Vessel Construction Contract, 7/16/1999

Exhibit 10.7


VESSEL CONSTRUCTION CONTRACT


BY AND BETWEEN


BUILDER: LEEVAC SHIPYARDS, INC.


AND


OWNER: HOLLYWOOD CASINO SHREVEPORT


TABLE OF CONTENTS


ARTICLE 1 - DEFINITIONS 1


ARTICLE 2 - SCOPE 4


ARTICLE 3 - DELIVERY 7


ARTICLE 4 - PAYMENT 8


ARTICLE 5 - CONSTRUCTION SCHEDULE 10


ARTICLE 6 - FORCE MAJEURE 10


ARTICLE 7 - LIQUIDATED DAMAGES AND BONUS PROVISIONS 12


ARTICLE 8 - CHANGES IN SPECIFICATIONS AND CONTRACT DRAWINGS 12


ARTICLE 9 - RISKS AND INSURANCE 13


ARTICLE 10 - WARRANTY 18


ARTICLE 11 - DEFAULT AND TERMINATION 20


ARTICLE 12 - APPLICABLE LAW 22


ARTICLE 13 - CONTRACT 22


ARTICLE 14 - INSPECTION, ACCESS, TESTS AND OFFICIAL CERTIFICATES 23


ARTICLE 15 - ASSIGNMENT; CONSTRUCTION FINANCING 24


ARTICLE 16 - COMPLIANCE WITH REGULATIONS 25


ARTICLE 17 - PATENTS 25


ARTICLE 18 - USE OF THE CONTRACT DRAWINGS AND SPECIFICATIONS 25


ARTICLE 19 - NOTICES AND COMMUNICATIONS 26


ARTICLE 20 - TITLE 26


ARTICLE 21 - INDEMNIFICATION 27


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ARTICLE 22 - DISPUTE RESOLUTION 28


ARTICLE 23 - GENERAL 29


LIST OF EXHIBITS


Exhibit A - Certificate of Completion & Delivery (Form)
Exhibit B - Schedule of Values Certificate (Form)
Exhibit C - Change Order (Form)


LIST OF SCHEDULES


Schedule 2.1 - Specifications and Contract Drawings
Schedule 13.1 - Builder's Bid


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VESSEL CONSTRUCTION CONTRACT


This Agreement is made as of the 16th day of July, 1999 (hereinafter, "this Agreement"), between the Builder, Leevac Shipyards, Inc., a corporation organized and existing under and by virtue of the laws of the State of Louisiana (hereinafter, "Builder"), whose mailing address, is P. O. Box 1190, Highway 90 E., Jennings, LA 70546, and Owner, Hollywood Casino Shreveport, a general partnership organized and existing under and by virtue of the laws of the State of Louisiana (hereinafter "Owner"), whose mailing address is c/o HWCC-Louisiana, Inc., Two Galleria Tower, Suite 2200, 13455 Noel Road, LB 48, Dallas, TX 75240.


The project is the construction of the Vessel at the Shipyards and at Owner's facility in Shreveport, Louisiana. The price to be paid by Owner for the construction of the Vessel is THIRTY-FOUR MILLION, THREE HUNDRED EIGHTY-SIX THOUSAND ($34,386,000.00) DOLLARS as adjusted to reflect all agreed upon Change Orders executed in accordance with the provisions of this Agreement (the "Contract Sum").


The Vessel shall be assigned Builder's Hull Number 327.


The Builder and Owner agree as set forth below.


WITNESSETH:


ARTICLE 1 - DEFINITIONS


1.1 Agreement - As defined in the Preamble.


Application for Payment - As defined in Paragraph 4.1.


Builder - As defined in the Preamble.


Builder's Indemnitees - As defined in Paragraph 21.2.


Certificate of Completion and Delivery - As defined in Paragraph 3.1.


Change Order - As used herein, the term "Change Order" shall mean a written
instrument prepared by the Builder and signed by the Owner and Builder,
stating their agreement upon: (1) a change in the Work; (2) the amount of
the adjustment in the Contract Sum, if any; and (3) the extent of the
adjustment in the Contract Time and either of the Delivery Dates, if any.


Commencement Notice - As defined in Paragraph 2.8.


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Completed Vessel - As defined in Paragraph 3.1.


Completion Date - As used herein "Completion Date" is October 2, 2000,
assuming Owner issues the Commencement Notice on August 7, 1999. If Owner
fails to issue the Commencement Notice on or before August 7, 1999, such
date shall be extended by the number of days elapsing after August 7, 1999
through the date that the Commencement Notice is issued.


Components - As used herein, the term "Components" shall mean all parts and
components of the Vessel which are fabricated by Builder for the use of the
construction of the Vessel, which will, when so used, form a part of the
Vessel and the fabrication of which is commenced at any of the Shipyards.


Construction Schedule - As defined in Paragraph 5.1.


Contract - As defined in Paragraph 13.1.


Contract Documents - As defined in Paragraph 13.1.


Contract Time - As used herein, the term "Contract Time" is the time
elapsed between execution of this Agreement and the date of issuance of the
Delivery and Acceptance Certificate.


Completed Vessel - As defined in Paragraph 3.1.


Contract Sum - As defined in the Preamble.


Cut-Off Date - As defined in Paragraph 4.1.


Delivery and Acceptance - As defined in Paragraph 3.3.


Delivery and Acceptance Certificate - As defined in Paragraph 3.3.


Delivery Dates - As used herein, the term "Delivery Dates" are the
combination of the Site Delivery Date and the Completion Date.


Down Payment - As defined in Paragraph 4.1.1.


Extended Delivery Date - As defined in Paragraph 3.2.


Final Inspection - As defined in Paragraph 3.3


FF&E - As used herein, the term FF&E is furniture, fixtures and equipment.


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Force Majeure - As defined in Paragraph 6.1.


Good Shipbuilding Practices - As defined in Paragraph 2.6.


Hull Number - As used herein, the term "Hull Number" means the number
assigned to the Vessel by the Builder.


Invoice Due Date - As defined in Paragraph 4.1.


Louisiana Authorities - As used herein, the term "Louisiana Authorities"
shall mean the Louisiana Gaming Control Board and the Louisiana State
Police, Riverboat Gaming Division.


Materials - As used herein, the term "Materials" shall mean all materials,
all items of machinery, and all items of equipment, including any Owner
furnished equipment, including but not limited to, engines and gears which
are purchased or acquired for use in the construction of the Vessel which
will, when so used, form a part of the Vessel and which have been delivered
to any of the Shipyards.


Modification - As defined in Paragraph 13.1.


Other Authorities - As used herein, the term "Other Authorities" whether
used singularly or together, shall mean all such entities promulgating
regulations or standards applicable to the Work, including but not limited
to those identified in the Contract.


Owner - as defined in the Preamble.


Owner's Indemnitees -As defined in Paragraph 21.1.


Owner's Representative - As defined in Paragraph 14.3.


Payment Due Date - As defined in Paragraph 4.1.2.


Regulatory Agencies or Bodies - As used herein, the term "Regulatory
Agencies or Bodies" whether used singularly or together, shall mean the
United States Coast Guard and any successor thereto.


Schedule of Values - As defined in Paragraph 4.3.


Shipyards - As used herein, the term "Shipyards" shall mean Builder's yards
in Jefferson Davis Parish, St. Mary's Parish and at any temporary yard in
Bossier or Caddo Parish used by Builder in connection with construction of
the Vessel.


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Site Delivery Date - As used herein, the term "Site Delivery Date" shall
mean June 15, 2000, assuming Owner issues the Commencement Notice on
August 7, 1999. If Owner fails to issue the Commencement Notice on or
before August 7, 1999, such date shall be extended by the number of days
elapsing after August 7, 1999 through the date that the Commencement Notice
is issued.


Site Delivery Point - As used herein, the "Site Delivery Point" is within
Owner's cofferdam on the Red River, north of the Texas Street Bridge,
Shreveport, Louisiana.


Specifications and Contract Drawings - As used herein, the term
"Specifications and Contract Drawings" shall mean the specifications and
contract drawings attached as Schedule 2.1.


Subcontractor - As used herein, the term "Subcontractor" shall mean any
subcontractor of Builder who performs any of the Work.


Vessel -As used herein, the term "Vessel" shall mean the casino gaming
vessel to be constructed by Builder at the Shipyards and the Site Delivery
Point in accordance with the Work.


Warranty Deficiency - As defined in Paragraph 10.5.


Work - As used herein, the term "Work"shall mean, in the case of a Vessel
having a keel, the keel, and in the case of a Vessel not having a keel, the
bottom plates, and all Materials, machinery, equipment, Components, and
fabrications, including, but not limited to, engines and gears forming a
part of the Vessel when permanently installed in place and all such others
labor, Materials, Components, equipment and services provided or to be
provided by Builder at the Shipyards or the Site Delivery Point to fulfill
the Builder's obligations under the Contract.


Working Drawings - As defined in Paragraph 2.10.


ARTICLE 2 - SCOPE


2.1 For the Contract Sum, Builder agrees, at its own risk and expense, to
build, complete and deliver to Owner, as hereinafter provided, the Vessel
having overall hull dimensions of 242 x 114 x 14 feet, constructed,
outfitted and tested in accordance with the Builder's Bid attached hereto
as Schedule 13.1 and the Specifications and Contract Drawings labeled as
follows:


Specifications
For the construction of a Casino Vessel
Prepared by: Rodney E. Lay & Associates
Project


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Rev. 2
Contract Drawings
Outboard Profile
Hold Arrangement
Main Deck Arrangement
2/nd/ Deck Arrangement
3/rd/ Deck Arrangement


The Specification and Contract Drawings are hereby made a part of this
Agreement.


2.2 Builder agrees to furnish suitable locations at the Shipyards and all
labor, tools, equipment, materials, services and fees necessary for the
Work, except as otherwise indicated herein or in the other Contract
Documents.


2.3 Builder shall comply with all laws, rules, regulations and requirements of
any Regulatory Agencies or Bodies affecting the Work and shall procure at
its own expense such permits from the United States, state and local
authorities as may be necessary in connection with beginning or carrying on
to completion of the Work and shall at all times comply with all United
States, state and local laws in any way effecting the Work. Builder has
conducted a detailed and thorough review of the Specifications and Contract
Drawings and is unaware of any item which does not comply with the
requirements of any RegulatoryAgencies or Bodies. In the event Builder
becomes aware that any portion of any of the Contract Documents violate or
do not comply with any rule or regulation of any Regulatory Agencies or
Bodies promulgated after execution of this Agreement ("Enforced Change"),
Builder shall immediately notify Owner of said Enforced Change prior to the
implementation of same which Enforced Change shall not be made absent the
prior written consent of Owner. If Owner does not give its prior written
consent to such Enforced Change, then either party shall have the right to
terminate this Contract on written notice to the other. In the event of
such termination, (a) Builder shall discontinue all Work and use its best
efforts to cancel all orders for Materials and Components which have not
been delivered to any of the Shipyards; (b) Owner shall pay Builder for all
Work performed and Materials and Components purchased by Builder to
complete the Vessel; (c) Builder shall deliver to Owner at the Shipyards
the Materials and Components; and (d) within thirty (30) days after such
delivery, Owner shall remove all such Materials and Components from such
Shipyards.


2.4 Builder will provide and/or install ready for use all parts, equipment and
appurtenances shown in the Contract Documents (including Owner furnished
items, except those items to be installed by Owner or its separate
contractors and not Builder or its subcontractors). Builder shall store,
safe keep and handle Owner's equipment and supplies, including Owner
furnished items, that are to be installed by Builder both prior to and
after placement on the Vessel.


2.5 Builder will allow Owner and/or its representatives at all reasonable times
to examine the Work during construction.


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2.6 The Builder accepts the relationship of trust and confidence established
between him and the Owner by this Agreement. Builder agrees to perform the
Work in accordance with the Contract, and all materials and equipment shall
be in accordance with the Contract. Builder acknowledges that the subject
Vessel is being constructed as a riverboat gaming vessel for the carriage
of passengers in the tourism/gaming industry. Additionally, Builder agrees
to perform the Work in accordance with Good Shipbuilding Practices in order
to meet the appropriate standards of construction and levels of finish for
the class and type of vessel required herein and by any Regulatory Agencies
or Bodies. Builder agrees to cooperate with the Owner in furthering the
interests of the Owner. Builder agrees to furnish efficient business
administration and superintendence and to make all reasonable efforts to
furnish at all times an adequate supply of workmen and materials, and to
perform the Work in a manner consistent with the interests of the Owner and
with Good Shipbuilding Practices. "Good Shipbuilding Practices" for
purposes of the Contract means the construction of a ship or vessel, with
due consideration to standard of high quality, incorporating the specified
components in order to meet requirements of the Contract, utilizing
construction and testing methods to insure that the completed Vessel will
conform to the intended design required for use in the tourism/gaming
industry.


2.7 All portions of the Work that Builder does not perform shall be performed
under subcontracts or by other appropriate agreement with Builder. Nothing
contained in the Contract shall create any contractual relationship
between Owner and any Subcontractor. Builder shall furnish to Owner a copy
of each subcontract it enters into in connection with the Work within ten
(10) days after execution of such subcontract.


2.8 Builder shall not commence Work of any nature or cause any Subcontractor to
commence Work of any nature until such time as Builder has received from
Owner written instructions to commence construction (the "Commencement
Notice).


2.9 Builder shall include in all written agreements it enters into with any
Subcontractor for the performance of any portion of the Work a clause
providing that, if this Contract is terminated for any reason, such
contract with a Subcontractor shall be, by its terms, at Owner's sole
option and election, assigned to and assumed by Owner or a person
designated by Owner, without any need for action by Builder or such
Subcontractor or materialman, and such Subcontractor or materialman shall
continue to be bound by the terms and conditions of such contract. This
provision shall survive the termination of the Contract.


2.10 Upon delivery by Owner or Owner's representative of any Owner furnished
documents, materials and equipment as called for by the Contract, Builder
shall take possession of such items and adequately and properly store and
maintain those items. Any costs of repair to or replacement of such items
necessitated by any damage to or loss of such items which occurs after
delivery by the Owner of the items to Builder and which is not covered by
the Builder's Risk Policy required in Paragraph 9.1.1 shall be borne
entirely by Builder, provided that the damage or loss is not solely caused
by an error or omission of Owner.


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2.11 Based on the Specifications and Contract Drawings and any further
adjustments in the scope of quality of the Work authorized by Owner, and in
accordance with the Construction Schedule, Builder shall prepare and revise
as appropriate, for approval by the Owner, working drawings consisting of
drawings and specifications setting forth in detail the final requirements
for the construction of the Vessel (the "Working Drawings").


2.12 Except for those matters and areas for which Builder is responsible as
described in the Specifications and Contract Drawings, Owner or his design
agents, shall be responsible for the adequacy and accuracy of the
Specifications and Contract Drawings with regard to compliance with any
requirements or classifications mandated by the U.S. Coast Guard or any
other governmental or regulatory body for the intended or actual use of the
Work.


ARTICLE 3 - DELIVERY


3.1 Builder agrees, subject to the other provisions of this Agreement, to
deliver the Vessel to Owner in a structurally complete condition, free and
clear of all known liens, claims and encumbrances, and Owner agrees to
accept delivery to Owner's satisfaction at the Site Delivery Point on or
before the Site Delivery Date. Thereafter Builder shall complete all
necessary Work, including Owner's FF&E for which Builder is responsible, so
that the Vessel is substantially complete and ready for gaming operations
by the Completion Date (the "Completed Vessel"). Upon delivery by Builder
to Owner of the Completed Vessel, Builder shall issue a Certificate of
Completion and Delivery which shall state (i) that the Vessel has been
completed; (ii) that all trials and tests have been satisfactorily
completed, (iii) that the Vessel complies with the Contract, and is free
from defects in materials and workmanship; (iv) that there are no liens or
claims upon said Vessel or Materials, Components, equipment or labor for
said Vessel, except those created or incurred by the Owner, its
subcontractors, vendors or employees.


3.2 Builder agrees to deliver the Vessel to Owner safely afloat at Site
Delivery Point in accordance with the Contract on or before the Site
Delivery Date specified, or on or before such later date as may be required
by reason of any Change Order executed in accordance with the provisions of
this Agreement or by reason of Force Majeure delays as that term is defined
in Article 6 (the "Extended Delivery Date".)


3.3 Upon completion of all Work relating to the Vessel, including, but not
limited to, Specification-required tests and trials, witnessed and accepted
by Owner's Representative, and approved by the United States Coast Guard, a
final inspection of the Vessel shall be performed by Owner (the "Final
Inspection"). If the Final Inspection discloses any of the Work as being
unsatisfactory or incomplete, Owner will so advise Builder in writing.
Builder immediately shall take appropriate action to correct or complete
the Work in accordance with the Contract. When all physical work and clean-
up relating to the Vessel, including all punch list work, is found by Owner
(or Owner's Representative) to be completed to the satisfaction of the
Owner and the Builder has furnished releases of liens acceptable to the
Owner, a delivery and acceptance certificate (the "Delivery and Acceptance
Certificate") shall be issued by Owner ("Delivery and Acceptance").


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3.4 Builder shall furnish Owner on Delivery and Acceptance of the Vessel: a
Bill of Sale and a Builder's Certificate, together with whatever other
documents may be required by law or by any Regulatory Agencies or Bodies in
order for Owner to document the Vessel with the United States Coast Guard.
Builder will also assist Owner, or its agent, in acquiring all required
information to enable Owner to obtain all documentation necessary to
operate the Vessel as intended by Owner. It is understood that Builder
shall furnish any and all required U.S. Coast Guard approved drawings
(i.e., "as built" drawings) based on the Specifications and Contract
Drawings and other Contract Documents, which drawings are the sole
responsibility of the Builder. Any Coast Guard fees in connection with
documentation of the Vessel shall be the responsibility of Owner. Within
thirty (30) days after Delivery and Acceptance of the Vessel, Builder shall
furnish Owner with a complete set of as-built drawings of the Vessel and on
Autocad 14 or such other format as shall be subsequently in use by Builder.


ARTICLE 4 - PAYMENT


4.1 Owner agrees to pay Builder according to the following payment schedule for
the Work (the "Payment Schedule"):


4.1.1 Within one (1) business day of Owner's delivery of the
Commencement Notice, Owner will pay to Builder an amount equal to
Three Million Four Hundred Thirty-Eight Thousand Six Hundred
($3,438,600.00) Dollars, representing an initial payment of the
Contract Sum (the "Down Payment").


4.1.2 Builder shall submit an application for payment in a form
satisfactory to Owner (an "Application for Payment") to Owner monthly
for unbilled Work by the Builder through the cut-off date which shall
be the Twenty-Fifth (25th) day of each month (individually, a "Cut-
Off Date"). An Application for Payment prepared through a particular
Cut-Off Date must be received by Owner no later than the First (1st)
day of the following month (individually, an "Invoice Due Date"). An
Application for Payment through a particular Cut-Off Date shall cover
the period commencing on the day following the immediately preceding
Cut-Off Date and ending on the Cut-Off Date for such Application for
Payment. All Applications for Payments for Work properly executed by
Builder which are submitted to Owner by the relevant Invoice Due Date,
together with the lien waivers in a form satisfactory to Owner from
all Subcontractors and any others requested by Owner, shall be paid by
Owner on or before the Twentieth (20th) day of the calendar month
following the calendar month in which the Cut-Off Date for the
submitted Application for Payment occurs (the "Payment Due Date").
The lien waivers shall encompass all previous Applications for Payment
which have been paid and shall also include a waiver of statutory
claims, liens and privileges for the amount included in the
Application for Payment submitted therewith which shall be contingent
and effective only upon receipt by Builder of such payment.
Applications for Payments unpaid thirty (30) days after the date
payment is due thereon shall bear interest at the rate of twelve
percent (12%) per annum from the date due until paid.


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4.1.3 The amount due under each Application for Payment shall be
reduced by $245,614.28, representing 1/14 of the Down Payment (each a
"Down Payment Reduction").


4.1.4 Other than the Down Payment, Owner shall retain ten (10%)
percent of the sum of such payment to Builder plus the Down Payment
Reduction through the date that 50% of the Work has been completed and
five (5%) per cent of the sum of each such payment plus the Down
Payment Reduction thereafter. The retainage shall be released upon
Delivery and Acceptance, except for such amount mutually agreed to by
Builder and Owner necessary to complete all punch-list items or, if a
dispute arises, under the provisions of Article 22.


4.3 The Builder shall furnish a schedule of values ("Schedule of Values") with
each Application for Payment which shall state (i) the percentage of
completion of each portion of the Work; (ii) that the Work completed
complies with the Contract; and (iii) that there are no liens or claims,
including those of any Subcontractor upon the Work for labor, Materials,
Components or equipment for the Work, except those created by Owner, its
subcontractors, vendors or employees. The Schedule of Values shall be
executed and certified by the President or Assistant Secretary/Treasurer of
Builder. If a lien exists on the Work, Owner shall not be obligated to
make payment in the amount of such lien until such lien is discharged or
bonded to Owner's reasonable satisfaction.


4.4 If Owner objects upon receipt of the Schedule of Values o ...