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EXHIBIT 10.5
UNDERSTANDING
AS TO
MASTER JOINT VENTURE AGREEMENT
Pursuant to Paragraph 4(b), of that certain Amended and Restated
Purchase Agreement dated as of even date herewith (the "Purchase Agreement") by
and between Black Hawk Gaming & Development Company, Inc. ("Seller") and
Diversified Opportunities Group Ltd. ("Purchaser"), it was provided that a
20-year Master Joint Venture Agreement would be entered into on terms mutually
agreeable to Seller and Purchaser. This document is to state the understanding
of the parties with respect to that subsection of the Purchase Agreement in
lieu of entering into a Master Joint Venture Agreement. The parties hereto
acknowledge, however, that they may in the future enter into joint venture
agreements with respect to future potential projects by and between the parties
and/or their assignees.
FOR AND IN CONSIDERATION of the promises and covenants set forth in
the Purchase Agreement, the parties hereto agree as follows:
The commitments described below shall be in full force and effect for
a period of 20 years from the date hereof and so long thereafter as the parties
hereto mutually extend such commitment; provided, however, in the event that
the Note issued by Seller to Purchaser pursuant to the Purchase Agreement is
accelerated or is not converted, then, from and after the date of acceleration
or maturity date of said Note, as the case may be, the provisions of this
Understanding shall cease to apply and be of no further force or effect with
respect to any gaming opportunities presented by either Seller or Purchaser,
unless, at such time, the parties have entered into a formal joint venture
agreement with respect to such gaming opportunity, in which event the terms of
such formal joint venture agreement shall apply.
1. Every gaming opportunity now or in the future owned or
controlled by the Purchaser and/or its affiliates and assignees will be offered
to a joint venture in which the Seller and/or its affiliates and assignees
shall have the right to obtain an ownership interest of up to 51% therein;
provided however, that Purchaser's or its affiliates' or assignees' present or
future interests in (i) any gaming opportunity located at the Nautica
Entertainment Complex, Cleveland, Ohio, (ii) the Colonial Downs, Virginia,
project and (iii) Boardwalk Casino, Inc. shall be excepted from the operation
of this Paragraph 2.
2. Every gaming opportunity now or in the future owned or
controlled by the Seller and/or its affiliates and assignees will be offered to
a joint venture in which the Purchaser and/or its affiliates and assignees
shall have the right to obtain an ownership interest of up to 49% therein;
provided, however, that Seller's or its affiliates' or assignees' present or
future interests in (i) the Gilpin Hotel Casino, (ii) the cross-border
transaction currently being pursued by Robert D. Greenlee, and (iii) the
Oklahoma City, Oklahoma project with the Sac and Fox Indian Nation shall be
excepted from the operation of this Paragraph 3.
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3. The Purchaser and/or its affiliates or assignees shall be
entitled to a co-management fee with respect to any joint venture formed in the
future pursuant to this Understanding, any individual agreement arising
thereunder, and shall be calculated as a percentage of each individual
venture's gaming revenues less gaming taxes (the "Fee"). The Fee shall be 1% if
the Purchaser's ownership of a particular venture is in the range of 25%-49%;
the Fee shall be 3/4 of 1% if the Purchaser's ownership is in the range of 15%
or more and less than 25%; and the Fee shall be 1/2 of 1% if the Purchaser's
ownership is less than 15%.
4. The terms of any such joint venture arising hereunder shall be
structured such that the financial results will be consolidated with the
financial results of the Seller in accordance with generally accepted
accounting principles.
5. Provision shall be made in any such joint venture to be
entered into or any agreement arising thereunder so as to provide for
contributions based on the discretion of the Board of Directors of the Seller
after giving due regard to the need for reserves for operating and capital
improvements of such joint venture, if any.
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With the intention of being fully and legally bound to the intentions
set forth above, the parties have executed this Understanding as of the 12th
day of November, 1996.
DIVERSIFIED OPPORTUNITIES
GROUP LTD.
By: Jacobs Entertainment Ltd., its manager
By: /s/ DAVID C. GRUNENWALD
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Title: Vice President
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BLACK HAWK GAMING &
DEVELOPMENT COMPANY, INC.
By: /s/ STEPHEN R. ROARK
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Stephen R. Roark, President
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