Vessel Construction Contract

Exhibit 10.14


9/27/96


VESSEL CONSTRUCTION CONTRACT


THIS VESSEL CONSTRUCTION CONTRACT ("Contract") is made as of September 27, 1996, between The Majestic Star Casino, LLC ("Owner"), an Indiana limited liability company, and Atlantic Marine, Inc. ("Builder"), a Florida corporation.


In consideration of the mutual undertakings expressed herein, the payments to be made by Owner, and other good and valuable consideration, it is hereby agreed by the parties as follows:


1. IDENTITY OF PARTIES-NOTICES


a. Owner. All written communications to Owner shall be addressed to:


Kenneth L. Kramer
The Majestic Star Casino, L.L.C.
400 Renaissance Center, Suite 2400
Detroit, MI 48243
Phone: (313) 259-0050
Telefax: (313) 259-0154


b. Owner's Representative. Owner shall designate in writing a representative or representatives who shall perform on-site inspection of the work at Builder's yard. Owner shall designate, in writing, those who will be authorized to execute Change Orders on Owner's behalf. Owner may change its representative(s) or designees from time to time by written notice to Builder. A copy of each written communication to Owner shall be furnished to Owner's representative. Builder shall provide Owner and its representatives on-site office space in accordance with the Specifications provided that Owner shall be responsible for the payment of long-distance or toll charges associate with Owner's, or its representatives' use of such telephone and facsimile equipment.


c. Builder. All written communications to Builder shall be addressed to:


Edward P. Doherty
Atlantic Marine, Inc.
8500 Heckscher Drive
Jacksonville, Florida 32226
Phone: (904)251-3111
Telefax: (904)251-3337


d. Builder's Representative. Builder shall designate in writing a representative who shall be authorized to execute Change Orders on Builder's behalf.


e. Notices in Writing. All notices required under this Contract shall be in writing.


2. SCOPE OF WORK. Builder shall furnish all labor, materials, equipment (except for "Owner Furnished Equipment", as defined below, some of which shall be installed by Owner, at Owner's sole expense, and some of which shall be installed by Builder, as part of the Contract Price) and services necessary to build, construct, and deliver a Great Lakes Casino Vessel (the "Vessel") in accordance with the Vessel Design Documents, using the equipment from the manufacturers specified in the Maker's List attached as EXHIBIT A. The completed project will produce a Vessel ready to commence operations in waters around Gary, IN (including on Lake Michigan) in a seaworthy manner.


3. VESSEL DESIGN DOCUMENTS. The Vessel Design Documents are the Specifications for the Vessel ("Specifications") attached as EXHIBIT B and the Drawings (the "Drawings") furnished by Guido Perla and Associates, Inc. ("GPA" or the "Naval Architect"). A schedule of the Drawings is set forth in Specification Group O, Section 080. Included in the Drawings are Contract Plans and Contract Guidance Plans as defined in Section 100 of the Specifications. Builder has carefully reviewed the Vessel Design Documents and represents that they are sufficiently clear, unambiguous, and understood for purposes of enabling Builder to construct the Vessel for the amount set forth in Article 7 below and within the time provided in Article 17 below. In case of a dispute as to the intent of any provisions of the Vessel Design Documents, such dispute shall be subject to arbitration in accordance with the provisions of Article 30.


Should the Drawings disagree in themselves, Builder shall provide the better quality or greater quantity of work and/or materials unless otherwise directed by a written Change Order to this Contract. Similarly, should the Specifications disagree in themselves, Builder shall provide the better quality or greater quantity of work and/or materials unless otherwise directed by a written Change Order to this Contract.


Builder and its subcontractors shall refer to all of the Drawings, including those showing primarily the work of the mechanical, electrical and other specialized trades, and to all of the Sections of the Specifications, and shall perform all work reasonably inferable therefrom as being necessary to produce the indicated results.


All indications or notations which apply to one of a number of similar situations, materials or processes shall be deemed to apply to all such situations, materials or processes wherever they appear in the work to be performed by Builder hereunder, except where a contrary result is clearly indicated by the Vessel Design Documents or this Contract.


Builder acknowledges that the Naval Architect will provide to Builder the drawings described in attached EXHIBIT C and in accordance with the schedule set forth therein.


Owner and Builder agree and acknowledge that Builder is not responsible for the design of the Vessel notwithstanding any reference in the Specifications to design. Owner and Builder further agree and acknowledge that Builder does not warrant the speed, draft, displacement, carrying or manning capacity and any other performance criteria.


Notwithstanding anything contained in the Specifications to the contrary, (i) the reference in Specification Group 5, Section 514, Paragraph 8.3 regarding the timing for the provision of warranty service shall be construed as the manufacturer utilizing its best efforts to respond within the times set forth in the Specifications as is reasonable under the circumstances; and (ii) the reference in Specification Group 5, Section 555, Paragraph 1.15 to a part distribution network shall be construed as the manufacturer utilizing its best efforts to respond within the time set forth in the Specifications as is reasonable under the circumstances.


4. CLASSIFICATION. The Vessel is to be constructed in compliance with United States Coast Guard ("USCG") rules and regulations without any reservation, including additional rules on circulars issued and effective up to the date of this Contract. All materials and workmanship shall be subject to the approval, inspection and testing by the USCG inspectors. Builder shall obtain a certificate of inspection issued by the USCG (the "COI") for the Vessel.


If there are changes after the execution of this Contract in USCG rules or other Federal rules and regulations applicable to the Vessel, alterations in the work caused by such changes shall be the subject of the Change Order procedure outlined in Article 10. Builder will be responsible for all elements of construction in accordance with USCG rules as applicable to this type of vessel.


All fees and charges incidental to the classifications and other requirements described in Specification Group O, Section 050, Paragraph 5.3 shall be for the account of Owner.


5. PRECEDENCE. In case of conflict between the requirements of the Drawings and the Specifications, the Specifications shall control. In case of a conflict between the requirements of the Specifications or this Contract, the terms of this Contract shall control.


6. OWNERSHIP OF VESSEL DESIGN DOCUMENTS. All Vessel Design Documents shall remain the exclusive property of Owner and Naval Architect and shall not be subject to reuse by Builder. Likewise, all calculations, sketches, shop drawings, working plans, reports, notes, models, and samples prepared by Builder in the course of completing the scope of work shall become the exclusive property of Owner. Builder agrees not to use the Vessel Design Documents for its own benefit or for the benefit of others, or transfer any of such property to a third party, except Builder's subcontractors and suppliers for their use in connection with the construction of the Vessel (provided that they, in turn, agree to abide with the provisions of this Article), without the prior written consent of Owner and Naval Architect. Builder acknowledges that, in view of the special and unique character of the project covered by this Contract, unauthorized use or disclosure of the Vessel Design Documents or the information contained therein will cause irreparable injury to Owner. Therefore, Builder acknowledges and agrees that Owner shall be entitled, without need to prove irreparable injury, to an injunction or other equitable relief restraining any violation or threatened violation of Builder's obligations hereunder.


7. CONTRACT PRICE; PAYMENT. Owner shall pay Builder for the construction of the Vessel, subject to any additions and deductions mutually agreed upon in writing between Owner and Builder, in United States currency, the sum of thirty-three million dollars ($33,000,000.00) (the "Contract Price"). In addition, Owner shall be liable and responsible for the payment of any and all applicable sales taxes in connection with the construction and purchase of the Vessel; provided, however, that Builder agrees to use its best efforts to take full advantage of any applicable sales tax exemptions and otherwise ensure that Builder's subcontractors and suppliers do not charge or collect sales tax in connection with the furnishing of labor, materials, supplies and/or equipment to the project. The Contract Price shall not be increased or decreased without a Change Order duly executed according to the procedure set forth in Article 10. Subject to the provisions of this Contract and with the exception of the cost of acquiring the Owner Furnished Equipment and the cost of installing that portion of the Owner Furnished Equipment that is described in the Specifications as being the responsibility of Owner, the Contract Price of the finished Vessel covers all costs required for completion and delivery of the Vessel according to the Vessel Design Documents and this Contract, including, without limitation, the cost of all construction and USCG permits, licenses, inspection fees, tests and trials, Vessel delivery costs, and the cost of insurance (as specified in Article 11).


a. Payment of the Contract Price will be made in the following manner:


(1) 10.5263% of the Contract Price, less retainage in an amount
equal to five percent (5%) thereof, within five (5) business
days after the parties' execution of this Contract;


(2) Ten percent (10%) of the Contract Price, less retainage in
an amount equal to five percent (5%) thereof, when the first
module has been completed with deck, bottom and sides, but
not sooner than eight (8) weeks after the date of this
Contract and provided further that good progress has been
made toward the completion of the Vessel systems;


(3) Ten percent (10%) of the Contract Price, less retainage in
an amount equal to five percent (5%) thereof, when the
following major equipment has been properly set in the
Vessel: the diesel generator sets, sea chests, bilge
manifolds and chiller units;


(4) Ten percent (10%) of the Contract Price, less retainage in
an amount equal to five percent (5%) thereof, when the hull
is complete from bow to stern provided that good progress
has been made toward the completion of the Vessel systems;


(5) Ten percent (10%) of the Contract Price, less retainage in
an amount equal to five percent (5%) thereof, when the main
deck to second deck steel superstructure has been completed
provided that good progress has been made toward the
completion of the Vessel systems;


(6) Ten percent (10%) of the Contract Price, less retainage in
an amount equal to five percent (5%) thereof, when the
second deck to third deck steel superstructure has been
completed provided that good progress has been made toward
the completion of the Vessel systems;


(7) Ten percent (10%) of the Contract Price, less retainage in
an amount equal to five percent (5%) thereof, when the third
deck to fourth deck steel superstructure has been completed
provided that good progress has been made toward the
completion of the Vessel systems;


(8) Ten percent (10%) of the Contract Price, less retainage in
an amount equal to five percent (5%) thereof, at the time
the Vessel is launched;


(9) Ten percent (10%) of the Contract Price, less retainage in
an amount equal to five percent (5%) thereof, upon the
satisfactory completion of sea trials;


(10) Five percent (5%) of the Contract Price, less retainage in
an amount equal to five percent (5%) thereof, when the
Vessel departs Builder's shipyard for Gary, Indiana;


(11) The balance of the Contract Price, including all retainage
but less the sum of fifty thousand dollars ($50,000.00),
upon delivery and acceptance of the Vessel by Owner in Gary,
Indiana; Builder acknowledges, however, that Owner's
obligation to accept the Vessel is conditioned upon (i) the
completion of the Vessel in accordance with the Vessel
Design Documents, this Contract and any approved Change
Orders; and (ii) receipt of a COI from the USCG; and


(12) The sum of fifty thousand dollars ($50,000.00) upon the last
to occur of the following: (i) the expiration of the
warranty period described in Article 13 below; or (ii) the
correction by Builder of any defects covered by Builder's
warranty in Article 13 below.


b. Any increase in the Contract Price resulting from a change or adjustment under Article 10 hereof shall be deemed a part of the Contract Price for the purpose of determining the amount of installment payments above. Conversely, any decrease in the Contract Price resulting from a change or adjustment under Article 10 hereof shall be taken into account for purposes of determining the amount of installment payments above.


c. If an increase or decrease in the Contract Price due to change or adjustment under Article 10 hereof is not finally determined prior to delivery to and acceptance of the Vessel by Owner, appropriate adjustment of any overpayment of underpayment shall be made promptly upon final determination of the increase or decrease and any monies owing shall be paid within ten (10) days after such final determination has been made and the work for which the adjustment to the Contract Price was being made has been completed.


d. If a change or adjustment hereunder shall result in an agreed upon increase or decrease in the Contract Price, all installment payments thereafter shall take account of such increased or decreased Contract Price as set forth above; additionally, the first such installment payment shall be adjusted by an amount equal to the product of (i) the amount of the increase or decrease in the Contract Price and (ii) the aggregate percentage of the Contract Price required to be paid on or before the due date of such installment payment.


e. Builder shall give Owner and Owner's representative not less than five (5) business days' prior written notice of the date on which Builder expects to achieve each of the milestones described in Article 7a above that will trigger the next periodic installment of the Contract Price. Such notice shall be sent to Owner both via telecopier and either by telephone conversation or face-to-face communication.


f. Builder shall submit periodic invoices and applications for payment in the form provided in attached EXHIBIT D to both Owner and Owner's representative and each periodic invoice and application for payment shall be reviewed and, if in order, approved by Owner's representative as soon as reasonably practical but in any event within three (3) business days. Payment of the periodic installment due Builder shall be made within five (5) business days after the later of (i) Owner's receipt of the periodic invoice and application for payment or (ii) completion of the corresponding milestone set forth in Article 7a above.


g. As a condition precedent to Owner's obligation to make progress payments, with respect to subcontractors and suppliers from which Builder has received invoices for amounts in excess of fifty thousand dollars ($50,000) each, Builder will provide Owner with evidence of prior payment for equipment and materials incorporated in the Vessel or delivered to Builder's yard for subsequent incorporation into the Vessel.


h. Builder will also provide Owner, upon request, with any reasonable additional information or documentation which Owner is required to provide to the Trustee under a certain Indenture dated as of May 22, 1996, and the Disbursement Agent under the Cash Collateral And Disbursement Agreement dated as of May 22, 1996. If the provision of such additional information or documentation by Builder necessitates the expenditure of a material amount of time on the part of Builder's personnel, Builder shall be reimbursed by Owner for the reasonable direct labor costs so incurred by Builder provided that Builder secures Owner's prior written approval of such costs.


8. QUALITY OF WORK. Builder shall perform all services and work, using new (except where specifically permitted in the Vessel Design Documents) and proper materials in a good and workmanlike manner. Such services and work shall be of high quality (consistent with the Vessel Design Documents), adequate for the purpose intended and at least comparable to similar services and work normally performed by an experienced, competent builder, consistent with the customary practices of the industry and shall conform to the Vessel Design Documents.


9. INSPECTION. In addition to inspection by a USCG inspector, Owner's representative(s) and its other agents shall observe and inspect the progress and quality of the executed work. The purpose of this review and inspection shall be, in general, to determine if the work is proceeding in accordance with the Vessel Design Documents and the Time Schedule. The review and inspection shall in no way alter or limit the ultimate responsibility of Builder to perform or finish the work in accordance with the provisions of this Contract and Vessel Design Documents. Owner's representative shall have the right to reject work that does not conform to the Vessel Design Documents or this Contract and Owner's representative shall advise Builder, in writing, of any work that is rejected and the reasons for the rejection. In case of a dispute as to the conformity of the work to the Vessel Design Documents or this Contract or the intent of any provisions of the Vessel Design Documents, such dispute shall be subject to arbitration in accordance with the provisions of Article 30 below. Notwithstanding the foregoing, pending resolution of any such dispute, Builder shall proceed with the Vessel construction under the direction of Owner's representative, keeping accurate records of the labor and material costs incurred by Builder in connection therewith as though Builder were performing the work on a time and material cost basis, and Builder's failure to so proceed shall not be the basis for any time extension with respect to the completion of the Vessel. If it is determined through the arbitration process that Owner's direction to proceed with the Vessel construction in the manner directed by Owner or Owner's representative was not in accordance with the Vessel Design Documents or this Contract, such work shall be the subject of a Change Order in accordance with the provisions of Article 10 below. Builder shall provide Owner's representative with not less than two (2) days' prior notice of all USCG inspections.


Builder shall give Owner's representative(s) full cooperation in carrying out his review, inspection and other duties described in the Specifications and/or this Contract, including, without limitation, free access to the Vessel and materials intended for its construction. Builder shall provide Owner's representative with the construction schedule, material ordering schedule, plan schedule, testing schedule, and with respect to equipment and/or machinery located in the main and auxiliary engine/machinery rooms and equipment and/or machinery relating to the deck systems, one copy of either (i) unpriced subcontractor or vendor quotes together with the data regarding the length of any relevant manufacturer warranty or (ii) if Builder has not secured quotes, all unpriced and unissued purchase orders and related information pertaining to the length of any relevant manufacturer warranty to be requested by Builder as they are written, and all updates of the same. Builder shall attend meetings called by Owner or Owner's representative.


Builder shall maintain a list of all vendors, subcontractors and suppliers from which it has secured labor, equipment, supplies and/or materials in connection with the construction of the Vessel and shall provide a copy of same to Owner upon written request therefor.


Owner's representative shall not be responsible for Builder's means, methods, techniques, sequences, or procedures of work nor the safety procedures incident thereto.


10. CHANGE ORDERS. All changes, which include time of completion or additions, deletions, or modifications to type, amount or quality of work performed pursuant to this Contract shall be in writing and must be authorized in accordance with this procedure (such written authorization for a change being hereafter referred to as a "Change Order"). There shall be no claim whatsoever for extra compensation or additional time for completion by Builder whether based on changes, owner interference, delays, or any other basis unless Builder requests, in writing and within the time prescribed in this Article, a Change Order. Builder's timely written request for a Change Order shall constitute a notice of a claim; otherwise, Builder's claims for extra compensation or additional time for completion shall be waived. Builder shall not commence any extra work without having obtained a fully executed Change Order except as provided in Article 9 above.


a. Form and Procedure. A Change Order shall be issued upon the Change Order form(s) attached hereto as EXHIBIT E, and signed by an authorized designee of Owner and Builder's representative, authorizing a change in the work, or an adjustment in price, or the time of completion. No change in price, extra work, time of completion, or change or deletion of work shall be made except on such form duly executed by both parties' representatives. When Owner proposes a change, it shall do so in writing to Builder's representative. Builder shall respond as soon as reasonably practicable and will use its best efforts to respond within fourteen (14) calendar days with a proposed cost estimate and changes in weight. If Builder is unable to respond to an Owner-proposed change within fourteen (14) calendar days, then, within three (3) business days after receipt by Builder of the Owner-proposed change, Builder shall notify Owner, in writing, of the reasons for same and the estimated time by which a response can be provided. If Builder proposes a change to the Contract Price or the time of completion of the Vessel, it shall do so in writing to Owner's representative and furnish a proposed cost estimate and change in weight. Builder shall propose any change within fourteen (14) calendar days of learning of the circumstances making a change advisable. Builder shall identify the impact that the proposed change will have on the Cont ...