total deferred tax liabilities . . . . . . 81,762 30,286 Deferred tax assets: Dividends . . . . . . . . . . . . . . 351 258 Write-down of assets held for sale. . 20,841 7,440 Preopening expenses . . . . . . . . . (1,522) (1,012) Accrued expenses. . . . . . . . . . . 9,148 5,035 Charitable contribution carryover . . 926 433 Alternative minimum tax credit. . . . 2,181 4,732 Net operating losses. . . . . . . . . 43,319 21,797 Other . . . . . . . . . . . . . . . . 4,893 (518) ----------- ----------- Total deferred tax assets. . . . . . . . . 80,137 38,165 Valuation allowance on deferred tax assets (8,971) (7,884) ------------ ---------- Net deferred tax assets. . . . . . . . . . 71,166 30,281 ------------ ---------- Net deferred tax liabilities . . . . . . . $ 10,596 $ 5 ============ ==========
At April 30, 2000, the Company had alternative minimum tax credits which can be carried forward indefinitely to reduce future regular tax liabilities. Additionally, as of April 30, 2000, the Company has federal net operating loss carryforwards of $104.1 million for income tax purposes, with expiration dates from 2008 to 2019. Approximately $103.4 million of net operating losses are subject to limitation under the income tax regulations, which may limit the amount ultimately utilized. The utilization of pre-acquisition net operating losses resulted in a reduction to goodwill of $5.1 million in fiscal 1999. 14. COMMON STOCK Stock-based compensation. Under the Company's 1992 and 1993 Stock Option Plans, as amended, a maximum of 1,058,750 and 4,650,000 options, respectively, may be granted to directors, officers and employees. The plans provide for the issuance of incentive stock options and nonqualified options which have a maximum term of 10 years and are, generally, exercisable in yearly installments ranging from 20% to 25%, commencing one year after the date of grant. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. COMMON STOCK (CONTINUED) Stock options outstanding are as follows:
WEIGHTED WEIGHTED AVERAGE AVERAGE 2000 EXERCISE 1999 EXERCISE 1998 OPTIONS PRICE OPTIONS PRICE OPTIONS ---------- --------- ---------- --------- ---------- Outstanding options at beginning of fiscal year. . . . . . . . . . . . . 3,959,487 $ 4.48 2,718,199 $ 5.24 1,980,138 Options granted . . . . . . . . . . . . . 518,200 10.25 1,342,500 3.05 1,096,500 Options exercised.. . . . . . . . . . . . (380,989) 4.11 - - (8,438) Options canceled. . . . . . . . . . . . . (176,200) 4.49 (101,212) 6.10 (350,001) ---------- ---------- ---------- Outstanding options at end of fiscal year 3,920,498 $ 5.29 3,959,487 $ 4.48 2,718,199 ========== ========== ==========
Weighted average fair value of options granted during fiscal 2000 and 1999 was $6.78 and $2.18, respectively. The following table summarizes information about stock options outstanding at April 30, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------- ------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED RANGES OF NUMBER REMAINING AVERAGE NUMBER AVERAGE EXERCISE PRICES. OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE - ---------------- ----------- ------------------- --------------- ------------- -------------- $.89 - $5.70 . . 2,750,298 7.38 years $ 3.37 696,308 $ 3.78 5.88 - 11.25 . . 932,200 7.54 years 8.73 282,769 7.28 11.56 - 18.00. . 238,000 3.52 years 13.97 238,000 13.97 ----------- ------------- -------------- $.89 - $18.00. . 3,920,498 7.19 years $ 5.29 1,217,077 $ 6.58 =========== ============= ==============
Pro forma information regarding net income and earnings per share is required by Statement of Financial Accounting Standard No. 123, Accounting for Stock-based Compensation. Had compensation costs for the Company's two stock option plans been determined based on the fair value at the grant dates for awards in fiscal years 2000, 1999 and 1998 consistent with the provisions of SFAS 123, the Company's net earnings and earnings per share would have been reduced to the pro forma amounts disclosed below:
Fiscal Year Ended April 30, April 25, April 26, 2000 1999 1998 ---------- ---------- --------- (In thousands, except per share data) NET INCOME (LOSS) As reported . . . . . . . . . . $ 31,071 ($24,176) $ 7,547 Pro forma . . . . . . . . . . . $ 29,055 ($25,153) $ 6,798 EARNINGS (LOSS) PER COMMON SHARE Basic As reported.. . . . . . . . . . $ 1.18 ($1.03) $ 0.32 Pro forma . . . . . . . . . . . $ 1.10 ($1.07) $ 0.29 Diluted As reported.. . . . . . . . . . $ 1.11 ($1.01) $ 0.32 Pro forma . . . . . . . . . . . $ 1.04 ($1.05) $ 0.29
ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. COMMON STOCK (CONTINUED) The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants in fiscal 2000, 1999 and 1998: options vest at 20% per year for five years; dividend yield of 0%; weighted average expected volatility of .70, .70, and .74, respectively; risk-free interest rate of 5.8%, 5.2% and 5.3%, respectively; and expected lives of 6 years. The pro forma effect on net income (loss) for fiscal 2000, 1999 and 1998 is not representative of the pro forma effect on net income for future years because it does not take into account pro forma compensation expense related to grants made prior to fiscal 1996 or the potential for issuance of additional stock options in future years. Warrants The Company has the following outstanding warrants:
NUMBER OF --------- EXERCISE DATE ISSUED EXPIRATION DATE WARRANTS SHARES PRICE - ----------- --------------- --------- ------- --------- June 1995 . June 9, 2001 1 416,667 $ 12.00 May 1996. . May 3, 2001 1 12,500 $ 5.88 May 1996. . May 3, 2001 380,599 380,599 $ 10.00 May 1996. . May 3, 2001 1 416,667 $ 12.00 August 1996 August 6, 2001 500,000 500,000 $ 10.50
15. STOCKHOLDER RIGHTS PLAN In February 1997, the Company adopted a Stockholder Rights Plan. The Plan is designed to preserve the long-term value of the shareholders' investment in the Company. Under the Plan, each shareholder will receive a distribution of one Right for each share of the Company's outstanding common stock. The Rights were distributed to shareholders of record on March 3, 1997 and will expire ten years thereafter. Each right entitles the holder to purchase one one-thousandth (1/1,000) of a share of a new series of participating preferred stock at an initial exercise price of $12.50. Initially the rights are represented by the Company's common stock certificates and are not exercisable. The rights become exercisable shortly after a person or group acquires beneficial ownership of 15% or more of the Company or publicly announces its intention to commence a tender or exchange offer that would result in the 15% beneficial ownership level. Under certain circumstances involving a buyer's acquisition of a 15% position in the Company, all Rights holders except the buyer will be entitled to purchase common stock at half price. If the Company is acquired through a merger, after such an acquisition, all Rights holders except the buyer will be entitled to purchase stock in the buyer at half price. The Company may redeem the rights at one cent each at any time before a buyer acquires 15% of the Company's stock. 16. PREOPENING EXPENSES Preopening expenses of $3.4 million and $3.3 million represent salaries, benefits, training, marketing and other costs incurred in connection with the openings of the Isle-Tunica on July 26, 1999 and the Isle-Black Hawk on December 30, 1998, respectively. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 17. VALUATION ALLOWANCE During fiscal 1999, the Company recorded a valuation allowance totaling $5.1 million. The valuation allowance reflects the write-down of assets held for development or sale of $2.4 million related to its two original riverboat casino vessels and land the Company was planning to develop in Cripple Creek, Colorado. During the third quarter ended January 24, 1999, the Company entered an agreement to sell one of its two original riverboats for less than the recorded value. This sale closed during fiscal year 2000, however, the Company had adjusted the valuation allowance related to both riverboats to reflect the fair value, based on the agreed upon sales price as of the third quarter ended January 24, 1999. Also, management delayed its plans to develop a casino on land it owns in Cripple Creek, Colorado. Accordingly, during the third quarter ended January 24, 1999, management established a valuation allowance on the land it owns in Cripple Creek to reflect the fair value as the carrying value. Additionally, the valuation allowance included $2.7 million related to future obligations under an operating lease related to its Cripple Creek, Colorado project. 18. EXTRAORDINARY ITEM The Company incurred pre-tax extraordinary losses totaling $1.6 million in fiscal year 2000 and $55.8 million in fiscal year 1999. These losses are associated with the extinguishment of debt, primarily related to debt associated with the acquisition of Lady Luck on March 2, 2000 and the refinancing of the Company's $315 million 12.5% Senior Secured Notes and other debt on April 23, 1999. These losses included early payment premiums, as well as the write-off of consent fees and debt acquisition costs. The tax benefit from the extraordinary losses for fiscal year 2000 and fiscal year 1999 was approximately $0.6 million and $19.5 million, respectively. 19. EMPLOYEE BENEFIT PLAN The Company has a defined-contribution, profit-sharing plan, including 401(k) plan provisions, covering substantially all of its employees. The Company's contribution expense related to this plan was approximately $904,000, $635,000 and $609,000 for the years ended April 30, 2000, April 25, 1999 and April 26, 1998, respectively. The Company's contribution is based on a percentage of employee contributions and may include an additional discretionary amount. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 20. SUBSEQUENT EVENTS On May 3, 2000, the Company acquired Davis Gaming Boonville, Inc. and changed the company name to Isle of Capri Casino-Boonville, Inc., a wholly-owned subsidiary of the Company. IOC-Boonville has a gaming site in Boonville, Missouri. Boonville is located midway between Kansas City and St. Louis and just three miles north of Interstate 70. IOC-Boonville intends to develop a $75 million gaming and entertainment complex with the planned casino consisting of approximately 900 slot machines and 30 table games in 28,000 square feet of gaming space. The Isle of Capri's signature restaurants and design and d cor elements will be showcased in the attached pavilion. Isle of Capri expects to begin construction on this project four months after receiving the necessary approvals and intends to fund this development through its Amended and Restated Senior Credit Facility. On June 5, 2000, the Isle of Capri Casino-Kansas City, a wholly-owned subsidiary of the Company, acquired certain assets of the Flamingo Hilton Riverboat Casino in Kansas City, Missouri, from Flamingo Hilton Riverboat Casino, L.P., a subsidiary of Hilton Hotel Corporation. The acquisition included the casino vessel, parking garage and all related gaming equipment for the purchase price of $33.5 million, less an adjustment for assumed liabilities. Isle of Capri anticipates investing up to an additional $15.0 million in this project primarily to re-theme the casino into an Isle of Capri Casino. Isle of Capri funded this acquisition and intends to fund the improvements through its Amended and Restated Credit Facility. The Isle of Capri Casino-Kansas City will continue to operate under the Flamingo name pursuant to a license agreement while the facility is converted to the Isle of Capri theme. The property will include, among other amenities, a Farraddays' Restaurant, Calypso's Buffet and Tradewinds Marketplace. The facility transition to an Isle of Capri property is expected to be completed by the end of the year. On June 5, 2000, the Isle-Black Hawk offered to purchase for cash up to $1,246,000 principal amount of their 13% First Mortgage Notes due 2004 at a price of $1,010 per $1,000 principal amount, plus interest accrued up to, but not including, the Payment Date in accordance with the terms of its indenture. No Notes were tendered for purchase. On July 19, 2000, the Company announced that it had entered into a definitive agreement to acquire certain assets including the casino vessel, hotel and all related gaming equipment of the President Casino in Davenport, Iowa, from President Casinos, Inc. and related parties for $58.2 million. Completion of the acquisition is subject to a due diligence review and receipt of all regulatory approvals. The Missouri Gaming Commission has selected our Jefferson County, Missouri project for development. This project, which will primarily serve the South St. Louis metropolitan area, was selected over three other projects, including our proposed project at the Jefferson Barracks site in South St. Louis County. We expect to begin construction in late 2000 and to complete this approximately $105 million project in the spring of 2002. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 21. CONSOLIDATING CONDENSED FINANCIAL INFORMATION Certain of the Company's subsidiaries have fully and unconditionally guaranteed the payment of all obligations under the Company's $390 million 8 3/4 % Senior Subordinated Notes due 2009. The following table presents the consolidating condensed financial information of Isle of Capri Casinos, Inc., as the parent company, its guarantor subsidiaries and its non-guarantor subsidiaries as of April 30, 2000, April 25, 1999 and April 26, 1998. ISLE OF CAPRI CASINOS, INC. CONSOLIDATING CONDENSED GUARANTOR, NONGUARANTOR AND PARENT COMPANY FINANCIAL INFORMATION AS OF AND FOR THE YEARS ENDED APRIL 30, 2000, APRIL 25, 1999 AND APRIL 26, 1998 (IN THOUSANDS)
(b) Isle of Capri (a) Non-Wholly Casinos, Inc. Wholly Owned Consolidating Guarantor Owned Non- and Isle of Capri (Parent Guarantor Guarantor Eliminating Casinos, Inc. Obligor) Subsidiaries Subsidiaries Entries Consolidated --------------- -------------- -------------- --------------- -------------- As of April 30, 2000 Balance Sheet - ------------------------------------------ Current assets . . . . . . . . . . . . . . $ 130,939 $ 99,785 $ 7,609 $ - $ 238,333 Intercompany receivables . . . . . . . . . 584,189 $ 238,811 4 (823,004) - Investments in subsidiaries. . . . . . . . 371,070 - - (369,156) 1,914 Property and equipment, net. . . . . . . . 5,229 595,306 98,711 - 699,246 Other assets . . . . . . . . . . . . . . . 46,724 315,729 3,568 - 366,021 --------------- -------------- -------------- --------------- -------------- Total assets . . . . . . . . . . . . . . . $ 1,138,151 $ 1,249,631 $ 109,892 $ (1,192,160) $ 1,305,514 =============== ============== ============== =============== ============== Current liabilities. . . . . . . . . . . . $ 44,474 $ 103,698 $ 13,769 $ - $ 161,941 Intercompany payable . . . . . . . . . . . 23,904 794,475 4,731 (823,015) 95 Long-term debt, less current maturities. . 854,973 15,528 75,000 - 945,501 Deferred income taxes. . . . . . . . . . . (14,801) 40,564 - - 25,763 Other accrued liabilities. . . . . . . . . - 8,851 - - 8,851 Minority interest. . . . . . . . . . . . . - - - 7,843 7,843 Stockholders' equity . . . . . . . . . . . 229,601 286,515 16,392 (376,988) 155,520 --------------- -------------- -------------- --------------- -------------- Total liabilities and stockholders' equity $ 1,138,151 $ 1,249,631 $ 109,892 $ (1,192,160) $ 1,305,514 =============== ============== ============== =============== ==============
ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 21. CONSOLIDATING CONDENSED FINANCIAL INFORMATION (CONTINUED)
(b) Isle of Capri (a) Non-Wholly Casinos, Inc. Wholly Owned Consolidating Guarantor Owned Non- and Isle of Capri (Parent Guarantor Guarantor Eliminating Casinos, Inc. Obligor) Subsidiaries Subsidiaries Entries Consolidated --------------- -------------- -------------- --------------- --------------- For the year ended April 30, 2000 Statement of Operations - --------------------------------------------- Revenue: Casino . . . . . . . . . . . . . . . . . $ - $ 530,803 $ 88,548 $ - $ 619,351 Rooms, food, beverage and other. . . . . 1,353 59,509 4,637 - 65,499 --------------- -------------- -------------- --------------- --------------- Total revenue . . . . . . . . . . . . . . . . 1,353 590,312 93,185 - 684,850 Operating expenses: Casino . . . . . . . . . . . . . . . . . - 103,509 12,596 - 116,105 Gaming taxes . . . . . . . . . . . . . . - 105,232 17,340 - 122,572 Rooms, food, beverage and other. . . . . (4,997) 253,552 41,776 - 290,331 Depreciation and amortization. . . . . . 1,030 39,202 2,114 - 42,346 --------------- -------------- -------------- --------------- --------------- Total operating expenses. . . . . . . . . . . (3,967) 501,495 73,826 - 571,354 --------------- -------------- -------------- --------------- --------------- Operating income. . . . . . . . . . . . . . . 5,320 88,817 19,359 - 113,496 Gain on sale of assets. . . . . . . . . . . . 3,092 14 - - 3,106 Interest expense, net . . . . . . . . . . . . 2,804 (47,683) (10,754) - (55,633) Minority interest . . . . . . . . . . . . . . - - - (3,700) (3,700) Equity in income (loss) of unconsolidated joint venture . . . . . . 44,686 - - (44,427) 259 --------------- -------------- -------------- --------------- --------------- Income (loss) before income taxes and extraordinary item . . . . . . . . . 55,902 41,148 8,605 (48,127) 57,528 Income tax provision. . . . . . . . . . . . . 10,977 14,496 - - 25,473 --------------- -------------- -------------- --------------- --------------- Income (loss) before extraordinary item . . . 44,925 26,652 8,605 (48,127) 32,055 Extraordinary loss on extinguishment of debt (net of applicable income tax benefit) . - (984) - - (984) --------------- -------------- -------------- --------------- --------------- Net income (loss) . . . . . . . . . . . . . . $ 44,925 $ 25,668 $ 8,605 $ (48,127) $ 31,071 =============== ============== ============== =============== =============== Statement of Cash Flows - --------------------------------------------- Net cash provided by (used in) operating activities . . . . . . . . . . $ (307,048) $ 267,908 $ 13,825 $ 155,798 $ 130,483 Net cash provided by (used in) investing activities . . . . . . . . . . (63,577) (21,108) (17,475) (155,798) (257,958) Net cash used in financing activities . . . . 407,411 (196,327) (754) - 210,330 --------------- -------------- -------------- --------------- --------------- Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . 36,786 50,473 (4,404) - 82,855 Cash and cash equivalents at beginning of the year. . . . . . . . . . 35,826 38,374 10,917 - 85,117 --------------- -------------- -------------- --------------- --------------- Cash and cash equivalents at end of the year. . . . . . . . . . . . . $ 72,612 $ 88,847 $ 6,513 $ - $ 167,972 =============== ============== ============== =============== ===============
ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 21. CONSOLIDATING CONDENSED FINANCIAL INFORMATION (CONTINUED)
(b) Isle of Capri (a) Non-Wholly Casinos, Inc. Wholly Owned Consolidating Guarantor Owned Non- and Isle of Capri (Parent Guarantor Guarantor Eliminating Casinos, Inc. Obligor) Subsidiaries Subsidiaries Entries Consolidated --------------- -------------- -------------- --------------- --------------- As of April 25, 1999 Balance Sheet - ----------------------------------------------- Current assets. . . . . . . . . . . . . . . . . $ 36,599 $ 60,679 $ 11,738 $ - $ 109,016 Intercompany receivables. . . . . . . . . . . . 220,578 159,361 - (379,939) - Investments in subsidiaries . . . . . . . . . . 233,541 - - (231,690) 1,851 Property and equipment, net . . . . . . . . . . 6,605 324,194 80,377 - 411,176 Other assets. . . . . . . . . . . . . . . . . . 44,377 103,916 6,148 - 154,441 --------------- -------------- -------------- --------------- --------------- Total Assets. . . . . . . . . . . . . . . . . . $ 541,700 $ 648,150 $ 98,263 $ (611,629) $ 676,484 =============== ============== ============== =============== =============== Current liabilities . . . . . . . . . . . . . . $ 13,395 $ 56,074 $ 9,419 $ (64) $ 78,824 Intercompany payable. . . . . . . . . . . . . . 24,593 349,994 5,289 (379,876) - Long-term debt, less current maturities . . . . 441,757 9,348 75,768 - 526,873 Deferred income taxes . . . . . . . . . . . . . - 4,689 - - 4,689 Minority interest . . . . . . . . . . . . . . . - - - 4,143 4,143 Stockholders' equity. . . . . . . . . . . . . . 61,955 228,045 7,787 (235,832) 61,955 --------------- -------------- -------------- --------------- --------------- Total Liabilities and Stockholders' Equity. . . $ 541,700 $ 648,150 $ 98,263 $ (611,629) $ 676,484 =============== ============== ============== =============== =============== For the year ended April 25, 1999 Statement of Operations - ----------------------------------------------- Revenue: Casino . . . . . . . . . . . . . . . . . . $ - $ 403,700 $ 20,679 $ - $ 424,379 Rooms, food, beverage and other. . . . . . 429 54,561 1,367 (359) 55,998 --------------- -------------- -------------- --------------- --------------- Total revenue . . . . . . . . . . . . . . . . . 429 458,261 22,046 (359) 480,377 Operating expenses: Casino . . . . . . . . . . . . . . . . . . - 74,793 2,886 - 77,679 Gaming taxes . . . . . . . . . . . . . . . - 82,925 3,930 - 86,855 Rooms, food, beverage and other. . . . . . 4,390 192,565 14,224 (359) 210,820 Depreciation and amortization. . . . . . . 3,439 31,853 985 - 36,277 --------------- -------------- -------------- --------------- --------------- Total operating expenses. . . . . . . . . . . . 7,829 382,136 22,025 (359) 411,631 --------------- -------------- -------------- --------------- --------------- Operating income (loss) . . . . . . . . . . . . (7,400) 76,125 21 - 68,746 Interest expense, net . . . . . . . . . . . . . (5,671) (34,853) (5,207) - (45,731) Minority interest . . . . . . . . . . . . . . . - - - 2,209 2,209 Equity in income (loss) of unconsolidated joint venture . . . . . . . 36,955 - - (38,295) (1,340) --------------- -------------- -------------- --------------- --------------- Income (loss) before income taxes and extraordinary item . . . . . . . . . . 23,884 41,272 (5,186) (36,086) 23,884 Income tax provision (benefit). . . . . . . . . 11,775 2,374 - (2,374) 11,775 --------------- -------------- -------------- --------------- --------------- Income (loss) before extraordinary item . . . . 12,109 38,898 (5,186) (33,712) 12,109 Extraordinary loss on extinguishment of debt (net of applicable income tax benefit) (36,285) - - - (36,285) --------------- -------------- -------------- --------------- --------------- Net income (loss) . . . . . . . . . . . . . . . $ (24,176) $ 38,898 $ (5,186) $ (33,712) $ (24,176) =============== ============== ============== =============== ===============
ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 21. CONSOLIDATING CONDENSED FINANCIAL INFORMATION (CONTINUED)
(b) Isle of Capri (a) Non-Wholly Casinos, Inc. Wholly Owned Consolidating Guarantor Owned Non- and Isle of Capri (Parent Guarantor Guarantor Eliminating Casinos, Inc. Obligor) Subsidiaries Subsidiaries Entries Consolidated --------------- -------------- -------------- --------------- --------------- Statement of Cash Flows - ------------------------------------------- Net cash provided by (used in) operating activities . . . . . . . . . $ (33,503) $ 94,689 $ 2,757 $ 1,275 $ 65,218 Net cash provided by (used in) investing activities . . . . . . . . . (7,465) (49,368) 6,092 (1,275) (52,016) Net cash provided by (used in) financing activities . . . . . . . . . 56,773 (38,840) 1,522 - 19,455 --------------- -------------- -------------- --------------- --------------- Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . 15,805 6,481 10,371 - 32,657 Cash and cash equivalents at beginning of the year. . . . . . . . . 20,021 31,892 547 - 52,460 --------------- -------------- -------------- --------------- --------------- Cash and cash equivalents at end of the year. . . . . . . . . . . . $ 35,826 $ 38,373 $ 10,918 $ - $ 85,117 =============== ============== ============== =============== =============== As of April 26, 1998 Balance Sheet - ------------------------------------------- Current assets. . . . . . . . . . . . . . . $ 20,732 $ 46,913 $ 1,612 $ - $ 69,257 Intercompany receivables. . . . . . . . . . 190,117 122,536 - (312,653) - Investments in subsidiaries . . . . . . . . 196,208 - - (194,499) 1,709 Property and equipment, net . . . . . . . . 3,194 289,675 40,942 - 333,811 Other assets. . . . . . . . . . . . . . . . 42,239 115,396 53,323 - 210,958 --------------- -------------- -------------- --------------- --------------- Total Assets. . . . . . . . . . . . . . . . $ 452,490 $ 574,520 $ 95,877 $ (507,152) $ 615,735 =============== ============== ============== =============== =============== Current liabilities . . . . . . . . . . . . $ 19,393 $ 50,969 $ 7,904 $ (311) $ 77,955 Intercompany payable. . . . . . . . . . . . 23,892 288,450 - (312,342) - Long-term debt, less current maturities . . 323,074 31,568 75,000 - 429,642 Deferred income taxes . . . . . . . . . . . - 16,155 - - 16,155 Minority interest . . . . . . . . . . . . . - - - 5,852 5,852 Stockholders' equity. . . . . . . . . . . . 86,131 187,378 12,973 (200,351) 86,131 --------------- -------------- -------------- --------------- --------------- Total Liabilities and Stockholders' Equity. $ 452,490 $ 574,520 $ 95,877 $ (507,152) $ 615,735 =============== ============== ============== =============== ===============
ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 21. CONSOLIDATING CONDENSED FINANCIAL INFORMATION (CONTINUED)
(b) Isle of Capri (a) Non-Wholly Casinos, Inc. Wholly Owned Consolidating Guarantor Owned Non- and Isle of Capri (Parent Guarantor Guarantor Eliminating Casinos, Inc. Obligor) Subsidiaries Subsidiaries Entries Consolidated --------------- -------------- -------------- --------------- --------------- For the year ended April 26, 1998 Statement of Operations - ------------------------------------- Revenue: Casino . . . . . . . . . . . . . $ - $ 388,223 $ - $ - $ 388,223 Rooms, food, beverage and other. 268 52,729 - (404) 52,593 --------------- -------------- -------------- --------------- --------------- Total revenue . . . . . . . . . . . . 268 440,952 - (404) 440,816 Operating expenses: Casino . . . . . . . . . . . . . - 76,072 - - 76,072 Gaming taxes . . . . . . . . . . - 78,586 - - 78,586 Rooms, food, beverage and other. (645) 192,517 - (404) 191,468 Depreciation and amortization. . 1,575 32,013 - - 33,588 --------------- -------------- -------------- --------------- --------------- Total operating expenses. . . . . . . 930 379,188 - (404) 379,714 --------------- -------------- -------------- --------------- --------------- Operating income (loss) . . . . . . . (662) 61,764 - - 61,102 Interest expense, net . . . . . . . . (6,990) (37,855) (2,032) - (46,877) Minority interest . . . . . . . . . . - - - 819 819 Equity in income (loss) of unconsolidated joint venture . . 22,696 - - (22,696) - --------------- -------------- -------------- --------------- --------------- Income (loss) before income taxes . . 15,044 23,909 (2,032) (21,877) 15,044 Income tax provision (benefit). . . . 7,497 (556) - 556 7,497 --------------- -------------- -------------- --------------- --------------- Net income (loss) . . . . . . . . . . $ 7,547 $ 24,465 $ (2,032) $ (22,433) $ 7,547 =============== ============== ============== =============== =============== Statement of Cash Flows - ------------------------------------- Net cash provided by operating activities . . . . . . $ 5,975 $ 48,323 $ 3,596 $ 7,415 $ 65,309 Net cash provided by (used in) investing activities . . . . . . (4,618) (34,683) (80,096) (331) (119,728) Net cash provided by (used in) financing activities . . . . . . (2,730) (12,200) 77,047 (7,084) 55,033 --------------- -------------- -------------- --------------- --------------- Net increase (decrease) in cash and cash equivalents . . . . . . . . (1,373) 1,440 547 - 614 Cash and cash equivalents at beginning of the year. . . . . . 21,394 30,452 - - 51,846 --------------- -------------- -------------- --------------- --------------- Cash and cash equivalents at end of the year. . . . . . . . . $ 20,021 $ 31,892 $ 547 $ - $ 52,460 =============== ============== ============== =============== ===============
(a) Certain of the Company's wholly owned subsidiaries were guarantors on the 8 3/4 % Senior Subordinated Notes, including the following: Riverboat Corporation of Mississippi, Riverboat Corporation of Mississippi -Vicksburg, Isle of Capri - Tunica, Inc., Louisiana Riverboat Gaming Partnership, St. Charles Gaming Company, Inc., Grand Palais Riverboat, Inc. and PPI, Inc. IOC-Natchez (f/k/a Lady Luck Mississippi, Inc.), IOC-Lula (f/k/a Magnolia Lady, Inc.), Isle of Capri Bettendorf, L.C., Isle of Capri Marquette, Inc. became guarantors as of March 2, 2000, the date of the acquisition. (b) The following non-wholly owned subsidiaries were not guarantors on the 8 3/4 % Senior Subordinated Notes: Isle of Capri Black Hawk, L.L.C. and Isle of Capri Black Hawk Capital Corp. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 22. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
FISCAL QUARTERS ENDED (IN THOUSANDS) ----------------------- JULY 25, OCTOBER 24, JANUARY 23, APRIL 30, 1999 1999 2000 2000 ----------- ------------ ------------ ----------- Revenue . . . . . . . . . . . . . . . $ 142,207 $ 154,995 $ 153,724 $ 233,924 Operating income. . . . . . . . . . . 20,989 23,770 23,084 45,653 Net income before extraordinary item. 6,528 6,632 4,881 14,014 Extraordinary item, net . . . . . . . - - - (984) Net income. . . . . . . . . . . . . . 6,528 6,632 4,881 13,030 Net income per share before extraordinary item: Basic. . . . . . . . . . . . . . 0.28 0.28 0.20 0.47 Diluted. . . . . . . . . . . . . 0.26 0.26 0.19 0.44 Net income per common share Basic. . . . . . . . . . . . . . 0.28 0.28 0.20 0.44 Diluted. . . . . . . . . . . . . 0.26 0.26 0.19 0.41 FISCAL QUARTERS ENDED (IN THOUSANDS) ----------------------- JULY 26, OCTOBER 25, JANUARY 24, APRIL 25, 1998 1998 1999 1999 ----------- ------------ ------------ ----------- Revenue . . . . . . . . . . . . . . . $ 114,079 $ 106,926 $ 115,120 $ 144,252 Operating income. . . . . . . . . . . 16,925 14,684 11,902 25,235 Net income before extraordinary item. 2,692 1,928 1,045 6,444 Extraordinary item, net . . . . . . . - - - (36,285) Net income (loss) . . . . . . . . . . 2,692 1,928 1,045 (29,841) Net income per share before extraordinary item: Basic. . . . . . . . . . . . . . 0.11 0.08 0.04 0.27 Diluted. . . . . . . . . . . . . 0.11 0.08 0.04 0.27 Net income (loss) per common share Basic. . . . . . . . . . . . . . 0.11 0.08 0.04 (1.27) Diluted. . . . . . . . . . . . . 0.11 0.08 0.04 (1.23)
Quarterly data may not necessarily sum to the full year data reported in the Company's consolidated financial statements. The third quarter of fiscal 1999 includes the following non-recurring items: a valuation charge of $5.1 million related to the write-down of certain assets held for sale or development, a $4.2 million reversal of an accrued litigation settlement and preopening expenses related to the openings of the Isle-Black Hawk in December 1998 totaling $3.3 million. The fourth quarter of fiscal 1999 includes an extraordinary after-tax charge of $36.3 million related to the refinancing of the Company's $315 million 12.5% Senior Secured Notes and other debt on April 23, 1999. The first quarter of fiscal 2000 includes the following non-recurring items: a gain of $3.1 million related to the sale of an option to purchase land adjacent to the Pompano Park, Inc. facility and preopening expenses of $3.4 million related to expenses incurred with the opening of the Isle-Tunica. ISLE OF CAPRI CASINOS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The fourth quarter of fiscal 2000 includes an extraordinary item after-tax charge of $1.0 million associated with the extinguishment of debt, primarily related to debt associated with acquisition of Lady Luck on March 2, 2000. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. This item has been omitted from this report and is incorporated by reference to Isle of Capri's definitive proxy statement to be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this report. ITEM 11. EXECUTIVE COMPENSATION. This item has been omitted from this report and is incorporated by reference to Isle of Capri's definitive proxy statement to be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this report. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. This item has been omitted from this report and is incorporated by reference to Isle of Capri's definitive proxy statement to be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this report. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. This item has been omitted from this report and is incorporated by reference to Isle of Capri's definitive proxy statement to be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this report. PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents Filed as Part of this Report. -------------------------------------------- 1. Financial Statements. --------------------- The following financial statements and report of independent auditors are included on pages 40 to 72 of this Form 10-K: ISLE OF CAPRI CASINOS, INC. Report of Independent Auditors Consolidated Balance Sheets - April 30, 2000 and April 25, 1999 Consolidated Statements of Operations - Years ended April 30, 2000, April 25, 1999 and April 26, 1998 Consolidated Statements of Stockholders' Equity - Years ended April 30, 2000 and April 25, 1999 and April 26, 1998 Consolidated Statements of Cash Flows - Years ended April 30, 2000, April 25, 1999 and April 26, 1998 Notes to Consolidated Financial Statements 2. Financial Statements Schedules. -------------------------------- None required or applicable. 3. Exhibits. -------- A list of the exhibits included as part of this Form 10-K is set forth in the Exhibit Index that immediately precedes such exhibits, which is incorporated herein by reference. (b) Reports on Form 8-K. ---------------------- During the year ended April 30, 2000, the Company filed the following reports on Form 8-K: Current Report on Form 8-K/A filed on March 14, 2000, regarding Item 7 to amend Form 8-K filed on March 7, 2000 to include the Consent of Arthur Andersen LLP. Current Report on Form 8-K filed on March 7, 2000, regarding Item 2 which filed the merger agreement and financial statements of Lady Luck. Current Report on Form 8-K filed on February 16, 2000, regarding Item 5 which announced the Company's earnings for the third quarter ended January 23, 2000. Current Report on Form 8-K filed on December 30, 1999, regarding Item 5 which filed the merger agreement by and among BRDC, Inc., the shareholders of BRDC, Inc. and Isle of Capri Casinos, Inc. as an exhibit. Current Report on Form 8-K filed on October 15, 1999, containing the merger agreement between Lady Luck and Isle of Capri, other agreements related to the Lady Luck acquisition and the press release announcing the Lady Luck acquisition agreement. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ISLE OF CAPRI CASINOS, INC. Dated: August 1, 2000 By: /s/ Bernard Goldstein ---------------------- Bernard Goldstein, Chairman of the Board, Chief Executive Officer, and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Dated: August 1, 2000 /s/ Bernard Goldstein ------------------------ Bernard Goldstein, Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer) Dated: August 1, 2000 /s/ John M. Gallaway ------------------------ John M. Gallaway, President, Chief Operating Officer and Director Dated: August 1, 2000 /s/ Rexford A. Yeisley -------------------------- Rexford A. Yeisley, Chief Financial Officer (Principal Financial and Accounting Officer) Dated: August 1, 2000 /s/ Allan B. Solomon ------------------------ Allan B. Solomon, Executive Vice President, Secretary, General Counsel and Director Dated: August 1, 2000 /s/ Emanuel Crystal ---------------------- Emanuel Crystal, Director Dated: August 1, 2000 /s/ Robert S. Goldstein --------------------------- Robert S. Goldstein, Director Dated: August 1, 2000 /s/ Alan J. Glazer ---------------------- Alan J. Glazer, Director Dated: August 1, 2000 /s/ W. Randolph Baker ------------------------- W. Randolph Baker, Director INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBIT - -------- ------- 2.1 Agreement and Plan of Merger, dated as of October 5, 1999. (21) 2.1A Agreement and Plan of Merger, dated as of December 19, 1999. (22) 3.1 Certificate of Incorporation of Casino America, Inc., as amended. (5) 3.1A Amendment to the Company's Certificate of Incorporation dated September 28, 1998. (18) 3.2 Bylaws of Casino America, Inc., as amended. (5) 3.2A Amendments to Bylaws of Casino America, Inc. dated as of February 7, 1997. (14) 4.1 Specimen Certificate of Common Stock. (2) 4.2A Specimen Warrant Agreement with respect to warrants to purchase 900,000 shares of Isle of Capri Casinos, Inc. Common Stock. (3) 4.2B Form of Warrant Agreement with respect to warrants to purchase 500,000 shares of Isle of Capri Casinos, Inc. Common Stock. (13) 4.3A Warrant, dated June 9, 1995, of Crown Casino Corporation to purchase up to 416,667 shares of Common Stock of Isle of Capri Casinos, Inc. (7) 4.3B Warrant, dated May 3, 1996, of Crown Casino Corporation to purchase up to 416,667 shares of Common Stock of Isle of Capri Casinos, Inc. (8) 4.4A Indenture dated as of August 1, 1996 between Casino America, Inc. and Fleet National Bank, as Trustee. (8) 4.4B First Supplemental Indenture, dated as of April 21, 1999, between Isle of Capri Casinos, Inc. and Fleet National Bank, as trustee. (18) 4.5 Isle of Capri Casinos, Inc. hereby agrees to furnish to the Securities and Exchange Commission, upon its request, the instruments defining the rights of holders of long term debt where the total amount of securities authorized thereunder does not exceed 10% of Isle of Capri Casinos, Inc.'s total consolidated assets. (18) 4.6 Rights Agreement dated as of February 7, 1997 between Casino America, Inc. and Norwest Bank Minnesota, N.A., as Rights Agent. (14) 4.7 Indenture, dated as of April 23, 1999, among the Company, the Subsidiary Guarantors named therein and State Street Bank and Trust Company, as trustee.(18) 4.8 Registration Rights Agreement, dated as of April 23, 1999, among Isle of Capri Casinos, Inc., the Subsidiary Guarantors named therein and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wasserstein Perella Securities, Inc. for themselves and on behalf of the other initial purchasers. (18) 10.1 Amended and Restated Berth Rental Agreement dated May 12, 1992 between the Biloxi Port Commission and Riverboat Corporation of Mississippi. (2) 10.2 Biloxi Waterfront Project Lease dated May 12, 1986 with Point Cadet Development Corporation.(2) 10.3 Addendum to Lease Agreement, dated August 1, 1992, between the City of Biloxi, Mississippi, Point Cadet Development Corporation. (2) 10.3A Second Addendum to Lease, dated April 9, 1994, by and between the City of Biloxi, Mississippi, Point Cadet Development Corporation, the Biloxi Port Commission and Riverboat Corporation of Mississippi. (4) 10.3B Third Addendum to Casino Lease, dated April 26, 1995, by and between the City of Biloxi, Mississippi, Point Cadet Development Corporation, the Biloxi Port Commission and Riverboat Corporation of Mississippi. (7) 10.4 Declaration of Shared Facilities Agreement for the Isle of Capri Casino and Hotel, Biloxi, Mississippi, dated as of April 26, 1995, made by Riverboat Corporation of Mississippi. (7) 10.5 Agreement for Sale and Purchase by and between Casino America, Inc. and Pompano Park Associates, Limited Partnership, dated as of November 8, 1994. (7) 10.6 Variable Gaming Adjustment Covenant made as of June 30, 1995 by PPI, Inc. in favor of Pompano Park Associates, Limited Partnership. (7) *10.7 Casino America, Inc. 1992 Stock Option Plan.(1) *10.8 Casino America, Inc. 1992 Stock Option Plan Amendment.(3) *10.9 Casino America, Inc. 1993 Stock Option Plan, as amended.(7) *10.10 Casino America, Inc. description of Employee Bonus Plan.(3) 10.11 Management Agreement dated January 4, 1993 between Riverboat Services, Inc. and Louisiana Riverboat Gaming Partnership. (3) 10.12 Management Agreement dated as of March 2, 1995 between Riverboat Services, Inc. and St. Charles Gaming Company, Inc.(7) *10.13 Casino America, Inc. Retirement Trust and Savings Plan.(3) *10.14 Director's Option Plan.(6) 10.15 Biloxi Waterfront Project Lease dated April 9, 1994 by and between the City of Biloxi, Mississippi and Riverboat Corporation of Mississippi. (4) 10.15A First Amendment to Biloxi Waterfront Project Lease (Hotel Lease), dated April 26, 1995, by and between Riverboat Corporation of Mississippi and the City of Biloxi, Mississippi. (7) 10.16 Crowne Plaza Resort New Development License Agreement between Holiday Inns Franchising, Inc. and Riverboat Corporation of Mississippi, dated December 30, 1994. (7) 10.17 Security Agreement - Pledge dated as of June 9, 1995, between Louisiana Riverboat Gaming Partnership and Crown Casino Corporation. (7) 10.18 Shareholders Agreement, dated as of June 9, 1995 by and between Crown Casino Corporation and Louisiana Riverboat Gaming Partnership. (7) 10.19 Amended and Restated Lease between Port Resources, Inc. and CRU, Inc., as landlords and St. Charles Gaming Company, Inc., as tenant, of certain land in Calcasieu Parish, Louisiana, dated April 19, 1999. (18) 10.20 Development Agreement between St. Charles Gaming Company, Inc. and Calcasieu Parish Police Jury dated June 5, 1995.(7) 10.21 Note Purchase Agreement, dated as of July 20, 1995, by and among Louisiana Riverboat Gaming Partnership, St. Charles Gaming Company, Inc., Nomura Holding America Inc. and First National Bank of Commerce. (7) 10.22 Lease between Pompano Park Associates, Inc., as Lessor, and Casino America, Inc., as Lessee, dated as of July 1, 1995.(7) 10.23 Promissory Note dated June 29, 1995 by and between PPI, Inc. and Capital Bank.(9) *10.24 Employment Agreement dated January 6, 1999 between Isle of Capri Casinos, Inc. and John M. Gallaway. (18) *10.25 Employment Agreement dated January 6, 1999 between Isle of Capri Casinos, Inc. and Allan B. Solomon. (18) *10.26 Employment Agreement dated January 6, 1999 by and between Isle of Capri Casinos, Inc. and Rexford A. Yeisley. (18) *10.27 Employment Agreement dated January 6, 1999 by and between Isle of Capri Casinos, Inc. and Timothy M. Hinkley. (18) 10.28 Management Agreement dated April 25, 1997 between Casino America, Inc. and ICB, L.L.C. (15) 10.29 Operating Agreement of ICB, L.L.C. dated as of April 25, 1997 between Casino America of Colorado, Inc. and Blackhawk Gold, Ltd. (14) 10.30 Amended Casino America, Inc. 1992 Stock Option Plan. (11) 10.31 Amended Casino America, Inc. l993 Stock Option Plan. (11) 10.32 Management Agreement dated July 29, 1997 between Casino America, Inc. and Isle of Capri Black Hawk, L.L.C. (16) 10.33 Joint Venture Agreement of Capri Cruises between Commodore Cruises Limited and Isle of Capri Casino Corporation. (18) *10.34 Amended Casino America, Inc. 1993 Stock Option Plan. (15) *10.35 Amended Casino America, Inc. 1993 Stock Option Plan. (17) 10.36 Asset Purchase Agreement by and between Tunica Partners, LP and Isle of Capri Casino - Tunica, Inc. and Isle of Capri Casinos, Inc. dated October 7, 1998. (19) 10.37 Amendment No. 1 to Asset Purchase Agreement dated December 7, 1998. (19) 10.38 Amendment No. 2 to Asset Purchase Agreement dated February 24, 1999. (19) *10.39 Employment Agreement dated January 6, 1999 between Isle of Capri Casinos, Inc. and Bernard Goldstein. (18) 10.40 Purchase Agreement, dated as of April 20, 1999, among Isle of Capri Casinos, Inc., the Subsidiary Guarantors named therein and Merrill Lynch & Co., Merrill Lynch, Pierce Fenner & Smith Incorporated and Wasserstein Perella Securities, Inc., for themselves and as representatives of the other initial purchasers. (18) 10.41 Amended and Restated Credit Agreement, dated as of March 2, 2000, among Isle of Capri Casinos, Inc., the lenders listed therein, CIBC Inc. as swing line lender, Canadian Imperial Bank of Commerce, as administrative agent and issuing lender, Bankers Trust Company as co-arranger and syndication agent for Lenders, The CIT Group/Equipment Financing, Inc. and documentation agent for lenders and CIBC World Markets Corp as lead arranger. (20) 10.42 Leases of part of casino site in Natchez, Mississippi dated October 28, 1991 between Lady Luck Mississippi, Inc and Silver Land, Inc. Incorporated by reference to Exhibit 10.7 to the Form S-1. 10.43 Silver Land, Inc. Amended and Restated Lease Agreement dated December 31, 1992. Incorporated by reference to Exhibit 10.8 to the Form S-1. 10.44 Option to purchase site in Jefferson County, Missouri dated July 8, 1993 by and between Lady Luck Kimmswick, Inc. and Donald J. Branch. Incorporated by reference to Exhibit 10.17 to the Form S-1. 10.45 Lease in Coahoma, Mississippi dated November 30, 1993 (sic) by and among Roger Allen Johnson, Jr., Charles Bryant Johnson and Magnolia Lady, Inc. Incorporated by reference to Exhibit 10.28 to the Form 10-K. 10.46 Addendum to Lease dated November 30, 1993 between Roger Allen Johnson, Jr., Charles Bryant Johnson and Magnolia Lady, Inc. 10.47 Second addendum to lease entered into on November 30, 1993, and amended by that addendum to Lease dated June 22, 1994 between Roger Allen Johnson, Jr., and Charles Bryant Johnson and Magnolia Lady, Inc. 10.48 Agreement dated July 18, 1994 by and among Green Bridge Company, an Iowa corporation, Bettendorf Riverfront Development Company, Inc., and Iowa limited liability company, Lady Luck Casino, Inc., a Nevada corporation, and Lady Luck Gaming Corporation. Incorporated by reference to Exhibit 10.40 to the June 30, 1994 Form 10-Q. 10.49 Letter Agreement dated October 24, 1994 by and between Alain Uboldi and Lady Luck Gaming Corporation. Incorporated by reference to Exhibit 10.41 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1994, by Lady Luck Gaming Corporation (the "1994 Form 10-K") 10.50 Letter Agreement dated October 24, 1994 by and between Rory J. Reid and Lady Luck Gaming Corporation. Incorporated by reference to Exhibit 10.42 to the 1994 Form 10-K. 10.51 Real Estate Lease dated January 12, 1995 by and among Green Bridge Company, an Iowa corporation, Bettendorf Riverfront Development Company, L.C., an Iowa limited liability company, Lady Luck Bettendorf, L.C., an Iowa limited liability company and Lady Luck Quad Cities, Inc., a Delaware corporation. Incorporated by reference to Exhibit 10.46 to the 1994 Form 10-K. 10.52 Operation Agreement dated December 2, 1994 by and between Lady Luck Quad Cities, Inc. a Delaware corporation and Bettendorf Riverfront Development Company, L.C., an Iowa limited liability company. Incorporated by reference to Exhibit 10.47 to the 1994 Form 10-K. 10.53 Services Agreement dated as of January 1, 1996 among Lady Luck Gaming Corporation and Marco Polo International Marketing, Inc. Incorporated by reference to Exhibit 10.46 to the 1995 Form 10-K. 10.54 Stockholder Support Agreement, dated as of October 5, 1999, by Andrew H. Tompkins to and for the benefit of Isle of Capri Casinos, Inc. (21) 10.55 Consulting, Advisory and Noncompetition Agreement, dated as of October 5, 1999 by and between Isle of Capri Casinos, Inc. and Andrew H. Thompkins. (21) 10.56 Form of Credit Agreement between Gamblers Supply Management Company as the Borrower, and Isle of Capri Casinos, Inc. as the Lender. (21) 10.57 Amended and Restated Lease Agreement by and between The Port Authority of Kansas City, Missouri and Hilton Hotels Corporation dated as of August 21, 1995. 10.58 Assignment and Assumption by and among Hilton Hotels Corporation, a Delaware corporation, Isle of Capri Casinos, Inc., a Delaware corporation and IOC-Kansas City, Inc., a Missouri corporation. 21 Subsidiaries of Isle of Capri Casinos, Inc. (18) 23.1 Consent of Ernst & Young LLP. 27 Financial Data Schedule.
___________________________ (1) Filed as an exhibit to the Casino America, Inc.'s Current Report on Form 8-K filed June 17, 1992 (File No. 0-20538), and incorporated into the Casino America, Inc.'s Form 10-K for the year ended April 27, 1997, by reference. (2) Filed as an exhibit to the Casino America Inc.'s Annual Report on Form 10-K for the fiscal year ended April 30, 1992 (File No. 0-20538), and incorporated into the Casino America, Inc.'s Form 10-K for the year ended April 27, 1997, by reference. (3) Filed as an exhibit to Casino America, Inc.'s Annual Report on Form 10-K for the fiscal year ended April 30, 1993 (File No. 0-20538), and incorporated into Casino America, Inc.'s Form 10-K for the year ended April 27, 1997, by reference. (4) Filed as an exhibit to Casino America, Inc.'s Annual Report on Form 10-K for the fiscal year ended April 30, 1994 (File No. 0-20538), and incorporated into Casino America, Inc.'s Form 10-K for the year ended April 27, 1997, by reference. (5) Filed as an exhibit to Casino America, Inc.'s Registration Statement on Form S-1 filed September 3, 1993, as amended (File No. 33-68434), and incorporated into Casino America, Inc.'s Form 10-K for the year ended April 27, 1997, by reference. (6) Filed as an exhibit to Casino America, Inc.'s Registration Statement on Form S-8 filed June 30, 1994 (File No. 33-80918), and incorporated into Casino America, Inc.'s Form 10-K for the year ended April 27, 1997, by reference. (7) Filed as an exhibit to Casino America, Inc.'s Annual Report on Form 10-K for the fiscal year ended April 30, 1995 (File No. 0-20538), and incorporated into Casino America, Inc.'s Form 10-K for the year ended April 26, 1998, by reference. (8) Filed as an exhibit to Casino America, Inc.'s Registration Statement on Form S-3 filed on March 21, 1996 (No. 333-02610), and incorporated into Casino America, Inc.'s Form 10-K for the year ended April 27, 1997, by reference. (9) Filed as an exhibit to Casino America, Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 1995, and incorporated into Casino America, Inc.'s Form 10-K for the fiscal year ended April 27, 1997, by reference. (10) Filed as an exhibit to Casino America, Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1996, and incorporated into Casino America, Inc.'s Form 10-K for the fiscal year ended April 27, 1997, by reference. (11) Filed as an exhibit to Casino America, Inc.'s Proxy Statement for the fiscal year ended April 30, 1996, by reference. (12) Filed as an exhibit to Casino America, Inc.'s Annual Report on Form 10-K for the fiscal year ended April 30, 1996, by reference. (13) Filed as an exhibit to Casino America, Inc.'s Current Report on Form 8-K filed on February 24, 1997, and incorporated into Casino America, Inc.'s Form 10-K for the fiscal year ended April 27, 1997, by reference. (14) Filed as an exhibit to Casino America, Inc.'s Annual Report on Form 10-K for the fiscal year ended April 27, 1997, by reference. (15) Filed as an exhibit to Casino America, Inc.'s Proxy Statement for the fiscal year ended April 27, 1997, by reference. (16) Filed as an exhibit to the Isle of Capri Black Hawk L.L.C./Isle of Capri Black Hawk Capital Corp. Registration Statement on Form S-4 (registration number 333-38093), and incorporated into Casino America, Inc.'s Form 10-K for the year ended April 26, 1998, by reference. (17) Filed as an Exhibit to the Casino America, Inc.'s Proxy Statement for the fiscal year ended April 26, 1998, by reference. (18) Filed as an exhibit to Isle of Capri Casinos, Inc.'s Annual Report on Form 10-K for the fiscal year ended April 25, 1999, by reference. (19) Filed as an Exhibit to the Isle of Capri Casinos, Inc. Quarterly Report on form 10-Q for the fiscal quarter ended January 24, 1999, by reference. (20) Filed as an Exhibit to the Isle of Capri Casinos, Inc. Quarterly Report on form 10-Q for the fiscal quarter ended January 23, 2000, by reference. (21) Filed as an Exhibit to the Isle of Capri Casinos, Inc. Current Report on Form 8-K filed on October 5, 1999. (22) Filed as an Exhibit to the Isle of Capri Casinos, Inc. Current Report on Form 8-K filed on December 19, 1999. *Management contract or compensatory plan. EX-10.46 2 0002.txt ADDENDUM TO LEASE This is an addendum to the lease entered into on November 16, 1993, between Roger Allen Johnson, Jr., and Charles Bryant Johnson (hereinafter collectively referred to as "Landlord") and Magnolia Lady, Inc., a Mississippi corporation (hereinafter referred to as "Tenant"). This Addendum to Lease is intended to extend the lease to the entire properties described as Parcels A, B, and C and to change, modify and add to some of the specific provisions of that lease; all provisions not specifically changed by this Addendum to Lease shall remain in full force and effect as set out by the parties in the Lease between them signed November 16, 1993. SECTION 1 LEASED PROPERTY Subsection 1.01 shall read as follows: 1.01. Upon the conditions, limitations, convenants and agreements set forth below, Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, those premises (the "Leased Property") consisting of that land described on Exhibits "A", "B", and "C" attached hereto and incorporated herein by reference, together will all improvements thereon, and all appurtenances thereto including, without limitation, all water rights, riparian rights, littoral rights and bottomland rights. The Leased Property is leased to Tenant for any lawful use, including, without limitation, gaming. Landlord reserves all mineral rights to subject leased property and all other reservations set forth in Section 9.04 of the lease, during the term of the lease. The total amount of property leased herein, to be accurately determined by survey, totals 900-1,000 acres. Subsection 1.04 is amended to read as follows: 1.04. Landlord quitclaims and releases for the term of this Lease to Tenant non-exclusive rights of way or easements across the parcels as described in Exhibits "B" and "C" so as to provide access to both the North and South sides of U.S. Highway 49. Landlord will not be required to pay any portion of the costs incurred in the construction of access roads to the Leased Property nor any expenses that might be incurred in securing access to U.S. Highway 49. Landlord makes no warranty as to the suitability of the Leased Property for any road construction or location. There shall be mutual access between the Leased Property and the property described in Exhibit "C" flowing under the road elevation or bridge at U.S. Highway 49. It is agreed that Landlord and family can farm, and exercise hunting and fishing rights to, any parts of the Lease Property so long as it does not interfere with the Tenant's business, including access and construction, provided that the foregoing shall not be construed to permit the lease of hunting and fishing rights to third parties, including hunting and fishing clubs. SECTION 3 RENT Paragraph (b) of Subsection 3.02 is amended to read as follows: 3.02 (b) Five and one-half percent (5-1/2 %) of the "Gross Revenue" as defined in Mississippi Code Ann. Sec 75-76-5(p) derived from any and all gaming or gambling activities, including boarding fees, if any, on any casino vessel moored on the Lease Property and five and one-half percent (5-1/2 %) of the revenue derived from the sale of alcoholic beverages on such Casino Vessels the Premises. Any future gaming license fees based on gross revenue that might be enacted into law by the Mississippi Legislature or adopted by any political subdivision of the State of Mississippi, including the imposition of that license fee presently authorized by Mississippi code Annotated 75-76-195, shall be deducted from gross revenue as defined in the Lease on a monthly or pro-rata basis; or Subsection 3.07 is amended to read as follows: 3.07. Tenant shall pay in addition to the $20,000.00 premium paid pursuant to the original version of this Agreement, an additional rental of $40,000.00 annually with the first annual payment to be made at the signing of this Addendum to Lease which may be used by the Landlord to pay for premiums of a performance bond in the sum of One Million Dollars ($1,000,000.00) or more. In the event the Landlord purchases a performance bond, Tenant will be named co-insured and a certificate provided to Tenant. This performance bond shall cover all contingent costs of environmental clean up for the Leased Property following termination or expiration of the term of the Lease and would only apply in the event Tenant or its transferees or assignees refuse or are economically unable to remedy any conditions on the premises that violate any federal, state and local laws and ordinances governing the environment or health and safety, including those related to toxic or hazardous substances and other contaminants. The following is added as Subsection 3.22: 3.11. Unless otherwise agreed upon by the Parties, the Tenant shall pay as additional rental a percentage of the gross revenue (as defined for Mississippi Sales Tax purposes) of any business constructed on Parcels B and C, the activity of which is one other than that which furthers the direct convenience and benefit of patrons while participating in and availing themselves of games and gaming machines of the gaming casino (activities for the direct convenience and benefit being such activities as restaurants, child care centers, etc.) SECTION 6 REPRESENTATIONS AND WARRANTIES There is hereby added an additional Subsection 6.04 and Subsection 6.05 to read as follows: 6.04 Tenant agrees to take all action necessary to obtain a license from the Mississippi Gaming Commission and to place in operation a gaming casino having a minimum of 30,000 square feet located on the Leased Premises on Parcel C South of Highway 49, on or before July 1, 1995. If the Tenant does not open for operation by July 1, 1995, a casino on Parcel C, Tenant agrees to pay to Landlord a penalty in the amount of One Hundred Fifty Thousand Dollars ($150,000.00) per month beginning July 1, 1995, and continuing until the casino is open for operation. Said penalty will be pro-rated on a daily basis for a partial month. The Parties recognize that despite the best efforts of Tenant, delays can occur with construction and licensing of a casino. Therefore, upon mutual agreement of the parties, this provision may be extended but only in writing, signed by the parties. Once a casino is opened for operation on Parcel C of the Leased Premises, the permanent cessation or termination of operation [as defined in Subsection 15.01(h)] of said casino shall at the option of the Tenant either 1) automatically terminate this lease as to Parcel B and C only, notwithstanding the provisions of Subsection 15.01 (h), or 2) reinstate the obligation of the Tenant to pay the Landlord the monthly penalty of $150,000.00 per month, which penalty will thereafter continue to be paid until a like casino again begins operation. 6.05. Landlord agrees that it has no intention to compete with Tenant in the casino business but, nevertheless, should Landlord attempt to engage in the casino business either directly or indirectly (specifically excluded is investment in publicly traded stock) in Coahoma County, Mississippi, within five (5) years from the date of this Addendum to Lease Landlord agrees to notify Tenant in writing and grant Tenant the opportunity to participate in any such venture. SECTION 8 ALTERATIONS AND IMPROVEMENTS Subsection 8.02 is amended to read as follows: 8.02. Landlord agrees to sell to Tenant and Tenant agrees to buy at the fixed price of One Dollar ($1.00) per cubic yard fill material in quantity sufficient for Tenant's construction purposes from premises set forth in Exhibits "A", "B", and "C". SECTION 20 MEMORANDUM OF LEASE This Addendum to Lease shall not be recorded. The parties will execute and record a memorandum of this Addendum to Lease, within ten (10) days of the execution of the Addendum to Lease. IN WITNESS WHEREOF, the parties hereto have executed this Addendum to Lease the day and year first above written. LANDLORD: TENANT: __________________________________ MAGNOLIA LADY, INC. Roger Allen Johnson, Jr. __________________________________ By: _______________________ Charles Bryant Johnson Andrew H. Tompkins President EX-10.47 3 0003.txt SECOND ADDENDUM TO LEASE This is an addendum to the Lease entered into on November 16, 1993, and amended by that Addendum to Lease dated June 22, 1994 (hereinafter, the "Amended Lease") between Roger Allen Johnson, Jr., and Charles Bryant Johnson (hereinafter collectively referred to as "Landlord") and Magnolia Lady, Inc., a Mississippi corporation (hereinafter referred to as "Tenant"). This Second Addendum to Lease is intended to modify the provisions of the Amended Lease requiring construction of a second casino on the Leased Property south of Highway 49 to permit construction of the second casino on the Leased Property required by the provisions of the Amended Lease north of Highway 49, to increase the amount which must be paid by Tenant as a penalty if the second casino is not operational by a date certain, to provide for the penalty to be paid by the Tenant if either casino is not suitably equipped, and to authorize the Tenant to construct an R V park and related amenities, all other provisions of the Amended Lease not specifically changed by this Second Addendum to Lease shall remain in full force and effect. SECTION 6 REPRESENTATIONS AND WARRANTIES Subsection 6.04 is amended to read as follows: 6.04 (a) Tenant covenants and agrees to construct, obtain a license from the Mississippi Gaming Commission for and place in operation a second gaming casino with a minimum of 30,000 square feet of actual gaming space on the Leased Property on or before July 1, 1996. "Actual gaming space" shall be defined as the total floor space in which gaming is legally conducted under the terms of the Mississippi Gaming Control Act and the gaming license issued to the Tenant by the Mississippi Gaming Commission in respect to the second casino. Notwithstanding anything to the contrary herein contained "actual gaming space" as that term is used herein shall not include other ancillary facilities such as restaurants, offices, hotel lobbies or rooms, or hallways leading from the gaming casino to such ancillary facilities. Tenant covenants and agrees to equip the second casino during the term of this lease with gaming devices, table games, cashier cages and change booths, players club facilities, bars and entertainment facilities are customary in the gaming industry as conducted in the State of Mississippi. (b) Tenant convenants and agrees that it will not during the term of this lease without prior written consent of the Landlord, reduce the number of gaming devices or table games in the existing casino by more than 25% from the level existing on the date of execution of this agreement. Landlord and Tenant acknowledge and agree that upon the date of execution of this agreement the existing casino contains 846 gaming devices and 31 table games. Default by Tenant in respect to either this covenant or its covenant in Paragraph (a) of this subsection to equip the second casino with gaming devices and table games as is customary in the gaming industry as conducted in the State of Mississippi shall reinstate the obligation of the Tenant to pay the Landlord the monthly penalty of $200,000.00 per month as set forth in paragraph (c) below, which penalty will thereafter continue to be paid until the default under this covenant or Tenant's covenant under the Paragraph (a) of this subsection to which reference is made is cured. Said penalty shall be prorated on a daily basis for a partial month. (c) Tenant acknowledge that it has paid to Landlord a penalty in the amount of $150,000.00 per month beginning July 1, 1995, because Tenant failed to open a second gaming casino having a minimum of 30,000 square feet located on the Leased Property on Parcel C south of Highway 49 on or before July 1, 1995, pursuant to Section 6.04 of the Addendum to Lease dated June 22, 1994. Tenant agrees to continue to pay to Landlord without interruption the penalty in the amount of $150,000.00 per month until the earlier of 1) the opening of the second casino or 2) July 1, 1996. If the Tenant does not open casino for operation by July 1, 1996, Tenant agrees to pay to Landlord a penalty in the amount of two hundred thousand dollars ($200,000.00) per month beginning July 1, 1996, and continuing until the second casino is open for operation. Once the second casino is open for operation, the permanent cessation or termination of operation [as defined in Subsection 15.01 (h)] of either casino located upon the Leased Property shall at the option of the Tenant either 1) automatically terminate this lease as to Parcels B and C only, notwithstanding the provisions of Subsection 15.01 (h) or 2) reinstate the obligation of the Tenant to pay the Landlord the monthly penalty of $200,000.00 per month, which penalty will thereafter continue to be paid until a like casino again begins operation. (d) Landlord hereby authorizes Tenant to construct a recreational vehicle ("R.V.") park on the leased Property, including washrooms, laundry facilities, and such other amenities which are ordinarily found in first-class R.V. parks. (e) Nothing contained in this Second Addendum to Lease shall be constructed as a waiver of any rights or claims which either party may have against the other arising under any provision of the Amended Lease as it existed prior to the execution of this agreement, including, but not limited to any rights or claims arising under Subsection 6.04 as the same was contained in the Addendum to Lease dated June 22, 1994, and the rights of each party to pursue claims arising as a result of the purported default in the terms and conditions of Subsection 6.04 existing prior to the execution and delivery of this Second Addendum to Lease. Each party shall have a full and absolute right to pursue such claims as if this Second Addendum to Lease had never been executed and delivered. SECTION 20 MEMORANDUM OF LEASE This Second Lease shall not be recorded. The parties will execute and record a memorandum of this Second Addendum to lease within ten (10) days of its execution. IN WITNESS WHEREOF, the parties hereto have executed this Second Addendum to Lease effective this 17th day of October, 1995. ---- LANDLORD: TENANT: /s/ Roger Allen Johnson, Jr MAGNOLIA LADY, INC Roger Allen Johnson, Jr. /s/ Charles Bryant Johnson By: /s/ Andrew H. Tompkins Charles Bryant Johnson Andrew H. Tompkins ACKNOWLEDGMENT STATE OF MISSISSIPPI COUNTY OF COAHOMA Personally appeared before me, the undersigned authority in and for the said county and state on this the 7th day of October, 1995 within any --- ------- jurisdiction, the within named Roger Allen Johnson Jr., who acknowledged that he executed the above and forgoing instrument. /s/ Gwendolyn Paige Johnson Notary Public My Commission Expires: May 4, 1998 STATE OF MISSISSIPPI COUNTY OF COAHOMA Personally appeared before me, the undersigned authority in and for the said county and state on this the 7th day of October , 1995 within any --- ------- jurisdiction, the within named Charles Bryant Johnson, who acknowledged that he executed the above and forgoing instrument. /s/ Gwendolyn Paige Johnson Notary Public My Commission Expires: May 4, 1998 STATE OF NEVADA COUNTY OF CLARKE Personally appeared before me, the undersigned authority in and for the said county and state on this the 17th day of October, 1995 within any ---- -------- jurisdiction, the within named Andrew H. Tompkins, who acknowledged that he is President of Magnolia Lady, Inc., a Mississippi corporation, and that for and on behalf of the said corporation, and is its act and deed he executed the above and foregoing instrument, after first having been duly authorized by the said corporation so to do. /s/ Dayle Annette Patronik Notary Public My Commission Expires: November 30, 1997 EX-10.57 4 0004.txt AMENDED AND RESTATED LEASE AGREEMENT BY AND BETWEEN THE PORT AUTHORITY OF KANSAS CITY, MISSOURI ("LANDLORD") AND HILTON HOTELS CORPORATION ("TENANT") DATED AS OF AUGUST 21, 1995 AMENDED AND RESTATED LEASE AGREEMENT --------------- THIS AMENDED AND RESTATED LEASE AGREEMENT (the "Lease") is made and entered into by and between THE PORT AUTHORITY OF KANSAS CITY, MISSOURI (the "Landlord") and HILTON HOTELS CORPORATION, a Delaware corporation (the "Tenant"), as of the ____ day of August, 1995. RECITALS The following recitals are a material part of this Lease: A. Landlord is a body politic created and formed by the city of Kansas City, Missouri (the "City") under Ordinance Number 47523 adopted February 11, 1983 by virtue of the power granted to the City under Sections 68.010 et. seq. of the Revised Statutes of Missouri. B. Tenant submitted a proposal dated December 30, 1992, and supplemented on January 11, 1993 (collectively, the "Proposal"), to construct gaming facilities on property leased by Landlord from the City. Landlord and Tenant signed a Development Agreement on March 12, 1993, under which Tenant attempted to develop such facilities on Site B and agreed to construct related infrastructure on behalf of Landlord and the City. Because of difficult site constraints, changing regulatory requirements, changes in the Missouri gaming laws, and concern of Landlord and Tenant with potential problems relating to environmental and archaeological issues at Site B, Landlord and Tenant have agreed, subject to the Development Agreement (as defined herein), to construct Tenant's gaming enterprise at Site A instead of at Site B and to modify the requirements of the Development Agreement relating to infrastructure construction and development. C. The City, as present owner of the Demised Premises (as defined herein) has, under that certain Kansas City Riverfront Lease Agreement dated May 14, 1993 as amended by agreements dated September 30, 1994 and ________________, 1995 (collectively "City Lease"), leased the Demised Premises (as herein defined) to Landlord with all necessary right, title and interest thereto in order for Landlord to have the full legal ability to further sublease the same to other parties such as Tenant. D. Subject to and in connection with that certain Development Agreement made and entered into by and between the Landlord and Tenant on March 12, 1993, and amended by Addenda One through Fourteen (collectively the "Development Agreement"), the first and signature pages of each of which are attached hereto identified as Exhibit A, Landlord has agreed to sublease to Tenant the Demised Premises and the Easements (as defined herein) and Tenant has agreed to sublease the same from Landlord. E. On March 12, 1993, Landlord and Tenant entered into a certain Lease Agreement (the "Lease") under which Landlord leased to Tenant the Demised Premises and additional real property. F. In the Twelfth and Thirteenth Addendums to the Development Agreement (Exhibit D) the parties agreed that Tenant would construct its riverboat gaming floating facility ("Riverboat Gaming Facility") in a basin adjacent to the Missouri River. G. The parties hereto have determined that the Lease should be amended and restated. WITNESSETH, that for and in consideration of the sum of Ten and NO/100 Dollars ($10.00) to each of them paid by the other, and other good and valuable consideration, the receipt, adequacy and sufficiency of which is hereby acknowledged by each of them, the parties hereto do hereby covenant and agree as follows: ARTICLE I. Demised Premises Section 1.01 DEMISE. Landlord hereby subleases to Tenant, and Tenant hereby ------ leases from Landlord, the real property described in Exhibit B attached hereto, together with all buildings and improvements to be constructed in accordance with the Development Agreement ("Site Improvements") (collectively the "Demised Premises"), and specifically including the Riverboat Gaming Facility and including the following easements and appurtenances: (a) That certain driveway easement conveyed to Landlord by Kansas City Power and Light Company ("KCPL") in the document entitled "Service Access Easement Agreement," which is recorded as Document No. ____ in Volume ____ at Page ____ of the Recorder of Deeds Office of Jackson County, Missouri and which was executed by such parties for the purpose of ingress and egress to and from the Demised Premises and Riverfront Road and which such easement is described in Exhibit B-1, which is attached hereto and incorporated herein by reference; and (b) A certain pedestrian easement (the "Pedestrian Access Easement") to be conveyed to and inuring to the benefit of Landlord in accordance with the Development Agreement and providing access for pedestrians crossing Front Street for the purpose of using Tenant's Riverboat Gaming Facility (to be attached to this Lease and identified as Exhibit B-2, as part of a future amendment to this Lease); and (c) Any other easements or other rights in adjoining property inuring to the benefit of Landlord by reason of the City Lease including any and all easements reasonably required for the installation, maintenance, operation and service of sewer, water, gas, power, and other utility lines and services; (d) All machinery, equipment and fixtures and other items of personal property and any replacements thereof, attached to or used in connection with the use, occupation and operation of the Demised Premises and the Easements, except those items specifically referred to as Tenant's Personalty and Fixtures in Section 4.01 hereof, and all alterations, additions and improvements hereafter made to the Demised Premises, title to which may now or hereafter vest in City and/or Landlord. Following the conveyance of the Pedestrian Access Easement to Landlord, this Lease shall be amended by the addition of the legal description for such easement. The Pedestrian Access Easement and the Service Access Easement referred to in subsections (a) and (b) are hereinafter referred to as "the Easements." Landlord warrants that it and no other entity now has the right to sublease the Demised Premises and the Easements to Tenant, and that so long as Tenant is not in default hereunder or under the Development Agreement, Tenant shall have peaceful and quiet use of the Demised Premises and the Easements, subject to all matters presently of record and all other agreements and encumbrances to which this Lease is or may hereafter be subordinated or otherwise made subject to as permitted herein or in the Development Agreement, and such use by Tenant shall also be subject to the following: (i) any state of facts which an accurate survey may show; and (ii) easements, covenants and restrictions of record, if any, to the extent that the same are in force or effect; and (iii) present and future zoning laws, ordinances, resolutions and regulations of the City, and all present and future ordinances, laws, regulations and orders of all boards, bureaus, commissions and bodies of any municipal, county, state or federal government or governmental authority now or hereafter having or acquiring jurisdiction of the Demised Premises and/or the use and improvement thereof and/or the operation of gaming or other enterprises thereat or in connection therewith; and (iv) violations of law, ordinances, orders and requirements, whether or not of record, of any federal, state or municipal department or authority having jurisdiction over or affecting the Demised Premises, as the same may exist on the date hereofor may be hereafter enacted; and (v) condition and state of repair of the Demised Premises as the same may be on the date of execution hereof. Notwithstanding anything to the contrary contained herein, the Demised Premises, the Easements, and all improvements presently existing thereon, Landlord's interest therein and City's title thereto have been examined by Tenant and when accepted by it as evidenced by its execution hereof or by its use thereof shall be deemed to have been accepted by it in its then present "as is" condition, except as set out in Article VIII hereof. Section 1.02 TERM. The term of this Lease (the "Term") shall commence on the ---- date hereof (the "Commencement Date") and shall terminate on the Termination Date (as defined herein), except as renewed under Article XIX hereof or as earlier terminated under Article XVIII hereof. The date on which the Tern shall terminate (the "Termination Date") shall be the earlier of: ------- (a) Ten (10) years after the date on which Tenant begins operation of its riverboat gaming enterprise ("Actual Opening Date") on the Demised Premises; or (b) Ten (10) years after the Deemed Opening Date (which shall be twenty-four (24) months after the Commencement Date, subject to extension for force majeure delay as defined in Section 5.4 of the Development Agreement) (the Actual Opening Date or the Deemed Opening Date, whichever first occurs is sometimes referred to herein as the "Opening Date"). Landlord and Tenant agree, upon demand of the other, to execute and deliver to the other party hereto, a declaration setting forth the Termination Date (in conformance herewith) as soon as it has been determined. Section 1.03 TERMINATION. This Lease shall terminate on the Termination Date ----------- (unless renewed in accordance with the provisions for renewal contained in Article XIX hereof, or unless otherwise extended by written agreement of Landlord and Tenant), without the necessity of any additional notice from either Landlord or Tenant to terminate the same, and Tenant hereby waives notice to then vacate or quit the Demised Premises and agrees that Landlord shall then be entitled to the benefit of all provisions of law respecting the summary recovery of possession of the Demised Premises from a tenant holding over to the same extent as if statutory notice had been given. Tenant hereby agrees that if it fails to surrender the Demised Premises and the Easements an the Termination Date, Tenant will be liable to Landlord for any and all damages which Landlord shall suffer by reason thereof including, but not being limited to, damages under Section 1.04 hereof and liquidated damages as described in Section 2.06 hereof or elsewhere described herein. Section 1.04 HOLDING OVER. If Tenant shall be in possession of the Demised ------------ Premises after the expiration of the Term, or, if applicable, after any validly exercised renewal thereof as provided for herein, the tenancy under this Lease shall become one from month to month, terminable by either party on thirty (30) days prior written notice, and shall be subject to all of the terms and conditions of this Lease as though the Term had been extended from month to month, except that: (i) the Minimum Net Rent (as defined herein) payable hereunder for each month during said holdover period shall be equal to twice the monthly installment of Minimum Net Rent (as defined herein) payable during the last month of the Term (or any such renewal thereof); (ii) the installment of Percentage Rent (as defined herein) payable hereunder for each such month shall be equal to one-twelfth (1/12th) of the average annual Percentage Rent payable hereunder, if any, for the immediately preceding three (3) years of the Term (or any renewal thereof); and (iii) all Additional Rent payable hereunder shall be prorated for each month during such holdover period. ARTICLE II. Rent Section 2.01 AMOUNT AND MEDIUM OF PAYMENT. Throughout the Term and any -------------------------------- renewal thereof, Tenant shall pay Landlord, without notice or demand, in lawful money of the United States of America, at the office of Landlord or at such other place as Landlord shall designate within the City, State of Missouri, as rent hereunder (collectively, the "Rent") the following: (a) Interim Fixed Rent as called for in Section 2.02 hereof; plus (b) Minimum Net Rent as called for in Section 2.03 hereof; plus (c) Percentage Rent as called for in Section 2.05 hereof; plus (d) Additional Rent as called for in Section 2.10 hereof. Section 2.02 INTERIM FIXED RENT. In lieu of Tenant's otherwise agreeing to ------------------- reimburse Landlord for expenses paid and/or incurred by Landlord for attorneys, accountants and other consultants retained by Landlord in connection with its requesting Tenant's Proposal and selecting Tenant as developer (which led to the execution of this Lease by Landlord), and so as to ensure that Landlord shall incur no expense with respect to the riverboat gaming enterprise of Tenant, as Tenant agreed to so do under the Proposal, Tenant agrees (i) that any payments made by it to Landlord on or before June 30, 1994 which might under prior agreements have been a credit against Minimum Net Rent, shall not be so deemed and Landlord shall not be obligated to credit such payments or any part thereof against monies due to Landlord hereunder, and (ii) that beginning on July 1, 1994 and continuing through the Opening Date or the Termination Date, whichever first occurs, Tenant shall pay monthly interim fixed rent ("Interim Fixed Rent") to Landlord at the rate of Twenty-Five Thousand and NO/100 Dollars ($25,000.00) per calendar month, payable in advance on the first day of each such calendar month, three-fifths (3/5) of which sum, as so paid, shall on Opening Date be credited against Minimum Net Rent due hereunder. Tenant shall have no further liability to Landlord for any such Landlord expenses. Section 2.03 MINIMUM NET RENT. Subject to credit therefor under Sections ---------------- 2.02, 2.04 and 2.13 hereof, beginning on the opening Date and continuing during the remainder of the Term and any renewal thereof (as adjusted under Section 2.04 with respect thereto), Tenant shall pay to Landlord a minimum net annual rent, over and above the other payments to be made by Tenant as hereinafter provided, at the rate of Two Million and NO/100 Dollars ($2,000,000.00) per year (as the same may be adjusted during any renewal term hereof). Such minimum net rental (the "Minimum Net Rent") shall be paid in equal annual installments of Two Million and NO/100 Dollars ($2,000,000.00) each, in advance, on the Opening Date and on the date of each and every annual anniversary of the Opening Date thereafter. Section 2.04 PARTIAL MONTH. If the Commencement Date and/or the Opening Date ------------- shall occur on any day other than the first day of a calendar month, Tenant shall pay Landlord on the Commencement Date and receive a credit on the Opening Date, as applicable, of the proportionate amount of Interim Fixed Rent accrued for the balance of such current calendar month. Section 2.05 PERCENTAGE RENT. Beginning with the Opening Date and continuing --------------- throughout the entire remaining Term of this Lease and any renewal thereof, pursuant to the terms of Section 2.07 hereof Tenant shall pay to Landlord as minimum percentage rent (the "Percentage Rent") a sum of money equal to three and one quarter percent (3 1/4%) of Gross, Revenues (as defined herein) less Minimum Net Rent paid hereunder. As used herein, the term "Gross Revenues" shall mean the sum of "adjusted gross receipts" as such term is defined under the Missouri Gaming Laws of the Revised Statutes of Missouri, plus all revenues from admissions, sales of food, beverages, merchandise, services, parking charges, and all other business endeavors at the Demised Premises and/or Tenant's riverboat gaming enterprise as are derived from use of the Demised Premises and/or operation of Tenant's riverboat gaming enterprise (including any parking facilities or concessions operated with respect thereto) by Tenant or any licensee, sublessee, franchisee or other operator of all or any portion of any such business endeavors, on or in connection with all or any portion of the Demised Premises or the Easements. Section 2.06 OBLIGATION TO OPERATE. At all times from and after the Opening --------------------- Date during the Term of this Lease (including any validly exercised renewals of the original or any extended term hereof), Tenant will continuously use and occupy the Demised Premises and operate its riverboat gaming enterprise in connection therewith in good faith and in such a manner as shall assure the transaction of a maximum volume of business in and at the Demised Premises and from said riverboat gaming enterprise. If Tenant shall fail to cause its said riverboat gaming enterprise to be operated as required under the immediately preceding sentence, then, in addition to any other remedy available to Landlord under this Lease, Tenant shall pay to the Landlord in lieu of Percentage Rent and in addition to any other Rent payable hereunder, and as liquidated damages for such failure to so operate, a sum equal to fifty percent (50%) of the then applicable Minimum Net Rent applicable to each day or portion thereof during which Tenant shall fail to so operate (e.g. if not operating for forty (40) days, 40/365th of 50% of the then applicable Minimum Net Rent as Percentage Rent for such forty (40) days). Notwithstanding the foregoing, solely for the purposes of this Section 2.06 Tenant's failure to so operate shall be deemed unavoidable and not a failure to so operate, if and so long as non-operation shall be directly caused by fire or other casualty, national emergency, condemnation, enemy action, civil commotion, strikes, lockouts, or national defense preemptions, acts of God, energy shortages, changes in the Missouri law which prohibits the continuation of Tenant's business, changes in the Kansas City, Missouri gaming industry which make Tenant's gaming operations unprofitable for a continuous period of one (1) year or more, or any other similar causes beyond the reasonable control of Tenant, and provided further that Tenant shall continually thereafter use its diligent best efforts to alleviate the cause for such cessation of operation and commence operation as soon thereafter as is practicable. Section 2.07 QUARTERLY STATEMENT/PAYMENT OF PERCENTAGE RENT. Tenant shall ---------------------------------------------- deliver to Landlord, within thirty (30) days after the end of each third month of the Term of this Lease after Opening Date, a written statement, in form reasonably acceptable to Landlord, certified to as true, complete and accurate by an authorized officer of Tenant, setting out its Gross Revenues during the immediately preceding three (3) month period ("Tenant's Quarterly Statement"). A similar statement, certified as correct by Tenant's chief financial officer shall be delivered to Landlord within thirty (30) days after each anniversary of the Opening Date ("Tenant's Annual Statement"). Tenant shall pay any Percentage Rent due, based on Tenant's Quarterly Annual Statement, within thirty (30) days after the end of the quarter or year reported in Tenant's Quarterly or Annual Statement, which statement reflects that any Percentage Rent is due hereunder, as a result of 3-1/4% of Gross Revenues during the total period of time reflected therein exceeding the Minimum Net Rent due for the 12-month period of time as to which said Quarterly or Annual Statement relates. Section 2.08 ACCOUNTING RECORDS AND AUDITING RIGHTS. ------------------------------------------ 2.08.1 Accounting Records. Tenant shall maintain at the Demised Premises or ------------------- at a central accounting location maintained in the City, and identified to Landlord upon request, account records and procedures complying with generally accepted accounting principles consistently applied, as defined by the American Institute of Certified Public Accountants ("AICPA") and the Financial Accounting Standards Board ("FASB"); provided, however, that such principles shall comply in all respects and conform to all rules, regulations and requirements of the Gaming Commission of the State of Missouri or any similar body established in Missouri relating to accounting principles for the determination of adjusted gross receipts of Tenant, so as to enable Tenant to calculate, and Landlord to verify, any Percentage Rent due under this Lease. Tenant shall preserve Tenant's said books and records relating to each calendar year for at least three (3) years after the end of such calendar. If at the conclusion of such three-year period, a dispute is pending between Landlord and Tenant regarding the amount of Percentage Rent due, then Tenant shall continue to preserve such records pending the final disposition of such dispute. 2.08.2 Audit Procedures. Within (and in no event later than) seventy-five ---------------- (75) days after the end of each calendar year of Tenant, Tenant shall cause the certified public accountant then regularly auditing Tenant's books and records (which CPA shall be licensed in Missouri and shall be a member of AICPA) to audit Tenant's (and/or any subtenant's, licensee's, franchisee's or concessionaire's) books and records relevant to the calculation of Rents and other payments and Gross Revenues reported by Tenant and/or which should have been reported by Tenant during its preceding calendar year and to certify to Landlord the correctness of same and the compliance thereof with the definitions and requirements of this Lease. Tenant shall provide to Landlord, at the time of filing thereof, copies of all financial reports and tax returns furnished to the State of Missouri and/or the Gaming Commission thereof in connection with the determination of Tenant's taxable gaming revenue and/or adjusted gross receipts. Further, if Tenant shall fail to so provide to Landlord such certification and/or copies as and when due hereunder or if Landlord shall desire to audit such statement(s), Landlord, in conjunction with the City Auditor and Director of Finance for the City, shall have the right to audit the books and records of Tenant with respect to Percentage Rent or other payments provided for in this Lease at any time upon reasonable notice; provided that Landlord agrees to exercise this audit right not more frequently than once per fiscal year. Any such audit shall be performed in accordance with generally accepted auditing standards, during ordinary business hours and without unreasonably interfering with Tenant's business. If such certification was not provided or if any such audit reveals that Gross Revenue or any portion of Percentage Rent due hereunder was understated, then within thirty (30) days after receipt of the audit with appropriate backup documentation, Tenant shall pay to Landlord the additional Percentage Rent due on account of the audit or audit corrections. Any adjusting payment due on account of previous underpayment shall bear interest at the Interest Rate (as defined herein) from the date it would have been paid had Tenant's Quarterly Statement been correct, until the date actually paid. If such certification was not so provided or if Percentage Rent reported therein was understated by more than two percent (2%) for any audited period of time, then Tenant shall pay the reasonable cost of the audit showing same and/or disclosing such understatement; otherwise the audit shall be conducted at Landlord's expense. Section 2.09 NET LEASE. It is the purpose and intent of Landlord and Tenant --------- that this is a net lease and that from and after the opening Date, the Minimum Net Rent (and any Percentage Rent and/or Additional Rent) shall, except as herein otherwise provided, be absolutely net to Landlord, so that this Lease shall thereafter yield, net, to Landlord, the Minimum Net Rent specified in section 2.03 hereof in each remaining year during the Term and any renewal thereof, together with the Percentage Rent provided for in Section 2.05 hereof, and the Additional Rent provided for in Section 2.10 hereof, and that all costs, expenses and obligations of every kind and nature whatsoever relating to the Demised Premises and/or the operation of Tenant's riverboat gaming enterprise thereon and/or in connection therewith, except as herein otherwise provided, which may arise or become due during or out of the original or any renewal Term of this Lease, shall be paid by Tenant, and that Landlord shall be protected, defended, indemnified and held harmless by Tenant from and against the payment of same or any obligation to pay the same. Section 2.10 ADDITIONAL RENT. Except as herein otherwise provided, Tenant --------------- shall also pay without notice except as may be required in this Lease, and without abatement, deduction or set-off, as additional rent ("Additional Rent"), all sums, Impositions (as defined in Article III hereof), costs, expenses and other payments which Tenant assumes or agrees to pay hereunder, and, in the event of any non-payment thereof, Landlord shall have all the rights and remedies provided for herein or by law. Section 2.11 ABSOLUTE RIGHT TO RENT. Rent due hereunder shall be paid to ---------------------- Landlord without notice or demand and without abatement, deduction or set-off, except as herein otherwise specifically provided. Section 2.12 ABSOLUTE MINIMUM RENT. Notwithstanding anything to the contrary --------------------- contained herein, the Minimum Net Rent shall never be less than $2,000,000.00 per year (subject to sum credited under Section 2.03, 2.04 and 2.13 hereof as rent received) and the amount of Additional Rent due hereunder shall always reflect the expenses incurred or made upon which Additional Rent is due. Section 2.13 GRANT AND CREDIT AGAINST RENT. As additional consideration to ----------------------------- Landlord for Landlord's entering into this Lease and the Development Agreement, Tenant shall make a grant to Landlord in the amount of TEN MILLION DOLLARS ($10,000,000.00), payable in all events as follows: ONE MILLION AND NO/100 DOLLARS ($1,000,000.00) on the Opening Date, and a like sun of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00) on the anniversary of the Opening Date in each of the next nine (9) consecutive years after the year in which the Opening Date occurs. This grant, in the aggregate, shall be known as the "Riverfront Park Grant." Said Riverfront Park Grant, along with Minimum Net Rent payable during the initial ten (10) year term hereof, shall be utilized, inter alia, for ----- ---- completion of the work described in Exhibit I of the Development Agreement (or for bond financing payments due with respect thereto), and for the purposes set out in Exhibit D attached hereto. Section 2.14 Bond Issue. Tenant acknowledges that Landlord intends to employ ---------- the Rents and Riverfront Park Grant in part to cover debt service under and other costs of a tax exempt revenue bond issue (the "Bond Issuance") utilizing the Tenant's credit and its payment obligations hereunder in order to fund the costs of the work described in Exhibit I to the Development Agreement. Tenant further acknowledges that its obligations hereunder are not subordinate to any of its most senior or other debts or obligations and that Landlord has not subordinated this Lease and/or Tenant's obligation hereunder to any other debt or obligations of Tenant. Tenant also acknowledges that in order to complete such work, it is necessary for Landlord to have net proceeds totaling in the aggregate not less than $20,000,000.00, in addition to amounts sufficient to fund interest reserves and to pay costs of issuance of the bonds, available to it as a result of the sale of such bonds. In addition, should said net proceeds be less than $20,000,000.00, Tenant shall on opening Date waive that portion of the credit to be given under Section 2.02 of this Lease which is equal to the amount by which $20,000,000.00 exceeds the actual net proceeds of the Bond Issuance (provided however, such waiver shall not exceed the sum of $195,000.00). As additional consideration for Landlord entering into this Lease with Tenant, Tenant agrees, that, on the Commencement Date, it shall pay Landlord in lieu of the anticipated cost of a forward interest rate swap or other derivative or financing device selected by Landlord, the sum of Three Hundred Fifty Thousand Dollars ($350,000.00). ARTICLE III. Payment of Taxes, Assessments, Etc. Section 3.01 IMPOSITIONS. Tenant shall pay or cause to be paid (except as in ----------- Section 3.03 hereof provided) , before any fine, penalty, interest or cost may be added thereto for the non-payment thereof, all taxes, general and/or special assessments, water, fire line, steam and sewer rents, fees, rates and charges, levies, license and permit fees and all other governmental charges, general and special, ordinary and extraordinary, foreseen or unforeseen, of any kind and nature whatsoever, which at any time on or after the Commencement Date may be assessed, levied, confirmed, imposed upon, and/or become due and payable during the balance, if any, of the original Term or any renewal or extension thereof, out of or in respect of, or become a lien on, the Demised Premises, or any part thereof or any appurtenance thereto and/or Tenant's riverboat gaming enterprise (all such taxes, assessments, water, fire line, steam and sewer rents, fees, rates and charges, levies, license and permit fees and other governmental charges being hereinafter referred to as "Impositions," and any of the same being hereinafter referred to as an "Imposition"); provided, however, that (a) if, by law, any Imposition may, at the option of the taxpayer, be paid in installments, Tenant may pay the same in equal installments over the period of time allowed under the terms thereof, provided, however that Tenant shall pay all such installments remaining unpaid at the expiration or earlier termination of the Term of this Lease or any properly exercised renewal or extension thereof; and (b) all Impositions for the calendar or tax years in which the Commencement Date occurs and the Term or any renewal term ends shall be apportioned so that Tenant shall pay only those portions thereof which correspond with the portion of said calendar years as are within the Term and/or any renewal or extension thereof and are payable by Tenant hereunder. Section 3.02 FURNISHED RECEIPTS. Tenant, upon request of Landlord, shall ------------------- furnish to Landlord or, if requested by Landlord, to City and/or any mortgagee of Landlord, within thirty (30) days after the date when any Imposition would become delinquent, official receipts of payment issued by the appropriate taxing authority, or other evidence satisfactory to Landlord, City and/or such mortgagee, evidencing the payment thereof. Section 3.03 SEEKING OF REDUCTION OF IMPOSITIONS BY TENANT. Tenant shall be --------------------------------------------- entitled to seek a reduction in the valuation of the Demised Premises for tax purposes and to contest in good faith by appropriate proceedings, at Tenant's sole cost and expense, and at no cost or expense to Landlord, the amount, rate, or validity in whole or in part of any Imposition, and if permitted by law may defer payment thereof, so long as no interest or penalty shall accrue thereon or with respect thereto or provided that such interest or penalty is deposited with Landlord or such taxing authority by Tenant to protect Landlord's interest if Tenant does not prevail in such proceeding. Section 3.04 JOINING OF LANDLORD. Landlord shall not be required to join in ------------------- any proceedings to contest any Imposition unless the provisions of any law, rule or regulation at the time in effect shall require that such proceedings be brought by or in the name of Landlord, in which event Landlord shall join in such proceedings or permit the same to be brought in its name. Landlord shall not ultimately be subjected to any liability for the payment of any costs or expenses in connection with any such proceedings, and Tenant shall protect, defend, indemnify and hold Landlord harmless from any such costs and expenses. Tenant shall be entitled to any refund of any Imposition and penalties or interest thereon which are recovered by Landlord and which have already been paid by Tenant, or which have been paid by Landlord and previously reimbursed in full by Tenant. Section 3.05 PRIMA FACIE EVIDENCE. The certificate, advice, receipt or bill -------------------- of the appropriate official designated by law to make or issue the same or to receive payment of any Imposition or of non-payment of such Imposition shall be prima facie evidence that such Imposition is due and unpaid or has been paid at - ----- ----- the time of the making or issuance of such certificate, advice, receipt or bill. Section 3.06 UTILITIES. During the Term hereof, and any renewals thereof, --------- Tenant shall be responsible for obtaining, maintaining, supplying and paying for all utilities required for operation of its business on and in connection with the Demised Premises and shall make all payments for or with respect to the same on a timely basis. Such payments as and when due shall also be considered "Impositions" hereunder. ARTICLE IV. Surrender Section 4.01 REMOVAL OF PERSONALTY AND FIXTURES. The Riverboat Gaming -------------------------------------- Facility, together with its contents and including trade fixtures and personalty shall, until termination of this Agreement, be the absolute property of the Tenant. Following the termination of this Agreement, Tenant shall have a period of sixty days (60) in which to remove all or part of the furniture, trade fixtures and business equipment within the Riverboat Gaming Facility ("Removal Period"). Tenant's furniture, trade fixtures and business equipment shall include and be limited to the following: (1) all gaming equipment including slot machines, table games (Blackjack, Craps, Poker, Mini Baccarat), slot bases, slot systems (tracking, data and communications), cards, chips, cups, etc.; (2) All gaming-related furnishings, fixtures and equipment including tables, chairs and stools; (3) unattached casino bar equipment and related items (e.g. mixers and blenders), office furniture and portable panel systems and equipment other than that located in general business offices; (4) All computers and equipment other than that located in general business offices (5) All interior and exterior signage (attached and freestanding); (6) All security and surveillance and specialized audio visual equipment and systems related to casino operation only and not to any portion of the Demised Premises as a structure; (7) All (i) other special decorative elements and (ii) advertising elements, related to or expressing the brand name of Tenant or concerning Tenant's corporate identity; (8) reader or other message type boards whether installed on the interior or exterior and (9) special decorative doors, windows or lighting fixtures but only if Tenant on such removal replaces such items with items of comparable functional and decorative quality. In addition, Tenant will reasonably repair any material damage to the Riverboat Gaming Facility caused by Tenant's exercise of its right to remove Tenant's Personalty and Fixtures. Provided, however, Tenant shall not have the right to remove any: (i) wiring or other apparatus or devise (including that for general building security systems) that is installed within the walls, floors or ceilings of the Riverboat Gaming Facility on a permanent or semi-permanent basis, or (ii) signage that is of a generic nature such as that for exits and restrooms. All of the above is referred to herein as "Tenant's Personalty and Fixtures". Following Removal Period and subject to Tenant's absolute right to remove Tenant's Personalty and Fixtures, any furniture, trade fixtures and business equipment remaining within the Riverboat Gaming Facility following the Removal Period shall become the property of Landlord and Tenant shall transfer all title and interest in the Riverboat Gaming Facility and remaining personalty, equipment and fixtures to Landlord. Section 4.02 SURRENDER AND DELIVERY OF DEMISED PREMISES. Except as is ------------------------------------------ herein otherwise provided, Tenant shall on the last day of the Term hereof, or any valid renewal or extension thereof, or upon the date of any earlier termination of this Lease, will and truly surrender and deliver up the Demised Premises and the Easements to the possession and use of Landlord without fraud or delay and in good order, condition and repair, except for reasonable wear and tear after the last necessary repair, replacement, restoration or renewal made by Tenant pursuant to its obligations, or the obligations of any of its subtenants, franchisees, licensees or invitees hereunder, and the transfer to Landlord of any reserve accounts with respect thereto, free and clear of all lettings and occupancies other than subleases then immediately terminable at the option of the Landlord or subleases to which Landlord shall have specifically consented, and free and clear of all liens and encumbrances other than those, if any, presently existing, or hereafter created and specifically consented to in writing by Landlord, without any payment or allowance whatever by Landlord for or on account of any improvements which may then be on the Demised Premises. Section 4.03 PERSONAL PROPERTY NOT REMOVED. Any personal property of Tenant ----------------------------- which shall remain in or on the Demised Premises after the expiration of the Removal Period may, at the option of Landlord, be deemed to have been abandoned by Tenant and either may be retained by Landlord as its property or be disposed of, without accountability, in such manner as Landlord may see fit, or if Landlord shall give written notice to Tenant to such effect, such property shall be immediately removed by Tenant at Tenant's sole cost and expense. Upon entering into any agreement with any subleasee, licensee, franchise or other operator which occupies or is entitled to place any personal property on or in the Demised Premises, Tenant shall advise Landlord of same (appropriately redacted by Tenant to protect proprietary or confidential information) and furnish to Landlord a copy of the agreement between Tenant and such party, so that Landlord may notify such third party of Landlord's right to any personal property remaining in or an the Demised Premises after the end of the Renewal Period. Section 4.04 LANDLORD NOT RESPONSIBLE. Landlord shall not be responsible for ------------------------ any loss or damage occurring to any personal property owned by Tenant or any sublessee, licensee or franchisee of Tenant or any of their respective suppliers, customers or invitees. Section 4.05 FULL REPLACEMENT COST INSURANCE. The provisions of this Article ------------------------------- IV shall survive any termination of this Lease. ARTICLE V. Insurance Section 5.01 FULL REPLACEMENT COST INSURANCE. Tenant, at its sole cost and -------------------------------- expense and at no cost or expense to Landlord, shall keep all of the improvements on the Demised Premises (now or hereafter existing) or used in connection therewith including, without limitation the Riverboat Gaming Facility, insured, during the Term and each renewal and extension thereof, against any loss or damage by fire, flood, earthquake and all other casualties and perils, and including, without limitation, all other perils as are included within what is commonly known as "all risk coverage" for any improvements on the Demised Premises, as the same shall from time to time be customary for premises similarly situated in Kansas City, Jackson County, Missouri, with full replacement cost insurance, in amounts sufficient to prevent City, Landlord or Tenant from being or becoming a co-insurer within the terms of the policy or policies in question and in no event less than the full replacement cost value thereof, exclusive of the cost of foundations, excavations, and footings below the lowest basement floor, and without any deduction being made for depreciation. Such full replacement cost value shall be determined from time to time, but not more frequently than once in any twelve (12) consecutive calendar months, at the request of Landlord, by an appraiser, architect, ship builder and/or contractor or one or more of same, as applicable, who shall be acceptable to Landlord in its sole discretion. No omission on the part of Landlord to request any such determination shall relieve Tenant of its obligation hereunder. Section 5.02 OTHER INSURANCE. Tenant, at its sole cost and expense and at no --------------- cost or expense to Landlord, shall maintain during the Term and all renewals thereof: (a) for the mutual benefit of City, Landlord and Tenant, general commercial (comprehensive) public liability insurance, and specifically including but not being limited to indemnity insurance against claims for personal injury, bodily injury, death or property damage, occurring upon, in or about or adjacent to the Demised Premises, and/or any adjacent public improvements, garage, bridge, walkway or elevators, and on, in or about the adjoining sidewalks, walkways and passageways, including, without limitation, insurance protecting against claims for personal injury, bodily injury or claim, death or property damage resulting directly or indirectly from ownership, use, occupancy or maintenance thereof including any change, alteration, improvement or repair thereof, to afford protection for at least $200,000,000.00 to any one individual per occurrence combined single limit and $200,000,000.00 in the aggregate; and (b) rental value insurance against loss of rental or other income to be derived by Landlord from the operation of Tenant's business in connection with the Demised Premises due to the risks referred to in Section 5.01 hereof (including those embraced by "all perils coverage") in an amount sufficient to prevent Tenant from becoming a co-insurer within the terms of the policy or policies in question, but in no event in an amount or amounts less than the aggregate amount of the Minimum Net Rent and Percentage Rent, the Additional Rent payable hereunder for a period of one (1) year; and Tenant hereby assigns to Landlord the proceeds of such insurance so that in the event the improvements an the Demised Premises shall be destroyed or seriously damaged, such proceeds shall be held as security for the payment of such sums due hereunder until the restoration of such improvements and, as Tenant shall make payment of such sums to Landlord, Landlord shall, if Tenant shall not then be in default under this Lease, pay out to Tenant from said amount the sums which shall have been so paid by insurance proceeds. Tenant may, at its election, carry such insurance as a coverage contained in a business interruption insurance policy; and (c) such other insurance, and in such amounts, as may from time to time be reasonably required by Landlord against other insurable hazards and liabilities which at the time are customarily insured against in the case of premises and/or business operations similarly situated in the State of Missouri, due regard being or to be given to the type of improvements and the construction, use and occupancy thereof, including but not being limited to workers' compensation and other comparable insurance; and (d) with respect to any construction or remodeling of improvements on the Demised Premises, Tenant shall provide or shall require that each contractor performing such work shall carry and maintain, at no cost or expense to Landlord, with customary deductibles: (i) commercial (comprehensive) liability insurance, including (but not limited to) contractor's liability coverage, contractual liability coverage, completed operations coverage, broad form property damage endorsement and contractor's protective liability coverage, to afford protection, with respect to personal injury, bodily injury, death or property damage of not less than $1,000,000.00 per occurrence combined single limit; and (ii) comprehensive automobile liability insurance with limits for each occurrence of not less than $1,000,000.00 combined single limit; and (iii) workers' compensation insurance or similar insurance in form and amounts required by law, including employer's liability in the amount of not less than $1,000,000.00 each occurrence, $1,000,000.00 by disease and $1,000,000.00 each person by disease; (iv) Builder's risk insurance, insuring the Demised Premises and related property under construction or remodeling of improvements thereon with limits previously approved by Landlord; and (v) umbrella and excess umbrella insurance with limits previously approved by Landlord. (e) The amount of the coverages set out herein shall be subject to increase or decrease at the time of each renewal of this Lease in accordance with Consumer Price Index provisions of Section 19.01 below. Section 5.03 TYPE OF POLICIES. ------------------ A. All insurance provided for in this Article shall be effected and continuously maintained under valid and enforceable policies issued by insurers of recognized responsibility licensed to do business in the State of Missouri, or be a recognized insurance facility, in either case acceptable to Landlord, which acceptance shall not be unreasonably withheld. Upon the execution of this Lease, and thereafter not less than fifteen (15) days prior to the expiration dates of the expiring policies theretofore furnished pursuant to this Article V, originals or binders of the policies (or, in the case of general public liability insurance, certificates of the insurers) bearing notations evidencing the payment of premiums in full, or accompanied by other evidence satisfactory to Landlord of such payment, shall be delivered by Tenant to Landlord. B. Nothing in this Article V shall prevent Tenant from taking out insurance of the kind and in the amounts provided for under this Article V under a blanket insurance policy or policies covering properties in addition to the Demised Premises, provided, however, that any such policy or policies of blanket insurance (i) shall specify therein, or Tenant shall furnish Landlord with a written statement from the insurers under such policy or policies specifying, the amount of the total insurance allocated to the Demised Premises, which amounts shall not be less than the amounts required by Sections 5.01 and 5.02 hereof and (ii) with respect to property coverage, such amounts so specified shall be sufficient to prevent any one of the insureds from becoming a co-insurer within the terms of the applicable policy or policies, and provided further, however, that any such policy or policies of blanket insurance, as to the Demised Premises, shall otherwise comply as to endorsements and coverage with the provisions of this Article. Section 5.04 NAMED INSURERS. --------------- A. All policies of insurance provided for in this Article V shall name City, Landlord and Tenant as the insured, as their respective interests may appear, and also each fee and/or each leasehold mortgagee of the Demised Premises, when requested, as the interest of any such mortgagee may appear, by standard mortgagee clause, if obtainable, provided that any such mortgagee shall agree that the proceeds of such insurance shall be applied in accordance with this Lease. In case of any particular casualty resulting in damage or destruction not exceeding $500,000.00 in the aggregate, the loss under such policies shall be adjusted by Tenant and the insurance companies. In case of such damage or destruction in excess of $500,000.00, the loss shall be adjusted with the insurance companies by Tenant and Landlord. Notwithstanding the foregoing, Tenant shall adjust any loss with respect to the Riverboat Gaming Facility unless an Event of Default shall exist and be uncured on the date of any such loss, in which case any such loss shall be adjusted by Landlord. B. All such policies shall provide that the loss, if any,. thereunder &hall be adjusted and paid as hereinabove provided. Each such policy shall contain a provision that no involuntary act or omission of Tenant or anyone operating under rights granted by it shall affect or limit the obligation of the issuing insurance company to so pay the amount of any loss sustained. Section 5.05 CANCELLATION NOTICE. Each such policy or certificate therefor -------------------- issued by the insurer shall contain an agreement by the insurer that such policy shall not be canceled or amended without at least thirty (30) days prior written notice to Landlord and wording such that the insurer must notify Landlord of any such impending cancellation or amendment. ARTICLE VI. Landlord's Right to Perform Tenant's Covenants Section 6.01 RIGHT TO MAKE PAYMENTS. If Tenant shall at any time fail to pay ---------------------- any Imposition or utility cost or charge in accordance with the provisions of Article III hereof, or to take out, pay for, maintain or deliver any of the insurance policies or certificates thereof or as provided for in Article V hereof , or shall fail to make any other payment or perform any other act on its part to be made or performed under this Lease, then Landlord, after ten (10) days notice to Tenant (or without notice in case of an emergency) and Tenant's failure to cure the same with the time period, if any, allowed for such cure, and without waiving or releasing Tenant from any obligation of Tenant contained in this Lease or from any default by Tenant hereunder and without waiving Landlord's right to take such action as may be permissible under this Lease as a result of such default, may (but shall be under no obligation to): (a) pay any Imposition or other charge payable by Tenant pursuant to the provisions of Article III hereof, or (b) take out, pay for and maintain any of the insurance policies provided for in Article V hereof, or (c) make any other payment or perform any other act on Tenant's part to be made or performed under this Lease, and may enter upon the Demised Premises for any such purpose, and take all such action thereon, as may be necessary therefor or in connection therewith. Section 6.02 REPAYMENT BY TENANT. All sums so paid by Landlord under this --------------------- Article VI and or as a result of the exercise by Landlord of any of its rights under this Article VI, and all costs and expenses incurred by Landlord with respect thereto or in connection therewith, including, without limitation, reasonable attorneys' fees in connection with the performance of any such act, together with interest thereon at the Interest Rate from the date of such payment or incurrence by Landlord of such cost and expense, shall constitute Additional Rent payable by Tenant under this Lease and shall be paid by Tenant to Landlord on demand. ARTICLE VII. Repairs and Maintenance of the Demised Premises Section 7.01 REPAIRS. Throughout the Term of this Lease and any renewal ------- thereof, Tenant shall, at its sole cost and expense and at no cost or expense to Landlord, take good care of the Demised Premises and all improvements and additions thereon or thereto, including, without limitation, all alleyways, walkways, passageways, sidewalks, curbs and streets, parking facilities and bridges adjoining the same and shall keep the same in good order and condition, except for reasonable wear and tear after the last necessary repair, replacement, restoration or renewal made by Tenant pursuant to its obligations hereunder, and shall make all necessary repairs thereto, interior and exterior, structural and non-structural, ordinary and extraordinary, and foreseen and unforeseen. All repairs, replacements, restorations and renewals made by Tenant shall be at least equal in quality and class to the original work with respect thereto. Section 7.02 MAINTENANCE. Tenant shall at its sole cost and expense, and at ----------- no cost or expense to Landlord, put, keep and maintain all portions of the Demised Premises and the sidewalks, curbs, streets, bridges, alleyways, walkways and passageways, bridges and parking facilities adjoining the same in a clean and orderly condition, free of dirt, rubbish, snow, ice and unlawful obstructions. Tenant shall also provide for structural maintenance, repair and replacement of the portions of the Demised Premises normally requiring same. Section 7.03 NO SERVICES FURNISHED. Landlord shall not be required to --------------------- furnish to Tenant any utilities, facilities or services of any kind whatsoever during the Term hereof or any renewal thereof, such as, but not limited to, water, steam, heat, gas, telephone, cable televisions, hot water, electricity, light, and/or power. Landlord shall in no event be required to make any alterations, rebuildings, replacements, changes, additions, improvements or repairs during the Term of this Lease or any renewal thereof. ARTICLE VIII. General and Specific Compliance with Laws, Insurance, Development Agreement and Exhibits Thereto, Etc. Section 8.01 GENERAL COMPLIANCE. Throughout the Term of this Lease and any ------------------- renewal thereof, Tenant, at its sole cost and expense and at no cost or expense to Landlord, shall promptly comply with all present and future laws, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments, departments, commissions, boards and officers, and all other body or bodies exercising similar functions, foreseen or unforeseen, ordinary as well as extraordinary, which 'may be applicable to the Demised Premises and the Easements or any portion thereof, and/or the sidewalks, alleyways, walkways, passageway &, curbs, streets, parking facilities and bridges adjoining the same or to the use or manner of use of the Demised Premises and the Easements or any portion thereof, or the owners or occupants thereof, including but not limited to the operation of any Riverboat Gaming Facility used in connection therewith and the operation of any riverboat gaming enterprise in connection with the Demised Premises and the Easements, whether or not such compliance is required by reason of any condition, event or circumstance existing prior to or after the commencement of the Term or any renewal thereof. Provided, however, that nothing in this Lease shall be construed to invalidate the Frustration of Purpose provisions found in Section 5.7 of the Development Agreement, which provisions are hereby incorporated herein by reference. Section 8.02 SPECIFIC COMPLIANCE. Notwithstanding the foregoing or anything ------------------- else contained in this Lease to the contrary, and not intending to limit the same, Tenant agrees that after its improvement and/or construction of improvements on the Demised Premises, or the modification of same, Tenant shall do and/or comply with each and all of the following: 8.02.1 Building Laws. Such improvements and their use by Tenant, its -------------- sublessees, franchisees, licensees and its and/or their respective agents, employees, contractors or invitees, shall comply fully with all environmental, air quality, zoning, flood plain, planning, subdivision, building, health, labor, discrimination, fire, traffic, safety, wetlands, shoreline and other governmental and regulatory rules, laws, ordinances, statutes, codes and requirements applicable to the Demised Premises or any portion thereof, including, without limitation, the Fair Housing Act of 1968 (as amended) and the Americans with Disabilities Act of 1990 (collectively, the "Building Laws"). Tenant shall obtain such final certificates as may be required or customary and evidencing compliance with all building codes and permits, and approval of full occupancy of such improvements (as improved) and of all installations therein or improvements thereto. Tenant shall cause the Demised Premises to be continuously in compliance with all Building Laws (as the same may be amended or enacted from time to time). Tenant agrees to protect, defend, (with counsel reasonably satisfactory to Landlord) indemnify and hold City and Landlord and Landlord's Commissioners, officers, employees, contractors and agents harmless from and against all liability threatened against or suffered by them or either of them by reason of a breach by Tenant of any of the foregoing representations and warranties contained herein. The foregoing indemnity shall include the cost of all alterations to the Demised Premises (including, without limitation, all architectural, engineering, legal and accounting costs), all fines, fees and penalties, and all legal and other expenses (including, without limitation, reasonable attorneys' fees), incurred in connection with the Demised Premises or any portion thereof, being in violation of any Building Law and for the cost of collection of the sums. due under this indemnity. 8.02.2 Toxic/Hazardous Substances; Tenant's Responsibilities. With respect ----------------------------------------------------- to environmental liabilities and risks, the following shall apply: (i) Definitions. "Toxic or Hazardous Substances" shall be interpreted ----------- broadly to include, but not be limited to, any material or substance that is defined or classified under federal, state or local laws as: (a) a "hazardous substance" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601(14), or 311 of the Federal Water Pollution Control Act, 33 U.S.C. 1321, as now or hereafter amended; (b) a "hazardous waste" pursuant to 1004 or 3001 of the Resource Conservation and Recovery Act, 42 U.S.C. 6921, as now or hereafter amended; (c) a "toxic pollutant" under 307 (1) (a) of the Federal Water Pollution Control Act, 33 U.S.C. 1317(l)(a), as now or hereafter amended; (d) a "hazardous air pollutant" under 112 of the Clean Air Act, 42 U.S.C. 7412, as now or hereafter amended; (e) a "hazardous material" under the Hazardous Material Transportation Act, 49 U.S.C. 1802(2), as now or hereafter amended; (f) toxic or hazardous pursuant to regulations promulgated now or hereafter under any of the aforementioned laws; or (g) presenting a risk to human health or the environment under other applicable federal, state or local laws, ordinances or regulations, as now or as may be passed or promulgated in the future. "Toxic or Hazardous Substances" shall also 'mean any substance that after release in the environment and upon exposure, ingestion, inhalation or assimilation, either directly from the environment or directly by ingestion through food chains, will or may reasonably be anticipated to cause death, disease, behavior abnormalities, cancer or genetic abnormalities. "Toxic or Hazardous Substance" specifically includes, but is not limited to, asbestos, polychlorinated biphenyls (PCBs) , petroleum and petroleum based derivatives, and urea formaldehyde. (ii) Use Restrictions/Compliance with Applicable Laws. Tenant, its ------------------------------------------------ sublessees, franchisees, licensees, and its and their respective agents, employees, contractors and invitees, shall not use the Demised Premises in a manner that violates any applicable federal, state or local law, regulation or ordinance, including, but not limited to, any such law, regulation or ordinance pertaining to air and water quality, the handling, transportation, storage, treatment, usage or disposal of Toxic or Hazardous Substances, air emissions, other environmental matters or any zoning and/or other land use matters. Tenant shall not cause or permit the release or disposal of any Toxic or Hazardous Substance on or from the Demised Premises. Tenant shall obtain prior written approval from Landlord before causing or permitting any Toxic or Hazardous Substance to be brought upon, kept or used in or about the Demised Premises by Tenant, its sublessees, franchisees, licensees, and/or its or their respective agents, employees, contractors or invitees. (iii) Representations and Warranties. Tenant represents and warrants to ------------------------------ Landlord that: a. Tenant is financially capable of performing and satisfying in full its obligations pursuant to this Lease, including the provisions of this Article. b. Tenant is not in violation of, or subject to, any existing, pending or threatened investigation by any governmental authority under any applicable federal state or local law, regulation or ordinance pertaining to air and water quality, the handling, transportation, storage, treatment, usage or disposal of Toxic or Hazardous Substances, air emissions, other environmental matters, or any zoning or other land use matter. c. Prior to the signing of this Amended and Restated Lease Agreement, Tenant has made 'all appropriate inquiry,' into the previous ownership and uses of the Demised Premises within the meaning of the Comprehensive Environmental Response, Compensation and Liability Act, as amended, or any other environmental law described or referred to herein. Based on the conclusions reached by its environmental consultant after performing a site assessment and based on Landlord's representations and warranties herein, Tenant does not know and has no reason to know or suspect that any Toxic or Hazardous substance has been disposed of or released on, in or at the Demised Premises. d. Tenant's intended use of the Demised Premises will not result in the disposal or release of any Toxic or Hazardous Substance on or to the Demised Premises or adjacent river. e. Tenant does not and will not use any Toxic or Hazardous Substance on the Demised Premises or adjacent river without the prior written approval of Landlord. f. Tenant will not change its intended use of the Demised Premises or the nature of its said operations in connection therewith without prior notice to, and written approval of, Landlord. (iv) Indemnities and Financial Assurances. Tenant agrees to protect, --------------------------------------- indemnify, defend (with counsel reasonably satisfactory to Landlord) and hold City and Landlord and all of their respective commissioners, officers, employees, contractors and agents harmless from any and all claims, judgments, damages, penalties, fines, expenses, liabilities and losses arising during or after the Term of this Lease or any renewals thereof, out of or in any way relating to the presence, release or disposal of any Toxic or Hazardous substance on or from all or any portion of the Demised Premises or the Easements if such Toxic or Hazardous Substance is proved to be first present after the Commencement Date solely as a result of the actions of Tenant (or its employees, contractors or agents) or a third party or to a breach of the environmental warranties made by Tenant in this Lease. Such indemnity shall include, without limitation, all costs incurred in connection with any Toxic or Hazardous Substance present on or under the Demised Premises or adjacent river as a result of any discharge, dumping or spilling (accidental or otherwise) on the Demised Premises or in the adjacent river after the Commencement Date. To the extent directly involved with an indemnifiable occurrence described above, the indemnification provided by this Article shall also specifically cover, without limitation, all costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal and restoration work required by any federal, state or local governmental agency or political subdivision or other third party because of the presence or suspected presence of any Toxic or Hazardous Substance in the soil, groundwater, or soil vapor on or under the Demised Premises and/or adjacent river. Such costs may include, but not be limited to, diminution in the value of the Demised Premises, damages for the loss or restriction on use of rentable or useable space or of any amenity of the Demised Premises, sums paid in settlements of claims, attorneys' fees, consultants fees, and expert fees. The foregoing environmental indemnity shall survive the expiration or earlier termination of this Lease and/or any transfer of all or any portion of the Demised Premises, or of any interest in this Lease. (v) Notification Requirements. Tenant shall promptly notify Landlord in -------------------------- writing of all spills or releases of any Toxic or Hazardous Substance, all failures to comply with any federal, state, or local law, regulation or ordinance, all inspections of the Demised Premises and/or adjacent river by any regulatory entity concerning the same, all notices, orders, fines and communications of any kind from any governmental entity or third party that relate to the existence of or potential for environmental pollution of any kind existing on or resulting from the use of the Demised Premises or any portion thereof and/or adjacent river, or any activity conducted thereon, and. all responses or interim cleanup action taken by or proposed to be taken by Tenant or any government entity or private party on the Demised Premises or any portion thereof or adjacent river. Upon request by Landlord, Tenant shall provide Landlord with a written report (a) listing each Toxic or Hazardous Substance that was/is used or stored on the Demised Premises; (b) discussing all releases of any Toxic or Hazardous Substance that occurred or were discovered on the Demised Premises and all compliance activities related to such Toxic or Hazardous Substance or adjacent river, including all contacts with and all requests from third parties for cleanup or compliance; (c) providing copies of all permits, manifests, business plans, consent agreements or other contracts relating to any Toxic or Hazardous Substance executed or requested during the time period requested; and (d) including such other information as may be reasonably requested by Landlord. The report shall include copies of all documents and correspondence related to such activities and written reports of verbal contacts. (vi) Inspection Rights. Landlord, its officers, employees, contractors and ------------------ agents shall have the right, but not the duty, to inspect the Demised Premises and Tenant's relevant environmental and land use documents upon reasonable notice to Tenant and to perform such tests on the Demised Premises and/or adjacent river as are reasonably necessary to determine whether Tenant is complying with the terms of this Lease. Tenant shall be responsible for paying for any testing that is conducted if it is determined that Tenant is not in compliance with this Lease due to Tenant's or any of its sublessee's, franchisee's or licensee's operations or use of the Demised Premises and/or adjacent river. 8.02.3 Toxic/Hazardous Substances; Landlord Responsibilities. -------------------------------------------------------- (i) Landlord hereby represents and warrants to Tenant that to the best of its knowledge and based on The Phase II Environmental Report dated November 23, 1994 by Woodward-Clyde Consultants and prepared on behalf of Tenant: a. No Toxic or Hazardous Substance is present on, in, under or migrating onto or from the Demised Premises; b. There has been no release or discharge, or threat of release or discharge, of any Toxic or Hazardous substance on, in, under or migrating onto or from the Demised Premises; c. The Demised Premises and any previous or current uses and operations concerning the Demised Premises are not in violation of any applicable federal, state or local statute, ordinance, law, regulation, consent decree, administrative order, guidance document, remediation directive, or common law relating to the public health and safety and protection of the environment (hereinafter "Environmental Law"); d. Landlord has no actual or constructive knowledge of any notice of any governmental entity or third party claiming that the Demised Premises or any uses of and operations on or of the Demised Premises have resulted in any violation of any Environmental Law; e. No litigation is pending or proposed, threatened, or anticipated with respect to any Toxic or Hazardous Substance at the Demised Premises or any proposed use thereon or thereto; and f. No underground storage tank containing petroleum or any other Toxic or Hazardous Substance is or was located on or under the Demised Premises at any time. (ii) Indemnities and Financial Assurances. Landlord agrees to protect, --------------------------------------- indemnify, defend (with counsel reasonably satisfactory to Tenant) , and hold Tenant and all of its officers, employees, contractors and agents harmless from any and all claims, judgments, damages, penalties, fines, expenses, liabilities and losses arising during or after the Term of this Lease or any renewals thereof, out of or in any way relating to (1) the presence, release or disposal of any Toxic or Hazardous Substance on or from all or any portion of the Demised Premises or the Easements, unless such Toxic or Hazardous Substance is proved to be first present after the Commencement Date solely as a result of the actions of Tenant (or its officers, employees, contractors or agents) or a third party; or (2) the breach of the environmental warranties made by Landlord in this Lease; or (3) the underground abandoned oil pipeline identified by Woodward-Clyde Consultants in that certain Phase 11 Environmental Report dated November 23, 1994, and prepared by Woodward-Clyde on behalf of Tenant, and any related Toxic or Hazardous Substances. To the extent directly involved within an indemnifiable occurrence described above, the indemnification provided by this Article shall also specifically cover, without limitation, all costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision or other third party because of the presence or suspected presence of any Toxic or Hazardous Substance in the soil, groundwater, or soil vapor or under the Demised Premises, the Easements and/or adjacent river. Such costs may include, but not be limited to, diminution in the value of the Demised Premises and the Easements, damages for the loss or restriction on use of rentable or useable space or of any amenity of the Demised Premises and the Easements, sums paid in settlement of claims, attorneys' fees, consultants' fees and expert fees. The foregoing environmental indemnity shall survive the expiration or earlier termination of this Lease and/or any transfer of all or any portion of the Demised Premises, the Easements, or of any interest in this Lease. Section 8.03 COMPLIANCE WITH INSURANCE. Tenant shall likewise observe and --------------------------- comply with the requirements of all insurance policies of public liability, property and all other policies of insurance required to be supplied by Tenant and at any time in force with respect to the Demised Premises or the Easements, whether or not such observance or compliance is required by reason of any condition, event or circumstance existing prior to or after the Commencement Date, and Tenant shall, upon learning of the existence of any violation or any attempted violation of any of the provisions of this Article of this Lease by any other person or entity, take steps, immediately upon knowledge of such violation or attempted violation, to remedy or prevent the same as the case may be. Section 8.04 COMPLIANCE WITH DEVELOPMENT AGREEMENT. Tenant shall strictly ------------------------------------- observe and fully comply with all of the requirements, terms and conditions of the Development Agreement and all Exhibits thereto. Section 8.05 CONTEST OF LAWS. Tenant shall have the right, after prior --------------- written notice to Landlord, to contest by appropriate administrative and/or legal proceedings, diligently conducted in good faith, in the name of Tenant or Landlord or both, without cost or expense to Landlord and/or the City, the validity or application of any law, ordinance, order, rule, regulation or requirement of the nature referred to herein, subject to the following: (a) if by the terms of any such law, ordinance, order, rule, regulation or requirement, compliance therewith pending the prosecution of any such proceeding may legally be delayed without the incurrence of any lien, charge or liability of any kind against the Demised Premises, the Easements, or any part thereof or operation of the Riverboat Gaming Facility, and without subjecting Tenant or Landlord and/or the City to any liability, civil or criminal, for failure so to comply therewith, Tenant may delay compliance therewith until the! final determination of such proceeding; or (b) if any lien, charge or civil liability would be incurred by reason of any such delay, Tenant nevertheless may contest as aforesaid and delay as aforesaid, provided that such delay would not subject Landlord and/or the City to criminal liability or fine, and Tenant (i) furnishes to Landlord security, reasonably satisfactory to Landlord, against any loss or injury by reason of such contest or delay, and (ii) prosecutes the contest with due diligence. Landlord, without cost to it, shall, subject to the foregoing, execute and deliver any appropriate documents and instruments which may be reasonably requested by Tenant in order to permit Tenant to so contest the validity or application of any such law, ordinance, order, rule, regulation or requirement. ARTICLE IX. Improvements, Etc. Section 9.01 IMPROVEMENTS. Tenant shall construct the Site Improvements as ------------ that term is defined in the Development Agreement. All construction, improvement or renovation of or to the improvements by Tenant pursuant to this Lease shall be done in strict and full compliance with all provisions hereof and of the Development Agreement, shall be commenced within sixty (60) days after the execution of the Contingencies Waiver Addendum, subject to the provisions in the Development Agreement made for Unavoidable Delays as that term is defined in Section 5.4 of the Development Agreement, and shall be completed in accordance with Critical Path timing requirements of the Development Agreement. Section 9.02 TITLE TO TENANT'S PERSONALTY AND FIXTURES. Title to Tenant's ----------------------------------------- Personalty and Fixtures shall at all times during the Term of this Lease be that of the Tenant. Title to all other Site Improvements including the Riverboat Gaming Facility, any equipment and/or appurtenances thereto and all changes, additions and alterations therein and all renewals and replacements thereof, when made, erected, constructed, installed or placed upon the Demised Premises or the Easements by Tenant shall be the property of the Landlord. Section 9.03 DESTRUCTION/DAMAGE. If any of the improvements as erected and ------------------ constructed on the Demised Premises hereunder or under the Development Agreement shall be substantially damaged by f ire or other casualty or as a result of a taking mentioned herein, the provisions hereof shall govern. Section 9.04 CHANGES AND ALTERATIONS. Tenant shall erect new buildings or ----------------------- improvements on the Demised. Premises, the Easements, and/or make changes or additions to existing improvements thereon only subject to, and in compliance with, the provisions hereof and the relevant provisions of the Development Agreement. Before beginning any such improvement and/or construction, Tenant shall submit to Landlord a copy of the plans and specifications for same, and any amendments thereto, together with an estimate which shall show in reasonable detail, allocated among the various trades, the approximate cost of same. Such plans and specifications shall comply with all relevant legal requirements, the provisions hereof, and of the relevant provisions of the Development Agreement. Section 9.05 PERFORMANCE BOND. Before beginning the addition or change to ---------------- any improvements which may at any time be on, adjacent to, or a part of the Demised Premises, or the construction of any new building or other improvement with respect thereto, Tenant will comply with all performance bond requirements of City and/or other governmental authorities having jurisdiction with respect thereto. Section 9.06 INSURANCE ENDORSEMENTS. Before making any such change or ---------------------- alteration or before beginning the letting of any contracts relating to the construction of any new improvement on the Demised Premises, Tenant shall supply Landlord with such endorsements to the existing insurance policies by Tenant as shall be necessary to covet the contemplated work. Section 9.07 ADDITIONAL IMPROVEMENTS. If, after satisfactory completion of ----------------------- all work to be done by it hereunder and under the Development Agreement, Tenant desires to alter, enlarge or structurally change any improvements then on the Demised Premises, Tenant may do so provided that Landlord has first approved in writing Tenant's written plans and specifications for same, which approval shall not be unreasonably withheld by Landlord if Tenant performs the same subject to the provisions of this Lease and in particular this Article IX, as if such additional work were called for under the Development Agreement. Section 9.08 COMPLIANCE WITH LAWS. All improvements and/or additions made -------------------- and/or erected hereunder shall be designed, constructed and completed in compliance with all requirements of law and with all ordinances, regulations and orders of any and all Federal, State, County and Municipal and other public authorities relating thereto. on completion of same, Tenant will procure a final Certificate of occupancy and deliver to Landlord the original or a copy thereof. Section 9.09 SURRENDER OF IMPROVEMENTS. Any and all buildings, structures, ------------------------- alterations, additions and improvements upon the Demised Premises and the Easements, at the expiration or sooner termination of this Lease, shall then become the property of Landlord and shall be surrendered in accordance with the provisions hereof. ARTICLE X. Discharge of Liens Section 10.01 NO LIENS. Tenant shall not create or permit to be created or --------- to remain, and shall discharge, any and all mechanic's, laborer's or materialman's liens and any and all conditional sale, title retention agreements, chattel mortgages or security interests, which might be or become a lien, encumbrance or charge upon or claim against the Demised Premises and the Easements or any part thereof and having any priority or preference over or ranking on a parity with the estate, rights and interest of Landlord in the Demised Premises or any part thereof. Section 10.02 DEFENSE OF LIEN CLAIM. If any mechanic's, laborer's, --------------------- architect's, engineer's, materialman's or nurseryman's lien shall at any time be filed against the Demised Premises and the Easements or any part thereof, Tenant, within ten (10) days after notice of the filing thereof, shall cause the same to be discharged of record by payment, deposit, bond, order of a court of competent jurisdiction, or otherwise. if Tenant shall fail to cause such lien to be so discharged within the period aforesaid, then, in addition to any other right or remedy hereunder, Landlord, after ten (10) days,' notice to Tenant, may, but shall not be obligated to, discharge the same either by paying the amount claimed to be due or by procuring the discharge of such lien by deposit or by bonding proceedings, and in any such event Landlord shall be entitled, if Landlord so elects, to compel the prosecution of an action for the foreclosure of such lien by the lienor and to pay the amount of the judgment in favor of the lienor with interest, costs and allowances. Any amount so paid by Landlord and all costs and expenses incurred by Landlord in connection therewith, together with interest thereon at the Interest Rate (as defined herein) per annum, from the respective dates of Landlord's making of the payment or incurring of the cost and expense shall constitute Additional Rent payable by Tenant under this Lease and shall be paid by Tenant to Landlord on demand. Section 10.03 NO CONSENT. Nothing in this Lease contained shall be deemed or ---------- construed in any way as constituting the consent or request of Landlord, express or implied, by inference or otherwise, to any contractor, subcontractor, laborer, supplier or materialman for the performance of any labor or the furnishing of any materials for any specific improvement, alteration to or repair of the Demised Premises, the Easements, or any part of either of same. ARTICLE XI. No Waste Tenant shall not do or suffer any material waste or damage, disfigurement or injury to the Demised Premises or any part thereof. ARTICLE XII. Use of Property Section 12.01 PROPER USE. Tenant shall not use or allow the Demised ----------- Premises, the Easements, or any improvements thereon or any appurtenances thereto, for any unlawful purpose or in violation of any certificate of occupancy or license covering or affecting the use of the Demised Premises or the Easements or which may, by law, constitute a nuisance, public or private, or which may make void or voidable any insurance then in force with respect thereto. Section 12.02 PROHIBITED US. Tenant shall not suffer or permit the Demised ------------- Premises or any portion thereof to be used by the public as such, without restriction or in such manner as might reasonably tend to impair Landlord's or City's title to the Demised Premises and the Easements or any portion thereof, or in such manner as might reasonably make possible a claim or claims of adverse usage, adverse possession or prescription by the public, as such, or of implied dedication, of the Demised Premises and the Easements or any portion thereof. Tenant hereby acknowledges that Landlord does not hereby consent, expressly or by implication, to the unrestricted use or possession of the whole or any portion of the Demised Premises by the public, as such. ARTICLE XIII. Entry on Demised Premises by Landlord Section 13.01 RIGHT TO ENTER. Tenant shall permit Landlord and its ---------------- authorized representatives to enter the Demised Premises at all reasonable times for the purpose of (a) inspecting the same, and (b) making necessary repairs by reason of Tenant's failure to make any such repairs or perform any such work or to commence the same within ten (10) days after written notice from Landlord (or without notice in case of emergency). Nothing herein shall imply any duty upon the part of Landlord to do any such work, and performance thereof by Landlord shall not constitute a waiver of Tenant's default in failing to perform the same. Section 13.02 STORAGE. During the progress of any work in, on, or to the ------- Demised Premises and the Easements performed by Landlord pursuant to any of the provisions hereof, Landlord may keep and store therein all necessary materials, tools, supplies and equipment. Landlord shall not be liable for inconvenience, annoyance, disturbance, loss of business or other damage of Tenant by making such repairs or the performance of any such work, or on account of bringing materials, tools, supplies and equipment into the Demised Premises during the course thereof and the obligations of Tenant under this Lease shall not be affected thereby. ARTICLE XIV. Indemnification of and by Landlord and Tenant Effective upon the date hereof, Tenant shall fully indemnify and save harmless Landlord and City and their respective elected and/or appointed officials, agents, servants, employees, officers and directors, from and against any and all liabilities, obligations, damages, penalties, claims, costs, charges and expenses, and any and all suits and proceedings in connection therewith, even if any such suit, claim or proceeding is false, groundless or fraudulent, including, without limitation, reasonable architects', engineers', accountants', expert witnesses' and attorneys' fees, which may be imposed upon or incurred by or asserted against Landlord and/or City, their said elected and/or appointed officials, agents, servants, officers, directors and employees by reason of or arising in whole or in part from any of the following or other actual or alleged matters, occurrences, events, transactions, acts and omissions during the Term of this Lease or any renewal or extension thereof or for so long as Tenant shall be in possession of the Demised Premises or any part thereof: (a) any work or thing done or permitted to be done in, on or about the Demised Premises and the Easements or any part thereof by Tenant, sublessees, franchisees, licensees and any of their respective officers, directors, agents, contractors, employees, and invitees; (b) any use, non-use, possession, occupation, condition, operation, maintenance or management of the Demised Premises and the Easements or any part thereof or any alley, sidewalk, curb, street, bridge, walkway, garage, passageway or space adjacent thereto or any riverboat gaming enterprise associated therewith for which Tenant is responsible hereunder; (c) any negligent or intentional act or omission on the part of Tenant or any of its agents, contractors, servants, employees, subtenants, licensees or invitees; (d) any accident, injury or damage to any person or property occurring in, on or about or arising from the Demised Premises and the Easements or any part thereof, or any alley, sidewalk, curb, street, bridge, walkway, passageway or space adjacent thereto; (e) any failure on the part of Tenant to perform or comply with any of the covenants, agreements, terms, provisions, conditions or limitations contained in this Lease and/or the Development Agreement, to be performed or complied with by it; and/or (f) any obligation of the Tenant or Tenant's contractors and/or their subcontractors under workers' compensation laws or the laws of the federal government or any state's government as to any employee benefits or any employment related problems under ERISA or any other statutory liabilities, be they state, local or federal. Notwithstanding the foregoing, Tenant shall not be obligated hereunder with respect to the liability or responsibility for any pre-existing environmental conditions described in Section 8.02.3 hereof. In case any action or proceeding is brought against Landlord or City by reason of any such claim, Tenant, upon written notice from Landlord or City, shall at Tenant's sole cost and expense resist and defend such action or proceeding by counsel approved by Landlord in writing, which approval Landlord agrees not to unreasonably withhold. Landlord shall fully indemnify and save harmless Tenant and its agents, servants, employees, officers and directors, with respect to any failure on the part of Landlord to perform or comply with any of the covenants, agreements, terms, provisions, conditions, or limitations contained in this Lease and/or the Development Agreement, to be performed or complied with by Landlord and any and all liabilities, obligations, damages, penalties, claims, costs, charges and expenses, and any and all suits and proceedings in connection therewith, even if any such suit, claim or proceeding is false, groundless or fraudulent, including, without limitation, reasonable architects', engineers', accountants', expert witnesses' and attorneys' fees, which may be imposed upon or incurred by or asserted against Tenant, its said agents, servants, officers, directors and employees by reason of or arising in whole or in part from any such actual or alleged matters, occurrences, events, transactions, acts and omissions during the Term of this Lease or any renewal or extension thereof or for so long as Tenant shall be in possession of the Demised Premises or any part thereof. In case any action or proceeding is brought against Tenant by reason of any claim, Landlord, upon written notice from Tenant, shall at Landlord's sole cost and expense resist and defend such action or proceeding by counsel approved by Tenant in writing, which approval Tenant agrees not to unreasonably withhold. Neither Landlord nor the City shall be responsible or liable to Tenant, or to those claiming by, through, or under Tenant, nor shall Landlord or the City be required to protect, defend, indemnify or hold Tenant or any of such persons or entities harmless from and against any loss or damage which may be occasioned by or through Tenant or others (including Tenant's business invitees), as a result of the occupancy or use of the Demised Premises and the Easements or any damage or injury of any nature whatsoever, including, without limitation, any loss or damage which arises from any defect in or failure of or danger in connection with the Demised Premises and the Easements or any improvement thereon or adjacent thereto, or any utility or other service furnished in connection therewith all except as described in Section 8.02.3 hereof. Other than as described in section 8.02.3 hereof, Tenant shall use and occupy the Demised Premises and the Easements, and all parts thereof and make same available to its business invitees and others at Tenant's sole risk and at no risk or liability to Landlord or the City. ARTICLE XV. Damage or Destruction Section 15.01 REPAIR/RESTORATION BY TENANT. In case of damage to or ------------------------------ destruction of any improvements now or hereafter existing on the Demised Premises and the Easements, including the Site Improvements as defined herein), Tenant be obligated to repair and/or restore the same. If Tenant shall, as soon as is practical after any such damage or destruction considering the extent of the damage, commence repair and/or construction of a new building and/or other improvements, as applicable, the proceeds of any insurance payable by reason of such damage or destruction shall be paid to Tenant. If Tenant shall fail to so commence such repair/construction and diligently pursue completion within such period of time, such proceeds of insurance shall be the property of and shall be paid to Landlord, except for proceeds payable with respect to Tenant's Personalty and Fixtures. Notwithstanding the foregoing, Landlord shall have all rights to direct use of payments made under insurance provided under Section 5.02(b) hereof. Section 15.02 NOTICE. In case of damage to or destruction of any ------ improvements on the Demised Premises and the Easements or any part thereof, by fire or otherwise, Tenant shall promptly give written notice thereof to Landlord, and Tenant shall, at Tenant's sole cost and expense, and whether or not the insurance proceeds, if any, shall be sufficient for such purpose, restore, repair, replace, rebuild or alter the same as nearly as possible to its value immediately prior to such damage or destruction, with such changes or alterations as may be made from time to time at Tenant's election, all in conformity with and subject to the applicable terms and conditions hereof and of the Development Agreement. Section 15.03 NO RIGHT TO TERMINATE/SURRENDER. No destruction of or damage ------------------------------- to the improvements on the Demised Premises and the Easements or any part thereof, by fire or any other casualty, shall permit Tenant to surrender this Lease or shall relieve Tenant from its liability to pay the full Minimum Net Rent, Percentage Rent, Additional Rent, the Riverfront Park Grant and other charges payable under this Lease or from any of its other obligations under this Lease or under the Development Agreement, and Tenant waives all rights now or hereafter conferred upon it by statute or otherwise to quit or surrender this Lease or the Demised Premises or any part thereof or to cease its operations hereunder or to any suspension, diminution, abatement or reduction of Rent on account of any such destruction or damage. ARTICLE XVI. Condemnation Section 16.01 TAKING. In the event that the Demised Premises or the ------ Easements, or any part thereof, shall be taken in condemnation proceedings or by exercise of any right of eminent domain or by agreement between Landlord and Tenant (any such matters being hereinafter referred to as a "taking"), Landlord and Tenant shall have the right to participate in any such condemnation proceedings or agreement for the purpose of protecting their interests hereunder. Each party so participating shall pay its own expenses therein. Section 16.02 SUBSTANTIAL/COMPLETE TAKING. If at any time during the term --------------------------- of this Lease or any renewal or extension thereof there shall be a taking of the whole or substantially all of the Demised Premises, this Lease shall terminate and expire on the date of such taking and the Rent payable hereunder shall be equitably apportioned and paid to the date of such taking and Tenant shall have no further liability to Landlord under this Lease. For the purpose of this Article, "substantially all of the Demised Premises" shall be deemed to have been taken if (i) the untaken part of the Demised Premises and/or the Easements shall be insufficient for the economic and feasible continued operation of the riverboat gambling enterprise in connection therewith, or (ii) if the taken part of the Demised Premises and/or Easements includes the Riverboat Gaming Facility. Section 16.03 TERMINATION FROM TAKING. If this Lease shall have terminated ----------------------- as a result of such taking: As to all of any award (regardless of basis for the making of same), Tenant shall be entitled to that portion of the award which is equivalent to a fraction in which the numerator is equal to the number of years remaining in the initial Term (and any potential renewal term) and the denominator is fifty (50) years ("Tenant's Award") and Landlord shall be entitled to the remainder of such award, provided however that in no event shall Landlord's share of such award be less than that amount of money required to retire all then outstanding bonds secured by Landlord's interest in this Lease, on the earliest redemption date to occur after termination of this Lease. Provided further such minimum Landlord's share shall not exceed the total principal interest and redemption premium, if any, that would have been due and owing as of the next redemption date under the first occurring Bond Issuance contemplated and described in Section 2.14 of this Lease. Section 16.04 PARTIAL TAKING. If this Lease shall not have been terminated -------------- as above provided and shall continue after the taking, then in such event all of the Award (regardless of the basis for the making of same) shall be distributed as follows: (a) Tenant shall be tendered that portion of the award received for all purposes (including land acquisition) of replacing, improving or making usable any improvement on or adjacent to the Demised Premises that needs replacement or alteration or improvement as a result of the taking; and (b) The remainder of the Award shall be divided between Landlord and Tenant as set forth in Section 16.03 above, except that the provisions therein for Landlord's minimum share respecting outstanding bonds shall not apply. Notwithstanding the foregoing, in the event of exercise of power of eminent domain by the Missouri Highway Transportation Department ("MHTD") or a successor thereof, of all or part of Parking Parcel A as that term is defined in that certain Cooperative Agreement between the City, Landlord and Tenant dated July 31, 1995, Tenant and Landlord shall not be entitled to damages for such taking and in such event the parties shall modify this Lease as therein provided. Section 16.05 EASEMENT TYPE TAKING. In the event of the taking of an ---------------------- easement or any other taking which shall be of an interest or estate in the land less than a fee simple, as a result of which the Demised Premises shall be insufficient for the economic and feasible continued operation of its business thereon by Tenant, this Lease shall terminate and expire with the same force and effect as in the case of a taking pursuant to Section 16.03 hereof. Otherwise, such taking shall be deemed a taking insufficient to terminate this Lease and the division of the award shall be governed by Section 16.04 in so far as that Section shall be applicable; provided, however, that if there shall be any payment or award predicated on a change in the grade of a street or avenue on which the Demised Premises abut, Tenant shall be entitled, after making such change in restoration as may be necessary and appropriate by reason of such change of grade, to reimbursement for the expense thereof to the extent of the net amount of any payment or award, after deduction of costs of collection, including, without limitation, attorneys' fees and expenses, which may be awarded for such change of grade. Any part of an award for change of grade which shall remain unexpended after such restoration shall be the property of Landlord. If any award shall include change of grade and any other item or element of damage, that part thereof shall be applied in accordance with this Section 16.05 which shall be specifically attributed to change of grade by the condemnation award or, if not so attributed, shall be determined by agreement between the parties. ARTICLE XVII. Assignments, Mortgages and Subleases of Tenant's Interest Except as specifically provided herein and in the Development Agreement, Tenant, and its permitted successors and assigns, shall have the right to assign, sublet, mortgage, encumber or otherwise affect this Lease or any interest therein, with the prior written consent of Landlord, which consent shall not be unreasonably withheld. Landlord's withholding of such consent shall be deemed reasonable hereunder unless Tenant and its proposed assignee comply with requirements substantially similar to those set forth in Section 18.04 B viii, (b) and (c) herein. With the prior written consent of Landlord, not to be unreasonably withheld or delayed, Tenant shall have the right to enter into sublease, license, franchise and concessionaire agreements with persons or entities to operate various types of ancillary and/or supporting business enterprises to Tenant's gaming business enterprise at the Demised Premises including, without limitation, those for the serving of food and beverages. No assignment or sublease, even if so consented to, shall be effective unless and until Landlord shall have received an executed counterpart of such assignment or sublease, in recordable form, under which the assignee shall have assumed all obligations of Tenant under this Lease and shall specifically agreed to perform and observe the covenants and conditions in this Lease contained on Tenant's part to be performed and observed. Notwithstanding the foregoing, Landlord acknowledges that Tenant is obligated under provisions of the Development Agreement to cause its riverboat gaming enterprise to be conducted by an enterprise which is ninety percent (90%) owned by Tenant and ten percent (10%) owned by minority interests. To the extent necessary to enable such joint venture to so operate, Tenant may assign its interest hereunder (but specifically without relieving it of any obligation or liability hereunder), provided, however, that such enterprise is formed pursuant to the minority ownership requirements of the Development Agreement and/or any Exhibit thereto and that on the Opening Date and for a period equal to the lesser of (i) five (5) years after the date hereof, or (ii) three (3) years after the Opening Date, and such enterprise shall in fact be ten percent (10%) minority owned. Tenant further agrees that said ten percent (10%) minority interest shall be such that such minority interest in the aggregate shall enjoy, receive and benefit from its aggregate ten percent (10%) ownership interest in the riverboat gaming enterprise herein provided for. Landlord shall have the right to, or to allow City to, convey, assign, pledge, encumber or mortgage any part of its respective interest in the Demised Premises and/or this Lease, specifically including but not being limited to any assignment by Landlord to a third party bond trustee, as security for bonds issued by Landlord and secured by this Lease so long as any such transfer is not to any person or party in direct competition with Tenant, and, in the event of a pledge, encumbrance or mortgage, such mortgagees(s) and Tenant enter into a Non-Disturbance and Attornment Agreement in standard form reasonably satisfactory to Tenant. Tenant may pledge, encumber or mortgage its leasehold estate or any part thereof so long as any such transfer is subordinate to the City's and to Landlord's (or its mortgagee's) estates and provided further that Landlord and any such mortgagee(s) shall enter into a Non--Disturbance and Attornment Agreement in standard form reasonably satisfactory to Landlord and the City. ARTICLE XVIII. Default Section 18.01 "EVENT OF DEFAULT" BY TENANT DEFINED. Any one or more of the ------------------------------------ following events shall constitute an "Event of Default" by Tenant hereunder: (a) The sale, assignment or other transfer of all or any of Tenant's interest in this Lease and/or the Demised Premises or any portion thereof (other than as is permitted under Article XVII hereof) voluntarily, or under attachment, execution or similar legal process, or if Tenant is adjudicated as bankrupt or insolvent under any state bankruptcy or insolvency law and such adjudication or order is not vacated within ninety (90) days and Tenant is not otherwise in default hereunder. (b) The commencement of a case under any chapter of the Federal Bankruptcy Code by or against Tenant or any operating entity of Tenant's riverboat gaming enterprise ("Operator") in connection with the Demised Premises or any portion thereof, or the filing of a voluntary or involuntary petition thereunder proposing the adjudication of Tenant or Operator as bankrupt or insolvent, or the reorganization of Tenant, or Operator or an arrangement by Tenant or any such Operator with its creditors, unless the petition filed or case commenced is withdrawn or dismissed within ninety (90) days after the date of its filing and Tenant is not otherwise in default hereunder. (c) The appointment of a receiver or trustee for the business or property of Tenant or any such Operator, unless such appointment shall be vacated within ninety (90) days of its entry. (d) The making by Tenant or any such Operator of an assignment for the benefit of its creditors, or if in any other manner Tenant's interest in this Lease shall pass to another person, firm or entity by operation of law except a merger or reorganization of Tenant in which Tenant shall be the survivor and/or the same persons or entities in control of Tenant shall remain in control of such merged or reorganized entity. (e) The failure of Tenant to pay any portion of properly due Rent within five (5) days after the giving of notice thereof by Landlord that the same is due hereunder. Tenant's failure to pay Percentage Rent greater than the Minimum Net Rent shall not be sufficient ground for termination of this Lease by Landlord if such failure is the result of a bona fide dispute as to the amount due and payable and Tenant promptly pays any Percentage Rent underpayment with interest at the Interest Rate from the due date until paid upon resolution of such dispute. (f) Material default by Tenant in the performance or observance of any covenant or agreement of this Lease (other than a default involving the payment of Rent), or any obligation of Tenant under the Development Agreement or any Exhibit thereto, which default is not cured within ten (10) days after the giving of notice thereof by Landlord, unless such default is of such nature that it cannot reasonably be cured within such ten (10) day period, in which case no Event of Default shall occur so long as Tenant shall commence the curing of the default within such ten (10) day period and shall thereafter diligently prosecute the curing of same; provided, however, if Tenant shall default in the performance of any such covenant or agreement of this Lease, the Development Agreement or any Exhibit thereto two (2) or more times in any twelve (12) month period, then notwithstanding that each of such defaults shall have been cured by Tenant, any further default of such covenant or agreement within such twelve (12) month period shall be deemed an Event of Default without the ability for cure. (g) The vacation or abandonment of the Demised Premises at any time after the Commencement Date by Tenant except a vacation or abandonment permitted under Section 2.06 hereof. (h) The occurrence of any other event described as constituting an '"Event of Default" elsewhere in this Lease or the Development Agreement or any Exhibit thereto and the continuation of such an Event of Default after the expiration of any cure period provided herein or therein. Section 18.02 REMEDIES. Upon the occurrence of an Event of Default and the -------- continuation of any such Event of Default after the expiration of any applicable cure period provided for herein, Landlord, without further notice to Tenant in any instance (except as expressly provided for below), may do any one or more of the following: (a) With or without judicial process, enter the Demised Premises and take possession thereof without the necessity of legal proceedings, and remove Tenant and all other persons and property from the Demised Premises, and may store such property in a public warehouse or elsewhere at the cost of and for the account of Tenant without resort to legal process and without Landlord being deemed guilty of trespass or becoming liable for any loss or damage occasioned thereby; and Landlord may, from time to time without terminating this Lease, make such alterations and repairs as may be necessary to relet the Demised Premises or any portion thereof, alone or together with other premises, on behalf of Tenant and for such term or terms (which may be greater or less than the period which otherwise would have constituted the balance of the Term or any then validly exercised renewal thereof) and on such terms and conditions (which may include concessions or free rent and alteration of the Demised Premises) as Landlord, in its sole discretion, may determine, but Landlord shall not be liable for, nor shall Tenant's obligations under this Lease be diminished by reason of, any failure by Landlord to relet the Demised Premises or any failure by Landlord to collect any rent due upon such reletting so long as Landlord has reasonably attempted to mitigate damages as required in Section 18.10. No such re-entry or the taking of possession of the Demised Premises or any portion thereof by Landlord shall be construed as an election on its part to terminate this Lease or to accept a surrender thereof unless a written notice of such intention be given to Tenant. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for such previous breach and receive, in addition to any other damages which it may be entitled, the Default/Termination Damages defined in 18.03 of this Lease and, in addition, the "Liquidated Damages" described in 18.03(ii) of this Lease; or (b) Perform, on behalf and at the expense of Tenant, any obligation of Tenant under this Lease which Tenant has failed to perform and of which Landlord shall have given Tenant notice, the cost of which performance by Landlord, together with interest thereon at the Interest Rate from the date of such expenditure, shall be deemed Additional Rent and shall be payable by Tenant to Landlord upon demand. Notwithstanding the provisions of this clause (b) and regardless of whether an Event of Default shall have occurred, Landlord may exercise the remedy described in this clause (b) without any notice to Tenant if Landlord, in its good faith judgment, believes it would be materially injured by failure to take rapid action or if the unperformed obligation of Tenant constitutes an emergency; or (c) Elect to terminate this Lease and the tenancy created hereby by giving written notice of such election to Tenant, and reenter the Demised Premises and the Easements, without the necessity of legal proceedings, and remove Tenant and all other persons and property from the Demised Premises and the Easements, and may store such property in a public warehouse or elsewhere at the cost and for the account of Tenant without resort to legal process and without Landlord being deemed guilty of trespass or becoming liable for any loss or damage occasioned thereby; or (d) Exercise any other legal or equitable right or remedy which it may have. (e) Notwithstanding anything to the contrary contained above or elsewhere herein or as provided by law or equity generally, in recognition of the major investment in Site Improvements, grants and fundings to be made by Tenant for Landlord's benefit as set out herein or in the Development Agreement, Landlord agrees that after the Commencement Date, it will only elect the remedies of dispossessing Tenant or terminating this Lease as a last resort in the event that Tenant has materially failed to perform its obligations hereunder and Tenant has failed to compensate Landlord for all reasonable damages and costs caused Landlord by such breach(es) so long as Tenant in good faith is continuing to operate the riverboat gaming enterprise in substantially the manner contemplated herein. All costs and expenses incurred by Landlord (including, without limitation, reasonable attorneys' fees) in enforcing any of its rights and remedies under this Lease shall be deemed to be Additional Rent and shall be paid to Landlord by Tenant upon demand. Section 18.03 DAMAGES. ------- Whether or not this Lease is terminated by Landlord pursuant to Section 18.02 hereof, upon the occurrence of an Event of Default and the continuation of any such Event of Default after the expiration of any applicable cure period provided for herein, Tenant shall in all events nevertheless remain liable for (a) any Rent, any installment of the Riverfront Park Grant (the "Grant"), any damages which may be due or sustained prior to the last to occur of the date upon which an Event of Default occurs or the date of expiration of any applicable cure period with respect to such Event of Default, including damages under Section 2.06 hereof, and, in addition, all reasonable costs, fees and expenses, including, but not limited to, reasonable attorneys' fees, costs and expenses, incurred by Landlord in pursuit of its remedies hereunder, and in renting the Demised Premises and the Easements or any portion thereof to others from time to time (all such Rent, Grant, damages, costs, fees and expenses being referred to herein as "Default/ Termination Damages"), and (b) in the event Landlord shall attempt to relet or shall relet all or any portion of the Demised Premises or in the event that this Lease shall be terminated, additional damages (the "Liquidated Damages"), which, at the election of Landlord, shall be as follows: (i) in the event that Landlord has not exercised its right to terminate this Lease, an amount equal to the Rent which would have become due during the remainder of the Term or any exercised renewal thereof, less the amount of rent, additional rent, grant, and other sums, if any, which Landlord shall receive during such period from others to whom the Demised Premises and/or any portion thereof may be rented (other than any rent or other sum received by Landlord as a result of any failure of such other person or entity to perform any of its obligations to Landlord), in which case such Liquidated Damages shall be computed and payable in monthly installments, in advance, on the first day of each calendar month following the occurrence of an uncured Event of Default under this Lease and continuing until the date on which the Term (or any exercised renewal thereof with no automatic renewals to occur thereafter) is due to expire, and any suit or action brought to collect any such Liquidated Damages for any month shall not in any manner prejudice the right of Landlord to collect any Liquidated Damages for any subsequent month by a similar proceeding or be deemed to require repeated lawsuits hereunder; or (ii) if Landlord shall at any time exercise its right to terminate this Lease, an amount equal to the present worth (as of the date of such termination) of Rent and Grant which, but for such termination of this Lease, would have become due during the remainder of the Term (or any exercised renewal thereof), less the fair rental value of the Demised Premises for the remainder of the Term (or any exercised renewal thereof) with no automatic renewals to occur thereafter, as determined by an independent appraiser named by the presiding judge of the Circuit Court of Jackson County, Missouri, in which case such Liquidated Damages shall be payable to Landlord in one lump sum on demand and shall bear interest at the Interest Rate until paid. For purposes of this clause (ii), "present worth" shall be computed by discounting such amount to present worth at a discount rate equal to the Interest Rate. If an uncured Event of Default shall take place after the expiration of two or more years after the Opening Date, then, for purposes of computing the Liquidated Damages, the Percentage Rent payable with respect to each calendar year or portion thereof following such uncured Event of Default (including the balance of the year in which such uncured Event of Default shall take place) shall be conclusively presumed to be equal to the average Percentage Rent payable with respect to each complete year preceding such uncured Event of Default. If such uncured Event of Default shall take place before the expiration of two years after Opening Date, then, for purposes of computing the Liquidated Damages, the Percentage Rent payable with respect to each calendar year or portion thereof following such uncured Event of Default (including the balance of the calendar year in which such uncured Event of Default shall take place) shall be conclusively presumed to be equal to twelve (12) times the average monthly amount of Percentage Rent which was due and payable prior to such uncured Event of if no Percentage Rent shall have been payable during such period, then the Percentage Rent for each year of the unexpired Term shall be conclusively presumed to be a sum equal to that described in Section 2.06 as if there had been a failure of Tenant to operate its riverboat gaming enterprise. Default/Termination Damages shall be due and payable immediately upon demand by Landlord following any uncured Event of Default of this Lease pursuant to Section 18.02. Liquidated Damages shall be due and payable at the times set forth herein. Nothing contained in this Lease shall limit or prejudice the right of Landlord to prove for and obtain, in proceedings for the termination of this Lease by reason of bankruptcy or insolvency, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which the damages are to be proved, whether or not the amount be greater, equal to, or less than the amount of the loss or damages referred to above. The failure or refusal of Landlord to relet the Demised Premises or any part or parts thereof shall not release or affect Tenant's liability for damages hereunder so long as Landlord has reasonably attempted to mitigate damages as required in Section 18.10. Section 18.04 REMEDIES IN EVENT OF BANKRUPTCY OR OTHER PROCEEDING. ---------------------------------------------------------- A. Anything contained herein to the contrary notwithstanding, if termination of this Lease shall be stayed by order of any court having jurisdiction over any proceeding described in paragraph (b) of Section 18.01, or by federal or state statute, then, following the expiration of any such stay, or if Tenant or Tenant as debtor-in-possession or the trustee appointed in any such proceeding (being collectively referred to as "Tenant" only for the purposes of this Section 18.04) shall fail to assume Tenant's obligations under this Lease within the period prescribed therefor by law or after entry of the order for relief or as may be allowed by the court, or if Tenant shall fail to provide adequate protection of Landlord's right, title and interest in and to the Demised Premises or adequate assurance of the complete and continuous future performance of Tenant's obligations under this Lease, then Landlord, to the extent permitted by law or by leave of the court having jurisdiction over such proceeding, shall have the right, at its election, to terminate this Lease, without written notice to Tenant, and upon the effective date of such termination, this Lease shall cease and expire as aforesaid and Tenant shall immediately quit and surrender the Demised Premises as aforesaid. Upon the termination of this Lease as provided above, Landlord, without notice, may re-enter and repossess the Demised Premises using such force for that purpose as may be necessary without being liable to indictment, prosecution or damages therefor dispossess Tenant by summary proceedings or otherwise. B. For the purposes of the preceding paragraph (a), adequate protection of Landlord's right, title and interest in and to the Demised Premises, and adequate assurance of the complete and continuous future performance of Tenant's obligations under this Lease, shall include, without limitation, the following requirements: (i) that Tenant comply with all of its obligations under this Lease; (ii) that Tenant pay to Landlord, on the first day of each month occurring subsequent to the entry of such order, or the effective date of such stay, a sum equal to the amount by which the Demised Premises diminished in value during the immediately preceding monthly period, but, in no event, an amount which is less than the aggregate Rent payable for such monthly period; (iii) that Tenant continue to use the Demised Premises in the manner and for the purposes originally required by this Lease; (iv) that Landlord be permitted to supervise the performance of Tenant's obligations under this Lease; (v) that Tenant pay to Landlord within fifteen (15) days after entry of such order or the effective date of such stay, as partial adequate protection against future diminution in value of the Demised Premises and adequate assurance of the complete and continuous future performance of Tenant's obligations under this Lease, a security deposit in an amount reasonably acceptable to Landlord; (vi) that Tenant has and will continue to have unencumbered assets after the payment of all secured obligations and administrative expenses adequate to assure Landlord that sufficient funds will be available to fulfill the obligations of Tenant under this Lease; (vii) that if Tenant assumes this Lease and proposes to assign the same (pursuant to Title 11 U.S.C. 365, or as the same may be amended) to any person or entity who/which shall have made a bona fide offer to accept an assignment of this Lease on terms acceptable to such court having competent jurisdiction over Tenant's estate, then notice of such proposed assignment, setting forth (x) the name and address of such person or entity, (y) all of the terms and conditions of such offer, and (z) if required by law or by any court, the adequate assurance to be provided Landlord to assure such person's or entity's future performance under this Lease, including, without limitation, the assurances referred to in Title 11 U.S.C. S365(b)(3) , as it may be amended, shall be given to Landlord by Tenant no later than fifteen (15) days after receipt by Tenant of such offer, but in any event no later than thirty (30) days prior to the date that Tenant shall make application to such court for authority and approval to enter into such assignment and assumption, and Landlord shall thereupon have the prior right and option, to be exercised by notice to Tenant given at any time prior to the effective date of such proposed assignment, to accept, or to cause Landlord's designee to accept, an assignment of this Lease upon the same terms and conditions and for the same consideration, if any, as the bona fide offer made by such person or entity, less any brokerage commissions which may be payable out of the consideration to be paid by such person or entity for the assignment of this Lease; and (viii) that if Tenant assumes this Lease and proposes to assign the same, and Landlord does not exercise its option pursuant to paragraph (vii) of this Section 18.04, Tenant hereby agrees that: a. such assignee shall have a net worth not less than the net worth of Tenant as of the Opening Date, or such Tenant's obligations under this Lease shall be unconditionally guaranteed by a person or an entity having a net worth equal to Tenant's net worth as of the Opening Date; b. such assignee shall not use the Demised Premises except subject to all restrictions contained in this Lease; c. such assignee shall assume in writing all of the terms, covenants and conditions of this Lease including, without limitation, all of such terms, covenants and conditions respecting the permitted use and payment of Rent, and such assignee shall provide Landlord with assurances satisfactory to Landlord that it has the experience in operating gaming enterprises similar to that to be conducted by Tenant hereunder, sufficient to enable it to so comply with all of the terms, covenants and conditions of this Lease and successfully operate the Demised Premises for such use; and d. if such assignee makes any payment to Tenant, or for Tenant's account, for the right to assume this Lease (including, without limitation, any lump sun payment, installment payment or payment in the nature of rent over and above the Rent payable under this Lease), Tenant shall pay over to Landlord one-quarter (1/4) of any such payment. Section 18.05 CONTINUED OBLIGATION. --------------------- A. No expiration or termination of this Lease or relief sought or obtained by Landlord or Tenant hereunder relieve Tenant or Landlord, as the case may be, of its liability and obligations under this Lease, and such liability and obligations shall survive any such expiration or termination or enforcement or attempted enforcement of relief hereunder. B. In the event that the Demised Premises or any part thereof be re-let by Landlord for the unexpired term of this Lease, or any part thereof, before presentation of proof of such liquidated damages to any court, then the amount of rent reserved upon such re-letting shall, prima facie, be the fair and ----- ----- reasonable rental value for the part or the whole of the Demised Premises so re-let during the term of the re-letting. Nothing herein contained shall limit or prejudice the right of Landlord to prove for and obtain, as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law in affect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to, or less than the amount of the difference referred to above. Section 18.06 WAIVER BY TENANT. Tenant hereby expressly waives, so far as ----------------- permitted by law, the service of any notice of intention to re-enter provided for in any statute and, except as is herein otherwise provided, Tenant, for and on behalf of itself and all persons and entities claiming through or under Tenant (including any leasehold mortgagee or other creditor), also waives any and all right of redemption or re-entry or re-possession in case Tenant shall be dispossessed by a judgment or by warrant of any court or judge or in case of re-entry or re-possession by Landlord or in case of any expiration or termination of this Lease. The terms "enter", "re-enter", "entry" or "re-entry" as used in this Lease are not restricted to their technical legal meanings. Section 18.07 NO WAIVER BY LANDLORD OR TENANT. No failure by Landlord or ------------------------------- Tenant to insist upon the strict performance of any agreement, term, covenant or condition hereof or to exercise any right or remedy upon a breach of any agreement, term, covenant or condition hereof, and no acceptance of full or partial Rent during the continuance of any such breach, shall constitute a waiver of any such breach or of such agreement, term, covenant or condition. No agreement, term, covenant or condition hereof to be performed or complied with by Tenant or Landlord, and no breach thereof, shall be waived, altered or modified except by a written instrument executed by the non-breaching party. No waiver of any breach shall affect or alter this Lease, but each and every agreement, term, covenant and condition hereof shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. Section 18.08 INJUNCTION. In the event of any breach or threatened breach ---------- by Tenant or Landlord of any of the agreements, terms, covenants or conditions contained in this Lease, Tenant or Landlord, as the case may be, shall be entitled to enjoin such breach or threatened breach and shall have the right to invoke any right and remedy allowed at law or in equity or by statute or otherwise as though other remedies were not provided for in this Lease. Section 18.09 CUMULATIVE RIGHTS. Each right and remedy provided to Landlord ----------------- or Tenant in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease or now or hereafter existing at law or in equity or by statute or otherwise. Section 18.10 MITIGATION. While Landlord shall be entitled to pursue each ---------- and every remedy hereunder as provided above, Landlord shall have the obligation to use reasonable best efforts to mitigate its damages hereunder by seeking a new tenant after Landlord has terminated this Lease. Section 18.11 DEFAULT BY LANDLORD; TENANT REMEDIES. Should Landlord ------------------------------------ materially default in the performance or observance of any covenant or agreement of this Lease, or any obligation of Landlord under the Development Agreement or any Exhibit thereto, which default is not cured within ten (10) days after the giving of notice thereof by Tenant, unless such default is of such a nature that it cannot reasonably be cured within such ten (10) day period, in which case no default by Landlord shall occur so long as Landlord shall commence the curing of the default within such ten (10) day period and shall thereafter diligently prosecute the curing of same; provided, however, if Landlord shall default in performance of any such covenant or agreement of this Lease, the Development Agreement or any Exhibit thereto two (2) or more times in any twelve (12) month period, then notwithstanding that each of such defaults shall have been cured by Landlord, any further default of such covenant or agreement within such twelve (12) month period shall be deemed a default without cure thereof. If Landlord does not timely cure such a default, Tenant shall have such legal and equitable remedies as are provided by law for such a default. All costs and expenses incurred by Tenant (including without limitation reasonable attorneys' fees) in enforcing any of its rights or remedies under this Lease shall be paid to Tenant by Landlord upon demand. ARTICLE XIX. Renewal Privileges Section 19.01 EIGHT RENEWAL TERMS. If this Lease shall be in force and --------------------- effect on the date for the expiration of the initial term hereof, Tenant shall automatically be deemed to have elected a renewal of the term hereby granted for a period of five (5) years beginning with the date of such expiration of such initial term, provided, however, that Tenant shall not have given Landlord at least twelve (12) months prior written notice negating such election. If this Lease shall be in force and effect on the date for the expiration of the first renewal term hereof, Tenant shall automatically be deemed to have elected a second renewal of the term hereby granted for a period of five (5) years beginning with the date of such expiration of the first renewal term, provided, however, that Tenant shall not have given Landlord at least twelve (12) months prior written notice negating such election. If this Lease shall be in force and effect on the date for the expiration of the second renewal term thereof, Tenant shall automatically be deemed to have elected a third renewal of the term hereby granted for a period of five (5) years beginning with the date of such expiration of the second renewal term, provided, however, that Tenant shall not have given Landlord at least twelve (12) months prior written notice negating such election. If this Lease shall be in force and effect on the date for the expiration of the third renewal term thereof, Tenant shall automatically be deemed to have elected a fourth renewal of the term hereby granted for a period of five (5) years beginning with the date of such expiration of the third renewal term, provided, however, that Tenant shall not have given Landlord at least twelve (12) months prior written notice negating such election. If this Lease shall be in force and effect on the date for the expiration of the fourth renewal term thereof, Tenant shall automatically be deemed to have elected a fifth renewal of the term hereby granted for a period of five (5) years beginning with the date of such expiration of the fourth renewal term, provided, however, that Tenant shall not have given Landlord at least twelve (12) months prior written notice negating such election. If this Lease shall be in force and effect on the date for the expiration of the fifth renewal term hereof, Tenant shall automatically be deemed to have elected a sixth renewal of the term hereby granted for a period of five (5) years beginning with the date of such expiration of the fifth renewal term, provided, however, that Tenant shall not have given Landlord at least twelve (12) months prior written notice negating such election. If this Lease shall be in force and effect on the date for the expiration of the sixth renewal term hereof, Tenant shall automatically be deemed to have elected a seventh renewal of the term hereby granted for a period of five (5) years beginning with the date of such expiration of the sixth renewal term, provided, however, that Tenant shall not have given Landlord at least twelve (12) months prior written notice negating such election. If this Lease shall be force and effect on the date for the expiration of the seventh renewal term hereof, Tenant shall automatically be deemed to have elected an eighth renewal of the term hereby granted for a period of five (5) years beginning with the date of such expiration of the seventh renewal term, provided, however, that Tenant shall not have given Landlord at least twelve (12) months prior written notice negating such election. Tenant acknowledges that a provision of the charter of the City may impose a fifty (50) year limit on the term of the City Lease, which limit may affect the length of the eighth renewal of the term of this Lease. Tenant acknowledges and agrees that any resulting limitation on the length of the eighth renewal only of the term of this Lease shall not give rise to any claim of default under or invalidity of this Lease or any extension hereof. This Lease shall not be deemed to be or have been in force and effect on any date on which Tenant shall be in default hereunder. Each such renewal term shall be upon the same terms and conditions as contained herein for the initial term (and applicable renewal term(s)) except for the diminishing of the number of renewal terms remaining as each such renewal term expires and except that as to each such renewal term, the Minimum Net Rent payable during same (in equal annual installments as to the Minimum Net Rent) shall be increased from the Minimum Net Rent payable during the initial term hereof by the percentage of change in the Consumer Price Index as of the Opening Date to the Consumer Price Index as of the first day of any such renewal term. For the purposes of this Section 19.01, the "Consumer Price Index" means the Consumer Index for all urban consumers published by the Bureau of Labor Statistics of the United States Department of Labor, United States City Average, all items (1982 equals 100). If no such Index is then being published, as of the first day of any such renewal term, then Landlord shall designate a successor or replacement index of substantially equivalent reliability and objectivity. The Consumer Price Index in effect for any given date shall be deemed to refer to the Consumer Price Index last established before such date. Section 19.02 NO WAIVER OR RELEASE. No renewal term hereunder shall be -------------------- evidence of a waiver or release of any default or claim of either party hereto against the other. Any unsatisfied claim of either party hereto against the other under the terms of this Lease during the initial Term or any renewal term shall survive and be deemed to be a similar default or claim under any subsequent renewal term. ARTICLE XX. Representations and Warranties Section 20.01 REPRESENTATIONS AND WARRANTIES OF LANDLORD. The following ---------------------------------------------- representations and warranties are hereby made by Landlord: A. POWER AND AUTHORITY. Landlord is a body politic created and formed by --------------------- the City of Kansas City, Missouri by virtue of the power granted to said City by the laws of the State of Missouri and has the full authority and power to enter into this Lease and to execute and deliver this Lease and to perform and observe all of the terms, conditions and provisions of this Lease to be so observed and performed by it and its said execution and delivery of this Lease has been duly authorized by all necessary action required of it; and B. NO CONFLICTS. Nothing herein agreed to by Landlord will conflict with or ------------ result in a breach of the terms and provisions or any existing law, rule, regulation, contract, agreement, order of any court or governmental body; and C. NO CONTRACT DEFAULTS. Landlord is not in default under any contract or -------------------- agreement to which it is a party and which materially and adversely affects its ability to enter into and perform its obligations hereunder; and D. NO LITIGATION. There are no claims, suits or other proceedings ------------- threatened or pending against Landlord which would materially and adversely affect its ability to enter into and perform its obligations hereunder. Section 20.02 REPRESENTATIONS AND WARRANTIES OF TENANT. The following -------------------------------------------- representations and warranties are hereby made by Tenant: A. POWER AND AUTHORITY. Tenant is a corporation duly organized and validly -------------------- existing and in good standing under the laws of the State of Delaware and is qualified to do business in the State of Missouri and has the full authority and power to enter into this Lease and to execute and deliver this Lease and to perform and observe all the terms, conditions and provisions hereof to be so observed and performed by it and its execution and delivery of this Lease has been duly authorized by all necessary corporate action on its part. (A copy of the Resolution of its Board of Directors so authorizing the same is attached hereto identified as Exhibit C.); and B. NO CONFLICTS. Nothing herein agreed to by Tenant will conflict with or ------------ result in a breach of the terms and provisions of any existing law, rule, regulation, contract, agreement, order of any court or governmental body; and C. FINANCIAL CONDITION. Tenant is solvent and is not a party to any ------------------- assignment for the benefit of its creditors or any bankruptcy proceedings, and the transaction contemplated herein shall not cause it to become insolvent or not be able to pay its debts as the same become due; and D. NO CONTRACT DEFAULTS. Tenant is not in default under the terms of any -------------------- contract or agreement to which it is a party and which materially and adversely affects its ability to perform its obligations hereunder; and E. NO LITIGATION. There are no claims, suits or other proceedings ------------- threatened or pending against Tenant which materially and adversely affect its ability to perform its obligations hereunder. ARTICLE XXI. Invalidity of Particular Provisions If any term or provision of this Lease or the application thereof to any person or entity or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons, entities or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. ARTICLE XXII. Notices Any and all notices, demands, requests, submissions, approvals, consents, disapprovals, objections, offers or other communications or documents required to be given, delivered or served or which may be given, delivered or served under or by the terms and provisions of this Lease or pursuant to law or otherwise, shall be in writing and shall be deemed to have been duly given, delivered or served; (i) if and when personally delivered or sent by verifiable facsimile, on the date so delivered or sent, or (ii) three (3) days after being mailed by registered or certified mail, postage prepaid, or (iii) one (1) day after the giving of same to an overnight courier delivery service if sent by a recognized overnight courier delivery service, costs prepaid, addressed if to the Tenant, at: Hilton Hotels Corporation 3930 Howard Hughes Parkway, Fifth Floor Las Vegas, NV 89109 Attention: President Phone: (702) 699-5000 Fax: (702) 699-5179 With copies to: Hilton Hotels Corporation 9936 Civic Center Drive Beverly Hills, California 90209-5567 Attention: General Counsel Phone: (310) 278-4321 Fax: (310) 205-4613 and Jerome D. Riffel Lathrop & Norquist 2345 Grand Avenue, Suite 2500 Kansas City, Missouri 64108 Phone: (816) 842-0820 Fax: (816) 421-0500 or to such other address as Tenant may from time to time designate by written notice to Landlord, or if to Landlord at: Port Authority of Kansas City, Missouri 10 Petticoat Lane, Suite 250 Kansas City, Missouri 64106 Attention: Executive Director Phone: (816) 221-0636 Fax: (816) 221-0189 With a copy to: Phillip A. Kusnetzky McDowell, Rice & Smith, a Professional Corporation 120 West 12th Street Suite 1300 Kansas City, Missouri 64105 Phone: (816) 221-5400 Fax: (816) 474-7304 or to such other address as Landlord may from time to time designate by written notice to Tenant. ARTICLE XXIII. Rent Abatement/Claim for Damages Except as in this Lease otherwise expressly prohibited Tenant shall have such rights as are provided by Missouri law for abatement, diminution or reduction of Rent or charges or other claim for damages based on any material inconvenience, discomfort, interruption of business, loss or damage to improvements to the Demised Premises or personal property thereon, or otherwise. ARTICLE XXIV. Estoppel Certificates Section 24.01 TENANT'S CERTIFICATE. Tenant shall, without charge, at any --------------------- time and from time to time, within ten days after request by Landlord, certify by written instrument, duly executed, acknowledged and delivered to Landlord or any other person, firm, entity or corporation specified by Landlord: (a) that this Lease in unmodified and in full force and effect, or, if there have been any modifications, that the same is in full force and effect as modified and stating the modifications; (b) whether or not there are then existing any set-offs or defenses against the enforcement of any of the agreements, terms, covenants or conditions hereof and any modifications hereof upon the part of Tenant to be performed or complied with, and, if so, specifying the same; (c) the dates, if any, to which the Minimum Net Rent, Percentage Rent and Additional Rent and other charges hereunder have been paid in advance; and (d) the date of expiration of the then current term; (e) the Rent then payable under this Lease; and (f) such other matters as Landlord shall reasonably request. Section 24.02 LANDLORD'S CERTIFICATE. Landlord shall, without charge, at ----------------------- any time and from time to time, within ten days after request by Tenant, certify by written instrument, duly executed, acknowledged and delivered to Tenant, to the effect that this Lease is unmodified and in full force and effect (of if there shall have been modifications, that the same is in full force and effect as modified and stating the modifications) and the dates to which the Rent has been paid, the date of expiration of the current term, the Rent then payable under this Lease, and stating whether or not, to the best knowledge of the officer executing such certificate on behalf of Landlord, Tenant is in default in performance of any covenant, agreement or condition contained in this Lease and, if so, specifying each such default of which the person executing such certificate may have actual knowledge and such other matters as Tenant shall reasonably request. ARTICLE XXV. Miscellaneous Section 25.01 GOVERNING LAW/VENUE. This Lease shall be governed by and -------------------- construed in accordance with the internal laws of the State of Missouri. Venue of any action brought pursuant to this Lease or any Exhibit hereto or arising on, out of, under or by reason of or in any way relating to this Lease or the landlord/tenant relationship created hereunder or the obligations arising out of, under, or by reason of the Development Agreement or resulting from any other transaction hereunder or thereunder or concerning the validity, interpretation or enforcement hereof or thereof shall only be brought in (or, if filed in a different venue, shall be transferred to) a State or Federal Court of appropriate jurisdiction located in or having jurisdiction over Jackson County, Missouri. Tenant waives any objection to the jurisdiction of or venue in any such court, consents to transfer of venue to such court and to the service of process issued by such court and agrees that each may be served by any method of process described in the Missouri or Federal Rules of Civil Procedure. Tenant waives any right to claim that any such court is an inconvenient forum or any similar defense. Section 25.02 CONFLICT AMONG PROVISIONS. In the event of a conflict between ------------------------- or among the terms, covenants, conditions or provisions of this Lease and the Development Agreement or any Exhibit to either of the same, if such conflict relates to performance or payment prior to the Commencement Date (except as to payment of Interim Rent), the provisions of the Development Agreement shall prevail, but if such conflict relates to performance or payment after the Commencement Date (except as to initial construction of improvements), the provisions of this Lease shall prevail. Notwithstanding any statement in the Development Agreement, the Proposal, the Exhibits to the Development Agreement or the Lease, Tenant's total obligations liability with respect to the payment of Minimum Rent and the Riverfront Park Grant shall be a total of Thirty Million Dollars ($30,000,000.00) during the initial ten (10) year term hereof and includes all grants of monies and Minimum Rent for Tenant is liable to Landlord or any other party and which payments include all liability of Tenant for the construction of or payment for infrastructure and improvements excluding the Site Improvements as now defined in the Development Agreement and which are fully stated and limited to those Site Improvements listed in Exhibits C and D to the Development Agreement. Section 25.03 INTEREST RATE. All sums due hereunder as Rent or otherwise ------------- and whether due from Tenant to Landlord, or vice--versa, shall bear interest from the date due until paid at a rate equal to 400 basis points (4%) over the rate of one year United States Treasury obligations existing on the first day of the month during which such sums become due, adjusted upward to reflect any increase in such rate during the time any such sun remains unpaid (the "Interest Rate"). Section 25.04 SPECIAL REPORTS. Tenant agrees to provide to Landlord, or to --------------- such parties as Landlord shall as required in connection with and under the terms of the Bond Issuance described in Section 2.14 of this Lease direct, such information as is necessary to allow Landlord to satisfy the requirements of Rule 15c2-12, as amended, of the Securities and Exchange Commission. ARTICLE XXVI. Consent of Landlord and Tenant Section 26.01 STANDARD. Where any provision of this Lease requires the -------- consent or approval of Landlord or Tenant, each agrees that such consent or approval will not be unreasonably withheld unless otherwise specifically provided for herein. Section 26.02 OTHER ACTS. Each party agrees to perform any further acts and ---------- deliver any additional documents that may be reasonably requested by the other and are necessary to carry out the provisions of this Lease. ARTICLE XXVII. Payments Under Protest In case of any dispute between Landlord and Tenant with respect to the amount of money payable by Tenant to Landlord under the provisions of this Lease, Tenant shall be privileged to make payment under protest and, in such event, shall be privileged to assert and prosecute a claim or claims for the recovery of the sum, or any part thereof, that shall have been so paid by Tenant under protest. ARTICLE XXVIII. No Oral Modification All prior understandings and agreements between the parties are merged with this Lease, which together with the Development Agreement and Exhibits to the same, fully and completely set forth the understanding of the parties hereto; and this Lease may not be changed or terminated orally or in any manner other than by an agreement in writing and signed by the party against whom enforcement of the change or termination is sought. ARTICLE XXIX. Covenants to Bind and Benefit Respective Parties The covenants and agreements herein contained shall bind and inure to the benefit of Landlord, its successors and assigns, and Tenant, and its permitted successors and assigns. ARTICLE XXX. Captions, Table of Contents and Exhibits Section 30.01 CAPTIONS. The captions, titles and headings of this Lease are -------- for convenience and reference only and in no way define, limit or describe the scope or intent of this Lease or any part thereof or in any way affect this Lease. Section 30.02 TABLE OF CONTENTS. The table of contents preceding this Lease ----------------- but under the same cover is for the purpose of convenience and reference only and is not to be deemed or construed in any way as part of this Lease, nor as supplemental thereto or amendatory thereof. Section 30.03 EXHIBITS. Each of the Exhibits hereto are by this reference -------- made a part hereof as though fully set out herein. IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed by their duly authorized officers and their respective corporate seals to be hereunto affixed. LANDLORD: THE PORT AUTHORITY OF KANSAS CITY, MISSOURI By: Name: Title: TENANT: HILTON HOTELS CORPORATION, a Delaware corporation By: Name: Title: ACKNOWLEDGMENTS STATE OF ) ) S/S COUNTY OF ) On this _____ day of ___________, 1995, before me appeared to me personally known, who being by me duly sworn, did say that he/she is the of The Port Authority of Kansas City, Missouri, a public Corporation, and said acknowledged execution of the foregoing instrument to be the free act and deed of said Port Authority. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my official seal the day and year last above written. Notary Public My Commission Expires: STATE OF ) ) SS COUNTY OF ) On this _____ day of ___________, 1995, before me appeared to me personally known, who being by me duly sworn, did say that he/she is the of Hilton Hotels Corporation, a Delaware Corporation, and said acknowledged execution of the foregoing instrument to be the free act and deed of said corporation. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my official seal the day and year last above written. Notary Public My Commission Expires: EXHIBIT A to AMENDED AND RESTATED LEASE AGREEMENT By and between THE PORT AUTHORITY OF KANSAS CITY, MISSOURI and HILTON HOTELS CORPORATION, a Delaware corporation, as of the _____ day of August, 1995. [Consisting of the attached 35 pages] [Development Agreement] EXHIBIT A to AMENDED AND RESTATED LEASE AGREEMENT By and between THE PORT AUTHORITY OF KANSAS CITY, MISSOURI and HILTON HOTELS CORPORATION, a Delaware corporation, as of the _____ day of August, 1995. [Consisting of the attached 35 pages] [Development Agreement] FIRST ADDENDUM TO DEVELOPMENT AGREEMENT --------------------------------------- This Addendum to that certain Development Agreement dated the 12th day of March, 1993, between Port Authority of Kansas City, Missouri ("Port Authority") and Hilton Hotels Corporation ("River Queen") is effective this ____ day of June, 1993, for the purposes of extending various dates by which Hilton and Port Authority are to satisfy their respective contingencies and requirements under the Agreement. NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements, and for other good and valuable consideration, sufficiency of which is hereby acknowledged, the undersigned do hereby agree that: 1. River Queen and Port Authority agree that the following dates respecting performance required by Hilton under the Agreement are extended as follows: Time Requirement Due Date - ---------------- -------- Complete Site A Facility 8/31/93 Preliminary Plans and Specifications and Development Budget Raise Objections to Title Commitment 8/31/93 Respecting Sites A and B Complete Surveys with Respect to Sites 8/31/93 A and B Raise Objections to Survey Sites A and B 8/31/93 Conduct and Complete Analysis of Construction 8/31/93 Costs and Inspections Concerning Archeological, Environmental and Geotechnical Issues ( 1.1b of Development Agreement) Right to Terminate Following Analysis of 8/31/93 Costs and Archeological, Environmental and Title Reviews IN WITNESS WHEREOF, this First Addendum to Development Agreement has been executed as of the day and year first above written. PORT AUTHORITY OF KANSAS CITY, MISSOURI By , (name) (title) HILTON HOTELS CORPORATION By , (name) (title) SECOND ADDENDUM TO DEVELOPMENT AGREEMENT ---------------------------------------- This Second Addendum to that certain Development Agreement dated the 12th day of March, 1993, between Port Authority of Kansas City, Missouri ("Port Authority") and Hilton Hotels Corporation ("River Queen") is effective this ____ day of August, 1993, for the purposes of extending various dates by which Hilton and Port Authority are to satisfy their respective contingencies and requirements under the Agreement. NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements, and for other good and valuable consideration, sufficiency of which is hereby acknowledged, the undersigned do hereby agree that: 1. River Queen and Port Authority agree that the following dates respecting performance required by Hilton under the Agreement are extended as follows: Time Requirement Due Date - ---------------- -------- Complete Site A Facility Preliminary Plans 9/30/93 and specifications and Development Budget Raise Objections to Title Commitment 9/30/93 Respecting Sites A and B Complete Surveys with Respect to Sites A and B 9/30/93 Raise Objections to Survey Sites A and B 9/30/93 Conduct and Complete Analysis of Construction 9/30/93 Costs and Inspections Concerning Archeological, Environmental and Geotechnical Issues ( 1.1b of Development Agreement) Right to Terminate Following Analysis of 9/30/93 Costs and Archeological, Environmental and Title Reviews Submit Final Critical Path 9/30/93 Submit Preliminary Plans and Specifications 9/30/93 for Site Improvements (to include requirement in 4.1a) Time Requirement Due Date - ---------------- -------- Right to Terminate for Inability to Acquire 9/30/93 Boatmen's Site for $2,000,000 Request Condemnation of Additional Improvements 9/30/93 and Easements 2. Port Authority and River Queen hereby agree to extend the time of Port Authority in which to perform certain tasks as follows: Time Requirement Due Date - ---------------- -------- Provide River Queen Sufficient Title 9/30/93 to Execute Contingencies Waiver Addendum Provide Title Commitment With All Documents 9/30/93 for Sites A & B 9/30/93 Approval of Critical Path 9/30/93 Approval of Plans and Specifications for 9/30/93 Site Improvements Cure Title Objections 9/30/93 Cure Survey Objections 9/30/93 Correct Environmental Problems on Site B 9/30/93 IN WITNESS WHEREOF, this Second Addendum to Development Agreement has been executed as of the day and year first above written. PORT AUTHORITY OF KANSAS CITY, MISSOURI By , (name) (title) HILTON HOTELS CORPORATION By , (name) (title) THIRD ADDENDUM TO DEVELOPMENT AGREEMENT --------------------------------------- THIS ADDENDUM is made and entered into this 24th day of September, 1993, by and between HILTON HOTELS CORPORATION, a Delaware corporation, and its River Queen Operating Assignee (jointly hereinafter referred to as "River Queen"), and PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public body corporate and politic (hereinafter referred to as "Port Authority"). WITNESSETH: WHEREAS, on March 12, 1993, River Queen and Port Authority entered into that certain Development Agreement which governs the development of certain real property described on Exhibit B to said Development Agreement as the "Leased Premises" and specifically includes the Boatmen's Property, as defined herein, and all other necessary property acquired to be part of the Leased Premises (hereinafter referred to as "Site B"); and WHEREAS, in May and June, 1993, a total of three (3) underground storage tanks were removed from that portion of Site B owned by the City of Kansas City, Missouri; and WHEREAS, the soils at and/or near the former underground storage tanks contain petroleum-related contaminants; and WHEREAS, the Development Agreement contractually obligates Port Authority to spend up to Two Million Five Hundred Thousand Dollars ($2,500,000) as may be necessary to remedy environmental contamination on Site B and deliver to River Queen a sufficiently clean environmental site; and 9. All provisions of the Development Agreement inconsistent with this Third Addendum are null and void and have no effect. IN WITNESS WHEREOF, the parties have caused this Addendum to be executed by their duly-authorized representatives as of the day and year first above written. PORT AUTHORITY OF KANSAS CITY, MISS0URI By Elbert Anderson , Chairman --------------- -------- (name) (title) HILTON HOTELS CORPORATION By , (name) (title) List of Exhibits - ---------------- M. Bioremediation Plan FOURTH ADDENDUM TO DEVELOPMENT AGREEMENT ---------------------------------------- THIS ADDENDUM is made and entered into this 31st day of October, 1993, by and between HILTON HOTELS CORPORATION, a Delaware corporation, and its River Queen Operating Assignee (jointly hereinafter referred to as "River Queen"), and PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public body corporate and politic (hereinafter referred to as "Port Authority"). WITNESSETH: NOW, THEREFORE, in consideration of the representations and mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, the parties agree as follows: 1. River Queen and Port Authority agree that the following date respecting performance required by Hilton under the Agreement are extended as follows: Time Requirement Due Date - ---------------- -------- Complete Site A Facility Preliminary Plans Submitted & and Specifications and Development Budget Approved 09/23/93 Raise Objections to Title Commitment Respecting Sites A and B 11/30/93 Complete Surveys with Respect to Sites A and B 11/30/93 Raise Objections to Survey Sites A and B 11/30/93 Conduct and Complete Analysis of Construction Completed Costs and Inspections Concerning Archeological 09/23/93 Environmental and Geotechnical Issues ( 1.1b of Development Agreement) 11/30/93 PORT AUTHORITY OF KANSAS CITY, MISS0URI By Elbert Anderson , Chairman --------------- -------- (name) (title) HILTON HOTELS CORPORATION By , (name) (title) ACKNOWLEDGMENT -------------- STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) BEFORE ME, a Notary Public in and for the County and State aforesaid, personally appeared Elbert L. Anderson, Chairman of the PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public corporation, who is known to me to be the same person who executed the foregoing instrument on behalf of said Port Authority, and acknowledged the execution of the same as the free and voluntary act and deed of said Port Authority. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal this 10th day of November, 1993. Notary Public My Commission Expires: June 22, 1994 - ------------- FIFTH ADDENDUM TO DEVELOPMENT AGREEMENT --------------------------------------- THIS ADDENDUM is made and entered into this 30th day of November, 1993, by and between HILTON HOTELS CORPORATION, a Delaware corporation, and its River Queen Operating Assignee (jointly hereinafter referred to as "River Queen"), and PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public body corporate and politic (hereinafter referred to as "Port Authority"). WITNESSETH: NOW, THEREFORE, in consideration of the representations and mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, the parties agree as follows: 1. River Queen and Port Authority agree that the following date respecting performance required by Hilton under the Agreement are extended as follows: Time Requirement Due Date - ---------------- -------- Complete Site A Facility Preliminary Plans Submitted & and Specifications and Development Budget Approved 09/23/93 Raise Objections to Title Commitment Respecting Sites A and B 01/15/94 Complete Surveys with Respect to Sites A and B 01/15/94 Raise Objections to Survey Sites A and B 01/15/94 Conduct and Complete Analysis of Construction Completed Costs and Inspections Concerning Archeological 09/23/93 PORT AUTHORITY OF KANSAS CITY, MISS0URI By , (name) (title) HILTON HOTELS CORPORATION By , (name) (title) ACKNOWLEDGMENT -------------- STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) BEFORE ME, a Notary Public in and for the County and State aforesaid, personally appeared Elbert L. Anderson, Chairman of the PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public corporation, who is known to me to be the same person who executed the foregoing instrument on behalf of said Port Authority, and acknowledged the execution of the same as the free and voluntary act and deed of said Port Authority. IN WITNESS WHEREOF I have hereunto set my hand and affixed my notarial seal this 6th day of December, 1993. Notary Public My Commission Expires: SIXTH ADDENDUM TO DEVELOPMENT AGREEMENT --------------------------------------- THIS ADDENDUM is made and entered into this 14th day of January, 1994, by and between HILTON HOTELS CORPORATION, a Delaware corporation, and its River Queen Operating Assignee (jointly hereinafter referred to as "River Queen"), and PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public body corporate and politic (hereinafter referred to as "Port Authority"). WITNESSETH: NOW, THEREFORE, in consideration of the representations and mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, the parties agree as follows: 1. River Queen and Port Authority agree that the following date respecting performance required by Hilton under the Agreement are extended as follows: Time Requirement Due Date - ---------------- -------- Complete Site A Facility Preliminary Plans Submitted & and Specifications and Development Budget Approved 09/23/93 Raise Objections to Title Commitment Respecting Sites A and B 02/07/94 Complete Surveys with Respect to Sites A and B 02/07/94 Raise Objections to Survey Sites A and B 02/07/94 Conduct and Complete Analysis of Construction Completed Costs and Inspections Concerning Archeological 09/23/93 Approval of Plans and Specifications for 02/07/94 Site Improvements Cure Title Objections 02/07/94 Cure Survey Objections 02/07/94 Correct Environmental Problems on Site B 03/31/94 IN WITNESS WHEREOF, the parties have caused this Addendum to be executed by their duly-authorized representatives as of the day and year first above written. PORT AUTHORITY OF KANSAS CITY, MISS0URI By , (name) (title) HILTON HOTELS CORPORATION By , (name) (title) ACKNOWLEDGMENT -------------- STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) BEFORE ME, a Notary Public in and for the County and State aforesaid, personally appeared Elbert L. Anderson, Chairman of the PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public corporation, who is known to me to be the same person who executed the foregoing instrument on behalf of said Port Authority, and acknowledged the execution of the same as the free and voluntary act and deed of said Port Authority. IN WITNESS WHEREOF I have hereunto set my hand and affixed my notarial seal this 24th day of January, 1994. Notary Public My Commission Expires: SEVENTH ADDENDUM TO DEVELOPMENT AGREEMENT ----------------------------------------- THIS ADDENDUM is made and entered into this 7th day of February, 1994, by and between HILTON HOTELS CORPORATION, a Delaware corporation, and its River Queen Operating Assignee (jointly hereinafter referred to as "River Queen"), and PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public body corporate and politic (hereinafter referred to as "Port Authority"). WITNESSETH: NOW, THEREFORE, in consideration of the representations and mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, the parties agree as follows: 1. River Queen and Port Authority agree that the following dates respecting performance required by Hilton under the Agreement are extended as follows: Time Requirement Due Date - ---------------- -------- Complete Site A Facility Preliminary Plans Submitted & and Specifications and Development Budget Approved 09/23/93 Raise Objections to Title Commitment Respecting Sites A and B 03/07/94 Complete Surveys with Respect to Sites A and B 03/07/94 Raise Objections to Survey Sites A and B 03/07/94 Conduct and Complete Analysis of Construction Completed Costs and Inspections Concerning Archeological 09/23/93 Approval of Plans and specifications for 03/07/94 Site Improvements Cure Title objections 03/07/94 Cure Survey Objections 03/07/94 Correct Environmental Problems on Site B 03/31/94 IN WITNESS WHEREOF, the parties have caused this Addendum to be executed by their duly-authorized representatives as of the day and year first above written. PORT AUTHORITY OF KANSAS CITY, MISS0URI By , (name) (title) HILTON HOTELS CORPORATION By , (name) (title) ACKNOWLEDGMENT -------------- STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) BEFORE ME, a Notary Public in and for the County and State aforesaid, personally appeared Elbert L. Anderson, Chairman of the PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public corporation, who is known to me to be the same person who executed the foregoing instrument on behalf of said Port Authority, and acknowledged the execution of the same as the free and voluntary act and deed of said Port Authority. IN WITNESS WHEREOF I have hereunto set my hand and affixed my notarial seal this 7th day of February, 1994. Notary Public My Commission Expires: EIGHTH ADDENDUM TO DEVELOPMENT AGREEMENT ---------------------------------------- THIS ADDENDUM is made and entered into this 18th day of March, 1994, by and between HILTON HOTELS CORPORATION, a Delaware corporation, and its River Queen Operating Assignee (jointly hereinafter referred to as "River Queen"), and PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public body corporate and politic (hereinafter referred to as "Port Authority"). WITNESSETH: NOW, THEREFORE, in consideration of the representations and mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, the parties agree as follows: 1. River Queen and Port Authority agree that the following dates respecting performance required by Hilton under the Agreement are extended as follows: Time Requirement Due Date - ---------------- -------- Complete Site A Facility Preliminary Plans Submitted & and Specifications and Development Budget Approved 09/23/93 Raise Objections to Title Commitment Respecting Sites A and B 04/15/94 Complete Surveys with Respect to Sites A and B 04/15/94 Raise Objections to Survey Sites A and B 04/15/94 Conduct and Complete Analysis of Construction Completed Costs and Inspections Concerning Archeological 09/23/93 Approval of Plans and Specifications for 04/15/94 Site Improvements Cure Title Objections 04/15/94 Cure Survey Objections 04/15/94 Correct Environmental Problems on Site B 04/15/94 IN WITNESS WHEREOF, the parties have caused this Addendum to be executed by their duly-authorized representatives as of the day and year first above written. PORT AUTHORITY OF KANSAS CITY, MISS0URI By , (name) (title) HILTON HOTELS CORPORATION By , (name) (title) ACKNOWLEDGMENT -------------- STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) BEFORE ME, a Notary Public in and for the County and State aforesaid, personally appeared Elbert L. Anderson, Chairman of the PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public corporation, who is known to me to be the same person who executed the foregoing instrument on behalf of said Port Authority, and acknowledged the execution of the same as the free and voluntary act and deed of said Port Authority. IN WITNESS WHEREOF I have hereunto set my hand and affixed my notarial seal this 17th day of March, 1994. Notary Public My Commission Expires: NINTH ADDENDUM TO DEVELOPMENT AGREEMENT --------------------------------------- THIS ADDENDUM is made and entered into this 26th day of April, 1994, by and between HILTON HOTELS CORPORATION, a Delaware corporation, and its River Queen Operating Assignee (jointly hereinafter referred to as "River Queen"), and PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public body corporate and politic (hereinafter referred to as "Port Authority"). WITNESSETH: NOW, THEREFORE, in consideration of the representations and mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, the parties agree as follows: 1. River Queen and Port Authority agree that the following dates respecting performance required by Hilton under the Agreement are extended as follows: Time Requirement Due Date - ---------------- -------- Complete Site A Facility Preliminary Plans Submitted & and Specifications and Development Budget Approved 09/23/93 Raise Objections to Title Commitment Respecting Sites A and B 05/15/94 Complete Surveys with Respect to Sites A and B 05/15/94 Raise Objections to Survey Sites A and B 05/15/94 Approval of Critical Path 05/15/94 Approval of Plans and Specifications for 05/15/94 Site Improvements Cure Title Objections 05/15/94 Cure Survey Objections 05/15/94 Correct Environmental Problems on Site B 05/15/94 IN WITNESS WHEREOF, the parties have caused this Addendum to be executed by their duly-authorized representatives as of the day and year first above written. PORT AUTHORITY OF KANSAS CITY, MISS0URI By , (name) (title) HILTON HOTELS CORPORATION By , (name) (title) ACKNOWLEDGMENT -------------- STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) BEFORE ME, a Notary Public in and for the County and State aforesaid, personally appeared Elbert L. Anderson, Chairman of the PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public corporation, who is known to me to be the same person who executed the foregoing instrument on behalf of said Port Authority, and acknowledged the execution of the same as the free and voluntary act and deed of said Port Authority. IN WITNESS WHEREOF I have hereunto set my hand and affixed my notarial seal this 26th day of April, 1994. Notary Public My Commission Expires: TENTH ADDENDUM TO DEVELOPMENT AGREEMENT --------------------------------------- THIS ADDENDUM is made and entered into this 13th day of May, 1994, by and between HILTON HOTELS CORPORATION, a Delaware corporation, and its River Queen Operating Assignee (jointly hereinafter referred to as "River Queen"), and PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public body corporate and politic (hereinafter referred to as "Port Authority"). WITNESSETH: NOW, THEREFORE, in consideration of the representations and mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, the parties agree as follows: 1. River Queen and Port Authority agree that the following dates respecting performance required by Hilton under the Agreement are extended as follows: Time Requirement Due Date - ---------------- -------- Complete Site A Facility Preliminary Plans Submitted & and Specifications and Development Budget Approved 09/23/93 Raise Objections to Title Commitment Respecting Sites A and B 05/31/94 Complete Surveys with Respect to Sites A and B 05/31/94 Raise Objections to Survey Sites A and B 05/31/94 Approval of Critical Path 05/31/94 Approval of Plans and Specifications for 05/31/94 Site Improvements Cure Title Objections 05/31/94 Cure Survey Objections 05/31/94 Correct Environmental Problems on Site B 05/31/94 IN WITNESS WHEREOF, the parties have caused this Addendum to be executed by their duly-authorized representatives as of the day and year first above written. PORT AUTHORITY OF KANSAS CITY, MISS0URI By , (name) (title) HILTON HOTELS CORPORATION By , (name) (title) ELEVENTH ADDENDUM TO DEVELOPMENT AGREEMENT ------------------------------------------ THIS ADDENDUM is made and entered into this 15th day of June,1994, by and between HILTON HOTELS CORPORATION, a Delaware corporation, and its River Queen Operating Assignee (jointly hereinafter referred to as "River Queen"), and PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public body corporate and politic (hereinafter referred to as "Port Authority"). WITNESSETH: NOW, THEREFORE, in consideration of the representations and mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, the parties agree as follows: 1. River Queen and Port Authority agree that the following dates respecting performance required by Hilton under the Agreement are extended as follows: Time Requirement Due Date - ---------------- -------- Complete Site A Facility Preliminary Plans Submitted & and Specifications and Development Budget Approved 09/23/93 Raise Objections to Title Commitment Respecting Sites A and B 07/11/94 Complete Surveys with Respect to Sites A and B 07/11/94 Raise Objections to Survey Sites A and B 07/11/94 Approval of Critical Path 07/11/94 Approval of Plans and Specifications for 07/11/94 Site Improvements Cure Title Objections 07/11/94 Cure Survey Objections 07/11/94 Correct Environmental Problems on site B 07/11/94 IN WITNESS WHEREOF, the parties have caused this Addendum to be executed by their duly-authorized representatives as of the day and year first above written. PORT AUTHORITY OF KANSAS CITY, MISS0URI By , (name) (title) HILTON HOTELS CORPORATION By Gerald W. Ricker, Senior Vice President - Development TWELFTH ADDENDUMTO DEVELOPMENT AGREEMENT ---------------------------------------- THIS ADDENDUM is made and entered into this 15th day of September, 1994, by and between HILTON HOTELS CORPORATION, a Delaware corporation, and its River Queen Operating Assignee (jointly hereinafter referred to as "River Queen"), and the PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public body corporate and politic (hereinafter referred to as "Port Authority"). WITNESSETH: WHEREAS, on March 12, 1993, River Queen and Port Authority entered into that certain Development Agreement which governs the development of certain real property described on Exhibit B to said Development Agreement as the "Leased Premises"; and WHEREAS, River Queen and Port Authority have executed Addenda One through Eleven which Addenda together with the original March 12, 1993 Development Agreement and this Twelfth Addendum are herein collectively referred to as the "Development Agreement" or the "Agreement"; and WHEREAS, Port Authority and River Queen have determined to proceed to development of Site A only because of changing regulatory requirements, changes in the Missouri gaming laws, certain site constraints, and concern with potential problems relating to environmental and archaeological issues at Site B. NOW, THEREFORE, in consideration of the representations and mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, the parties agree as follows: Improvements as now defined in the Development Agreement and which are fully stated and limited to those Site Improvements listed in Exhibits C and D to the ---------------- Development Agreement. PORT AUTHORITY OF KANSAS CITY, MISS0URI By , (name) (title) HILTON HOTELS CORPORATION By , (name) (title) THIRTEENTH ADDENDUM TO DEVELOPMENT AGREEMENT -------------------------------------------- THIS ADDENDUM is made and entered into this 1st day of May, 1995, by and between HILTON HOTELS CORPORATION, a Delaware corporation, and its River Queen Operating Assignee (jointly hereinafter referred to as "River Queen"), and the PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public body corporate and politic (hereinafter referred to as "Port Authority"). WITNESSETH: WHEREAS, on March 12, 1993, River Queen and Port Authority entered into that certain Development Agreement which governs the development of certain real property described on Exhibit B to said Development Agreement as the "Leased Premises"; and WHEREAS, River Queen and Port Authority have executed Addenda One through Twelve which Addenda together with the original March 12, 1993 Development Agreement and this Thirteenth Addendum are herein collectively referred to as the "Development Agreement" or the "Agreement"; and WHEREAS, River Queen and Port Authority have been unable to complete all requirements necessary to satisfy the contingencies in the Development Agreement but have diligently proceeded and made satisfactory progress toward satisfaction thereof; and WHEREAS, the Port Authority and River Queen desire to extend the Contingencies Waiver Date and certain other dates of the Development Agreement to and including July 31, 1995. NOW, THEREFORE, in consideration of the representations and mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, the parties agree as follows: 1. Section 3.1(a) of the Development Agreement is hereby further amended to provide that the Contingencies Waiver Date is hereby extended by agreement of River Queen and Port Authority to and including July 31, 1995, and such date shall hereafter be the Extended Contingencies Waiver Date. 2. All other dates extended to December 31, 1994 in the Twelfth Addendum (for example, title, survey and permitting requirements) are hereby extended by agreement of the Port Authority and River Queen to and including July 31, 1995. 3. River Queen and Port Authority agree the documents attached hereto as "Exhibit D" be and hereby are substituted for existing "Exhibit D" (Site -------- --------- Improvements Plan) to the Development Agreement and shall hereafter be "Exhibit ------- D" in all respects. - -- PORT AUTHORITY OF KANSAS CITY, MISS0URI By , (name) (title) HILTON HOTELS CORPORATION By Gerald W. Ricker, Senior Vice President - Development FOURTEENTH ADDENDUM TO DVELOPMENT AGREEMENT ------------------------------------------- THIS ADDENDUM is made and entered into this 31st day of July, 1995, by and between HILTON HOTELS CORPORATION, a Delaware corporation, and its River Queen Operating Assignee (jointly hereinafter referred to as "River Queen"), and the PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public body corporate and politic (hereinafter referred to as "Port Authority"). WITNESSETH: WHEREAS, on March 12, 1993, River Queen and Port Authority entered into that certain Development Agreement which governs the development of certain real property described on Exhibit B to said Development Agreement as the "Leased Premises"; and WHEREAS, River Queen and Port Authority have executed Addenda One through Thirteen which Addenda together with the original March 12, 1993 Development Agreement and this Fourteenth Addendum are herein collectively referred to as the "Development Agreement" or the "Agreement"; and WHEREAS, River Queen and Port Authority have been unable to complete all requirements necessary to satisfy the contingencies in the Development Agreement but have diligently proceeded and made satisfactory progress toward satisfaction thereof; and WHEREAS, the Port Authority and River Queen desire to extend the Contingencies Waiver Date and certain other dates of the Development Agreement to and including August 15, 1995; and PORT AUTHORITY OF KANSAS CITY, MISS0URI By Elbert Anderson, Chairman HILTON HOTELS CORPORATION By Gerald W. Ricker, Senior Vice President - Development ACKNOWLEDGMENT -------------- STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) BEFORE ME, a Notary Public in and for the County and State aforesaid, personally appeared Elbert L. Anderson, Chairman of the PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public corporation, who is known to me to be the same person who executed the foregoing instrument on behalf of said Port Authority, and acknowledged the execution of the same as the free and voluntary act and deed of said Port Authority. IN WITNESS WHEREOF I have hereunto set my hand and affixed my notarial seal this 4th day of August, 1995. Notary Public My Commission Expires: EXHIBIT B to AMENDED AND RESTATED LEASE AGREEMENT By and between THE PORT AUTHORITY OF KANSAS CITY, MISSOURI and HILTON HOTELS CORPORATION, a Delaware corporation, as of the 21st day of August, 1995. Description of Property TRACT A-1 ALL THAT PART OF FRACTIONAL SECTION 28 AND FRACTIONAL SECTION 33, IN TOWNSHIP 50 NORTH, RANGE 33 WEST, AS ORIGINALLY SURVEYED BY THE UNITED STATES, AND CERTAIN ACCRETED LAND, ALL IN KANSAS CITY, JACKSON COUNTY, MISSOURI, DESCRIBED AS FOLLOWS: COMMENCING AT THE POINT OF INTERSECTION OF THE UNITED STATES HARBOR LINE, AS ESTABLISHED ON THE SOUTH BANK OF THE MISSOURI RIVER IN 1904 AND 1924, AND THE EAST RIGHT-OF-WAY LINE OF U.S. INTERSTATE ROUTES 29 AND 35, AS RECORDED IN BOOK B-5945, PAGE 310, AS DOCUMENT NO. B570825, DATED 5-11-1965; THEN S19-47-42E ALONG THAT RIGHT-OF-WAY LINE, A DISTANCE OF 198.70 FEET TO THE SOUTH RIGHT-OF-WAY LINE OF RELOCATED RIVER FRONT ROAD, AS RECORDED IN ORDINANCE NO. 42446, DATED 3-30-1973, THE POINT OF BEGINNING ALSO BEING A POINT OF CURVE OF A NONTANGENT CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 61-35-24 AND A RADIUS OF 460.87 FEET, THE RADIUS POINT BEARS S24-06-56E; THEN SOUTHEASTERLY, SOUTHWESTERLY AND NORTHWESTERLY ALONG THE SOUTHEASTERLY RIGHT-OF-WAY LINE OF RELOCATED RIVER FRONT ROAD, AS RECORDED IN ORDINANCE NO. 42446, DATED 3-30-1973 AND IN BOOK K436, AT PAGE 730, DATED 4-12-1973, UNDER DOCUMENT NO. K-194186, THE FOLLOWING 8 COURSES: 1. SOUTHEASTERLY ALONG THE ARC OF THAT CURVE, A DISTANCE OF 495.41 FEET; 2. S52-31-32E, A DISTANCE OF 449.20 FEET TO A POINT OF CURVE OF A CURVE TO THE LEFT HAVING A CENTRAL ANGLE OF 4-40-10 AND A RADIUS OF 580.87 FEET; 1. SOUTHEASTERLY ALONG THE ARC OF THAT CURVE, A DISTANCE OF 47.34 FEET; 2. S14-03-53E, A DISTANCE OF 155.67 FEET TO A POINT OF CURVE OF A NONTANGENT CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 37-59-11 AND A RADIUS OF 460.87 FEET, THE RADIUS POINT BEARS N69-51-40W; 3. SOUTHWESTERLY ALONG THE ARC OF THAT CURVE, A DISTANCE OF 305.55 FEET; 4. S67-22-36W, A DISTANCE OF 248.91 FEET TO A POINT OF CURVE OF A NONTANGENT CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 89-54-37 AND A RADIUS OF 140.19 FEET, THE RADIUS POINT BEARS N31-52-21W; 5. WESTERLY ALONG THE ARC OF THAT CURVE, A DISTANCE OF 219.99 FEET; 6. N27-55-08W, A DISTANCE OF 60.58 FEET TO THE EAST RIGHT-OF-WAY LINE OF U.S. INTERSTATE ROUTES 29 AND 35, ALSO BEING A POINT OF CURVE OF A NONTANGENT CURVE TO THE LEFT HAVING A CENTRAL ANGLE OF 12-47-05 AND A RADIUS OF 2059.86 FEET, THE RADIUS POINT BEARS S85-59-23W; THEN NORTHERLY ALONG THE EAST RIGHT-OF-WAY LINE OF U.S. INTERSTATE ROUTES 29 AND 35 THE FOLLOWING 5 COURSES; 1. NORTHWESTERLY ALONG THE ARC OF THAT CURVE, A DISTANCE OF 459.63 FEET TO A POINT THAT IS 150 FEET DISTANT NORTHEASTERLY FROM AND CONCENTRIC WITH U.S. INTERSTATE ROUTES 29 AND 35 CENTERLINE, AND BEING A POINT OF CURVE OF A SPIRAL CURVE TO THE LEFT HAVING A CENTRAL ANGLE OF 3-00-00 AND AN INFINITE RADIUS; 2. NORTHWESTERLY ALONG THE ARC OF THAT SPIRAL CURVE, A DISTANCE OF 207.16 FEET, MORE OR LESS, TO A POINT BEING 150 FEET DISTANT NORTHEASTERLY FROM AND CONCENTRIC WITH U.S. INTERSTATE ROUTES 29 AND 35 CENTERLINE; 3. N19-47-42W, A DISTANCE OF 109.38 FEET; 4. S70-12-18W, A DISTANCE OF 75.00 FEET; 5. N19-47-42W, A DISTANCE OF 12.31 FEET TO THE POINT OF BEGINNING. CONTAINING 10.327 ACRES MORE OR LESS. TRACT A-2 ALL THAT PART OF FRACTIONAL SECTION 28 AND FRACTIONAL SECTION 33, IN TOWNSHIP 50 NORTH, RANGE 33 WEST, AS ORIGINALLY SURVEYED BY THE UNITED STATES, AND CERTAIN ACCRETED LANDS (PART OF THE LAND MAY ALSO LIE WITHIN PARTS OF LOTS 51 AND 52, HURCK'S SUBDIVISION OF GUINOTTE BLUFF, ACCORDING TO THE RECORDED PLAT THEREOF) ALL OF SAID LAND BEING IN KANSAS CITY, JACKSON COUNTY, MISSOURI, DESCRIBED AS FOLLOWS: BEGINNING AT THE POINT OF INTERSECTION OF THE UNITED STATES HARBOR LINE, AS ESTABLISHED ON THE SOUTH BANK OF THE MISSOURI RIVER IN 1904 AND 1924, AND THE EAST RIGHT-OF-WAY LINE OF U.S. INTERSTATE ROUTES 29 AND 35, AS RECORDED IN BOOK B5945, PAGE 310 AS DOCUMENT NO. B570825, DATED 5-11-1965; THEN N61-01-00E ALONG THAT HARBOR LINE A DISTANCE OF 1172.84 FEET TO THE NORTHWESTERLY PROLONGATION OF THE WEST LINE OF A TRACT OF LAND CONVEYED TO THE KANSAS CITY POWER AND LIGHT COMPANY BY BOOK B1942, PAGE 262, UNDER DOCUMENT NO. 1338778, AND BY BOOK B-4111, PAGE 36, UNDER DOCUMENT A-881822; THEN S28-59-OOE ALONG THAT WEST LINE, A DISTANCE OF 1098.96 FEET; THEN S48-39-06W, A DISTANCE OF 10.79 FEET TO THE POINT OF CURVE OF A CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 78-49-22 AND A RADIUS OF 460.87 FEET, BEING A POINT ON THE NORTH RIGHT-OF-WAY LINE OF RELOCATED RIVER FRONT ROAD AS RECORDED IN BOOK K436, PAGE 730, UNDER DOCUMENT NO. 194186; THEN SOUTHWESTERLY AND NORTHWESTERLY ALONG THE NORTHEASTERLY RIGHT-OF-WAY OF RELOCATED RIVER FRONT ROAD AS RECORDED IN BOOK K436, PAGE 730, DATED 4-12-1973, AND IN ORDINANCE NO. 42446, DATED 3-30-1973, THE FOLLOWING 3 COURSES; 1 SOUTHWESTERLY WESTERLY AND NORTHWESTERLY ALONG THE ARC OF THAT CURVE, A DISTANCE OF 634.03 FEET; 2. N52-31-32W, A DISTANCE OF 449.20 FEET TO A POINT OF CURVE OF A CURVE TO THE LEFT HAVING A CENTRAL ANGLE OF 60-41-46 AND A RADIUS OF 580.87 FEET; 3. NORTHWESTERLY ALONG THE ARC OF THAT CURVE, A DISTANCE OF 615.34 FEET TO THE EAST RIGHT-OF-WAY LINE OF U.S. INTERSTATE ROUTES 29 AND 35; THEN N19-47-42W, ALONG THAT RIGHT-OF-WAY LINE, A DISTANCE OF 78.43 TO THE POINT OF BEGINNING; CONTAINING 17.394 ACRES MORE OR LESS. TRACT A-3 SERVICE ACCESS EASEMENT A TRACT OF LAND IN FRACTIONAL SECTION 28 AND FRACTIONAL SECTION 33, IN TOWNSHIP 50 NORTH, RANGE 33 WEST, AS ORIGINALLY SURVEYED BY THE UNITED STATES, AND CERTAIN ACCRETED LANDS (PART OF THE LAND MAY ALSO LIE WITHIN PARTS OF LOTS 51 AND 52, HURCK'S SUBDIVISION OF GUINOTTE BLUFF, ACCORDING TO THE RECORDED PLAT THEREOF) ALL OF SAID LAND BEING IN KANSAS CITY, JACKSON COUNTY, MISSOURI, DESCRIBED AS FOLLOWS: COMMENCING AT THE POINT OF INTERSECTION OF THE UNITED STATES HARBOR LINE, AS ESTABLISHED ON THE SOUTH BANK OF THE MISSOURI RIVER IN 1904 AND 1924, AND THE EAST RIGHT-OF-WAY LINE OF U.S. INTERSTATE ROUTES 29 AND 35, AS RECORDED IN BOOK B5945, PAGE 310 AS DOCUMENT NO. B570825, DATED 5-11-1965; THEN N61-01-00E ALONG THAT HARBOR LINE A DISTANCE OF 1172.84 FEET TO THE NORTHWESTERLY PROLONGATION OF THE WEST LINE OF A TRACT OF LAND CONVEYED TO THE KANSAS CITY POWER AND LIGHT COMPANY BY BOOK B1942, PAGE 262, AS DOCUMENT NO. 1338778, AND BY BOOK B-4111, PAGE 36, AS DOCUMENT NO. 1 -881822; THEN S28-59-00E ALONG THAT WEST LINE, A DISTANCE OF 937.77 FEET TO A POINT 175.00 FEET NORTHWESTERLY FROM THE NORTHERLY RIGHT-OF-WAY LINE OF RIVER FRONT ROAD, BEING THE POINT OF BEGINNING. THEN S56-52-23E, A DISTANCE OF 177.56 FEET TO A POINT ON THE NORTHERLY RIGHT-OF-WAY LINE OF RIVER FRONT ROAD; THEN S48-44-55W ALONG THAT RIGHT-OF-WAY LINE, A DISTANCE OF 85.00 FEET TO THE PREVIOUSLY DESCRIBED WEST LINE OF THAT TRACT OF LAND CONVEYED TO THE KANSAS CITY POWER AND LIGHT COMPANY; THEN N28-59-00W ALONG THE WEST LINE OF THAT TRACT OF LAND, A DISTANCE OF 175.00 FEET TO THE POINT OF BEGINNING. CONTAINING 7268 SQUARE FEET, MORE OR LESS. EXHIBIT B-1 to AMENDED AND RESTATED LEASE AGREEMENT By and between THE PORT AUTHORITY OF KANSAS CITY, MISSOURI and HILTON HOTELS CORPORATION, a Delaware corporation, as of the ____ day of August, 1995. [Consisting of the attached ____ pages] [Service Access Easement Agreement) DEVELOPMENT AGREEMENT (Gaming Riverboat) between the Port Authority of Kansas City, Missouri and Hilton Hotels Corporation DATED MARCH 12, 1993 DEVELOPMENT AGREEMENT --------------------- (Gaming Riverboat) THIS AGREEMENT (the "Agreement") is made and entered into as of the ____ day of March, 1993 between the HILTON HOTELS CORPORATION, a Delaware corporation, and its "River Queen Operating Assignee" to be formed at a later date (hereinafter Hilton Hotels Corporation ("Hilton") and its River Queen operating Assignee are either referred to herein by their respective names or are jointly and severally referred to as "River Queen"), and the PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public body corporate and politic (hereinafter referred to as "Port Authority"). WITNESSETH: WHEREAS, Port Authority has been created as a public body corporate and politic duly organized and existing by Chapter 68 R.S.Mo. and the Ordinances of the City of Kansas City, Missouri and is charged with developing a riverfront area of Kansas City, Missouri, adjacent to the Missouri River in the vicinity of Grand Avenue and generally bounded by the Missouri River on the North, the Paseo Bridge on the East, Front Street (and the Grand Avenue extension from West to East) on the South and the Broadway Bridge on the West (hereinafter said area and certain adjacent areas where Site Improvements, as defined below, must be constructed, is sometimes referred to as the "Development Area"), as authorized by Sections 68.020 and 68.025 R.S.Mo. 1986, as amended; and Agreement may be executed at different times and in any number of originals or counterparts, each of which shall be deemed an original, but all of which together shall constitute only one instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first stated above by their duly authorized representatives. PORT AUTHORITY OF KANSAS CITY, MISSOURI By , (name) (title) HILTON HOTELS CORPORATION By , (name) (title) List of Exhibits - ------------------ A. River Queen Premises Lease Identification Pages B. Legal Description of River Queen Leased Premises C. Site Improvements D. Site Improvements Plans E. Critical Path F. Opinion Letters of Port Authority's and River Queen's Counsel G. Cooperative Agreement for Public Improvements H. Legal Description of Boatmen's Property I. Drawing of Riverfront Park Area J. River Queen Original Response Dated December 30, 1992 and Resubmission Response Dated January 11, 1993 to Port Authority Request for Proposals K. Minority and Women Participation in Hilton's Kansas City Queen Gaming Riverboat Policy & Plan L. Security/Safety Measures for the Development EXHIBIT A TRACT A-3 SERVICE ACCESS EASEMENT LAND DESCRIPTION A TRACT OF LAND IN FRACTIONAL SECTION 28 AND FRACTIONAL SECTION 33, IN TOWNSHIP 50 NORTH, RANGE 33 WEST, AS ORIGINALLY SURVEYED BY THE UNITED STATES, AND CERTAIN ACCRETED LANDS (PART OF THE LAND MAY ALSO LIE WITHIN PARTS OF LOTS 51 AND 52, HURCK'S SUBDIVISION OF GUINOTTE BLUFF, ACCORDING TO THE RECORDED PLAT THEREOF) ALL OF SAID LAND BEING IN KANSAS CITY, JACKSON COUNTY, MISSOURI, DESCRIBED AS FOLLOWS: COMMENCING AT THE POINT OF INTERSECTION OF THE UNITED STATES HARBOR LINE, AS ESTABLISHED ON THE SOUTH BANK OF THE MISSOURI RIVER IN 1904 AND 1924, AND THE EAST RIGHT-OF-WAY LINE OF U.S. INTERSTATE ROUTES 29 AND 35, AS RECORDED IN BOOK B5945, PAGE 310, DOCUMENT NO. B570825, DATED 5-11-1965; THEN N61-01-00E ALONG THAT HARBOR LINE A DISTANCE OF 1172.84 FEET TO THE NORTHWESTERLY PROLONGATION OF THE WEST LINE OF A TRACT OF LAND CONVEYED TO THE KANSAS CITY POWER AND LIGHT COMPANY BY BOOK B1942, PAGE 262, AS DOCUMENT NO. 1338778, AND BY BOOK B-4111, PAGE 36, AS DOCUMENT NO. A-881822; THEN S28-59-00E ALONG THAT WEST LINE, A DISTANCE OF 937.77 FEET TO A POINT 175.00 FEET NORTHWESTERLY FROM THE NORTHERLY RIGHT-OF-WAY LINE OF RIVER FRONT ROAD, BEING THE POINT OF BEGINNING; THE S56-52-23E, A DISTANCE OF 177.56 FEET TO A POINT ON THE NORTHERLY RIGHT-OF-WAY LINE OF RIVER FRONT ROAD; THEN S48-44-55W ALONG THAT RIGHT-OF-WAY LINE, A DISTANCE OF 85.00 FEET TO THE PREVIOUSLY DESCRIBED WEST LINE OF THAT TRACT OF LAND CONVEYED TO THE KANSAS CITY POWER AND LIGHT COMPANY; THEN N28-59-00W ALONG THE WEST LINE OF THAT TRACT OF LAND, A DISTANCE OF 175.00 FEET TO THE POINT OF BEGINNING. CONTAINING 7268 SQUARE FEET, MORE OR LESS. NON-EXCLUSIVE ACCESS EASEMENT AGREEMENT --------------------------------------- This Easement Agreement (the "Agreement") is made an entered into as of the ____ day of ___________, _______, by and among KANSAS CITY POWER AND LIGHT COMPANY, a Missouri corporation ("Grantor"), HILTON HOTELS CORPORATION, a Delaware corporation ("Hilton"), HILTON KANSAS CITY CORPORATION ("Hilton KC"), a Missouri corporation, and THE PORT AUTHORITY OF KANSAS CITY, MISSOURI, a public body corporate and politic ("Grantee"). ARTICLE XXXI. RECITALS OF FACT ---------------- Section 31.01 Grantor is the fee simple owner of that certain real property commonly known as Tract A-3 which abuts River Front Road in the City of Kansas City, Missouri ("City") and is legally described on Exhibit "A" and shown on ----------- Exhibit "B", both of which are attached hereto and incorporated herein by --------- reference ("Grantor's Property"). Section 31.02 Grantee is the Lessee from the City of certain real property shown on Exhibit "C", attached hereto and incorporated herein by reference ----------- ("Grantee's Property"), which Grantee desires to sublease to Hilton (sometimes hereinafter referred to as "Grantee's Sublessee") under a certain Amended and Restated Lease of approximately even date herewith (the "Hilton Lease"). Section 31.03 Grantor desires to grant a certain easement, and Grantee desires to receive said easement for the purpose of providing vehicular access across Grantor's Property for Grantee, its tenants, invitees, employees and others including, without limitation, Hilton and its successors and assigns under the Hilton Lease and said entities' tenants, invitees, and employees, between Grantee's Property and the public street commonly known as River Front Road and on which Grantor's property Hilton will construct certain driveway improvements. Section 31.04 Under Section 10.02 of that certain General Mortgage Indenture and Deed of Trust, by and between Grantor and United Missouri Bank, N.A., as Trustee ("Trustee"), dated December 1, 1986, and recorded in Book K-1612, at Page 1, as Document No. K-746018 and in Book I-1612, at Page 632, as Document No. I-733944, each in the real estate records of Jackson County, Missouri at Kansas City and at Independence, respectively, as supplemented by various supplemental indentures, Grantor is authorized to convey an easement to Grantee without further authorization of Trustee. NOW, THEREFORE, in consideration of the grants, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, Grantor hereby grants, covenants and agrees and Grantee and Hilton hereby consent and agree as follows: ARTICLE XXXII. AGREEMENT --------- Section 32.01 Grant of Easement. Grantor does hereby grant, remise release ------------------ and forever quitclaim to Grantee for the use and benefit of Grantee, its tenants, employees, invitees, successors and assigns, a perpetual non-exclusive easement over, under, across, and through that portion of Grantor's Property shown on Exhibit "B", as, and hereinafter referred to as, the "Driveway ------------ Easement." The Driveway Easement shall be for the purpose of allowing continuous ingress and egress of motor vehicles and other traffic from River Front Road to and from Grantee's Property. The Driveway Easement shall be a covenant running with the land. 32.01.1 Purchase Price. In consideration for the conveyance to Grantee of --------------- the non-exclusive Driveway Easement, Hilton shall pay to Grantor a purchase price of Seven Thousand Two Hundred Sixty-Eight and No/100 Dollars ($7,268.00) with said purchase price to be paid in cash or certified funds upon execution of this Agreement. 32.01.2 Title. Grantor hereby conveys a good, merchantable easement interest ----- in the Driveway Easement to Grantee free and clear of any and all leases, liens, or other encumbrances of any kind or nature whatsoever, or any combination thereof, except those agreed to by Grantee in writing. Section 32.02 Construction of Driveway. Hilton agrees as follows: -------------------------- 32.02.1 Construction. At its sole cost and expense, and within a reasonable ------------ period of time following execution of this Agreement, Hilton shall cause Hilton KC to construct a driveway (the "Driveway Improvements") on the Driveway Easement, to include grading, paving and construction of necessary appurtenances. Hilton KC shall construct the Driveway Improvements in accordance with plans and specifications prepared by Hilton KC at Hilton KC's cost and expense and subject to the reasonable written approval of Grantor, which approval shall be deemed given if no approval or request for changes has been given within thirty (30) days after Grantor's receipt of Hilton KC's plans and specifications from time to time. 32.02.2 Indemnity. Hilton agrees to defend, indemnify and hold Grantor and --------- Grantee harmless from any and all claims, demands, causes of action, claims for liens, bond claims, suits, actions, loss, costs, expenses, damages, liabilities, obligations and judgments in any manner arising out of or related to or connected with the work performed and the materials furnished for the Driveway Easement. 32.02.3 Protection Against Lien Claims. Neither Hilton nor Hilton KC shall ------------------------------ have any power to do any act or make any contract which may create or be the basis for any lien, mortgage or other encumbrance upon the interest of Grantor in Grantor's Property or the interest of Grantee in the Driveway Easement. Should Hilton or Hilton KC cause any construction, alteration, rebuilding, restoration, replacement, change, addition, improvements or repairs to be made on the Driveway Easement, including the Driveway Improvements, or cause any labor to be performed or material to be furnished thereon, therein or thereto, including labor and materials as necessary for the Driveway Improvements, Grantor and Grantee shall under no circumstances be liable for the payment of any cost or expense incurred or for the value of any work done or material furnished, and Hilton and Hilton KC shall be solely and wholly responsible to contractors, laborers and materialmen performing such labor and furnishing such materials. If, because of any act or omission (or alleged act or omission) of Hilton or Hilton KC, any mechanics', materialmens' or other lien, charge or order for the payment of money shall be filed or recorded against Grantor's Property or the Driveway Easement or against Grantor or Grantee (whether or not such lien, charge or order is valid or enforceable as such), Hilton shall, at its own cost and expense, cause the same to be released and discharged of record within thirty (30) days after Hilton shall have received notice of the filing or recording thereof, or Hilton may, within said period, furnish to Grantor and/or Grantee a bond satisfactory to Grantor and/or Grantee against any lien, charge or order, in which case Hilton shall have the right in good faith to contest the validity or amount thereof. 32.02.4 Construction Permits. Hilton and Hilton KC shall obtain and comply --------------------- with all permits and approvals of the City or other governmental bodies as may be necessary to complete construction of the Driveway Improvements. Section 32.03 Maintenance of the Easement. Hilton and Hilton KC agree to ----------------------------- cause the Driveway Easement to be maintained and repaired in a state of good condition and repair, free of weeds, brush, accumulated debris, water, snow and other obstructions or hazards whatsoever. If Hilton and Hilton KC fail to so maintain and repair the Driveway Easement in such condition, Grantor shall have the right: (a) if no emergency exists, to perform the same after giving ten (10) days written notice to Hilton; and (b) if an emergency exists, to perform the same immediately without notice or delay. In either case, Hilton shall within thirty (30) days after written demand from Grantor, reimburse Grantor for the cost and expense reasonably incurred by Grantor in rectifying Hilton's defaults as aforesaid, including reasonable attorneys' fees. Notwithstanding anything stated herein to the contrary, neither Hilton nor Hilton KC or their successors and assigns, shall have any obligation or liability hereunder (except for any then pending obligation or liability previously incurred hereunder) after the termination or expiration of the Hilton Lease. Section 32.04 Termination of Easement for Default or Vacation. In the event ----------------------------------------------- (a) Grantee and/or Hilton fails to comply with any term, provision, condition or covenant of this Agreement, or (b) Grantee and Hilton deserts or vacates the Driveway Easement for a period of one calendar year or longer, Grantee shall be in default upon Grantor giving Grantee and Hilton (or its permitted successors or assigns under the Hilton Lease) written notice of such default, and upon Grantee's and Hilton's failure to cure such default within a period of sixty (60) days after such written notice, Grantor may in its sole discretion terminate this Agreement and shall, in such event, have no further obligation or liability hereunder to Grantee or Hilton. Upon such termination, neither Grantee nor Hilton shall have any right by Court action or otherwise, to enforce any rights of possession to the Driveway Easement. Section 32.05 Hilton Indemnification of Grantee. Grantor agrees that Grantee --------------------------------- may, in its discretion, require that Hilton (or its permitted successors or assigns under the Lease), perform Grantee's covenants related to insurance and indemnity stated in Sections II.F and II.G below and as contemplated in the Hilton Lease. Section 32.06 Liability Insurance. This Agreement is made upon the express ------------------- condition that Grantor is to be free from all liability and claims for damages by reason of any injury to any person or persons, or property of any kind whatsoever and to whomsoever belonging, including Grantee, Hilton and Hilton KC, from any cause or causes whatsoever in, upon or in any way connected with the Driveway Easement during the term of this Agreement or any occupancy hereunder. Grantee hereby covenants and agrees to save Grantor harmless from all liability, loss, costs and expenses on account of or arising out of any such injuries or losses however occurring on the Driveway Easement, except as provided herein. Grantee covenants and agrees that it will at all times during the term hereof, at its own cost and expense, maintain and keep in force in an insurance company or companies reasonably acceptable to Grantor authorized to transact business in the State of Missouri, naming both Grantor and Grantee as insureds thereunder, general public liability and property damage insurance covering Grantee's use of the Driveway Easement affording protection in an amount not less than One Million Dollars ($1,000,000) for injury to or death of one or more persons arising out of any one occurrence, and not less than Fifty Thousand Dollars ($50,000) for property damage. Such policy shall contain an endorsement thereof to the effect that the same shall not be canceled by the insurer without at least thirty (30) days' prior written notice to Grantor. Grantee further covenants to deposit with Grantor a certificate of such insurance, the certificate of each such renewal policy to be similarly deposited with Grantor at least thirty (30) days prior to the expiration of any then current policy. Section 32.07 Payment of Insurance Premiums-Maintenance of Insurance. ----------------------------------------------------------- If Grantee does not keep the insurance referred to in Section II.F hereof in force and effect, Grantor in its sole discretion may pay the premiums therefor or obtain the necessary insurance, and the amount of payment therefor, with legal interest from the date of payment, shall be due and owing from Grantee to Grantor upon written demand by Grantor. ARTICLE XXXIII. OTHER TERMS ----------- Section 33.01 Monitoring Wells. Grantor shall contract with Terracon ----------------- Environmental of Kansas City, Missouri for the purpose of filling and capping certain environmental monitoring wells presently located on Grantor's Property and the relocation of such wells so they will not interfere with Grantee's use of the Driveway Easement. Hilton shall reimburse Grantor for the actual cost and expense of filling, capping and relocating said monitoring wells which cost may include an income tax component if applicable. Section 33.02 Fencing. For safety and security purposes, Grantor shall, ------- relocate certain fencing along that area of Grantor's Property as shown on Exhibit "D", which is attached hereto and incorporated herein by reference. Hilton shall reimburse Grantor for the actual cost and expense of relocating the fencing, which cost may include an income tax component, if applicable. Section 33.03 Missouri Law. This Agreement shall be construed and enforced ------------ in accordance with the laws of the State of Missouri. Section 33.04 Notices. All notices required to be given hereunder to Grantee ------- must also be given to Hilton in accordance with the notice provisions stated herein. Any notices or other communication required or permitted to be given hereunder shall be in writing and shall be deemed given when delivered personally or deposited in the United States mail, either certified or registered, postage prepaid, return receipt required, addressed as follows: If to Hilton: Hilton Hotels Corporation c/o Hilton Kansas City Corporation Attention: Dan Musser 920 Main Street, Suite 1950 Kansas City, MO 64105 With Copy to: Lathrop & Norquist, L.C. Attention: Jerome D. Riffel 2345 Grand Blvd., Suite 2500 Kansas City, MO 64108 If to KCP&L: Kansas City Power & Light Company Attention: Patrick J. O'Malley Real Estate Department P.O. Box 418679 Kansas City, MO 64141-9679 With Copy to: Kansas City Power & Light Company Legal Department Attention: Michael Rump P.O. Box 418679 Kansas City, MO 64141-9679 If to the Port Authority of Kansas City Port Authority: Attention: Edward Simms One Petticoat Lane Kansas City, MO 64106 With Copy to: McDowell, Rich & Smith, P.C. Attention: Phillip A. Kusnetzky 1300 Twelve Wyandotte Plaza 120 W. 12th Street Kansas City, MO 64105 Any person or entity may change the place or person for receipt of notices by written notice to the others given as provided above. Section 33.05 Counterparts. Captions used herein are for convenience only ------------ and are not to be considered in construing this Agreement. This Agreement may be executed at different times and in any number of counterparts, each of which shall be considered an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above. KANSAS CITY POWER & LIGHT COMPANY By: Name: Title: "GRANTOR" PORT AUTHORITY OF KANSAS CITY, MISSOURI By: Name: Title: "GRANTEE" HILTON HOTELS CORPORATION By: Name: Title: HILTON KANSAS CITY CORPORATION By: Name: Title: Attach: Exhibit A - Tract A-3 Legal Description ---------- Exhibit B - Tract A-3 (Plan) ---------- Exhibit C - Tracts A-1 and A-2 (Plan) ---------- Exhibit D - Relocation Plan Drawing showing Fencing ---------- STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) On this ____ day of ____________, 1995, before me, the undersigned, a Notary Public in and for said County and State, personally appeared _______________, known to me to be the person whose name is subscribed to the foregoing instrument, and known to me to be the _____________ of the Kansas City Power and Light Company, and acknowledged to me that he executed said instrument for the purposes and consideration therein expressed, and as the free act and deed of the Kansas City Power and Light Company as authorized by its Board of Directors. WITNESS my hand and notarial seal subscribed and affixed in said County and State the day and year in this certificate above written. Notary Public My Commission Expires: STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) On this ____ day of ____________, 1995, before me, the undersigned, a Notary Public in and for said County and State, personally appeared _______________, known to me to be the person whose name is subscribed to the foregoing instrument, and known to me to be the _____________ of the Port Authority of Kansas City, and acknowledged to me that he executed said instrument for the purposes and consideration therein expressed, and as the free act and deed of the Port Authority of Kansas City as authorized by its Board of Directors. WITNESS my hand and notarial seal subscribed and affixed in said County and State the day and year in this certificate above written. Notary Public My Commission Expires: STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) On this ____ day of ____________, 1995, before me, the undersigned, a Notary Public in and for said County and State, personally appeared _______________, known to me to be the person whose name is subscribed to the foregoing instrument, and known to me to be the _____________ of the Hilton Hotels Corporation, a Delaware corporation, and acknowledged to me that he executed said instrument for the purposes and consideration therein expressed, and as the free act and deed of said corporation as authorized by its Board of Directors. WITNESS my hand and notarial seal subscribed and affixed in said County and State the day and year in this certificate above written. Notary Public My Commission Expires: STATE OF MISSOURI ) ) ss. COUNTY OF JACKSON ) On this ____ day of ____________, 1995, before me, the undersigned, a Notary Public in and for said County and State, personally appeared _______________, known to me to be the person whose name is subscribed to the foregoing instrument, and known to me to be the _____________ of the Hilton Kansas City Corporation, a Missouri corporation, and acknowledged to me that he executed said instrument for the purposes and consideration therein expressed, and as the free act and deed of the Kansas City Power and Light Company as authorized by its Board of Directors. WITNESS my hand and notarial seal subscribed and affixed in said County and State the day and year in this certificate above written. Notary Public My Commission Expires: EXHIBIT C TRACT A-1 LAND DESCRIPTION ALL THAT PART OF FRACTIONAL SECTION 28 AND FRACTIONAL SECTION 33, IN TOWNSHIP 50 NORTH, RANGE 33 WEST, AS ORIGINALLY SURVEYED BY THE UNITED STATES, AND CERTAIN ACCRETED LAND, ALL IN KANSAS CITY, JACKSON COUNTY, MISSOURI, DESCRIBED AS FOLLOWS: COMMENCING AT THE POINT OF INTERSECTION OF THE UNITED STATES HARBOR LINE, AS ESTABLISHED ON THE SOUTH BANK OF THE MISSOURI RIM IN 1904 AND 1924, AND THE EAST RIGHT-OF-WAY LINE OF U.S. INTERSTATE ROUTES 29 AND 35, AS RECORDED IN BOOK B-5945, PAGE 310, AS DOCUMENT NO. B570825, DATED 5-11-1965; THEN S19-47-42E ALONG THAT RIGHT-OF-WAY LINE, A DISTANCE OF 198.70 FEET TO THE SOUTH RIGHT-OF-WAY LINE OF RELOCATED RIVER FRONT ROAD, AS RECORDED IN ORDINANCE NO. 42446, DATED 3-30-1973, THE POINT OF BEGINNING ALSO BEING A POINT OF CURVE OF A NONTANGENT CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 61-35-24 AND A RADIUS OF 460.87 FEET, THE RADIUS POINT BEARS S24-06-56E; THEN SOUTHEASTERLY, SOUTHWESTERLY AND NORTHWESTERLY ALONG THE SOUTHEASTERLY RIGHT-OF-WAY LINE OF RELOCATED RIVER FRONT ROAD, AS RECORDED IN ORDINANCE NO. 42446, DATED 3-30-1973 AND IN BOOK K436, AT PAGE 730, DATED 4-12-1973, AS DOCUMENT NO. K-194186, THE FOLLOWING 8 COURSES; 1. SOUTHEASTERLY ALONG THE ARC OF THAT CURVE, A DISTANCE OF 495.41 FEET; 2. S52-31-32E, A DISTANCE OF 449.20 FEET TO A POINT OF CURVE OF A CURVE TO THE LEFT HAVING A CENTRAL ANGLE OF 4-40-10 AND A RADIUS OF 580.87 FEET; 3. SOUTHEASTERLY ALONG THE ARC OF THAT CURVE, A DISTANCE OF 47.34 FEET; 4. S14-03-53E, A DISTANCE OF 155.67 FEET TO A POINT OF CURVE OF A NONTANGENT CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 37-59-11 AND A RADIUS OF 460.87 FEET, THE RADIUS POINT BEARS N69-51-40W; 5. SOUTHWESTERLY ALONG THE ARC OF THAT CURVE, A DISTANCE OF 305.55 FEET; 6. S67-22-36W, A DISTANCE OF 248.91 FEET TO A POINT OF CURVE OF A NONTANGENT CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 89-54-37 AND A RADIUS OF 140.19 FEET, THE RADIUS POINT BEARS N31-52-21W; 7. WESTERLY ALONG THE ARC OF THAT CURVE, A DISTANCE OF 219.99 FEET; 8. N27-55-08W, A DISTANCE OF 60.58 FEET TO THE EAST RIGHT-OF-WAY LINE OF U.S. INTERSTATE ROUTES 29 AND 35, ALSO BEING A POINT OF CURVE OF A NONTANGENT CURVE TO THE LEFT HAVING A CENTRAL ANGLE OF 12-47-05 AND A RADIUS OF 2059.86 FEET, THE RADIUS POINT BEARS S85-59-23W; TRACT A-2 LAND DESCRIPTION ALL THAT PART OF FRACTIONAL SECTION 28 AND FRACTIONAL SECTION 33, IN TOWNSHIP 50 NORTH, RANGE 33 WEST, AS ORIGINALLY SURVEYED BY THE UNITED STATES, AND CERTAIN ACCRETED LANDS (PART OF THE LAND MAY ALSO LIE WITHIN PARTS OF LOTS 51 AND 52, HURCK'S SUBDIVISION OF GUINOTTE BLUFF, ACCORDING TO THE RECORDED PLAT THEREOF) ALL OF SAID LAND BEING IN KANSAS CITY, JACKSON COUNTY, MISSOURI, DESCRIBED AS FOLLOWS: BEGINNING AT THE POINT OF INTERSECTION OF THE UNITED STATES HARBOR LINE, AS ESTABLISHED ON THE SOUTH BANK OF THE MISSOURI RIVER IN 1904 AND 1924, AND THE EAST RIGHT-OF-WAY LINE OF U.S. INTERSTATE ROUTES 29 AND 35, AS RECORDED IN BOOK B5945, PAGE 310, AS DOCUMENT NO. B570825, DATED 5-11-1965; THEN N61-01-00E ALONG THAT HARBOR LINE, A DISTANCE OF 1172.84 FEET TO THE NORTHWESTERLY PROLONGATION OF THE WEST LINE OF A TRACT OF LAND CONVEYED TO THE KANSAS CITY POWER AND LIGHT COMPANY BY BOOK B1942, PAGE 262, AS DOCUMENT NO. 1338778 AND BY BOOK B-4111, PAGE 36, AS DOCUMENT NO. A-881822; THEN S28-59-00E ALONG THAT WEST LINE, A DISTANCE OF 1098.96 FEET; THEN S48-39-06W, A DISTANCE OF 10.79 FEET TO A POINT OF CURVE OF A CURVE TO THE RIGHT HAVING A CENTRAL ANGLE OF 78-49-22 AND A RADIUS OF 460.87 FEET, BEING A POINT ON THE NORTH RIGHT-OF-WAY LINE OF RELOCATED RIVER FRONT ROAD AS RECORDED IN BOOK K436, PAGE 730, DATED 4-12-1973, AS DOCUMENT NO. K-194186; THEN SOUTHWESTERLY AND NORTHWESTERLY ALONG THE NORTHEASTERLY RIGHT-OF-WAY LINE OF RELOCATED RIVERFRONT ROAD AS RECORDED IN BOOK K436, PAGE 730, DATED 4-12-1973, AND IN ORDINANCE NO. 42446, DATED 3-30-1973, THE FOLLOWING 3 COURSES; 1. SOUTHWESTERLY, WESTERLY AND NORTHWESTERLY ALONG THE ARC OF THAT CURVE, A DISTANCE OF 634.03 FEET; 2. N52-31-32W, A DISTANCE OF 449.20 FEET TO A POINT OF CURVE OF A CURVE TO THE LEFT HAVING A CENTRAL ANGLE OF 60-41-46 AND A RADIUS OF 580.87 FEET; 3. NORTHWESTERLY ALONG THE ARC OF THAT CURVE, A DISTANCE OF 615.34 FEET TO THE EAST RIGHT-OF-WAY LINE OF U.S. INTERSTATE ROUTES 29 AND 35; THEN N19-47-42W, ALONG THAT RIGHT-OF-WAY LINE, A DISTANCE OF 78.43 FEET TO THE POINT OF BEGINNING; CONTAINING 17.394 ACRES M/L. THEN NORTHERLY ALONG THE EAST RIGHT-OF-WAY LINE OF U.S. INTERSTATE ROUTES 29 AND 35 THE FOLLOWING 5 COURSES; 1. NORTHWESTERLY ALONG THE ARC OF THAT CURVE, A DISTANCE OF 459.63 FEET TO A POINT THAT IS 150 FEET DISTANT NORTHEASTERLY FROM AND CONCENTRIC WITH U.S. INTERSTATE ROUTES 29 AND 35 CENTERLINE, AND BEING A POINT OF CURVE OF A SPIRAL CURVE TO THE LEFT HAVING A CENTRAL ANGLE OF 3-00-00 AND AN INFINITE RADIUS; 2. NORTHWESTERLY ALONG THE ARC OF THAT SPIRAL CURVE, A DISTANCE OF 207.16 FEET, MORE OR LESS, TO A POINT BEING 150 FEET DISTANT NORTHEASTERLY FROM AND CONCENTRIC WITH U.S. INTERSTATE ROUTES 29 AND 35 CENTERLINE; 3. N19-47-42W, A DISTANCE OF 109.38 FEET; 4. S70-12-18W, A DISTANCE OF 75.00 FEET; 5. N19-47-42W, A DISTANCE OF 12.31 FEET TO THE POINT OF BEGINNING. CONTAINING 10.327 ACRES M/L. EX-10.58 5 0005.txt ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- (LEASE AGREEMENT) THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made and entered into this ________ day of June, 2000, by and among (i) HILTON HOTELS CORPORATION, a Delaware corporation, and FLAMINGO HILTON RIVERBOAT CASINO, L.P., a Missouri limited partnership and assignee by assignment from Hilton Hotels Corporation (collectively, "Assignor"), (ii) ISLE OF CAPRI CASINOS, INC., a Delaware -------- corporation ("Assignee"), and (iii) IOC-KANSAS CITY, INC., a Missouri -------- corporation and affiliate of Assignee ("Operating Assignee"). -------------------- Recitals A. The Port Authority of Kansas City, Missouri (the "Port Authority") -------------- and Hilton Hotels Corporation ("HHC") are parties to an Amended and Restated --- Lease Agreement dated as of August 21, 1995, as thereafter amended (the "Lease"), a true, correct and complete copy of which is attached as SCHEDULE A hereto. B. The interest of HHC under the Lease Agreement was assigned (i) pursuant to that certain Lessee's Assignment and Assumption Agreement dated August 9, 1996 by and between HHC and Hilton Kansas City Corporation, a Missouri corporation ("HKCC"), whereby HHC transferred all its right, title, and interest ---- in and to the Lease to HKCC; and (ii) pursuant to that certain Blanket Conveyance, Bill of Sale, and Assignment and Assumption Agreement dated August 9, 1996 by and between HKCC and Flamingo Hilton Riverboat Casino, L.P. ("Flamingo Hilton"), whereby HKCC transferred all its right, title, and interest -------- in and to the Lease to Flamingo Hilton. C. Assignor now desires to assign and transfer all right, title and interest in the Lease to Assignee, while remaining liable for any and all liabilities and obligations previously accrued or hereafter accruing pursuant to the Lease. D. Assignee desires to accept such assignment, and thereafter to assign and transfer to Operating Assignee all right, title and interest in the Lease held by Assignee. Agreement NOW, THEREFORE, in consideration of the above premises, the mutual covenants and agreements stated herein and stated in the Asset Sale Agreement dated as of February 8, 2000, by and among Assignor, as sellers, and Assignee and Operating Assignee, as purchasers (the "Asset Sale Agreement"), as well as -------------------- other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. ASSIGNMENT. Effective upon (a) the consummation of the transactions ---------- contemplated by the Asset Sale Agreement, (b) the execution of the Consent (as defined below), and (c) the issuance of a license by the Missouri Gaming Commission to Operating Assignee to conduct gaming operations on the property which is subject to the Lease (collectively, the "Closing"), Assignor does hereby irrevocably assign, transfer, sell, deliver and convey unto Assignee, its successors and assigns, all of Assignor's right, title and interest in and to the Lease, as of the close of business on the day on which the Closing occurs, free and clear of any lien, charge, claim or encumbrance, except as set forth on Schedule B attached hereto and incorporated herein by this reference. Subject to and upon the occurrence of the Closing, Assignee hereby accepts the assignment of the Lease pursuant to the terms of this Assignment and Assumption Agreement. The parties hereto acknowledge and agree that this Assignment ( and Assumption Agreement shall not become effective and shall be of no legal force or effect unless and until the Closing occurs. 2. ASSUMPTION OF LIABILITIES. ------------------------- (a) Assignee hereby assumes responsibility to faithfully and punctually perform, satisfy and discharge all of the duties, obligations, terms, conditions, covenants and liabilities arising or accruing after the date of the Closing that Assignor is otherwise bound to perform, discharge or otherwise satisfy under the Lease, including without limitation, pursuant to Section 18.04 (B) (viii) (b) and (c) of the Lease regarding (i) the use of the "Demised Premises" (as that term is defined in the Lease) in accordance with the restrictions set forth in the Lease and (ii) the payment of "Rent" (as that term is defined in the Lease). Assignor does hereby agree to indemnify, defend and hold Assignee harmless from any loss (including without limitation attorneys' fees and costs), claim or cause of action arising or accruing under or in connection with any of the following: (i) the Lease based upon events, acts or omissions that occurred on or before the date of the Closing; (ii) any future written assignments executed and delivered by and between Assignor and Assignee based upon events, acts or omissions that occurred on or before the date of the Closing; or (iii) the failure of Assignor to perform its obligations under this Assignment and Assumption Agreement. Assignee does hereby agree to indemnify, defend and hold Assignor harmless from any loss (including without limitation attorneys' fees and costs), claim or cause of action arising or accruing under or in connection with any of the following: (i) the Lease based upon events, acts or omissions that occurred after the date of the Closing; (ii) any future written assignments executed and delivered by and between Assignee and Assignor based upon events, acts or omissions that occurred after the date of the Closing; or (iii) the failure of Assignee or Operating Assignee to perform their respective obligations under this Assignment and Assumption Agreement. (b) Notwithstanding any other provision of this Assignment and Assumption Agreement to the contrary, Assignor shall remain liable to the Port Authority in connection with the performance of all liabilities and obligations under the Lease to the same extent as if this Assignment and Assumption Agreement had not been executed. The foregoing sentence does not, however, in any way relieve (i) Assignee or Operating Assignee from the liabilities and obligations that each owes to Assignor which are set forth in this Assignment and Assumption Agreement or (ii) Assignor from the liabilities and obligations that it owes to Assignee and Operating Assignee which are set forth in this Assignment and Assumption Agreement. 3. FURTHER ASSIGNMENT TO OPERATING SUBSIDIARY OF ASSIGNEE. ------------------------------------------------------------ (a) Subject to the occurrence of the Closing, Assignee does hereby irrevocably assign, transfer, sell, deliver and convey unto Operating Assignee, its successors and assigns, all its right, title and interest in and to the Lease, as of the close of business on the day the Closing occurs, free and clear of any lien, charge, claim or encumbrance, except asset forth on SCHEDULE B attached hereto and incorporated herein by this reference. Subject to and upon the occurrence of the Closing, Operating Assignee hereby accepts the assignment of the Lease pursuant to the terms of this Assignment and Assumption Agreement. (b) Assignor hereby acknowledges and consents to the assignment, transfer, sale, delivery and conveyance by Assignee to Operating Assignee of all right, title and interest in the Lease that has been assigned to Assignee pursuant to Section 1 of this Assignment and Assumption Agreement. (c) Operating Assignee hereby assumes responsibility to faithfully and punctually perform, satisfy and discharge all of the duties, obligations, terms, conditions, covenants and liabilities arising or accruing after the date of the Closing that Assignee is otherwise bound to perform, discharge or otherwise satisfy under the Lease (as a result of the terms and conditions of this Assignment and Assumption Agreement), including without limitation, pursuant to Section 18.04 (B) (viii) (b) and (c) of the Lease regarding (i) the use of the "Demised Premises" (as that term is defined in the Lease) in accordance with the restrictions set forth in the Lease and (ii) the payment of the "Rent" (as that term is defined in the Lease). Assignor does hereby agree to indemnify, defend and hold Operating Assignee harmless from any loss (including without limitation attorneys' fees and costs), claim or cause of action arising or accruing under or in connection with any of the following: (i) the Lease based upon events, acts or omissions that occurred on and before the date of the Closing; (ii) any future written assignments executed and delivered by and between Assignor and Assignee based upon events, acts or omissions that occurred on or before the date of the Closing; or (iii) the failure of Assignor to perform its obligations under this Assignment and Assumption Agreement. Operating Assignee does hereby agree to indemnify, defend and hold Assignor harmless from any loss (including without limitation attorneys' fees and costs), claim or cause of action arising or accruing under or in connection with any of the following: (i) the Lease based upon events, acts or omissions that occurred after the date of the Closing; (ii) any future written assignments by and between Operating Assignee and Assignor based upon events, acts or omissions that occurred after the date of the Closing; or (iii) the failure of Operating Assignee or Assignee to perform their respective obligations under this Assignment and Assumption Agreement. (d) Notwithstanding any other provision of this Assignment and Assumption Agreement to the contrary, Assignee shall remain liable to the Port Authority and Assignor in connection with the performance of all liabilities and obligations under the Lease to the same extent as if the further assignment pursuant to this Section 3 had not been made. The foregoing sentence does not, however, in any way relieve (i) Assignor from the liabilities and obligations that it owes to Assignee and Operating Assignee which are set forth in this Assignment and Assumption Agreement or (ii) Assignee or Operating Assignee from the liabilities and obligations that each owe to Assignor which are set forth in this Assignment and Assumption Agreement. 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ASSIGNOR. ---------------------------------------------------------- (a) Assignor, as of the date of the Closing, does hereby represent and warrant to Assignee and Operating Assignee as follows: (i) Assignor has complete and unrestricted power and authority to sell, assign, and transfer all its right, title and interest in the Lease as contemplated by this Assignment and Assumption Agreement, and such sale, assignment and transfer does not and will not require the consent or approval of any third party or government entity, except for the prior written consent of the Port Authority, which written consent is set forth in the Acknowledgment, Consent and Estoppel Certificate (the "Consent") attached hereto as Exhibit 1 and incorporated herein by reference. (ii) Neither the execution and delivery of this Assignment and Assumption Agreement nor compliance with the terms hereof on the part of Assignor will violate the Articles of Incorporation or Bylaws, or the Certificate of Limited Partnership or Partnership Agreement, as the case may be, of Assignor, breach any governmental law, statute or regulation, or conflict with or result in the breach of any of the terms, conditions or provisions of any agreement or instrument to which Assignor is a party or by which it is or may be bound, or constitute a default thereunder, or result in the creation or imposition of any lien, claim, charge, or encumbrance. Except as set forth in SCHEDULE C attached hereto and incorporated herein by this reference, Assignor has no knowledge of any fact or condition regarding or involving the Demised Premises (as defined in the Lease) or any of Assignor's duties and obligations under the Lease that constitute a violation or breach of any law, statute, ordinance, regulation, order, contract or other agreement including, without limitation, environmental laws and regulations. (iii) Assignor has all necessary corporate power and authority to enter into this Assignment and Assumption Agreement, and has taken all corporate action necessary to make this Assignment and Assumption Agreement enforceable upon Assignor in accordance with its terms. (iv) A true, correct and complete copy of the Lease, and all amendments thereto, are attached hereto as SCHEDULE A. The Lease has not been amended or modified, except as set forth on SCHEDULE A attached hereto and incorporated herein by this reference. The Lease, as amended or modified, is in full force and effect and constitutes the legal, valid and binding obligation of all of the parties thereto and is enforceable in accordance with its terms. (v) Except as set forth in SCHEDULE D attached hereto and incorporated herein by this reference, no event has occurred and no condition exists that, with the giving of notice or the lapse of time or both, could constitute a default by Assignor under the Lease or, to Assignor's best knowledge after due and diligent inquiry, by the Port Authority. Assignor has no present intention to bring an action or otherwise attempt to enforce any alleged nonperformance or breach of any provision of the Lease. Except as set forth in SCHEDULE E attached hereto and incorporated herein by this reference, Assignor has no existing defenses or offsets against the enforcement of the Lease by the Port Authority, and knows of no other parties who are not signatories to the Lease who possess or may assert rights under or in connection with the Lease. (vi) Except as set forth in SCHEDULE F attached hereto and incorporated herein by this reference, the Lease and the Development Agreement dated as of March 12, 1993 by and between the Port Authority and HHC (the "Development ------------ Agreement"),as thereafter amended, are the only agreements, written or oral, ------- entered into between the Port Authority and Assignor. (b) Assignor covenants and agrees as follows: (i) Assignor has not and will not assign the whole or any part of its right, title and interest hereby assigned to any person other than Assignee. (ii) Assignor shall forthwith notify Assignee and Operating Assignee in writing of any default (or any event or occurrence that, but for the giving of notice or the passage of time, or both, would constitute a default) under the Lease of which it has knowledge or any assertion made to Assignor by any other party to the Lease that circumstances have arisen that may pen-nit or result in a breach or the cancellation of the Lease. 5. REPRESENTATIONS AND WARRANTIES OF ASSIGNEE. ---------------------------------------------- (a) Assignee, as of the date of the Closing, does hereby represent and warrant to Assignor as follows: (i) Assignee has complete and unrestricted power and authority to sell, assign, and transfer its right, title and interest in the Lease as contemplated by this Assignment and Assumption Agreement. (ii) Neither the execution and delivery of this Assignment and Assumption Agreement nor compliance with the terms hereof on the part of Assignee will violate the Articles of Incorporation or Bylaws of Assignee, breach any governmental law, statute or regulation, or conflict with or result in the breach of any of the terms, conditions or provisions of any agreement or instrument to which Assignee is a party or by which it is or may be bound, or constitute a default thereunder, or result in the creation or imposition of any lien, claim, charge or encumbrance. (iii) Assignee has all necessary corporate power and authority to enter into this Assignment and Assumption Agreement and has taken all corporate action necessary to make this Assignment and Assumption Agreement enforceable upon Assignee in accordance with its terms. (b) Assignee covenants and agrees that Assignee will not assign the whole or any part of its right, title and interest hereby assigned to any person or entity other than Operating Assignee, without the prior written consent of the Port Authority and Assignor, which consent shall not be unreasonably withheld. Assignor acknowledges and agrees that, for purposes of this subsection (b) of this Section 5, consent shall be deemed "unreasonably withheld" if the proposed assignee, in the Assignor's reasonable opinion, is financially capable of performing and satisfying in full each of its respective obligations pursuant to the Lease and Assignor withholds its consent. 6. REPRESENTATIONS AND WARRANTIES OF OPERATING ASSIGNEE.Operating Assignee, ------------------------------------------------------ as of the date of the Closing, does hereby represent and warrant to the Assignor as follows: (a) Neither the execution and delivery of this Assignment and Assumption Agreement nor compliance with the terms hereof on the part of Operating Assignee will violate the Articles of Organization or Operating Agreement of Operating Assignee, breach any governmental law, statute or regulation, or conflict with or result in the breach of any of the terms, conditions or provisions of any agreement or instrument to which Operating Assignee is a party or by which it is or may be bound, or constitute a default thereunder, or result in the creation or imposition of any lien, claim, charge or encumbrance. (b) Operating Assignee has all necessary corporate power and authority to enter into this Assignment and Assumption Agreement, and has taken all corporate action necessary to make this Assignment and Assumption Agreement enforceable upon Operating Assignee in accordance with its terms. 7. FURTHER ACTION. --------------- (a) Assignor, Assignee and Operating Assignee agree that each shall execute and deliver, or cause to be executed and delivered from time to time, such instruments, documents, agreements, consents and assurances and take such other action as the other parties reasonably may require to more effectively assign and transfer to and vest in such parties the rights and assets assigned hereunder. Assignor, Assignee and Operating Assignee agree to promptly remit and send to such parties any and all payments, funds, assets, notices, reports and other documents and information received by each party, its agents or representatives as a direct or indirect result of its rights in, or with respect to, the Lease. (b) If any right or asset hereby assigned or transferred shall for any reason be nonassignable or not enforceable by Assignee or Operating Assignee, Assignor shall take such action to enforce the same or to obtain the benefits thereof for Assignee and/or Operating Assignee as Assignee or Operating Assignee may reasonably direct, but at the sole expense and risk of Assignee and Operating Assignee, and Assignor will deliver to Operating Assignee any amounts received by it on account of any such claim, right or chose in action after deducting any reasonable expenses incurred by Assignor in taking such action that have not been paid or reimbursed by Assignee or Operating Assignee 8. GENERAL. ------- (a) This Assignment and Assumption Agreement cancels and supersedes all previous agreements (other than the Asset Sale Agreement) relating to the subject matter of this Assignment and Assumption Agreement, written or oral, between the parties hereto and, together with the relevant provisions of the Asset Sale Agreement, contains the entire understanding of the parties hereto and shall not be amended, modified or supplemented in any manner whatsoever except as otherwise provided herein or in writing signed by each of the parties hereto. (b) Neither this Assignment and Assumption Agreement, nor any of the rights, duties or obligations of Assignor hereunder, may be assigned either voluntarily or by operation of law or otherwise delegated by Assignor without the prior written consent of the Assignee and Operating Assignee, and any attempted assignment that is not in conformity herewith shall be null and void. This Assignment and Assumption Agreement shall be binding upon, and inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns. (c) This Assignment and Assumption Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which shall constitute one agreement which is binding upon all the parties hereto, notwithstanding that all parties are not signatories to the same counterpart. (d) Any notice, request, consent or communication under this Assignment and Assumption Agreement shall be effective only if it is in writing and personally delivered or sent by (i) certified mail, postage prepaid, (ii) nationally recognized express delivery service with delivery confirmed or (iii) telexed or telecopies with receipt confirmed, addressed as follows: If to Assignor: Name: With Copy To: ---- ------------ Flamingo Hilton Riverboat Casino, L.P. Park Place Entertainment Corp. c/o Hilton Hotels Corporation 3930 Howard Hughes Pkwy. 9336 Civic Center Drive Las Vegas, NV 89109 Beverly Hills, CA 902 10 ATTN: Clive S. Cummis ATTN: Thomas E. Gallagher Executive Vice President and Executive Vice President, General Counsel General Counsel and Secretary FAX: 702-699-5107 FAX: 310-205-7677 and to Scott LaPorta Executive Vice President and Chief Financial Officer FAX: 702-699-5190 If to Assignee: Name: ---- Isle of Capri Casinos, Inc. 2200 Corporate Blvd., N.W., Suite 310 Boca Raton, FL 33431 ATTN: Allan Solomon Executive Vice President and General Counsel FAX: 561-995-6665 If to Operating Assignee: Name: ----- IOC-KANSAS CITY, INC. C/o Isle of Capri Casinos, Inc. 2200 Corporate Blvd., N.W., Suite 310 Boca Raton, FL 33431 ATTN: Allan Solomon Executive Vice President and General Counsel FAX: 561-995-6665 or such other persons and/or addresses as shall be furnished in writing by any such party, and shall be deemed to have been given as of the date so personally delivered or received. (e) This Assignment and Assumption Agreement and all rights and obligations of the parties hereunder shall be governed by, and construed and interpreted in accordance with, the laws of the State of Missouri applicable to agreements made and to be performed entirely within such State, including all matters of enforcement, validity and performance. (f) Assignor, Assignee and Operating Assignee acknowledge and agree that the provisions set forth in the Consent pertaining or otherwise applicable to Assignor, Assignee and/or Operating Assignee, as the case may be, are true and correct and will be relied upon by the Port Authority in executing and delivering the Consent, and Assignor, Assignee and Operating Assignee agree to be bound by such applicable provisions of the Consent. (g) Assignor, Assignee and Operating Assignee acknowledge and agree that the Port Authority shall be a third party beneficiary of this Assignment and Assumption Agreement, and shall have the right to enforce any such terms and conditions hereof in such capacity. SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- (LEASE AGREEMENT) IN WITNESS WHEREOF, the parties hereto have each caused this Assignment and Assumption Agreement to be duly executed as of the day and year first above written. ASSIGNOR: HILTON HOTELS CORPORATION By: Print Name: Title: SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- (LEASE AGREEMENT) IN WITNESS WHEREOF, the parties hereto have each caused this Assignment and Assumption Agreement to be duly executed as of the day and year first above written. FLAMINGO HILTON RIVERBOAT CASINO, L.P. By: Hilton Kansas City Corp., General Partner By: Print Name: Title: SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- (LEASE AGREEMENT) IN WITNESS WHEREOF, the parties hereto have each caused this Assignment and Assumption Agreement to be duly executed as of the day and year first above written. ASSIGNEE: ISLE OF CAPRI CASINOS, INC. By: Print Name: Title: SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- (LEASE AGREEMENT) IN WITNESS WHEREOF, the parties hereto have each caused this Assignment and Assumption Agreement to be duly executed as of the day and year first above written. OPERATING ASSIGNEE: IOC-KANSAS CITY, INC. By: Print Name: Title: ACKNOWLEDGMENT -------------- STATE OF ) )ss. COUNTY OF ) BEFORE ME, a Notary Public in and for the County and State aforesaid, personally appeared __________________, as ____________________ of Hilton Hotels Corporation, a Delaware corporation, who is known to me to be the same person who executed the foregoing instrument on behalf of said corporation and acknowledged the execution of the same as the free and voluntary act and deed of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal this ____ day of __________________, 2000. Notary Public My Commission Expires: ACKNOWLEDGMENT -------------- STATE OF ) )ss. COUNTY OF ) BEFORE ME, a Notary Public in and for the County and State aforesaid, personally appeared _________________________, ____________________________ of Hilton Kansas City Corp., the corporate general partner of Flamingo Hilton Riverboat Casino, L.P., a Missouri limited partnership, who is known to me to be the same person who executed the foregoing instrument on behalf of said corporation as general partner of said limited partnership and acknowledged the execution of the same as the free and voluntary act and deed of said corporation, as general partner of said limited partnership. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal this _______ day of _____________________, 2000. Notary Public My Commission Expires: ACKNOWLEDGMENT -------------- STATE OF ) )ss. COUNTY OF ) BEFORE ME, a Notary Public in and for the County and State aforesaid, personally appeared _________________, as _________________ of Isle of Capri Casinos, Inc., a Delaware corporation, who is known to me to be the same person who executed the foregoing instrument on behalf of said corporation and acknowledged the execution of the same as the free and voluntary act and deed of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal this _____ day of __________________, 2000. Notary Public My Commission Expires: ACKNOWLEDGMENT -------------- STATE OF ) )ss. COUNTY OF ) BEFORE ME, a Notary Public in and for the County and State aforesaid, personally appeared ____________________, ___________________ of IOC-KANSAS CITY, INC., a Missouri corporation, who is known to me to be the same person who executed the foregoing instrument on behalf of said corporation, as sole member of said limited liability company, and acknowledged the execution of the same as the free and voluntary act and deed of said corporation, as sole member of said limited liability company. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal this _____ day of _______________, 2000. Notary Public My Commission Expires: SCHEDULE A TO ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- (LEASE AGREEMENT) ATTACHED HERETO AND FOLLOWING THIS PAGE IS A COMPLETE COPY OF THE LEASE AND ALL AMENDMENTS TO THE LEASE SCHEDULE B TO ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- (LEASE AGREEMENT) LIENS, CHARGES, CLAIMS AND ENCUMBRANCES TO THE LEASE 1. Those liens and encumbrances, if any, granted pursuant to any of the documents executed and/or delivered in connection with the $21,185,000.00 of Port Authority Revenue Bonds (Riverfront Park Project), Series 1995A, dated December 15, 1995, issued by the Port Authority under and pursuant to their certain Trust Indenture dated as of January 9, 1996, by and between the Port Authority and Boatmen's Trust Company, as Trustee (the "Bond Issuance -------- Transaction"). - ----------- 2. To the extent that Assignor's rights under the Lease are dependent upon Assignor's rights to the real property and improvements covered by the Lease and Assignor's rights in and thereto are subject to those liens and encumbrances listed as exceptions on Schedule B to that certain ALTA Commitment issued by Assured Quality Title Insurance Company, Commitment No. MJ26420, with an effective date of April 5, 1999. 3. All ongoing performance obligations of Assignor under the Lease that have not yet been performed as of the date of the Closing. SCHEDULE C TO ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- (LEASE AGREEMENT) NO KNOWLEDGE OF A VIOLATION OR BREACH Assignor has no knowledge of any fact or condition under the Lease that would constitute a violation or breach of any law, contract or agreement except that the gravel valet parking lot which Assignor leases from the Port Authority was not constructed to, and does not currently comply with, the building code requirements of Kansas City, Missouri. SCHEDULE D TO ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- (LEASE AGREEMENT) DEFAULT(S) UNDER THE LEASE Assignor has no knowledge of any fact or condition under the Lease that would constitute a default by Assignor under the Lease except that the gravel valet parking lot which Assignor leases from the Port Authority was not constructed to, and does not currently comply with, the building code requirements of Kansas City, Missouri. SCHEDULE E TO ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- (LEASE AGREEMENT) NO DEFENSES AND OFFSETS AGAINST ENFORCEMENT AND NO OTHER SIGNATORIES NONE SCHEDULE F TO ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- (LEASE AGREEMENT) OTHER AGREEMENTS BETWEEN ASSIGNOR AND THE PORT AUTHORITY 1. Non-Exclusive Access Easement Agreement dated August 18, 1995, by and among KCP&L Co., HHC, HKCC and the Port Authority. 2. Those certain agreements, certificates, documents and instruments delivered by HHC and/or HKCC in connection with the closing of the Bond Issuance Transaction, including, but not limited, to, certain closing certificates, that certain Continuing Disclosure Agreement dated January 9, 1996, and that certain Acknowledgment and Attornment Agreement dated as of December 1, 1995. 3. Cooperative Agreement dated August 18, 1995 by and among HKCC, the Port Authority and the City of Kansas City, Missouri. 4. Social/Minority Grant Escrow Agreement dated as of November 4, 1996 by and among Flamingo Hilton, the Port Authority, and Boatmen's Trust Company (the "Trust Company"). - ----------------- 5. Problem Gaming Grant Escrow Agreement dated as of November 4,1996 by and among Flamingo Hilton, the Port Authority and the Trust Company. 6. Development Rights Memorandum dated August 21, 1995 by and between the Port Authority and HHC. EXHIBIT 1 ACKNOWLEDGMENT, CONSENT AND ESTOPPEL CERTIFICATE ------------------------------------------------ TO ASSIGNMENT AND ASSUMPTION AGREEMENT ----------------------------------- (LEASE AGREEMENT) This Acknowledgment, Consent Estoppel Certificate and Agreement ("AGREEMENT") is entered into as of ________________, 2000 between the Port Authority of Kansas City, Missouri, a body politic created and formed by the City of Kansas City, Missouri (the "PORT AUTHORITY") and Isle of Capri Casinos, Inc., a Delaware corporation ("ASSIGNEE"), and IOC-Missouri, Inc., a Missouri corporation and affiliate of Assignee ("OPERATING ASSIGNEE"). The Port Authority, Assignee and Operating Assignee state and agree as follows: 1. Acknowledgment and Consent. Pursuant to Article XVII of the Amended -------------------------- and Restated Lease dated as of August 21, 1995 by and between Port Authority and Hilton Hotels Corporation, a Delaware corporation, as thereafter amended (the "LEASE"), the Port Authority hereby acknowledges and consents to the foregoing Assignment and Assumption Agreement dated 5 2000 (the "ASSIGNMENT AND ASSUMPTION AGREEMENT") by and among (i) Hilton Hotels Corporation and Flamingo Hilton Riverboat Casino, L.P., a Missouri limited partnership, (collectively, "ASSIGNOR"), (ii) Assignee, and (iii) Operating Assignee; provided, however, the Port Authority does not and shall not release Assignor from, and Assignor shall continue to be liable for, the performance, discharge and satisfaction of all obligations, terms, conditions, covenants and liabilities of Assignor under the Lease. The Port Authority specifically acknowledges and consents to the assignment, transfer, sale, delivery and conveyance by Assignee to Operating Assignee of all right, title and interest in the Lease that has been assigned to Assignee pursuant to Section 1 of the Assignment and Assumption Agreement; provided, however, the Port Authority does not and shall not release Assignee from the performance, discharge and satisfaction of all obligations, terms, conditions, covenants and liabilities of Assignee under the Assignment and Assumption Agreement. The Port Authority hereby specifically acknowledges and agrees that pursuant to Section 18.04 (B) (viii) (c) of the Lease, Assignee and Operating Assignee have provided the Port Authority with satisfactory assurances that Assignee and Operating Assignee have the experience in operating gaming enterprises similar to that conducted by Assignor under the Lease, sufficient to enable Assignee and Operating Assignee to so comply with all of the terms, covenants and conditions of the Lease and successfully operate the "Demised Premises" (as such term is defined in the Lease) for such use. 2. Payments to Operating Assignee. The Port Authority agrees to pay to ------------------------------ the Operating Assignee any and all amounts that it would, in the absence of the Assignment and Assumption Agreement, otherwise be required to pay to the Assignor under the Lease. 3. Attornment. The Assignee and Operating Assignee each agree that it ---------- shall be liable to the Port Authority for the performance, discharge and satisfaction of all obligations, terms, conditions, covenants and liabilities of Assignor under the Lease. 4. Representations and Warranties of Assignee and Operating Assignee. ------------------------------------------------------------------- Assignee and Operating Assignee each hereby certify, represent and warrant to the Port Authority, as follows: (i) Assignee and Operating Assignee are solvent and are not a party o any assignment for the benefit of their respective creditors or to any bankruptcy proceedings; (ii) the transactions contemplated by the Assignment and Assumption Agreement shall not cause the Assignee or the Operating Assignee to become insolvent or to not be able to pay its debts as the same become due; and (iii) Assignee and Operating Assignee are financially capable of performing and satisfying in full their respective obligations pursuant to the Assignment and Assumption Agreement and the Lease. 5. Estoppel. Pursuant to Section 24.02 of the Lease, the Port Authority -------- hereby certifies, represents and warrants to Assignor, Assignee and Operating Assignee that as of the date of the execution of this Agreement: (a) A true, correct and complete copy of the Lease, and all amendments thereto, are attached hereto as SCHEDULE A. The Lease has not been amended or modified, except as set forth on SCHEDULE A attached hereto and incorporated herein by this reference. (b) The Lease, as amended or modified, is in full force and effect and constitutes the legal, valid and binding obligation of, and is enforceable against, the Port Authority in accordance with its terms. (c) The Rent (as such term is defined in the Lease) payable by Assignor under the Lease presently consists of the Minimum Net Rent, the Percentage Rent, and the Additional Rent (as those terms are defined in the Lease). The Rent payable by Assignor under the Lease has been paid up through October 18, 1999, except for the Percentage Rent and the Additional Rent which cannot presently be calculated. The Minimum Net Rent now payable annually under the Lease is Two Million Dollars ($2,000,000). In addition, the Riverfront Park Grant (as defined in the Lease) now payable annually under the Lease is One Million Dollars ($1,000,000). (d) The expiration of the current term of the Lease is October 18, 2006, and there are eight (8) separate renewal periods of five (5) years each, of the term of the Lease. No event has occurred or condition currently exists that would prevent Assignee or Operating Assignee from exercising its option to extend the term of the Lease for any or all of the aforementioned renewal periods. (e) To the best knowledge of the officer executing this Agreement on behalf of the Port Authority, Assignor is not default in performance of any covenant, agreement or condition contained in the Lease, except as specifically set forth on SCHEDULE B attached hereto and incorporated herein by this reference. (f) Except as set forth on SCHEDULE C attached hereto and incorporated herein by this reference, no event has occurred and no condition exists that, with the giving of notice or the lapse of time or both, could constitute a default by the Port Authority. (g) The Port Authority has no present intention to bring an action or otherwise attempt to enforce any alleged nonperformance or breach of any provision of the Lease by Assignor. Except as set forth on SCHEDULE D attached hereto and incorporated herein by this reference, the Port Authority has no existing defenses or offsets against the enforcement of the Lease by Assignor, and knows of no other parties who are not signatories to the Lease who possess or may assert rights under or in connection with the Lease. (h) Except as set forth on SCHEDULE E attached hereto and incorporated herein by this reference, the Lease and the Development Agreement dated as of March 12, 1993, by and between the Port Authority and Hilton Hotels Corporation, as thereafter amended, are the only agreements, written or oral, entered into directly between the Port Authority and Hilton Hotels Corporation or Flamingo Hilton Riverboat Casino, L.P. (i) Except as set forth on SCHEDULE F attached hereto and incorporated herein by this reference, the Port Authority has not received any notice of any violations of any statutes, laws, ordinances or directives relating to the Lease. 6. Counterparts. This Agreement operates as the required written ------------ consent under Article XVII of the Lease, and no further action need be taken or consent obtained by Assignor, Assignee or Operating Assignee with respect to the Port Authority to give full legal effect to the Assignment and Assumption Agreement, except to deliver an executed counterpart of the Assignment and Assumption Agreement, in recordable form, to the Port Authority. 7. Reliance. The Port Authority acknowledges that the Port Authority's -------- acknowledgment, consent representations and warranties set forth in this Agreement are for the benefit of, shall be relied upon, and shall be enforceable by, Assignor, in addition to the Assignee and Operating Assignee; accordingly, the Port Authority acknowledges and agrees that Assignor shall be a third party beneficiary hereof and shall have the right to enforce any such terms and conditions hereof in such capacity. Date:_______________________ 2000 THE PORT AUTHORITY OF KANSAS CITY, MISSOURI By: Print Name: Title: ISLE OF CAPRI CASINOS, INC. By: Print Name: Title: IOC-KANSAS CITY, INC. By: Print Name: Title: ACKNOWLEDGMENT -------------- STATE OF MISSOURI ) ) s/s. COUNTY OF JACKSON ) BEFORE ME, a Notary Public in and t for the County and State aforesaid, personally Appeared ___________, as Chairman of the Port Authority of Kansas City, Missouri, a public corporation, who is known to me to be the same person who executed the foregoing instrument on behalf of said Port Authority and acknowledged the execution of the same as the free and voluntary act and deed of said Port Authority. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal This____ day of _____________, 1999. Notary Public My Commission Expires: SCHEDULE A ---------- TO -- ACKNOWLEDGMENT, CONSENT AND ESTOPPEL CERTIFICATE ------------------------------------------------ COMPLETE COPY OF THE LEASE AND ALL AMENDMENTS TO THE LEASE ATTACHED HERETO AND FOLLOWING THIS PAGE IS A COMPLETE COPY OF THE LEASE AND ALL AMENDMENTS TO THE LEASE SCHEDULE B ---------- TO -- ACKNOWLEDGMENT, CONSENT AND ESTOPPEL CERTIFICATE ------------------------------------------------ DEFAULT(S) BY ASSIGNOR UNDER THE LEASE NO KNOWLEDGE OF VIOLATION OR BREACH The Port Authority has no knowledge of any fact or condition under the Lease Agreement that would constitute a violation or breach of any law, contract or agreement except that the gravel valet parking lot which Assignor leases from the Port Authority was not constructed to, and does not currently comply with, the building code requirements of Kansas City, Missouri. SCHEDULE C ---------- TO -- ACKNOWLEDGMENT, CONSENT AND ESTOPPEL CERTIFICATE ------------------------------------------------ DEFAULT(S) BY THE PORT AUTHORITY UNDER THE LEASE The Port Authority has no knowledge of any fact or condition under the Lease Agreement that would constitute a default by Assignor under the Lease Agreement except that the gravel valet parking lot which Assignor leases from the Port Authority was not constructed to, and does not currently comply with, the building code requirements of Kansas City, Missouri. SCHEDULE D ---------- TO -- ACKNOWLEDGMENT, CONSENT AND ESTOPPEL CERTIFICATE ------------------------------------------------ NO DEFENSES OR OFFSETS AGAINST ENFORCEMENT AND NO OTHER SIGNATORIES NONE SCHEDULE E ---------- TO -- ACKNOWLEDGMENT, CONSENT AND ESTOPPEL CERTIFICATE ------------------------------------------------ OTHER AGREEMENTS BETWEEN ASSIGNOR AND THE PORT AUTHORITY 1. Non-Exclusive Access Easement Agreement dated August 18, 1995, by and among KCP&L Co., Hilton Hotels Corp. ("IRLC"), HKCC and the Port Authority. 2. Those certain agreements, certificates, documents and instruments delivered by HCC and/or HKCC in connection with the closing of the Bond Issuance Transaction, including, but not limited to, certain closing certificates, that certain Continuing Disclosure Agreement dated January 9, 1996, and that certain Acknowledgment and Attornment Agreement dated as of December 1, 1995. 3. Cooperative Agreement dated August 18, 1995 by and among HKCC, the Port Authority and the City of Kansas City, Missouri. 4. Social/Minority Grant Escrow Agreement dated as of November 4, 1996 by and among Flamingo Hilton Riverboat Casino, L.P. ("FlamingoHilton"), the Port ---------- Authority, and Boatmen's Trust Company (the "Trust Company"). -------------- 5. Problem Gaming Grant Escrow Agreement dated as of November 4, 1996 by and among Flamingo Hilton, the Port Authority and the Trust Company. 6. Development Rights Memorandum dated August 21, 1995 by and between the Port Authority and HHC. SCHEDULE F ---------- TO -- ACKNOWLEDGMENT, CONSENT AND ESTOPPEL CERTIFICATE ------------------------------------------------ NOTICE OF ANY VIOLATIONS NONE EX-23.1 6 0006.txt CONSENT OF INDEPENDENT AUDITORS Consent of Independent Auditors We consent to the incorporation by reference in the following Registration Statements of Isle of Capri Casinos, Inc. (f/k/a Casino America, Inc.) of our report dated June 15, 2000 (except for Note 20, as to which the date is July 26, 2000), with respect to the consolidated financial statements of Isle of Capri Casinos, Inc. included in Isle of Capri Casinos, Inc. Annual Report (Form 10-K) for the year ended April 30, 2000. - - Post-Effective Amendment No. 1 to the Form S-8 No. 33-61752 (the 1992 Stock Option Plan, as amended); - - Form S-8 No. 33-80918 (the 1993 Stock Option Plan; the Director's Plan; and the Stock Bonus Plan); - - Form S-8 No. 33-86940 (the Employee Stock Purchase Plan; the 1993 Stock Option Plan; the Consulting Agreement, dated October 1, 1993, with Theodore E. Deutch; the Consulting Agreement, dated October 1, 1993, with Scott Crawford; and the Consulting Agreement, dated November 10, 1994, with Becker & Poliakoff, P.A.); - - Form S-8 No. 33-93088 (the Retirement Trust and Savings Plan); and - - Form S-8 No. 333-77233 (the 1992 Stock Option Plan and the 1993 Stock Option Plan). /s/Ernst & Young LLP New Orleans, Louisiana July 26, 2000 EX-27 7 0007.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ISLE OF CAPRI CASINOS, INC.'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND RELATED NOTES TO SAID FINANCIAL STATEMENTS. 1000 12-MOS APR-30-2000 APR-26-1999 APR-30-2000 167972 39044 6650 0 0 238333 699246 144346 1305514 162036 945501 0 0 304 155520 1305514 0 684850 0 279996 291358 0 60413 57528 25473 32055 0 984 0 31071 1.18 1.11
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