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EXHIBIT 4.8
CASH COLLATERAL AND DISBURSEMENT AGREEMENT
DATED MAY 22, 1996
AMONG
IBJ SCHRODER BANK & TRUST COMPANY,
AS TRUSTEE,
NBD BANK,
AS DISBURSEMENT AGENT,
AND
THE MAJESTIC STAR CASINO, LLC
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CASH COLLATERAL AND DISBURSEMENT AGREEMENT
CASH COLLATERAL AND DISBURSEMENT AGREEMENT, dated May 22, 1996, among IBJ
Schroder Bank & Trust Company, as trustee (in such capacity, together with its
successor in trust, if any, appointed pursuant to the Indenture, the "Trustee")
under an Indenture dated the date hereof between the Company (as defined below)
and the Trustee (such Indenture as amended, supplemented or otherwise modified
from time to time, the "Indenture"), The Majestic Star Casino, LLC, an Indiana
limited liability company (the "Company") and NBD Bank, Detroit, Michigan, as
Disbursement Agent for the Trustee (the "Disbursement Agent"). Capitalized
terms used and not defined herein shall have the meanings set forth in the
Indenture.
PRELIMINARY STATEMENTS:
(1) The Company has entered into the Indenture pursuant to which the
Company will issue $105,000,000 of its 12-3/4% Senior Secured Notes due May 15,
2003 (the "Senior Notes"). The Senior Notes will also bear contingent interest
as described in the Indenture.
(2) As security for the prompt and complete payment and performance in
full of the Indenture Obligations, the Company intends to grant to the Trustee
a security interest in, among other things, the Cash Collateral.
(3) The Disbursement Agent has agreed to take such action with respect to
the Cash Collateral Accounts as is specified herein.
(4) The execution and delivery of this Cash Collateral and Disbursement
Agreement is a condition to the issuance of the Senior Notes under the terms of
the Purchase Agreement dated May 16, 1996 by and between the Company and
Wasserstein Perella Securities, Inc., as initial purchaser.
(5) Amounts expended in accordance with this Agreement for capital
contributions to the BHR Joint Venture will be released from the security
interest thereunder, and any assets or properties acquired or developed in
connection with such disbursements will not constitute collateral hereunder.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto hereby agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms. Capitalized terms used but not
defined herein and in any schedules and exhibits hereto shall have the meanings
set forth in the Indenture. In addition, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Asset Sale" has the meaning specified in the Indenture.
"Asset Sale Account" has the meaning specified in Section 2.1.
"BHR Joint Venture" has the meaning specified in the Indenture.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banks in New York City or Detroit are
authorized or obligated by law to close.
"Cash Collateral" has the meaning specified in Section 2.5.
"Cash Collateral Accounts" has the meaning specified in Section 2.1.
"Cash Equivalents" has the meaning specified in the Indenture.
"Chartered Vessel" has the meaning specified in the Indenture.
"Chartered Vessel Project" means the project for the chartering,
refitting and equipping of the Chartered Vessel.
"Closing Date" means May 22, 1996.
"Company" has the meaning specified in the recital of parties.
"Completion Reserve Account" has the meaning specified in Section
2.1.
"Construction Account" has the meaning specified in Section 2.1.
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"Construction Budget" means, for each of the Chartered Vessel and
the Land Project, a budget provided by the Company, not in excess of
funds available in the relevant Sub-Account and otherwise available to
the Company for the Chartered Vessel Project or the Land Project, as
applicable, and for the Permanent Vessel, a budget to be provided by the
Company, not in excess of funds available in the Permanent Vessel
Sub-Account and otherwise available to the Company for the Permanent
Vessel Project.
"Construction Consultant" means the consultant engaged by the
Company to monitor the construction of the Permanent Vessel on behalf of
the Trustee as set forth herein.
"Construction Schedule" means for each of the Projects the
construction schedule proposed by the Company.
"Construction Supervisor" means for each Project the Person
responsible for approving and monitoring the relevant Construction
Budget, Plans and Specifications and changes thereto, cost breakdowns and
estimates; the Construction Supervisor shall make periodic inspections of
the appropriate Project, as applicable, monitor the appropriate Project,
as applicable, and have responsibility to approve Project Disbursements.
The Construction Supervisor shall be Guido Perla & Associates or a
Project Architect or an outside contractor with respect to the Permanent
Vessel Project.
"Contract" means any contract or subcontract for work or materials
for any Project.
"Costs" means all Hard Costs and all Soft Costs.
"Disbursement Agent" has the meaning specified in the recital of
parties.
"Event of Loss" has the meaning specified in the Indenture.
"Event of Loss Account" has the meaning specified in Section 2.1.
"Gaming License" has the meaning specified in the Indenture.
"Hard Costs" means the costs and expenses in respect of supplying
goods, materials and labor for the construction of the Projects.
"Indenture" has the meaning specified in the recital of parties.
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"Indenture Obligations" means any obligations of the Company
pursuant to the Indenture now or hereafter existing, including the
obligation to pay principal and interest, including contingent interest,
on the securities issued under the Indenture when due and payable,
whether by acceleration or otherwise, and all other amounts due or to
become due in connection with the Indenture and the Collateral Documents,
including all fees and expenses incurred by the Trustee or the Holders in
the collection or enforcement of any such obligations or realization upon
the Collateral or the security of any Collateral Documents.
"Initial Phase" shall mean the first phase of the development of the
Projects, which includes the land, the Chartered Vessel, gaming equipment
and initial berthing and support facilities, as described in the Offering
Memorandum.
"Interest Reserve Account" has the meaning specified in Section 2.1.
"Land Contracts" means each Contract for the Land Project.
"Land Project" means the Project relating to the construction of
initial berthing and support facilities for the Initial Phase, including
equipment and other capital costs relating to the berthing and support
facilities.
"Line Item" means an item of cost set forth in a Construction Budget
for a specific Project.
"Major Contract" means any Contract or series of related Contracts
for substantially the same work or materials in connection with Hard
Costs or Soft Costs for an amount equal to or in excess of $500,000.
"Major Contractor" means any counterparty under a Major Contract.
"Minor Contract" means any Contract or series of related Contracts
for substantially the same work or materials that is not a Major
Contract.
"Offering Memorandum" means the final Offering Memorandum dated May
16, 1996 of the Company relating to the Senior Notes.
"Permanent Vessel" has the meaning specified in the Indenture.
"Permanent Vessel Project" means the project for the construction of
the Permanent Vessel, including equipping
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the Permanent Vessel but excluding gaming equipment and related casino
fixtures, furniture and equipment.
"Person" means an individual, partnership, limited liability
company, corporation (including a business trust), joint stock company,
trust, unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Plans and Specifications" means for each of the Projects the plans
and specifications developed by the Company.
"Projects" means each of the Chartered Vessel Project, the Permanent
Vessel Project and the Land Project.
"Project Architect" means, in the case of any Project, any Person
acting as an architect for any aspect of the applicable Project selected
by the Company.
"Project Disbursement" means a disbursement to or as directed by the
Company, the proceeds of which will be applied solely to pay or reimburse
construction and other costs directly related to the applicable Project.
"Project Disbursement Date" has the meaning specified in Section
3.1.
"Project Disbursement Documentation" means a certificate of the
Company substantially in the form of Annex 1-A or 1-B to Exhibit A
hereto, together with all documentation referred to in such certificate
and any other accompanying documentation required by this Agreement.
"Request for a Project Disbursement" has the meaning specified in
Section 3.1.
"Retainage" means, with respect to any Major Contract for Hard
Costs, an amount to be withheld with respect to any payment made or to be
made to any contractor, subcontractor, mechanic, materialman, vendor or
any other Person under such Major Contract, which amount shall be at
least equal to the amounts referred to in Schedules 1 or 2, as
applicable; provided, however, that Retainage is not required for a Major
Contract not involving construction where Retainage is not customary.
"Senior Notes" has the meaning specified in the Preamble hereof and
includes any notes issued in exchange therefor pursuant to the Indenture.
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"Ship Contract" means each Contract for the Permanent Vessel
Project.
"Shipyard" means any shipyard chosen by the Company to construct the
Permanent Vessel.
"Soft Costs" means all costs of the Company other than Hard Costs
that are related to the Projects, including, without limitation,
pre-opening costs.
"Sub-Accounts" has the meaning specified in Section 2.1.
"Termination of Construction Date" means the date that a Project is
completed, as certified in writing by the Construction Supervisor for
such Project.
"Trustee" shall have the meaning set forth in the recitals hereof.
"Working Capital Account" has the meaning specified in Section 2.1.
SECTION 1.2 Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding."
ARTICLE II
ESTABLISHMENT OF CASH COLLATERAL ACCOUNTS;
INITIAL DEPOSITS; PRIORITY RELEASES
SECTION 2.1 Establishment of Accounts. There is hereby established with
the Disbursement Agent the following separate custodial accounts (collectively,
the "Cash Collateral Accounts") under the sole dominion and control of the
Disbursement Agent: (a) an account in the name of the Company for construction
and related disbursements of the Company, including amounts to be contributed
to the BHR Joint Venture (the "Construction Account") consisting of the
following sub-accounts: (i) a sub-account for the chartering, refitting and
equipping of the Chartered Vessel prior to construction of the Permanent Vessel
(the "Chartered Vessel Sub-Account"), (ii) a sub-account for the construction
of the Permanent Vessel, including the equipping thereof (the "Permanent Vessel
Sub-Account") and (iii) a sub-account for the construction of the Land Project,
including contributions required to be made to the BHR Joint Venture (the "Land
Sub-Account" and, together with the Chartered Vessel Sub-Account and the
Permanent Vessel Sub-Account, the "Sub-
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Accounts"); (b) an account in the name of the Company for working capital and
general purposes, including the funding of remaining pre-opening expenses and
equipment purchases (the "Working Capital Account"); (c) an account in the name
of the Company for payment of the first two fixed interest payments scheduled
to be paid on the Senior Notes (the "Interest Reserve Account"); (d) an account
in the name of the Company to be used as a reserve to assure completion of the
Projects (the "Completion Reserve Account"); (e) an account in the name of the
Company to be used upon the occurrence of an Event of Loss (the "Event of Loss
Account"); (f) an account in the name of the Company to be used upon the
occurrence of an Asset Sale (the "Asset Sale Account"); and (g) an account in
the name of the Company to be used upon the liquidation of assets in connection
with an Uncompleted Project (the "Uncompleted Project Account"). Each of the
above listed Cash Collateral Accounts and Sub-Accounts shall clearly indicate
on the title thereof that it is held "subject to the lien of IBJ Schroder Bank
& Trust Company, as trustee for the holders of 12-3/4% Senior Secured Notes due
2003 of The Majestic Star Casino, LLC."
The Sub-Accounts shall be for bookkeeping purposes only and all cash or
other property credited to any Sub-Account (including interest) shall be the
property of the Construction Account. All Project Disbursements pursuant to
Article III and IV in respect of the Chartered Vessel Project shall be charged
to the Chartered Vessel Sub-Account, in respect of the Permanent Vessel Project
shall be charged to the Permanent Vessel Sub-Account and in respect of the Land
Project shall be charged to the Land Sub-Account.
SECTION 2.2 Initial Deposits to Accounts. The initial deposits to the
Cash Collateral Accounts shall be as follows:
Chartered Vessel Sub-Account $ 0
Permanent Vessel Sub-Account $ 40,000,000
Land Sub-Account $ 8,148,415
TOTAL DEPOSIT TO
CONSTRUCTION ACCOUNTS $ 48,148,415
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Working Capital Account $ 29,654,644
Interest Reserve Account $ 12,902,000
Completion Reserve Account $ 10,759,000
TOTAL DEPOSIT TO
CASH COLLATERAL ACCOUNTS $101,464,059
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In addition to transfers pursuant to Section 3.3(b), the Company may, at
any time and in its sole discretion, cause to be deducted from one or more Cash
Collateral Accounts or Sub-Accounts and be added to one or more other Cash
Collateral Account(s) or Sub-Account(s) up to an aggregate for all such
transfers collectively of $4,500,000; provided, however, that transfers to or
from the Interest Reserve Account may only be made pursuant to the provisions
of Section 5.2 and transfers to and from the Completion Reserve Account may
only be made pursuant to the provisions of Section 5.3.
SECTION 2.3 Initial Disbursements. Upon execution of this Agreement and
the funding of the Cash Collateral Accounts in an aggregate amount equal to the
net proceeds of the Senior Notes, after giving effect to the expenses incurred
in connection with such offering in accordance with the Offering Memorandum
under the heading "Use of Proceeds", the Disbursement Agent is hereby directed
to and shall release and transfer (i) from the Land Sub-Account $3,648,415 to
fund the balance of the required capital contributions to the BHR Joint Venture
to a bank account identified by the Company in writing at least two Business
Days prior thereto, (ii) from the Working Capital Account $5,464,059 to fund
the refitting and equipping of the Chartered Vessel and certain other
pre-opening expenses to an account identified by the Company in writing at
least two Business Days prior thereto, and (iii) from the Working Capital
Account $18,166,556 to repay certain advances of funds to the Company by Barden
Development, Inc. as evidenced by the promissory note or notes attached hereto
as Exhibit B to an account identified by the Company in writing at least two
Business Days prior thereto.
SECTION 2.4 Default Releases. Upon the occurrence of an Event of Default
under the Indenture which (except in the case of a Change of Control Offer,
Uncompleted Project Offer or Uncompleted Vessel Offer) has resulted in
acceleration of the Senior Notes pursuant to Section 6.02 of the Indenture,
funds in the Cash Collateral Accounts shall be released by the Disbursement
Agent to any account specified by the Trustee, upon receipt of an executed
Trustee's Certificate substantially in the form of Exhibit C hereto, certifying
that such Event of Default and acceleration of the Senior Notes, if applicable,
has occurred. Such released amounts will promptly be used for the purpose of
making any required payment of principal or interest (including contingent
interest, if any) to Noteholders, including, without limitation, payments to
Noteholders accepting any Change of Control Offer, Uncompleted Project Offer or
Uncompleted Vessel Offer pursuant to the terms of the Indenture; provided, that
funds shall be released to the Trustee from the Interest Reserve Account in
connection with any Change of Control Offer as set forth above only in an
amount equal to (i) the interest payable on the Senior Notes to be purchased in
such offer in connection with such purpose, plus (ii) solely in the
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case where the purchase date for such offer occurs prior to November 15, 1996,
the interest that would be payable on November 15, 1996 on the Senior Notes to
be purchased were such Senior Notes then to be outstanding. The Disbursement
Agent shall sell such portions of investments in Cash Equivalents as shall be
necessary to satisfy any such request for release within two Business Days of
receiving such Trustee's Certificate.
SECTION 2.5 Trust Estate and Security Interest. As security for the
prompt and complete payment and performance in full of all the Indenture
Obligations, the Company hereby conveys, pledges and assigns to the Trustee for
the equal and ratable benefit of the Holders, and grants to the Trustee for the
equal and ratable benefit of the Holders an exclusive first priority security
interest in, all of its right, title and interest in the following collateral
(the "Cash Collateral"):
(a) the Cash Collateral Accounts, all funds, investments and
securities held therein and all certificates and instruments, if
any, from time to time representing or evidencing the Cash
Collateral Accounts;
(b) all investments from time to time credited to any of the
accounts constituting the Cash Collateral Accounts, and all
certificates and instruments, if any, from time to time representing
or evidencing the investment in Cash Equivalents or other
investments;
(c) all notes, certificates of deposits, deposit amounts, checks
and other instruments from time to time hereafter delivered to or
otherwise possessed by the Disbursement Agent for or on behalf of
the Trustee for the benefit of the Holders;
(d) all interest, cash and instruments from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of the then existing Cash Collateral; and
(e) all proceeds of any and all of the foregoing.
SECTION 2.6 Appointment of Disbursement Agent. The Trustee hereby
appoints NBD Bank, Detroit, Michigan, to act as the Disbursement Agent in
connection with this agreement, and to take all actions as set forth in this
Agreement on behalf of the Trustee in order to comply with the terms of this
Cash Collateral and Disbursement Agreement. Reimbursable fees and expenses of
the Trustee shall include any fees and expenses of the Disbursement Agent which
are payable by the Trustee; provided that the Trustee shall be under no
obligation to pay fees and expenses of the Disbursement Agent to the extent
funds are not received from the Company.
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SECTION 2.7 Resignation of Disbursement Agent. The Disbursement Agent
may resign upon giving written notice to the Company and the Trustee. The
Trustee may appoint a successor Disbursement Agent provided that said successor
Disbursement Agent is a bank or trust company having a combined capital and
surplus (as set forth in its most recent published report of condition) of at
least $100,000,000.
ARTICLE III
REQUESTING AND MAKING PROJECT
DISBURSEMENTS FROM THE CONSTRUCTION ACCOUNTS
SECTION 3.1 Requesting the Project Disbursements. Subject to the
provisions of Section 3.2 below, the Company may request that a Project
Disbursement be made from any Construction Account by delivering notice to the
Disbursement Agent, not later than 11:00 A.M. (New York time) on the Business
Day immediately preceding the date of the proposed Project Disbursement. Each
such request shall be substantially in the form of Exhibit A (a "Request for a
Project Disbursement"), shall be executed by an Officer of the Company and
shall specify therein (i) the requested date of such Project Disbursement (the
"Project Disbursement Date"), (ii) the aggregate amount of such Project
Disbursement and (iii) the Sub-Account from which such disbursement will be
made. Simultaneously with the delivery of each Request for a Project
Disbursement, the Company shall deliver or shall cause to be delivered the
Project Disbursement Documentation to the Disbursement Agent, the Trustee, the
applicable Construction Supervisor and in the case of Project Disbursements
relating to the Permanent Vessel Project, the Construction Consultant.
SECTION 3.2 Making the Project Disbursements. Upon fulfillment of the
terms and conditions set forth herein including, without limitation, the
applicable conditions set forth in Article IV hereof, the Disbursement Agent
shall make each Project Disbursement, no later than 1:00 P.M. (New York time)
on each Project Disbursement Date, by deducting the amount of each Project
Disbursement from the appropriate Sub-Account of the Construction Account and
depositing such amount in the Company's account maintained with the
Disbursement Agent for such purpose or as otherwise directed by the Company.
At least two Business Days prior to any Project Disbursement Date, the Company
shall instruct the Disbursement Agent to sell such portion of the investments
in Cash Equivalents held in the Construction Account as shall be necessary to
fund the requested Project Disbursement. Notwithstanding the foregoing, if on
any Project Disbursement Date the cash on deposit in the relevant Account or
Sub-Account is less than the amount of the Project Disbursement to be made on
such date, the Disbursement Agent shall make only such portion of such Project
Disbursement equal to such cash on deposit in the
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relevant Account or Sub-Account, provided, that, if such cash is not available
solely because the sale of Cash Equivalents contemplated in the preceding
sentence has not been completed, then the Disbursement Agent shall make such
Project Disbursement or any portion thereof as soon as the funds from such sale
are available.
SECTION 3.3 Additional Project Disbursement Requirements. (a) Disputed
Items. (i) If, with respect to any Project Disbursement, the Construction
Supervisor disputes in writing to the Company and the Disbursement Agent the
appropriateness of any item or items funded with the proceeds of such Project
Disbursement, the Disbursement Agent shall, to the extent all other conditions
to such Project Disbursement have been satisfied, make a Project Disbursement
less an amount equal to the portion of the requested Project Disbursement
allocated to such disputed item or items. The Construction Supervisor shall
not authorize a Project Disbursement with respect to any disputed item unless
and until such dispute has been resolved either (i) pursuant to Article IX
hereto or (ii) as set forth in a writing signed by the Company and the
Construction Supervisor.
(ii) If, after a Project Disbursement has been made relating to the
Permanent Vessel Project, the Construction Consultant disputes the
appropriateness of any item or items funded with the proceeds of such Project
Disbursement by providing written notice of such dispute to the Company, the
Trustee and the Disbursement Agent within 21 days of the date of such Project
Disbursement, the Disbursement Agent shall not make any further Project
Disbursements if the amount of such disputed item or items exceeds $250,000
until such dispute is resolved. Any such dispute shall be resolved either (A)
pursuant to Article IX hereto or (B) as set forth in a writing signed by an
authorized officer of the Company and the Construction Consultant.
(b) Line Item Reallocation. Subject to the terms of Section 3.4, in the
event that (i) the work to be performed in respect of any Line Item in a
particular Construction Budget (either for Hard Costs or Soft Costs) shall be
completed without the expenditure of all amounts in the applicable Construction
Budget allocated to such Line Item (or the Company certifies in an Officer's
Certificate (x) that at least three-fourths of the work to be performed in
respect of such Line Item has been completed and (y) that such work is
projected to be completed without the expenditure of all amounts in the
applicable Construction Budget allocated to such Line Item) and (ii) all
contractors under contracts entered into with the Company and other Persons
with whom the Company has contracted and directly entitled to payment have been
paid in full for work completed as of the date of request for disbursement in
respect of such Line Item (except as may be disputed in good faith and as to
which
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appropriate reserves are being maintained), the Company may, subject to the
other terms and conditions of this Agreement regarding the making of Project
Disbursements, reallocate the undisbursed portion of the Construction Budget
allocable to such Line Item to other uncompleted Line Items within such
Construction Budget or, if no uncompleted Line Items remain, to another Cash
Collateral Account, as selected by the Company.
(c) Use of Contingency. In the event that the Company advises the
Disbursement Agent in writing that the cost of the work performed or projected
to be performed in respect of any Line Item shall exceed the amount allocated
to such Line Item in the applicable Construction Budget, the Disbursement
Agent, subject to the other terms and conditions of this Agreement regarding
the making of Project Disbursements, shall at the request of the Company
disburse funds to pay such excess from the undisbursed portion of any general
contingency Line Item contained in such Construction Budget, provided, that the
Company shall certify that the Plans and Specifications for the entire Project
can still be met after such reallocation.
(d) Payment of Fees. Each Project Disbursement shall include an amount
equal to the amount necessary to pay all fees due and payable to the
Construction Supervisor and the Disbursement Agent in relation to such Project
Disbursement.
(e) Funds from BHR Joint Venture. If funds disbursed to the BHR Joint
Venture from one of the Cash Collateral Accounts are returned or distributed to
the Company by the BHR Joint Venture, said funds shall be deposited in the Cash
Collateral Account or the applicable Sub-Account thereof from which such
disbursement was originally made. Funds received by the Company from BHR Joint
Venture which are not required by the Indenture or any Collateral Document to
be deposited in a Cash Collateral Account may be retained by the Company.
SECTION 3.4 Completion of the Project. If the Termination of
Construction Date for the Permanent Vessel Project is later than June 30, 1998,
or if the Termination of Construction Date for the Land Project or the
Chartered Vessel Project is later than December 31, 1996, and subject to the
first paragraph of Section 2.2, any undisbursed, unreleased funds remaining in
the relevant Cash Collateral Account or Sub-Account shall be retained in the
Construction Account until such time as the Company may be required pursuant to
Article 4 of the Indenture to make (i) an Uncompleted Project Offer because the
project has not been certified in writing as complete by the Construction
Supervisor prior to December 31, 1996 or (ii) an Uncompleted Vessel Offer
because the Permanent Vessel has not been Delivered prior to June 30, 1998. In
the case of an Uncompleted Project Offer, the Disbursement Agent shall deposit
the proceeds of any liquidation of assets contemplated by Section
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4.28 of the Indenture relating to such Uncompleted Project in an Uncompleted
Project Account. The Disbursement Agent shall, upon receipt of written
direction of the Trustee, promptly release and transfer to the Trustee such
amounts as the Trustee shall reasonably deem necessary to make payments to
Holders accepting any Uncompleted Project Offer or any Uncompleted Vessel Offer
pursuant to the terms of the Indenture. Undisbursed, unreleased funds
remaining in the Construction Account following such Uncompleted Project Offer
or Uncompleted Vessel Offer shall remain in the relevant Cash Collateral
Account or Sub-Account and not be released to the Company except as provided
herein. Upon the date construction is certified in writing as complete by the
Construction Supervisor for all of the Projects and the Permanent Vessel has
been Delivered, any undisbursed, unreleased amounts remaining on deposit in the
Construction Account shall be transferred to the Working Capital Account and
any undisbursed, unreleased amounts remaining on deposit in the Completion
Reserve Account shall be released to the Company in accordance with the
provisions of Section 5.3 hereof.
All Project Disbursements pursuant to this Article III shall be made to or
as directed by the Company. The Company may make disbursements from the Land
Sub-Account notwithstanding the fact that the construction is being undertaken
by the BHR Joint Venture.
ARTICLE IV
CONDITIONS OF PROJECT DISBURSEMENTS
FROM THE CONSTRUCTION ACCOUNTS
SECTION 4.1 Conditions Precedent to Project Disbursements. The
Disbursement Agent shall make Project Disbursements from the applicable
Sub-Account of the Construction Account upon satisfaction in connection with
each Project Disbursement of the following conditions:
(a) Documents. The Disbursement Agent shall have received the following,
in form and substance satisfactory to the Disbursement Agent:
(i) an executed Request for a Project Disbursement in substantially
the form of Exhibit A;
(ii) the Project Disbursement Documentation;
(iii) in the case of Project Disbursements for Hard Costs, (x)
copies of unpaid invoices, bills, receipts or other evidence of amounts
due or paid in connection with the Project in excess of $10,000, and (y)
a certificate of the Company indicating a trade payment breakdown showing
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payments that previously have been made and payments that are to be made
by or on behalf of the Company to each contractor, subcontractor, and
materialman with the proceeds of such Project Disbursement; and
(iv) in the case of Project Disbursements for Soft Costs, copies of
unpaid invoices, bills, receipts or other evidence of amounts due or paid
in connection with the applicable Project.
(b) Representations and Warranties. The giving of each Request for a
Project Disbursement and the acceptance by the Company of the proceeds of such
Project Disbursement shall constitute a representation and warranty by the
Company to the Disbursement Agent, the Trustee and the Holders that:
(i) The representations and warranties contained in the applicable
Project Disbursement Documentation are correct, in each case on and as of
the date of such Project Disbursement, before and after giving effect to
such Project Disbursement and to the application of the proceeds
therefrom, as though made on and as of such date, except to the extent
that any such representation or warranty by its terms relates to a
specified prior date;
(ii) No event has occurred and is continuing, or would result from
such disbursement or from the application of the proceeds thereof, that
constitutes an Event of Default under the Indenture or would constitute
an Event of Default but for the requirement that notice be given or time
elapse or both; and
(iii) The Company has satisfied all of the conditions herein to the
release of such funds.
(c) No Notice of Default. The Disbursement Agent shall not have received
written notice from the Trustee that an Event of Default has occurred and is
continuing under the Indenture.
(d) Cessation of Disbursements. In the event that the Disbursement Agent
has received a notice from the Trustee of an Event of Default under the
Indenture pursuant to clause (c) above, the Disbursement Agent shall not
disburse any additional funds until notified in writing by the Trustee.
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ARTICLE V
OTHER DISBURSEMENTS
SECTION 5.1 Disbursements from the Working Capital Account.
Notwithstanding Articles III and IV, but subject to Section 4.1(c), the
Disbursement Agent shall release from time to time amounts on deposit in the
Working Capital Account to a bank account of the Company, identified in writing
at least 2 Business Days prior thereto by the Company upon receipt of an
Officer's Certificate (a copy of which shall be delivered to the Trustee) to
the effect that:
(i) such funds will not be applied in violation of the terms of the
Indenture;
(ii) the representations and warranties referred to in Section
4.1(b)(ii) herein are true and correct as if set forth in such Officer's
Certificate, and the conditions set forth in Section 4.1(b) have been
satisfied; and
(iii) from and after the date granted, no Gaming License required
for the Company to operate its business in the manner described in the
Offering Memorandum shall have been rescinded, suspended, conditioned,
restricted, nullified or revoked and such rescission, suspension,
condition, restriction, nullification or revocation is continuing.
SECTION 5.2 Disbursements from the Interest Reserve Account.
Notwithstanding Articles III and IV, the Disbursement Agent shall, without the
prior approval of any other party, release and transfer to the Trustee such
amounts on deposit in the Interest Reserve Account as specified by the Company
to make payments to Noteholders of the first and/or second scheduled fixed
interest payments on the Senior Notes, upon receipt of an Officer's Certificate
from the Company, certifying that such amounts will promptly be used for
payment of the first or second scheduled fixed interest payment on the Senior
Notes, as applicable. Such Officer's Certificate shall be delivered to the
Disbursement Agent (with a copy to the Trustee) at least two days prior to the
date of the scheduled fixed interest payment.
Following payment in full of the first scheduled fixed interest payment on
the Senior Notes, an amount equal to the undisbursed, unreleased amounts
remaining on deposit in the Interest Reserve Account less the amount of the
second scheduled fixed interest payment shall be transferred to the Working
Capital Account upon the written request of the Company.
Following payment in full of the first two scheduled fixed interest
payments on the Senior Notes, all undisbursed, unreleased amounts remaining on
deposit in the Interest Reserve
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Account upon written notice of the Company shall be transferred to the Working
Capital Account.
SECTION 5.3 Disbursements from the Completion Reserve Account. (a)
Notwithstanding Articles III and IV, but subject to Section 4.1(c), the
Disbursement Agent shall release amounts on deposit in the Completion Reserve
Account to a bank account of the Company, identified in writing to the
Disbursement Agent (with a copy to the Trustee) at least 2 Business Days prior
thereto by the Company upon receipt of an Officer's Certificate to the effect
that:
(i) (A) construction has been completed for all of the
Projects, or (B) the funds are required for completion of a
Project (specifying details);
(ii) if construction has been completed for all of the
Projects, a mortgage on the Permanent Vessel substantially in the
form of the First Preferred Ship Mortgage attached to the
Indenture has been filed with the United States Coast Guard at the
home port of the Permanent Vessel;
(iii) such funds will not be applied in violation of the
terms of the Indenture;
(iv) the representations and warranties referred to in
Section 4.1(b)(ii) herein are true and correct as if set forth in
such Officer's Certificate, and the conditions set forth in
Section 4.1(b) have been satisfied; and
(v) from and after the date granted, no Gaming License
required for the Company to operate its business in the manner
described in the Offering Memorandum has been rescinded,
suspended, conditioned, restricted, nullified or revoked and such
rescission, suspension, condition, restriction, nullification or
revocation is continuing.
(b) If funds in the Completion Reserve Account are required to be used for
completion of a Project, the amounts required shall be transferred to a
Sub-Account of the Construction Account as specified in the written request of
the Company.
(c) Notwithstanding Articles III and IV or Section 5.3(a), but subject to
Section 4.1(c), the Disbursement Agent shall release $5 million on deposit in
the Completion Reserve Account to a bank account of the Company, identified in
writing at least 2 Business Days prior thereto by the Company, upon receipt of
an Officers' Certificate to the effect that:
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(i) the Majestic Star Casino has been operating for 90 days;
(ii) the Fixed Charge Coverage Ratio as calculated on the last day of
such 90-day period or the last day of any fiscal quarter thereafter is
greater than 2.5 to 1, and Cash Equivalents (other than Cash Equivalents
then remaining in the Cash Collateral Accounts) available to the Company
on any such date of calculation exceed $5.0 million;
(iii) a guaranteed maximum price construction contract or contracts
to construct the Permanent Vessel have been entered into and such
contract or contracts provide for the Permanent Vessel to be constructed
and delivered to the Company in Gary, Indiana no later than September 30,
1997;
(iv) such funds will not be applied in violation of the Indenture;
(v) the representation and warranties referred to in Section
4.1(b)(ii) herein are true and correct as if set forth in such
Officers' Certificate; and
(vi) from and after the date granted, no Gaming License
required for the Company to operate its business in the manner
described in the Offering Memorandum has been rescinded,
suspended, conditioned, restricted, nullified or revoked and such
rescission, suspension, condition, restriction, nullification or
revocation is continuing.
(d) Upon the occurrence of an Event of Default under the Indenture, funds
in the Completion Reserve Account shall at the direction of the Trustee be
transferred to the Trustee to pay principal and interest on the Senior Notes or
as otherwise determined pursuant to the Indenture.
SECTION 5.4. Event of Loss Account. The Company shall deposit any Net
Loss Proceeds in excess of $1,000,000 and any BHR Loss Proceeds in the Event of
Loss Account. If the Net Loss Proceeds are less than $15,000,000 and if the
Company delivers an Officers' Certificate that the conditions set forth in
Section 4.11(a) of the Indenture have been satisfied, the Disbursement Agent
shall release amounts on deposit in the Event of Loss Account to the applicable
Sub-Account of the Construction Account designated in such Officers'
Certificate. If the Company is required to make an Event of Loss Offer, the
Disbursement Agent shall release amounts on deposit in the Event of Loss
Account to a bank account of the Trustee, identified in writing at least 2
Business Days prior thereto by the Trustee, upon receipt of an Officers'
Certificate from the Company certifying that such funds are required by Section
4.11 of the Indenture to
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pay in whole or in part for the purchase of Senior Notes pursuant to the Event
of Loss Offer. Following satisfaction of the requirements of Section 4.11 of
the Indenture, undisbursed, unreleased amounts remaining on deposit in the
Event of Loss Account shall be transferred to the Working Capital Account upon
the written request of the Company.
SECTION 5.5 Asset Sale Account. The Company shall deposit the Net
Proceeds of an Asset Sale in the Asset Sale Account. If the Company delivers
an Officer's Certificate certifying that the Net Proceeds from such Asset Sale
will be applied to (i) an investment in the Principal Business or in tangible
long-term assets used or useful in the Principal Business or (ii) permanently
reduce Indebtedness that is not Subordinated Indebtedness, the Disbursement
Agent shall release amounts on deposit in the Asset Sale Account to the
applicable Sub-Account of the Construction Account or directly to make such
investment or to reduce such indebtedness as designated in such Officer's
Certificate. If the Company is required to make an Asset Sale Offer, the
Disbursement Agent shall release amounts on deposit in the Asset Sale Account
to a bank account of the Trustee identified in writing at least 2 Business Days
prior thereto by the Trustee upon receipt of an Officers' Certificate from the
Company certifying that such funds are required by Section 4.10 of the
Indenture to pay in whole or in part for the purchase of Senior Notes pursuant
to the Asset Sale Offer. Following satisfaction of the requirements of Section
4.10 of the Indenture, undisbursed, unreleased amounts remaining on deposit in
the Asset Sale Account shall be transferred to the Working Capital Account upon
the written request of the Company.
ARTICLE VI
COVENANTS
SECTION 6.1 Covenants of the Company. For so long as this Agreement
shall remain in effect, the Company shall:
(a) Construction Consultant. Within 30 days of the date hereof, enter
into an agreement with a construction consultant experienced in marine
construction matters and providing for (i) such consultant to perform the
services of the Construction Consultant set forth in this Agreement, including,
without limitation, the services set forth in Schedules 1 and 3 hereto, and
(ii) the Company to pay all of the fees and expenses of such Construction
Consultant arising under such agreement.
(b) Construction Supervisor. Select a Construction Supervisor for the
Permanent Vessel Project as soon as practicable.
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(c) Budgets, etc. As soon as practicable, prepare (or cause to be
prepared) Plans and Specifications, a Construction Budget and a Construction
Schedule for the Chartered Vessel (if applicable) Project, for the Land Project
(if applicable) and for the Permanent Vessel Project, which Construction
Budgets shall not exceed amounts previously expended for such Projects, cash on
deposit in the relevant Sub-Account, plus cash reasonably available from other
sources, including equipment and other financing.
(d) General Contractor. Use reasonable efforts to cause the general
contractor, if any, of the Land Project (or, if different general contractors
are utilized, the general contractor for each aspect of such Project), the
Chartered Vessel Project, if any, and the Permanent Vessel Project to complete
the work (or the construction of a Permanent Vessel) in a timely and efficient
manner and in accordance with the requirements of the Indenture.
(e) Copies of Contracts, Etc. Deliver to the Disbursement Agent, the
Construction Consultant (only with respect to the Permanent Vessel Project) and
the applicable Construction Supervisor (i) upon the request of the Disbursement
Agent, the Construction Consultant (if applicable) or the applicable
Construction Supervisor, copies of all Major and Minor Contracts, (ii) as
promptly as practicable, copies of all work permits, building permits and other
permits required with respect to each of the Projects, and (iii) on the first
Business Day of each month a list of all Major Contractors that have performed
work on or supplied materials for each of the Projects during the previous
month and that are scheduled to perform work or supply materials to one or both
of the Projects during the current month; provided that at any time after the
delivery of the initial list of such Major Contractors, the Company may fulfill
its obligations hereunder by delivering a list of changes from the most recent
list delivered to the Construction Consultant (if applicable) and the
applicable Construction Supervisor.
(f) Changes in Budget and Plans. (i) Cause the proceeds from the Offering
to be utilized in accordance with Section 4.18 of the Indenture, and not make,
any changes in such Plans and Specifications and Construction Budgets, except
such changes that (x) do not materially alter the scope of the applicable
Project, or (y) changes which are set forth in revised Plans and Specifications
or a revised Construction Budget which are delivered to the applicable
Construction Supervisor and the Construction Consultant with respect to
Permanent Vessel Project, together with an Officers' Certificate to the effect
that such revised Construction Budget does not exceed funds previously expended
for the applicable Project, cash on deposit in the relevant Account or
Sub-Account, plus cash reasonably available from other sources including, as
applicable, equipment and other
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financing (which Officers' Certificate shall provide a reasonably detailed
listing of such other sources, if applicable), (ii) deliver to the Construction
Consultant (only with respect to the Permanent Vessel Project) and the
applicable Construction Supervisor, as promptly as possible, copies of material
change orders for each Project, and (iii) keep complete and accurate records of
all changes in the applicable Plans and Specifications and Construction
Budgets.
(g) Access to Information. Permit the Disbursement Agent and the Trustee
and any of their respective agents on reasonable notice and at such times as
shall be reasonably requested (i) to inspect each of the Plans and
Specifications and Construction Budgets, (ii) to inspect and review (and
receive copies of, if requested) (A) all changes to the Plans and
Specifications and Construction Budgets, (B) all contracts or subcontracts
relating to the Projects and any changes thereto, (C) all books and records of
the Company related to the Projects and (D) such other information as such
parties shall reasonably request relating to the performance of the Projects
(including copies of receipts, invoices and other supporting documentation to
substantiate the costs to be paid from the proceeds of any requested
disbursement hereunder), (iii) to attend any job progress meetings and (iv) to
discuss, in the presence of a designated employee of the Company, the Projects
and other matters related thereto with any Project Architect, any contractor or
subcontractor performing work or supplying material for the Projects or any
employee of the Company, provided, further, that the Company shall also grant
the Construction Consultant and any of its respective agents on reasonable
notice and at such times as shall be reasonably requested each of the foregoing
rights with respect to the Permanent Vessel Project.
(h) Certain Rights. The Company shall not have any rights with respect to
the Cash Collateral Accounts except as specifically set forth in the Indenture
or herein.
(i) Further Assurances. The Company will from time to time at the expense
of the Company, promptly execute, deliver, file and record all further
instruments, endorsements and other documents, and take such further action as
the Trustee may deem reasonably desirable in obtaining the full benefits of
this Cash Collateral and Disbursement Agreement and of the rights, remedies and
powers herein granted, including, without limitation, the following:
(i) the filing of any financing statements, in form acceptable to
the Trustee under the Uniform Commercial Code in effect in any
jurisdiction with respect to the liens and security interests granted
hereby. The Company also hereby authorizes the Trustee to file any such
financing statement without the signature of the Company to the extent
permitted
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by applicable law. A photocopy or other reproduction of this Cash
Collateral and Disbursement Agreement shall be sufficient as a financing
statement and may be filed in lieu of the original to the extent
permitted by applicable law. The Company will pay or reimburse the
Trustee for all filing fees and related expenses;
(ii) upon commencement of construction of the Permanent Vessel, the
assignment of any Major Contract to the Trustee and the granting of a
security interest in the work-in-progress at the Shipyard relating to the
construction of the Permanent Vessel, including, without limitation, the
execution of the Construction Contract Assignment and the Construction
Security Agreement substantially in the forms attached to the Indenture;
(iii) upon completion of the construction of the Permanent
Vessel to be owned by the Company, the filing of a mortgage on the
Permanent Vessel substantially in the form of the First Preferred
Ship Mortgage attached to the Indenture, with the appropriate
office of the United States Coast Guard, and the delivery of the
legal opinion relating to the First Preferred Ship Mortgage
required by Section 10.02(c) of the Indenture; and
(iv) furnish to the Trustee from time to time statements and
schedules further identifying and describing the Cash Collateral and such
other reports in connection with the Cash Collateral as the Trustee may
reasonably request, all in reasonable detail and in form satisfactory to
the Trustee.
(j) Change of Name; Identity; Corporate Structure; or Chief Executive
Office. The Company will not change its name, identity, corporate structure or
the location of its chief executive office without (i) giving the Trustee at
least thirty (30) days' prior written notice clearly describing such new name,
identity, corporate structure or new location and providing such other
information in connection therewith as the Trustee may reasonably request, and
(ii) taking all action satisfactory to the Trustee as the Trustee may
reasonably request to maintain the security interest of the Trustee in the Cash
Collateral intended to be granted hereby at all times fully perfected with the
same or better priority and in full force and effect.
SECTION 6.2 Covenants of the Disbursement Agent. For so long as this
Agreement shall remain in effect, in addition to its other undertakings, the
Disbursement Agent shall agree as follows:
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(a) The Cash Collateral Accounts.
(i) Each of the Cash Collateral Accounts is and will be held in
trust on behalf of the Trustee for the benefit of the Holders and not
commingled with any ordinary deposit or commercial bank account, will be
maintained with the corporate trust department of the Disbursement Agent
solely for the Trustee for the benefit of the Holders and will be subject
to the written instructions of the Trustee as set forth in this Agreement
and the Indenture.
(ii) Unless otherwise instructed in writing by the Trustee for the
benefit of the Holders, the Disbursement Agent shall invest amounts on
deposit in the Cash Collateral Accounts in accordance with the written
instructions of the Company pursuant to Section 10.12 of the Indenture
and all interest, cash and instruments from time to time received,
receivable or otherwise distributed in respect of or in exchange for any
or all of then existing Cash Collateral in any Cash Collateral Account
shall be allocated to the applicable Cash Collateral Account or any
applicable Sub-Account thereof.
(iii) All disbursements and releases pursuant to this Agreement
shall be made by the Disbursement Agent irrespective of, and without
deduction for, any counterclaim, defense, recoupment or set-off and shall
be final, and the Disbursement Agent will not seek to recover the same
from the Trustee for any reason any such payment once made.
(iv) All service charges and fees with respect to this Agreement or
the Cash Collateral Accounts shall be paid by the Company.
(v) The Disbursement Agent irrevocably waives and renounces any
pledge, security interest (whether consensual, statutory or otherwise) or
right of offset or compensation that it has or may ever have for its own
benefit with respect to the Cash Collateral Accounts.
(b) Books and Records. The Disbursement Agent shall maintain appropriate
books and records with respect to the Cash Collateral Accounts (including each
Sub-Account) in which shall be recorded all transactions related thereto
including, without limitation, all disbursements hereunder and any investment
of Cash Equivalents made by the Disbursement Agent and shall permit the Company
or any of its agents or representatives and the Trustee or any of its agents or
representatives at reasonable times to inspect and to make copies of such books
and records at the Company's sole cost and expense.
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ARTICLE VII
EVENTS OF DEFAULT; REMEDIES; RIGHTS UPON DEFAULT
SECTION 7.1 Event of Default. For purposes of this Cash Collateral and
Disbursement Agreement, the term "Event of Default" shall have the meaning
provided in the Indenture and shall also include any default in the
performance, or breach, of any covenant of the Company set forth in Section 6.1
hereof that continues for 30 days after written notice has been given from the
Trustee or from holders of at least 25% of the aggregate principal amount of
the Senior Notes then outstanding to the Company and the Disbursement Agent,
specifying such default and requiring that it be remedied.
SECTION 7.2 Rights and Remedies Generally. If an Event of Default shall
occur and be continuing, then and in every such case, the Trustee shall have
all the rights of a secured party under the Uniform Commercial Code, shall have
all rights now or hereafter existing under all other applicable laws, and,
subject to any mandatory requirements of applicable law then in effect, shall
have all the rights set forth in this Cash Collateral and Disbursement
Agreement and all the rights set forth with respect to the Cash Collateral or
this Cash Collateral and Disbursement Agreement and in any other security
agreement or Collateral Document between the parties.
SECTION 7.3 Assembly of Collateral. If an Event of Default shall occur
and be continuing, upon five days notice to the Company, the Company shall, at
its own expense, assemble any and all Cash Collateral in the possession of the
Company (or from time to time any portion thereof) and make it available to the
Trustee at any place or places designated by the Trustee which is reasonably
convenient to both parties.
SECTION 7.4 Disposition of Collateral. The Trustee will give the Company
notice in accordance with Section 10.08 of the Indenture of the time and place
of any public sale of the Cash Collateral or any part thereof or of the time
after which any private sale or any other intended disposition thereof is to be
made.
SECTION 7.5 Recourse. The Company shall remain liable for any deficiency
if the proceeds of any sale or other disposition of the Cash Collateral are
insufficient to satisfy the Indenture Obligations. The Company shall also be
liable for all fees and expenses of the Trustee incurred in connection with
collecting such deficiency, including, without limitation, the fees, expenses
and disbursements of any attorneys employed by the Trustee to collect such
deficiency.
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SECTION 7.6 Expenses; Attorneys' Fees. The Company shall reimburse the
Trustee and the Disbursing Agent for all its fees and expenses in connection
with the exercise of its rights hereunder, including, without limitation, all
reasonable attorneys' fees and legal expenses incurred by the Trustee or the
Disbursement Agent. Expenses of retaking, holding, preparing for sale, selling
or the like shall include the reasonable attorneys' fees and legal expenses of
the Trustee and the Disbursement Agent. All such expenses shall be secured
hereby.
SECTION 7.7 Limitation on Duties Regarding Preservation of Cash
Collateral. (a) The Trustee's sole duty with respect to the custody,
safekeeping and physical preservation of any Cash Collateral in its possession,
under Section 9-207 of the Uniform Commercial Code or otherwise, shall be to
deal with it in the same manner as the Trustee deals with similar property for
its own account.
(b) The Trustee shall have no obligation to take any steps to preserve
rights against prior parties to any Cash Collateral.
(c) Neither the Trustee nor any of its directors, officers, employees or
agents shall be liable for failure to demand, collect or realize upon all or
any part of the Cash Collateral or for any delay in doing so or shall be under
any obligation to sell or otherwise dispose of any Cash Collateral upon the
request of the Company or otherwise.
(d) Neither the Trustee nor the Disbursement Agent nor any of their
directors, officers, employees or agents shall be liable for disbursements made
in good faith reliance on any certificate provided to either of them pursuant
to the terms of this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Amendments, Etc. No amendment, modification or waiver of
any provision of this Agreement may be made except in accordance with Article 9
of the Indenture; provided, that any such amendment, modification or waiver of
this Agreement shall require the prior written consent of the Disbursement
Agent.
SECTION 8.2 Notices, Etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be sufficiently given if
made by registered overnight courier, by hand delivery, by telex, by facsimile
or
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registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
To the Company:
The Majestic Star Casino, LLC
c/o Barden Development, Inc.
400 Renaissance Center
Suite 2400
Detroit, Michigan 48243
Attention: Vice President
Telecopy No.: (313) 259-0154
with a copy to:
Dykema Gossett
400 Renaissance Center
Detroit, Michigan 48243
Attention: Frank K. Zinn, Esq.
Telecopy No.: (313) 568-6915
To the Indenture Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust Department
Telecopy No.: (212) 858-2952
To The Disbursement Agent:
NBD Bank
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Corporate Trust Department
Telecopy No.: (313) 225-3420
Any party hereto may by notice to each other party designate such
additional or different addresses as shall be furnished in writing by such
party. Any notice or communication to any party shall be deemed to have been
given or made: as of the date so delivered, if personally delivered; on the
next business day, if sent by registered overnight courier; when answered back,
if telexed; when receipt is acknowledged, if faxed; and five calendar days
after mailing, if sent by registered or certified mail (except that a notice of
change of address shall not be deemed to have been given until actually
received by the addressee).
SECTION 8.3 No Waiver, Remedies. No failure on the part of the
Disbursement Agent, the Trustee or any Holder to
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exercise, and no delay in exercising, any right under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of
any other right.
SECTION 8.4 Indemnity and Expenses. (a) The Company agrees to indemnify
the Trustee, the Holders, the Disbursement Agent and the Construction
Consultant (the "Indemnified Parties") from and against any and all claims,
losses and liabilities growing out of or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except claims,
losses or liabilities resulting from such Indemnified Party's bad faith, gross
negligence or willful misconduct as determined by a final judgment of a court
of competent jurisdiction.
(b) The Company will upon demand pay to the Disbursement Agent, the
Trustee or the Construction Consultant the amount of any and all reasonable
fees and expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, that the Disbursement Agent or the Trustee may
incur in connection with (i) the administration of this Agreement, (ii) the
exercise or enforcement of any of the rights of the Disbursement Agent, the
Trustee, or the Holders hereunder or (iii) the failure by the Company to
perform or observe any of the provisions hereof.
(c) Notwithstanding any other provision of this Agreement, the fees and
expenses (but not indemnities) payable to any Construction Supervisor and
included in the relevant Construction Budget shall be paid from the relevant
Sub-Account upon request by the Company.
(d) The making of any Project Disbursement or part thereof shall not
constitute an approval or acceptance of the work or material by the Trustee,
the Construction Consultant or the Disbursement Agent nor shall such approval
give rise to any liability or responsibility related to:
(i) the quality of the work, the quantity of the work, the rate or
progress in completion of the work, or the sufficiency of materials or
labor being supplied in connection therewith; and
(ii) any errors, omissions, inconsistencies or other defects of any
nature in the Plans and Specifications and any inspection of the work
that either the Trustee, the Disbursement Agent or the Construction
Consultant may choose to make, whether through any consulting engineer,
agent or employee or officer, during the progress of the work shall be
solely for the Trustee, the Disbursement Agent's or the Construction
Consultant's information, and under no
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circumstances will any such inspection be deemed to have been made for
the purpose of supervising or superintending the work or for the
information or protection of any right or interest of any Persons other
than the Trustee, the Construction Consultant, the Disbursement Agent or
the Holders.
(e) In no event shall either the Trustee or the Disbursement Agent be
liable for any Liens which may be filed by third parties against the Projects.
SECTION 8.5 Execution in Counterparts. This Agreement may be executed in
any number of separate counterparts and by different parties hereto in separate
counterparts, each of which, when so executed, shall be deemed to be an
original and all of which, taken together, shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.6 Relationship of Parties. Neither the Trustee nor the
Disbursement Agent shall be under any responsibility in respect of the validity
or sufficiency of this Agreement or the execution and delivery hereof by any
other party or in respect of the validity or sufficiency of any document or
agreement delivered in connection herewith, including, but not limited to, any
document or agreement the forms of which are attached hereto as Exhibits to
this Agreement. Neither the Trustee nor the Disbursement Agent shall be
accountable for the use or application of the funds in the Cash Collateral
Accounts or for Project Disbursements, except as set forth in the Indenture or
herein.
SECTION 8.7 Duties of Disbursement Agent. (a) The Disbursement Agent
shall have only those duties as are specifically provided herein. The
Disbursement Agent shall neither be responsible for, nor chargeable with
knowledge of, the terms and conditions of any other agreement, instrument, or
document between the other parties hereto, in connection herewith, except as
specifically set forth in this Agreement and shall be required to act only
pursuant to the terms and provisions of this Agreement. This Agreement sets
forth all matters pertinent to the duties of the Disbursement Agent
contemplated hereunder and no additional obligations shall be implied from the
terms of this Agreement or any other agreement.
(b) The Disbursement Agent shall be entitled to deem the signatories of
any documents or instruments submitted to it hereunder as being those purported
to be authorized to sign such documents or instruments and shall be entitled to
rely on the genuineness of such signatures without requiring substantiating
evidence of any kind. In the absence of bad faith on its part,
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the Disbursement Agent may conclusively rely upon certificates or documents
conforming to the requirements of this Agreement as for the truth of the
statements expressed therein.
SECTION 8.8 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Michigan.
SECTION 8.9 Gaming Laws. Each of the provisions of this Agreement is
subject to, and shall be enforced in compliance with, the provisions of any
applicable laws, including, without limitation, the rules and regulations of
the Indiana Gaming Commission.
SECTION 8.10 Waiver Of Jury Trial. Each of the Company, the Trustee and
the Disbursement Agent hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement, or the actions of any
party hereto in the negotiation, administration, performance or enforcement
thereof.
SECTION 8.11 Termination. This Agreement shall terminate upon mutual
written agreement of each of the parties hereto or upon payment in full of all
Obligations under the Indenture.
SECTION 8.12 Third Party Beneficiaries. Except as provided in Section 8.4
with respect to the Construction Consultant and except as to the Holders, no
Person shall be a third party beneficiary of this Agreement.
ARTICLE IX
ARBITRATION
Section 9.1 Arbitration. (a) Any disagreement with respect to the
release of funds from the Construction Account, or any related disagreement
with respect to the construction, meaning or effect of this Agreement, arising
out of this Agreement or concerning the rights or obligations of the parties
hereunder shall be submitted to arbitration, one arbitrator to be chosen by the
Company, one by the Trustee, and a third to be chosen by the first two
arbitrators before they enter into arbitration. The arbitrators shall be
impartial and shall be active or retired persons with experience in
construction, development and/or construction lending (and in the case of the
Chartered Vessel Sub-Account or the Permanent Vessel Sub-Account, maritime
construction, development and/or construction lending).
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(b) In the event that either party should fail to choose an arbitrator
within 15 days following a written request by the other party to enter into
arbitration, the requesting party may choose two arbitrators who shall, in
turn, choose the third arbitrator. If the first two arbitrators have not
chosen a third arbitrator at the end of 15 days following the last day of the
selection of the first two arbitrators, each of the first two arbitrators shall
name three candidates, of whom the other arbitrator shall eliminate two, and
the determination of the third arbitrator shall be made from the remaining two
candidates by drawing lots. Each party shall present its case to the
arbitrators within 15 days following the date of the appointment of the third
arbitrator. The decision of a majority of the three arbitrators shall be final
and binding upon both parties. Judgment may be entered upon the arbitration
award in any court having jurisdiction. Each party shall bear the expense of
its own arbitrator and shall jointly and equally bear with the other the
expense of the third arbitrator and of the arbitration. In the event that the
two arbitrators are chosen by one party, as above provided, the expense of the
arbitrators and the arbitration shall be equally divided between the two
parties. Any such arbitration shall take place in Detroit, Michigan unless
some other location is mutually agreed upon by the parties. The arbitrators
shall resolve any dispute arising hereunder in a manner consistent with the
intent of the parties as expressed in this Agreement. The arbitrators shall
not award any punitive, consequential or exemplary damages or any amount in
excess of the amount to be released from the relevant Cash Collateral Account
or Sub-Account. All awards by the arbitrators shall be payable solely from the
amounts on deposit in the relevant Cash Collateral Account or Sub-Account.
(c) Notwithstanding the provisions of clauses (a) and (b) above, in the
event that a dispute relates to the construction of the Permanent Vessel, upon
the written request of the Company, any controversy or claim arising out of or
relating to the construction of the Permanent Vessel and the meaning or effect
of this Agreement or the rights or obligations of the parties hereunder shall
be settled by arbitration administered by the American Arbitration Association
under its Construction Industry Arbitration Rules. The parties shall use their
best efforts to resolve the dispute as soon as practicable and to comply, if
available, with the fast track procedures specified in the Construction
Industry Arbitration Rules. Judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE MAJESTIC STAR CASINO, LLC
By: Barden Development, Inc.
By: Kenneth L. Kramer
---------------------------
Name: Kenneth L. Kramer
Title: Vice President
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By: Nancy R. Besse
----------------------------
NBD BANK,
as Disbursement Agent
By: J. Michael Banas
----------------------------
Name: J. Michael Banas
Title: Vice President
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Schedule 1
Requirements for Major
Ship Contracts
1. In the case of the principal agreement or agreements for the construction
of the Permanent Vessel (the "Ship Construction Contracts"), such
Contracts shall be maximum guaranteed price contracts not in excess of an
aggregate of $40 million plus any additional capital contributions
deposited into the Permanent Vessel Sub-Account by the Company for such
construction and the Company shall have delivered a copy of such contracts
to the Construction Consultant.
2. The Construction Consultant shall have certified within 15 days of the
receipt thereof that such Ship Construction Contracts are customary or
commercially reasonably for a construction project of similar design and
scope. If the Construction Consultant is not able to make such
certification because such Contracts are not, in the opinion of such
Construction Consultant, customary or commercially reasonable, the
Construction Consultant shall deliver notice to the Company specifying in
reasonable detail its objections and the Company shall use its reasonable
best efforts to modify, amend or replace such contracts to address such
objections. If the Company disputes the appropriateness of such
objections, such dispute shall be resolved either (i) pursuant to Article
IX of the Agreement or (ii) as set forth in writing by the Company and the
Construction Supervisor. If the Construction Consultant does not make
such certification or deliver such objections to the Company within such
15-day period, the Construction Consultant shall have been deemed to have
made such certification.
3. Such contract (other than the Ship Construction Contracts and other than
contracts not involving construction where Retainage is not customary)
shall provide for at least 5% Retainage until final completion of the
applicable work, including all "punch list" items.
4. The Ship Construction Contracts shall be assigned to the Trustee as
additional security and any necessary consents to such assignment shall be
obtained.
5. The Company shall grant a security interest to the work-in-process
relating to the construction of the Permanent Vessel at the Shipyard to
the Trustee.
33
Schedule 2
Requirements for Major
Contracts Other than Ship Contracts
1. Such contract shall be a maximum guaranteed price contract not in excess
of the amount of the items reflected on the Construction Budget to which
such contract relates or otherwise contain customary and prudent
conditions to protect against cost overruns.
2. Such contract shall provide for at least 5% Retainage until 50%
completion of the applicable work (as reasonably determined by a Project
Architect and reasonably approved by the applicable Construction
Supervisor) and at least 5% Retainage until final completion of the
applicable work, including all "punch list" items, provided that Retainage
will not be required for contracts not involving construction where
Retainage is not customary.
34
Schedule 3
Additional Conditions to
Disbursements from Permanent Vessel Sub-Account
1. For any Project Disbursements from the Permanent Vessel
Sub-Account,(i) from and after the date granted, the Gaming License
issued to the Company by the Indiana Gaming Commission shall not have
elapsed and shall not have been rescinded, suspended, nullified or
revoked and any such rescission, suspension, nullification or revocation
shall be continuing, nor shall proceedings instituted by the Indiana
Gaming Commission for any such action be pending and (ii) the Company
shall not have received notice that the Company will not receive a
riverboat owner's license.
2. The Company shall have delivered to the Disbursement Agent and the
Construction Consultant a copy of the Major Contract to which such
Project Disbursement relates which satisfies the requirements of Schedule
1.
3. The Company shall continue to retain a Construction Supervisor and the
Construction Consultant for the Permanent Vessel Project in accordance
with the Cash Collateral and Disbursement Agreement.
4. Following preparation of the design specifications for the Permanent
Vessel, the Company shall have completed or caused to be completed
initial drafts of the Plans and Specifications sufficient to reasonably
define the scope and major elements of the Project, a preliminary
Construction Budget and a preliminary Construction Schedule and the
Company shall deliver a copy of such Plans and Specifications to the
Construction Consultant.
5. The Construction Consultant shall have certified within 15 days of
receipt thereof that such Plans and Specifications are customary or
commercially reasonable for a construction project of similar design and
scope. If the Construction Consultant is not able to make such
certification because such Plans and Specifications are not, in the
opinion of such Construction Consultant, customary or commercially
reasonable, the Construction Consultant shall deliver notice to the
Company specifying in reasonable detail its objections and the Company
shall use its reasonable best efforts to modify, amend or replace such
Plans and Specification to address such objections. If the Company
disputes the appropriateness of such objections, such dispute shall be
resolved either (i) pursuant to Article IX of the Agreement or (ii) as
set forth in writing by the Company and the Construction Consultant. If
the Construction Consultant does not make such certification or deliver
such objections to the Company within such 15 day period, the
Construction Consultant shall have been deemed to have made such
certification.
35
Schedule 4
Additional Conditions to
Disbursements from Land Sub-Account
During the Initial Phase
1. For any Project Disbursements from the Land Sub-Account (i) from and
after the date granted, the Certificate of Suitability issued to the
Company by the Indiana Gaming Commission shall not have elapsed and shall
not have been rescinded, suspended, nullified or revoked and any such
rescission, suspension, nullification or revocation shall be continuing,
nor shall proceedings for any such action be pending and (ii) the Company
shall not have received notice that the Company will not receive a
riverboat owner's license.
2. (i) The Company shall have delivered to the Disbursement Agent a copy
of each of the Major Contracts required by (and complying with) paragraph
1 of Schedule 2. Such contract may take the form of a preliminary letter
agreement for the first 120 days of construction.
3. The Company shall continue to retain a Construction Supervisor, if
applicable, for the Project in accordance with the Cash Collateral and
Disbursement Agreement.
4. The Company shall have completed or caused to be completed the Plans
and Specifications sufficient to reasonably define the scope and major
elements of the Project, a preliminary Construction Budget and a
preliminary Construction Schedule.
5. In the case of disbursements to the BHR Joint Venture, such
disbursements, after giving effect to all prior disbursements, may not
exceed in the aggregate $56.1 million.
36
EXHIBIT A
REQUEST FOR A PROJECT DISBURSEMENT
[Letterhead of the Company]
__________________, 19____
NBD Bank
as Disbursement Agent
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Corporate Trust Department
Project
Gentlemen:
The undersigned refers to the Cash Collateral and Disbursement Agreement,
dated May 22, 1996 (the "Collateral Disbursement Agreement"; the terms defined
therein being used herein as therein defined), among the Trustee, the
undersigned and you and hereby requests, pursuant to Section 3.1 of the
Collateral Disbursement Agreement, that a Project Disbursement from the
__________ [Cash Collateral Account] [Sub-Account] in the aggregate amount of
$____________ (the "Project Disbursement") be made available to the undersigned
on _____________, 199_, which is a Business Day.
The undersigned hereby certifies that the following statements are true on
the date hereof and will be true on the date of the Project Disbursement:
(i) The Project Disbursement will be applied to the following uses
permitted under Section 4.18 of the Indenture in the following amounts:
Description Amount
___________________ ___________
___________________ ___________
37
(ii) No event has occurred and is continuing, or would result from
such Project Disbursement or from the application of the proceeds thereof,
that constitutes an Event of Default under the Indenture or would
constitute an Event of Default under the Indenture but for the
requirement that notice be given or time elapse or both;
(iii) The Company has not exceeded, and after giving effect to this
Project Disbursement (and after taking into account all adjustments
permitted by Section 3.3(b)) will not exceed, the Line Item or Line Items
with respect to the applicable construction budget for the costs to be
paid with the proceeds of this Project Disbursement;
(iv) The amount of the requested Project Disbursement, together with
the amounts on deposit in the applicable Cash Collateral Account and the
amount of any financing of Project costs permitted under the Indenture
and reasonably available to the Company are sufficient to finance the
completion of the Project;
(v) The amount shown on each Line 12 of the attached Project
Disbursement Documentation is the actual amount presently payable or paid
to the applicable Contractor, and this Project Disbursement shall be used
solely for the purpose of paying the items of cost specified herein or
for reimbursing the Company for such items previously paid by the
Company;
(vi) The Company has no knowledge of and has received no notices of
Liens, except Permitted Liens, or claims of lien either filed or
threatened against the Project;
(vii) All amounts shown on each Line 7 and Line 10 of the Project
Disbursement Documentation have been paid by the Company;
(viii) The Company approves all work and materials for which payment
is due (as shown on each Line 12 of the Project Disbursement
Documentation) and confirms that such work and materials and all work and
materials to be prepaid conform in all material respects with the Plans
and Specifications, as such Plans and Specifications may be modified in
accordance with the terms of the Collateral Disbursement Agreement;
(ix) Approximately __% of the _________ Project has been completed
as of this date;
(x) Construction of the Project is progressing in such manner so as
to achieve substantial completion thereof, substantially in accordance
with the Plans and
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Specifications, on or before the completion date in the Construction
Schedule;
(xi) All previous Project Disbursements have been expended for the
sole purpose of paying the costs ("Costs") previously certified to the
Disbursement Agent and the Trustee and no part of said funds has been
used, and this Project Disbursement shall not be used, for any other
purpose. No item of Costs previously certified to the Disbursement Agent
and the Trustee remains unpaid as of the date hereof except for any item
of Cost where payment had been reasonably withheld by the Company as a
result of a good faith dispute; and
(xii) All conditions to this Project Disbursement have been met in
accordance with the terms of the Collateral Disbursement Agreement,
including, without limitation, the conditions set forth in Schedules 1-4
thereto.
Documentation for this Project Disbursement is provided in Annex 1-A or,
in the alternative, Annex 1-B hereto. A copy of this Request for a Project
Disbursement and the attached documentation have been delivered to the Trustee
at its address for notices provided in the Indenture.
Very truly yours,
[REQUESTING PARTY]
By:____________________
Name:
Title:
39
ANNEX I-B TO REQUEST FOR PROJECT DISBURSEMENT
(To be used as an alternative to Annex I-A in cases where the Project
Architect is acting as the Construction Supervisor.]
AIA FORM
40
EXHIBIT B
PROMISSORY NOTES
41
EXHIBIT C
FORM OF TRUSTEE'S CERTIFICATE
[Date]
NBD Bank
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Corporate Trust Department
Re: Request of $_______ from
[______________ Account(s)]
Gentlemen:
Pursuant to Section 2.4 of the Cash Collateral and Disbursement Agreement
dated May 22, 1996, to which you are a party, IBJ Schroder Bank & Trust
Company, a New York banking corporation (the "Trustee"), requests that a
disbursement of $_________ be made from the [________________ Account(s)] to
Account No._________. In connection with the requested release of funds, the
Trustee hereby represents, warrants and certifies that an Event of Default has
occurred under the Indenture which (except in the case of a Change of Control
Offer, Uncompleted Project Offer or Uncompleted Vessel Offer) has been
accelerated pursuant to Section 6.02 of the Indenture.
The foregoing representations, warranties and certifications are true and
correct and Disbursement Agent is entitled to rely on the foregoing and is
authorized in making the release of funds.
IBJ SCHRODER BANK & TRUST COMPANY
By:______________________________
Name:
Title: