<PAGE>
As filed with the Securities and Exchange Commission on March 2, 1999.
Registration No.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
HOLLYWOOD PARK, INC.
and Other Registrants
(See Table of Other Registrants Below)
(Exact name of each Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 7999 95-3667491
(state or other jurisdiction of (Primary standard industrial (I.R.S. Employer
incorporation or organization) classification code number) Identification No.)
</TABLE>
1050 South Prairie Avenue, Inglewood, California 90301
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
---------------
G. MICHAEL FINNIGAN
Chief Financial Officer
Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
(310) 419-1500
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
copy to:
ALVIN G. SEGEL, ESQ.
ASHOK W. MUKHEY, ESQ.
Irell & Manella LLP
1800 Avenue of the Stars
Los Angeles, California 90067
(310) 277-1010
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Proposed
Proposed maximum
Amount maximum aggregate Amount of
Title of each class of to be offering price offering registration
securities to be registered registered per unit(1) price(1) fee
- -------------------------------------------------------------------------------------------------
Series B 9 1/4% Senior Subordinated
Notes due 2007...................... $350,000,000 100% $350,000,000 $97,300
- -------------------------------------------------------------------------------------------------
Guaranties of Series B 9 1/4% Senior
Subordinated Notes due 2007......... $350,000,000 None(2) None(2) None(2)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee
is payable for the Guaranties.
---------------
The Registrants hereby amend the Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
OTHER REGISTRANTS
<TABLE>
<CAPTION>
State or Other I.R.S.
Jurisdiction of Employer
Exact Name of Registrant Incorporation Identification
as Specified in its Charter or Organization Number
- --------------------------- --------------- --------------
<S> <C> <C>
Hollywood Park Operating Company............... Delaware 95-3667220
Hollywood Park Fall Operating Company.......... Delaware 95-4093972
HP Yakama Consulting, Inc. .................... Delaware 94-4651282
HP Yakama, Inc. ............................... Delaware 95-4636368
Boomtown, Inc. ................................ Delaware 94-3044204
Hollywood Park Food Services, Inc. ............ California 95-2844591
HP/Compton, Inc. .............................. California 95-4545471
HP Casino, Inc. ............................... California 95-4548638
Crystal Park Hotel and Casino Development
Company, LLC.................................. California 95-4595453
Louisiana Gaming Enterprises, Inc. ............ Louisiana 72-1229201
Louisiana-I Gaming, a Louisiana Partnership in
Commendam..................................... Louisiana 72-1238179
Casino Magic Corp. ............................ Minnesota 64-0817483
Casino Magic American Corp. ................... Minnesota 41-1779346
Bayview Yacht Club, Inc. ...................... Mississippi 64-0824102
Mississippi-I Gaming, L.P. .................... Mississippi 64-0828954
Biloxi Casino Corp. ........................... Mississippi 64-0814408
Casino Magic Finance Corp. .................... Mississippi 64-0835473
Casino One Corporation......................... Mississippi 64-0814345
Bay St. Louis Casino Corp. .................... Mississippi 64-0814409
Mardi Gras Casino Corp. ....................... Mississippi 64-0793787
Boomtown Hotel & Casino, Inc. ................. Nevada 88-0101849
Boomtown Hoosier, Inc. ........................ Nevada 88-0355622
Indiana Ventures LLC........................... Nevada 93-1199012
Switzerland County Development Corp. .......... Nevada 95-4355039
Pinnacle Gaming Development Corp. ............. Colorado 84-1242274
Turf Paradise, Inc. ........................... Arizona 86-0114029
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 2, 1999
PROSPECTUS
[LOGO OF HOLLYWOOD PARK, INC.]
HOLLYWOOD PARK, INC.
OFFER TO EXCHANGE 9 1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007 FOR ANY
AND ALL OUTSTANDING 9 1/4% SENIOR SUBORDINATED NOTES DUE 2007
TERMS OF EXCHANGE OFFER
. Expires 5:00 p.m., New York City time, , 1999, unless extended
. Subject to certain customary conditions, which we may waive
. All outstanding notes that are validly tendered and not withdrawn will be
exchanged
. Tenders of outstanding notes may be withdrawn any time prior to the
expiration of the exchange offer
. The exchange of notes should not be a taxable exchange for U.S. Federal
income tax purposes
. We will not receive any proceeds from the exchange offer
. The terms of the notes we will issue in the exchange offer are substantially
identical to the outstanding notes, except that certain transfer restrictions
and registration rights relating to the outstanding notes will not apply to
the registered notes
. Each broker-dealer that receives registered notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such notes. See "Plan of
Distribution".
For a discussion of certain factors that you should consider before
participating in this exchange offer, see "Risk Factors" commencing on page 12.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of those notes to be issued in the
exchange offer, nor have any of these organizations passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
Neither the California Attorney General's office, the Nevada Gaming
Commission, the Nevada State Gaming Control Board, the Mississippi Gaming
Commission, the Louisiana Gaming Control Board, the Indiana Gaming Commission
nor any other regulatory agency of any other state has passed upon the adequacy
or accuracy of this Prospectus or the investment merits of the securities
offered hereby. Any representation to the contrary is unlawful.
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Where You Can Find More Information...................................... i
Disclosure Regarding Forward-Looking Statements.......................... ii
Prospectus Summary....................................................... 1
Risk Factors............................................................. 12
Use of Proceeds.......................................................... 22
Capitalization........................................................... 22
Unaudited Pro Forma Combined Consolidated Financial Statements........... 23
Selected Historical Financial and Other Data............................. 31
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 35
Business................................................................. 48
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management................................................................. 73
Security Ownership of Certain Beneficial Owners and Management............. 81
Certain Relationships and Related
Transactions.............................................................. 83
Description of Certain Indebtedness........................................ 84
The Exchange Offer......................................................... 87
Description of Notes....................................................... 98
Certain United States Federal Income Tax Consequences...................... 141
Plan of Distribution....................................................... 144
Legal Matters.............................................................. 145
Experts.................................................................... 145
Index to Financial Statements.............................................. F-1
</TABLE>
----------------
WHERE YOU CAN FIND MORE INFORMATION
In connection with the exchange offer, we have filed with the Securities and
Exchange Commission (the "SEC" or the "Commission") a Registration Statement on
Form S-4 (together with all amendments, exhibits, schedules and supplements
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the 9 1/4% Series B Senior
Subordinated Notes. As permitted by SEC rules, this prospectus does not contain
all of the information set forth in the Registration Statement. For further
information about us and the 9 1/4% Series B Senior Subordinated Notes, you
should refer to the Registration Statement. This prospectus summarizes material
provisions of contracts and other documents to which we refer you. Since this
prospectus may not contain all of the information that you may find important,
you should review the full text of these documents. We have included copies of
these documents as exhibits to our Registration Statement.
We also file annual, quarterly and special reports, proxy statements and
other information with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). You may read and copy the Registration Statement
and our other SEC filings can be inspected and copied at the Public Reference
Section of the Commission located at Room 1024, Judiciary Plaza, 450 Fifth
Street, NW, Washington D.C. 20549. You may also obtain copies of such
materials, including copies of all or any portion of the Registration
Statement, from the Public Reference Section of the Commission at prescribed
rates. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference room. Such materials are also available on
the Commission's home page on the Internet (http://www.sec.gov). These
documents are also available for viewing at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. These incorporated documents contain
important business and financial information about us that is not included in
or delivered with this prospectus. The information incorporated by reference is
considered to be part of this prospectus, and earlier information incorporated
by reference may be updated and superseded by information in the prospectus,
and later information filed with the SEC will update and supersede the
information in this prospectus. We incorporate by reference the following:
(1) pages F-55 through F-84 of Amendment No. 4 to our Registration
Statement on Form S-4 filed February 6, 1998 (registration no. 333-34471);
i
<PAGE>
(2) our Annual Report on Form 10-K for the fiscal year ended December 31,
1997;
(3) our Quarterly Report on Form 10-Q for the quarter ended March 31,
1998;
(4) our Quarterly Report on Form 10-Q for the quarter ended June 30,
1998;
(5) our Quarterly Report on Form 10-Q for the quarter ended September 30,
1998;
(6) our Current Report on Form 8-K filed October 30, 1998;
(7) the description of our common stock set forth in our Registration
Statement on Form 8-A filed with the Commission on June 29, 1994; and
(8) all documents filed by us or our subsidiaries pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the date of this prospectus and prior to the expiration date of the
exchange offer shall be deemed to be incorporated by reference into this
prospectus from the date of filing of such documents.
THESE FILINGS ARE AVAILABLE WITHOUT CHARGE TO HOLDERS OF EXISTING NOTES. YOU
MAY REQUEST A COPY OF THESE FILINGS BY WRITING OR TELEPHONING US AT HOLLYWOOD
PARK, INC., ATTENTION: INVESTOR RELATIONS, 1050 SOUTH PRAIRIE AVENUE,
INGLEWOOD, CALIFORNIA 90301 (TELEPHONE (310) 419-1610). TO OBTAIN TIMELY
DELIVERY OF ANY COPIES OF FILINGS REQUESTED FROM US, PLEASE WRITE OR TELEPHONE
US NO LATER THAN , 1999.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This document includes or incorporates by reference "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
regarding, among other things, our business strategy, our prospects and our
financial position. Although we believe that the expectations reflected in such
forward-looking statements are reasonable, they are inherently subject to
risks, uncertainties and assumptions about us and our subsidiaries. Important
factors that could cause actual results to differ materially from our
expectations are disclosed or incorporated by reference in this document, and
include, without limitation:
. the failure to complete or successfully operate planned expansion
projects;
. the failure to obtain adequate financing to meet our strategic goals;
. difficulties in completing the integration of Hollywood Park and Casino
Magic;
. the failure to obtain or retain licenses or regulatory approvals;
. and the other factors set forth under "Risk Factors."
All subsequent written and oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
the cautionary statements included in this document. We undertake no obligation
to publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this
document might not occur.
ii
<PAGE>
PROSPECTUS SUMMARY
The following summary contains basic information about this exchange offer.
It likely does not contain all the information that may be important to you.
For a more complete understanding of this exchange offer, we encourage you to
read this entire document and the documents we have referred you to, including
the financial data and the information set forth under the heading "Risk
Factors."
Unless the context may otherwise require, "we," "us," "our" and similar
terms, as well as references to "Hollywood Park" and the "Company" refer to
Hollywood Park, Inc. and its subsidiaries, except that all non-financial data
(1) for periods prior to October 15, 1998 do not include Casino Magic Corp.
("Casino Magic") (which we acquired on that date) and (2) for periods prior to
June 30, 1997 do not include Boomtown, Inc. (which we acquired on that date).
Certain information in this document is given for Hollywood Park, Inc. and its
"Restricted Subsidiaries" under the Indenture governing the 9 1/4% Senior
Subordinated Notes, on a consolidated basis, excluding the "Unrestricted
Subsidiaries" (the "Restricted Group").
The Company
General
We are a diversified gaming company that owns and/or operates eight casinos,
two pari-mutuel horse racing facilities, and two card club casinos at twelve
locations in Nevada, Mississippi, Louisiana, California, Arizona and Argentina.
We have also been approved to receive the final license to conduct riverboat
gaming on the Ohio River in Indiana and have begun development of a $150
million hotel/casino and golf resort at a site in Switzerland County, Indiana,
35 miles southwest of Cincinnati, Ohio. In addition to our operating
properties, we have significant excess land available for future sale or
development at four of our properties.
As part of our business strategy, we acquired Boomtown on June 30, 1997 and
Casino Magic on October 15, 1998. These companies own strategically located
properties in growing and established gaming markets and, at the time we
acquired them, were for the most part underperforming and had limited access to
capital for expansion. We recently hired four members of the senior management
team of Horseshoe Gaming to actively participate in the overall execution of
our business and operating strategies, including re-positioning the Boomtown
and Casino Magic properties and overseeing the construction and operations of
the Indiana Hotel and Casino Resort.
In light of the Boomtown and Casino Magic acquisitions, the following may be
helpful to give you an idea of the current size of our company. If the
acquisitions and related transactions had occurred on January 1, 1997 (which we
refer to as being on a "pro forma" basis), our total revenues would have been
approximately $610.8 million for the year ended December 31, 1997 and
approximately $495.2 million for the nine months ended September 30, 1998. On a
pro forma basis, earnings before interest, taxes, depreciation and amortization
(abbreviated as "EBITDA") would have totaled approximately $104.6 million for
the year ended December 31, 1997 and approximately $93.2 million for the nine
months ended September 30, 1998. On this basis, and giving effect to the
issuance of the 9 1/4% Senior Subordinated Notes on a pro forma basis, net loss
would have totaled $6.6 million for the year ended December 31, 1997 and net
income of approximately $4.0 million for the nine months ended September 30,
1998. In addition, on a pro forma basis, as of September 30, 1998, we would
have had total assets of approximately $966.4 million. On a pro forma basis,
after giving effect to the issuance of the 9 1/4% Senior Subordinated Notes,
including our use of proceeds from the sale of the 9 1/4% Series A Senior
Subordinated Notes, we would have had total indebtedness of approximately
$623.2 million as of September 30, 1998.
1
<PAGE>
Here is an overview of our gaming properties:
<TABLE>
<CAPTION>
Gaming Excess
Type of Square Slot Table Hotel Developable
Location/Property Gaming Facility Footage Machines Games Rooms Land (acres)
- ----------------- ------------------ ------- -------- ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Bossier City, Louisiana
Casino Magic
Bossier(1)........... Dockside Riverboat 30,000 980 44 188 --
Harvey, Louisiana
Boomtown New Orleans.. Cruising Riverboat 30,000 1,089 49 -- --
Bay St. Louis,
Mississippi
Casino Magic Bay St.
Louis................ Dockside 39,500 1,132 42 201 50
Biloxi, Mississippi
Boomtown Biloxi....... Dockside 33,632 1,308 35 -- --
Casino Magic Biloxi... Dockside 47,700 1,174 41 378 --
Verdi, Nevada
Boomtown Reno......... Land-based 40,000 1,320 44 322 250
Los Angeles, California
Hollywood Park Race
Track................ Horse Racing -- -- -- -- 160
Hollywood Park-
Casino............... Card Club 30,000 -- 145 -- --
Crystal Park(2)....... Card Club 30,000 -- 60 226 --
Phoenix, Arizona
Turf Paradise......... Horse Racing -- -- -- -- 100
Neuquen Province,
Argentina(3)
Casino Magic Neuquen.. Land-based 27,000 398 40 -- --
Casino Magic San
Martin de los Andes.. Land-based 2,500 75 16 -- --
------- ----- --- ----- ---
SUBTOTAL ........... 310,332 7,476 516 1,315 560
Development Project
- -------------------
Switzerland County,
Indiana
Indiana Hotel/Casino
Resort (4)........... Cruising Riverboat 38,000 1,300 55 309 --
------- ----- --- ----- ---
TOTAL .............. 348,332 8,776 571 1,624 560
======= ===== === ===== ===
</TABLE>
- --------
(1) Casino Magic Bossier is owned by our wholly-owned subsidiary, Casino Magic
of Louisiana, Corp., which is an unrestricted subsidiary under the
Indenture governing the 9 1/4% Senior Subordinated Notes and does not
guarantee the 9 1/4% Senior Subordinated Notes.
(2) We own Crystal Park and lease it to an unaffiliated operator.
(3) We own 51% of Casino Magic's Neuquen Province casinos.
(4) We own 97% of the Indiana Hotel/Casino Resort, which we expect to complete
within 18 to 24 months.
2
<PAGE>
Business Strategy
Our strategic plan is to develop a broad base of regionally diversified
casino entertainment facilities by making selected acquisitions in the non-Las
Vegas, non-Atlantic City gaming markets and achieving economies of scale. In
the realization of this strategy, we acquired Boomtown on June 30, 1997, and
Casino Magic on October 15, 1998. Our management seeks to develop its casinos
and maximize profitability by:
. refinancing expensive debt;
. fostering customer loyalty by offering a value oriented, quality customer
service gaming experience;
. providing gaming and entertainment facilities uniquely designed for each
property and target customer base; and
. using focused direct marketing incentives.
Specific growth initiatives vary by property type:
. Boomtown Casinos. Since the acquisition, we refinanced Boomtown's
expensive debt and undertook various capital expenditure programs to
enlarge and enhance the facilities. The three Boomtown casinos are now
fully developed facilities that serve their local markets in a relaxed
and customer-friendly environment. The goal for our new management team
with respect to the Boomtown casinos is to maximize profitability through
cost control and increase market share through improved marketing.
. Casino Magic Properties. We believe the Casino Magic properties offer
significant growth potential through improved management and re-
positioning of the brand to a more upscale and exciting image. The
properties are well-located and have ample room for limited and focused
capital spending to make them more attractive and customer-friendly via
parking and room additions, casino expansion and renovation, and
additional entertainment amenities. We have already refinanced some high
cost debt at Casino Magic and completed a hotel development at Casino
Magic Bossier.
. Indiana Hotel/Casino Resort. On September 14, 1998, the Indiana Gaming
Commission approved us to receive the final riverboat gaming license on
the Ohio River in Indiana. We own 97% of the project, which is located on
a 197-acre site only 35 miles southwest of Cincinnati, Ohio and will be
the most accessible gaming facility from Lexington and other parts of
northern Kentucky. The project is expected to cost approximately $150
million (including land and pre-opening expenses but excluding
capitalized interest) and will include a cruising riverboat with 38,000
square feet of gaming space, a land-based facility with a 309-room hotel,
restaurants, convention space, an 18-hole championship golf course and
related amenities. The Indiana Hotel/Casino Resort is currently scheduled
to open in 18 to 24 months; however, there can be no assurance that
construction, regulatory or other issues will not delay the opening.
. Excess Land. There is significant excess land surrounding the Hollywood
Park and Turf Paradise properties. The land at these sites, totaling
approximately 653 acres, has a book value of $13.1 million. Management
believes the fair market value of the land is approximately $230 million.
Of the total acreage, approximately 260 acres are available for sale or
development. We also have excess land at our Reno and Bay St. Louis
properties. While this land offers extensive expansion opportunity at
each of these properties, we will aggressively pursue realization of
value through sale and/or development (including joint venture
arrangements).
. Additional Acquisitions. We continually evaluate opportunities to expand
and diversify our operations through acquisitions of gaming entities
operating in markets outside Las Vegas and Atlantic City, including
entities that are unable to maximize their potential due to capital
constraints or operating inefficiencies. We believe that our financial
and management resources can significantly improve the operations of
acquired entities. We have applied this strategy in both our recent
acquisition of Casino Magic and our earlier acquisition of Boomtown. In
both cases, we have streamlined operations, implemented expansion
projects and refinanced expensive debt.
3
<PAGE>
Recent Developments
Acquisition of Casino Magic
On October 15, 1998, we acquired Casino Magic for approximately $80.9
million in cash. In addition, Casino Magic had approximately $268.4 million of
indebtedness. For the nine months ended September 30, 1998, on a pro forma
basis Casino Magic had EBITDA of approximately $45.1 million. In keeping with
our business strategy, following the acquisition, we (1) eliminated redundant
management positions to streamline operations; (2) accelerated completion of
the 188-room hotel under construction at Casino Magic Bossier; and (3) reduced
interest expense by redeeming $135 million aggregate principal amount of Casino
Magic's 11 1/2% First Mortgage Notes at a redemption price of 103.833% of
principal amount plus accrued interest.
Bank Credit Facility
In connection with the Casino Magic acquisition, we executed an Amended and
Restated Reducing Revolving Loan Agreement ("Bank Credit Facility") with a
group of banks led by Bank of America National Trust and Savings Association
("Bank of America NT&SA") as Administrative Agent. This facility provides for a
reducing revolving line of credit of up to $300 million, with an option to
increase the facility by an additional $75 million, and expires on December 31,
2003. The facility is secured by liens on substantially all of our assets and
those of our material subsidiaries, except for Casino Magic of Louisiana, Corp.
and our Argentina subsidiaries. At December 31, 1998, the weighted average
interest rate under the Bank Credit Facility was 7.3%.
Consent Solicitation
We solicited consents to amend the indenture governing the 9 1/2% Senior
Subordinated Notes due 2007 (which we refer to as the "9 1/2% Notes") to create
more flexibility in certain of the covenants and to conform certain of the
covenants in the 9 1/2% Notes indenture to the covenants then proposed for the
indenture governing the 9 1/4% Senior Subordinated Notes. We received such
consents from the holders of a majority of the principal amount of the 9 1/2%
Notes and on February 5, 1999, we executed a supplemental indenture which,
among other things, lowers the required minimum consolidated coverage ratio to
2.00:1.00 and increases the size of our allowed borrowings under our Bank
Credit Facility from $100 million to $350 million. We paid holders of the 9
1/2% Notes $50.00 for each $1,000 principal amount of the 9 1/2% Notes for
which consents were obtained.
----------------
Our principal executive offices are located at 1050 South Prairie Avenue,
Inglewood, California, 90301. Our telephone number is (310) 419-1500.
4
<PAGE>
Summary of the Exchange Offer
The Exchange Offer.......... We are offering to exchange up to $350,000,000
aggregate principal amount of our new 9 1/4%
Series B Senior Subordinated Notes due 2007 which
have been registered under the Securities Act
(the "Exchange Notes") for a like amount of our
outstanding 9 1/4% Series A Senior Subordinated
Notes due 2007 which were issued in February 1999
in a private offering (the "Old Notes" and
together with the Exchange Notes, the "Notes").
The Exchange Notes are substantially identical to
the Old Notes, except that the Exchange Notes are
freely transferable by their holders (other than
as provided herein), and are not subject to any
covenant regarding registration under the
Securities Act.
Interest Payments........... The Exchange Notes will bear interest from their
date of issuance. Interest will accrue on the Old
Notes that are tendered in exchange for the
Exchange Notes through the issue date of the
Exchange Notes. Holders of Old Notes that are
accepted for exchange will not receive interest
on the Old Notes that is accrued but unpaid at
the time of exchange, but such interest will be
payable, together with interest on the Exchange
Notes, on the first interest payment date after
the expiration date.
Minimum Condition........... We are not conditioning the exchange offer on any
minimum aggregate principal amount of Old Notes
being tendered for exchange.
Expiration Date............. The exchange offer will expire at 5:00 p.m., New
York City time, on , 1999, unless we
decide to extend the exchange offer, in which
case the term "expiration date" shall mean the
latest date and time to which the exchange offer
is extended.
Withdrawal Rights........... You may withdraw your tender at any time prior to
5:00 p.m., New York City time, on the expiration
date.
Exchange Date............... The date of acceptance for exchange of the Old
Notes will be as soon as practicable after the
expiration date.
Conditions to the Exchange
Offer...................... The exchange offer is subject to certain
customary conditions, which we may waive. We
currently expect that each of the conditions will
be satisfied and that no waivers will be
necessary. See "The Exchange Offer--Certain
Conditions to the Exchange Offer". We reserve the
right to terminate or amend the exchange offer at
any time before the expiration date if any such
condition occurs.
Procedures for Tendering
Old Notes.................. If you are a holder of Old Notes who wishes to
accept the exchange offer, you must complete,
sign and date the accompanying Letter of
Transmittal, or a facsimile thereof, or arrange
for The Depository Trust Company ("DTC") to
transmit certain required information to the
exchange agent in connection with a book-entry
transfer or mail or otherwise deliver such
documentation, together with your Old Notes, to
the exchange agent at the address set forth under
"The Exchange Offer--Exchange Agent".
5
<PAGE>
By tendering your Old Notes in this manner, you
will be representing among other things, that:
. the Exchange Notes you acquire pursuant to the
exchange offer are being acquired in the
ordinary course of your business;
. you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate,
in the distribution of the Exchange Notes
issued to you in the exchange offer; and
. you are not an "affiliate" of ours.
Use of Proceeds............. We will not receive any proceeds from the
issuance of Exchange Notes pursuant to the
exchange offer. We will pay all our expenses
incident to the exchange offer.
Certain United States
Federal Income Tax
Consequences............... The exchange of notes pursuant to the exchange
offer should not be a taxable event for federal
income tax purposes. See "Certain United States
Federal Income Tax Consequences".
Special Procedures for
Beneficial Owners.......... If you beneficially own Old Notes registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee and you wish to
tender your Old Notes in the exchange offer, you
should contact such registered holder promptly
and instruct it to tender on your behalf. If you
wish to tender on your own behalf, you must,
prior to completing and executing the Letter of
Transmittal and delivering your Old Notes, either
arrange to have your Notes registered in your
name or obtain a properly completed bond power
from the registered holder. The transfer of
registered ownership may take considerable time.
Guaranteed Delivery
Procedures................. If you wish to tender your Old Notes and time
will not permit your required documents to reach
the exchange agent by the expiration date, or the
procedure for book-entry transfer cannot be
completed on time, you may tender your Old Notes
according to the guaranteed delivery procedures
set forth in "The Exchange Offer--Procedures for
Tendering Old Notes".
Acceptance of Old Notes and
Delivery of Exchange
Notes...................... We will accept for exchange all Old Notes which
are properly tendered in the exchange offer prior
to 5:00 p.m., New York City time, on the
expiration date. The Exchange Notes issued
pursuant to the exchange offer will be delivered
promptly following the expiration date. See "The
Exchange Offer--Acceptance of Old Notes for
Exchange; Delivery of Exchange Notes".
Effect on Holders of Old
Notes...................... As a result of this exchange offer, we will have
fulfilled a covenant contained in the
Registration Rights Agreement (the "Registration
Rights Agreement") dated as of February 18, 1999
among
6
<PAGE>
Hollywood Park, Inc., each of the subsidiary
guarantors named therein and Lehman Brothers
Inc., CIBC Oppenheimer Corp., Morgan Stanley &
Co. Incorporated, NationsBanc Montgomery
Securities LLC, SG Cowen Securities Corporation
and Wasserstein Perella Securities, Inc. (the
"Initial Purchasers") and, accordingly, there
will be no liquidated damages paid on the Old
Notes. If you do not tender your Old Notes in the
exchange offer, you will continue to hold such
Old Notes and will be entitled to all the rights
and limitations applicable thereto under the
Indenture dated as of February 18, 1999 among
Hollywood Park, Inc., the subsidiary guarantors
named therein and The Bank of New York as trustee
(the "Trustee") relating to the Old Notes and the
Exchange Notes (the "Indenture"), except for any
rights under the Registration Rights Agreement
that terminate as a result of the acceptance for
exchange of validly tendered Old Notes pursuant
to the exchange offer. If you do not tender your
Old Notes, you will not have any further
registration or exchange rights and your Old
Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the
trading market for untendered Old Notes could be
adversely affected.
Exchange Agent.............. The Bank of New York is serving as exchange agent
in connection with the exchange offer.
7
<PAGE>
Summary of Terms of the Exchange Notes
Capitalized terms used under this heading "Summary of Terms of the Exchange
Notes" have been defined under the heading "Description of Notes--Certain
Definitions." The Exchange Notes will evidence the same debt as the Old Notes
and will be entitled to the benefits of the Indenture. The following summary of
terms applies equally to the Exchange Notes and the Old Notes.
Issuer...................... Hollywood Park, Inc.
Securities Offered.......... $350,000,000 in principal amount of 9 1/4% Senior
Subordinated Notes due 2007.
Maturity.................... February 15, 2007.
Interest.................... Annual Rate -- 9 1/4%.
Payment frequency -- every six months on February
15 and August 15.
First payment -- August 15, 1999.
Subsidiary Guarantors....... Each guarantor is our subsidiary. However, not
all of our subsidiaries are guarantors of these
Notes. In particular, the following subsidiaries
are not guarantors: Casino Magic of Louisiana,
Corp., which owns our casino in Bossier City; its
immediate parent entity, Jefferson Casino
Corporation; Casino Magic Management Services
Corp., which provides management services at
Casino Magic Bossier; and Casino Magic Neuquen,
the company that owns our casinos in Argentina,
and its subsidiary. If we cannot make payments on
the Notes when they are due, the guarantor
subsidiaries must make them instead.
Optional Redemption......... On or after February 15, 2003, we may redeem some
or all of the Notes at any time at the redemption
prices listed in the section "Description of
Notes" under the heading "Optional Redemption."
Before February 15, 2002, we may redeem up to 25%
of the Notes initially issued with the proceeds
of certain offerings of equity in our Company at
109.25% of principal amount, plus accrued and
unpaid interest. See "Optional Redemption" in
"Description of Notes."
Change of Control Offer and
Asset Sale Offer........... If we experience specific kinds of changes of
control, we must offer to repurchase the Notes at
101% of their principal amount, plus accrued and
unpaid interest through, but not including, the
date of purchase. If we sell certain assets,
under certain circumstances we must offer to
repurchase the Notes at 100% of their principal
amount, plus accrued and unpaid interest through,
but not including, the date of purchase. See
"Repurchase at the Option of Holders-- Change of
Control" and "--Asset Sales" in the section
"Description of Notes."
Ranking..................... These Notes and the subsidiary guarantees are
senior subordinated debts.
8
<PAGE>
They rank behind all of our and our guarantor
subsidiaries' current and future senior debt,
which includes all borrowings under our Bank
Credit Facility and all other indebtedness, other
than our $125 million of 9 1/2% Notes, our trade
payables and any indebtedness that expressly
provides that it is not senior to these Notes and
the subsidiary guarantees.
Assuming we had completed this offering on
September 30, 1998 and applied the proceeds as
intended, these Notes and the subsidiary
guarantees:
. would have been subordinated to approximately
$31.1 million of senior debt;
. would have been effectively junior to
approximately $140.5 million of liabilities of
our unrestricted subsidiaries; and
. would have ranked equally with the $125 million
aggregate principal amount of 9 1/2% Notes.
Basic Covenants of
Indenture................... The Indenture restricts our ability and the
ability of our restricted subsidiaries to, among
other things:
. borrow money;
. pay dividends on or purchase our stock or our
restricted subsidiaries' stock;
. make investments;
. use assets as security in other transactions;
. sell certain assets or merge with or into other
companies; and
. enter into transactions with affiliates.
Certain of our subsidiaries are not subject to
the covenants in the Indenture. For more details,
see the section "Description of Notes" under the
heading "Certain Covenants."
For a discussion of certain factors that should be considered in connection
with an investment in the Notes, see "Risk Factors."
9
<PAGE>
Unaudited Summary Pro Forma Financial Data
The following unaudited summary pro forma combined consolidated statement of
operations for the year ended December 31, 1997 was prepared by combining
Hollywood Park's results with the following and reflects: (1) Boomtown's
results prior to Hollywood Park's June 30, 1997 acquisition of Boomtown
(exclusive of approximately a $1.9 million net loss, associated with Boomtown's
Las Vegas property, which was sold on July 1, 1997), including the early
retirement of $102.2 million principal amount of the Boomtown first mortgage
notes, (2) Hollywood Park's issuance of the 9 1/2% Notes; (3) Casino Magic's
results for the full year 1997 (Casino Magic was acquired on October 15, 1998),
including the redemption of $135 million principal amount of Casino Magic's 11
1/2% First Mortgage Notes; (4) the issuance of the Notes; and (5) the consent
fee paid to holders of the 9 1/2% Notes in the consent solicitation.
The following unaudited summary pro forma combined consolidated statement of
operations for the nine months ended September 30, 1998, was prepared by
combining Hollywood Park's results of operations with those of Casino Magic and
reflects: (1) the acquisition of Casino Magic (acquired on October 15, 1998),
including the redemption of $135 million principal amount of Casino Magic's 11
1/2% First Mortgage Notes; (2) the issuance of the Notes; and (3) the consent
fee paid to holders of the 9 1/2% Notes in the consent solicitation.
The following unaudited pro forma combined consolidated balance sheet has
been prepared by combining the unaudited balance sheets of Hollywood Park and
Casino Magic, both as of September 30, 1998, and reflects: (1) acquisition of
Casino Magic (acquired on October 15, 1998), including the redemption of
$135 million principal amount of Casino Magic's 11 1/2% First Mortgage Notes;
(2) the issuance of the Notes; and (3) the consent fee paid to holders of the 9
1/2% Notes in the consent solicitation.
The following financial information is based on, and should be read in
conjunction with, the historical consolidated financial statements and related
notes of Hollywood Park and Casino Magic and the unaudited pro forma combined
consolidated financial statements included elsewhere in this prospectus. This
pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that
would have occurred if the Casino Magic acquisition and the issuance of the
Notes had occurred in an earlier period, nor is it necessarily indicative of
the future operating results or financial position.
Under the Indenture governing the Notes, the following subsidiaries have
been initially designated as "Unrestricted Subsidiaries": Casino Magic of
Louisiana, Corp., Jefferson Casino Corporation (the parent company of Casino
Magic of Louisiana, Corp.), Casino Magic Management Services Corporation, and
two Argentina subsidiaries, Casino Magic Neuquen SA and Casino Magic Support
Services SA. Pro forma information under the heading "Total Company Pro Forma"
is provided for Hollywood Park and its subsidiaries, on a consolidated basis,
including the Unrestricted Subsidiaries (and is sometimes referred to as the
"Total Company"). Pro forma information under the heading "Restricted Group Pro
Forma" excludes the Unrestricted Subsidiaries and is provided for Hollywood
Park and its "Restricted Subsidiaries" under the Indenture, on a consolidated
basis (and is sometimes referred to as the "Restricted Group"). Hollywood
Park's Restricted Subsidiaries are all of its subsidiaries except for the
Unrestricted Subsidiaries.
10
<PAGE>
Summary Unaudited Pro Forma Financial Data
<TABLE>
<CAPTION>
Total Company Pro Forma Restricted Group Pro Forma
-------------------------- --------------------------
Nine months Nine months
Year ended ended Year ended ended
December 31, September 30, December 31, September 30,
1997 1998 1997 1998
------------ ------------- ------------ -------------
(in thousands, except ratios)
<S> <C> <C> <C> <C>
Income statement data:
Revenues............... $610,831 $495,175 $499,580 $395,060
Operating expenses..... 555,262 439,200 455,197 357,349
Operating income....... 55,569 55,975 44,383 37,711
Interest expense....... 61,154 46,749 44,227 34,118
Income (loss) before
extraordinary item.... (6,582) 3,999 675 997
Dividends on
convertible preferred
stock(a).............. 1,520 0 1,520 0
Income (loss) before
extraordinary item
allocated to common
shareholders.......... (8,102) 3,999 (845) 997
Other data:
Operating income......... $ 55,569 $ 55,975 $ 44,383 $ 37,711
Depreciation and
amortization............ 49,002 37,210 41,830 31,315
-------- -------- -------- --------
EBITDA(b)................ 104,571 93,185 86,213 69,026
Non-recurring expenses:
REIT restructuring..... 2,483 0 2,483 0
Hollywood Park/Boomtown
merger costs.......... 1,487 0 1,487 0
Hollywood Park/Casino
Magic merger costs.... 0 4,838 0 3,084
-------- -------- -------- --------
Adjusted EBITDA.......... $108,541 $ 98,023 $ 90,183 $ 72,110
======== ======== ======== ========
Ratio of Adjusted
EBITDA to interest
expense............... 1.77x 2.10x 2.04x 2.11x
Ratio of earnings to
fixed charges(c)...... 0.85x 1.06x 0.91x 0.97x
Balance sheet data:
Cash and cash
equivalents........... -- $104,837 -- $ 97,356
Total assets........... -- 966,418 -- 815,662
Total debt (current and
long term)............ -- 623,228 -- 506,088
Net debt(d)............ -- 514,932 -- 406,872
Stockholders' equity... -- 225,624 -- 218,907
</TABLE>
- --------
(a) As of August 28, 1997 Hollywood Park had caused conversion of all
convertible preferred stock, into 2,291,492 shares of Hollywood Park common
stock, and eliminated the future quarterly dividends.
(b) EBITDA is not a measure of financial performance under GAAP, but is used by
some investors to determine a company's ability to service or incur
indebtedness. EBITDA and Adjusted EBITDA are not calculated in the same
manner by all entities and accordingly, may not be appropriate measures for
performance. Neither EBITDA nor Adjusted EBITDA should be considered in
isolation from, or as a substitute for, net income (loss), cash flows from
operations or cash flow data prepared in accordance with GAAP.
(c) In computing the ratio of earnings to fixed charges: (1) earnings were
calculated from income from continuing operations, before income taxes and
fixed charges, and excluding capitalized interest and; (2) fixed charges
were computed from interest expense, amortization of debt issuance costs,
capitalized interest, and the estimated interest included in rental
expense. Hollywood Park's total company pro forma earnings for the year
ended December 31, 1997, were not sufficient to cover its pro forma fixed
charge requirement by $9.9 million. Hollywood Park's restricted group pro
forma earnings for the year ended December 31, 1997, and for the nine
months ended September 30, 1998, were not sufficient to cover its pro forma
fixed charge requirements by $4.1 million and $1.1 million, respectively.
(d) Net debt is total debt (current and long term) less cash and cash
equivalents and short term investments.
11
<PAGE>
RISK FACTORS
In addition to the other matters described in this prospectus, you should
carefully consider the following factors in connection with your decision to
accept the exchange offer. Many of the risk factors set forth below are equally
applicable to the Old Notes.
Old Notes Outstanding After the Exchange Offer Will Not Have Registration
Rights and We Expect the Market for such Old Notes to be Illiquid
If you do not exchange your Old Notes for Exchange Notes pursuant to the
exchange offer, you will continue to be subject to the restrictions on transfer
of such Old Notes. In general, you may not offer or sell Old Notes unless they
are registered under the Securities Act, except pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of the
Securities Act and applicable state securities laws. We do not currently intend
to register the Old Notes under the Securities Act. Based on interpretations by
the staff of the Commission, we believe that Exchange Notes issued pursuant to
the exchange offer may be offered for resale, resold or otherwise transferred
by their holders (unless such holder is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, so long
as the Old Notes were acquired in the ordinary course of the holders' business
and such holders have no arrangement with any person to participate in the
distribution of such Exchange Notes. Each broker-dealer that receives Exchange
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of Distribution."
To the extent that Old Notes are tendered and accepted in the exchange offer,
the trading market for untendered and tendered but unacceptable Old Notes will
be adversely affected.
You Cannot Be Sure that an Active Trading Market Will Develop for the Exchange
Notes
We are offering the Exchange Notes to the holders of the Old Notes. The Old
Notes were offered and sold in February 1999 to institutional investors and are
eligible for trading in the Private Offerings, Resale and Trading through
Automatic Linkages (PORTAL) Market.
We do not intend to apply for a listing of the Exchange Notes on a
securities exchange or on any automated dealer quotation system. There is
currently no established market for the Exchange Notes and we cannot assure you
as to the liquidity of markets that may develop for the Exchange Notes, your
ability to sell the Exchange Notes or the price at which you would be able to
sell the Exchange Notes. If such markets were to exist, the Exchange Notes
could trade at prices that may be lower than their principal amount or purchase
price depending on many factors, including prevailing interest rates and the
markets for similar securities. We expect that the Exchange Notes will be
designated for trading in the PORTAL market. The Initial Purchasers have
advised us that they currently intend to make a market with respect to the
Exchange Notes. However, the Initial Purchasers are not obligated to do so, and
any market making with respect to the Exchange Notes may be discontinued at any
time without notice. In addition, such market making activity will be subject
to the limits imposed under the Exchange Act. Moreover, you cannot be sure that
the Exchange Notes will trade as one class with the Old Notes.
The liquidity of, and trading market for, the Exchange Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of our financial performance and prospects.
12
<PAGE>
We Have a Significant Amount of Debt
We have now and, after the Old Notes offering, continue to have a
significant amount of debt. The following chart shows certain important credit
statistics and is presented assuming we had completed the Old Notes offering as
of the dates or at the beginning of the periods specified below and applied the
proceeds as intended:
<TABLE>
<CAPTION>
Total Company
Pro Forma as of
September 30, 1998
-------------------------
(in thousands, unaudited)
<S> <C>
Total debt......................................... $623,228
Stockholders' equity............................... $225,624
Debt to equity ratio............................... 2.76x
</TABLE>
<TABLE>
<CAPTION>
Total Company Pro Forma
--------------------------------------------
For the Year Ended For the Nine Months Ended
December 31, 1997 September 30, 1998
------------------ -------------------------
<S> <C> <C>
Ratio of earnings to fixed
charges......................... 0.85x 1.06x
</TABLE>
Based upon our current level of operations and anticipated improvements, we
believe that our cash flow from operations, together with proceeds from this
offering and amounts we are able to borrow under our Bank Credit Facility, will
be adequate to meet our anticipated requirements for working capital, capital
expenditures, planned expansion costs and project development and acquisition
efforts, interest payments and scheduled principal payments for the foreseeable
future, and in any event for at least the next twelve months. Our ability to
make scheduled payments of principal and interest on and to refinance our debt,
including these Notes, and to fund planned expansion costs and project
development and acquisition efforts will depend on our ability to generate cash
in the future. We do not have complete control over our future performance
because it is subject to economic, financial, competitive, regulatory and other
factors affecting the gaming industry. It is possible that in the future our
business may not generate sufficient cash flow from operations to allow us to
service our debt and make necessary capital expenditures. If this situation
occurs, we may have to sell assets, restructure debt or obtain additional
equity capital. We cannot be sure that we would be able to do so or do so
without additional expense. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition."
Our level of debt may have important consequences on your investment in the
Notes. These consequences include:
. requiring a substantial portion of our cash flow from operations to be
used to pay interest and principal on our debt and therefore be
unavailable for other purposes including capital expenditures, project
expansion, development and acquisition efforts;
. limiting our ability to obtain additional financing;
. incurring higher interest expense in the event of increases in interest
rates on our borrowings which have variable interest rates;
. heightening our vulnerability to downturns in our business or in the
general economy and restricting us from making improvements or
acquisitions, or exploiting business opportunities; and
. limiting our ability to dispose of assets or pay cash dividends.
Failure to comply with these limitations could result in an event of default
under our debt agreements which, if not cured or waived, could result in a
significant portion of our debt becoming due and payable. We are not certain
that in such event we would have, or be able to obtain, sufficient funds to
make such accelerated payments, including payments on the Notes.
13
<PAGE>
We May Still Be Able to Incur Substantially More Debt
We and our subsidiaries may be able to incur substantial additional debt in
the future. The terms of the Indenture do not fully prohibit us or our
subsidiaries from doing so. Subject to satisfying the conditions for borrowing
under our Bank Credit Facility, the full amount remains fully available to us
even after completion of the Old Notes offering and all borrowings under our
Bank Credit Facility would be senior to the Notes and the subsidiary
guarantees. If new debt is added to our and our subsidiaries' current debt
levels, the related risks that we and they now face could intensify.
See "Capitalization," "Selected Financial Data," "Description of Notes--
Repurchase at Option of Holder--Change of Control" and "Description of Certain
Indebtedness--The Bank Credit Facility."
These Notes are Subordinated to Senior Debt and Effectively Subordinated to
Debt of Our Non-Guarantor Subsidiaries
These Notes and the subsidiary guarantees rank behind all of our and the
subsidiary guarantors' existing debt (other than our 9 1/2% Notes and trade
payables) and all of our and their future borrowings (other than trade
payables), except any future debt that expressly provides that it ranks equal
with, or subordinated in right of payment to, the Notes and the guarantees. As
a result, upon any distribution to our creditors or the creditors of the
guarantors in a bankruptcy, liquidation or reorganization or similar proceeding
relating to us or the guarantors or our or their property, the holders of
senior debt of Hollywood Park and the guarantors will be entitled to be paid in
full before any payment may be made with respect to these Notes or the
subsidiary guarantees. Further, our Bank Credit Facility is secured by
substantially all of our assets and those of our material subsidiaries, except
for Jefferson Casino Corporation, Casino Magic of Louisiana, Corp. and our
Argentina subsidiaries, Casino Magic Neuquen SA and Casino Magic Support
Services SA.
In addition, all payments on the Notes and the guarantees will be blocked in
the event of a payment default on senior debt and may be blocked for up to 179
of 360 consecutive days in the event of certain non-payment defaults on senior
debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to us or the guarantors, holders of the Notes will
participate with the holders of the 9 1/2% Notes, trade creditors and all other
holders of our subordinated debt and that of the guarantors in the assets
remaining after we and the subsidiary guarantors have paid all of the senior
debt. However, because the Indenture requires that amounts otherwise payable to
holders of the Notes in a bankruptcy or similar proceeding be paid to holders
of senior debt instead, holders of the Notes may receive less, ratably, than
holders of trade payables in any such proceeding. In any of these cases, we and
the subsidiary guarantors may not have sufficient funds to pay all of our
creditors. In addition, any amounts that holders of the Notes would become
entitled to in a bankruptcy or a similar proceeding would have to be shared
with the holders of the 9 1/2% Notes.
Assuming we had completed the Old Notes offering on September 30, 1998,
these Notes and the subsidiary guarantees would have been subordinated to $31.1
million of senior debt. We are permitted to borrow substantial additional debt,
including senior debt, in the future under the terms of the Indenture.
Moreover, some but not all of our subsidiaries guarantee the Notes. For
example, Casino Magic of Louisiana, Corp., which owns Casino Magic Bossier, and
Casino Magic Neuquen, the entity that operates the casinos in Argentina, are
not guarantors. In the event of a bankruptcy, liquidation or reorganization of
any of the non-guarantor subsidiaries, holders of their debt and their trade
creditors will generally be entitled to payment of their claims from the assets
of those subsidiaries before any assets are made available for distribution to
us. Assuming we had completed the Old Notes offering on September 30, 1998,
these Notes would have been effectively junior to approximately $140.5 million
of debt and other liabilities (including trade payables) of these non-guarantor
subsidiaries. On a pro forma basis, the non-guarantor subsidiaries generated
20.2% of our consolidated revenues in the nine-month period ended September 30,
1998 and held 15.6% of our consolidated assets as of September 30, 1998.
14
<PAGE>
We Face Significant Competition From Other Gaming Operations
We face significant competition in each of the jurisdictions in which we
have gaming operations. We expect this competition to intensify as new gaming
operators enter our markets and existing competitors expand their operations.
Our properties compete directly with other gaming properties in Louisiana,
Mississippi, Nevada, California and Arizona. To a lesser extent, we also
compete for customers with other casino operators in North American markets,
including casinos located on Indian reservations, and other forms of gaming
such as lotteries. Several of our competitors have substantially greater name
recognition and marketing resources as well as access to lower-cost sources of
financing.
Competition in the Gulf Coast Markets. Our casinos in the Gulf Coast area
have experienced intense competition. In Mississippi, competing casino
operations have expanded and, as a result, a number of casinos in the Gulf
Coast market have failed. Further, Mississippi law does not limit the number of
gaming licenses that may be granted. Mirage Resorts is constructing a $650
million, 1,800-room hotel and casino in Biloxi and, in Bay St. Louis, Circus
Circus has announced plans to construct a $225 million, 1,500-room hotel and
casino at a location on Interstate 10 that would compete with our Bay St. Louis
property. Additionally, Park Place Entertainment has acquired and expects to
further develop Grand Casino's Biloxi property, and expects to complete Grand
Casino's construction of a 600-room expansion to its Gulfport facility, located
near Bay St. Louis, in June 1999.
In the Bossier City/Shreveport market, our 188-room, 30,000 gaming square
foot Casino Magic hotel/casino competes with three other properties. Two of
these properties are substantially similar to ours in size. The third,
Horseshoe Casino, recently completed construction of a 606-room luxury hotel
and 62,400 square foot, four-deck riverboat with approximately 30,000 square
feet of gaming space, making it the largest in the Bossier City/Shreveport
market. Additionally, Isle of Capri Casinos is currently constructing a 305-
room suite hotel, which is expected to open in the second quarter of 1999. A
consortium led by Hollywood Casino (which is not affiliated with Hollywood
Park, Inc.) recently received approval for a $185 million riverboat casino and
hotel in Shreveport. Finally, Harrah's announced a 500-room hotel at its
existing property in Shreveport.
In the New Orleans market, Harrah's is currently constructing a land-based
casino entertainment facility. The casino, which is scheduled to open in the
third quarter of 1999, will be the only land-based casino entertainment
facility in New Orleans.
While we believe we have been able to effectively compete in these markets
to date, increasing competition may adversely affect our gaming operations in
the future. We believe that increased legalized gaming in other states,
particularly in areas close to some of our existing gaming properties, such as
in Texas and Alabama, could adversely affect our operations.
Proposition 5; Competition in our California and Reno Markets. Indian tribes
have operated casinos in California for approximately ten years. There are
about 40 gambling halls currently operated by Indian tribes in California, but
most are significantly smaller than typical casinos in Las Vegas. In November
1998, California voters passed Proposition 5, a ballot initiative that, upon
becoming effective, would allow Indian tribes to conduct various gaming
activities including horse race wagering, gaming devices (including slot
machines), banked card games (i.e., where the casino has a stake in the amount
wagered or the outcome of the game), and lotteries. On December 2, 1998, the
California Supreme Court issued a stay on Proposition 5 based on the State of
California's position that the initiative violates the state constitution. We
are not certain if or when Proposition 5 will become effective or how it will
affect us; however, if Proposition 5 is implemented, increased competition from
Indian gaming could adversely affect our gaming operations in California and
Reno.
The Hollywood Park-Casino and Crystal Park also face competition from other
card club casinos in neighboring cities.
15
<PAGE>
We May Experience Difficulty Integrating Operations of Our Acquired Companies
and Managing Our Overall Growth
We may not be able to manage the combined operations of Hollywood Park and
Casino Magic effectively or realize any of the anticipated benefits of the
acquisition of this company, including streamlining operations or gaining
efficiencies from the elimination of duplicative functions. We acquired Casino
Magic in October 1998 and are continuing to integrate its operations with ours.
This integration will require continued dedication of management resources and
may temporarily detract from attention to our day-to-day business.
In addition, because we plan to continue pursuing expansion opportunities
aggressively, we face significant challenges not only in managing and
integrating Casino Magic's operations, but also in managing our expansion
projects and any other gaming operations we may acquire in the future.
Management of these new projects will require increased managerial resources,
and we intend to continue our efforts to enhance our gaming management team.
However, there can be no assurance that we will succeed in doing so. Failure to
manage our growth effectively could materially adversely affect our operating
results.
We Depend on the Mississippi and Louisiana Markets
Our operating strategy emphasizes attracting and retaining customers from
the local and repeat visitor market. All of our casinos in Mississippi and
Louisiana are dependent upon attracting customers within their respective
geographic markets. Moreover, with our acquisitions of Boomtown and Casino
Magic, we have three casinos in Mississippi, two in Biloxi and one in nearby
Bay St. Louis. We also have two casinos in Louisiana, one in Bossier City and
one in Harvey near New Orleans (though our Louisiana properties are located 320
miles apart). We cannot be sure that we will be able to continue to attract a
sufficient number of guests, gaming customers and other visitors in Mississippi
and Louisiana to make our operations profitable. In addition, adverse
regulatory changes or changes in the gaming environment in the Gulf Coast
states could have a material adverse effect on our operations.
We May Not be Able to Complete Expansion Projects on Time, on Budget or as
Planned
Our strategic plan involves significant future expansion, including the
development of the Indiana Hotel/Casino Resort in Switzerland County and
possible expansion of our other gaming properties. We also plan to sell or
develop certain unimproved acreage, principally at our racing facilities in
California and Arizona. We may not be successful in completing any currently
contemplated or future expansion projects and, even if they are completed, the
projects may not be successful. Numerous factors, including regulatory or
financial constraints, could intervene and cause us to alter, delay or abandon
our expansion plans.
Construction and Land Use Risks. If we proceed with a proposed expansion
project, we will face numerous risks which could require substantial changes to
proposed plans or otherwise alter the time frames or budgets initially
contemplated. Such risks include the ability to secure all required permits and
resolution of potential land use issues, as well as risks typically associated
with any construction project, including possible shortages of materials or
skilled labor, unforeseen engineering or environmental or geological problems,
work stoppages, weather interference and unanticipated cost overruns.
Risks in Expanding Operations to Additional Sites. Our ability to expand our
operations to additional gaming jurisdictions will depend upon a number of
factors, including our success in (1) identifying available suitable locations
and negotiating acceptable purchase or lease terms; (2) securing required state
and local licenses, permits and approvals, which in some jurisdictions may be
limited in number, and in certain cases may require legislative relief from
existing laws; and (3) obtaining necessary financing for the projects.
Political factors, such as the proposed referenda in Mississippi that were
declared invalid by a lower court which would have banned gaming in the state,
or other referenda or proposed legislation seeking to restrict or prohibit
gaming, may also inhibit our expansion. In addition, there can be no assurance
that gaming will remain a growth industry with opportunities for expansion. We
may incur significant costs, which it is our policy to expense as incurred,
with respect to proposed ventures that do not materialize.
16
<PAGE>
Weather and Other Conditions Could Seriously Disrupt Our Operations
Riverboat and Dockside Gaming Operations. Our riverboat and dockside
facilities in Mississippi and Louisiana, as well as any additional riverboats
that might be developed or acquired in the future such as the riverboat for the
Indiana Hotel/Casino Resort, are subject to risks in addition to those
associated with land-based casinos, including loss of service due to casualty,
mechanical failure, extended or extraordinary maintenance, flood, hurricane or
other severe weather conditions. For riverboats that cruise there are
additional risks associated with the movement of vessels on inland waterways,
including risks of casualty due to river turbulence and severe weather
conditions.
For example, in September 1998, Hurricane Georges struck the Gulf Coast
region and caused Boomtown Biloxi, Casino Magic Biloxi, Casino Magic Bay St.
Louis and Boomtown New Orleans to shut down for approximately one week, though
none of our properties sustained significant damage. The loss of a riverboat
casino or a dockside casino from service for any period of time could adversely
affect our results of operations.
Boomtown Reno. Boomtown Reno's primary customer base is drawn from the
traffic flow on Interstate 80. If traffic on Interstate 80 is significantly
reduced for an extended period, as a result of inclement weather or otherwise,
or the off-ramps providing access to Boomtown Reno are impaired for an extended
period due to poor weather conditions, road modifications and repairs or other
factors, Boomtown Reno's results of operations will be adversely affected. In
the Winters of 1994/1995 and 1996/1997, severe storms, together with road
repairs to Interstate 80 on the corridor between California and Reno, resulted
in road closures or substantially reduced traffic flow on Interstate 80 for
extended periods. Such road closures and repairs had an adverse effect on the
related quarters' and years' results of operations for Boomtown Reno.
We Experience Significant Quarterly and Annual Fluctuations in Operating
Results
We experience significant fluctuations in our quarterly and annual operating
results, due to seasonality and other factors. Historically, our subsidiaries
have generated a substantial majority of the income from operations before non-
recurring items in the quarters ending June 30 and September 30, with the
summer months being the strongest period. Conversely, the winter months, which
primarily cover the quarter ending March 31, are our slowest periods and have
historically resulted, and may in the future result, in losses in this quarter.
The gaming industry historically has experienced a general slowdown in the
fourth quarter of the calendar year with revenues typically declining during
this period. In addition, our Argentina operations experience seasonal
variation due to reliance on tourism.
We Face Extensive Regulation from Gaming Authorities
Licensing Requirements. The ownership and operation of gaming facilities are
subject to extensive state and local regulation. The states and localities in
which we and our subsidiaries conduct gaming operations require us to hold
various licenses, findings of suitability, registrations, permits and
approvals. The various regulatory authorities, including the Nevada State
Gaming Control Board, the Nevada Gaming Commission, the Mississippi Gaming
Commission, the Louisiana Gaming Control Board and the Indiana Gaming
Commission may, among other things, limit, condition, suspend or revoke a
license or approval to own the securities of any of our gaming subsidiaries for
any cause deemed reasonable by such licensing authorities. Substantial fines or
forfeiture of assets for violations of gaming laws or regulations may be levied
against us, our subsidiaries and the persons involved. The suspension or
revocation of any of our licenses or the levy on us of substantial fines or
forfeiture of assets would have a material adverse effect on our business.
To date, we have obtained all governmental licenses, findings of
suitability, registrations, permits and approvals necessary for the operation
of our gaming facilities. However, there can be no assurance that we can obtain
any new licenses, findings of suitability, registrations, permits and approvals
that may be required in the future or that existing ones will not be suspended
or revoked. Any expansion of our gaming operations in Nevada, Mississippi,
Louisiana, California or Arizona or into new jurisdictions will require various
additional
17
<PAGE>
licenses, findings of suitability, registrations, permits and approvals of the
gaming authorities. The approval process can be time consuming and costly and
has no assurance of success.
The Hollywood Park-Casino and Crystal Park have been and are currently
operating under provisional licenses in accordance with California law. In each
case, permanent licenses will not be granted until the newly formed California
Gambling Control Commission is fully constituted and commences operations. No
assurance can be given that permanent licenses will be obtained.
Gaming authorities have the authority generally to require that any
beneficial owner of our securities, including the Old Notes, the Exchange Notes
and the 9 1/2% Notes, file an application and be investigated for a finding of
suitability. If a record or beneficial owner of an Old Note, an Exchange Note
or a 9 1/2% Note is required by any gaming authority to be found suitable, such
owner will be required to apply for a finding of suitability within 30 days
after request of such gaming authority or within such earlier time prescribed
by such gaming authority. The applicant for a finding of suitability must pay
all costs of the investigation for such finding of suitability. If a record or
beneficial owner is required to be found suitable and is not found suitable, it
may be required pursuant to the terms of the Notes or law to dispose of the
Notes. See "Regulation and Licensing" and "Description of Notes--Optional
Redemption."
Other Regulatory Restrictions. Restrictions on transfers of, agreements not
to encumber or pledges of equity securities issued by a corporation which is
registered as an intermediary company by, or holds a gaming license issued by
the Nevada Gaming Commission, the Mississippi Gaming Commission, or the Indiana
Gaming Commission, or which is registered by the Nevada Gaming Commission or
the Mississippi Gaming Commission as an intermediary company, are ineffective
unless approved in advance by the Nevada Gaming Commission, the Mississippi
Gaming Commission or the Indiana Gaming Commission, as applicable.
Potential Changes in Regulatory Requirements. The regulatory environment in
any particular jurisdiction may change in the future and any such change may
have a material adverse effect on the combined company's results of operations.
For example, in 1996, the State of Louisiana adopted a statute pursuant to
which voter referenda on the continuation of gaming were held locally where
gaming operations are conducted and which, had the continuation of gaming been
rejected by the voters, might have resulted in the termination of Boomtown New
Orleans' and Casino Magic Bossier's operations at the end of their current
license terms. The parishes in which Boomtown New Orleans and Casino Magic
Bossier operate voted to continue gaming, but there can be no assurance that
similar referenda might not produce unfavorable results in the future.
Moreover, in Mississippi, two recent referenda were proposed that would have,
if passed, banned gaming in Mississippi and required all currently legal gaming
entities to cease operations within two years of the ban. The referenda were
challenged in court and declared improper on constitutional and procedural
grounds. These referenda are discussed in more detail below. In addition,
unless and until California enacts legislation permitting the operation
generally of card club casinos by public companies, our involvement in other
card club casino projects (such as Crystal Park) will be similarly limited to
leasing the facility to an unaffiliated operator. The returns from such
arrangements could be substantially less than if we operated such facilities
directly.
National Gambling Impact Study Commission. The United States Congress has
established a National Gambling Impact Study Commission to conduct a
comprehensive study of the social and economic impact of gaming in the United
States. The National Commission is required to issue a report containing its
findings and conclusions, together with recommendations for legislation and
administrative actions, within two years after its first meeting, which
occurred on June 20, 1997. Any recommendations which may be made by the
National Commission could result in the enactment of new laws and/or the
adoption of new regulations which could adversely impact the gaming industry in
general. We are unable at this time to determine what recommendations, if any,
the National Commission will make, or the ultimate disposition of any such
recommendations.
From time to time, certain legislators have proposed the imposition of a
federal tax on gross gaming revenues. Any such tax could have a material
adverse effect on our business, financial condition or results of operations.
18
<PAGE>
Uncertain Status of Mississippi Anti-Gaming Initiative
In Mississippi, where we have three casinos, Boomtown Biloxi, Casino Magic
Biloxi, and Casino Magic Bay St. Louis, two referenda were proposed which, if
approved, would have amended the Mississippi Constitution to ban gaming in
Mississippi and would have required all currently legal gaming entities to
cease operations within two years of the ban. A Mississippi State Circuit Court
judge ruled that the first of the proposed referenda was illegal because, among
other reasons, it failed to include required information regarding its
anticipated effect on government revenues. The Mississippi Supreme Court
affirmed the Circuit Court ruling, but only on procedural grounds. The second
referendum proposal included the same language on government revenues as the
first referendum and was struck down by another Mississippi State Circuit Court
judge on the same grounds as the first. Any such referendum must be approved by
the Mississippi Secretary of State and signatures of approximately 98,000
registered voters must be gathered and certified in order for such a proposal
to be included on a statewide ballot for consideration by the voters. The next
election, for which the proponents could attempt to place such a proposal on
the ballot, would be in November 2000. It is likely at some point that a
revised initiative will be filed which will adequately address the issues
regarding the effect on government revenues of a prohibition of gaming in
Mississippi. However, while it is too early in the process for us to make any
predictions with respect to whether such a referendum will appear on a ballot
or the likelihood of such a referendum being approved by the voters, if such a
referendum were passed and gaming were prohibited in Mississippi, it would have
a material adverse effect on us.
The Indenture Permits Substantial Disposition of Undeveloped Real Estate
We have significant excess developable land at four of our properties. The
terms of the Indenture permit us to sell or dispose of this land under certain
exceptions from the general Indenture restrictions on the disposition of assets
and restricted payments. In general, proceeds from the sale of undeveloped land
will not require us to make an offer to repurchase Notes no matter how the
proceeds are used as long as 60% of the consideration received for the sale is
in cash. In addition, the covenant entitled "Restricted Payments" permits
substantial conveyances of undeveloped real estate to unrestricted subsidiaries
and joint ventures. See "Description of Notes" under the heading "Repurchase at
the Option of Holders--Asset Sales" and related definitions, and "Certain
Covenants--Restricted Payments."
This Prospectus Contains Forward Looking Statements
Certain of the matters discussed concerning our operations, economic
performance and financial condition, including in particular the likelihood of
our success in developing and expanding our business, include forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Statements that are
predictive in nature, that depend upon or refer to future events or conditions
or that include words such as "expects", "anticipates", "intends", "plans",
"believes", "estimates" and similar expressions are forward-looking statements.
Although we believe that these statements are based upon reasonable
assumptions, we can give no assurance that their goals will be achieved.
Guaranties Could be Voided and Payments from Guarantors Could be Returned Under
Fraudulent Conveyance Laws
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, an obligation such as a guarantee could be voided, or
claims in respect of an obligation such as a guarantee could be subordinated to
all other debts of that guarantor if, among other things, the guarantor, at the
time it incurred the debt evidenced by its guarantee:
. received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee; or
. was insolvent or rendered insolvent by reason of such incurrence; or
19
<PAGE>
. was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could
be required to be returned to the guarantor, or to a fund for the benefit of
the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
. the sum of its debts, including contingent liabilities, were greater than
the fair saleable value of all of its assets; or
. if the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become absolute
and mature; or
. it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history,
estimated values of assets and liabilities of each guarantor and other factors,
we believe that each guarantor, after giving effect to its guarantee of these
Notes, will not be insolvent, will not have unreasonably small capital for the
business in which it is engaged and will not have incurred debts beyond its
ability to pay such debts as they mature. There can be no assurance, however,
as to what standard a court would apply in making such determinations or that a
court would agree with our conclusions in this regard.
Our Year 2000 Compliance Efforts May Require Substantial Resources and Failure
by Us or Certain Third Parties to Be Year 2000 Compliant Poses Certain Risks
The inability of business processes to continue to function correctly after
the beginning of the Year 2000 could have serious adverse effects on companies
and entities throughout the world. Our business operations are also dependent
on the Year 2000 readiness of our customers and infrastructure suppliers in
areas such as utilities, communications, transportation and other services.
We have assembled a committee composed of individuals from each business
unit and each corporate function to identify and mitigate Year 2000 issues in
our information systems, products, facilities, suppliers and customers. We
believe we have identified all of the internal hardware and software
applications that will need to be upgraded or replaced. We are currently in the
process of procuring and installing hardware and software to make the necessary
repairs to all affected internal systems. As to external systems, we have been
assured by the lessors of our pari-mutuel racing services that those systems
will be Year 2000 compatible by March 1999.
We estimate that the total cost of addressing our Year 2000 issues will be
approximately $2 million. This cost estimate is based on numerous assumptions,
including the assumptions that we have already identified our most significant
Year 2000 issues and that our third party suppliers will timely complete their
Year 2000 programs without cost to us. However, there can be no guarantee that
these assumptions are accurate, and actual results could differ materially from
those anticipated.
We cannot assure you that our Year 2000 program will be effective, that our
estimates about the timing and cost of completing our program will be accurate,
or that our third party suppliers will timely resolve any or all Year 2000
problems with their systems. We have no alternative software system to handle
pari-mutuel wagering if the third party provided services fail. Any failure of
the third party suppliers to timely resolve their Year 2000 issues could result
in material disruption to our business. Such disruption could have a material
adverse effect on our business, financial condition and results of operations.
20
<PAGE>
Inability to Repurchase Notes Upon Change of Control Offer
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding Notes. However, it
is possible that we will not have sufficient funds at the time of the change of
control to make the required repurchase of Notes or that restrictions in our
Bank Credit Facility will not allow such repurchases or that the change of
control may result in a default under our Bank Credit Facility, which in turn
could delay or prevent repurchase of the Notes. In addition, certain important
corporate events, such as leveraged recapitalizations that would increase the
level of our indebtedness, would not constitute a "Change of Control" under the
Indenture. See "Description of Notes--Repurchase at the Option of Holders."
We Face Environmental Regulation of Our Real Estate
Our business is subject to a variety of federal, state and local
governmental regulations relating to the use, storage, discharge, emission and
disposal of hazardous materials. We believe that we are presently in material
compliance with applicable environmental laws. However, failure to comply with
such laws could result in the imposition of severe penalties or restrictions on
our operations by government agencies or courts of law. We currently do not
have environmental impairment liability insurance, and a material fine or
penalty or a severe restriction would adversely affect our business.
21
<PAGE>
USE OF PROCEEDS
We will receive no proceeds from the exchange of Notes pursuant to the
exchange offer.
The net proceeds to us from the Old Notes offering, approximately $339.9
million after deducting the Initial Purchasers' discounts and commissions and
other estimated offering expenses which aggregated $10.1 million, were used to
repay outstanding borrowings under the Bank Credit Facility of approximately
$287 million. Remaining proceeds have been, and will continue to be, used for
general corporate purposes, primarily for 1999 capital expenditures.
The maturity date of borrowings under the Bank Credit Facility repaid with
the proceeds of the Old Notes offering was December 31, 2003 and, at December
31, 1998, the weighted average interest rate under the Bank Credit Facility was
7.3%. Of the $287 million of outstanding borrowings under the Bank Credit
Facility repaid with the proceeds of the Old Notes offering, we had borrowed
$222.6 million on October 15, 1998 to fund the purchase price of the
acquisition of Casino Magic and to redeem Casino Magic's 11 1/2% First Mortgage
Notes. The repayment of amounts outstanding under our Bank Credit Facility with
proceeds from the Old Notes offering did not reduce the size of the banks'
commitment to lend and, if we meet the relevant conditions for borrowing, we
could borrow the full amount available under the facility in the future,
including the amounts we repaid with the proceeds of the Old Notes offering.
CAPITALIZATION
The following table sets forth our unaudited actual and pro forma cash and
cash equivalents, debt and capitalization as of September 30, 1998, for the
Total Company on an actual and pro forma basis, and for the Restricted Group on
a pro forma basis, and includes the effect of the sale of the Old Notes and the
application of the associated proceeds. This table should be read in
conjunction with the Unaudited Pro Forma Combined Consolidated Financial
Statements, Management's Discussion and Analysis of Financial Condition and
Results of Operations, and Hollywood Park's and Casino Magic's historical
financial statements and associated notes.
<TABLE>
<CAPTION>
As of September 30, 1998
-----------------------------
Total Company Restricted
------------------ Group
Actual Pro Forma Pro Forma
-------- --------- ----------
(in thousands, unaudited)
<S> <C> <C> <C>
Cash and cash equivalents.................... $ 20,126 $104,837 $ 97,356
======== ======== ========
Current maturities of long term debt......... $ 2,058 $ 10,079 $ 6,472
Long term debt:
Secured notes payable, Bank Credit
Facility.................................. 40,000 0 0
9 1/4% Senior Subordinated Notes due 2007.. 0 350,000 350,000
9 1/2% Senior Subordinated Notes due 2007.. 125,000 125,000 125,000
Casino Magic of Louisiana, Corp. 13% First
Mortgage Notes due 2003................... 0 112,875 0
Other...................................... 3,574 25,274 24,616
-------- -------- --------
Total long term debt, including current
maturities.............................. 170,632 623,228 506,088
Total stockholders' equity............... 225,624 225,624 218,907
-------- -------- --------
Total capitalization..................... $396,256 $848,852 $724,995
======== ======== ========
- --------
Senior debt calculated:
Current maturities of long-term debt....... $ 2,058 $ 10,079 $ 6,472
Secured notes payable, Bank Credit
facility.................................. 40,000 0 0
Other long-term debt....................... 3,574 25,274 24,616
-------- -------- --------
$ 45,632 $ 35,353 $ 31,088
======== ======== ========
</TABLE>
22
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma combined consolidated statement of
operations for the year ended December 31, 1997 was prepared by combining
Hollywood Park's results with the following and reflects: (1) Boomtown's
results prior to Hollywood Park's June 30, 1997 acquisition (exclusive of an
approximately $1.9 million net loss, associated with Boomtown's Las Vegas
property, which was sold on July 1, 1997) including the early retirement of
$102.2 million principal amount of the Boomtown first mortgage notes, and the
issuance of the 9 1/2% Notes; (2) Casino Magic's results for the full year 1997
(Casino Magic was acquired on October 15, 1998), including the redemption of
$135 million principal amount of Casino Magic's 11 1/2% First Mortgage Notes;
(3) the issuance of the Notes; and (4) the consent fee paid to holders of the 9
1/2% Notes in the consent solicitation.
The following unaudited pro forma combined consolidated statement of
operations for the nine months ended September 30, 1998 was prepared by
combining Hollywood Park's results of operations with those of Casino Magic and
reflects: (1) the acquisition of Casino Magic (acquired on October 15, 1998),
including the redemption of $135 million principal amount of Casino Magic's 11
1/2% First Mortgage Notes; (2) the issuance of the Notes; and (3) the consent
fee paid to holders of the 9 1/2% Notes in the consent solicitation.
The following unaudited pro forma combined consolidated balance sheet has
been prepared by combining the unaudited balance sheets of Hollywood Park and
Casino Magic, both as of September 30, 1998, and reflects: (1) the acquisition
of Casino Magic (acquired on October 15, 1998), including the redemption of
$135 million principal amount of Casino Magic's 11 1/2% First Mortgage Notes;
(2) the issuance of the Notes; and (3) the consent fee paid to holders of the 9
1/2% Notes in the consent solicitation.
Under the Indenture, the following subsidiaries have been initially
designated as "Unrestricted Subsidiaries": Casino Magic of Louisiana, Corp.,
Jefferson Casino Corporation (the parent company of Casino Magic of Louisiana,
Corp.), Casino Magic Management Services Corp., and two Argentina subsidiaries,
Casino Magic Neuquen SA and Casino Magic Support Services SA. Pro forma
information under the heading "Pro Forma Combined Consolidated" is provided for
Hollywood Park and its subsidiaries, on a consolidated basis, including the
Unrestricted Subsidiaries. Pro forma information under the heading "Pro Forma
Combined Consolidated Restricted Group" excludes the Unrestricted Subsidiaries
and is provided for Hollywood Park and its "Restricted Subsidiaries" under the
Indenture, on a consolidated basis. Hollywood Park's Restricted Subsidiaries
are all of its subsidiaries except for the Unrestricted Subsidiaries.
Both the acquisitions of Boomtown and Casino Magic were accounted for under
the purchase method of accounting for a business combination. The following
unaudited pro forma combined consolidated financial statements should be read
in conjunction with the accompanying notes.
This pro forma financial information is presented for illustrative purposes
only and is not necessarily indicative of the operating results or financial
position that would have occurred if Boomtown and Casino Magic had been
acquired as of January 1, 1997, or if the issuance of the Notes or the 9 1/2%
Notes had been completed in an earlier period, nor is it necessarily indicative
of future operating results or financial position.
The pro forma financial statements are based on, and should be read in
conjunction with, Hollywood Park's and Casino Magic's historical consolidated
financial statements and the related notes.
23
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following is the calculation of the pro forma purchase price and pro
forma preliminary purchase price allocation for the Casino Magic acquisition.
The preliminary purchase price allocation is based on currently available
information as of September 30, 1998 and is subject to change.
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Pro forma purchase price:
Cost to purchase Casino
Magic common stock at
$2.27 per share........ $ 80,904
Transaction costs....... 2,810
Assumption of Casino
Magic debt............. 260,907
--------
$344,621
========
Pro forma preliminary
purchase price
allocation:
Property, plant and
equipment.............. $282,939
Other, net.............. 9,351
Goodwill................ 52,331
--------
$344,621
========
</TABLE>
24
<PAGE>
HOLLYWOOD PARK, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Boomtown, Hollywood Adjustments
Pro Forma Inc. Park, ---------------------- Elimination
Hollywood Adjusted Acquisition Inc. and Casino Casino Issuance Pro Forma of
Park, Boomtown, Pro Forma Boomtown, Magic Magic Corp. of the Combined Unrestricted
Inc. Inc. Adjustments Inc. Corp. Acquisition Notes Consolidated Group
--------- --------- ----------- --------- -------- ----------- -------- ------------ ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming.......... $137,659 $83,349 $ 0 $221,008 $246,320 $ 0 $ 0 $467,328 $105,781
Racing.......... 68,844 0 0 68,844 0 0 0 68,844 0
Food and
beverage........ 19,894 4,921 0 24,815 9,414 0 0 34,229 4,064
Hotel and
recreational
vehicle park.... 937 795 0 1,732 1,724 0 0 3,456 0
Truck stop and
service
station......... 8,633 6,570 0 15,203 0 0 0 15,203 0
Other income.... 12,161 5,321 0 17,482 4,289 0 0 21,771 1,406
-------- ------- ------- -------- -------- ------- -------- -------- --------
248,128 100,956 0 349,084 261,747 0 0 610,831 111,251
-------- ------- ------- -------- -------- ------- -------- -------- --------
Expenses:
Gaming.......... 74,733 42,886 0 117,619 155,885 0 0 273,504 66,630
Racing.......... 30,304 0 0 30,304 0 0 0 30,304 0
Food and
beverage........ 25,745 6,583 0 32,328 10,757 0 0 43,085 4,633
Hotel and
recreational
vehicle park.... 356 334 0 690 834 0 0 1,524 0
Truck stop and
service
station......... 7,969 6,046 0 14,015 0 0 0 14,015 0
Administration.. 61,514 23,596 0 85,110 45,099 (1,183)(g) 0 128,896 21,630
-- -- 0 -- -- (130)(h) -- -- --
Other........... 5,048 1,816 0 6,864 4,098 0 0 10,962 0
REIT
restructuring... 2,483 0 0 2,483 0 0 0 2,483 0
Hollywood
Park/Boomtown
merger costs.... 0 1,487 0 1,487 0 0 0 1,487 0
Depreciation and
amortization.... 18,157 8,522 264 (a) 26,943 20,751 1,308 (i) 0 49,002 7,172
-------- ------- ------- -------- -------- ------- -------- -------- --------
226,309 91,270 264 317,843 237,424 (5) 0 555,262 100,065
-------- ------- ------- -------- -------- ------- -------- -------- --------
Operating income
(loss)........... 21,819 9,686 (264) 31,241 24,323 5 0 55,569 11,186
Loss (gain) on
sale of assets.. 0 357 0 357 (2,632) 1,440 (j) 0 (835) (1,440)
Write off of
available for
sale
securities...... 0 0 0 0 1,350 0 0 1,350 0
Interest
expense......... 7,302 6,850 (108)(b) 14,406 31,385 (1,871)(k) (16,764)(m) 61,154 16,927
-- -- (5,922)(c) -- -- (319)(l) 32,375 (n) -- --
-- -- 5,938 (d) -- -- -- 1,264 (o) -- --
-- -- 346 (e) -- -- -- 678 (p) -- --
-------- ------- ------- -------- -------- ------- -------- -------- --------
Income (loss)
before minority
interests and
taxes............ 14,517 2,479 (518) 16,478 (5,780) 755 (17,533) (6,100) (4,301)
Minority
interests....... (3) 0 0 (3) 1,404 0 0 1,401 1,404
Income tax
expense
(benefit)....... 5,850 1,464 (102)(f) 7,212 (1,935) 825 (f) (7,021) (919) 1,552
-------- ------- ------- -------- -------- ------- -------- -------- --------
Income (loss)
before
extraordinary
item............. $ 8,670 $ 1,015 $ (416) $ 9,269 $ (5,249) $ (70) $(10,532) $ (6,582) $ (7,257)
======== ======= ======= ======== ======== ======= ======== ======== ========
Dividend
requirements on
convertible
preferred stock.. $ 1,520
Loss before
extraordinary
item allocated to
common
shareholders..... $ (8,102)
Per common share:
Loss before
extraordinary
item--basic..... $ (0.37)
Loss before
extraordinary
item--diluted... $ (0.37)
Number of
shares--basic... 22,010
Number of
shares--
diluted......... 22,340
<CAPTION>
Pro Forma
Combined
Consolidated
Restricted
Group
------------
<S> <C>
Revenues:
Gaming.......... $361,547
Racing.......... 68,844
Food and
beverage........ 30,165
Hotel and
recreational
vehicle park.... 3,456
Truck stop and
service
station......... 15,203
Other income.... 20,365
------------
499,580
------------
Expenses:
Gaming.......... 206,874
Racing.......... 30,304
Food and
beverage........ 38,452
Hotel and
recreational
vehicle park.... 1,524
Truck stop and
service
station......... 14,015
Administration.. 107,266
--
Other........... 10,962
REIT
restructuring... 2,483
Hollywood
Park/Boomtown
merger costs.... 1,487
Depreciation and
amortization.... 41,830
------------
455,197
------------
Operating income
(loss)........... 44,383
Loss (gain) on
sale of assets.. 605
Write off of
available for
sale
securities...... 1,350
Interest
expense......... 44,227
--
--
--
------------
Income (loss)
before minority
interests and
taxes............ (1,799)
Minority
interests....... (3)
Income tax
expense
(benefit)....... (2,471)
------------
Income (loss)
before
extraordinary
item............. $ 675
============
Dividend
requirements on
convertible
preferred stock..
Loss before
extraordinary
item allocated to
common
shareholders.....
Per common share:
Loss before
extraordinary
item--basic.....
Loss before
extraordinary
item--diluted...
Number of
shares--basic...
Number of
shares--
diluted.........
</TABLE>
25
<PAGE>
HOLLYWOOD PARK, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
For the nine months ended September 30, 1998
<TABLE>
<CAPTION>
Pro Forma
Adjustments Pro Forma
---------------------- Combined
Hollywood Casino Casino Issuance Pro Forma Elimination of Consolidated
Park, Magic Magic Corp. of the Combined Unrestricted Restricted
Inc. Corp. Acquisition Notes Consolidated Group Group
--------- -------- ----------- -------- ------------ -------------- ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming................ $173,552 $210,889 $ 0 $ 0 $384,441 $96,096 $288,345
Racing................ 48,085 0 0 0 48,085 0 48,085
Food and beverage..... 21,245 7,739 0 0 28,984 2,805 26,179
Hotel and recreational
vehicle park......... 1,362 3,196 0 0 4,558 0 4,558
Truck stop and service
station.............. 11,071 0 0 0 11,071 0 11,071
Other income.......... 13,434 4,602 0 0 18,036 1,214 16,822
-------- -------- ------- -------- -------- ------- --------
268,749 226,426 0 0 495,175 100,115 395,060
-------- -------- ------- -------- -------- ------- --------
Expenses:
Gaming................ 93,920 124,133 0 0 218,053 54,635 163,418
Racing................ 21,244 0 0 0 21,244 0 21,244
Food and beverage..... 27,601 8,587 0 0 36,188 3,303 32,885
Hotel and recreational
vehicle park......... 499 1,367 0 0 1,866 0 1,866
Truck stop and service
station.............. 10,164 0 0 0 10,164 0 10,164
Administration........ 62,678 40,291 (874)(g) 0 101,952 16,264 85,688
-- -- (143)(h) -- -- -- --
Other................. 5,586 2,099 0 0 7,685 0 7,685
Hollywood Park/Casino
Magic merger......... 0 4,838 0 0 4,838 1,754 3,084
Depreciation and
amortization......... 19,874 16,355 981 (i) 0 37,210 5,895 31,315
-------- -------- ------- -------- -------- ------- --------
241,566 197,670 (36) 0 439,200 81,851 357,349
-------- -------- ------- -------- -------- ------- --------
Operating income........ 27,183 28,756 36 0 55,975 18,264 37,711
Loss on write off of
assets............... 1,586 29 0 0 1,615 0 1,615
Interest expense...... 11,827 24,340 (1,403)(k) (11,748)(m) 46,749 12,631 34,118
-- -- (239)(l) 24,281 (n) -- -- --
-- -- -- 948 (o) -- -- --
-- -- -- 509 (p) -- -- --
-- -- -- (1,766)(q) -- -- --
-------- -------- ------- -------- -------- ------- --------
Income (loss) before
minority
interests and taxes.... 13,770 4,387 1,678 (12,224) 7,611 5,633 1,978
Minority interests...... 0 1,082 0 0 1,082 1,082 0
Income tax expense
(benefit).............. 4,903 1,453 1,064 (f) (4,890) 2,530 1,549 981
-------- -------- ------- -------- -------- ------- --------
Income (loss) before
extraordinary items.... $ 8,867 $ 1,852 $ 614 $ (7,334) $ 3,999 $ 3,002 $ 997
======== ======== ======= ======== ======== ======= ========
Per common share:
Income before
extraordinary item--
basic................ $ 0.15
Income before
extraordinary item--
diluted.............. $ 0.15
Number of shares--
basic................ 26,115
Number of shares--
diluted.............. 26,277
</TABLE>
26
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED
STATEMENTS OF OPERATIONS
Assumptions The unaudited pro forma combined consolidated statements of
operations for the year ended December 31, 1997 and the nine months ended
September 30, 1998, were prepared as if the following had taken place on
January 1, 1997: (1) the acquisition of Boomtown, including Boomtown's sale of
its Las Vegas property, the early retirement of the Boomtown first mortgage
notes; (2) the issuance of the 9 1/2% Notes; (3) the acquisition of Casino
Magic, including the redemption of $135 million principal amount of Casino
Magic's 11 1/2% First Mortgage Notes; (4) the issuance of the Notes; and (5)
the consent fee paid to holders of the 9 1/2% Notes in the consent
solicitation.
Pro Forma Adjustments The following adjustments have been made to the
unaudited pro forma combined consolidated statements of operations:
(a) To record six months of amortization of the approximately $20.5 million of
Boomtown excess purchase price over net assets acquired. This goodwill is
being amortized over 40 years.
(b) To eliminate the amortization of the discount associated with the Boomtown
first mortgage notes that were redeemed just subsequent to the close of the
June 30, 1997 acquisition.
(c) To eliminate the interest expense associated with the Boomtown first
mortgage notes that were redeemed just subsequent to the June 30, 1997
acquisition.
(d) To record the interest expense associated with the 9 1/2% Notes.
(e) To amortize the approximately $4.0 million of up-front loan fees associated
with the bank credit facility Hollywood Park executed in conjunction with
the acquisition of Boomtown.
(f) To record the tax expense or benefit associated with the net of the pro
forma adjustments, after adding back the amortization of goodwill (when
appropriate), which is not deductible for income tax purposes.
(g) To eliminate the compensation expense associated with three Casino Magic
corporate level executives who resigned and will not be replaced.
(h) To eliminate Casino Magic's directors fees and expenses. Casino Magic's
board was dissolved at the close of the acquisition.
(i) To amortize the approximately $52.3 million of Casino Magic excess purchase
price over net assets acquired. This goodwill will be amortized over 40
years.
(j) To eliminate the gain Casino Magic recorded upon selling a riverboat to
Hollywood Park.
(k) To record the amortization of the premium associated with the purchase
accounting write-up of the Casino Magic of Louisiana, Corp. $115 million
principal amount of 13% First Mortgage Notes to their fair market value at
the date of the Casino Magic acquisition. This premium will be amortized
over the remaining 59 months that these 13% First Mortgage Notes are
scheduled to be outstanding.
(l) To eliminate the interest expense associated with approximately $2.1
million principal amount of the Casino Magic of Louisiana, Corp. 13% First
Mortgage Notes tendered upon the required change in control offer, leaving
the Casino Magic of Louisiana, Corp. 13% First Mortgage Notes at a
principal balance of $112.9 million.
(m) To eliminate the interest expense associated with the $135 million
principal amount of Casino Magic 11 1/2% First Mortgage Notes that were
called on October 15, 1998.
(n) To record the interest expense associated with the Notes.
(o) To amortize the assumed debt issuance costs associated with the Notes.
(p) To amortize the assumed costs associated with modifying the indenture
governing the 9 1/2% Notes pursuant to the consent solicitation.
(q) To eliminate the interest expense associated with $40 million of borrowings
under the Bank Credit Facility repaid from the proceeds of the offering of
the Old Notes.
27
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED
STATEMENTS OF OPERATIONS--(Continued)
Reclassifications Certain reclassifications have been made to the Casino
Magic historical consolidated statements of operations to conform to the pro
forma combined consolidated statements of operations presentation.
Extraordinary Item The pro forma statement of operations for the year ended
December 31, 1997, excludes the extraordinary loss of $14.2 million (or
approximately $8.4 million, net of tax effect) related to the early retirement
of the Boomtown first mortgage notes. The approximate cost for the tender and
consent and the write off of debt issuance costs was $9.0 million and $5.2
million, respectively.
28
<PAGE>
HOLLYWOOD PARK, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
As of September 30, 1998
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
-------------------------- Combined
Hollywood Casino Pro Forma Elimination of Consolidated
Park, Casino Magic Corp. Issuance of Combined Unrestricted Restricted
Inc. Magic Corp. Acquisition the Notes Consolidated Group Group
--------- ----------- ----------- ----------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
------
Current Assets:
Cash and cash
equivalents........... $ 20,126 $ 26,809 $(12,480)(a) $70,382(k) $104,837 $ 7,481 $ 97,356
Restricted cash........ 798 85 0 0 883 0 883
Short term
investments........... 3,459 0 0 0 3,459 1,599 1,860
Other receivables,
net................... 7,061 2,792 609 (b) 0 10,462 640 9,822
Prepaid expenses and
other assets.......... 15,884 4,627 0 0 20,511 838 19,673
Deferred tax assets.... 10,250 0 6,974 (c) 0 17,224 0 17,224
Current portion of
notes receivable...... 2,340 0 0 0 2,340 0 2,340
-------- -------- -------- ------- -------- -------- --------
Total current assets... 59,918 34,313 (4,897) 70,382 159,716 10,558 149,158
Notes receivable....... 18,250 0 0 0 18,250 0 18,250
Property, plant and
equipment, net........ 301,125 290,070 (7,131)(d) 0 584,064 90,363 493,701
Land held for sale or
development........... 0 6,146 0 0 6,146 0 6,146
Foreign casino
concession agreement,
net................... 0 7,828 0 0 7,828 7,828 0
Debt related costs,
net................... 4,840 9,306 (1,617)(e) 16,894(l) 29,423 4,106 25,317
Gaming license costs,
net................... 0 36,847 0 0 36,847 36,847 0
Goodwill, net.......... 50,341 0 52,331 (f) 0 102,672 0 102,672
Other assets........... 18,445 3,027 0 0 21,472 1,054 20,418
-------- -------- -------- ------- -------- -------- --------
$452,919 $387,537 $ 38,686 $87,276 $966,418 $150,756 $815,662
======== ======== ======== ======= ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
---------------------
Current Liabilities:
Accounts payable....... $ 8,848 $ 13,201 $ 0 $ 0 $ 22,049 $ 6,469 $ 15,580
Accrued compensation... 7,620 9,605 0 0 17,225 3,420 13,805
Accrued liabilities.... 26,986 14,048 10,251 (g) 0 51,285 5,101 46,184
Accrued interest....... 2,642 9,468 (5,643)(h) (109)(m) 6,358 3,540 2,818
Gaming liabilities..... 3,698 1,786 0 0 5,484 737 4,747
Racing liabilities..... 263 0 0 0 263 0 263
Current portion of
notes payable......... 2,058 8,021 0 0 10,079 3,607 6,472
-------- -------- -------- ------- -------- -------- --------
Total current
liabilities........... 52,115 56,129 4,608 (109) 112,743 22,874 89,869
Notes payable.......... 168,574 260,907 96,283 (i) 87,385 (n) 613,149 113,533 499,616
Deferred tax
liabilities........... 6,606 1,065 0 0 7,671 4,050 3,621
Other liabilities...... 0 3,649 0 0 3,649 0 3,649
-------- -------- -------- ------- -------- -------- --------
Total liabilities...... 227,295 321,750 100,891 82,276 737,212 140,457 596,755
Minority interests..... 0 3,582 0 0 3,582 3,582 0
Stockholders' Equity:
Capital stock--
Preferred.............. 0 0 0 0 0 0 0
Common................. 2,580 357 (357)(j) 0 2,580 1 2,579
Capital in excess of
par value............. 218,023 67,123 (67,123)(j) 0 218,023 0 218,023
Retained earnings
(accumulated
deficit).............. 5,338 (5,275) 5,275 (j) 0 5,338 6,716 (1,378)
Accumulated other
comprehensive income
(loss)................ (317) 0 0 0 (317) 0 (317)
-------- -------- -------- ------- -------- -------- --------
Total stockholders'
equity................ 225,624 62,205 (62,205) 0 225,624 6,717 218,907
-------- -------- -------- ------- -------- -------- --------
$452,919 $387,537 $ 38,686 $87,276 $966,418 $150,756 $815,662
======== ======== ======== ======= ======== ======== ========
</TABLE>
29
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED
BALANCE SHEET
Assumptions The acquisition of Casino Magic was accounted for under the
purchase method of accounting for a business combination. The unaudited
combined consolidated balance sheet is presented as if the following had taken
place as of September 30, 1998: (1) the acquisition of Casino Magic, including
the redemption of $135 million principal amount of Casino Magic's 11 1/2% First
Mortgage Notes; (2) the issuance of the Notes; and (3) the consent fee paid to
holders of the 9 1/2% Notes in the consent solicitation.
Pro Forma Adjustments The following pro forma adjustments have been made to
the unaudited pro forma combined consolidated balance sheet:
(a) To record the net reduction in cash associated with the acquisition of
Casino Magic, the redemption of $135 million principal amount of the Casino
Magic 11 1/2% First Mortgage Notes, and the redemption of $2.1 million
principal amount of Casino Magic of Louisiana, Corp. 13% First Mortgage
Notes.
(b) To record the estimated interest receivable earned on the funds deposited
to retire $135 million principal amount of the Casino Magic 11 1/2% First
Mortgage Notes.
(c) To record the estimated 40% deferred tax asset associated with Casino
Magic's purchase accounting adjustments of approximately $17.4 million.
(d) To record Casino Magic's purchase accounting adjustment to write down
certain property and equipment to its fair market value.
(e) To eliminate the prepaid debt issuance costs associated with redemption of
$135 million principal amount of the Casino Magic 11 1/2% First Mortgage
Notes and $2.1 million principal amount of the Casino Magic of Louisiana,
Corp. 13% First Mortgage Notes, and to record debt issuance costs on the
Hollywood Park's bank borrowings incurred to acquire Casino Magic.
(f) To record the goodwill associated with the acquisition of Casino Magic.
(g) To record Casino Magic purchase accounting adjustments of $2.3 million, and
to accrue for Casino Magic's transaction and other costs of $8.0 million.
(h) To record interest payable associated with the redemption of $135 million
principal amount of Casino Magic's 11 1/2% First Mortgage Notes on October
15, 1998.
(i) To record the net increase in Hollywood Park's bank debt of $81.1 million
incurred to acquire Casino Magic, $141.5 to redeem $135 million principal
amount of the Casino Magic 11 1/2% First Mortgage Notes, and $2.1 million
principal amount of the Casino Magic of Louisiana, Corp. 13% First Mortgage
Notes tendered in the change of control offer. To record the purchase
accounting adjustment of $9.2 million, to record the Casino Magic of
Louisiana, Corp. 13% First Mortgage Notes at their fair market value, and
to record the write off of the balance of the original issued discount of
$1.6 million, associated with the $135 million principal amount of the
Casino Magic 11 1/2% First Mortgage Notes.
(j) To eliminate Casino Magic's equity accounts.
(k) To record the net cash proceeds of the offering of the Notes.
(l) To record the assumed debt issuance costs associated with the offering of
the Notes, and the costs associated with modifying the indenture governing
the 9 1/2% Notes pursuant to the consent solicitation.
(m) To eliminate the accrued interest payable on the Hollywood Park bank debt
repaid with the proceeds from the Old Notes offering.
(n) To record the net increase in debt in connection with the offering of the
Old Notes.
Reclassifications Certain reclassifications have been made to both the
Hollywood Park and the Casino Magic historical consolidated balance sheets to
conform to the pro forma combined consolidated balance sheet presentation.
30
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
The following selected historical financial information of Hollywood Park
and Casino Magic has been derived from their respective historical financial
statements and should be read in conjunction with such consolidated financial
statements and the notes thereto included herein. The Hollywood Park and Casino
Magic historical financial statement data as of and for the nine months ended
September 30, 1998 and 1997 has been prepared on the same basis as the
historical information derived from the audited financial statements and, in
the opinion of management, contains all adjustments, consisting only of normal
recurring accruals, necessary for the fair presentation of the results of
operations for such periods and financial positions as of such dates.
The selected unaudited pro forma financial data is derived from the
Unaudited Pro Forma Combined Consolidated Financial Statements, appearing
elsewhere in this prospectus, which give effect to the acquisition of Casino
Magic as a purchase, shown also as adjusted to reflect the issuance of the
Notes and the application of the proceeds therefrom, and should be read in
conjunction with such pro forma statements and the notes thereto.
Certain amounts from the Hollywood Park and Casino Magic Historical Selected
Financial Data have been reclassified to conform with the selected presentation
hereto.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred had the acquisition of Casino Magic been consummated in an
earlier period, nor is it necessarily indicative of future operating results or
financial position.
31
<PAGE>
HOLLYWOOD PARK, INC.
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30,
------------------------------------------------ ------------------
1993 1994 1995 1996 1997(a) 1997 1998
-------- -------- -------- -------- -------- -------- --------
(unaudited)
(in thousands, except per share data and
ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of operations
data:
Revenues:
Gaming................. $ 0 $ 11,745 $ 26,656 $ 50,717 $137,659 $ 83,990 $173,552
Racing................. 63,850 78,719 77,036 71,308 68,844 48,084 48,085
Food and beverage...... 10,908 20,540 19,783 13,947 19,894 13,016 21,245
Other.................. 4,227 6,320 7,097 7,253 21,731 13,259 25,867
-------- -------- -------- -------- -------- -------- --------
78,985 117,324 130,572 143,225 248,128 158,349 268,749
-------- -------- -------- -------- -------- -------- --------
Expenses:
Gaming................. 0 0 5,291 27,249 74,733 45,117 93,920
Racing................. 20,860 23,393 30,960 30,167 30,304 21,615 21,244
Food and beverage...... 9,400 21,852 24,749 19,573 25,745 16,920 27,601
Administrative and
other................. 32,538 51,151 48,647 43,962 74,887 46,544 78,458
Depreciation and
amortization.......... 6,402 9,563 11,384 10,695 18,157 11,939 19,874
Non-recurring
expenses.............. 850 2,964 6,088 11,412 2,483 609 469
-------- -------- -------- -------- -------- -------- --------
70,050 108,923 127,119 143,058 226,309 142,744 241,566
-------- -------- -------- -------- -------- -------- --------
Operating income....... 8,935 8,401 3,453 167 21,819 15,605 27,183
Loss on write off of
assets................ 0 0 0 0 0 0 1,586
Interest expense....... 1,517 3,061 3,922 942 7,302 3,782 11,827
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and
minority interests.... 7,418 5,340 (469) (775) 14,517 11,823 13,770
Minority interests..... 0 0 0 15 (3) 80 0
Income tax expense
(benefit)............. 1,025 1,568 693 3,459 5,850 4,624 4,903
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...... $ 6,393 $ 3,772 $ (1,162) $ (4,249) $ 8,670 $ 7,119 $ 8,867
======== ======== ======== ======== ======== ======== ========
Dividend requirements
on convertible
preferred stock....... $ 1,718 $ 1,925 $ 1,925 $ 1,925 $ 1,520 $ 1,520 $ 0
Net income (loss)
attributable to
(allocated to) common
shareholders.......... $ 4,675 $ 1,847 $ (3,087) $ (6,174) $ 7,150 $ 5,599 $ 8,867
======== ======== ======== ======== ======== ======== ========
Per common share:
Net income (loss)--
basic................. $ 0.30 $ 0.10 $ (0.17) $ (0.33) $ 0.33 $ 0.27 $ 0.34
Net income (loss)--
diluted............... $ 0.30 $ 0.10 $ (0.17) $ (0.33) $ 0.32 $ 0.27 $ 0.34
Number of common
shares--basic......... 15,418 18,224 18,399 18,505 22,010 20,596 26,115
Number of common
shares--diluted....... 17,465 20,516 20,691 20,797 22,340 20,596 26,277
Other data:
Cash flows provided by
(used in):
Operating activities... $ 13,280 $ (7,287) $ 20,291 $ 13,677 $ 18,454 $ 6,059 $ 14,790
Investing activities... (32,677) (7,331) (32,922) (19,893) (16,236) (5,884) (49,140)
Financing activities... 74,391 (8,877) (2,085) (4,268) 9,609 9,910 30,727
Capital expenditures... 12,902 27,584 25,150 23,786 32,505 (23,059) (34,981)
Ratio of earnings to
fixed charges(b)...... 5.89x 2.74x -- -- 2.74x 3.86x 2.00x
Balance sheet data:
Total assets........... $176,424 $246,573 $283,303 $205,886 $419,029 $413,379 $452,919
Other liabilities...... 21,876 36,518 101,928 47,444 65,573 61,741 58,721
Long term obligations.. 348 42,800 15,629 282 132,102 132,163 168,574
Stockholders' equity... 154,200 167,255 165,746 158,160 221,354 219,475 225,624
Operating income
(loss)................. $ 8,935 $ 8,401 $ 3,453 $ 167 $ 21,819 $ 15,605 $ 27,183
Add back depreciation
and amortization....... 6,402 9,563 11,384 10,695 18,157 11,939 19,874
-------- -------- -------- -------- -------- -------- --------
EBITDA................. 15,337 17,964 14,837 10,862 39,976 27,544 47,057
Add back:
Casino pre-opening and
training expenses..... 850 2,337 0 0 0 0 0
Turf Paradise
acquisition costs..... 0 627 0 0 0 0 0
Lawsuit settlement..... 0 0 6,088 0 0 0 0
Write off of investment
in a business......... 0 0 0 11,412 0 0 0
REIT restructuring..... 0 0 0 0 2,483 609 469
-------- -------- -------- -------- -------- -------- --------
Adjusted EBITDA........ $ 16,187 $ 20,928 $ 20,925 $ 22,274 $ 42,459 $ 28,153 $ 47,526
======== ======== ======== ======== ======== ======== ========
</TABLE>
- -------
Management believes that the following calculation of EBITDA and Adjusted
EBITDA are relevant to the note holders:
EBITDA is not a measure of financial performance under GAAP, but is used by
some investors to determine our ability to service or incur indebtedness.
EBITDA and Adjusted EBITDA are not calculated by all entities in the same
fashion and accordingly, may not be an appropriate measure of our performance.
Neither EBITDA nor Adjusted EBITDA should be considered in isolation from, or
as a substitute for, net income (loss), cash flows from operations, or cash
flow data prepared in accordance with GAAP.
(a) Inclusive of Boomtown's financial results as of the June 30, 1997,
acquisition forward.
(b) In computing the ratio of earnings to fixed charges: (1) earnings were
calculated from income from continuing operations, before income taxes and
fixed charges, and excluding capitalized interest; and (2) fixed charges
were computed from interest expense, amortization of debt issuance costs,
capitalized interest, and the estimated interest included in rental
expense. For the years ended December 31, 1995 and 1996, earnings were
insufficient to cover fixed charges by $1.1 million and $2.2 million,
respectively.
32
<PAGE>
CASINO MAGIC CORP.
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30,
------------------------------------------------ ------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- --------
(unaudited)
(in thousands, except per share data and
ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of operations
data:
Revenues:
Casino................. $195,899 $178,337 $165,998 $167,153 $246,320 $186,411 $210,889
Food, beverage and
rooms................. 5,697 5,625 8,393 8,080 10,785 8,496 10,687
Royalty and management
fees.................. 0 0 2,224 3,100 0 0 0
Other.................. 808 1,056 1,108 1,945 4,369 3,327 3,813
-------- -------- -------- -------- -------- -------- --------
202,404 185,018 177,723 180,278 261,474 198,234 225,389
-------- -------- -------- -------- -------- -------- --------
Expenses:
Casino................. 66,142 73,213 69,655 74,943 118,467 88,899 100,673
Food and beverage and
rooms................. 7,309 6,610 8,020 8,391 11,396 8,874 10,389
Advertising and
marketing............. 17,457 25,097 25,874 20,902 36,427 28,517 26,593
Administrative and
other................. 35,096 42,474 38,206 40,448 49,820 38,124 38,083
Hollywood Park/Casino
Magic merger costs.... 0 0 0 0 0 0 4,838
Development............ 2,521 10,244 2,228 1,850 562 512 431
Depreciation and
amortization.......... 6,357 10,669 15,769 18,346 20,247 15,259 16,058
Non-recurring
expenses.............. 2,114 5,479 13,201 6,555 0 0 0
-------- -------- -------- -------- -------- -------- --------
136,996 173,786 172,953 171,435 236,919 180,185 197,065
-------- -------- -------- -------- -------- -------- --------
Operating income....... 65,408 11,232 4,770 8,843 24,555 18,049 28,324
Loss from
unconsolidated
subsidiary............ 0 408 112 26,502 505 405 349
Write off of
capitalized costs..... (3) 107 2,415 689 (1,555) (2,823) 155
Interest expense....... 5,680 13,935 15,766 17,917 31,385 23,704 23,433
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and
minority interests.... 59,731 (3,218) (13,523) (36,265) (5,780) (3,237) 4,387
Minority interests..... 0 0 0 0 1,404 917 1,453
Income tax expense
(benefit)............. 21,225 (188) (3,231) (4,676) (1,935) (1,935) 1,082
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...... $ 38,506 $ (3,030) $(10,292) $(31,589) $ (5,249) $ (2,219) $ 1,852
Per common share:
Net income (loss)--
basic................. $ 1.32 $ (0.10) $ (0.31) $ (0.89) $ (0.15) $ (0.06) $ 0.05
Net income (loss)--
diluted............... $ 1.32 $ (0.11) $ (0.31) $ (0.89) $ (0.15) $ (0.06) $ 0.05
Number of common
shares--basic......... 29,079 28,934 33,261 35,448 35,663 35,643 35,722
Number of common
shares--diluted....... 29,088 27,314 33,261 35,448 35,663 35,643 35,722
Other data:
Cash flows provided by
(used in):
Operating activities... $ 54,077 $ 17,906 $ 15,348 $ 24,126 $ 23,781 $ 18,085 $ 23,192
Investing activities... (87,589) (56,470) (10,533) (86,778) (31,219) (9,017) (22,691)
Financing activities... 67,643 16,445 5,454 66,442 (6,122) (6,117) 3,807
Capital expenditures... (54,859) (27,445) (11,396) (67,850) (37,177) (28,996) (33,789)
Ratio of earnings to
fixed charges(a)...... 8.23x 0.74x 0.20x --x 0.74x 1.58x 1.02x
Balance sheet data:
Total assets........... $222,892 $252,623 $268,431 $369,800 $372,705 $368,118 $387,538
Other liabilities...... 24,050 37,404 36,412 47,914 59,780 52,995 64,426
Long term obligations.. 131,984 135,643 136,840 258,261 253,471 253,484 260,907
Stockholders' equity... 66,858 79,576 95,179 63,625 59,454 61,639 62,205
Operating income
(loss)................. $ 65,408 $ 11,232 $ 4,770 $ 8,843 $ 24,555 $ 18,049 $ 28,324
Add back depreciation
and amortization....... 6,357 10,669 15,769 18,346 20,247 15,259 16,058
-------- -------- -------- -------- -------- -------- --------
EBITDA................. 71,765 21,901 20,539 27,189 44,802 33,308 44,382
Add back:
Pre-opening costs...... 2,114 0 1,819 6,555 0 0 0
Abandoned project
costs................. 0 5,479 11,382 0 0 0 0
Hollywood Park/Casino
Magic merger.......... 0 0 0 0 0 0 4,838
-------- -------- -------- -------- -------- -------- --------
Adjusted EBITDA........ $ 73,879 $ 27,380 $ 33,740 $ 33,744 $ 44,802 $ 33,308 $ 49,220
======== ======== ======== ======== ======== ======== ========
</TABLE>
- --------
Management believes that the following calculation of EBITDA and Adjusted
EBITDA are relevant to note holders:
EBITDA is not a measure of financial performance under GAAP, but is used by
some investors to determine a company's ability to service or incur
indebtedness. EBITDA and Adjusted EBITDA are not calculated by all entities in
the same fashion and accordingly, may not be an appropriate measure of
performance. Neither EBITDA nor Adjusted EBITDA should be considered in
isolation from, or as a substitute for, net income (loss), cash flows from
operations, or cash flow data prepared in accordance with GAAP.
(a) In computing the ratio of earnings to fixed charges: (1) earnings were
calculated from income from continuing operations, before income taxes and
fixed charges, and excluding capitalized interest; and (2) fixed charges
were computed from interest expense, amortization of debt issuance costs,
capitalized interest, and the estimated interest included in rental
expense. Casino Magic's ratio of earnings to fixed charges were
insufficient to cover fixed charges by $4.5 million in 1994, $14.4 million
in 1995, $42.0 million in 1996, $9.1 million in 1997, and $5.3 million for
the nine months ended September 30, 1997.
33
<PAGE>
HOLLYWOOD PARK, INC.
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
Total Company Pro Forma Restricted Group Pro Forma
-------------------------- --------------------------
Nine months Nine months
Year ended ended Year ended ended
December 31, September 30, December 31, September 30,
1997 1998 1997 1998
------------ ------------- ------------ -------------
(in thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C>
Statement of operations
data:
Revenues:
Gaming................. $467,328 $384,441 $361,547 $288,345
Racing................. 68,844 48,085 68,844 48,085
Food and beverage...... 34,229 28,984 30,165 26,179
Other.................. 40,430 33,665 39,024 32,451
-------- -------- -------- --------
610,831 495,175 499,580 395,060
-------- -------- -------- --------
Expenses:
Gaming................. 273,504 218,053 206,874 163,418
Racing................. 30,304 21,244 30,304 21,244
Food and beverage...... 43,085 36,188 38,452 32,885
Administrative and
other................. 155,397 121,667 133,767 105,403
Depreciation and
amortization.......... 49,002 37,210 41,830 31,315
Non-recurring
expenses.............. 3,970 4,838 3,970 3,084
-------- -------- -------- --------
555,262 439,200 455,197 357,349
-------- -------- -------- --------
Operating income....... 55,569 55,975 44,383 37,711
(Gain)loss on write off
of assets............. (835) 1,615 605 1,615
Write off of available
for sale securities... 1,350 0 1,350 0
Interest expense....... 61,154 46,749 44,227 34,118
-------- -------- -------- --------
Income (loss) before
income taxes and
minority interests..... (6,100) 7,611 (1,799) 1,978
Minority interests...... 1,401 1,082 (3) 0
Income tax expense
(benefit).............. (919) 2,530 (2,471) 981
-------- -------- -------- --------
Net income (loss)....... $ (6,582) $ 3,999 $ 675 $ 997
======== ======== ======== ========
Dividend requirements on
convertible preferred
stock.................. $ 1,520 $ 0 $ 1,520 $ 0
Net income (loss)
attributable to
(allocated to) common
shareholders........... $ (8,102) $ 3,999 $ (845) $ 997
======== ======== ======== ========
Other data:
Ratio of Adjusted
EBITDA to interest
expense............... 1.77x 2.10x 2.04x 2.11x
Ratio of earnings to
fixed charges (a)..... 0.85x 1.06x 0.91x 0.97x
Balance sheet data:
Total assets........... -- $966,418 -- $815,662
Other liabilities...... -- 127,645 -- 97,139
Long term obligations.. -- 613,149 -- 499,616
Stockholders' equity... -- 225,624 -- 218,907
Operating income
(loss)................. $ 55,569 $ 55,975 $ 44,383 $ 37,711
Add back depreciation
and amortization....... 49,002 37,210 41,830 31,315
-------- -------- -------- --------
EBITDA................. 104,571 93,185 86,213 69,026
Add back:
REIT restructuring..... 2,483 0 2,483 0
Hollywood Park/Boomtown
merger costs.......... 1,487 0 1,487 0
Hollywood Park/Casino
Magic merger costs.... 0 4,838 0 3,084
-------- -------- -------- --------
Adjusted EBITDA........ $108,541 $ 98,023 $ 90,183 $ 72,110
======== ======== ======== ========
</TABLE>
- --------
Management believes that the following calculation of EBITDA and Adjusted
EBITDA are relevant to the noteholders:
(a) Hollywood Park's total company pro forma earnings for the year ended
December 31, 1997, were not sufficient to cover its pro forma fixed charge
requirement by $9.9 million. Hollywood Park's restricted group pro forma
earnings for the year ended December 31, 1997, and for the nine months
ended September 30, 1998, were not sufficient to cover its pro forma fixed
charge requirements by $4.1 million and $1.1 million, respectively.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with the financial
statements, including the related notes, and the other financial information
appearing elsewhere in this prospectus, as well as the risks described in the
"Risk Factors" section. This discussion reflects the historical operations of
Hollywood Park and Casino Magic which, prior to the Casino Magic acquisition,
had operated separately. Results of operations of the acquired businesses,
Casino Magic and Boomtown, are included in the consolidated financial
statements for periods after the relevant acquisition date. As such, our
results of operations for the year ended December 31, 1997 are not comparable
to our results of operations for the year ended December 31, 1996, and our
results for the nine months ended September 30, 1998 are not comparable to the
nine months ended September 30, 1997.
History of Hollywood Park
Our predecessor, the Hollywood Park Turf Club, was organized in 1938 and
incorporated in Delaware in 1981. Historically, our operations focused on
thoroughbred racing facilities, principally at the Hollywood Park Race Track,
located in the Los Angeles metropolitan area. The Hollywood Park Race Track
remains one of the premier thoroughbred racing facilities in the United States.
Since 1991, we have expanded our gaming operations beyond the single
thoroughbred racing operation to become a diversified gaming company with
operations in many jurisdictions. We significantly expanded our casino
operations with the June 30, 1997 acquisition of Boomtown and its three
casinos, and the October 15, 1998 acquisition of Casino Magic and its five
casinos. The following is an overview of our gaming properties:
<TABLE>
<CAPTION>
Gaming Excess
Type of Square Slot Table Hotel Developable
Location/Property Gaming Facility Footage Machines Games Rooms Land (acres)
- ----------------- ------------------ ------- -------- ----- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Bossier City, Louisiana
Casino Magic Bossier(1).. Dockside Riverboat 30,000 980 44 188 --
Harvey, Louisiana
Boomtown New Orleans..... Cruising Riverboat 30,000 1,089 49 -- --
Bay St. Louis, Mississippi
Casino Magic Bay
St. Louis................ Dockside 39,500 1,132 42 201 50
Biloxi, Mississippi
Boomtown Biloxi.......... Dockside 33,632 1,308 35 -- --
Casino Magic Biloxi...... Dockside 47,700 1,174 41 378 --
Verdi, Nevada
Boomtown Reno............ Land-based 40,000 1,320 44 322 250
Los Angeles, California
Hollywood Park Race
Track................... Horse Racing -- -- -- -- 160
Hollywood Park-Casino.... Card Club 30,000 -- 145 -- --
Crystal Park(2).......... Card Club 30,000 -- 60 226 --
Phoenix, Arizona
Turf Paradise............ Horse Racing -- -- -- -- 100
Neuquen Province,
Argentina(3) Casino Magic
Neuquen.................. Land-based 27,000 398 40 -- --
Casino Magic San Martin
de los Andes............ Land-based 2,500 75 16 -- --
------- ----- --- ----- ---
SUBTOTAL................ 310,332 7,476 516 1,315 560
<CAPTION>
Development Project
- -------------------
<S> <C> <C> <C> <C> <C> <C>
Switzerland County,
Indiana
Indiana Hotel/Casino
Resort(4)................ Cruising Riverboat 38,000 1,300 55 309 --
------- ----- --- ----- ---
TOTAL................... 348,332 8,776 571 1,624 560
======= ===== === ===== ===
</TABLE>
35
<PAGE>
- --------
(1) Casino Magic Bossier is owned by our wholly-owned subsidiary, Casino Magic
of Louisiana, Corp., which is an unrestricted subsidiary under the
Indenture governing the Notes and does not guarantee the Notes.
(2) We own Crystal Park and lease it to an unaffiliated operator.
(3) We own 51% of Casino Magic's Neuquen Province casinos.
(4) We own 97% of the Indiana Hotel/Casino Resort, which we expect to complete
within 18 to 24 months.
Results of Operations
The following discussion relates to historical results of operations for
Hollywood Park (excluding Casino Magic) and for Casino Magic separately.
Hollywood Park
For periods before June 30, 1997, Hollywood Park's financial results
consisted primarily of gaming revenues from the Hollywood Park Race Track, Turf
Paradise, Hollywood Park-Casino, and lease payments from the operator of
Crystal Park. For periods after June 30, 1997, when Hollywood Park acquired
Boomtown, Hollywood Park's financial results also included those of Boomtown.
Hollywood Park's acquisition of Boomtown was accounted for under the purchase
method of accounting for a business combination.
Nine Months Ended September 30, 1998 Compared to the Nine Months Ended
September 30, 1997
Results of operations for the nine months ended September 30, 1998 included
the results of operations of Boomtown, which was acquired by Hollywood Park on
June 30, 1997, and accounted for under the purchase method of accounting for a
business combination. As required under the rules of purchase accounting,
Boomtown's results of operations, prior to the acquisition, were not combined
with those of Hollywood Park, and therefore, the results of operations for the
nine months ended September 30, 1997 did not include Boomtown's results of
operations for the first two quarters of 1997, accounting for significant
differences when comparing the results of operations for the nine months ended
September 30, 1998 to the nine months ended September 30, 1997.
Total revenues increased by approximately $110,400,000, or 69.7%, for the
nine months ended September 30, 1998, as compared to the nine months ended
September 30, 1997. Included in the revenues for the 1998 period was
approximately $110,454,000 of revenues attributable to Boomtown through June
1998, for which there are no corresponding revenues in the 1997 period. Gaming
revenues increased by approximately $89,562,000, or 106.6% for the nine-month
period, with approximately $90,989,000 attributable to the inclusion of
Boomtown results through June 1998 with no corresponding Boomtown revenues in
the first six months of the 1997 period, netted against gaming revenue declines
of approximately $3,364,000 at the Hollywood Park-Casino primarily a result of
the ban on indoor smoking and recent economic problems in various Asian
countries (a significant portion of Hollywood Park-Casino's patrons are Asian).
Gaming revenues also declined by approximately $1,152,000 at the Crystal Park
Casino, which in 1998 was leased to a new operator with lower rent to allow
time to grow the business. The prior operator defaulted on the lease. As of
July 1, 1998, rent payable to the Company on the Crystal Park facility was
scheduled to increase to $350,000 per month, but the Company has agreed to
accept rent of $150,000 per month through January 1999. In present market
conditions, it is expected that the rent will remain between $100,000 and
$150,000 rather than increase as scheduled in the lease.
Food and beverage revenues increased by approximately $8,229,000, or 63.2%
for the nine-month period, due primarily to the inclusion of Boomtown revenues
of $7,031,000 through June 1998 with no corresponding Boomtown revenues in the
first six months of 1997, with the balance of the increase attributable to
increased
36
<PAGE>
sales at the three Boomtown properties due to the opening of new food service
outlets. Hotel and recreational vehicle park revenues (all of which were
attributable to Boomtown Reno) increased by $781,000, or 134.4%, due to there
being just three months of revenues in the 1997 amounts compared to nine months
of revenues in the 1998 results. Truck stop and service station revenues (all
of which were attributable to Boomtown Reno) increased by $6,174,000 for the
nine-month period, or 126.1%, due primarily to the inclusion of $6,546,000 of
revenues through June 1998 with no corresponding revenues in the first six
months of 1997, netted against a revenue decrease due to price competition in
the Reno market. Other income increased by $5,653,000, or 72.7%, for the nine-
month period, due to the inclusion of $5,163,000 of Boomtown revenues through
June 1998 with no corresponding revenues in the first six months of 1997, and
increased revenues associated with Boomtown New Orleans' Great Escape arcade,
which opened in July 1998.
Total operating expenses increased by $98,822,000, or 69.2%, during the nine
months ended September 30, 1998, as compared to the nine months ended September
30, 1997, due in part to the inclusion of approximately $96,966,000 of Boomtown
operating expenses through June 1998 for which there are no corresponding
amounts in the operating expenses for the first six months of 1997. Gaming
expenses increased by $48,803,000, or 108.2%, for the nine-month period,
primarily due to the inclusion of $49,855,000 of Boomtown expenses through June
1998 and no corresponding expenses in the 1997 period, netted against
$1,461,000 of expense savings at the Hollywood Park-Casino, a corresponding
result of the decrease in revenues.
Food and beverage expenses increased by $10,681,000, or 63.1%, for the nine-
month period, due in part to the inclusion of $8,593,000 of Boomtown expenses
through June 1998 with no corresponding expenses in the 1997 period, and cost
increases at the Boomtown properties in relation to increased food and beverage
sales, due to the opening of new food service outlets. Hotel and recreational
vehicle park expenses (all of which were attributable to Boomtown Reno)
increased by $300,000, or 150.8%, for the nine-month period, due to the
inclusion of $287,000 of expenses through June 1998 for which there are no
corresponding expenses in 1997. Truck stop and service station expenses (all of
which were attributable to Boomtown Reno) increased by $5,703,000, or 127.8%,
for the nine-month period, due primarily to the inclusion of $5,987,000 of
expenses through June 1998 with no corresponding expenses in the 1997 period,
netted against fuel cost decreases during 1998.
Administrative expenses increased by $23,587,000, or 61.1%, for the nine-
month period, due primarily to the inclusion of $22,829,000 of Boomtown
expenses through June 1998, with the balance of the increase primarily due to
additional staffing at the Hollywood Park corporate level and other expansion
related expense increases. Other expenses increased by $2,324,000, or 71.2%,
for the nine-month period, and included Boomtown costs through June 1998 of
$2,280,000 for which there are no corresponding costs in the 1997 results.
Depreciation and amortization increased by $7,935,000, or 66.5%, for the nine-
month period, with $7,165,000 of the increase attributable to the inclusion of
Boomtown expenses through June 1998 with no corresponding expenses in the 1997
period, with the balance of the increase due to Boomtown New Orleans' February
1998 placement of the new riverboat into service and the July 1998 opening of
the land-based Great Escape arcade and restaurant. Loss on write off of assets
related to the closing of the Hollywood Park Golf Center, and the associated
$1,086,000 write off of the Hollywood Park Golf Center assets, and the write
off of $500,000 related to an abandoned project in Kansas. Interest expense
increased by $8,045,000, or 212.7%, due to interest on the 9 1/2% Notes, which
were issued in August 1997, and interest on bank borrowings. Income tax expense
increased by $279,000, or 6.0%, due to increased pre-tax income in 1998 and
certain non-recurring tax benefits recorded in 1998.
Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996
As mentioned above, Boomtown's results of operations are not consolidated
with those of Hollywood Park's prior to June 30, 1997. As of April 1, 1996, the
results of operations of Sunflower Racing, Inc., a former subsidiary of the
Company, were no longer consolidated with Hollywood Park's results. Thus, the
results of operations for the year ended December 31, 1997 are exclusive of
Sunflower's results of operations, but the
37
<PAGE>
financial results for the year ended December 31, 1996 included Sunflower's
results of operations through March 31, 1996. Also included in the results of
operations for the year ended December 31, 1996 was the $11,412,000 one time,
non-cash write off of Hollywood Park's investment in Sunflower. See the
discussion in the following section for information on Sunflower.
Total revenues for the year ended December 31, 1997, increased by
$104,903,000 or 73.2%, as compared to the year ended December 31, 1996,
primarily due to the inclusion of $105,781,000 of Boomtown revenues in 1997,
with no corresponding revenues recorded in 1996. Gaming revenues increased by
$86,942,000, or 171.4%, due primarily to Boomtown gaming revenues of
$84,620,000, and Crystal Park rent revenues of $2,222,000, in 1997, with no
corresponding Boomtown revenues in 1996. Crystal Park opened in late October
1996. As of December 19, 1997, Hollywood Park had leased Crystal Park to
California Casino Management, Inc., an unaffiliated third party. Previously,
Crystal Park was under lease to Compton Entertainment, Inc. On November 4,
1997, Hollywood Park obtained a judgment in an action for unlawful detainer
against Compton Entertainment, due to Compton Entertainment's failure to pay a
portion of the June 1997 rent and to make required additional rent payments. In
October 1997, the California Attorney General revoked Compton Entertainment's
conditional gaming registration, and the City of Compton revoked Compton
Entertainment's city gaming license.
Gaming revenues from racing decreased by $2,464,000, or 3.5%, due primarily
to one fewer live race day at the Hollywood Park Race Track, and the inclusion
of $1,317,000 of revenues from racing attributable to Sunflower in 1996, with
no corresponding Sunflower revenues in 1997.
Food and beverage revenues increased by $5,947,000, or 42.6%, due primarily
to the inclusion of Boomtown food and beverage revenues in 1997, with no
corresponding revenues in 1996. Hotel and recreational vehicle park and truck
stop and service station revenues related to Boomtown Reno, and there are no
corresponding revenues in 1996. Other income increased by $4,908,000, or 67.7%,
due primarily to the inclusion of Boomtown revenues in 1997 with no
corresponding revenues in 1996.
Total operating expenses (inclusive of approximately $93,072,000 of Boomtown
expenses in 1997, with no corresponding expenses in 1996) increased by
$83,251,000, or 58.2%, during the year ended December 31, 1997, as compared to
the year ended December 31, 1996. Gaming expenses increased by $47,484,000, or
174.3%, primarily due to the inclusion of Boomtown expenses of $46,380,000, and
increased tournament costs at the Hollywood Park-Casino.
Food and beverage expenses increased by $6,172,000, or 31.5%, due primarily
to Boomtown food and beverage expenses of $7,510,000, netted against expense
reductions at the Hollywood Park-Casino, that included labor savings due to the
closing of some food service outlets. Hotel and recreational vehicle park
expenses and truck stop and service station expenses related to Boomtown Reno,
and there are no corresponding expenses in 1996.
Administrative expenses increased by $20,037,000, or 48.3%, which included
$22,054,000 of Boomtown expenses, netted against Sunflower related
administrative costs included in the 1996 financial results, for which there
are no similar costs in the 1997 results. Other expenses increased by
$2,563,000, or 103.1%, due primarily to the inclusion of Boomtown expenses in
1997 with no corresponding expenses in 1996. Depreciation and amortization
increased by $7,462,000, or 69.8%, primarily due to the Boomtown and Crystal
Park LLC depreciation expense in 1997, with no corresponding expenses in 1996.
REIT restructuring expenses consisted primarily of legal and tax consulting
expenses incurred by Hollywood Park with respect to the preparation of
reinstatement of Hollywood Park's paired share REIT status, which was not
implemented. Interest expense increased by $6,360,000, due to interest on
Hollywood Park's $125,000,000 in principal amount of 9 1/2% Senior Subordinated
Notes that were issued in August 1997, short term bank borrowings (all of which
had been repaid as of December 31, 1997), and bank commitment fees. Income tax
expense increased by $2,391,000, or 69.1%, due to increased income before
income taxes in 1997 as compared to 1996.
38
<PAGE>
Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995
The results of operations for the year ended December 31, 1996 included the
results of Hollywood Park operating all aspects of the Hollywood Park-Casino,
including the Casino gaming floors. Hollywood Park acquired the Hollywood Park-
Casino gaming floor business from Pacific Casino Management on November 17,
1995; therefore, the results of operations for the year ended December 31, 1995
do not include the operating results of the Hollywood Park-Casino gaming floor
business prior to November 17, 1995 but rather are reflective of the lease
arrangement then in place. The results of operations for the year ended
December 31, 1996 included Sunflower's results of operations for the three
months ended March 31, 1996, only. As of March 31, 1996, Sunflower's results of
operations were no longer consolidated with Hollywood Park's due to Sunflower's
May 17, 1996 filing for reorganization under Chapter 11 of the Bankruptcy Code.
Sunflower's results of operations are consolidated in the financial statements
for the year ended December 31, 1995.
Total revenues increased by $12,653,000, or 9.7%, for the year ended
December 31, 1996, as compared to the year ended December 31,1995, primarily
due to Hollywood Park-Casino gaming revenues. Gaming revenues of $50,717,000
were generated from the Hollywood Park-Casino gaming activities, which
Hollywood Park acquired from Pacific Casino Management on November 17, 1995.
During the year ended December 31,1995, Hollywood Park recorded $20,624,000 of
lease revenues, $6,032,000 of gaming revenues (covering the period November 17,
1995, through December 31,1995), and concession sales to Pacific Casino
Management of approximately $2,773,000, or total 1995 Hollywood Park-Casino
gaming and lease related revenues of $29,429,000. On October 25, 1996, Crystal
Park opened under a triple net lease between Hollywood Park and Compton
Entertainment (the operator of Crystal Park). Racing revenues decreased by
$5,728,000, or 7.4%, primarily due to the exclusion of Sunflower's gaming
revenues from racing for the nine months ended December 31, 1996. Food and
beverage sales decreased by $5,836,000, or 29.5%, with approximately $2,773,000
of the difference attributable to the inclusion of sales to Pacific Casino
Management in 1995 with no corresponding sales in 1996, approximately
$2,414,000 of the difference due to the inclusion of a full year of food and
beverage sales recorded for Sunflower in 1995 and just three months of
Sunflower sales recorded in 1996, and the balance of the difference primarily
due to lower on-track attendance at Hollywood Park.
Total operating expenses increased by $15,939,000, or 12.5%, for the year
ended December 31, 1996, compared to the year ended December 31, 1995,
primarily due to the inclusion of $27,249,000 of Hollywood Park-Casino gaming
floor expenses (with corresponding gaming floor expenses of $5,291,000 in 1995)
which more than offset a $7,476,000 reduction in expenses arising from the
exclusion in 1996 of Sunflower's expenses. Food and beverage expenses decreased
by $5,176,000, or 20.9%, with $2,089,000 of the savings attributable to the
exclusion of Sunflower's expenses subsequent to the first quarter of 1996, and
the balance of the savings primarily attributable to cost savings programs
implemented at the Hollywood Park-Casino. Administrative expenses decreased by
$3,970,000, or 8.7%, due to the inclusion of a full year of Sunflower expenses
in 1995 and just three months of corresponding costs recorded in 1996.
Included in the 1996 results of operations was the $11,412,000 one time,
non-cash write off of Hollywood Park's investment in Sunflower. On May 2, 1996,
the Kansas Legislature adjourned without passing legislation that would have
allowed additional gaming at Sunflower, thereby allowing Sunflower to compete
with Missouri riverboat gaming. On May 17, 1996, Sunflower filed for
reorganization under Chapter 11 of the Bankruptcy Code. Sunflower's case has
been converted to a Chapter 7 liquidation under the Bankruptcy Code and final
sale of the property occurred in December 1998.
Included in the 1995 results of operations was $6,088,000 of expenses (with
no corresponding expenses in 1996) related to the settlement of certain claims
in connection with a shareholder class action and related shareholder
derivative suit, as more fully described in the Company's 1996 Annual Report on
Form 10-K.
Depreciation and amortization expenses decreased by $689,000, or 6.1%,
primarily due to the exclusion of Sunflower's expenses for the nine months
ended December 31, 1996, netted against the amortization of the
39
<PAGE>
goodwill associated with the November 17, 1995, acquisition of Pacific Casino
Management. Interest expense decreased by $2,980,000, or 76.0%, due to the
exclusion of Sunflower's interest expense for the nine months ended December
31, 1996.
Income tax expense increased by $2,766,000, due primarily to the
establishment of certain tax reserves.
Casino Magic
Casino Magic commenced operations on the Mississippi Gulf Coast in
September 1992 at Casino Magic Bay St. Louis. In 1993, Casino Magic opened
Casino Magic Biloxi. In 1995, Casino Magic opened two gaming facilities in the
Province of Neuquen, Argentina and, in 1997, Casino Magic sold 49% of its
Argentina subsidiary. In 1996, Casino Magic opened Casino Magic Bossier.
Nine Months Ended September 30, 1998 Compared to the Nine Months Ended
September 30, 1997
Consolidated revenues increased $27.2 million, or 13.7%, to $225.4 million
in the first nine months of 1998, compared to $198.2 million in the first nine
months of 1997. The increase in consolidated revenues was attributable to
increased revenues at all five casinos. The largest individual increase of
$15.4 million, or 22.5%, between the comparable periods, occurred at Casino
Magic Bossier. The increase at Casino Magic Bossier was attributable to
improved marketing efforts drawing more patrons to the property. Revenues at
Casino Magic Biloxi increased $9.0 million, or 18.6%, between the comparable
periods. Casino Magic Argentina's revenues increased $2.4 million, or 17.8%,
between the comparable periods. The increase resulted from the continuing
improvements in slot machine revenues due to an increase in the number of slot
machines.
Operating costs and expenses increased $16.9 million, or 9.4%, to $197.1
million in the first nine months of 1998 as compared to $180.2 million in the
first nine months of 1997. Casino expenses increased by $11.8 million, or
13.2%, due to increases in gaming taxes related to increased gaming revenues,
increased personnel costs related to the increased gaming volume and an
increase in slot point redemption values. Advertising and marketing costs
declined $1.9 million, to $26.6 million in the first nine months of 1998,
compared to $28.5 million in the first nine months of 1997. During the first
nine months of 1997 Casino Magic Bossier attempted to increase market share
and revenue with expensive promotions which were significantly less successful
than anticipated. In May 1997, the promotional programs of Casino Magic
Bossier were significantly reduced. Operating expenses for the nine months
ended September 30, 1998 include approximately $4.8 million of costs related
to the merger with Hollywood Park. These costs primarily related to conforming
accounting policies of Casino Magic with those of Hollywood Park.
Other (income) expense (non-operating income and expenses) increased to a
net expense of $23.9 million in the first nine months of 1998 as compared to
$21.3 million in the first nine months of 1997. In 1997 there was a non-
recurring net $2.6 million gain on sale of assets which included a $1.4
million gain on the sale of a riverboat to Hollywood Park, and a $1.3 million
gain on the sale of 49% of Casino Magic Argentina, netted against losses on
the sale of miscellaneous gaming and other equipment.
Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996
Consolidated revenues increased $81.2 million, or 45.0%, to $261.5 million
in 1997 compared to $180.3 million in 1996. The increase in 1997 consolidated
revenues is attributable to $93.2 million in revenues from Casino Magic's new
facility, Casino Magic Bossier, which opened on October 4, 1996.
Casino Magic Bossier revenues increased by $80.5 million in 1997 as compared
to 1996. This increase in revenues is the result of the facility opening in
late 1996 using a temporary facility and the completion of the permanent land
based pavilion, including restaurants, a gift shop and entertainment areas, on
December 31, 1996. Casino Magic Biloxi revenues declined $1.6 million, or
2.5%, from 1996 to 1997. This decline is primarily the result of competition
from other casinos with greater amenities than Casino Magic Biloxi. While
competitive pressures will likely continue to adversely affect Casino Magic
Biloxi's revenues and operating
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margins, management believes that the hotel completed in May 1998 at Casino
Magic Biloxi will help offset or reverse these declines in revenues.
Additionally, Casino Magic Biloxi may experience reduced revenues in 1998 due
to customer inconveniences, particularly those related to the construction of
the hotel entrance areas. However, management has taken precautions to minimize
the impact of the construction on the customer and will continue to do so.
Other fluctuations in revenues when comparing the periods ended December 31,
1997 to December 31, 1996 include: the loss of $3.1 million in royalties and
management fees from Greece in 1997 due to the termination of operations in
Greece in December 1996; loss of $0.8 million in revenues as a result of the
sale of Goldiggers in June 1996; revenues at Casino Magic Bay St. Louis
increased $4.5 million as the result of increased direct mail efforts and
improved amenities, which include a golf course and expanded buffet; and an
increase in revenues at Casino Magic Argentina of $1.7 million attributable to
the addition of seventy-five slot machines during the latter half of 1997 and
the continued popularity of slot machines at Casino Magic Argentina.
Total operating expenses increased $65.5 million, or 38.2%, to $236.9
million in 1997 compared to $171.4 million in 1996. Of this increase, $67.4
million is related to Casino Magic Bossier, which opened in October 1996 and
the closure of Goldiggers in June 1996, which decreased operating expenses, by
$1.2 million. Excluding the effects of Casino Magic Bossier and Goldiggers,
operating expenses in 1997 decreased by $0.7 million, or 0.5%, as compared to
operating expenses in 1996. Although total operating expenses remained flat
between the comparable periods for 1997 and 1996, there were significant
fluctuations in various categories. Casino expenses increased by $4.0 million
in 1997 as compared to 1996 as a result of increased expenses associated with
increases in player's club slot point redemption values, the increased use of
complimentaries in marketing efforts and increased gaming taxes due to
increased revenues. Other operating costs and expenses increased by $1.0
million as a result of the opening of a golf course at Casino Magic Bay St.
Louis in February 1997. Advertising and marketing expenses increased by $2.3
million due to increased motorcoach based marketing efforts at Casino Magic
Biloxi and the associated commission and giveaways expenses. The increases in
advertising and marketing expenses resulted from attempts to stabilize revenues
in Biloxi and offset the effects of the disruption caused by the hotel
construction. General and administrative expenses decreased by $2.7 million as
a result of efforts to contain expenses and staff reductions. The majority of
this decrease, $2.3 million, was at the corporate management level. Development
expenses decreased by $1.2 million as a result of decreased efforts to pursue
new gaming opportunities. Depreciation expenses decreased by $1.9 million due
to the sale of various assets held by Casino Magic including a jet airplane and
slot machines that were previously leased in Argentina. It is anticipated that
depreciation expense will increase after the opening of the hotel in Biloxi.
Consolidated "Other (income) expense" (non-operating income and expenses)
improved by $14.8 million, to a net expense of $30.3 million in 1997, compared
to a net expense of $45.1 million in 1996. Approximately $27.0 million of the
additional expenses in 1996 were attributable to management's decision to write
off its 49% equity interest in a gaming facility in Porto Carras, Greece. Net
interest expense increased by $13.5 million in 1997 compared to the same period
in 1996. This was due to the increased debt from the issuance of the
$115,000,000 principal amount of 13% Louisiana First Mortgage Notes by Casino
Magic of Louisiana, Corp. (a wholly-owned subsidiary of Casino Magic) in late
August 1996, and a reduction of $3.7 million in capitalized interest due to the
completion of the Casino Magic Bossier facility and the golf course at Casino
Magic Bay St. Louis. Other income increased by $2.3 million in 1997 compared to
the same period in 1996 due to a gain on the sale of the Crescent City
Riverboat and the gain on the sale of a 49% interest in Casino Magic Argentina.
Casino Magic's effective tax rates for 1997 and 1996 of approximately (26.9%)
and (12.9%), respectively, are the result of an allowance against deferred tax
assets. This allowance reduces net deferred tax assets to approximately zero.
Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995
Consolidated revenues increased $2.6 million, or 1.4%, to $180.3 million in
1996 compared to $177.7 million in 1995. The increase in 1996 consolidated
revenues is attributable to $12.7 million in revenues
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from Casino Magic Bossier, which opened using a temporary facility on October
4, 1996, and increased revenues from Casino Magic Argentina of $2.8 million, or
21.4%. The majority of the increase in revenues at Casino Magic Argentina
resulted from the increase in slot machine revenues of $3.4 million. Slot
machine revenues increased in 1996 compared to the same period in 1995 due to
an increase in the number of slot machines at Casino Magic Argentina from 89 to
400 in May 1995. The rest of the increase resulted from increased customer
counts and their influence on food and beverage revenues. These increases in
revenues at Casino Magic Argentina were partially offset by lower revenues from
table games. These increases in consolidated revenues were offset by lower
revenues at Casino Magic Bay St. Louis, Casino Magic Biloxi, and the loss of
approximately six months of revenues from the sale of a gaming facility in
Deadwood, South Dakota, which Casino Magic sold in June 1996. Casino Magic
Biloxi revenues declined $8.9 million, or 12.2%, from 1995 to 1996. This
decline was primarily the result of adjacent hotel/casino operations on both
sides of Casino Magic Biloxi that offer significantly greater amenities than
Casino Magic Biloxi. While competitive pressures will likely continue to
adversely affect Casino Magic Biloxi's revenues and operating margins,
management believes that the hotel completed in May 1998 at Casino Magic Biloxi
will help offset or reverse these declines in revenues. The combination of
construction disruption caused by the development of a new buffet and kitchen
and increased overall competition in the Gulf Coast and New Orleans markets,
both of which Casino Magic Bay St. Louis competes in, caused the $3.6 million,
or 4.1%, decline in revenues at Casino Magic Bay St. Louis. The loss of $1.4
million in corporate and other revenues is due to the sale of a gaming facility
located in Deadwood, South Dakota in June 1996. Although royalty and management
fee revenues increased by $0.9 million, or 39.3%, to $3.1 million in 1996,
Casino Magic has divested itself of all operations in Greece during 1996 where
the majority of all royalties and management fee revenues were generated.
Total operating costs and expenses were down $1.5 million, or 1.0%, in 1996
compared to 1995. Casino expenses increased $5.3 million, or 7.6%, during the
same period principally as a result of the opening of a new gaming facility in
Bossier City, Louisiana, which had $7.1 million in casino expenses in 1996.
This increase in casino expenses relating to Casino Magic Bossier was offset by
reduced expenses at Casino Magic Biloxi as a result of reduced revenues, and
the sale of Casino Magic's gaming facility at Deadwood, South Dakota in June
1996. Food and beverage costs increased $0.6 million, or 8.1%, as a result of
increased customer traffic at Casino Magic Argentina. Casino Magic Argentina
relies on its food and beverage facilities at the casino to promote casino
operations. Other operating costs and expenses increased $1.5 million, or
110.5%, to $2.8 million in 1996 compared to 1995. This increase was the result
of additions to amenities at Casino Magic Bay St. Louis, and the transfer of
the gift shop operations at Casino Magic Bay St. Louis and Casino Magic Biloxi
from a third party to Casino Magic. During 1996, Casino Magic Bay St. Louis
added amenities relating to the Arnold Palmer-designed golf course, such as the
pro shop, the Arnold Palmer Golf Academy and the groundskeeping department. In
addition, Casino Magic Bay St. Louis began operating a child-care facility for
casino patrons in 1996. Advertising and marketing expenses decreased by $5.0
million, or 19.2%, in 1996 as compared to 1995. This decrease was due to
several factors: a reduction in the use of air charters to attract customers;
the use of more cost efficient promotions concerning give-aways through the
Magic Money Players Club Card; and an overall reduction in marketing and
advertising costs during 1996. This decrease was offset by the opening of
Casino Magic's new facility, Casino Magic Bossier, in October 1996.
General and administrative expenses decreased $4.3 million, or 15.0%, in
1996 as compared to the same period of 1995. The decline resulted from cost
reduction measures implemented in early 1996, including the elimination of
several corporate officer positions. Property operation, maintenance and energy
costs increased by $3.4 million, or 83.2%, in 1996 as compared to 1995 as a
result of the addition of Casino Magic Bossier, the continued aging of the
facilities at Casino Magic Bay St. Louis and Casino Magic Biloxi which required
more maintenance in 1996, and the addition of the golf facility at Casino Magic
Bay St. Louis in 1996. Rents, property taxes and insurance costs increased by
$1.7 million, or 38.9%, in 1996 as compared to 1995. The increase was in part a
result of the addition of Casino Magic Bossier. Depreciation and amortization
increased $2.6 million, or 16.3%, in 1996 as compared to the same period in
1995. This increase resulted from the
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addition of tangible depreciable property, the amortization of the investment
costs in excess of equity interest in the 49% owned Greek gaming facility which
was amortized for 105 days in 1995 and for nine months in 1996, and a change in
1996 in the method used to amortize Casino Magic's land option deposits over
the life of the option. During 1996, management wrote-off the excess of equity
interest in the Greek gaming facility. Furthermore, the addition of Casino
Magic Bossier increased depreciation expense, while the divesting of Casino
Magic's gaming facility in Deadwood, South Dakota, decreased depreciation
expense. Preopening costs increased by $4.7 million, or 260.0%, in 1996 from
1995. This was a result of the opening of Casino Magic Bossier in October
1996. In 1995, Casino Magic opened the Greek gaming facility in which it had a
49% ownership.
Consolidated other (income) expense (non-operating income and expenses)
increased $26.8 million from a net expense of $18.3 million to a net expense of
$45.1 million over the comparative periods. Of this increase, $26.1 million was
due to Casino Magic's decision to write off its 49% equity interest in the
Greek gaming facility. Management's decision was based on the results from
Casino Magic's Greek gaming facilities after the opening of a competing casino
by Hyatt Corporation. Although Casino Magic anticipated some revenue loss as a
result of this increased competition, the actual effects were greater than
anticipated and resulted in a $2.0 million loss in operations at the Greek
gaming facility for the month of September 1996. Net interest expense (interest
expense less capitalized interest and interest income) increased $2.1 million
from 1995 to 1996. The increase reflects the cost of funding the development of
Casino Magic Bossier. In August 1996, the Company, through a wholly-owned
subsidiary, issued $115 million in first mortgage notes to fund Casino Magic
Bossier. In 1995, Casino Magic expensed capitalized costs relating to
development joint ventures in the amount of $2.2 million. In 1996, no such
expense was incurred. Casino Magic's effective tax rate for 1996 of
approximately (13.0%) resulted from an allowance against deferred tax assets of
approximately $8.2 million. This valuation allowance was recorded in
recognition of the Company's recent operating results. The effective tax rate
for 1995 of (24.0%) was due to significant permanent tax differences.
Year 2000 Issues
We are actively evaluating and resolving any potential impact of the Year
2000 problem on the processing of date-sensitive information by our information
systems, and the information systems of vendors upon whom we are dependent. The
Year 2000 problem exists because computer systems and applications were
historically designed to use two digit fields (rather than four) to designate a
year, and date sensitive systems may not properly recognize year 2000, which
could result in miscalculations or system failures. We have established a Year
2000 project team to evaluate the impact of the problem on our computer systems
and on enterprises with which we have significant business relationships. The
team, which is comprised of individuals from each business unit and each
corporate function, meets monthly to identify potential Year 2000 issues and to
develop and implement plans to fix any non-compliant aspects of our system.
Internal Computer Systems. We believe that our various financial reporting
software and associated hardware are Year 2000 compatible. We have become aware
that point of sale cash register systems, personal computer networks, and
gaming patron player tracking systems will need to be upgraded or replaced. We
are currently in the process of procuring and installing hardware and software
to make the necessary repairs to all affected internal systems.
External Computer Systems. We have sent Year 2000 compliance questionnaires
to all of our significant external goods and service providers. To date, other
than with respect to pari-mutuel wagering software and hardware, we are not
aware of any potential Year 2000 problems that would have a material effect on
us. We lease pari-mutuel wagering software and associated hardware. Our service
providers of this software and hardware have given us written assurance that
such software and hardware will be Year 2000 compatible by March 1999. We do
not have alternative systems to handle our pari-mutuel wagering. If such
service providers are unable to timely overcome any potential Year 2000 issues,
it would have a materially adverse effect on our racing operations.
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Estimated Cost of Year 2000 Compliance Efforts. We estimate that the total
cost of addressing our Year 2000 issues will be approximately $2,000,000. This
cost estimate is based on numerous assumptions, including the assumptions that
we have already identified our most significant Year 2000 issues and that our
third party suppliers will timely complete their Year 2000 programs without
cost to us. However, there can be no guarantee that these assumptions are
accurate, and actual results could differ materially from those anticipated.
Liquidity and Capital Resources
Hollywood Park's principal source of liquidity as of September 30, 1998,
excluding Casino Magic, was cash and cash equivalents of $20,126,000. Cash and
cash equivalents decreased by $3,623,000 during the nine months ended September
30, 1998. Net cash of $14,790,000 was provided by operating activities. Net
cash of $49,140,000 was used in investing activities. Cash of $33,375,000 was
used to purchase capital assets, including amounts spent for the Boomtown Reno
and Boomtown New Orleans construction projects. Cash of $8,012,000 was lent in
connection with the HP Yakama project. Cash of $3,232,000 was lent to Paul
Alanis, the Company's new President and Chief Operating Officer, for which the
Company holds a promissory note. Cash was used for short term investing (for
the purchase of Casino Magic common stock), and the Company, through its
wholly-owned subsidiary HP Casino, Inc., used cash of $1,946,000 to acquire the
remaining minority interest in Crystal Park. Net cash provided by financing
activities was $30,727,000, which included short term borrowings of $40,000,000
under the Company's Bank Credit Facility.
On October 14, 1998, the Company executed the Bank Credit Facility with a
group of banks with Bank of America NT&SA as Administrative Agent for up to
$300,000,000, with an option to increase this amount to $375,000,000. The Bank
Credit Facility also provides for sub-facilities for letters of credit of up to
$30,000,000, and swing line loans of up to $10,000,000. Prior to the execution
of the Bank Credit Facility, the Company was operating with a bank credit
facility (the "Old Bank Credit Facility") which was initially for $225,000,000,
and was reduced to $100,000,000 with the August 1997 issuance of the 9 1/2%
Notes. The Bank Credit Facility extended the maturity of the Old Bank Credit
Facility to December 31, 2003, reduced interest and commitment fee rates, and
amended certain covenants, as compared to the previous Old Bank Credit
Facility.
As of September 30, 1998, the Company had outstanding borrowings under the
Old Bank Credit Facility of $40,000,000 at a weighted average interest rate of
7.79%. On October 13, 1998, the Company borrowed an additional $5,000,000 under
the Old Bank Credit Facility. On October 15, 1998, the Company borrowed
$225,000,000 under the Bank Credit Facility with respect to the acquisition of
Casino Magic. The funds were utilized as follows: approximately $80,900,000 to
purchase Casino Magic's outstanding common stock; $141,515,000 to redeem Casino
Magic's 11 1/2% First Mortgage Notes due October 15, 2001 (the "Casino Magic
Notes"); and $2,125,000 to purchase the 13% First Mortgage Notes due 2003
issued by Casino Magic of Louisiana, Corp. tendered in the change of control
offer made in connection with the acquisition of Casino Magic. The Company
borrowed $5,000,000 on January 7, 1999, $5,000,000 on January 28, 1999 and
$7,000,000 on February 8, 1999 under the Bank Credit Facility for general
corporate purposes.
Under the Bank Credit Facility, the Company is not required to make any
principal payments prior to March 31, 2001, but must make monthly interest
payments. Starting March 31, 2001, and on the last day of each subsequent
calendar quarter, through December 31, 2002, the amount available under the
Bank Credit Facility will decrease by $15,000,000, and on the last day of each
calendar quarter for the period March 31, 2003, through September 30, 2003, it
will decrease by $25,000,000, with the balance of any principal outstanding due
on December 31, 2003. If the Bank Credit Facility has been increased, then the
amount of the reduction will increase proportionately. If the Company has
borrowings in excess of the reduced availability of the Bank Credit Facility,
these amounts are due on the same day as the scheduled reductions.
The annual interest rate under the Bank Credit Facility is determined, at
the Company's election, by reference to the "Eurodollar Rate" (for Eurodollar
loans) (for interest periods of one, two, three or six months) or the
"Alternate Base Rate" (for Base Rate loans), as these terms are defined in the
Bank Credit Facility, plus
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margins that vary depending on the Company's ratio of funded debt to earnings
before interest, taxes, depreciation and amortization ("EBITDA"). With a funded
debt to EBITDA ratio of less than 2.00 to 1.00, the margin for Eurodollar loans
is 1.00% and nothing for Base Rate loans. The margin for each type of loan will
increase by 25 basis points (except the initial increase in the margin for Base
Rate loans, which increases by 12.5 basis points) for each 50 basis point
increase in the funded debt to EBITDA ratio. The maximum margin for Eurodollar
loans is 2.25%, and for Base Rate loans is 1.125%. The margin for the period
October 15, 1998, through November 30, 1998, for Eurodollar loans was 2.00% and
0.875% for Base Rate loans. Effective December 1, 1998 through February 28,
1999, the margins are 2.25% and 1.125% for Eurodollar and Base Rate loans,
respectively. After giving effect to this offering, the margins would continue
to be 2.25% and 1.125% for Eurodollar and Base Rate loans, respectively.
The Bank Credit Facility requires the payment of a quarterly commitment fee,
based on the Company's ratio of funded debt to EBITDA, applied to the average
amount of the unused portion of the Bank Credit Facility. The commitment fee
starts at 25 basis points when the ratio of funded debt to EBITDA is less than
2.00 to 1.00, and increases by 6.25 basis points for the first two increases in
the ratio of 50 basis points, then remains unchanged for the next 50 basis
point increase in the ratio, and thereafter increases by 6.25 basis points for
each 50 basis points increase in the ratio, up to a maximum of 50 basis points.
The commitment fee for the period October 15, 1998 through November 30, 1998
was 43.75 basis points, and for the period December 1, 1998 through February
28, 1999 is 50 basis points. After giving effect to this offering, the
commitment fee would continue to be 50 basis points.
The Bank Credit Facility allows for interest rate swap agreements, or other
interest rate protection agreements, up to a maximum notional amount of
$300,000,000. Presently, the Company does not use such financial instruments.
The net proceeds of the Old Notes offering were first used to repay
borrowings under the Bank Credit Facility. We have used, and will continue to
use, the remaining proceeds for general corporate purposes, primarily for 1999
capital expenditures.
The Company has entered into an agreement to sell 12 acres of land at its
Phoenix, Arizona based Turf Paradise racing facility, for approximately
$4,574,000. The purchaser, a national retailer, intends to construct a major
retail outlet at the site. The sale is expected to be completed in the first
quarter of 1999.
On August 6, 1997, Hollywood Park and Hollywood Park Operating Company co-
issued $125,000,000 aggregate principal amount of 9 1/2% Notes. The Company
paid liquidated damages at an annual rate of 0.5% of the principal amount of
the 9 1/2% Notes for the period January 27, 1998 to March 20, 1998 (the date of
consummation of a registered exchange offer for the 9 1/2% Notes).
Hollywood Park, through its wholly-owned subsidiary HP Yakama, loaned
approximately $9,618,000 to the Yakama Tribal Corporation to construct the
Legends Casino. The Tribal Corporation gave HP Yakama a promissory note for the
$9,618,000, payable in 84 equal installments at a 10% rate of interest.
As of September 30, 1998, the Company had invested approximately $3,845,000
(net of an unrealized loss of approximately $386,000) in equity securities
(including Casino Magic common stock), which were being held as available-for-
sale. Effective upon the completion of the Casino Magic acquisition, those
shares of Casino Magic common stock held by Hollywood Park were cancelled.
In October 1993, a wholly-owned subsidiary of Casino Magic issued and sold,
and Casino Magic guaranteed, $135,000,000 aggregate principal amount of the
Casino Magic Notes. On October 15, 1998, concurrent with the completion of the
Casino Magic acquisition, Casino Magic elected to redeem the Casino Magic Notes
at the optional redemption price of 103.833% and therefore deposited
approximately $141,515,000 with the trustee of the Casino Magic Notes.
Effective with the deposit, Casino Magic and the issuer were discharged from
further obligations for the Casino Magic Notes. The deposit was from proceeds
from borrowings under the Bank Credit Facility.
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In August 1996, Casino Magic of Louisiana, Corp., a wholly-owned subsidiary
of Casino Magic and the owner of Casino Magic Bossier, issued and sold
$115,000,000 aggregate principal amount of 13% First Mortgage Notes due August
15, 2003 (the "Louisiana Notes"). The Louisiana Notes provide for interest at
13% per year and for contingent interest in the amount of 5% of Casino Magic of
Louisiana's adjusted consolidated cash flow under certain circumstances. The
Louisiana Notes are secured by a first priority lien and security interest in
substantially all of the assets of Casino Magic of Louisiana, including the
Bossier Riverboat. Jefferson Casino Corporation, the immediate parent of Casino
Magic of Louisiana, guarantees the Louisiana Notes and the guarantee is secured
by all of the assets of Jefferson Casino Corporation, including all of the
capital stock of Casino Magic of Louisiana, Corp.
On November 13, 1998, due to the acquisition of Casino Magic by Hollywood
Park, Casino Magic of Louisiana, Corp. initiated a change in control purchase
offer at a price of $1,010 for each $1,000 principal amount of Louisiana Notes
outstanding. The change in control purchase offer expired December 23, 1998 and
$2,125,000 in principal amount of the Louisiana Notes were tendered.
As of September 30, 1998, Casino Magic and its subsidiaries (excluding
Casino Magic of Louisiana, Corp.) had other secured and unsecured debt
obligations as follows: (a) six secured notes aggregating approximately
$6,932,000, secured by certain furniture and fixtures at Casino Magic Biloxi,
with interest ranging from 9.5% to 10.3%, and maturity dates ranging from May
2002 to November 2002; (b) a note payable for approximately $2,727,000, secured
by land, bearing interest at prime, due March 2003; (c) an unsecured term note
payable for approximately $1,600,000, bearing interest at 8.25%, due September
1999; (d) an unsecured note payable for approximately $1,214,000, bearing
interest at prime rate plus 1% (9.5% as of September 30, 1998), due February
2000; (e) five other secured notes totaling approximately $1,236,000, with
interest rates ranging from 8.0% to 11.0%, and maturity dates ranging from
April 1999 to June 2004; and (f) various capital lease obligations, secured by
certain equipment, totaling approximately $630,000.
As of September 30, 1998, Casino Magic of Louisiana, Corp. had other secured
and unsecured debt obligations as follows: (a) a note payable for approximately
$1,540,000, secured by certain gaming equipment, bearing interest at 8.75%, due
September 1999; (b) a note payable for approximately $746,000, secured by
certain gaming equipment, bearing interest at 10.5%, due October 1999; (c) two
capital leases for slot machines aggregating $1,769,000; and (d) various other
capital lease obligations, totaling approximately $198,000.
Capital Commitments
As previously discussed, the Company was approved to receive a gaming
license to own and operate a riverboat casino in Indiana. As a result, the
Company has capital commitments of approximately $3,700,000 for the purchase of
the common stock of Pinnacle Gaming Development Corporation (the entity that
initially applied for the Indiana gaming license). The Indiana riverboat
project is expected to cost approximately $150,000,000 (including land and pre-
opening expenses but excluding capitalized interest), to be spent over the next
18 to 24 months. The Company believes that the Bank Credit Facility and
available future cash flow will be sufficient to fund the construction of the
Indiana Hotel/Casino Resort; however, there can be no assurance that additional
funds will not be required.
The Company anticipates spending approximately $26,000,000 in 1999 in
maintenance capital expenditures.
Expansion Costs
In addition to the current capital commitments discussed, Hollywood Park has
other capital needs with respect to Boomtown Reno and Casino Magic Bossier. As
of September 30, 1998, the Company had spent approximately $14,000,000 of the
estimated $25,000,000 on the expansion and renovation of Boomtown Reno,
including additional hotel rooms, expanded gaming space and other amenities.
The hotel opened in late December 1998. As of September 30, 1998, Casino Magic
had spent approximately $14,500,000 of the
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estimated $21,000,000 on the construction of a 188-room hotel and full service
restaurants which opened in December 1998 at Casino Magic Bossier.
General
Hollywood Park is continually evaluating future growth opportunities in the
gaming business. Hollywood Park expects that funding for the Indiana
Hotel/Casino Resort, payment of interest on the Notes and the 9 1/2% Notes,
payment of notes payable, and normal and necessary capital expenditure needs
will come from existing cash balances generated from operating activities and
borrowings from the Bank Credit Facility. In the opinion of management, these
resources will be sufficient to meet Hollywood Park's anticipated cash
requirements for the foreseeable future and in any event for at least the next
twelve months.
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BUSINESS
Hollywood Park
We are a diversified gaming company that owns and/or operates eight casinos,
two pari-mutuel horse racing facilities, and two card club casinos at twelve
locations in Nevada, Mississippi, Louisiana, California, Arizona and Argentina.
We have also been approved to receive the final license to conduct riverboat
gaming on the Ohio River in Indiana and have begun development of a $150
million hotel/casino and golf resort at a site in Switzerland County, Indiana,
35 miles southwest of Cincinnati, Ohio. In addition to our operating
properties, we have significant excess land available for future sale or
development at four of our properties.
In October 1998, we acquired Casino Magic and now own and operate Casino
Magic Bay St. Louis and Casino Magic Biloxi in Mississippi, Casino Magic
Bossier in Louisiana, and two Casino Magic casinos in Argentina. In 1997, we
acquired Boomtown and now own and operate Boomtown Reno in Verdi, Nevada,
Boomtown Biloxi in Biloxi, Mississippi, and Boomtown New Orleans in Harvey,
Louisiana. These companies own strategically located properties in growing and
established gaming markets and, at the time we acquired them, were for the most
part underperforming and had limited access to capital for expansion. In both
acquisitions, we have been able to use our financial and management resources
to streamline operations, implement expansion projects and enable the acquired
companies to refinance expensive debt.
Our two card club casinos in the Los Angeles metropolitan area, the
Hollywood Park-Casino and Crystal Park, offer a variety of card games,
including Poker, Pai Gow and California Blackjack, but by law may not
participate in the wagers made or the outcome of any card games, or offer other
games that are permitted in Nevada and other traditional jurisdictions. We own
and operate the Hollywood Park-Casino, and own and lease Crystal Park to an
unaffiliated third party operator.
Finally, we own and operate two pari-mutuel gaming facilities: Hollywood
Park Race Track, a premier thoroughbred racing facility located on a 378-acre
parcel within three miles of the Los Angeles International Airport, and Turf
Paradise Race Track in Phoenix, Arizona. Hollywood Park Race Track has been the
site of the prestigious Breeders' Cup on three occasions, the most recent in
1997.
In January 1999, we strengthened our gaming management team by hiring Paul
Alanis as our President and Chief Operating Officer and J. Michael Allen as
Senior Vice President-Gaming Operations. Both Mr. Alanis and Mr. Allen held
similar positions with Horseshoe Gaming Inc. Mr. Alanis and Mr. Allen were
hired to actively participate in the overall execution of our business and
operating strategies, including re-positioning the Boomtown and Casino Magic
properties and overseeing the construction and operations of the Indiana Hotel
and Casino Resort.
In light of the Boomtown and Casino Magic acquisitions, the following may be
helpful to give you an idea of the current size of our company. If the
acquisitions and related transactions had occurred on January 1, 1997 (which we
refer to as being on a "pro forma" basis), our revenues would have totaled
approximately $610.8 million for the year ended December 31, 1997 and
approximately $495.2 million for the nine months ended September 30, 1998. On a
pro forma basis, earnings before interest, taxes, depreciation and amortization
(abbreviated as "EBITDA") would have totaled approximately $104.6 million for
the year ended December 31, 1997 and approximately $93.2 million for the nine
months ended September 30, 1998. On this basis, and giving effect to the Old
Notes offering on a pro forma basis, net loss would have totaled $6.6 million
for the year ended December 31, 1997 and net income of approximately $4.0
million for the nine months ended September 30, 1998. In addition, on a pro
forma basis, as of September 30, 1998, we would have had total assets of
approximately $966.4 million. On a pro forma basis, giving effect to the Old
Notes offering, including our use of proceeds from that offering, we would have
had total indebtedness of approximately $623.2 million as of September 30,
1998.
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Corporate Structure
The following chart illustrates the organizational structure of our
principal operations. It is designed to depict how our various operations
relate to one another and our ownership interest in them. It does not contain
all of our subsidiaries and, in some cases for presentation purposes, we have
combined separate entities to indicate operational relationships. We have also
indicated the principal subsidiaries that initially are "Unrestricted
Subsidiaries" under the Indenture, i.e., the subsidiaries that are not
guarantors and are not subject to the Indenture covenants.
[CORPORATE ORGANIZATIONAL CHART APPEARS HERE]
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Business Strategy
Our strategic plan is to develop a broad base of regionally diversified
casino entertainment facilities by making selected acquisitions in the non-Las
Vegas, non-Atlantic City gaming markets and achieving economies of scale. In
the realization of this strategy, we acquired Boomtown on June 30, 1997, and
Casino Magic on October 15, 1998. Our management seeks to develop its casinos
and maximize profitability by:
. refinancing expensive debt;
. fostering customer loyalty by offering a value oriented, quality customer
service gaming experience;
. providing gaming and entertainment facilities uniquely designed for each
property and target customer base; and
. using focused direct marketing incentives.
Specific growth initiatives vary by property type:
Boomtown Casinos. Since the acquisition, we refinanced Boomtown's expensive
debt and undertook various capital expenditure programs to enlarge and enhance
the facilities. The three Boomtown casinos are now fully developed facilities
that serve their local markets in a relaxed and customer-friendly environment.
The goal for our new management team with respect to the Boomtown casinos is
to maximize profitability through cost control and increase market share
through improved marketing. We seek to enhance customer loyalty through direct
customer marketing and by providing customers a high value gaming experience.
Property enhancements and financial restructuring already undertaken at
Boomtown include the following:
Property Enhancements .Boomtown New Orleans: Replacement of existing
riverboat with the Boomtown Belle II, a
$16.4 million riverboat (including
installation and renovation) which is
bigger and has a more elegant decor (opened
February 1998)
.Boomtown New Orleans: $10 million expansion
of land-based premier, adult-oriented
dining and entertainment complex called
"The Great Escape" (opened July 1998)
.Boomtown Reno: $25 million expansion and
renovation, including 200 additional hotel
rooms, a complete renovation of existing
gaming floors, addition of 13,000 square
feet of gaming space (including 200 slot
machines) and 10,000 square feet of meeting
space, additional parking, a new buffet
restaurant, and other amenities (hotel
opened December 1998; other aspects of the
project expected to be completed in the
first quarter of 1999)
Financial Restructuring .Repurchase of $103.5 million principal amount
of Boomtown 11 1/2% First Mortgage Notes
.Repurchase of minority interests in Boomtown
New Orleans for $5.7 million and in
Boomtown Biloxi for $400,000
.Restructure high-cost operating leases
.Prepayment of $2 million note bearing 13%
interest and secured by the existing
Boomtown New Orleans riverboat
.Purchase of dockside barge at Boomtown Biloxi
for $5.3 million
Casino Magic Properties. We believe the Casino Magic properties offer
significant growth potential through improved management and re-positioning of
the brand to a more upscale and exciting image. The
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properties are well-located and have ample room for limited and focused capital
spending to make them more attractive and customer-friendly via parking and
room additions, casino expansion and renovation, and additional entertainment
amenities. Property enhancements and financial restructuring already undertaken
at Casino Magic include the following:
Property Enhancements .Casino Magic Bossier: Accelerated the $21
million construction of an 188-room hotel
with four master suites, 88 junior suites
and additional full service restaurants
(opened December 1998)
Financial Restructuring .Redemption of $135 million principal amount
of Casino Magic 11 1/2% First Mortgage
Notes
We are also considering the following expansion projects at existing Casino
Magic properties:
Possible Expansion .Casino Magic Biloxi: Renovation of the casino
Projects gaming area and its attendant amenities
.Casino Magic Bay St. Louis: Construction of a
300-room hotel next to the casino
.Casino Magic Bossier: Construction of a
second hotel tower consisting of 200
rooms--Our decision to pursue this project
will be made after we have evaluated the
results from the initial 188-room addition
completed in December 1998
Indiana Hotel/Casino Resort. On September 14, 1998, the Indiana Gaming
Commission approved us to receive the last available license to conduct
riverboat gaming operations on the Ohio River in Indiana. We expect to spend
approximately $150 million (including land and pre-opening expenses but
excluding capitalized interest) to develop a new gaming facility approximately
35 miles southwest of Cincinnati, Ohio in Switzerland County, Indiana. This
site will be the most accessible gaming facility from Lexington and other parts
of northern Kentucky. The project will include a cruising riverboat with 38,000
square feet of casino space, as well as a land-based facility with a 309-room
hotel, an 18-hole golf course, convention space, restaurants, and other related
amenities. We own 97% of the Indiana Hotel/Casino Resort; the remaining
interest is held by a non-voting local partner. While we expect to complete the
Indiana Hotel/Casino Resort in 18 to 24 months, construction matters or other
issues may delay the facility's opening.
Excess Land. We are exploring the development of our 378-acre Hollywood Park
Race Track property and our 275-acre Turf Paradise Race Track property. This
land has a combined book value of $13.1 million. Management believes the fair
market value of the land is approximately $230 million. The Hollywood Park Race
Track property has approximately 160 undeveloped acres and Turf Paradise has
approximately 100 undeveloped acres on which we seek to develop multi-use
retail, entertainment and/or sports venues. We have entered an agreement to
sell 12 acres of land at Turf Paradise on which the purchaser intends to
construct a major retail outlet.
We also have excess land at our Reno and Bay St. Louis properties. While the
excess land offers extensive expansion opportunity at each of these properties,
we will aggressively pursue realization of value through sale and/or
development (including joint venture arrangements).
Additional Acquisitions. We continually evaluate opportunities to expand and
diversify our operations through gaming acquisitions in markets outside Las
Vegas and Atlantic City, including entities which are unable to maximize their
potential due to operating inefficiencies or capital constraints. We believe
that by matching our financial and management resources with the opportunities
of the acquired entities, we can significantly improve their operations. We
have applied this strategy in our recent acquisition of Casino Magic and our
earlier acquisition of Boomtown. In both cases, since making the acquisitions,
we have used our resources to streamline operations, implement expansion
projects and refinance expensive debt.
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Louisiana Properties
Louisiana legalized riverboat and dockside gaming in 1991 and gaming
operations began in Louisiana in September 1993.
Casino Magic Bossier
Casino Magic Bossier opened in October 1996, with gaming operations
conducted from a dockside riverboat. The property includes 23 acres of land in
the Shreveport/Bossier City metropolitan area, approximately 180 miles east of
the Dallas-Fort Worth area. The site is highly visible with convenient access
from Interstate Highway 20, the major east-west artery connecting Dallas-Fort
Worth and Bossier City. Most of the customers at Casino Magic Bossier come from
eastern Texas.
The Casino Magic Bossier riverboat contains approximately 30,000 square feet
of gaming space, and offers 980 slot machines and 44 table games. The Casino
Magic Bossier facility includes a 55,000 square foot entertainment pavilion
with a 350-seat buffet, a gift shop, and live entertainment theater. We
recently completed a 188-room luxury hotel with four master suites, 88 junior
suites and a full service restaurant.
Casino Magic Bossier is owned and operated by Casino Magic of Louisiana,
Corp., an indirect wholly-owned subsidiary which will be an Unrestricted
Subsidiary under the Indenture governing the Notes.
Boomtown New Orleans
Boomtown New Orleans began operations in August 1994 on a 50-acre site in
Harvey, Louisiana, approximately ten miles from the French Quarter of New
Orleans. Three riverboats, including our Boomtown New Orleans casino, currently
operate in the New Orleans area. Boomtown New Orleans is located on the "West
Bank" in Jefferson Parish. The West Bank has approximately 300,000 local
residents who comprise a large majority of the Boomtown New Orleans customers.
In mid-February 1998, Boomtown New Orleans began conducting gaming
operations on the Boomtown Belle II, a 380-foot riverboat containing 30,000
square feet of gaming space. The new casino offers 1,089 slot machines and 49
table games. The Boomtown Belle II replaced a smaller riverboat that offered
911 slot machines and 55 table games. Boomtown New Orleans also includes a
land-based facility adjacent to the riverboat dock. The first floor of the
building offers patrons a buffet and a western saloon/dancehall. On July 1,
1998, we opened "The Great Escape," a $10 million expansion project located on
the second floor of the land-based facility. The Great Escape, a premier dining
and entertainment complex, features a 160-seat casual dining restaurant, 500-
person capacity banquet facilities and a state-of-the-art adult-oriented arcade
style amusement center offering numerous attractions, including a 3-D giant
screen thrill ride, virtual reality rides, golf simulators, and a billiard
center.
Mississippi Properties
Mississippi legalized dockside gaming in June 1990 and gaming operations
began in Mississippi in August 1992. We operate three of the eleven casinos in
the Mississippi Gulf Coast market. The Mississippi Gulf Coast is a traditional
vacation destination. The region draws an estimated 6.5 million visitors
annually, primarily from Louisiana, Mississippi, Alabama, Florida and Georgia.
Casino Magic Bay St. Louis
Casino Magic Bay St. Louis began operations in September 1992 as the first
dockside casino in Mississippi to utilize a fixed barge rather than a
traditional riverboat, which allowed for larger contiguous gaming areas and a
more spacious casino environment. Casino Magic Bay St. Louis is approximately
46 miles east of New Orleans, Louisiana. While Casino Magic Bay St. Louis
primarily serves the 4.1 million adults residing within 150 miles of Bay St.
Louis, approximately 50% of these customers come from the greater New Orleans
area.
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Casino Magic Bay St. Louis conducts gaming operations on a permanently
moored barge in a 17-acre marina with the adjoining land based facilities
situated on 591 acres. Casino Magic Bay St. Louis offers approximately 39,500
square feet of gaming space, with 1,132 slot machines and 42 table games. The
three story land-based building houses a restaurant, buffet, snack bar, gift
shop and live entertainment lounge. The property has a 201-room hotel, an 1,800
seat arena for concerts and sporting events, and an 18-hole golf course.
Casino Magic Biloxi
Casino Magic Biloxi, which opened in June 1993, is located on the Front Bay
of Biloxi in a strip with two other casinos on the major highway running
through the Mississippi Gulf Coast. Biloxi is approximately 50 miles west of
Mobile, Alabama. The target market for Casino Magic Biloxi is the 2.2 million
adults within a 200-mile radius of Biloxi and includes visitors from Alabama,
Mississippi and Florida.
Casino Magic Biloxi conducts gaming from a permanently moored barge with
approximately 47,700 square feet of gaming space with 1,174 slot machines and
41 gaming tables. The land-based facility, which is located adjacent to the
barge on the approximately 16-acre site, is approximately 21,600 square feet
and offers buffets and full service restaurants. On May 1, 1998, Casino Magic
Biloxi opened its 378-room luxury hotel, which includes 16 master suites, 70
junior suites, 6,600 square feet of convention and meeting space, a full
service restaurant and retail shops.
Boomtown Biloxi
Boomtown Biloxi began operations in July 1994. Boomtown Biloxi occupies
nineteen acres on Biloxi's historic Back Bay. We lease the site under a 99-year
lease that began in 1994. The casino is one-half mile from Interstate 110,
which is the main highway connecting Interstate 10 and Biloxi.
Boomtown Biloxi offers a 33,632-square foot casino constructed on a
permanently moored barge. The casino contains 1,308 slot machines and 35 table
games. The dockside property includes a land-based facility with restaurants
and other non-gaming activities. We purchased the barge and building shell for
$5.3 million from the lessor of those assets, National Gaming Mississippi,
Inc., of which a $2.5 million balance is due in two annual installments to be
paid in 1999 and 2000.
Nevada Property
Boomtown Reno
Boomtown Reno began operations over 30 years ago on 569 acres in Verdi,
Nevada, seven miles west of Reno and two miles from the California border. The
facility is located on Interstate 80, the major highway connecting Northern
California and Reno. We believe Boomtown Reno maintains a loyal customer base
primarily drawn from Interstate 80 traffic.
Boomtown Reno offers a 40,000-square foot casino with 1,320 slot machines,
44 table games, and two Keno games. Boomtown Reno opened a new 200-room hotel
tower in December 1998 to augment its existing 122-room hotel. It also offers a
35,000-square foot family entertainment center, a 16-acre truck stop, a
recreational vehicle park, and other related amenities.
California Properties
Hollywood Park Race Track
The Hollywood Park Race Track is located in the Los Angeles metropolitan
area, which has a population base of approximately 14 million people. The race
track sits on 378 acres, approximately 160 of which are undeveloped. Since
1938, the Hollywood Park Race Track has been among the country's most
distinguished thoroughbred racing facilities. In 1997, it hosted the Breeders'
Cup championship racing series for the third time.
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Through our wholly-owned subsidiary, Hollywood Park Operating Company, we
conduct two live on-track thoroughbred horse race meets per year. The meets
provide a total of approximately 95 to 100 race days per year, usually with
nine races a day. We also send the signal of our live races to hundreds of off-
track sites, including fairgrounds, hotels, casinos, and other race tracks, and
receive simulcast signals from live races conducted at other race tracks,
including Southern and Northern California tracks.
Hollywood Park derives revenues primarily from a share of the pari-mutuel
handle at rates fixed by the State of California. Pari-mutuel wagering means
that patrons bet against each other in a pool rather than against the operator
of the facility or with pre-set odds. Hollywood Park also receives revenue from
admission fees and concession sales.
The Hollywood Park-Casino
The Hollywood Park-Casino opened in July 1994 on the premises of the
Hollywood Park Race Track. We operate the casino under a California law that
permits publicly-traded pari-mutuel racing associations to operate card club
casinos on race track premises.
The Hollywood Park-Casino offers 145 table games in 30,000 square feet of
gaming space. California card club casinos may not participate in the wagers
made or in the outcome of any card games. The Hollywood Park-Casino offers only
certain card games, including Poker, Pai Gow and California Blackjack, but no
slot machines. Hollywood Park-Casino patrons pay a fee for seats at gaming
tables or for each hand played. We also derive revenue from food and beverage
sales, rental of facilities for bingo, gift shops and health club operations.
Crystal Park Hotel and Casino
Crystal Park opened in late 1996 as Southern California's first major
combined hotel and casino property. The 226-room hotel operates under a
Radisson Hotels International, Inc. flag. Crystal Park's casino, which has 60
table games, offers games similar to those offered at the Hollywood Park-
Casino.
Since Crystal Park is not located on the same property as a race track, an
unaffiliated operator who is licensed by the State of California and the City
of Compton operates Crystal Park under a four year triple-net lease. Although
the rent was due to increase to $350,000 per month as of July 1, 1998, we
agreed to accept rent of $150,000 per month through January 1999. We expect
that, under present market conditions, the monthly rent will not increase as
scheduled in the lease, but rather will remain between $100,000 and $150,000.
Arizona Property
Turf Paradise
We acquired Turf Paradise in 1994. Turf Paradise was organized in 1954 and
is located in the northwest region of Phoenix, Arizona on approximately 275
acres, approximately 100 of which are undeveloped. We have entered into an
agreement to sell 12 acres of the undeveloped land for approximately $4.6
million. The purchaser, a national retailer, intends to construct a major
retail outlet on the site. We expect to complete the sale in the first quarter
of 1999.
Turf Paradise conducts one live thoroughbred meet per year, which runs from
September to May. During live racing, Turf Paradise accepts simulcast races
from numerous race tracks, and also sends its live race signals to a large
number of off-track sites. Turf Paradise operates as a simulcast facility,
accepting race signals during its off season covering June through August.
Argentina Properties
We operate two casinos in the cities of Neuquen and San Martin de los Andes
in west central Argentina. Approximately 900,000 people live within a 150-mile
radius of the two cities. The cities are located near
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several Argentine tourist attractions, including national parks, ski resorts
and a wide variety of outdoor activities.
Casino Magic Argentina
In December, 1994, Casino Magic Neuquen SA, a wholly-owned subsidiary of
Casino Magic, entered into a twelve-year concession agreement with the
provincial government of the Argentine Province of Neuquen to operate the
casinos. Gaming operations began on January 1, 1995. On May 31, 1997, Casino
Magic sold a 49% interest in Casino Magic Neuquen SA to Crown Casino Corp. for
$7 million. We retain a controlling interest in Casino Magic Neuquen SA and
manage the casinos in Argentina for a fee equal to approximately two percent of
the casinos' gross revenues.
The larger casino, located in the city of Neuquen, contains approximately
27,000 square feet of gaming space and offers 398 slot machines, 40 table
games, and a 384-seat bingo facility. The smaller casino operates in San Martin
de los Andes, a resort town approximately 200 miles southwest of the city of
Neuquen. The San Martin de los Andes casino offers 75 slot machines and 16
table games in approximately 2,500 square feet of gaming space.
Other Gaming Interests
Legends Casino
Through HP Yakama, Inc., our wholly-owned subsidiary, we made a seven-year
loan of approximately $9.6 million, at 10% interest, to the Yakama Tribal
Gaming Corporation to construct the Legends Casino, which opened in May 1998 in
Toppenish, Washington. Legends Casino is approximately 160 miles from both
Seattle, Washington and Portland, Oregon, and features a 600-seat bingo hall,
electronic pull tabs, and table games, including Blackjack, Poker, Craps,
Roulette, Mini-bac, and Caribbean Stud. Legends Casino does not have slot
machines. The Yakama Tribal Gaming Corporation pays HP Yakama an amount equal
to 28% of Net Revenues (as defined in the relevant agreement). The payment
decreases to 22% over a seven-year period. HP Yakama pays 22% of payments
received from the Yakama Tribal Gaming Corporation to North American Sports
Management pursuant to a Profit Participation Agreement.
Employees
The following is a summary of Hollywood Park's employees by property:
<TABLE>
<CAPTION>
Total
Permanent Seasonal Staffing
Property Staff Staff Range
-------- --------- -------- ------------
<S> <C> <C> <C>
Hollywood Park-Casino........................ 1,415 -- 1,415
Boomtown Reno................................ 800 300 800-1,100
Boomtown New Orleans......................... 1,100 -- 1,100
Boomtown Biloxi.............................. 970 -- 970
Casino Magic Bay St. Louis................... 1,250 50 1,250-1,300
Casino Magic Biloxi.......................... 1,160 -- 1,160
Casino Magic Bossier......................... 1,425 -- 1,425
Casino Magic Argentina....................... 255 -- 255
Hollywood Park Race Track.................... 390 1,020 390-1,410
Turf Paradise................................ 85 425 85-510
Corporate.................................... 35 -- 35
----- ----- ------------
8,885 1,795 8,885-10,680
===== ===== ============
</TABLE>
We do not employ the staff at the Crystal Park Casino.
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Our staff is non-union, with the exception of the janitorial and food
service employees at the Hollywood Park-Casino and the majority of the seasonal
staff at the Hollywood Park Race Track. We believe that we have good
relationships with our employees. We are presently in or about to begin
discussions with the union representing the food service staff. We believe that
this contract will be renewed without incident, though there can be no
assurance that labor problems will be avoided.
Properties
The following describes our principal real estate properties:
Casino Magic Bossier. We own the 23-acre site on the Red River in Bossier
City, Louisiana on which Casino Magic Bossier is located. The property, which
contains a dockside casino and land-based facilities, including a new hotel
that opened in December 1998, secures the outstanding $112.9 million aggregate
principal amount of Louisiana Notes. Casino Magic Bossier is owned and operated
by Casino Magic of Louisiana, Corp., an indirect wholly-owned subsidiary which
will be an unrestricted subsidiary under the Indenture governing the Notes.
Boomtown New Orleans. We own the approximately 50 acres in Harvey, Louisiana
on which Boomtown New Orleans is located. This property is approximately 10
miles from the French Quarter of New Orleans. We own all improvements to and
facilities on this property, including the riverboat casino.
Casino Magic Bay St. Louis. We own approximately 591 acres in the city of
Bay St. Louis, Mississippi, including the 17-acre marina where the gaming barge
is moored. The property includes an 18-hole golf course, a hotel, and other
land-based facilities, all of which we own.
Casino Magic Biloxi. Casino Magic Biloxi is located on an approximately 16-
acre site, which includes land located on both the north and south sides of
U.S. Highway 90. We own approximately 4.5 acres and lease approximately 11.5
acres, including approximately 6.4 acres of submerged tidelands adjacent to the
land which is leased from the State of Mississippi under a ten-year lease with
a five-year renewal option.
Boomtown Biloxi. We lease substantially all of the 19 acres on which
Boomtown Biloxi sits under a 99 year lease that began in 1994. In addition, we
lease property for parking under several lease agreements ranging from 10 to 25
years. We also lease approximately 5.1 acres of submerged tidelands at the
casino site from the State of Mississippi under a ten-year lease with a five-
year option to renew. We own the barge on which the casino is located and all
of the land-based facilities.
Boomtown Reno. We own the 569 acres of land in Verdi, Nevada on which
Boomtown Reno is located. We use approximately 61 acres for current operations.
We also own all of the improvements and facilities on the land, including the
casino, hotel, fun center, truck stop and recreational vehicle park. We also
own the related water rights and operate our own sewage treatment facility at
the site. Of the remaining acreage, we are considering developing approximately
250 acres.
Hollywood Park Race Track and Hollywood Park-Casino. We own approximately
378 acres in Inglewood, California. Management believes the fair market value
of the land equals approximately $200 million. The property contains the 60,000
square foot Hollywood Park-Casino, the Hollywood Park Race Track and our
executive offices. The Hollywood Park Race Track, Hollywood Park-Casino, and
parking areas cover approximately 218 acres, leaving approximately 160 acres
available for development.
Crystal Park Hotel and Casino. Crystal Park Hotel and Casino Development
Company, LLC, our wholly-owned subsidiary, leases the hotel from the City of
Compton under a 50-year lease, but owns the ground floor where the
approximately 40,000 square foot casino is located. It also owns approximately
six acres of land containing a parking structure used for the hotel and casino
and leases an additional approximately 35 acres of unimproved land to be used
for expansion or additional parking, if needed. An unaffiliated third party
operates Crystal Park under a four-year triple-net lease.
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Turf Paradise. We own approximately 275 acres in the northwest region of
Phoenix, Arizona, on which our Turf Paradise race track is located. Management
believes the land has a fair market value of approximately $30 million. The
site includes approximately 100 acres of undeveloped land. We have entered into
an agreement to sell 12 acres of the property to a national retailer, who plans
to construct a major retail outlet on the purchased parcels.
Argentina Properties. We operate two casinos in Argentina under a twelve-
year concession agreement with the provincial government of the Argentine
Province of Neuquen. Pursuant to the agreement, we operate a casino in the city
of Neuquen on an approximately 27,000 square foot site owned by the Province of
Neuquen and provided to us as part of the concession. The second casino is in
San Martin de los Andes on an approximately 2,500 square foot site which we
lease from a third party for a six-year term. We have the option to extend the
term of the concession agreement for a minimum of an additional five years if
we expend more than $5 million to construct a hotel in the Province of Neuquen.
Except for the Casino Magic Bossier and Argentina properties, substantially
all of the properties described above are pledged to secure obligations under
the Bank Credit Facility.
Regulation and Licensing
Louisiana. The ownership and operation of a riverboat gaming vessel is
subject to the Louisiana Riverboat Economic Development and Gaming Control Act
(the "Louisiana Act"). As of May 1, 1996, gaming activities are regulated by
the Louisiana Gaming Control Board (the "Board"). The Board is responsible for
issuing the gaming license and enforcing the laws, rules and regulations
relative to riverboat gaming activities. The Board is empowered to issue up to
15 licenses to conduct gaming activities on a riverboat of new construction in
accordance with applicable law. However, no more than six licenses may be
granted to riverboats operating from any one parish.
The laws and regulations of Louisiana seek to (i) prevent unsavory or
unsuitable persons from having any direct or indirect involvement with gaming
at any time or in any capacity, (ii) establish and maintain responsible
accounting practices and procedures; (iii) maintain effective control over the
financial practices of licensees, including establishing procedures for
reliable record keeping and making periodic reports to the Board; (iv) prevent
cheating and fraudulent practices; (v) provide a source of state and local
revenues through fees; and (vi) ensure that gaming licensees, to the extent
practicable, employ and contract with Louisiana residents, women and
minorities.
The Louisiana Act specifies certain restrictions and conditions relating to
the operation of riverboat gaming, including but not limited to the following:
(i) in parishes bordering the Red River, such as the Company's Casino Magic
property in Bossier, gaming may be conducted dockside; however, in all other
authorized locations such as Boomtown New Orleans, gaming is not permitted
while a riverboat is docked, other than for forty-five minutes between
excursions, unless dangerous weather or water conditions exist; (ii) each round
trip riverboat cruise may not be less than three nor more than eight hours in
duration, subject to specified exceptions; (iii) agents of the Board are
permitted on board at any time during gaming operations; (iv) gaming devices,
equipment and supplies may be purchased or leased from permitted suppliers; (v)
gaming may only take place in the designated river or waterway; (vi) gaming
equipment may not be possessed, maintained, or exhibited by any person on a
riverboat except in the specifically designated gaming area, or a secure area
used for inspection, repair, or storage of such equipment; (vii) wagers may be
received only from a person present on a licensed riverboat; (viii) persons
under 21 are not permitted in designated gaming areas; (ix) except for slot
machine play, wagers may be made only with tokens, chips, or electronic cards
purchased from the licensee aboard a riverboat, (x) licensees may only use
docking facilities and routes for which they are licensed and may only board
and discharge passengers at the riverboat's licensed berth; (xi) licensees must
have adequate protection and indemnity insurance; (xii) licensees must have all
necessary federal and state licenses, certificates and other regulatory
approvals prior to operating a riverboat; and (xiii) gaming may only be
conducted in accordance with the terms of the license and the rules and
regulations adopted by the Board.
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No person may receive any percentage of the profits from the Company's
operations in Louisiana without first being found suitable. In March 1994,
Boomtown New Orleans, its officers, key personnel, partners and persons holding
a 5% or greater interest in the partnership were found suitable by the
predecessor to the Board. In April 1996, the Board's predecessor confirmed that
Casino Magic Bossier's officers, key personnel, partners and persons holding a
5% or greater interest in the corporation were suitable and authorized to
acquire an existing licensee. A gaming license is deemed to be a privilege
under Louisiana law and as such may be denied, revoked, suspended, conditioned
or limited at any time by the Board. In issuing a license, the Board must find
that the applicant is a person of good character, honesty and integrity and the
applicant is a person whose prior activities, criminal record, if any,
reputation, habits and associations do not pose a threat to the public interest
of the State of Louisiana or to the effective regulation and control of gaming,
or create or enhance the dangers of unsuitable, unfair or illegal practices,
methods, and activities in the conduct of gaming or the carrying on of business
and financial arrangements in connection therewith. The Board will not grant
any licenses unless it finds that: (i) the applicant is capable of conducting
gaming operations, which means that the applicant can demonstrate the
capability, either through training, education, business experience, or a
combination of the above, to operate a gaming casino; (ii) the proposed
financing of the riverboat and the gaming operations is adequate for the nature
of the proposed operation and from a source suitable and acceptable to the
Board; (iii) the applicant demonstrates a proven ability to operate a vessel of
comparable size, capacity and complexity to a riverboat in its application for
a license; (v) the applicant designates the docking facilities to be used by
the riverboat; (vi) the applicant shows adequate financial ability to construct
and maintain a riverboat; (vii) the applicant has a good faith plan to recruit,
train and upgrade minorities in all employment classifications; and (viii) the
applicant is of good moral character.
The Board may not award a license to any applicant who fails to provide
information and documentation to reveal any fact material to qualifications or
who supplies information which is untrue or misleading as to a material fact
pertaining to the qualification criteria; who has been convicted of or pled
nolo contendere to an offense punishable by imprisonment of more than one year;
who is currently being prosecuted for or regarding whom charges are pending in
any jurisdiction of an offense punishable by more than one year imprisonment;
if any holder of 5% or more in the profits and losses of the applicant has been
convicted of or pled guilty or nolo contendere to an offense which at the time
of conviction is punishable as a felony.
The transfer of a license is prohibited. The sale, assignment, transfer,
pledge, or disposition of securities which represent 5% or more of the total
outstanding shares issued by a holder of a license is subject to prior Board
approval. A security issued by a holder of a license must generally disclose
these restrictions.
Section 2501 of the regulations enacted by the Louisiana State Police
Riverboat Gaming Division pursuant to the Louisiana Act (the "Regulations")
requires prior written approval of the Board of all persons involved in the
sale, purchase, assignment, lease, grant or foreclosure of a security interest,
hypothecation, transfer, conveyance or acquisition of an ownership interest
(other than in a corporation) or economic interest of five percent (5%) or more
in any licensee.
Section 2523 of the Regulations requires notification to and prior approval
from the Board of the (a) application for, receipt, acceptance or modification
of a loan, or the (b) use of any cash, property, credit, loan or line of
credit, or the (c) guarantee or granting of other forms of security for a loan
by a licensee or person acting on a licensee's behalf. Exceptions to prior
written approval apply to any transaction for less than $2,500,000 in which all
of the lending institutions are federally regulated, or if the transaction
involves publicly registered debt and securities sold pursuant to a firm
underwriting agreement.
The failure of a licensee to comply with the requirements set forth above
may result in the suspension or revocation of that licensee's gaming license.
Additionally, if the Board finds that the individual owner or holder of a
security of a corporate license or intermediary company or any person with an
economic interest in a licensee is not qualified under the Louisiana Act, the
Board may require, under penalty of suspension or revocation of the license,
that the person not (a) receive dividends or interest on securities of the
corporation,
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(b) exercise directly or indirectly a right conferred by securities of the
corporation, (c) receive remuneration or economic benefit from the licensee, or
(d) continue in an ownership or economic interest in the licensee.
A licensee must periodically report the following information to the Board,
which is not confidential and is to be available for public inspection: the
licensee's net gaming proceeds from all authorized games; the amount of net
gaming proceeds tax paid; and all quarterly and annual financial statements
presenting historical data that are submitted to the Board, including annual
financial statements that have been audited by an independent certified public
accountant.
The Board has adopted rules governing the method for approval of the area of
operations and the rules and odds of authorized games and devices permitted,
and prescribing grounds and procedures for the revocation, limitation or
suspension of licenses and permits.
On April 19, 1996, the Louisiana legislature adopted legislation requiring
statewide local elections on a parish-by-parish basis to determine whether to
prohibit or continue to permit licensed riverboat gaming, licensed video poker
gaming, and licensed land-based gaming in Orleans Parish. The applicable local
election took place on November 5, 1996, and the voters in the parishes of
Boomtown New Orleans and Casino Magic Bossier voted to continue licensed
riverboat and video poker gaming. However, it is noteworthy that the current
legislation does not provide for any moratorium on future local elections on
gaming.
Mississippi. The ownership and operation of casino facilities in Mississippi
are subject to extensive state and local regulation, but primarily the
licensing and regulatory control of the Mississippi Gaming Commission (the
"Mississippi Commission") and the Mississippi State Tax Commission (the
"Mississippi Gaming Authorities").
The Mississippi Gaming Control Act (the "Mississippi Act"), which legalized
dockside casino gaming in Mississippi, was enacted June 29, 1990. Although not
identical, the Mississippi Act is similar to the Nevada Gaming Control Act. The
Mississippi Commission adopted regulations which are also similar in many
respects to the Nevada Gaming Commission's regulations.
The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Commission seek to: (i) prevent unsavory or unsuitable persons from
having any direct or indirect involvement with gaming at any time or in any
capacity; (ii) establish and maintain responsible accounting practices and
procedures; (iii) maintain effective control over the financial practices of
licensees, including establishing minimum procedures for internal fiscal
affairs and safeguarding of assets and revenues, providing reliable record
keeping and making periodic reports to the Mississippi Commission; (iv) prevent
cheating and fraudulent practices; (v) provide a source of state and local
revenues through taxation and licensing fees; and (vi) ensure that gaming
licensees, to the extent practicable, employ Mississippi residents. The
regulations are subject to amendment and interpretation by the Mississippi
Commission. Changes in Mississippi laws or regulations may limit or otherwise
materially affect the types of gaming that may be conducted and such changes,
if enacted, could have an adverse effect on the Company and the Company's
Mississippi gaming operations.
The Mississippi Act provides for legalized dockside gaming at the discretion
of the 14 counties that border the Gulf Coast or the Mississippi River, but
only if the voters in such counties have not voted to prohibit gaming in that
county. During 1998, certain anti-gaming groups proposed for adoption through
the initiative and referendum process certain amendments to the Mississippi
Constitution. The proposals were declared illegal by Mississippi courts on
constitutional and procedural grounds. If another such proposal were to be
offered and if a sufficient number of signatures were to be gathered to place a
legal initiative on the ballot, it is possible for the voters of Mississippi to
consider such a proposal in November of 2000. See "Risk Factors-- Uncertain
Status of Mississippi Anti-Gaming Initiative." As of January 1, 1999, dockside
gaming was permissible in nine of the fourteen eligible counties in the state
and gaming operations had commenced in Adams, Coahoma, Hancock, Harrison,
Tunica, Warren and Washington counties. Under Mississippi law, gaming vessels
must be located on the Mississippi River or on navigable waters in eligible
counties along the Mississippi River or in the waters lying south of the
counties along the Mississippi Gulf Coast. The law permits
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unlimited stakes gaming on permanently moored vessels on a 24-hour basis and
does not restrict the percentage of space which may be utilized for gaming.
There are no limitations on the number of gaming licenses which may be issued
in Mississippi.
The Company and any subsidiary of the Company (or partnership in which the
subsidiary is a partner) that operates a casino in Mississippi (a "Mississippi
Gaming Subsidiary"), is subject to the licensing and regulatory control of the
Mississippi Commission. The Company must be registered under the Mississippi
Act as a publicly traded holding company for the Mississippi Gaming
Subsidiaries and is required periodically to submit detailed financial and
operating reports to the Mississippi Commission and furnish any other
information which the Mississippi Commission may require. If the Company is
unable to continue to satisfy the registration requirements of the Mississippi
Act, the Company and its Mississippi Gaming Subsidiaries cannot own or operate
gaming facilities in Mississippi. Each Mississippi Gaming Subsidiary must
maintain a gaming license from the Mississippi Commission to operate a casino
in Mississippi. Such licenses are issued by the Mississippi Commission subject
to certain conditions, including continued compliance with all applicable state
laws and regulations.
Gaming licenses are not transferable, are issued for a two-year period and
must be renewed periodically thereafter. Boomtown Biloxi's license must be
renewed in July of 2000, Casino Magic Bay St. Louis's license must be renewed
in April of 2000, and Casino Magic Biloxi's license must be renewed in December
of 2000. No person may become a stockholder of or receive any percentage of
profits from a licensed subsidiary of a holding company without first obtaining
licenses and approvals from the Mississippi Commission. The Company has
obtained such approvals in connection with the licensing of its Mississippi
Gaming Subsidiaries, and the registration of the Company as a publicly-traded
holding company.
Certain officers and employees of the Company and the officers, directors
and certain key employees of the Company's Mississippi Gaming Subsidiaries must
be found suitable or be licensed by the Mississippi Commission. The Company
believes that findings of suitability with respect to such persons associated
with the Company or its Mississippi Gaming Subsidiaries have been applied for
or obtained, although the Mississippi Commission in its discretion may require
additional persons to file applications for findings of suitability. In
addition, any person having a material relationship or involvement with the
Company may be required to be found suitable or licensed, in which case those
persons must pay the costs and fees associated with such investigation. The
Mississippi Commission may deny an application for a finding of suitability for
any cause that it deems reasonable. Changes in certain licensed positions must
be reported to the Mississippi Commission. In addition to its authority to deny
an application for a finding of suitability, the Mississippi Commission has
jurisdiction to disapprove a change in a licensed position. The Mississippi
Commission has the power to require any Mississippi Gaming Subsidiary and the
Company to suspend or dismiss officers, directors and other key employees or
sever relationships with other persons who refuse to file appropriate
applications or whom the authorities find unsuitable to act in such capacities.
Employees associated with gaming must obtain work permits that are subject
to immediate suspension under certain circumstances. The Mississippi Commission
shall refuse to issue a work permit to a person convicted of a felony and it
may refuse to issue a work permit to a gaming employee if the employee has
committed certain misdemeanors or knowingly violated the Mississippi Act or for
any other reasonable cause.
At any time, the Mississippi Commission has the power to investigate and
require the finding of suitability of any record or beneficial stockholder of
the Company. Mississippi law requires any person who acquires more than 5% of
the common stock of a publicly traded corporation registered with the
Mississippi Commission to report the acquisition to the Mississippi Commission,
and such person may be required to be found suitable. Also, any person who
becomes a beneficial owner of more than 10% of the common stock of such a
company, as reported to the Securities and Exchange Commission, must apply for
a finding of suitability by the Mississippi Commission and must pay the costs
and fees that the Mississippi Commission incurs in conducting the
investigation. The Mississippi Commission has generally exercised its
discretion to require a finding of suitability of any beneficial owner of more
than 5% of a registered publicly-traded holding
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company's common stock. However, the Mississippi Commission has adopted a
policy that permits certain institutional investors to own beneficially up to
10% of a registered public company's stock without a finding of suitability. If
a stockholder who must be found suitable is a corporation, partnership or
trust, it must submit detailed business and financial information, including a
list of beneficial owners.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Mississippi
Commission may be found unsuitable. Management believes that compliance by the
Company with the licensing procedures and regulatory requirements of the
Mississippi Commission will not affect the marketability of the Company's
securities. Any person found unsuitable and who holds, directly or indirectly,
any beneficial ownership of the securities of the Company beyond such time as
the Mississippi Commission prescribes, may be guilty of a misdemeanor. The
Company is subject to disciplinary action if, after receiving notice that a
person is unsuitable to be a stockholder or to have any other relationship with
the Company or its Mississippi Gaming Subsidiaries, the Company: (i) pays the
unsuitable person any dividend or other distribution upon the voting securities
of the Company; (ii) recognizes the exercise, directly or indirectly, of any
voting rights conferred by securities of the Company; (iii) pays the unsuitable
person any remuneration in any form for services rendered or otherwise, except
in certain limited and specific circumstances; or (iv) fails to pursue all
lawful efforts to require the unsuitable person to divest himself of the
securities, including, if necessary, the immediate purchase of the securities
for cash at a fair market value.
The Company may be required to disclose to the Mississippi Commission upon
request the identities of the holders of any of the Company's debt securities,
such as the Old Notes, the Exchange Notes and the 9 1/2% Notes. In addition,
under the Mississippi Act the Mississippi Commission may, in its discretion,
(i) require holders of securities of registered corporations, including debt
securities such as the Notes, to file applications, (ii) investigate such
holders, and (iii) require such holders to be found suitable to own such
securities. Although the Mississippi Commission generally does not require the
individual holders of obligations such as the Notes to be investigated and
found suitable, the Mississippi Commission retains the discretion to do so for
any reason, including but not limited to a default, or where the holder of the
debt instrument exercises a material influence over the gaming operations of
the entity in question. Any holder of debt securities required to apply for a
finding of suitability must pay all investigative fees and costs of the
Mississippi Commission in connection with such an investigation.
Each Mississippi Gaming Subsidiary must maintain in Mississippi a current
ledger with respect to ownership of its equity securities, and the Company must
maintain in Mississippi a current list of stockholders of the Company which
must reflect the record ownership of each outstanding share of any class of
equity security issued by the Company. The ledger and stockholder lists must be
available for inspection by the Mississippi Commission at any time. If any
securities of the Company are held in trust by an agent or by a nominee, the
record holder may be required to disclose the identity of the beneficial owner
to the Mississippi Commission. A failure to make such disclosure may be grounds
for finding the record holder unsuitable. The Company must also render maximum
assistance in determining the identity of the beneficial owners.
The Mississippi Act requires that the certificates representing securities
of a publicly-traded corporation bear a legend to the general effect that such
securities are subject to the Mississippi Act and the regulations of the
Mississippi Commission. The Company has received a waiver from this legend
requirement from the Mississippi Commission. The Mississippi Commission has the
power to impose additional restrictions on the holders of the Company's
securities at any time.
Substantially all loans, leases, sales of securities and similar financing
transactions by a Mississippi Gaming Subsidiary must be reported to or approved
by the Mississippi Commission. A Mississippi Gaming Subsidiary may not make an
issuance or a public offering of its securities, but may pledge or mortgage
casino facilities. The equity interests of a Mississippi Gaming Subsidiary may
not be pledged without the prior approval of the Mississippi Commission. The
Company may not make a public offering of its securities without the prior
approval of the Mississippi Commission if any part of the proceeds of the
offering is to be used to finance the construction, acquisition or operation of
gaming facilities in Mississippi or to retire or extend
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obligations incurred for one or more such purposes. Such approval, if given,
does not constitute a recommendation or approval of the investment merits of
the securities subject to the offering.
Changes in control of the Company through merger, consolidation, acquisition
of assets, management or consulting agreements or any form of takeover, and
certain recapitalizations and stock purchases by the Company, cannot occur
without the prior approval of the Mississippi Commission. The Mississippi
Commission may also require controlling stockholders, officers, directors and
other persons having a material relationship or involvement with the entity
proposing to acquire control, to be investigated and licensed as part of the
approval process relating to the transaction.
The Mississippi legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other corporate
defense tactics that affect corporate gaming licensees in Mississippi and
corporations whose stock is publicly traded that are affiliated with those
licensees, may be injurious to stable and productive corporate gaming. The
Mississippi Commission has established a regulatory scheme to ameliorate the
potentially adverse effects of these business practices upon Mississippi's
gaming industry and to further Mississippi's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Mississippi
Commission before the Company may make exceptional repurchases of voting
securities in excess of the current market price of its common stock (commonly
called "greenmail") or before a corporate acquisition opposed by management may
be consummated. Mississippi's gaming regulations will also require prior
approval by the Mississippi Commission if the Company adopts a plan of
recapitalization proposed by its Board of Directors opposing a tender offer
made directly to the shareholders for the purpose of acquiring control of the
Company.
Neither the Company nor any subsidiary may engage in gaming activities in
Mississippi while also conducting gaming operations outside of Mississippi
without approval of the Mississippi Commission. The Mississippi Commission may
require determinations that, among other things, there are means for the
Mississippi Commission to have access to information concerning the out-of-
state gaming operations of the Company and its affiliates. The Mississippi
Commission must approve any future gaming operations of the Company outside
Mississippi. The Mississippi Commission has approved the Company's current
operations in other jurisdictions but must approve the Company's operations in
any new jurisdictions.
If the Mississippi Commission decides that a Mississippi Gaming Subsidiary
violated a gaming law or regulation, the Mississippi Commission could limit,
condition, suspend or revoke the license of the Mississippi Gaming Subsidiary.
In addition, a Mississippi Gaming Subsidiary, the Company and the persons
involved could be subject to substantial fines for each separate violation.
Because of such a violation, the Mississippi Commission could attempt to
appoint a supervisor to operate the casino facilities. Limitation, conditioning
or suspension of any gaming license or the appointment of a supervisor could
(and revocation of any gaming license would) materially adversely affect the
Company and the Mississippi Gaming Subsidiary's gaming operations and the
Company's results of operations.
License fees and taxes, computed in various ways depending on the type of
gaming involved, are payable to the State of Mississippi and to the counties
and cities in which a Mississippi Gaming Subsidiary's respective operations
will be conducted. Depending upon the particular fee or tax involved, these
fees and taxes are payable either monthly, quarterly or annually and are based
upon (i) a percentage of the gross gaming revenues received by the casino
operation, (ii) the number of slot machines operated by the casino or (iii) the
number of table games operated by the casino. The license fee payable to the
State of Mississippi is based upon "gaming receipts" (generally defined as
gross receipts less pay outs to customers as winnings) and equals 4% of gaming
receipts of $50,000 or less per month, 6% of gaming receipts over $50,000 and
less than $134,000 per month, and 8% of gaming receipts over $134,000. The
foregoing license fees are allowed as a credit against the licensee's
Mississippi income tax liability for the year paid. The gross revenue fee
imposed by the Mississippi communities in which the Company's casino operations
are located equals approximately 4 percent of the gaming receipts.
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In October 1994, the Mississippi Commission adopted two new regulations.
Under the first regulation, as condition of licensure or license renewal,
casino vessels on the Mississippi Gulf Coast that are not self-propelled must
be moored to withstand a Category 4 hurricane with 155 mile-per-hour winds and
15-foot tidal surge. The Company believes that all of its Mississippi Gaming
Subsidiaries currently meet this requirement. The second regulation requires as
a condition of licensure or license renewal that a gaming establishment's plan
include a 500-car parking facility in close proximity to the casino complex and
infrastructure facilities, the expenditures for which will amount to at least
25% of the casino cost. Such facilities shall include any of the following: a
250-room hotel of at least a two-star rating as defined by the current edition
of the Mobil Travel Guide, a theme park, golf courses, marinas, tennis complex,
entertainment facilities, or any other such facility as approved by the
Mississippi Commission as infrastructure. Parking facilities, roads, sewage and
water systems, or facilities normally provided by cities and/or counties are
excluded. The Mississippi Commission may in its discretion reduce the number of
rooms required, where it is shown to the Commission's satisfaction that
sufficient rooms are available to accommodate the anticipated visitor load. The
Company believes that all of its Mississippi Gaming Subsidiaries currently meet
such requirements. The Mississippi Commission has recently approved amendments
to the regulation that would increase the infrastructure development
requirement from 25% to 100% for new casinos (or upon acquisition of a closed
casino), but would grandfather existing licensees.
The sale of food or alcoholic beverages at the Mississippi Gaming
Subsidiaries is subject to licensing, control and regulation by the applicable
state and local authorities. The agencies involved have full power to limit,
condition, suspend or revoke any such license, and any such disciplinary action
could (and revocation would) have a material adverse effect upon the operations
of the affected casino or casinos. Certain officers and managers of the Company
and the Mississippi Gaming Subsidiaries must be investigated by the Alcoholic
Beverage Control Division of the State Tax Commission (the "ABC") in connection
with the Mississippi Gaming Subsidiaries' liquor permits. Changes in licensed
positions must be approved by the ABC.
Nevada. The ownership and operation of casino gaming facilities in Nevada
are subject to: (i) the Nevada Gaming Control Act and the regulations
promulgated thereunder (collectively, "Nevada Act"); and (ii) various local
regulations. The Company's gaming operations are subject to the licensing and
regulatory control of the Nevada Gaming Commission ("Nevada Commission"), the
Nevada State Gaming Control Board ("Nevada Board") and Washoe County. The
Nevada Commission, the Nevada Board and Washoe County are collectively referred
to as the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the prevention of
cheating and fraudulent practices; and (v) providing a source of state and
local revenues through taxation and licensing fees. Changes in such laws,
regulations and procedures could have an adverse effect on Boomtown's gaming
operations.
Boomtown Hotel & Casino, Inc. (the "Gaming Subsidiary"), which operates
Boomtown Reno and two other gaming operations with slot machines only, is
required to be licensed by the Nevada Gaming Authorities. The gaming licenses
require the periodic payment of fees and taxes and are not transferable. The
Company is currently registered by the Nevada Commission as a publicly traded
corporation (a "Registered Corporation") and has been found suitable to own the
stock of Boomtown, which is registered as an intermediary company
("Intermediary Company"). Boomtown has been found suitable to own the stock of
the Gaming Subsidiary, which is a corporate licensee (a "Corporate Licensee")
under the terms of the Nevada Act. As a Registered Corporation, the Company is
required periodically to submit detailed financial and operating reports to the
Nevada Commission and furnish any other information which the Nevada Commission
may require. No person
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may become a stockholder of, or holder of an interest of, or receive any
percentage of profits from an Intermediary Company or a Corporate Licensee
without first obtaining licenses and approvals from the Nevada Gaming
Authorities. The Company, Boomtown and the Gaming Subsidiary have obtained from
the Nevada Gaming Authorities the various registrations, findings of
suitability, approvals, permits and licenses required in order to engage in
gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company, Boomtown
or the Gaming Subsidiary in order to determine whether such individual is
suitable or should be licensed as a business associate of a gaming licensee.
Officers, directors and certain key employees of the Company, Boomtown and the
Gaming Subsidiary must file applications with the Nevada Gaming Authorities and
may be required to be licensed or found suitable by the Nevada Gaming
Authorities. Officers, directors and key employees of the Company and Boomtown
who are actively and directly involved in gaming activities of the Gaming
Subsidiary may be required to be licensed or found suitable by the Nevada
Gaming Authorities. The Nevada Gaming Authorities may deny an application for
licensing for any cause which they deem reasonable. A finding of suitability is
comparable to licensing, and both require submission of detailed personal and
financial information followed by a thorough investigation. The applicant for
licensing or a finding of suitability must pay all the costs of the
investigation. Changes in licensed positions must be reported to the Nevada
Gaming Authorities and, in addition to their authority to deny an application
for a finding of suitability or licensure, the Nevada Gaming Authorities have
jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, Boomtown or the Gaming Subsidiary, the companies
involved would have to sever all relationships with such person. In addition,
the Nevada Commission may require the Company, Boomtown or the Gaming
Subsidiary to terminate the employment of any person who refuses to file
appropriate applications. Determinations of suitability or of questions
pertaining to licensing are not subject to judicial review in Nevada.
The Company and the Gaming Subsidiary are required to submit detailed
financial and operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing transactions
by the Company, Boomtown and the Gaming Subsidiary must be reported to or
approved by the Nevada Commission.
If it were determined that the Nevada Act was violated by the Gaming
Subsidiary, the gaming licenses it holds could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, the Company, Boomtown, the Gaming
Subsidiary and the persons involved could be subject to substantial fines for
each separate violation of the Nevada Act at the discretion of the Nevada
Commission. Further, a supervisor could be appointed by the Nevada Commission
to operate Boomtown Reno and, under certain circumstances, earnings generated
during the supervisor's appointment (except for reasonable rental value of the
casino) could be forfeited to the State of Nevada. Limitation, conditioning or
suspension of the gaming licenses of the Gaming Subsidiary or the appointment
of a supervisor could (and revocation of any gaming license would) materially
adversely affect the Company's gaming operations.
Any beneficial holder of the Company's voting securities, regardless of the
number of shares owned, may be required to file an application, be
investigated, and be found suitable as a beneficial holder of the Company's
voting securities if the Nevada Commission has reason to believe that such
ownership would otherwise be inconsistent with the declared policies of the
State of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires beneficial ownership of more
than 5% of a Registered Corporation's voting securities to report the
acquisition to the Nevada Commission. The Nevada Act requires that beneficial
owners of more than 10% of a Registered Corporation's voting securities apply
to the Nevada
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Commission for a finding of suitability within thirty days after the Chairman
of the Nevada Board mails the written notice requiring such filing. Under
certain circumstances, an "institutional investor," as defined in the Nevada
Act, which acquires more than 10%, but not more than 15%, of a Registered
Corporation's voting securities may apply to the Nevada Commission for a waiver
of such finding of suitability if such institutional investor holds the voting
securities for investment purposes only. An institutional investor shall not be
deemed to hold voting securities for investment purposes unless the voting
securities were acquired and are held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the board of directors
of the Registered Corporation, any change in the Registered Corporation's
corporate charter, bylaws, management, policies or operations of the Registered
Corporation, or any of its gaming affiliates, or any other action which the
Nevada Commission finds to be inconsistent with holding the Registered
Corporation's voting securities for investment purposes only. Activities which
are not deemed to be inconsistent with holding voting securities for investment
purposes only include: (i) voting on all matters voted on by stockholders; (ii)
making financial and other inquiries of management of the type normally made by
securities analysts for informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other activities as the
Nevada Commission may determine to be consistent with such investment intent.
If the beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information, including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada
Commission or the Chairman of the Nevada Board, may be found unsuitable. The
same restrictions apply to a record owner if the record owner, after request,
fails to identify the beneficial owner. Any stockholder found unsuitable and
who holds, directly or indirectly, any beneficial ownership of the common stock
beyond such period of time as may be prescribed by the Nevada Commission may be
guilty of a criminal offense. The Company is subject to disciplinary action if,
after it receives notice that a person is unsuitable to be a stockholder or to
have any other relationship with the Company, Boomtown or the Gaming
Subsidiary, the Company (i) pays that person any dividend or interest upon
voting securities of the Company, (ii) allows that person to exercise, directly
or indirectly, any voting right conferred through securities held by that
person, (iii) pays remuneration in any form to that person for services
rendered or otherwise, or (iv) fails to pursue all lawful efforts to require
such unsuitable person to relinquish his voting securities including, if
necessary, the immediate purchase of said voting securities for cash at fair
market value.
The Nevada Commission may, in its discretion, require the holder of any debt
security of a Registered Corporation such as the Old Notes, the Exchange Notes
and the 9 1/2% Notes, to file applications, be investigated and be found
suitable to own the debt security of a Registered Corporation. If the Nevada
Commission determines that a person is unsuitable to own such security, then
pursuant to the Nevada Act, the Registered Corporation can be sanctioned,
including the loss of its approvals, if without the prior approval of the
Nevada Commission, it (i) pays to the unsuitable person any dividend, interest,
or any distribution whatsoever; (ii) recognizes any voting right by such
unsuitable person in connection with such securities; (iii) pays the unsuitable
person remuneration in any form; or (iv) makes any payment to the unsuitable
person by way of principal, redemption, conversion, exchange, liquidation, or
similar transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be
required to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require that the Company's stock certificates bear
a legend indicating that the securities are subject to the Nevada Act. However,
to date the Nevada Commission has not imposed such a requirement on the
Company.
The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or proceeds therefrom
are intended to be used to construct, acquire or finance gaming facilities in
Nevada, or to retire or extend obligations incurred for such purposes. The
exchange offer
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will constitute a public offering (as defined in the Nevada Act) and will
require the prior approval of the Nevada Commission upon the recommendation of
the Nevada Board. In addition, (i) an Intermediary Company and a Corporate
Licensee may not guarantee a security issued by a Registered Corporation
pursuant to a public offering without the prior approval of the Nevada
Commission; and (ii) restrictions upon the transfer of an equity security
issued by a Corporate Licensee or an Intermediary Company, and agreements not
to encumber such securities (collectively, "Stock Restrictions") are
ineffective without the prior approval of the Nevada Commission. The Stock
Restrictions in respect of the Notes require the prior approval of the Nevada
Commission to be effective. In connection with the approval of the exchange
offer, the Guaranties of the Gaming Subsidiary and Boomtown and the Stock
Restrictions will also require the prior approval of the Nevada Commission.
However, there can be no assurances that such approval will be granted or that,
if granted, it will be granted on a timely basis. Furthermore, any such
approval, if granted, does not constitute a finding, recommendation or approval
by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of
the prospectus or the investment merits of the securities offered. Any
representation to the contrary is unlawful.
Changes in control of a Registered Corporation through merger,
consolidation, stock or asset acquisitions, management or consulting
agreements, or any act or conduct by a person whereby he obtains control, may
not occur without the prior approval of the Nevada Commission. Entities seeking
to acquire control of a Registered Corporation must satisfy the Nevada Board
and Nevada Commission in a variety of stringent standards prior to assuming
control of such Registered Corporation. The Nevada Commission may also require
controlling stockholders, officers, directors and other persons having a
material relationship or involvement with the entity proposing to acquire
control to be investigated and licensed as part of the approval process
relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Nevada corporate gaming licensees, and Registered Corporations that
are affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming licensees and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Registered Corporation can make exceptional repurchases
of voting securities above the current market price thereof and before a
corporate acquisition opposed by management can be consummated. The Nevada Act
also requires prior approval of a plan of recapitalization proposed by the
Registered Corporation's Board of Directors in response to a tender offer made
directly to the Registered Corporation's stockholders for the purposes of
acquiring control of the Registered Corporation.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to Washoe
County, in which the Gaming Subsidiary's operations are conducted. Depending
upon the particular fee or tax involved, these fees and taxes are payable
either monthly, quarterly or annually and are based upon either: (i) a
percentage of the gross revenues received; (ii) the number of gaming devices
operated; or (iii) the number of table games operated. A casino entertainment
tax is also paid by casino operations where entertainment is furnished in a
cabaret, nightclub, cocktail lounge or casino showroom in connection with the
serving or selling of food or refreshments, or the selling of any merchandise.
Any person who is licensed, required to be licensed, registered, required to
be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside
of Nevada, is required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the expenses of
investigation by the Nevada Board of such Licensee's participation in such
foreign gaming. The revolving fund is subject to increase or decrease in the
discretion of the Nevada Commission. Thereafter, Licensees are required to
comply with certain reporting requirements imposed by the Nevada Act. Licensees
are also subject to disciplinary action by the Nevada
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Commission if they knowingly violate any laws of the foreign jurisdiction
pertaining to the foreign gaming operation, fail to conduct the foreign gaming
operation in accordance with the standards of honesty and integrity required of
Nevada gaming operations, engage in activities or enter into associations that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employ, contract with, or associate with a person in the foreign
operation who has been denied a license or finding of suitability in Nevada on
the ground of personal unsuitability.
California. Operation of California card club casinos such as the Hollywood
Park-Casino and Crystal Park is governed by the Gambling Control Act (the
"GCA") and is subject to the oversight of the California Attorney General and
the California Gambling Control Commission. Under the GCA, a California card
club casino may only offer certain forms of card games, including Poker, Pai
Gow, and California Blackjack. A card club casino may not offer many of the
card games and other games of chance permitted in Nevada and other
jurisdictions where the Company conducts business.
Although the California Attorney General takes the position that, under the
GCA, only individuals, partnerships or privately-held companies (as opposed to
publicly-traded companies such as Hollywood Park) are eligible to operate card
club casinos, the 1995 enactment of California Senate Bill 100 ("SB-100") and
the subsequent enactment of SB-8 permit a publicly-owned racing association to
own and operate a card club casino if it also owns and operates a race track on
the same premises.
Pursuant to the GCA, the operator of a card club casino, and its officers,
directors and certain stockholders are required to be registered by the
Attorney General and licensed by the municipality in which it is located. In
September 1995, the Attorney General granted Hollywood Park a provisional
registration under SB-100 to operate the Hollywood Park-Casino which was
renewed effective January 1, 1999. A permanent registration will not be granted
until the California Department of Justice completes its review of the
applications of Hollywood Park and its corporate officers and directors. The
Attorney General has broad discretion to deny a gaming registration and may
impose reasonably necessary conditions upon the granting of a gaming
registration. Grounds for denial include felony convictions, criminal acts,
convictions involving dishonesty, illegal gambling activities, and false
statements on a gaming application. Such grounds also generally include having
a financial interest in a business or organization that engages in gaming
activities that are illegal under California law; however, this provision
contains an exception for publicly-traded racing associations such as Hollywood
Park. In addition, the Attorney General possesses broad authority to suspend or
revoke a gaming registration on any of the foregoing grounds, as well as for
violation of any federal, state or local gambling law, failure to take
reasonable steps to prevent dishonest acts or illegal activities on the
premises of the card club casino, failure to cooperate with the Attorney
General in its oversight of the card club casino and failure to comply with any
condition of the registration.
Hollywood Park's operations at the Hollywood Park-Casino are also regulated
by a City of Inglewood ordinance (the "Inglewood Ordinance"). The Inglewood
Ordinance provides for a single card club casino located on the premises of the
Hollywood Park Race Track and requires Hollywood Park, as the operator of the
Hollywood Park-Casino, to be licensed by the City of Inglewood and to obtain a
card club operations certificate. The Inglewood City Council has approved
Hollywood Park's application for a gaming license and on August 21, 1996
Hollywood Park was granted the required card club operations certificate.
Hollywood Park's city gaming license and operations certificate are valid for
five years unless revoked, suspended or surrendered, and are renewable annually
thereafter.
In addition to Hollywood Park, the Inglewood Ordinance also requires all
employees, each beneficial owner of at least 10% of the outstanding Hollywood
Park common stock, and certain key employees of Hollywood Park to have either a
permit or a valid registration from the City of Inglewood. The license to
operate the card club casino may be suspended or revoked if such a stockholder
or employee fails to obtain a permit. Without the prior consent of the City of
Inglewood, a 10% stockholder may not transfer or sell its Hollywood Park shares
to any person who is, or by reason of such transaction would become, a
10% stockholder. These licensing requirements and transfer restrictions apply
to all 10% stockholders of
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Hollywood Park, and no waiver from such requirements or restrictions are
provided for institutional or other investors who purchase for investment
purposes only.
The City of Compton has granted the operator of Crystal Park all municipal
gaming licenses necessary for operation of Crystal Park, and the operator has
received a provisional registration from the California Department of Justice.
The California Horse Racing Board ("CHRB") has jurisdiction and supervision
over all horse race meets in the State of California. Licenses granted by the
CHRB must be obtained annually by Hollywood Park in order to conduct both the
Spring/Summer and Autumn race meets. The CHRB has the authority, when granting
any license, to vary the number of weeks allocated to any applicant and the
time of year in which such allocation falls. The CHRB may, at its discretion,
refuse to issue a license to a race track operator such as Hollywood Park that
has a financial interest in another licensed race track operation or in the
conduct of horse racing meets by any other person at any other race track in
California. Although no future assurance can be given, Hollywood Park has
applied for and received a license to conduct thoroughbred horse race meets
every year since 1938, except for 1942 and 1943 due to wartime activities.
Indiana. On September 14, 1998, the Indiana Gaming Commission ("Indiana
Commission") voted to award a Certificate of Suitability to Pinnacle Gaming
Development Corporation ("Indiana Affiliate"), ninety-seven percent (97%) of
the equity of which is owned and controlled by affiliates of the Company. The
Certificate of Suitability authorizes the Indiana Affiliate to develop a
$148,000,000 riverboat gaming resort, including a hotel and golf course, in
Switzerland County, Indiana. Upon completion of development of the project in
accordance with the Certificate of Suitability and satisfaction of other
conditions, the Indiana Commission is expected to issue a license to the
Indiana Affiliate. That license would be the fifth and final license authorized
under Indiana law for riverboat gaming operations conducted from sites on the
Ohio River.
The ownership and operation of riverboat casinos docked at Indiana-based
sites are subject to extensive state regulation under the Indiana Riverboat
Gaming Act ("Indiana Act") and regulations which the Indiana Commission has
adopted under the Indiana Act. The Indiana Act and the regulations adopted to
date are significant to the Company's prospects for successfully developing and
operating the Switzerland County, Indiana based riverboat casino and associated
developments through its Indiana affiliate.
The Indiana Act extends broad and pervasive regulatory powers and authority
to the Indiana Commission. The Indiana Commission has adopted a comprehensive
set of regulations covering ownership and reporting for licensed riverboat
casinos together with "rules of the game" governing the actual operation of
riverboat casinos. The Indiana Commission has also adopted a set of regulations
under the Indiana Act which covers numerous operational matters concerning
riverboat casinos licensed by the Commission.
Among the regulations adopted by the Indiana Commission is one dealing with
riverboat excursions, routes and public safety. The Indiana Act requires
licensed riverboat casinos to be cruising vessels and the regulations carry out
the legislative intent with appropriate recognition of public safety needs. The
regulations explicitly preclude "dockside gambling." Riverboat gaming
excursions are limited to a duration of up to four hours unless otherwise
expressly approved by the Indiana Commission. All excursion routes and
schedules are subject to the approval of the Indiana Commission. No gaming may
be conducted while the boat is docked except: (1) for thirty-minute embarkment
and disembarkment periods at the beginning and end of a cruise; (2) if the
master of the riverboat reasonably determines that specific weather or water
conditions present a danger to the riverboat, its passengers and crew; (3) if
either the vessel or the docking facility is undergoing mechanical or
structural repair; (4) if water traffic conditions present a danger to the
riverboat, riverboat passengers and crew, or to other vessels on the water, or
(5) if the master has been notified that a condition exists that would cause a
violation of Federal law if the riverboat were to cruise.
For Ohio River excursions, such as those the Indiana Affiliate will conduct
from its Switzerland County development, "full excursions" must be conducted at
all times during the year unless the master determines
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otherwise, for the above-stated reasons. A "full excursion" is a cruise on the
Ohio River. The Ohio River has waters in both Indiana and Kentucky. The Company
believes there is ample room to cruise fully in Indiana waters on the Ohio
River with no need or likelihood of entering Kentucky waters. Therefore, the
provisions of Kentucky law (which preclude any kind of casino gaming) will not
have any impact on the Company's prospective Indiana operations.
An Indiana riverboat owner's license has an initial effective period of five
years; thereafter, a license is subject to annual renewal. The Indiana
Commission has broad discretion over the initial issuance of licenses and over
the renewal, revocation, suspension and control of riverboat owner's licenses.
The Indiana affiliate has received a Certificate of Suitability designed to
lead to issuance of a license upon completion of project development and
satisfaction of various conditions. The Indiana Act requires a reinvestigation
after three years to ensure the owner continues to be in compliance with the
Indiana Act. Officers, directors and principal owners of the actual license
holder and employees who are to work on the riverboat are subject to
substantial disclosure requirements as a part of securing and maintaining
necessary licenses. Significant contracts to which the Indiana Affiliate is
party are subject to disclosure and approval processes imposed by the
regulations. A riverboat owner's licensee may not enter into or perform any
contract or transaction in which it transfers or receives consideration which
is not commercially reasonable or which does not reflect the fair market value
of the goods or services rendered or received. All contracts are subject to
disapproval by the Indiana Commission. Suppliers of gaming equipment and
materials must also be licensed under the Indiana Act.
Licensees are statutorily required to disclose to the Indiana Commission the
identity of all directors, officers and persons holding direct or indirect
beneficial interests of 1% or greater. The Indiana Commission also requires a
broad and comprehensive disclosure of financial and operating information on
licensees and their principal officers, and those parent corporations and other
upstream owners. The Company and the Indiana Affiliate have provided full
information and documentation to the Indiana Commission. As part of the process
leading up to the issuance of the Certificate of Suitability they must continue
to do so until issuance of the license and then throughout the period of
licensure. The Indiana Act prohibits contributions to a candidate for a state,
legislative, or local office, or to a candidate's committee or to a regular
party committee by the holder of a riverboat owner's license or a supplier's
license, by an officer of a licensee, by an officer of a person that holds at
least a 1% interest in the licensee or by a person holding at least a 1%
interest in the licensee. The Indiana Commission has promulgated a rule
requiring quarterly reporting by such licensees, officers, and persons.
As a condition to receiving a license to conduct riverboat casino operations
from the Indiana Commission, the Company will be required to obtain permits and
approvals from the United States Army Corp of Engineers to develop the
facilities it will use to conduct operations. Clearances will be required to be
received from the Indiana Department of Natural Resources for portions of the
proposed development. Alcoholic beverage permits for riverboat excursions and
for the hotel and boarding facilities will be required as will various other
permits and governmental consents or clearances.
Adjusted gross receipts from gambling games authorized under the Indiana Act
are subject to a tax at the rate of 20% on adjusted gross receipts. "Adjusted
gross receipts" means the total of all cash and property received from gaming
operations less cash paid out as winnings and uncollectible gaming receivables
(not to exceed 2%). The Indiana Act also prescribes an additional tax for
admissions, based upon $3 per person per excursion. Property taxes may be
imposed on riverboats at rates determined by local taxing authorities. Income
to the Company from the Indiana Affiliate will be subject to the Indiana gross
income tax, the Indiana adjusted gross income tax and the Indiana supplemental
corporate net income tax. Sales on a riverboat and at related resort facilities
are subject to applicable use, excise and retail taxes. The Indiana Act
requires a riverboat owner licensee to directly reimburse the Indiana
Commission for the costs of inspectors and agents required to be present while
authorized gaming is conducted.
Through the establishment of purchasing "goals," the Indiana Act encourages
minority and women's business enterprise participation in the riverboat gaming
industry. Any person issued a riverboat owner's
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license must establish goals of at least 10% of the total dollar value of the
licensee's contracts for goods and services with minority business enterprises
and 5% of the total dollar value of the licensee's contracts for goods and
services with women's business enterprises. Compliance with these conditions is
incorporated into the Indiana Affiliate's Certificate of Suitability. The
Indiana Commission may suspend, limit or revoke the owner's license or impose a
fine for failure to comply with the statutory requirements.
Minimum and maximum wagers on games on the riverboat are left to the
discretion of the licensee. Wagering may not be conducted with money or other
negotiable currency. There are no statutory restrictions on extending credit to
patrons; however, the matter of credit may come under scrutiny in future
legislative sessions.
If an institutional investor acquires 5% or more of any class of voting
securities of a holding company of a licensee, the investor is required to
notify the Indiana Commission and to provide additional information, and may be
subject to a finding of suitability. Any other person who acquires 5% or more
of any class of voting securities of a holding company of a licensee is
required to apply to the Indiana Commission for a finding of suitability. A
riverboat licensee or an affiliate may not enter into a debt transaction of $1
million or more without approval of the Indiana Commission. The Indiana
Commission has taken the position that a "debt transaction" includes increases
in maximum amount available under reducing revolving credit facilities. A
riverboat owner's license is a revocable privilege and is not a property right
under the Indiana Act. A riverboat owner licensee or any other person may not
lease, hypothecate, borrow money against or loan money against or otherwise
scrutinize or monetize a riverboat owner's license.
The Governor of Indiana has appointed a study commission on the impact of
legalized wagering in Indiana. Its work product may result in calls for changes
to the legislative landscape surrounding gaming in Indiana.
Arizona. The Arizona Racing Commission ("ARC") has jurisdiction and
supervision over all racing activities in the State of Arizona. The ARC issues
live racing permits that are valid for three years, and off-track permits are
granted on a year to year basis. In June 1997, Turf Paradise received a live
racing permit from the ARC, which will remain in force through the 1999/2000
race year. The permit specifies that live racing may be conducted between the
first week of September through the third week of May and that, so long as
there is live racing at Turf Paradise at least five days a week, Turf Paradise
may have simulcast wagering on days when there is no live racing.
Argentina. The Provincial Government of Neuquen, Argentina enacted a casino
privatization program to issue twelve-year exclusive concession agreements to
operate existing casinos. The Company's two casinos are the only casinos in the
province of Neuquen, in west central Argentina, and are located in Neuquen City
and San Martin de los Andes. The casinos had previously been operated by the
provincial government. The Ministry of Finance of Argentina has adopted a
modified regulatory system for casinos, based on the regulatory system utilized
by the State of Nevada, and such regulatory system is being administered by the
Provincial Government of Neuquen. The Company cannot predict what effect the
enactment of other laws, regulations or pronouncements relating to casino
operations may have on the operations of Casino Magic Argentina.
Litigation
Poulos Lawsuit. A class action lawsuit was filed on April 26, 1994, in the
United States District Court, Middle District of Florida (the "Poulos
Lawsuit"), naming as defendants 41 manufacturers, distributors and casino
operators of video poker and electronic slot machines, including Casino Magic.
The lawsuit alleges that the defendants have engaged in a course of fraudulent
and misleading conduct intended to induce people to play such games based on
false beliefs concerning the operation of the gaming machines and the extent to
which there is an opportunity to win. The suit alleges violations of the
Racketeer Influenced and Corrupt Organization Act, as well as claims of common
law fraud, unjust enrichment and negligent misrepresentation, and seeks damages
in excess of $6 billion. On May 10, 1994, a second class action lawsuit was
filed in the
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United States District Court, Middle District of Florida (the "Ahern Lawsuit"),
naming as defendants the same defendants who were named in the Poulos Lawsuit
and adding as defendants the owners of certain casino operations in Puerto Rico
and the Bahamas, who were not named as defendants in the Poulos Lawsuit. The
claims in the Ahern Lawsuit are identical to the claims in the Poulos Lawsuit.
Because of the similarity of parties and claims, the Poulos Lawsuit and Ahern
Lawsuit were consolidated into one case file in the United States District
Court, Middle District of Florida. On December 9, 1994 a motion by the
defendants for change of venue was granted, transferring the case to the United
States District Court for the District of Nevada, in Las Vegas. In an order
dated April 17, 1996, the court granted motions to dismiss filed by Casino
Magic and other defendants and dismissed the Complaint without prejudice. The
plaintiffs then filed an amended Complaint on May 31, 1996 seeking damages
against Casino Magic and other defendants in excess of $1 billion and punitive
damages for violations of the Racketeer Influenced and Corrupt Organizations
Act and for state common law claims for fraud, unjust enrichment and negligent
misrepresentation. Casino Magic and other defendants have moved to dismiss the
amended Complaint. Casino Magic believes that the claims are without merit and
does not expect that the lawsuit will have a material adverse effect on the
financial condition or results of operations of Casino Magic.
Casino America Litigation. On or about September 6, 1996, Casino America,
Inc. commenced litigation in the Chancery Court of Harrison County,
Mississippi, Second Judicial District, against Casino Magic, and James Edward
Ernst, its Chief Executive Officer, seeking injunctive relief and unspecified
compensatory damages in an amount to be proven at trial as well as punitive
damages. The plaintiff claims, among other things, that the defendants (i)
breached the terms of an agreement they had with the plaintiff, (ii) tortiously
interfered with certain of the plaintiff's business relations; and (iii)
breached covenants of good faith and fair dealing they allegedly owed to the
plaintiff. On or about October 8, 1996, the defendants interposed an answer,
denying the allegations contained in the Complaint. The discovery phase of this
litigation is continuing and a trial date was initially set for August 1998,
but was postponed to mid-1999 after the plaintiff requested a continuance.
While Casino Magic's management cannot predict the outcome of this action, it
believes plaintiff's claims are without merit and intends to vigorously defend
this action.
Astoria Entertainment, Inc. v. Edwin W. Edwards, et als., United States
District Court for the Eastern District of Louisiana, No. 98-3359. This civil
action was filed on November 12, 1998 in federal district court in New Orleans
against 21 defendants, including Edwin W. Edwards, Stephen Edwards, Edward J.
Debartolo, Jr., Debartolo Entertainment Louisiana Gaming, Inc., Hollywood
Casino Corporation, Boyd Kenner, Inc., Treasure Chest Casino, L.L.C., five
members of the former Louisiana Riverboat Gaming Commission, Hollywood Park,
Inc., Louisiana Gaming Enterprises, Inc., and Robert List (the latter three
hereafter are referred to as the "Hollywood Park/Boomtown defendants"). The
complaint alleges violations of the Racketeer Influenced and Corrupt
Organizations ("RICO") Act in connection with the awarding of riverboat gaming
licenses in Louisiana. The plaintiff, Astoria Entertainment, Inc. ("Astoria"),
contends that it has sustained damages due to alleged racketeering activities
of the defendants, allegedly resulting in corruption of the licensing process
and Astoria's failure to receive a license for riverboat gaming in, inter alia,
the West Bank of Jefferson Parish (suburban New Orleans). The Complaint seeks
damages of "not less than $340 million," plus treble damages, costs, and
attorneys' fees. On January 15, 1999, the Hollywood Park/Boomtown defendants
filed a motion to dismiss Astoria's Complaint for failure to state a claim
against those defendants. Astoria voluntarily dismissed its complaint, without
prejudice, on February 2, 1999 as to many of the defendants, including the
three Hollywood Park/Boomtown defendants.
Astoria Entertainment Inc. v. Edward J. DeBartolo, Jr., et als., Civil
District Court for the Parish of Orleans, State of Louisiana, No. 98-
20315. This action was filed on or about December 1, 1998 in state district
court in New Orleans against twelve defendants, including Edward J. Debartolo,
Jr., Debartolo Entertainment Louisiana Gaming, Inc., Hollywood Casino
Corporation, Robert Guidry, Boyd Gaming, Inc., Boyd Kenner, Inc., Treasure
Chest Casino, L.L.C., Hollywood Park, Inc., Robert List, Louisiana Gaming
Enterprises, Inc., Boomtown, Inc., and Louisiana-I Gaming, L.P. (the latter
five hereafter are referred to as the "Hollywood Park/Boomtown defendants").
The petition seeks damages against the Hollywood
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Park/Boomtown defendants and others "in excess of $300 million" for alleged
"intentional interference with economic advantage and/or prospective economic
advantage" and alleged "unjust enrichment" in connection with the licensing of
riverboat gaming in Louisiana. The plaintiff, Astoria Entertainment, Inc.
("Astoria"), alleges that the defendants were obligated to refrain from
intentional acts that would interfere with Astoria's alleged ability to obtain
a license for riverboat gaming in the West Bank of Jefferson Parish (suburban
New Orleans) and that the Hollywood Park/Boomtown defendants breached the
obligation by participating in alleged unlawful practices designed to gain an
improper advantage in obtaining a certificate of preliminary approval and
license for such riverboat gaming. The petition was not served upon any of the
Hollywood Park/Boomtown defendants until December 21, 1998, and an extension of
time within which to file responsive pleadings through and including February
4, 1999 was obtained. On February 4, 1999, the Hollywood Park/Boomtown
defendants filed the Louisiana state court equivalent of a motion to dismiss
for failure to state a claim and improper venue. While we cannot predict the
outcome of this action, management believes that the claims lack merit, and the
Hollywood Park/Boomtown defendants intend to vigorously defend these
allegations.
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MANAGEMENT
Directors and Executive Officers
Each of the executive officers of Hollywood Park, Inc. holds office at the
pleasure of the Board of Directors. The current directors and executive
officers of Hollywood Park, Inc. are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
R.D. Hubbard 63 Chairman of the Board and Chief Executive
Officer
J.R. Johnson 77 Director
Robert T. Manfuso 61 Director
Michael Ornest 41 Director
Timothy J. Parrott 50 Director
Lynn P. Reitnouer 66 Director
Herman Sarkowsky 73 Director
Marlin Torguson 54 Director
Warren B. Williamson 69 Director
G. Michael Finnigan 50 President and Chief Executive Officer of Realty
Investment Group, Inc., a subsidiary of
Hollywood Park; and Chief Financial Officer
Paul R. Alanis 50 President and Chief Operating Officer
J. Michael Allen 51 Senior Vice President/Chief Operating Officer
of Gaming Operations
Donald M. Robbins 51 Secretary; and President of Racing of Hollywood
Park Operating Company
</TABLE>
Mr. Hubbard has been a Director of the Company since 1990; Chairman of the
Board and Chief Executive Officer of the Company since September 1991; Chairman
of the Board and Chief Executive Officer, Hollywood Park Operating Company
since February 1991; President, Hollywood Park Operating Company from February
to July 1991; Chairman, AFG Industries, Inc. and its parent company, Clarity
Holdings Corp. (glass manufacturing), and director of AFG Industries, Inc.'s
subsidiaries, from 1978 to July 1993; Chairman of the Board (and 60%
stockholder until March 1994), Sunflower (The Woodlands Race Tracks--greyhound
racing and horse racing) from 1988 to March 1994; President, Director, and
owner, Ruidoso Downs Racing, Inc. (horse racing) since 1988; Chairman of the
Board, Chief Executive Officer and sole stockholder, Multnomah Kennel Club,
Inc. (greyhound racing) since December 1991; owner and breeder of numerous
thoroughbreds and quarter horses since 1962.
Mr. Johnson has been a Director of the Company since 1991; Director,
Hollywood Park Operating Company from February 1991 to January 1992; Chairman,
President and Chief Executive Officer, NEWMAR (marine electronics
manufacturing) since 1980; Director, Logicon, Inc. (defense oriented
intelligence); Trustee, Westminster College.
Mr. Manfuso has been a Director of the Company since 1991; Director,
Hollywood Park Operating Company from February 1991 to January 1992; Co-
Chairman of the Board, Laurel Racing Association (horse race track management)
from 1984 to February 1994; Vice Chairman of the Board, The Maryland Jockey
Club (horse racing) from 1986 to February 1994; Executive Vice President,
Laurel Racing Association from 1984 to May 1990; Executive Vice President, The
Maryland Jockey Club from 1986 to June 1990; Director, Maryland Horse Breeders
Association from 1984 to 1992 and since 1993; Member, Executive Committee,
Maryland Million since 1991.
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Mr. Ornest has been a director of the Company since October 1998 and his
family has been a shareholder of the Company since 1962; Director of the Ornest
Family Partnership since 1983; Director of the Ornest Family Foundation since
1993; Director of the Toronto Argonauts Football Club from 1988 to 1990;
President of the St. Louis Arena and Vice President of the St. Louis Blues
Hockey Club from 1983 to 1986 and Managing Director of the Vancouver Canadians
Baseball Club, Pacific Coast League from 1979 to 1980.
Mr. Parrott has served as a Director of the Company since June 1997;
Chairman of the Board and Chief Executive Officer, Boomtown, Inc. from
September 1992 to October 1998; President and Treasurer, Boomtown, Inc. from
June 1987 to September 1992; Director, Boomtown, Inc. since 1987; Chairman of
the Board and Chief Executive Officer, Boomtown Hotel & Casino, Inc. since May
1988; Chief Executive Officer, Parrott Investment Company (a family-held
investment company with agricultural interests in California) since April 1995;
Director, The Chronicle Publishing Company since April 1995.
Mr. Reitnouer has been a Director of the Company since 1991; Director,
Hollywood Park Operating Company from September 1991 to January 1992; Partner,
Crowell Weedon & Co. (stock brokerage) since 1969; Director (and former
Chairman of the Board), COHR, Inc. since 1986; Director, President and Regent,
Forest Lawn Memorial Parks Association since 1975; Trustee, University of
California Santa Barbara Foundation since 1992.
Mr. Sarkowsky has been a Director of the Company since 1991; Director,
Hollywood Park Operating Company from February 1991 to January 1992; Owner,
Sarkowsky Investment Corporation and SPF Holding, Inc. (real estate development
and investments) since 1980; Director, The Sarkowsky Foundation (charitable
foundation) since 1982; thoroughbred horse breeder and owner since 1959;
Director, Synetics, Inc. (porous plastic manufacturing); Director, Eagle
Hardware & Garden, since 1990.
Mr. Torguson served as the Chairman of the Board of Casino Magic from
December 1, 1994 until the Company acquired Casino Magic. Mr. Torguson was
President and Chief Executive Officer of Casino Magic from April 1992 through
November 1994. From April 1992 to February 1993, Mr. Torguson also served as
the Chief Financial Officer and Treasurer of Casino Magic. Mr. Torguson was a
50 percent owner and a Vice President of G.M.T. Management Co. from December
1983 to December 1994. G.M.T. Management Co. was responsible for the operation
and management of Jackpot Junction Casino, located in Morton, Minnesota, from
December 1983 until January 1, 1992.
Mr. Williamson has been a Director of the Company since 1991; Vice President
and Secretary of the Company from September 1991 to August 1996; Chairman of
the Board and Chief Executive Officer of the Company from 1989 to September
1991; Director, Hollywood Park Operating Company since 1985; Vice President and
Secretary, Hollywood Park Operating Company from February 1991 to August 1996;
Secretary and Treasurer, Hollywood Park Operating Company from 1985 to November
1990; Chairman and Chief Executive Officer, Chandis Securities Co. (holding
company) since 1985; Director, Times Mirror Company; Trustee, Hospital of the
Good Samaritan; Trustee, California Thoroughbred Breeders Foundation; Trustee,
Claremont McKenna College; Chairman Emeritus, Art Center College of Design;
breeder and racer of thoroughbreds since 1970.
Mr. Finnigan has served as the President and Chief Executive Officer of
Realty Investment Group, Inc., a wholly-owned subsidiary of the Company which
conducts all of the Company's real estate business and related development
activities, since December 1998. He has also served as the Chief Financial
Officer of the Company and of Hollywood Park Operating Company since March
1989. Mr. Finnigan served as the Company's President, Sports and Entertainment,
from January 1996 to December 1998; President, Gaming and Entertainment from
February 1994 to January 1996; Executive Vice President of the Company and of
Hollywood Park Operating Company from March 1989 to December 1998; and
Treasurer of the Company and of Hollywood Park Operating Company since March
1992; Chairman of the Board, Southern California Special Olympics since 1996;
Chairman of the Board, Centinela Hospital since 1996; and Director, Shoemaker
Foundation since 1993.
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<PAGE>
Mr. Alanis has served as the President and Chief Operating Officer since
January 1999. Mr. Alanis served as President of Horseshoe Gaming, Inc., which
is the manager and a member of Horseshoe Gaming, L.L.C., and of Horseshoe GP,
Inc., a wholly-owned subsidiary of Horseshoe Gaming, L.L.C. from January 1996
to December 1998; President, KII-Pasadena, Inc. since December 1988; President,
Koar International, Inc. from 1991 until 1995.
Mr. Allen has served as the Company's Senior Vice President, Gaming
Operations, since January 1999. Mr. Allen served as Senior Vice President of
Horseshoe Gaming, Inc. from October 1, 1995 to December 31, 1998 and prior to
that as General Manager of the Horseshoe Casino Center from May 1994. Prior to
that, Mr. Allen served as Principal of Gaming Associates, Inc. from September
1992.
Mr. Robbins has served as Secretary of the Company since 1996 (formerly
Assistant Secretary since September 1991). He has also served as President of
Racing of Hollywood Park Operating Company since February 1994, Executive Vice
President of Hollywood Park Operating Company since 1988, and Secretary of
Hollywood Park Operating Company since July 1991. Mr. Robbins served as
President of the Company from September 1991 to December 1998; General Manager,
Hollywood Park Operating Company from 1986 to February 1994.
Executive Compensation
The following tables summarize the annual and long-term compensation of, and
stock options held by, Hollywood Park's Chief Executive Officer and the two
additional most highly compensated executive officers whose annual salaries and
bonuses exceeded $100,000 in total during the fiscal year ended December 31,
1998 (collectively, the "Named Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation Awards
----------------- ------------
Securities
Underlying
Name and Principal Salary Bonus Other Annual Options/ All Other
Position Year ($) ($) Compensation SARs (#) Compensation
- ------------------ ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
R.D. Hubbard 1998 $500,000 $160,000 $0 50,000 $ 2,370(a)
Chairman of the Board 1997 400,000 40,235 0 45,000 4,740
and Chief Executive 1996 400,000 0 0 85,000 0
Officer
G. Michael Finnigan 1998 $307,600 $ 75,000 $0 35,000 $23,633(b)
President, Sports and 1997 307,608 0 0 25,000 3,555
Entertainment,
Executive 1996 262,608 25,000 0 40,000 0
Vice President,
Treasurer, Chief
Financial Officer
Donald M. Robbins 1998 $295,000 $ 35,000 $0 15,000 $30,484(c)
President of Hollywood 1997 295,008 0 0 25,000 3,373
Park, Inc., President
of 1996 250,008 25,000 0 40,000 0
Racing and Secretary
</TABLE>
- --------
(a) Reflects Company matching contributions under the Hollywood Park 401(k)
Plan.
(b) Includes Company matching contribution under the Hollywood Park 401(k) Plan
of $2,370, and $21,262 of distribution related to the termination of the
Company's Supplemental Executive Retirement Plan
(c) Includes Company matching contribution under the Hollywood Park 401(k) Plan
of $2,249, and $28,235 of distribution related to the termination of the
Company's Supplemental Executive Retirement Plan.
On January 1, 1999, the Company appointed Paul Alanis as President and Chief
Operating Officer and Michael Allen as Senior Vice President and Chief
Operating Officer of the Company's Gaming Division. Mr. Alanis' annual base
salary will be $600,000 and Mr. Allen's will be $400,000. Mr. Alanis and Mr.
Allen were granted stock options to purchase 400,000 and 200,000 shares,
respectively, on September 10, 1998, but they were not eligible to exercise any
of the options until January 1, 1999.
75
<PAGE>
Stock Option Plans. In 1993 and 1996, the stockholders of Hollywood Park
adopted Stock Options Plans, which provided for the issuance of up to 625,000
and 900,000 shares of Hollywood Park common stock upon exercise of the options,
respectively. Except for the provisions governing the number of shares issuable
thereunder, and except for certain provisions which reflect changes in tax and
securities laws, the provisions of the Stock Option Plans are substantially
similar. The Hollywood Park Stock Option Plans are administered and terms of
option grants are established by the Compensation Committee of the Board of
Directors. Under the Hollywood Park Stock Option Plans, options alone or
coupled with stock appreciation rights may be granted to selected key
employees, directors, consultants and advisors of Hollywood Park. Options
become exercisable according to a vesting period as determined by the
Compensation Committee at the date of grant, and expire on the earlier of one
month after termination of employment, six months after the death or permanent
disability of the optionee, or the expiration of the fixed option term set by
the Compensation Committee at the grant date (not to exceed ten years from the
grant date). The exercise prices of all options granted under the Hollywood
Park Stock Options Plans are determined by the Compensation Committee on the
grant date, provided that the exercise price of an incentive stock option may
not be less than the fair market value of the common stock at the date of
grant.
As of December 31, 1998, all of the 625,000 shares eligible for issuance
under the 1993 Stock Option Plan had either been issued or were subject to
outstanding options, and of the 900,000 shares eligible for issuance under the
1996 Stock Option Plan, 260,688 were subject to outstanding options. In
addition, 965,674 and 352,017 shares of Hollywood Park common stock are
issuable upon exercise of options granted under pre-merger plans of Boomtown
and Casino Magic, respectively, which Hollywood Park assumed in each Merger,
Hollywood Park has filed registration statements with the Securities and
Exchange Commission covering an aggregate of 2,465,853 shares of Hollywood Park
common stock issuable upon exercise of options granted under the Hollywood Park
Stock Option Plans, the Stock Option Plans of Boomtown and the Stock Option
Plans of Casino Magic.
Options/SAR Grants In Last Fiscal Year. The following table summarizes the
option grants to Named Officers and Messrs. Alanis and Allen during the year
ended December 31, 1998:
<TABLE>
<CAPTION>
Potential Realizable Value
of Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
- --------------------------------------------------------------------------- ----------------------------
Percent of
Total
Number of Options/
Securities SARs
Underlying Granted to
Options/SARs Employees Exercise of
Granted in Fiscal Base Price Expiration
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
- ---- ------------ ---------- ----------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
R.D. Hubbard............ 50,000 5% $13.6250 Feb 3, 2008 $ 428,000 $1,086,000
G. Michael Finnigan..... 35,000 3% 13.6250 Feb. 3, 2008 300,000 760,000
Paul R. Alanis.......... 300,000 29% 10.1875 Sept. 10, 2008 1,922,000 4,871,000
100,000 10% 18.0000 Sept. 10, 2008 1,132,000 2,869,000
J. Michael Allen........ 150,000 14% 10.1875 Sept. 10, 2008 961,000 2,435,000
50,000 5% 18.0000 Sept. 10, 2008 566,000 1,434,000
Donald M. Robbins....... 15,000 1% 13.6250 Feb. 3, 2008 129,000 326,000
</TABLE>
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<PAGE>
Aggregated Options/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Options/SAR Values. The following table sets forth information with respect to
the exercise of stock options during the year ended December 31, 1998, and the
final year end value of unexercised options. None of the Named Officers
exercised, nor held, stock appreciation rights during the year ended December
31, 1998.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Securities In-the Money
Shares Underlying Option/SARs
Acquired Options/SARs At Fiscal
On Value At Fiscal Year-End ($)
Exercise Realized Year-End (#) Exercisable/
Name (#) ($) Exercisable/Unexercisable Unexercisable (a)
- ---- -------- -------- ------------------------- -----------------
<S> <C> <C> <C> <C>
R.D. Hubbard............ 0 $0 71,688/108,332 $0/$0
G. Michael Finnigan..... 0 0 60,001/64,999 $0/$0
Paul R. Alanis.......... 0 0 100,000/300,000 $0/$0
J. Michael Allen........ 0 0 50,000/150,000 $0/$0
Donald M. Robbins....... 0 0 60,001/44,999 $0/$0
</TABLE>
- --------
(a) Represents the difference between the market price of Hollywood Park Common
Stock on December 31, 1998, and the exercise price of the options.
Pension Plan
<TABLE>
<CAPTION>
Years of Qualified Service
---------------------------------------
Final Average Annual Salary 10 15 20 25 30
- --------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$100,000................................ $24,745 $37,118 $49,490 $61,863 $66,863
$150,000 to $500,000 (a)................ 37,995 56,993 75,990 94,988 102,488
</TABLE>
- --------
(a) Under current provisions of the Internal Revenue Code, the maximum average
salary that may be used in calculating retirement benefits in 1996 was
$150,000. Benefits accrued on April 1, 1994 (based on prior compensation
limits) are grandfathered. Pension benefits were frozen as of September 1,
1996, for all plan participants, except retained participants, whose
benefits were frozen as of December 31, 1996.
Hollywood Park elected to terminate the Hollywood Park Pension Plan (the
"Pension Plan") as of January 31, 1997. Accrued Pension Plan benefits were
frozen as of September 1, 1996, for all Pension Plan participants, except
retained participants, (participants who, because of legal requirements,
including the provisions of the National Labor Relation Act, are represented by
a collective bargaining agent) whose benefits were frozen as of December 31,
1996.
The Pension Plan was a non-contributory, defined benefit plan covering
employees of Hollywood Park, Inc., and all employees of HPOC, not eligible for
participation in a multi-employer defined benefit plan, who met the Pension
Plan's service requirement. R.D. Hubbard, G. Michael Finnigan, and Donald M.
Robbins, are the only officers or directors of the Company who participated in
the Pension Plan, and their Pension Plan benefits were frozen as of September
1, 1996, and as of that date, Messrs. Hubbard, Finnigan and Robbins had two,
six and ten years, respectively, of qualified years of service. Only amounts
earned by Messrs. Hubbard, Finnigan and Robbins listed under "Annual
Compensation-Salary" as shown in the Summary Compensation table, were
considered in determining their Pension Plan benefit levels.
The amounts listed in the above pension Plan table are estimated annual
retirement benefits under the Pension Plan (assuming payments were made on the
normal life annuity basis, and not under the provisions on survivor benefits)
at a normal retirement age of 65 in 1996, after various years of qualified
service, at selected average annual compensation levels. However, due to the
Pension Plan benefits being frozen as of September 1,
77
<PAGE>
1996, and based on their actual years of qualified service, and annual
compensation levels, Messrs. Hubbard, Finnigan and Robbins annual benefits,
expressed as a joint and survivor annuity payment, starting at age 65, are
$7,521, $29,082 and $51,009, respectively.
The amounts required to fund the pension Plan were determined actuarially,
and were paid by Hollywood Park to a life insurance company under an
unallocated annuity contract.
Effective January 31, 1997, in conjunction with the termination of the
Pension Plan, Hollywood Park elected to terminate its non-qualified
Supplementary Employment Retirement Plan (the "SERP"). The SERP was an unfunded
plan, established primarily for the purpose of restoring the retirement
benefits for highly compensated employees that were eliminated by the Internal
Revenue Service in 1994, when the maximum annual earnings allowed for qualified
pension plans was reduced to $150,000 from $235,850. Messes. Hubbard, Finnigan
and Robbins participated in the SERP, prior to its termination.
Director Compensation. All directors hold office until the next annual
meeting of stockholders and until their successors are duly elected and
qualified. Directors are entitled to receive, and in 1998 received, an annual
retainer of $25,000 per year plus a $1,000 for each Board meeting attended,
which they may take in cash or in deferred compensation under Hollywood Park's
Directors Deferred Compensation Plan as outlined below. In addition, members of
the Executive Committee, Audit Committee and Compensation Committee receive
$1,000 for each committee meeting attended, and such amounts are also eligible
for the Directors Deferred Compensation Plan. Furthermore, directors and their
guests are entitled, without charge, to use the Directors' Room at the
Hollywood Park Race Track, which is open on weekends and holidays during the
racing season.
On December 16, 1998, each of Messrs. Johnson, Manfuso, M. Ornest, Parrott,
Reitnouer, Sarkowsky, Torguson and Williamson was granted a non-qualified stock
option to purchase 2,000 shares of Hollywood Park common stock at an exercise
price of $8.75 per share. One-third of the shares purchasable upon exercise of
these options was vested on the grant date, with an additional one-third to
vest on each of the first and second anniversary of the grant date. All of
these options expire on the tenth anniversary of the grant date and (except for
the options granted to Messrs. Johnson, Reitnouer, and Williamson) were granted
under the Hollywood Park 1996 Stock Option Plan.
Directors Deferred Compensation Plan. Participation in Hollywood Park's
Directors Deferred Compensation Plan is limited to directors of Hollywood Park
and each eligible director may elect to defer all or a portion of his annual
retainer and any fees for meetings attended. Any such deferred compensation is
credited to a deferred compensation account, either in cash or in shares of
Hollywood Park Common Stock, at each director's election. As of the date the
director's compensation would otherwise have been paid, and depending on the
director's election, the director's deferred compensation account will be
credited with either (i) cash, (ii) the number of full and/or fractional shares
of Hollywood Park common stock obtained by dividing the amount of the
director's compensation for the calendar quarter or month which he elected to
defer, by the average of the closing price of Hollywood Park common stock on
the principal stock exchange on which the Company's common stock listed (or, if
the common shares are not listed on a stock exchange, the NASDAQ National
Market System) on the last ten business days of the calendar quarter or month
for which such compensation is payable or (iii) a combination of cash and
shares of Hollywood Park common stock as described in clause (i) and (iii). All
cash amounts credited to the director's deferred compensation account bear
interest at an amount to be determined from time to time by the Board of
Directors.
If a director has elected to receive shares of Hollywood Park common stock
in lieu of his retainer, such director's deferred compensation account is
credited at the end of each calendar quarter with the number of full and/or
fractional shares of Hollywood Park common stock obtained by dividing the
dividends which would have been paid on the shares credited to the director's
deferred compensation account as of the dividend record date, if any, occurring
during such calendar quarter is such shares had been shares of issued and
outstanding Hollywood Park common stock on such date, by the closing price of
the Hollywood Park common stock on the New York Stock Exchange on the date such
dividend(s) was paid. In addition, if Hollywood Park declares a
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<PAGE>
dividend payable in shares of Hollywood Park common stock, the director's
deferred compensation account is credited at the end of each calendar quarter
with the number of full and/or fractional shares of Hollywood Park common stock
which such shares would have been entitled to if such shares had been shares of
issued and outstanding Hollywood Park common stock on the record date for such
stock dividend(s).
Participating directors do not have any interest in the cash and/or
Hollywood Park common stock credited to their deferred compensation accounts
until distributed in accordance with the Directors Deferred Compensation Plan,
nor do they have any voting rights with respect to such shares until shares
credited to their deferred compensation accounts are distributed. The rights of
a director to receive payments under the Deferred Compensation Plan are no
greater than the rights of an unsecured general creditor of Hollywood Park.
Each participating director may elect to have the aggregate amount of cash and
shares credited to his deferred compensation account distributed to him in one
lump sum payment or in a number of approximately equal annual installments over
a period of time not to exceed fifteen years. The lump sum payment or the first
installment will be paid as of the first business day of the calendar quarter
immediately following the cessation of the director's service as a director of
Hollywood Park. Prior to the beginning of any calendar year, a director may
elect to change the method of distribution, but amounts credited to a
director's account prior to the effective date of such change may not be
affected, but rather will be distributed in accordance with the election of the
time such amounts were credited to the director's deferred compensation
account.
The maximum number of shares of Hollywood Park common stock that can be
issued pursuant to the Directors Deferred Compensation Plan is 125,000 shares.
Hollywood Park is not required to reserve or set aside funds or shares of
Hollywood Park common stock for the payment of its obligations pursuant to the
Directors Deferred Compensation Plan. Hollywood Park is obligated to make
available, as and when required, a sufficient number of shares of common stock
to meet the needs of the Directors Plan. The shares of Hollywood Park Common
Stock to be issued under the Directors Deferred Compensation Plan may be either
authorized and unissued shares or reacquired shares.
Amendment, modification or termination of the Directors Deferred
compensation Plan may not (1) adversely affect any eligible director's rights
with respect to amounts then credited to his account or (2) accelerate any
payments or distributions under the Directors Deferred Compensation Plan
(except with regard to bona fide financial hardships).
Amendment, modification or termination of the Directors Deferred
Compensation Plan may not (i) adversely affect any eligible director's rights
with respect to amounts then credited to his account or (ii) accelerate any
payments or distributions under the Directors Deferred Compensation Plan
(except with regard to bona fide financial hardships).
Employment Contracts, Termination of Employment and Change-in-Control
Arrangement. The Company has entered into a three-year employment agreement
with G. Michael Finnigan, effective January 1, 1999. Mr. Finnigan's annual
compensation will be $400,000 with an annual bonus of up to $200,000. The bonus
is payable as follows: (a) an amount in the discretion of the Board in the
initial year, and (b) in the remaining years, $100,000 based on the Realty
Investment Group, Inc.'s (a subsidiary of the Company) performance and $100,000
at the discretion of the Board. If Mr. Finnigan terminates his employment for
good reason (including certain change of control events), or if the Company
terminates him without cause, Mr. Finnigan will receive his annual compensation
for one year (including salary and bonus), with health and disability insurance
coverage for six months. Mr. Finnigan will also immediately vest in all stock
option grants.
The Company has entered into a three year employment agreement with Paul
Alanis, effective January 1, 1999. Mr. Alanis's annual compensation will be
$600,000, with an annual bonus of not less than $100,000 and up to $600,000.
The bonus is payable as follows: (a) $100,000 if Mr. Alanis remains employed by
Hollywood Park for the year in question; (b) $200,000 based on the Company's
actual earnings before interest, taxes depreciation and amortization as
compared to budget, and not exceeding the capital budget; and (c) the remaining
$300,000 to awarded at the discretion of the Board of Directors. If Mr. Alanis
terminates his
79
<PAGE>
employment for good reason, or if the Company terminates Mr. Alanis without
cause, Mr. Alanis will receive an annual salary of $700,000 through the balance
of the contract period, and retain his health and disability insurance for six
months after termination. Mr. Alanis will also immediately vest in all stock
option grants. If Mr. Alanis terminates his employment upon failure to be
promoted to the Company's Chief Executive Officer by December 31, 1999, he will
be entitled to lump sum severance payments of $700,000, and continued health
and disability insurance coverage for six months. Mr. Alanis would also
immediately vest in 75% of the 400,000 options granted to him on September 10,
1998.
The Company has also entered into a three-year employment agreement with J.
Michael Allen, effective January 1, 1999. Mr. Allen's annual compensation will
be $400,000 with a possible bonus of up to $200,000. The bonus is payable as
follows: (a) $100,000 based on the company's actual earnings before interest,
taxes depreciation and amortization as compared to budget, and not exceeding
the capital budget, and (b) $100,000 at the discretion of the Board of
Directors. If Mr. Allen terminates his employment for good reason, or if the
Company terminates him without cause, and so long as he does not compete with
the Company or its subsidiaries in the gaming business prior to the end of the
employment contract term, he will be entitled to $400,000 per year for the
balance of employment contract term, with health and disability insurance
coverage for six months. Mr. Allen will also immediately vest in all stock
option grants. If Mr. Allen terminates his employment due to Mr. Alanis's
failure to be promoted to the Company's Chief Executive Officer by December 31,
1999, he will receive any accrued but unpaid salary and vacation benefits.
Compensation Committee Interlocks and Insider Participation. The members of
the Compensation Committee currently are Messrs. Johnson, Reitnouer and
Williamson. None of the members of the Compensation Committee were officers or
employees or former officers or employees of the Company or its subsidiaries.
80
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the name, address (address is provided for
persons listed as beneficial owners of 5% or more of the outstanding Hollywood
Park common stock) and number of shares and percent of the outstanding
Hollywood Park common stock beneficially owned as of December 31, 1998, by each
person known to the Board of Directors of Hollywood Park to be the beneficial
owner of 5% or more of the outstanding shares of Hollywood Park common stock,
each Director, each Named Officer and all current Directors and Executive
Officers as a group.
<TABLE>
<CAPTION>
Shares Percent of
Beneficially Shares
Name and Address of Beneficial Owner Owned(a) Outstanding(b)
- ------------------------------------ ------------ --------------
<S> <C> <C>
Legg Mason, Inc................................ 2,709,095(c) 10.5%
111 South Calvert Street
Baltimore, Maryland 21202
R.D. Hubbard................................... 2,708,821(d) 10.5%
Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
State of Wisconsin Investment Board............ 1,611,000(e) 6.2%
P.O. Box 7842
Madison, Wisconsin 53707
Timothy J. Parrott............................. 443,716(f) 1.7%
J.R. Johnson................................... 380,760(g) 1.5%
Michael Ornest................................. 299,833(h) 1.2%
Warren B. Williamson........................... 159,917(i) *
Lynn P. Reitnouer.............................. 62,000(j) *
Herman Sarkowsky............................... 57,938(k) *
Robert T. Manfuso.............................. 40,333(l) *
Marlin Torguson................................ 30,667(m) *
G. Michael Finnigan............................ 97,071(n) *
Paul Alanis.................................... 400,000(o) 1.5%
J. Michael Allen............................... 50,000(p) *
Donald M. Robbins.............................. 67,339(q) *
Current Directors and Executive Officers as a
group (13 persons)............................ 4,798,416(r) 18.0%
</TABLE>
- --------
* Less than one percent (1%) of the outstanding common shares.
(a) Reflects the conversion of each of Hollywood Park's outstanding Depository
Shares into 0.8333 shares of Hollywood Park Common Stock effective August
28, 1997.
(b) Assumes exercise of stock options beneficially owned by the named
individual or entity into shares of Hollywood Park Common Stock. Based on
25,800,069 shares outstanding as of December 31, 1998.
(c) Based upon information provided by the stockholder in Schedule 13G filed
with the Commission on February 16, 1999.
(d) Includes 89,001 shares of Hollywood Park Common Stock which Mr. Hubbard has
the right to acquire upon the exercise of options which are exercisable
within 60 days of December 31, 1998.
(e) Based upon information provided by the stockholder in Schedule 13G filed
with the Commission on January 16, 1999.
81
<PAGE>
(f) Includes 270,945 shares of Hollywood Park Common Stock which Mr. Parrott
has the right to acquire pursuant to options assumed by the Company in
connection with the Boomtown Merger which are exercisable within sixty days
of December 31, 1998.
(g) Includes 12,000 shares of Hollywood Park Common Stock which Mr. Johnson has
the right to acquire upon the exercise of options which are exercisable
within 60 days of December 31, 1998.
(h) Includes 667 shares of Hollywood Park Common Stock which Mr. Ornest has the
right to acquire upon the exercise of options which are exercisable within
60 days of December 31, 1998.
(i) Includes 12,000 shares of Hollywood Park Common Stock which Mr. Williamson
has the right to acquire upon the exercise of options which are exercisable
within 60 days of December 31, 1998.
(j) Includes 12,000 shares of Hollywood Park Common Stock which Mr. Reitnouer
has the right to acquire upon the exercise of options which are exercisable
within 60 days of December 31, 1998.
(k) Includes 12,000 shares of Hollywood Park Common Stock which Mr. Sarkowsky
has the right to acquire upon the exercise of options which are exercisable
within 60 days of December 31, 1998.
(l) Includes 12,000 shares of Hollywood Park Common Stock which Mr. Manfuso has
the right to acquire upon the exercise of options which are exercisable
within 60 days of December 31, 1998.
(m) Includes 30,667 shares of Hollywood Park Common Stock which Mr. Torguson
has the right to acquire upon the exercise of options which are exercisable
within 60 days of December 31, 1998.
(n) Includes 71,669 shares of Hollywood Park Common Stock which Mr. Finnigan
has the right to acquire upon the exercise of options which are exercisable
within 60 days of December 31, 1998.
(o) Includes 100,000 shares of Hollywood Park Common Stock which Mr. Alanis has
the right to acquire upon the exercise of options which are exercisable
within 60 days of December 31, 1998.
(p) Includes 50,000 shares of Hollywood Park Common Stock which Mr. Allen has
the right to acquire upon the exercise of options which are exercisable
within 60 days of December 31, 1998.
(q) Includes 65,001 shares of Hollywood Park Common Stock which Mr. Robbins has
the right to acquire upon the exercise of options which are exercisable
within 60 days of December 31, 1998.
(r) Includes 737,950 shares of Hollywood Park Common Stock of which the
Directors and Executive Officers may be deemed to have beneficial ownership
following the exercise of options to purchase Hollywood Park Common Stock
which are exercisable within 60 days of December 31, 1998. Excluding such
shares, the Directors and Executive Officers of Hollywood Park have
beneficial ownership of 4,060,466 shares of Hollywood Park Common Stock,
which represents 15.7% of the shares of Hollywood Park Common Stock
outstanding as of December 31, 1998.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since November 1993, we have had an aircraft time sharing agreement with
R.D. Hubbard Enterprises, Inc., which is wholly owned by Mr. Hubbard. The
agreement automatically renews each month unless either party gives written
notice of termination at least two weeks before a renewal date. We reimbursed
Hubbard Enterprises approximately $72,000 in 1998 for our use of the aircraft.
Timothy J. Parrott purchased 270,738 shares of Boomtown common stock in
connection with Boomtown's 1988 acquisition of Boomtown Hotel & Casino, Inc.
(which operates Boomtown Reno). Mr. Parrott paid an aggregate purchase price of
$222,000, of which $1,000 was paid in cash and $221,000 was paid by a
promissory note secured by a pledge to Boomtown of all of the shares owned by
Mr. Parrott. As of October 31, 1998, Mr. Parrott resigned his position as
Chairman of Boomtown, and Hollywood Park retained him as a consultant to
provide executive consulting services to Hollywood Park relating to gaming and
other business issues. Mr. Parrott was retained for a three year period, with
an annual retainer of $350,000 with health and disability benefits equivalent
to those he received as a Boomtown employee. Mr. Parrott's note will be
forgiven in three equal parts on each anniversary of the consulting agreement.
In connection with the Boomtown merger, Mr. Parrott was designated as a Board
member and continues in that respect.
On August 31, 1998, we received a promissory note from Mr. Alanis for up to
$3.5 million evidencing a loan we made to Mr. Alanis of approximately $3.2
million to purchase 300,000 shares of our common stock in connection with Mr.
Alanis' becoming an officer of Hollywood Park. Mr. Alanis was formerly the
President of Horseshoe Gaming, Inc., the manager and a member of Horseshoe
Gaming, L.L.C. The promissory note bears interest at the prime interest rate,
but is not to exceed 10%. The principal amount of the promissory note, along
with any accrued interest, is due in full no later than December 31, 1999. The
promissory note is secured by Mr. Alanis' interest in Horseshoe Gaming, L.L.C.,
which has an approximate value well in excess of $3.5 million.
Marlin F. Torguson, who beneficially owned approximately 21.5% of the
outstanding common stock of Casino Magic, agreed, in connection with the Casino
Magic acquisition, to vote his Casino Magic shares in favor of the acquisition
by Hollywood Park. In addition, Mr. Torguson agreed to continue to serve as an
employee of Casino Magic for three years following the acquisition, and during
such three-year period not to compete with Hollywood Park or Casino Magic in
any jurisdictions in which either Hollywood Park or Casino Magic operates.
Hollywood Park agreed to appoint Mr. Torguson to the board of directors of
Hollywood Park. Hollywood Park has agreed to issue to Mr. Torguson 20,000
shares of Hollywood Park common stock per year during such three-year period
and pay him $300,000 per year of such period. In addition, Hollywood Park
agreed to grant Mr. Torguson options to acquire 30,000 shares of Hollywood Park
common stock at an exercise price equal to the closing price of Hollywood Park
common stock on the effective date of the Casino Magic acquisition. The
foregoing payments will be made to Mr. Torguson whether or not Hollywood Park
or Casino Magic terminates Mr. Torguson's employment (except for a termination
for cause).
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Bank Credit Facility
In connection with the acquisition of Casino Magic, we entered into the Bank
Credit Facility with a group of banks (the "Banks") for whom Bank of America
NT&SA acts as Administrative Agent. The Bank Credit Facility provides us with a
revolving line of credit of up to $300 million, with a letter of credit sub-
facility of $30 million and swing line sub-facility of $10 million provided by
the Administrative Agent. Under the terms of the Bank Credit Facility, now that
we have been approved to receive the gaming license in Indiana, we may request
that the line of credit be increased to $375 million. The Bank Credit Facility
matures December 31, 2003; however, the Banks have the right to terminate the
line of credit upon a "Change in Control", as defined in the Bank Credit
Facility.
The commitment under the revolving line of credit will be reduced by $15
million, commencing March 31, 2001, and on the last day of each third calendar
month thereafter until December 31, 2002. Commencing on March 31, 2003 and on
the last day of each third calendar month thereafter, the amount available for
borrowing under the line of credit will decrease by $25 million. If the
facility has been increased, the reduction amounts are to be increased
proportionately.
The annual interest rate under the Bank Credit Facility is determined, at
the Company's election, by reference to the "Eurodollar Rate" (for Eurodollar
loans) (for interest periods of one, two, three or six months) or the
"Alternate Base Rate" (for Base Rate loans), as these terms are defined in the
Bank Credit Facility, plus margins that vary depending on the Company's ratio
of funded debt to earnings before interest, taxes, depreciation and
amortization ("EBITDA"). With a funded debt to EBITDA ratio of less than 2.00
to 1.00, the margin for Eurodollar loans is 1.00% and nothing for Base Rate
loans. The margin for each type of loan will increase by 25 basis points
(except the initial increase in the margin for Base Rate loans, which increases
by 12.5 basis points) for each 50 basis point increase in the funded debt to
EBITDA ratio. The maximum margin for Eurodollar loans is 2.25%, and for Base
Rate loans is 1.125%. The margin for the period October 15, 1998, through
November 30, 1998, for Eurodollar loans was 2.00% and 0.875% for Base Rate
loans. Effective December 1, 1998 through February 28, 1999, the margins are
2.25% and 1.125% for Eurodollar and Base Rate loans, respectively. After giving
effect to this offering, the margins would continue to be 2.25% and 1.125% for
Eurodollar and Base Rate loans, respectively.
The commitment fee for the facility also varies based on the ratio of funded
debt to EBITDA, starting from 25 basis points when the ratio is less than 2.00,
and increasing by 6.25 basis points for the first two increases in the ratio of
50 basis points, then remaining unchanged for the next 50 basis points increase
in the ratio, and thereafter increasing by 6.25 basis points for each 50 basis
points increase in the ratio, up to a maximum of 50 basis points.
Our obligations under the Bank Credit Facility are guaranteed by all of our
significant subsidiaries (except Casino Magic of Louisiana, Corp. and Casino
Magic Neuquen) and are secured by a first lien and security interest on
substantially all of our assets and the assets of our significant subsidiaries,
except for specified permitted liens incurred in connection with, or existing
at the time of, acquisition of property or subsidiaries.
The Bank Credit Facility imposes various customary affirmative covenants on
us and our subsidiaries, including among others, reporting covenants, covenants
to maintain insurance, comply with laws, maintain properties and other
covenants customary in commercial bank financings of this type.
The Bank Credit Facility imposes various negative covenants on us and our
subsidiaries including, without limitation: (1) restrictions on the payment of
subordinated obligations, (2) disposition of property, (3) mergers, (4) hostile
acquisitions, (5) payment of dividends and other distributions, (6) change in
the nature of our business, (7) restrictions on the incurrence of additional
debt and guaranties of debt, (8) restrictions on capital expenditures and
operating leases, (9) restrictions on investments, (10) restrictions on
transactions with affiliates, (11) restrictions on liens and negative pledges,
and (12) restrictions on amendments and modifications
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of subordinated indebtedness. In addition, we must comply with various
financial covenants, including interest coverage ratio, and funded debt to
EBITDA ratio.
Events of default under the Bank Credit Facility include, among other
things: (1) failure to make payments when due, (2) breach of representations or
warranties, (3) events of insolvency, (4) failure to pay other debt for
borrowed money, or other breach or default under agreements for such other debt
allowing the holder or lender to accelerate its maturity, or require such debt
to be redeemed or repurchased, (5) final judgment in an amount in excess of
$1.0 million which has not been stayed or satisfied within 30 days, (6)
revocation of the licenses affecting gaming operations accounting for 5% or
more of consolidated gross revenues, and (7) failure to comply with covenants.
Hollywood Park 9 1/2% Senior Subordinated Notes
On August 6, 1997, we and our wholly-owned subsidiary, Hollywood Park
Operating Company, jointly issued $125,000,000 aggregate principal amount of 9
1/2% Senior Subordinated Notes. These notes bear interest at 9 1/2% per year,
and interest is payable on each February 1 and August 1. The 9 1/2% Notes may
be redeemed, at our option and at the option of Hollywood Park Operating
Company, in whole or in part, on or after August 1, 2002 at the following
premiums over face: (1) on and after August 1, 2002, but before August 1, 2003:
104.75%; (2) on and after August 1, 2003, but before August 1, 2004: 102.375%;
(3) on and after August 1, 2004, but before August 1, 2005: 101.188%; and (4)
on and after August 1, 2005, and thereafter: 100%. Our obligations and those of
Hollywood Park Operating Company on the 9 1/2% Notes are not secured by any of
our assets, but are guaranteed by all of our material restricted subsidiaries.
The 9 1/2% Notes are governed by an indenture dated August 1, 1997, as
amended, which contains covenants limiting the ability of Hollywood Park and
Hollywood Park Operating Company and their respective subsidiaries to incur
additional debt, issue preferred stock, pay dividends or make certain
distributions, repurchase their stock, grant liens on their property, enter
into certain transactions with their affiliates, sell assets or enter into
mergers or consolidations, or sell stock in their subsidiaries. The indenture
also requires that we and Hollywood Park Operating Company offer to repurchase
the 9 1/2% Notes upon a change of control, as defined in the indenture. In a
supplemental indenture dated February 5, 1999, the indenture was amended to
make changes consented to by holders of the 9 1/2% Notes in the consent
solicitation.
Events of default under the indenture include: (1) failure to make payments
on the 9 1/2% Notes when due, (2) failure to comply with covenants, (3) failure
to pay other debt of $10 million or more, or default under such debt resulting
in acceleration of the maturity of such debt, (4) failure to satisfy or
discharge any final judgment in excess of $10 million, and (5) occurrence of
certain insolvency events.
Casino Magic of Louisiana, Corp. 13% First Mortgage Notes
On August 22, 1996, Casino Magic of Louisiana, Corp., our indirect wholly-
owned subsidiary which owns and operates Casino Magic Bossier, issued and sold
$115,000,000 aggregate principal amount of 13% First Mortgage Notes due 2003.
The Louisiana Notes provide for interest at 13% per year, payable semi-annually
on each February 15 and August 15, and at maturity. The Louisiana Notes also
provide for contingent interest in the amount of 5% of Casino Magic of
Louisiana, Corp.'s "Adjusted Consolidated Cash Flow", as defined in the
indenture for the Louisiana Notes, for the "Accrual Period", which is generally
the six month period ending December 31 or June 30, as the case may be. The
contingent interest is payable on each interest payment date, but may be
deferred at the option of Casino Magic of Louisiana, Corp., if and to the
extent that: (1) the payment of such contingent interest will cause Casino
Magic of Louisiana, Corp.'s "Adjusted Fixed Charge Coverage Ratio" for the most
recently completed four full fiscal quarters preceding such interest payment
date to be less than 1.5 to 1.0 on a pro forma basis, giving effect to the
payment of such contingent interest, and (2) the principal amount of the
Louisiana Notes to which such contingent interest relates has not then matured
or otherwise become due and payable. "Adjusted Fixed Charge Coverage Ratio" is
defined in the indenture as the ratio obtained by dividing the "Adjusted
Consolidated Cash Flow" by the "Fixed Charges."
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The aggregate contingent interest payable in any Accrual Period is reduced by
the portion of such interest that relates to Louisiana Notes that were not
outstanding as of the record date, each February 1 and August 1, preceding such
interest payment date.
The Louisiana Notes are secured by a first priority lien and security
interest in substantially all of the assets of Casino Magic of Louisiana,
Corp., including the Bossier riverboat. Jefferson Casino Corporation, the
immediate parent of Casino Magic of Louisiana, Corp., guarantees the Louisiana
Notes and the guarantee is secured by all of the assets of Jefferson Casino
Corporation, including all of the capital stock of Casino Magic of Louisiana,
Corp.
The Louisiana Notes are governed by an indenture which contains certain
covenants limiting the ability of Casino Magic of Louisiana, Corp. and its
subsidiaries to engage in any line of business other than the gaming business
and activities incidental to it, to borrow additional moneys or otherwise
become liable for additional debt, to pay dividends, issue preferred stock,
make investments and certain types of payments, to grant liens in their
property or enter into mergers or consolidations, or to enter into certain
specified transactions with their affiliates. The covenants also limit the
ability of Jefferson Casino Corporation to engage in any business other than
owning the stock of Casino Magic of Louisiana, Corp. or to incur any debt or
make any investments. The indenture also contains covenants which require
Casino Magic of Louisiana, Corp. to make an offer to repurchase the Louisiana
Notes upon certain sales of assets, casualty losses and changes in the control
of Casino Magic of Louisiana, Corp. or Jefferson Casino Corporation. Our
acquisition of Casino Magic resulted in a change in control. Accordingly,
Casino Magic of Louisiana, Corp. offered to repurchase the Louisiana Notes. The
offer expired on December 23, 1998 and holders of an aggregate principal amount
of approximately $2.1 million principal amount of Louisiana Notes accepted the
offer.
The indenture provides for certain events of default which include failure
to pay interest or contingent interest due on the Louisiana Notes, failure to
pay the principal or premium on the Louisiana Notes at maturity, upon
redemption or otherwise, failure to comply with the covenants contained in the
indenture, failure to pay certain other indebtedness, failure to satisfy a
final judgment, breach of any material representation or warranty in the
indenture and related documents, becoming insolvent or seeking relief under any
bankruptcy laws, and failure to continue operations.
The Louisiana Notes may only be redeemed at the option of Casino Magic of
Louisiana, Corp. after August 14, 2000, at the following redemption prices: (1)
after August 14, 2000, and before August 15, 2001: 106.5%; (2) after August 14,
2001, and before August 15, 2002: 104.332%, and (3) after August 14, 2002:
102.166%. Upon any acceleration of the maturity of the Louisiana Notes as a
result of an event of default caused by the willful action or inaction of
Casino Magic of Louisiana, Corp., the applicable redemption premiums set forth
above will also become due and payable in addition to the principal and other
amounts otherwise due on the Louisiana Notes. In the event of an acceleration
of the maturity of the Louisiana Notes as a result of a willful default before
August 15, 2000, when the Louisiana Notes may not be redeemed at the option of
Casino Magic of Louisiana, Corp., the following premiums will apply: (1) after
August 14, 1998, and before August 15, 1999: 109.750%, and (2) after August 14,
1999, and before August 15, 2000: 108.125%.
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THE EXCHANGE OFFER
General
The Company hereby offers, upon the terms and subject to the conditions set
forth in this prospectus and in the accompanying Letter of Transmittal (which
together constitute the exchange offer (the "Exchange Offer")), to exchange up
to $350 million aggregate principal amount of Exchange Notes for a like
aggregate principal amount of Old Notes properly tendered on or prior to the
Expiration Date (as defined below) and not withdrawn as permitted pursuant to
the procedures described below. The Exchange Offer is being made with respect
to all of the Old Notes.
As of the date of this prospectus, $350 million aggregate principal amount
of the Old Notes is outstanding. This prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1999, to all holders
of Old Notes known to the Company. The Company's obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain conditions
set forth under "--Certain Conditions to the Exchange Offer" below. The Company
currently expects that each of the conditions will be satisfied and that no
waivers will be necessary.
Purpose of the Exchange Offer
The Old Notes were issued on February 18, 1999 (the "Issuance Date") in a
transaction exempt from the registration requirements of the Securities Act.
Accordingly, the Old Notes may not be reoffered, resold, or otherwise
transferred unless so registered or unless an applicable exemption from the
registration and prospectus delivery requirements of the Securities Act is
available.
In connection with the issuance and sale of the Old Notes, the Company
entered into the Registration Rights Agreement, which requires that:
. the Company file with the Commission a registration statement relating to
the Exchange Offer not later than 45 days after the date of issuance of
the Old Notes, and
. the Company use its best efforts to cause the registration statement
relating to the Exchange Offer to become effective under the Securities
Act not later than 150 days after the date of issuance of the Old Notes,
and
. the Exchange Offer be consummated not later than 30 business days after
the target date for the effectiveness of the Registration Statement,
. or, if obligated to file a shelf registration statement, that the Company
use its best efforts to file the shelf registration statement with the
Commission within 30 days after such filing obligation arises and to
cause the shelf registration statement to be declared effective within 90
days after such obligation arises.
A copy of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement.
The Exchange Offer is being made by the Company to satisfy its obligations
with respect to the Registration Rights Agreement. The term "holder," with
respect to the Exchange Offer, means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Notes are held of record by The Depository Trust Company. Other than
pursuant to the Registration Rights Agreement, the Company is not required to
file any registration statement to register any outstanding Old Notes. Holders
of Old Notes who do not tender their Old Notes or whose Old Notes are tendered
but not accepted would have to rely on exemptions to registration requirements
under the securities laws, including the Securities Act, if they wish to sell
their Old Notes.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Company
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has not sought its own interpretive letter and there can be no assurance that
the staff would make a similar determination with respect to the Exchange Offer
as it has in such interpretive letters to third parties. Based on these
interpretations by the Staff, the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a Holder (other than any Holder
who is a broker-dealer or an "affiliate" of the Company within the meaning of
Rule 405 of the Securities Act) without further compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
Holder's business and that such Holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such Exchange Notes, as to which
such Holder must acknowledge. See "--Resale of Exchange Notes". Any holder who
is an affiliate of the Company or who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes cannot rely on
such interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution".
Terms of the Exchange
The Company hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this prospectus, $1,000 in
principal amount of Exchange Notes for each $1,000 in principal amount of the
Old Notes. The terms of the Exchange Notes are identical in all material
respects to the terms of the Old Notes for which they may be exchanged pursuant
to this Exchange Offer, except that the Exchange Notes will generally be freely
transferable by holders thereof and will not be subject to any covenant
regarding registration. The Exchange Notes will evidence the same indebtedness
as the Old Notes and will be entitled to the benefits of the Indenture. See
"Description of Notes".
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
Tendering holders of the Old Notes will be required to make the
acknowledgements referred to in the last paragraph of the heading "--Purpose of
the Exchange Offer." Tendering holders of the Old Notes shall not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of the Old
Notes pursuant to the Exchange Offer.
Expiration Date; Extension; Termination; Amendment
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1999, unless the Company, in its sole discretion, has extended the
period of time for which the Exchange Offer is open (such date, as it may be
extended, is referred to herein as the "Expiration Date"). The Expiration Date
will be at least 20 business days after the commencement of the Exchange Offer
in accordance with Rule 14e-1(a) under the Exchange Act. The Company expressly
reserves the right, at any time or from time to time, to extend the period of
time during which the Exchange Offer is open, and thereby delay acceptance for
exchange of any Old Notes, by giving oral or written notice to the Exchange
Agent and by timely public announcement no later than 9:00 a.m. New York City
time, on the next business day after the previously scheduled Expiration Date.
During any such extension, all Old Notes previously tendered will remain
subject to the Exchange Offer unless properly withdrawn.
The Company expressly reserves the right to
. terminate or amend the Exchange Offer and not to accept for exchange any
Old Notes not theretofore accepted for exchange upon the occurrence of
any of the events specified below under "Certain Conditions to the
Exchange Offer" which have not been waived by the Company and
. amend the terms of the Exchange Offer in any manner.
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If any such termination or amendment occurs and is determined by the Company to
be a material change, the Company will notify the Exchange Agent and will
either issue a press release or give oral or written notice to the holders of
the Old Notes as promptly as practicable.
For purposes of the Exchange Offer, a "business day" means any day other
than Saturday, Sunday or a date on which banking institutions are required or
authorized by New York State law to be closed, and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time. Unless the Company
terminates the Exchange Offer prior to 5:00 p.m., New York City time, on the
Expiration Date, the Company will exchange the Exchange Notes for the Old Notes
on the Exchange Date.
Interest on Exchange Notes
The Exchange Notes will bear interest from their date of issuance. Interest
will accrue on the Old Notes that are tendered in exchange for the Exchange
Notes through the issue date of the Exchange Notes. Holders of Old Notes that
are accepted for exchange will not receive interest that is accrued but unpaid
on the Old Notes at the time of exchange, but such interest will be payable,
together with interest on the Exchange Notes, on the first interest payment
date after the Expiration Date. Interest on the Exchange Notes will be payable
semi-annually on each February 15 and August 15, commencing on August 15, 1999.
Procedures for Tendering Old Notes
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this prospectus and in the accompanying
Letter of Transmittal.
A holder of Old Notes may tender the same by
. properly completing and signing the Letter of Transmittal or a facsimile
thereof (all references in this prospectus to the Letter of Transmittal
shall be deemed to include a facsimile thereof) and delivering the
same, together with the certificate or certificates representing the Old
Notes being tendered and any required signature guarantees and any other
documents required by the Letter of Transmittal, to the Exchange Agent (as
defined below) at its address set forth below on or prior to the
Expiration Date (or complying with the procedure for book-entry transfer
described below) or
. complying with the guaranteed delivery procedures described below.
The method of delivery of Old Notes, Letters of Transmittal and all other
required documents is at the election and risk of the holders. If such delivery
is by mail, it is recommended that registered mail properly insured, with
return receipt requested, be used. In all cases, sufficient time should be
allowed to insure timely delivery. No Old Notes or Letters of Transmittal
should be sent to the Company.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in The Depository Trust Company (also referred to as a "book-
entry transfer facility") whose name appears on a security listing as the owner
of Old Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed
by the registered holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Notes and/or Old Notes not exchanged are to be delivered to an address
other than that of
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the registered holder appearing on the note register for the Old Notes, the
signature in the Letter of Transmittal must be guaranteed by an Eligible
Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this prospectus to establish accounts with respect to the
Old Notes at the book-entry transfer facility for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the book-entry transfer facility's system
may make book-entry delivery of Old Notes by causing such book-entry transfer
facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the book-entry transfer facility's
procedures for such transfer. Although delivery of Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the book-entry
transfer facility, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its address set forth below on or prior to the Expiration Date, a letter,
telegram or facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) from an Eligible
Institution setting forth the name and address of the tendering holder, the
names in which the Old Notes are registered and, if possible, the certificate
numbers of the Old Notes to be tendered, and stating that the tender is being
made thereby and guaranteeing that within three business days after the
Expiration Date, the Old Notes in proper form for transfer (or a confirmation
of book-entry transfer of such Old Notes into the Exchange Agent's account at
the book-entry transfer facility), will be delivered by such Eligible
Institution together with a properly completed and duly executed Letter of
Transmittal (and any other required documents). Unless Old Notes being tendered
by the above-described method are deposited with the Exchange Agent within the
time period set forth above (accompanied or preceded by a properly completed
Letter of Transmittal and any other required documents), the Company may, at
its option, reject the tender. Copies of the notice of guaranteed delivery
("Notice of Guaranteed Delivery") which may be used by Eligible Institutions
for the purposes described in this paragraph are available from the Exchange
Agent.
A tender will be deemed to have been received as of the date when
. the tendering holder's properly completed and duly signed Letter of
Transmittal accompanied by the Old Notes (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the book-
entry transfer facility) is received by the Exchange Agent, or
. a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) from an Eligible
Institution is received by the Exchange Agent.
Issuances of Exchange Notes in exchange for Old Notes tendered pursuant to a
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) by an Eligible Institution will be made only
against deposit of the Letter of Transmittal (and any other required documents)
and the tendered Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer (including the Letter
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of Transmittal and the instructions thereto) by the Company shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes for exchange must be cured within such
reasonable period of time as the Company shall determine. Neither the Company,
the Exchange Agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of Old
Notes for exchange, nor shall any of them incur any liability for failure to
give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders appear on the Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things:
. the Exchange Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder,
. that neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and
. that neither the holder nor any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act, of the Company, or if it is
an affiliate it will comply with the registration and prospectus
requirements of the Securities Act to the extent applicable.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution".
Terms and Conditions of the Letter of Transmittal
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer:
The party tendering Notes for exchange (the "Transferor") exchanges, assigns
and transfers the Old Notes to the Company and irrevocably constitutes and
appoints the Exchange Agent as the Transferor's agent and attorney-in-fact to
cause the Old Notes to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The Transferor also warrants
that it will, upon request, execute and deliver any additional documents deemed
by the Exchange Agent or the Company to be necessary or desirable to complete
the exchange, assignment and transfer of tendered Old Notes or transfer
ownership of such Old Notes on the account books maintained by a book-entry
transfer facility. The Transferor further agrees that acceptance of any
tendered Old Notes by the Company and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Company of
certain of its obligations under the Registration Rights Agreement. All
authority conferred by the Transferor will survive the death or incapacity of
the Transferor and every obligation of the Transferor shall be binding upon the
heirs, legal representatives, successors, assigns, executors and administrators
of such Transferor.
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The Transferor certifies that it is not an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act and that it is acquiring the
Exchange Notes offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such Exchange Notes.
Each holder, other than a broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage in, a distribution of Exchange Notes.
Each Transferor which is a broker-dealer receiving Exchange Notes for its own
account must acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes. By so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
Withdrawal Rights
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter
must be received by the Exchange Agent at the address set forth herein prior to
the Expiration Date. Any such notice of withdrawal must:
. specify the name of the person having tendered the Old Notes to be
withdrawn (the "Depositor"),
. identify the Old Notes to be withdrawn (including the certificate number
or numbers and principal amount of such Old Notes),
. specify the principal amount of Notes to be withdrawn,
. include a statement that such holder is withdrawing his election to have
such Old Notes exchanged,
. be signed by the holder in the same manner as the original signature on
the Letter of Transmittal by which such Old Notes were tendered or as
otherwise described above (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee
under the Indenture register the transfer of such Old Notes into the name
of the person withdrawing the tender, and
. specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. The Exchange Agent will return the
properly withdrawn Old Notes promptly following receipt of notice of
withdrawal. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer, any notice of withdrawal must specify the name and
number of the account at the book-entry transfer facility to be credited
with the withdrawn Old Notes or otherwise comply with the book-entry
transfer facility procedure. All questions as to the validity of notices
of withdrawals, including time of receipt, will be determined by the
Company and such determination will be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account with such book-
entry transfer facility specified by the holder) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described under "--Procedures for Tendering Old Notes" above at any time on or
prior to the Expiration Date.
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Acceptance of Old Notes for Exchange; Delivery of Exchange Notes
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly on the Exchange Date, all Old Notes properly
tendered and will issue the Exchange Notes promptly after such acceptance. See
"--Certain Conditions to the Exchange Offer" below. For purposes of the
Exchange Offer, the Company shall be deemed to have accepted properly tendered
Old Notes for exchange when, as and if the Company has given oral or written
notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the holder of such Old Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note.
In all cases, issuance of Exchange Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely book-entry
confirmation of such Old Notes into the Exchange Agent's account at the book-
entry transfer facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such non-exchanged Old Notes will be credited to an account
maintained with such book-entry transfer facility) as promptly as practicable
after the expiration of the Exchange Offer.
Certain Conditions to the Exchange Offer
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company shall not be required to accept for
exchange, or to issue Exchange Notes in exchange for, any Old Notes and may
terminate or amend the Exchange Offer (by oral or written notice to the
Exchange Agent or by a timely press release) if at any time before the
acceptance of such Old Notes for exchange or the exchange of the Exchange Notes
for such Old Notes, any of the following conditions exist:
(1) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Exchange
Offer which, in the sole judgment of the Company, might materially impair
the ability of the Company to proceed with the Exchange Offer or have a
material adverse effect on the contemplated benefits of the Exchange Offer
to the Company; or
(2) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company that is or may be adverse to the Company, or the
Company shall have become aware of facts that have or may have adverse
significance with respect to the value of the Old Notes or the Exchange
Notes or that may materially impair the contemplated benefits of the
Exchange Offer to the Company; or
(3) any law, rule or regulation or applicable interpretations of the
staff of the Commission is issued or promulgated which, in the good faith
determination of the Company, do not permit the Company to effect the
Exchange Offer; or
(4) any governmental approval has not been obtained, which approval the
Company, in its sole discretion, deems necessary for the consummation of
the Exchange Offer; or
(5) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation (or an amendment to any existing law statute, rule or
regulation) which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
have a material adverse effect on the contemplated benefits of the Exchange
Offer to the Company; or
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(6) there shall occur a change in the current interpretation by the staff
of the Commission which permits the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes to be offered for resale, resold
and otherwise transferred by holders thereof (other than any such holder
that is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act provided that such Exchange Notes
are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the
distribution of such Exchange Notes; or
(7) there shall have occurred:
. any general suspension of, shortening of hours for, or limitation on
prices for, trading in securities on any national securities exchange
or in the over-the-counter market (whether or not mandatory),
. any limitation by any governmental agency or authority which may
adversely affect the ability of the Company to complete the
transactions contemplated by the Exchange Offer,
. a declaration of a banking moratorium or any suspension of payments
in respect of banks by Federal or state authorities in the United
States (whether or not mandatory),
. a commencement of a war, armed hostilities or other international or
national crisis directly or indirectly involving the United States,
. any limitation (whether or not mandatory) by any governmental
authority on, or other event having a reasonable likelihood of
affecting, the extension of credit by banks or other lending
institutions in the United States, or
. in the case of any of the foregoing existing at the time of the
commencement of the Exchange Offer, a material acceleration or
worsening thereof.
The Company expressly reserves the right to terminate the Exchange Offer and
not accept for exchange any Old Notes upon the occurrence of any of the
foregoing conditions (which represent all of the material conditions to the
acceptance by the Company of properly tendered Old Notes). In addition, the
Company may amend the Exchange Offer at any time prior to the Expiration Date
in any respect whether or not any of the conditions set forth above occur.
The foregoing conditions are for the sole benefit of the Company and maybe
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which maybe
asserted at any time and from time to time.
If the Company waives or amends the foregoing conditions, it will, if
required by law, extend the Exchange Offer for a minimum of five business days
from the date that the Company first gives notice, by public announcement or
otherwise, of such waiver or amendment, if the Exchange Offer would otherwise
expire within such five business-day period. Any determination by the Company
concerning the events described above will be final and binding upon all
parties.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no Exchange Notes will be issued in exchange for any such Old
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this prospectus constitutes
apart or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended. In any such event the Company is required to use every
reasonable effort to obtain the withdrawal of any stop order at the earliest
possible time.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange.
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Exchange Agent
The Bank of New York has been appointed as the "Exchange Agent" for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below:
<TABLE>
<S> <C>
By Hand/Overnight Courier: By Mail:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street, 7E
Corporate Trust Services Window Corporate Trust Services Window
New York, New York 10286 New York, New York 10286
Attn: Reorganization Section Attn: Reorganization Section
</TABLE>
By Facsimile: (212) 815-6339
Attn.: Reorganization Section
Telephone: (212) 815-4444
Questions and requests for assistance, requests for additional copies of this
prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the address and
telephone number set forth in the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF TRANSMITTAL,
OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER OTHER THAN THE
ONES SET FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE A VALID
DELIVERY.
Solicitation of Tenders; Fees and Expenses
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The Company will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this and other related documents to the beneficial owners
of the Old Notes and in handling or forwarding tenders for their customers.
The Company will pay all expenses incurred in connection with the Exchange
Offer, including fees and expenses of the Exchange Agent, Trustee, registration
fees, accounting, legal, printing and related fees and expenses.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those
contained in this prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the respective dates as of
which information is given herein. The Exchange Offer is not being made to (nor
will tenders be accepted from or on behalf of) holders of Old Notes in any
jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction. However,
the Company may, at its discretion, take such action as it may deem necessary
to make the Exchange Offer in any such jurisdiction and extend the Exchange
Offer to holders of Old Notes in such jurisdiction. In any jurisdiction in
which the securities laws or blue sky laws of which require the Exchange Offer
to be made by a licensed broker or dealer, the Exchange Offer is being made on
behalf of the Company by one or more registered brokers or dealers which are
licensed under the laws of such jurisdiction.
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Transfer Taxes
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or
if tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
Accounting Treatment
The Exchange Notes will be recorded at the carrying value of the Old Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the exchange of Exchange Notes for Old Notes. Expenses incurred in
connection with the issuance of the Exchange Notes will be amortized over the
term of the Exchange Notes.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. Old Notes not
exchanged pursuant to the Exchange Offer will continue to remain outstanding in
accordance with their terms. In general, the Old Notes may not be offered or
sold unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate
that it will register the Old Notes under the Securities Act.
Participation in the Exchange Offer is voluntary, and holders of Old Notes
should carefully consider whether to participate. Holders of Old Notes are
urged to consult their financial and tax advisors in making their own decision
on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Exchange Offer, the
Company will have fulfilled a covenant contained in the Registration Rights
Agreement to effect the Exchange Offer. Holders of Old Notes who do not tender
their Old Notes in the Exchange Offer will continue to hold such Old Notes and
will be entitled to all the rights and limitations applicable thereto under the
Indenture, except for any such rights under the Registration Rights Agreement
that by their terms terminate or cease to have further effectiveness as a
result of the making of this Exchange Offer. All untendered Old Notes will
continue to be subject to the restrictions on transfer set forth in the
Indenture. To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered Old Notes could be adversely
affected.
The Company may in the future seek to acquire, subject to the terms of the
Indenture, untendered Old Notes in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. The Company has
no present plan to acquire any Old Notes which are not tendered in the Exchange
Offer.
Resale of Exchange Notes
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Company has not sought its
own interpretive letter and there can be no assurance that the Staff would make
a similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on
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these interpretations by the staff, the Company believes that the Exchange
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by a Holder (other than
any Holder who is a broker-dealer or an "affiliate" of the Company within the
meaning of Rule 405 of the Securities Act) without further compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
Holder's business and that such Holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such Exchange Notes. However, any
holder who is an "affiliate" of the Company or who has an arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, or any broker-dealer who purchased Old
Notes from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act:
. could not rely on the applicable interpretations of the staff and
. must comply with the registration and prospectus delivery requirements of
the Securities Act. A broker-dealer who holds Old Notes that were
acquired for its own account as a result of market-making or other
trading activities may be deemed to be an "underwriter" within the
meaning of the Securities Act and must, therefore, deliver a prospectus
meeting the requirements of the Securities Act in connection with any
resale of Exchange Notes. Each such broker-dealer that receives Exchange
Notes for its own account in exchange for Old Notes, where such Old Notes
were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge in the Letter of
Transmittal that it will deliver a prospectus in connection with any
resale of such Exchange Notes. See "Plan of Distribution".
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the Exchange Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company
has agreed, pursuant to the Registration Rights Agreement and subject to
certain specified limitations therein, to register or qualify the Exchange
Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Exchange Notes reasonably requests. Such
registration or qualification may require the imposition of restrictions or
conditions (including suitability requirements for offers or purchasers) in
connection with the offer or sale of any Exchange Notes.
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DESCRIPTION OF NOTES
The Old Notes were issued and the Exchange Notes offered hereby will be
issued under an indenture dated as of February 18, 1999 (the "Indenture") among
the Company, as issuer, the Guarantors named therein and The Bank of New York,
as trustee (the "Trustee"). The terms of the Exchange Notes include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
Exchange Notes are subject to all such terms, and holders of the Exchange Notes
are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of the material provisions of the Indenture
describes the material terms of the Indenture but does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
provisions of the Indenture, including the definitions of certain terms
contained therein and those terms made part of the Indenture by reference to
the Trust Indenture Act.
You can find the definitions of certain terms used in this description under
the subheading "Certain Definitions." In this description, the word "Company"
refers only to Hollywood Park, Inc. and not to any of its subsidiaries or
affiliates.
On February 18, 1999, the Company issued $350 million aggregate principal
amount of Old Notes under the Indenture. The terms of the Exchange Notes are
identical in all material respects to the Old Notes, except for certain
transfer restrictions and registration and other rights relating to the
exchange of the Old Notes for the Exchange Notes. The Trustee will authenticate
and deliver Exchange Notes for original issue only in exchange for a like
principal amount of Old Notes. Any Old Notes that remain outstanding after the
consummation of the Exchange Offer, together with the Exchange Notes, will be
treated as a single class of securities under the Indenture. Accordingly, all
references herein to specified percentages in aggregate principal amount of the
outstanding Notes shall be deemed to mean, at any time after the Exchange Offer
is consummated, such percentage in aggregate principal amount of the Old Notes
and Exchange Notes then outstanding.
Brief Description of the Notes and the Guarantees
The Notes
These Notes:
. are general unsecured obligations of the Company;
. are subordinated in right of payment to all existing and future Senior
Debt of the Company;
. are effectively subordinated to all secured Indebtedness of the Company;
. rank equally with its 9 1/2% Senior Subordinated Notes due 2007 issued by
the Company and Hollywood Park Operating Company;
. are senior in right of payment to any future Indebtedness of the Company
that is specifically subordinated to the Notes; and
. are unconditionally guaranteed by the Guarantors.
The Guarantees
These Notes are guaranteed by each of the existing and future Material
Restricted Subsidiaries of the Company, which are initially all of the
subsidiaries of the Company except:
Hollywood Park Kansas, Inc.
Sunflower Racing, Inc. and its subsidiary SR Food & Beverage Company
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the following subsidiaries of Casino Magic Corp.:
Jefferson Casino Corporation and its subsidiary Casino Magic of Louisiana,
Corp.
Casino Magic Neuquen S.A. and its subsidiary Casino Magic Support Services
SA
Casino Magic Management Services Corp.
St. Louis Casino Corp.
Boston Casino Corp.
Casino Advertising, Inc.
the following subsidiaries of Boomtown, Inc.:
Boomtown Missouri, Inc.
Boomtown Council Bluffs, Inc.
Boomtown Iowa, L.C.
Old River Enterprises
Blue Diamond Hotel and Casino, Inc.
Boomtown Las Vegas, Inc.
and the subsidiaries of any of the foregoing.
The Guarantees of these Notes:
. are general unsecured obligations of each Guarantor;
. are subordinated in right of payment to all existing and future Senior
Debt of each Guarantor;
. are effectively subordinated to all secured Indebtedness of each
Guarantor;
. rank equally with each Guarantor's guarantee of the 9 1/2% Senior
Subordinated Notes due 2007 issued by the Company and Hollywood Park
Operating Company; and
. are senior in right of payment to any future Indebtedness of each
Guarantor that is specifically subordinated to the Guarantees.
Assuming we had completed the offering of these Notes and applied the net
proceeds as intended, as of September 30, 1998, the Company and the Guarantors
would have had total Senior Debt (including secured Indebtedness) of
approximately $31.1 million, plus an aggregate of approximately $15.6 million
of accounts payable ranking equally with the Notes. As indicated above and as
discussed in detail below under the subheading "Subordination," payments on the
Notes and under the Guarantees will be subordinated to the payment of Senior
Debt. The Indenture permits us and the Guarantors to incur additional Senior
Debt.
As of the date of the Indenture, all of our Subsidiaries were "Restricted
Subsidiaries," except for Sunflower Racing, Inc. and its subsidiary SR Food &
Beverage Company, Jefferson Casino Corporation and its subsidiary Casino Magic
of Louisiana, Corp., Casino Magic Neuquen S.A. and its subsidiary Casino Magic
Support Services SA and Casino Magic Management Services Corp. However, under
the circumstances described below under the subheading "Certain Covenants--
Designation of Restricted and Unrestricted Subsidiaries," we will be permitted
to designate certain of our subsidiaries as "Unrestricted Subsidiaries."
Unrestricted Subsidiaries are not subject to many of the restrictive covenants
in the Indenture. Unrestricted Subsidiaries do not guarantee these Notes.
Not all of our "Restricted Subsidiaries" guarantee these Notes. In the event
of a bankruptcy, liquidation or reorganization of any of these non-guarantor
subsidiaries, these non-guarantor subsidiaries will pay the holders of their
debt and their trade creditors before they will be able to distribute any of
their assets to us. The
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guarantor subsidiaries generated 79.8% of our pro forma consolidated revenues
in the nine-month period ended September 30, 1998 and held 84.4% of our pro
forma consolidated assets as of September 30, 1998. See footnote 18 to our
Consolidated Financial Statements for year ended December 31, 1997 and footnote
7 to our Consolidated Financial Statements for the nine months ended September
30, 1998, included at the back of this prospectus for more detail about the
division of our consolidated revenues and assets between our guarantor and non-
guarantor subsidiaries. The Guaranty by Boomtown and Boomtown Hotel & Casino,
Inc. of the Exchange Notes to be issued in the exchange offer require approval
of the Nevada Commission in conjunction with the Nevada Commission's approval
of the exchange offer. The issuance of the Exchange Notes in the exchange offer
requires the approval of the Indiana Gaming Commission.
Principal, Maturity and Interest
The Notes are limited to a maximum aggregate principal amount of $350
million. The Company issues Notes in denominations of $1,000 and integral
multiples of $1,000. The Notes will mature on February 15, 2007.
Interest on these Notes accrues at the rate of 9 1/4% per annum and is
payable semi-annually in arrears on February 15 and August 15, commencing on
August 15, 1999. The Company will make each interest payment to the Holders of
record of these Notes on the immediately preceding February 1 and August 1.
Interest on these Notes will accrue from the date of original issuance or,
if interest has already been paid, from the date it was most recently paid. The
Exchange Notes will bear interest from their date of issuance. Interest will
accrue on the Old Notes that are tendered in exchange for the Exchange Notes
through the issue date of the Exchange Notes. Holders of Old Notes that are
accepted for exchange will not receive interest that is accrued but unpaid on
the Old Notes at the time of exchange, but such interest will be payable,
together with interest on the Exchange Notes, on the first interest payment
date after the Expiration Date. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to the Company, the Company
will make all principal, premium and interest payments on those Notes in
accordance with those instructions. All other payments on these Notes will be
made at the office or agency of the Company maintained for such purpose within
the City and State of New York unless the Company elects to make interest
payments by check mailed to the Holders at their address set forth in the
register of Holders; provided that all payments with respect to Global Notes,
and any definitive Notes the Holder of which has given wire instructions to the
Company will be made by wire transfer. Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose.
Optional Redemption
The Company does not have the option to redeem the Notes prior to February
15, 2003. Thereafter, the Company has the option to redeem the Notes, in whole
or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of the principal amount thereof)
set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on February 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003............................................................ 104.625%
2004............................................................ 103.083%
2005............................................................ 101.542%
2006 and thereafter............................................. 100.000%
</TABLE>
Notwithstanding the foregoing, the Company may, during the first 36 months
after the Issue Date, redeem up to 25% of the initially outstanding aggregate
principal amount of Notes with the net cash proceeds of one or
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more Public Equity Offerings of common stock of the Company at a redemption
price in cash of 109.25% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date;
provided that:
(1) at least 75% of the initially outstanding aggregate principal amount
of Notes remains outstanding immediately after the occurrence of such
redemption;
(2) notice of any such redemption shall be given by the Company to the
Holders and the Trustee within 15 days after the consummation of any such
Public Equity Offering; and
(3) such redemption shall occur within 60 days of the date of such
notice.
In addition to the foregoing, if any Gaming Authority requires that a holder
or beneficial owner of Notes must be licensed, qualified or found suitable
under any applicable Gaming Laws and such holder or beneficial owner:
(1) fails to apply for a license, qualification or a finding of
suitability within 30 days (or such shorter period as may be required by
the applicable Gaming Authority) after being requested to do so by the
Gaming Authority, or
(2) is denied such license or qualification or not found suitable,
the Company shall have the right, at its option:
(1) to require any such holder or beneficial owner to dispose of its
Notes within 30 days (or such earlier date as may be required by the
applicable Gaming Authority) of receipt of such notice or finding by such
Gaming Authority, or
(2) to call for the redemption of the Notes of such holder or beneficial
owner at a redemption price equal to the least of:
(A) the principal amount thereof,
(B) the price at which such holder or beneficial owner acquired the
Notes, in the case of either clause (A) above or this clause (B),
together with accrued interest and Liquidated Damages, if any, to the
earlier of the date of redemption or the date of the denial of license
or qualification or of the finding of unsuitability by such Gaming
Authority, or
(C) such other lesser amount as may be required by any Gaming
Authority.
The Company shall notify the Trustee in writing of any such redemption as
soon as practicable. The holder or beneficial owner applying for license,
qualification or a finding of suitability must pay all costs of the licensure
or investigation for such qualification or finding of suitability.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, the Trustee
will select the Notes to be redeemed among the holders of Notes as follows:
(1) if the Notes are listed, in compliance with the requirements of the
principal national securities exchange on which the Notes are listed, or
(2) if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and
appropriate.
No Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days
before the redemption date to each holder of Notes to be redeemed at its
registered address. Notices of redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of redemption that
relates to such Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the
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unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original Note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption.
The Company may obtain a satisfaction and discharge from all of its
obligations under the Indenture and the Notes concurrently with its issuance of
any notice to redeem all of the outstanding Notes by (1) depositing cash or
Cash Equivalents in an amount sufficient to pay and discharge the entire
indebtedness on the outstanding Notes for principal, premium (if any), and
interest to the redemption date set forth in the notice of redemption, (2)
paying or providing for the payment of all other sums payable under the
Indenture or the Notes including, without limitation, the expenses and fees of
the Trustee, and (3) delivering an Officer's Certificate and opinion of
counsel, each stating that all conditions precedent herein provided for the
satisfaction and discharge of the Indenture have been complied with, and
otherwise complying with any additional provisions of Section 314(c) of the
Trust Indenture Act in connection with such satisfaction and discharge. Upon
compliance with the foregoing, the Trustee shall execute proper instrument(s)
acknowledging the satisfaction and discharge of the Indenture.
Mandatory Redemption
Except as described below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
Subordination
The payment of principal, Liquidated Damages, if any, and interest on the
Old Notes and the related Guaranties are, and on the Exchange Notes and related
Guaranties will be, subordinated to the prior payment in full of all Senior
Debt, whether outstanding on the Issue Date or thereafter Incurred.
Upon any distribution to creditors of any Obligor in a liquidation or
dissolution of such Obligor or in a proceeding under Bankruptcy Law relating to
such Obligor or its property, in an assignment for the benefit of creditors or
any marshaling of such Obligor's assets and liabilities:
(1) the holders of Senior Debt will be entitled to receive payment in
full of all Obligations in respect of such Senior Debt (including Accrued
Bankruptcy Interest) and to have all outstanding Letter of Credit
Obligations and applicable Hedging Obligations fully cash collateralized
before the Trustee or the holders shall be entitled to receive any payment
or distribution on Obligations in respect of the Notes (except that the
Trustee or the holders may receive payments and other distributions made
from the defeasance or redemption trust described under "Legal Defeasance
and Covenant Defeasance" or "Selection and Notice" and the issuance of
Permitted Junior Securities), and
(2) until all Obligations with respect to Senior Debt (as provided in
clause (1) above) are paid in full and all outstanding Letter of Credit
Obligations and applicable Hedging Obligations are fully cash
collateralized, any distribution to which the Trustee or the holders would
be entitled but for this provision, including any such distribution that is
payable or deliverable by reason of the payment of any other Indebtedness
of such Obligor being subordinated to the payment of the Notes, shall be
made to holders of Senior Debt or their representatives, ratably in
accordance with the respective amounts of the principal of such Senior
Debt, interest (including, without limitation, Accrued Bankruptcy Interest)
thereon and all other Obligations with respect thereto (except that holders
may receive payments and other distributions made from the defeasance or
redemption trust described under "Legal Defeasance and Covenant Defeasance"
or "Selection and Notice" and the issuance of Permitted Junior Securities),
as their respective interests may appear.
The Obligors will also be restrained from making any payment or distribution
to the Trustee or any holder in respect of Obligations arising under or in
connection with the Notes, and from acquiring from the Trustee or any holder
any Notes for cash or property (other than payments and other distributions
made from any defeasance or redemption trust described under "Legal Defeasance
and Covenant Defeasance" or "Selection
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and Notice" and the issuance of Permitted Junior Securities), until all
principal and other Obligations arising under or in connection with the Senior
Debt have been paid in full or fully cash-collateralized, if not yet due if:
(1) a default in the payment of any Obligations with respect to
Designated Senior Debt occurs and is continuing (including any default in
payment upon the maturity of any Designated Senior Debt by lapse of time,
acceleration or otherwise), or any judicial proceeding is pending to
determine whether any such default has occurred, or
(2) any other default occurs and is continuing with respect to Designated
Senior Debt that permits holders of the Designated Senior Debt as to which
such default relates to accelerate its maturity and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the affected
Obligors or the holders of any Designated Senior Debt.
Payments on the Notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such default
is cured or waived, and
(2) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received by the Trustee,
unless the maturity of any Designated Senior Debt has been accelerated.
No new period of payment blockage predicated on a nonpayment default may be
commenced unless and until 360 days have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice. No nonpayment default that existed
or was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been waived for a period of not less than
180 days.
Notwithstanding the foregoing, the Company will be permitted to repurchase,
redeem, repay or prepay any or all of the Notes to the extent required to do so
by any Gaming Authority having authority over any Obligor.
The Indenture provides that the Trustee or any holder that has received any
payment or distribution in violation of the foregoing provisions will be
required to hold the same without commingling and deliver the same, in the form
received, together with any necessary endorsements, to the holders of Senior
Debt or their representatives. The Indenture further requires that each
affected Obligor promptly notify holders of Senior Debt if payment of the Notes
is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, holders of Notes may recover less ratably than
creditors of the affected Obligors who are holders of Senior Debt. See "Risk
Factors--The Notes are Subordinated to Senior Debt and Effectively Subordinated
to Debt of Our Non-Guarantor Subsidiaries."
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash (the
"Change of Control Payment") equal to 101% of the aggregate principal amount of
Notes plus accrued and unpaid interest thereon, if any, to the date of
repurchase. Within 30 days following any Change of Control, the Company will
mail a notice to the Trustee and each holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days nor later than 60 days from the date such notice is mailed (the "Change
of Control Payment Date"), pursuant to the procedures required by the Indenture
and described in such notice. The Company will comply with all applicable laws,
including, without limitation, Section 14(e) of the Exchange Act and the rules
thereunder and all applicable federal and state securities laws, and will
include all instructions and materials necessary to enable holders to tender
their Notes.
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On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer,
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered,
and
(3) deliver or cause to be delivered to the Trustee the Notes so
accepted, together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the
Company.
The Paying Agent will promptly mail to each holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered by such holder, if any; provided that each such new Note will be in
a principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Indenture will provide that, prior to complying with the provisions of
this covenant, but in any event within 90 days following a Change of Control,
the Company will either:
(1) repay all outstanding obligations with respect to Senior Debt,
(2) obtain the requisite consents, if any, from the holders of Senior
Debt to permit the repurchase of the Notes required by this covenant, or
(3) deliver to the Trustee an Officer's Certificate to the effect that no
action of the kind described in clause (1) or (2) is necessary.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Bank Credit Facility contains, and any future Credit Facilities or other
agreements relating to Indebtedness to which the Company becomes a party may
contain, restrictions on the ability of the Company to purchase any Notes, and
also may provide that certain change of control events with respect to the
Company would constitute a default thereunder. In the event a Change of Control
occurs at a time when the Company is prohibited from purchasing Notes, the
Company could seek the consents of its lenders to the purchase of Notes or
could attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain all such requisite consents or repay such borrowings,
the Company will remain prohibited from purchasing Notes. In such case, the
Company's failure to purchase tendered Notes would constitute an Event of
Default under the Indenture. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the holders of
Notes. Thus, there can be no assurance that in the event of a Change of Control
the Company will have sufficient funds, or that it will be permitted under the
terms of the Bank Credit Facility, to satisfy its obligations with respect to
any or all of the tendered Notes.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Restricted Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of
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Notes to require the Company to repurchase such Notes as a result of a sale,
lease, transfer, conveyance or other disposition of less than all of the assets
of the Company or the Company and its Restricted Subsidiaries, taken as a
whole, to another Person or group may be uncertain.
The presence of the Company's Note repurchase obligation in the event of a
Change of Control may deter potential bidders from attempting to acquire the
Company, whether by merger, tender offer or otherwise. Such deterrence may have
an adverse effect on the market price for the Company's securities,
particularly its common stock, which would presumably reflect the market's
perception of the likelihood of any takeover attempt at a premium to the market
price.
Asset Sales
The Indenture provides that no Obligor will, directly or indirectly,
consummate or enter into a binding commitment to consummate an Asset Sale
unless:
(1) such Obligor, as the case may be, receives consideration at the time
of such Asset Sale at least equal to the fair market value of the assets
sold or of which other disposition is made (as determined reasonably and in
good faith by the Board of such Obligor), and
(2) at least 75% of the consideration received by such Obligor from such
Asset Sale will be cash or Cash Equivalents and will be received at the
time of the consummation of any such Asset Sale. For purposes of this
provision, each of the following shall be deemed to be cash:
(A) any liabilities as shown on the Obligors' most recent balance
sheet (or in the notes thereto) (other than (i) Indebtedness
subordinate in right of payment to the Notes, (ii) contingent
liabilities, (iii) liabilities or Indebtedness to Affiliates of the
Company and (iv) Non-Recourse Indebtedness) that are assumed by the
transferee of any such assets, and
(B) to the extent of the cash received, any notes or other
obligations received by the Company or any such Restricted Subsidiary
from such transferee that are converted by such Obligor into cash
within 60 days of receipt.
Notwithstanding the foregoing, an Obligor will be permitted to consummate an
Asset Sale without complying with the foregoing provisions if:
(1) such Obligor receives consideration at the time of such Asset Sale at
least equal to the fair market value of the assets or other property sold,
issued or otherwise disposed of (as evidenced by a resolution of the Board
of such Obligor) as set forth in an Officers' Certificate delivered to the
Trustee,
(2) the transaction constitutes a "like-kind exchange" of the type
contemplated by Section 1031 of the Internal Revenue Code, and
(3) the consideration for such Asset Sale constitutes Productive Assets;
provided that any non-cash consideration not constituting Productive Assets
received by such Obligor in connection with such Asset Sale that is
converted into or sold or otherwise disposed of for cash or Cash
Equivalents at any time within 360 days after such Asset Sale and any
Productive Assets constituting cash or Cash Equivalents received by such
Obligor in connection with such Asset Sale shall constitute Net Cash
Proceeds subject to the provisions set forth above.
Upon the consummation of an Asset Sale, the Company or the affected Obligor
will be required to apply all Net Cash Proceeds that are received from such
Asset Sale within 360 days of the receipt thereof either:
(1) to reinvest (or enter into a binding commitment to invest, if such
investment is effected within 360 days after the date of such commitment)
in Productive Assets or in Asset Acquisitions not otherwise prohibited by
the Indenture, or
(2) to permanently prepay or repay Indebtedness of any Obligor other than
Indebtedness that is subordinate in right of payment to the Notes.
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Pending the final application of any such Net Cash Proceeds, the Obligors
may temporarily reduce revolving Indebtedness or otherwise invest such Net
Cash Proceeds in any manner not prohibited by the Indenture.
On the 361st day after an Asset Sale or such earlier date, if any, as the
Board of the Company or the affected Obligor determines not to apply the Net
Cash Proceeds relating to such Asset Sale as set forth in clauses (1) or (2)
of the preceding paragraph (each a "Net Proceeds Offer Trigger Date"), such
aggregate amount of Net Cash Proceeds which have not been applied on or before
such Net Proceeds Offer Trigger Date as permitted in clauses (1) or (2) of the
preceding paragraph (each a "Net Proceeds Offer Amount"), will be applied by
the Company to make an offer to purchase (the "Net Proceeds Offer"), on a date
(the "Net Proceeds Offer Payment Date") not less than 30 nor more than 60 days
following the applicable Net Proceeds Offer Trigger Date, on a pro rata basis
(A) Notes at a purchase price in cash equal to 100% of the aggregate principal
amount of Notes, in each case, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon on the Net Proceeds Offer Payment Date and (B) 9 1/2%
Senior Subordinated Notes due 2007 issued by the Company and Hollywood Park
Operating Company to the extent required by the terms thereof; provided that
if at any time within 360 days after an Asset Sale any non-cash consideration
received by the Company or the affected Obligor in connection with such Asset
Sale is converted into or sold or otherwise disposed of for cash, then such
conversion or disposition will be deemed to constitute an Asset Sale hereunder
and the Net Cash Proceeds thereof will be applied in accordance with this
covenant. To the extent that the aggregate principal amount of Notes tendered
pursuant to the Net Proceeds Offer is less than the Net Proceeds Offer Amount,
the Obligors may use any remaining proceeds of such Asset Sales for general
corporate purposes (but subject to the other terms of the Indenture). Upon
completion of a Net Proceeds Offer, the Net Proceeds Offer Amount relating to
such Net Proceeds Offer will be deemed to be zero for purposes of any
subsequent Asset Sale. In the event that a Restricted Subsidiary consummates
an Asset Sale, only that portion of the Net Cash Proceeds therefrom (including
any Net Cash Proceeds received upon the sale or other disposition of any non-
cash proceeds received in connection with an Asset Sale) that are distributed
to or received by any Obligor will be required to be applied by the Obligors
in accordance with the provisions of this paragraph.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than
$10 million the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time
as such Net Proceeds Offer Amount plus the aggregate amount of all Net
Proceeds Offer Amounts arising subsequent to the Issue Date of the Notes from
all Asset Sales by the Obligors in respect of which a Net Proceeds Offer has
not been made aggregate at least $10 million at which time the affected
Obligor will apply all Net Cash Proceeds constituting all Net Proceeds Offer
Amounts that have been so deferred to make a Net Proceeds Offer (each date on
which the aggregate of all such deferred Net Proceeds Offer Amounts is equal
to $10 million or more will be deemed to be a Net Proceeds Offer Trigger
Date). In connection with any Asset Sale with respect to assets having a book
value in excess of $10 million or as to which it is expected that the
aggregate consideration therefor to be received by the affected Obligor will
exceed $10 million in value, such Asset Sale will be approved, prior to the
consummation thereof, by the Board of the applicable Obligor.
Certain Covenants
Restricted Payments
The Indenture provides that neither the Company nor any Restricted
Subsidiary will, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution
(other than dividends or distributions payable solely in Qualified Capital
Stock of the Company or dividends or distributions payable to the Company
or a Restricted Subsidiary) in respect of the Company's or any Restricted
Subsidiary's Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or
such Restricted Subsidiary, as applicable) or to the direct or indirect
holders of the Company's or such Restricted Subsidiary's Equity Interests
in their capacity as such,
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(2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, any payment in connection with any merger or
consolidation involving the Company or any Restricted Subsidiary) Equity
Interests of the Company or any Restricted Subsidiary or of any direct or
indirect parent or Affiliate of the Company or any Restricted Subsidiary
(other than any such Equity Interests owned by the Company or any
Restricted Subsidiary),
(3) make any payment on or with respect to, or purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value any Indebtedness
that is subordinate in right of payment to the Notes, except a payment at
Stated Maturity, or
(4) make any Investment (other than Permitted Investments) (each of the
foregoing prohibited actions set forth in clauses (1), (2), (3) and (4)
being referred to as a "Restricted Payment"),
if at the time of such proposed Restricted Payment or immediately after giving
effect thereto,
(1) a Default or an Event of Default has occurred and is continuing or
would result therefrom,
(2) the Company is not, or would not be, able to Incur at least $1.00 of
additional Indebtedness under the Consolidated Coverage Ratio test
described in the second paragraph of the covenant described below under the
caption "Incurrence of Indebtedness and Issuance of Preferred Stock", or
(3) the aggregate amount of Restricted Payments (including such proposed
Restricted Payment) made subsequent to the Issue Date (the amount expended
for such purposes, if other than in cash, being the fair market value of
such property as determined reasonably and in good faith by the Board of
the Company) exceeds or would exceed the sum, without duplication, of:
(A) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of
the Company and the Restricted Subsidiaries during the period (treating
such period as a single accounting period) beginning on the Issue Date
and ending on the last day of the most recent fiscal quarter of the
Company ending immediately prior to the date of the making of such
Restricted Payment for which internal financial statements are
available ending not more than 135 days prior to the date of
determination, plus
(B) 100% of the aggregate net cash proceeds received by the Company
from any Person (other than from a Subsidiary of the Company) from the
issuance and sale of Qualified Capital Stock of the Company or the
conversion of debt securities or Disqualified Capital Stock into
Qualified Capital Stock (to the extent that proceeds of the issuance of
such Qualified Capital Stock would have been includable in this clause
if such Qualified Capital Stock had been initially issued for cash)
subsequent to the Issue Date and on or prior to the date of the making
of such Restricted Payment (excluding any Qualified Capital Stock of
the Company the purchase price of which has been financed directly or
indirectly using funds (i) borrowed from the Company or any Restricted
Subsidiary, unless and until and to the extent such borrowing is
repaid, or (ii) contributed, extended, guaranteed or advanced by the
Company or any Restricted Subsidiary (including, without limitation, in
respect of any employee stock ownership or benefit plan)), plus
(C) 100% of the aggregate cash received by the Company subsequent to
the Issue Date and on or prior to the date of the making of such
Restricted Payment upon the exercise of options or warrants (whether
issued prior to or after the Issue Date) to purchase Qualified Capital
Stock of the Company, plus
(D) to the extent that any Restricted Investment that was made after
the Issue Date is sold for cash or Cash Equivalents or otherwise
liquidated or repaid for cash or Cash Equivalents, or any dividends,
distributions, principal repayments, or returns of capital are received
by the Company or any Restricted Subsidiary in respect of any
Restricted Investment, in each such case (i) reduced by the amount of
any Amount Limitation Restoration (as defined below) for such
Restricted Investment and (ii) valued at the cash or marked-to-market
value of Cash Equivalents received with respect to such Restricted
Investment (less the cost of disposition, if any), plus
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(E) to the extent that any Person becomes a Restricted Subsidiary or
an Unrestricted Subsidiary is redesignated as a Restricted Subsidiary
after the date of the Indenture, the lesser of (i) the fair market
value of the Restricted Investment of the Company and its Restricted
Subsidiaries in such Person as of the date it becomes a Restricted
Subsidiary or in such Unrestricted Subsidiary on the date of
redesignation as a Restricted Subsidiary or (ii) the fair market value
of such Restricted Investment as of the date such Restricted Investment
was originally made in such Person or, in the case of the redesignation
of an Unrestricted Subsidiary into a Restricted Subsidiary which
Subsidiary was designated as an Unrestricted Subsidiary after the date
of the Indenture, the amount of the Company's Restricted Investment
therein as determined under the last paragraph of this covenant, plus
the aggregate fair market value of any additional Restricted
Investments (each valued as of the date made) by the Company and its
Restricted Subsidiaries in such Unrestricted Subsidiary after the date
of the Indenture; provided that any amount so determined in (i) or (ii)
shall be reduced to the extent that such Investment shall have been
recouped as an Amount Limitation Restoration to the Amount Limitations
of clause (4) (including (4)(A)) or (6) below.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph will not prohibit:
(1) the payment of any dividend or the making of any distribution within
60 days after the date of declaration of such dividend or distribution if
the making thereof would have been permitted on the date of declaration;
provided such dividend will be deemed to have been made as of its date of
declaration or the giving of such notice for purposes of this clause (1);
(2) the redemption, repurchase, retirement or other acquisition of
Capital Stock of the Company or warrants, rights or options to acquire
Capital Stock of the Company either (A) solely in exchange for shares of
Qualified Capital Stock of the Company or warrants, rights or options to
acquire Qualified Capital Stock of the Company, or (B) through the
application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of shares of Qualified Capital
Stock of the Company or warrants, rights or options to acquire Qualified
Capital Stock of the Company; provided that no Default or Event of Default
shall have occurred and be continuing at the time of such Restricted
Payment or would result therefrom;
(3) the redemption, repurchase, retirement, defeasance or other
acquisition of Indebtedness of any Obligor that is subordinate or junior in
right of payment to the Notes or the Guaranties either (A) solely in
exchange for shares of Qualified Capital Stock of the Company or for
Permitted Refinancing Indebtedness, or (B) through the application of the
net proceeds of a substantially concurrent sale for cash (other than to an
Obligor) of (i) shares of Qualified Capital Stock of the Company or
warrants, rights or options to acquire Qualified Capital Stock of the
Company or (ii) Permitted Refinancing Indebtedness; provided that no
Default or Event of Default shall have occurred and be continuing at the
time of such Restricted Payment pursuant to this clause (3) and would not
result therefrom;
(4) Restricted Payments in an amount not in excess of $50 million in the
aggregate for all such Restricted Payments made in reliance upon this
clause (4), for the purpose of (A) Limited Real Estate Development not to
exceed $25 million or (B) developing, constructing, improving or acquiring
(i) a Casino or Casinos or, if applicable, any Related Business in
connection with such Casino or Casinos or (ii) a Related Business to be
used primarily in connection with an existing Casino or Casinos;
(5) redemptions, repurchases or repayments to the extent required by any
Gaming Authority having jurisdiction over the Company or any Restricted
Subsidiary or deemed necessary by the Board of the Company in order to
avoid the suspension, revocation or denial of a gaming license by any
Gaming Authority;
(6) other Restricted Payments not to exceed $20 million in the aggregate;
provided no Default or Event of Default then exists or would result
therefrom;
(7) repurchases by the Company of its common stock, options, warrants or
other securities exercisable or convertible into such common stock from
employees and directors of the Company or any
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of its respective Subsidiaries upon death, disability or termination of
employment or directorship of such employees or directors;
(8) the payment of any amounts in respect of Equity Interests by any
Restricted Subsidiary organized as a partnership or a limited liability
company or other pass-through entity:
(A) to the extent of capital contributions made to such Restricted
Subsidiary (other than capital contributions made to such Restricted
Subsidiary by the Company or any Restricted Subsidiary),
(B) to the extent that they constitute dividends or other
distributions on minority interests in Equity Interests of Restricted
Subsidiaries pursuant to requirements under partnership agreements or
organizational or membership agreements of other pass-through entities,
(C) to the extent required by applicable law, or
(D) to the extent necessary for holders thereof to pay taxes with
respect to the net income of such Restricted Subsidiary, the payment of
which amounts under this clause (D) is required by the terms of the
relevant partnership agreement, limited liability company operating
agreement or other governing document;
provided, that except in the case of clause (C), no Default or Event of
Default has occurred and is continuing at the time of such Restricted
Payment or would result therefrom, and provided further that, except in the
case of clause (C) or (D), such distributions are made pro rata with the
distributions paid contemporaneously to the Company or a Restricted
Subsidiary or their Affiliates holding an interest in such Equity
Interests;
(9) Investments in Unrestricted Subsidiaries, joint ventures,
partnerships or limited liability companies consisting of conveyances of
substantially undeveloped real estate in a number of acres which, after
giving effect to any such conveyance, would not exceed in the aggregate for
all such conveyances after the Issue Date, 50% of the sum of (A) the acres
of undeveloped real estate held by the Company and its Restricted
Subsidiaries on the date of such conveyance plus (B) the acres of
undeveloped real estate previously so conveyed by the Company and its
Restricted Subsidiaries after the Issue Date; provided, that no Default or
Event of Default has occurred and is continuing at the time of such
Restricted Payment or would result therefrom; or
(10) Investments, not to exceed $15 million in the aggregate, in any
combination of (A) readily marketable equity securities and (B) assets of
the kinds described in the definition of "Cash Equivalents"; provided, that
for the purposes of this clause (10), such Investments may be made without
regard to the rating requirements or the maturity limitations set forth in
such definition.
In determining the aggregate amount of Restricted Payments made subsequent to
the Issue Date, Restricted Payments made pursuant to clauses (2), (3), (4),
(6), (8) and (9) of this paragraph shall, in each case, be excluded from such
calculation; provided, that any amounts expended or liabilities incurred in
respect of fees, premiums or similar payments in connection therewith shall be
included in such calculation. Restricted Payments under clauses (4), (4)(A),
(6) and (10) shall be limited to the respective amounts of $50 million,
$25 million, $20 million and $15 million set forth in such clauses (each, an
"Amount Limitation") The Amount Limitation for each clause shall be permanently
reduced at the time of any Restricted Payment made under such clause; provided,
however, that to the extent that a Restricted Investment made under such clause
is sold for cash or Cash Equivalents or otherwise liquidated or repaid for cash
or Cash Equivalents, or principal repayments or returns of capital are received
by the Company or any Restricted Subsidiary in respect of such Restricted
Investment, valued, in each such case at the cash or marked-to-market value of
Cash Equivalents received with respect to such Restricted Investment (less the
cost of disposition, if any), then the Amount Limitation for such clause shall
be increased by the amount so received by the Company or a Restricted
Subsidiary (an "Amount Limitation Restoration"). In no event shall the
aggregate Amount Limitation Restorations for a Restricted Investment exceed the
original amount of such Restricted Investment.
With respect to clauses (4), (4)(A) and (6) above, the respective Amount
Limitation under each such clause, as applicable, shall also be increased when
any Person becomes a Restricted Subsidiary or an
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Unrestricted Subsidiary is redesignated as a Restricted Subsidiary (each such
increase also referred to as an "Amount Limitation Restoration") by the lesser
of (i) the fair market value of the Restricted Investment made under clause
(4), (4)(A) or (6) in such Person as of the date it becomes a Restricted
Subsidiary or in such Unrestricted Subsidiary as of the date of redesignation,
as the case may be, or (ii) the fair market value of such Restricted Investment
as of the date such Restricted Investment was originally made in such Person
or, in the case of the redesignation of an Unrestricted Subsidiary into a
Restricted Subsidiary which Subsidiary was designated as an Unrestricted
Subsidiary after the date of the Indenture, the amount of the Company's
Restricted Investment therein as determined under the last paragraph of this
covenant, plus the aggregate fair market value of any additional Investments
(each valued as of the date made) made under clause (4), (4)(A) or (6) in such
Unrestricted Subsidiary after the date of the Indenture.
Not less than once each fiscal quarter, the Company shall deliver to the
Trustee an Officers' Certificate stating that each Restricted Payment (and any
Amount Limitation Restoration relied upon in making such Restricted Payment)
made during the prior fiscal quarter complies with the Indenture and setting
forth in reasonable detail the basis upon which the required calculations were
computed (upon which the Trustee may conclusively rely without any
investigation whatsoever), which calculations may be based upon the Company's
latest available internal quarterly financial statements. In the event that the
Company makes one or more Restricted Payments in an amount exceeding $3 million
that have not been covered by an Officers' Certificate issued pursuant to the
immediately preceding sentence, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payments (and any Amount
Limitation Restoration relied upon in making such Restricted Payment) comply
with the Indenture and setting forth in reasonable detail the basis upon which
the required calculations were computed (upon which the Trustee may
conclusively rely without any investigation whatsoever), which calculations may
be based upon the Company's latest available internal quarterly financial
statements.
The Board of the Company may designate any of its Restricted Subsidiaries to
be Unrestricted Subsidiaries if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Obligors (except to the extent repaid in cash or in kind) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the greatest of:
(1) the net book value of such Investments at the time of such
designation,
(2) the fair market value of such Investments at the time of such
designation, and
(3) the original fair market value of such Investments at the time they
were made.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, directly or indirectly:
(1) Incur any Indebtedness or issue any Disqualified Capital Stock, other
than Permitted Indebtedness, or
(2) cause or permit any of its Subsidiaries to Incur any Indebtedness or
issue any Disqualified Capital Stock or preferred stock, in each case,
other than Permitted Indebtedness.
Notwithstanding the foregoing limitations, the Company may issue
Disqualified Capital Stock, and any Obligor may Incur Indebtedness (including,
without limitation, Acquired Debt) or issue preferred stock, if:
(1) no Default or Event of Default shall have occurred and be continuing
on the date of the proposed Incurrence or issuance or would result as a
consequence of such proposed Incurrence or issuance, and
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(2) immediately after giving pro forma effect to such proposed Incurrence
or issuance and the receipt and application of the net proceeds therefrom,
the Company's Consolidated Coverage Ratio would not be less than 2.00:1.00.
Any Indebtedness of any Person existing at the time it becomes a Restricted
Subsidiary (whether by merger, consolidation, acquisition of capital stock or
otherwise) shall be deemed to be Incurred as of the date such Person becomes a
Restricted Subsidiary.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Indebtedness described in clauses (1) through (11) of such
definition or is entitled to be Incurred pursuant to the second paragraph of
this covenant, the Company will, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this covenant and such item of
Indebtedness will be treated as having been Incurred pursuant to only one of
such clauses or pursuant to the second paragraph hereof. The Company may
reclassify such Indebtedness from time to time in its sole discretion. Accrual
of interest and the accretion of principal amount will not be deemed to be an
Incurrence of Indebtedness for purposes of this covenant.
Liens
The Indenture provides that no Obligor will, directly or indirectly, create,
Incur or assume any Lien, except a Permitted Lien, securing Indebtedness that
is pari passu with or subordinate in right of payment to the Notes or the
Guaranties, on or with respect to any of its property or assets including any
shares of stock or Indebtedness of any Restricted Subsidiary, whether owned on
the Issue Date or thereafter acquired, or any income, profits or proceeds
therefrom, unless:
(1) in the case of any Lien securing Indebtedness that is pari passu in
right of payment with the Notes or the Guaranties, the Notes or the
Guaranties are secured by a Lien on such property, assets or proceeds that
is senior in priority to or pari passu with such Lien, and
(2) in the case of any Lien securing Indebtedness that is subordinate in
right of payment to the Notes or the Guaranties, the Notes or the
Guaranties are secured by a Lien on such property, assets or proceeds that
is senior in priority to such Lien.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture provides that no Obligor will, directly or indirectly, create
or otherwise cause or permit or suffer to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock,
(2) make loans or advances to or pay any Indebtedness or other
obligations owed to any Obligor or to any Restricted Subsidiary, or
(3) transfer any of its property or assets to any Obligor or to any
Restricted Subsidiary (each such encumbrance or restriction in clause (1),
(2) or (3), a "Payment Restriction").
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(A) applicable law or required by any Gaming Authority;
(B) the Indenture;
(C) customary non-assignment provisions of any purchase money financing
contract or lease of any Restricted Subsidiary entered into in the ordinary
course of business of such Restricted Subsidiary;
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(D) any instrument governing Acquired Debt Incurred in connection with an
acquisition by any Obligor or Restricted Subsidiary in accordance with the
Indenture as the same was in effect on the date of such Incurrence; provided
that such encumbrance or restriction is not, and will not be, applicable to any
Person, or the properties or assets of any Person, other than the Person and
its Subsidiaries or the property or assets, including directly-related assets,
such as accessions and proceeds so acquired or leased;
(E) any restriction or encumbrance contained in contracts for the sale of
assets to be consummated in accordance with the Indenture solely in respect of
the assets to be sold pursuant to such contract;
(F) any restrictions of the nature described in clause (3) above with
respect to the transfer of assets secured by a Lien that was permitted by the
Indenture to be Incurred;
(G) any encumbrance or restriction contained in Permitted Refinancing
Indebtedness; provided that the provisions relating to such encumbrance or
restriction contained in any such Permitted Refinancing Indebtedness are no
less favorable to the holders of the Notes in any material respect in the good
faith judgment of the Board of the Company than the provisions relating to such
encumbrance or restriction contained in the Indebtedness being refinanced; or
(H) Indebtedness or Investments existing on the Issue Date, as in effect on
the Issue Date.
Merger, Consolidation, or Sale of Assets
The Indenture provides that no Obligor may, in a single transaction or a
series of related transactions, consolidate or merge with or into any Person,
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of such Obligor's properties or assets whether as an entirety
or substantially as an entirety to any Person or adopt a Plan of Liquidation
unless:
(1) either
(A) in the case of a consolidation or merger, such Obligor shall be
the surviving or continuing corporation, or
(B) the Person (if other than such Obligor) formed by such
consolidation or into which such Obligor is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition of the properties and assets of such Obligor and of such
Obligor's Subsidiaries substantially as an entirety, or in the case of
a Plan of Liquidation, the Person to which assets of such Obligor and
such Obligor's Subsidiaries have been transferred (i) shall be a
corporation organized and validly existing under the laws of the United
States or any State thereof or the District of Columbia and (ii) shall
expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee), executed and delivered to the Trustee,
the due and punctual payment of the principal of, and premium, if any,
and interest on all of the Notes and, if applicable, the Guaranties and
the performance of every covenant of the Notes, the Indenture and the
Registration Rights Agreement on the part of such Obligor to be
performed or observed;
(2) immediately after giving effect to such transaction and the
assumption contemplated by clause (1)(B)(ii) above (including giving effect
to any Indebtedness and Acquired Debt Incurred or anticipated to be
Incurred in connection with or in respect of such transaction), the
Obligors, including any such other Person becoming an Obligor through the
operation of clause (1)(B) above would have a Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated
Net Worth of such Obligor immediately preceding the transaction;
(3) in the event that such transaction involves (A) the incurrence by the
Company or any Restricted Subsidiary, directly or indirectly, of additional
Indebtedness (and treating any Indebtedness not previously an obligation of
the Company or any of its Restricted Subsidiaries incurred in connection
with or as a result of such transaction as having been incurred at the time
of such transaction) and/or (B) the assumption contemplated by clause
(1)(B)(ii) above (including giving effect to any Indebtedness and Acquired
Debt Incurred or anticipated to be Incurred in connection with or in
respect of such transaction),
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then immediately after giving effect to such incurrence and/or assumption
under clauses (A) and (B), (i) the Obligors, including any such other
Person becoming an Obligor through the operation of clause (1)(B) above
could Incur at least $1.00 of Indebtedness (other than Permitted
Indebtedness) pursuant to the Consolidated Coverage Ratio test described
above under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock" or (ii) any other Person which would, as a result of the
applicable transaction, properly classify such Obligor as a consolidated
subsidiary in accordance with GAAP, satisfied the conditions set forth in
clause (1)(B)(i) above and either (a) also satisfied the condition set
forth in clause (1)(B)(ii) above and caused each acquired Person to become
a Guarantor or (b) became a Guarantor, and, in either such case, after
giving effect to such assumption of the Notes or Incurrence of Obligations
under the Guaranty, such assuming or guarantying Person would be able to
Incur at least $1.00 of Indebtedness pursuant to the Consolidated Coverage
Ratio test described above under the caption "--Incurrence of Indebtedness
and Issuance of Preferred Stock";
(4) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (1)(B)(ii) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Debt Incurred or anticipated to be Incurred and any Lien granted
in connection with or in respect of the transaction) no Default and no
Event of Default shall have occurred or be continuing; and
(5) such Obligor or such other Person shall have delivered to the Trustee
(A) an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger, sale, assignment, transfer, lease, conveyance,
other disposition or Plan of Liquidation and, if a supplemental indenture
is required in connection with such transaction, such supplemental
indenture, comply with the applicable provisions of the Indenture and that
all conditions precedent in the Indenture relating to such transaction have
been satisfied and (B) a certificate from the Company's independent
certified public accountants stating that such Obligor has made the
calculations required by clause (2) above in accordance with the terms of
the Indenture and the Notes after the consummation of such transaction.
Notwithstanding clauses (2) and (3) above:
(A) any Restricted Subsidiary may consolidate with, or merge with or
into, or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its assets to the Company or to a
Restricted Subsidiary, and
(B) any Obligor may consolidate with or merge with or into any Person
that has conducted no business and Incurred no Indebtedness or other
liabilities if such transaction is solely for the purpose of effecting
a change in the state of incorporation of such Obligor.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties and assets of one or more Subsidiaries of
the Company, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
Transactions With Affiliates
The Indenture provides that no Obligor will make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless:
(1) such Affiliate Transaction is, considered in light of any series of
related transactions of which it comprises a part, on terms that are fair
and reasonable and no less favorable to such Obligor than those that might
reasonably have been obtained at such time in a comparable transaction or
series of related transactions on an arms-length basis from a Person that
is not such an Affiliate;
(2) with respect to any Affiliate Transaction involving aggregate
consideration of $5 million or more, a majority of the disinterested
members of the Board of the Company (and of any other affected Obligor,
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where applicable) shall, prior to the consummation of any portion of such
Affiliate Transaction, have reasonably and in good faith determined, as
evidenced by a resolution of its Board, that such Affiliate Transaction
meets the requirements of the foregoing clause; and
(3) with respect to any Affiliate Transaction involving value of $15
million or more, the Board of the applicable Obligor shall have received
prior to the consummation of any portion of such Affiliate Transaction, a
written opinion from an independent investment banking, accounting or
appraisal firm of recognized national standing that such Affiliate
Transaction is on terms that are fair to such Obligor from a financial
point of view.
The foregoing restrictions will not apply to:
(1) reasonable fees and compensation (including any such compensation in
the form of Equity Interests not derived from Disqualified Capital Stock,
together with loans and advances, the proceeds of which are used to acquire
such Equity Interests) paid to, and indemnity provided on behalf of,
officers, directors, employees or consultants of the Obligors as determined
in good faith by the Board or senior management,
(2) any transaction solely between or among Obligors and Restricted
Subsidiaries to the extent any such transaction is otherwise in compliance
with, or not prohibited by, the Indenture,
(3) any Restricted Payment permitted by the terms of the covenant
described above under the heading "--Restricted Payments" or
(4) provision of management services (including any agreements therefor)
to an Unrestricted Subsidiary in connection with the development,
construction and operation of gaming facilities, provided the Obligor is
reimbursed for all costs and expenses it incurs in providing such services.
No Subordinated Debt Senior to The Notes or Guaranties
The Indenture provides that no Obligor will Incur any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes or the Guaranties.
Amendments to Subordination Provisions
The Indenture provides that, without the consent of the holders of 66 2/3%
of the principal amount of the outstanding Notes, the Obligors will not amend,
modify or alter the terms of any indebtedness subordinated to the Notes or the
Guaranties in any way that will:
(1) increase the rate of or change the time for payment of interest on
such subordinated indebtedness,
(2) increase the principal of, advance the final maturity date of or
shorten the Weighted Average Life to Maturity of any such subordinated
indebtedness,
(3) alter the redemption provisions or the price or terms at which any
Obligor is required to offer to purchase such subordinated indebtedness, or
(4) amend the subordination provisions of any documents, instruments or
agreements governing any such subordinated indebtedness, except to the
extent that any of the foregoing would be required to permit any Obligor to
make a Restricted Payment permitted by the covenant described above under
the heading "--Restricted Payments."
Lines of Business
The Indenture provides that the Obligors will not engage in any lines of
business other than the Core Businesses.
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Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will furnish to the Trustee for
mailing to the holders of Notes:
(1) all quarterly and annual financial information that would be required
to be contained in a filing or filings by the Company with the Commission
on Forms 10-Q and 10-K if the Company was required to file such forms,
including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information
only, a report thereon by the Company's certified independent accountants,
and
(2) all current reports that would be required to be filed by the Company
with the Commission on Form 8-K if the Company was required to file such
reports,
in each case within 15 days of the time periods specified in the SEC's rules
and regulations.
In addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, the Company has
agreed that, for so long as any Notes remain outstanding, it will furnish to
the holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act. The Indenture permits the Company to deliver the
consolidated reports or financial information of the Company to comply with the
foregoing requirements.
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes or the Guaranties (whether or
not prohibited by the subordination provisions of the Indenture);
(2) default in payment of the principal of or premium, if any, on the
Notes or the Guaranties when due and payable, at maturity, upon
acceleration, redemption or otherwise (whether or not prohibited by the
subordination provisions of the Indenture);
(3) failure by any Obligor for 60 days after written notice to comply
with any of its other agreements in the Indenture, the Notes or the
Guaranties;
(4) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by any Obligor (or the payment of which is
guaranteed by any Obligor) whether such Indebtedness or guarantee now
exists, or is created after the Issue Date, which default:
(A) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
"Payment Default"), or
(B) results in the acceleration of such Indebtedness prior to its
express maturity
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10 million or more;
(5) failure by any Obligor to pay final judgments aggregating in excess
of $10 million, net of any applicable insurance, the carrier or underwriter
with respect to which has acknowledged liability in writing, which
judgments are not paid, discharged or stayed for a period of 60 days; and
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(6) certain events of bankruptcy or insolvency with respect to any
Obligor.
If an Event of Default (other than an Event of Default with respect to
certain events of bankruptcy, insolvency or reorganization) occurs and is
continuing, then and in every such case, the Trustee or the holders of not less
than 25% in aggregate principal amount of the then outstanding Notes may
declare the principal amount, together with any accrued and unpaid interest,
premium and Liquidated Damages on all the Notes and Guaranties then outstanding
to be due and payable, by a notice in writing to the Company (and to the
Trustee, if given by holders) specifying the Event of Default and that it is a
"notice of acceleration" and on the fifth Business Day after delivery of such
notice the principal amount, in either case, together with any accrued and
unpaid interest, premium and Liquidated Damages on all the Notes or the
Guaranties then outstanding will become immediately due and payable,
notwithstanding anything contained in the Indenture, the Notes or the
Guaranties to the contrary. Upon the occurrence of specified Events of Default
relating to bankruptcy, insolvency or reorganization, the principal amount,
together with any accrued and unpaid interest, premium and Liquidated Damages,
will immediately and automatically become due and payable, without the
necessity of notice or any other action by any Person. Holders of the Notes may
not enforce the Indenture, the Notes or the Guaranties except as provided in
the Indenture. Subject to certain limitations, holders of a majority in
principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of any Obligor with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
February 15, 2003 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to February 15, 2003, then the
additional premium specified in the Indenture shall also become immediately due
and payable to the extent permitted by law upon the acceleration of the Notes
and Guaranties.
The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
principal of, premium and Liquidated Damages, if any, or interest on the Notes
or the Guaranties.
The Company will be required to deliver to the Trustee annually statements
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No past, present or future director, officer, employee, agent, manager,
partner, member, incorporator or stockholder of any Obligor, in such capacity,
will have any liability for any obligations of any Obligor under the Notes, the
Indenture or the Guaranties or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes and the Guaranties.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
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Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes and all
obligations of the Guarantors discharged with respect to their Guarantees
("Legal Defeasance") except for:
(1) the rights of holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest on such Notes
when such payments are due from the trust referred to below;
(2) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost
or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and
the Company's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company and the Guarantors released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with those covenants shall not constitute
a Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default and Remedies" will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest
and Liquidated Damages on the outstanding Notes on the stated maturity or
on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date;
(2) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel reasonably acceptable to the Trustee
confirming that:
(A) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling, or
(B) since the date of the Indenture, there has been a change in the
applicable federal income tax law,
in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel reasonably acceptable to the Trustee
confirming that the holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
either:
(A) on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit); or
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(B) insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after
the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company or
any of its Restricted Subsidiaries is a party or by which the Company or
any of its Restricted Subsidiaries is bound;
(6) the Company must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable Bankruptcy Law;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the holders of Notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate and
an opinion of counsel, each stating that all conditions precedent relating
to the Legal Defeasance or the Covenant Defeasance have been complied with.
Transfer and Exchange
A holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed. The registered holder of a Note will be treated as the owner of it
for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next three succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder):
(1) reduce the principal amount of Notes whose holders must consent to an
amendment, supplement or waiver,
(2) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes (other
than provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"),
(3) reduce the rate of or change the time for payment of interest on any
Note,
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment default
that resulted from such acceleration),
(5) make any Note payable in money other than that stated in the Notes,
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(6) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes,
(7) waive a redemption payment with respect to any Note (other than a
payment required by one of the conditions described above under the caption
"--Repurchase at the Option of Holders"), or
(8) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without notice to or the consent of any
holder of Notes, the Obligors and the Trustee may amend or supplement the
Indenture or the Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Obligors' obligations to holders of
Notes in the case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the holders of Notes or that does
not adversely affect the legal rights under the Indenture of any such holder,
to provide for the issuance of registered notes in exchange for the Notes
pursuant to the Registration Rights Agreement or to comply with requirements of
the Commission in order to effect or maintain the qualification of the
Indenture under the TIA.
In addition, any amendment (1) to the provisions of the article of the
Indenture which governs subordination or (2) which releases any Guarantor from
its obligations under any Guaranty, in either case will require the consent of
the holders of at least 66 2/3% in aggregate principal amount of the Notes then
outstanding, if such amendment would adversely affect the rights of holders of
Notes.
Concerning The Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign. The holders of a majority in principal amount of the
then outstanding Notes will have the right to direct the time, method and place
of conducting any proceeding for exercising any remedy available to the
Trustee, subject to certain exceptions. The Indenture provides that in case an
Event of Default shall occur (which shall not be cured), the Trustee will be
required, in the exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. However, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any holder of Notes, unless such holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability
or expense.
The Trustee also serves as trustee under the indenture governing the 9 1/2%
Notes.
Additional Information
Anyone who receives this prospectus may obtain a copy of the Indenture
without charge by writing to Hollywood Park, Inc., 1050 South Prairie Avenue,
Inglewood CA 90301, Attn: Assistant Treasurer.
Book-Entry, Delivery and Form
Exchange Notes exchanged for Old Notes through the book-entry transfer
facility may be represented by one or more Global Notes (the "Global Exchange
Notes"). The Global Exchange Notes will be deposited upon issuance with the
Trustee as custodian for The Depository Trust Company ("DTC"), in New York, New
York, and registered in the name of DTC or its nominee, in each case for credit
to an account of a direct or indirect participant in DTC as described below.
Beneficial interests in the Global Exchange Notes may also be held through the
Euroclear System ("Euroclear") and Cedel, S.A. ("Cedel") (as indirect
participants in DTC).Transfers of beneficial interests in the Global Exchange
Notes will be subject to the applicable rules and procedures of DTC and its
direct or indirect participants (including, if applicable, those of Euroclear
and Cedel), which may change from time to time.
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Exchange Notes exchanged for Old Notes which are in the form of registered
definitive certificates will be issued in the form of certificated Exchange
Notes. Such certificated Exchange Notes may, unless the Global Exchange Notes
previously have been exchanged for certificated Exchange Notes, be exchanged
for an interest in the Global Exchange Notes representing the prinicipal amount
at maturity of Exchange Notes being transferred.
Initially, the Trustee will act as Paying Agent and Registrar. The Notes may
be presented for registration of transfer and exchange at the offices of the
Registrar.
Depository Procedures
The following description of the operations and procedures of DTC, Euroclear
and Cedel are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems
and are subject to changes by them from time to time. The Company takes no
responsibility for these operations and procedures and urges investors to
contact the system or their participants directly to discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers of ownership
interests in, each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
Purchases of Notes under the DTC system must be made by or through
Participants, who will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of each Note ("Beneficial Owner")
is in turn to be recorded on the Participants' and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from DTC of
their purchase, but Beneficial Owners are
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expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holdings, from the Participant or
Indirect Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interests in the Notes are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Notes, except in the event that use of the book-
entry system for the Notes is discontinued. To facilitate subsequent transfers,
all Notes deposited by Participants with DTC are registered in the name of
DTC's partnership nominee, Cede & Co. The deposit of Notes with DTC and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Notes;
DTC's records reflect only the identity of the Participants to whose accounts
such Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Redemption notices shall be sent to Cede & Co. If less than all
of the Notes within an issue are being redeemed, DTC's practice is to determine
by lot the amount of the interest of each Participant in such issue to be
redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to
Notes. Under its usual procedures, DTC mails an Omnibus Proxy to the Company as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Participants to whose accounts the Notes
are credited on the record date identified in a listing attached to the Omnibus
Proxy.
Investors in the Global Exchange Notes may hold their interests therein
directly through DTC, if they are Participants in such system, or indirectly
through organizations (including Euroclear and Cedel) which are Participants in
such system. Euroclear and Cedel will hold interests in the Global Exchange
Notes on behalf of their participants through customers' securities accounts in
their respective names on the books of their respective depositories, which are
Morgan Guaranty Trust Company of New York, Brussels office, as operator of
Euroclear, and Citibank, N.A., as operator of Cedel. All interests in a Global
Exchange Note, including those held through Euroclear or Cedel, may be subject
to the procedures and requirements of DTC. Those interests held through
Euroclear or Cedel may also be subject to the procedures and requirements of
such systems. The laws of some states require that certain persons take
physical delivery in definitive form of securities that they own. Consequently,
the ability to transfer beneficial interests in a Global Exchange Note to such
persons will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a Global Exchange
Note to pledge such interests to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interest in the Global Exchange Notes
will not have Exchange Notes registered in their names, will not receive
physical delivery of Exchange Notes in certificated form and will not be
considered the registered owners or "Holders" thereof under the Indenture for
any purpose.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a Global Exchange Note registered in the name
of DTC or its nominee will be payable to DTC in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee will treat the persons in whose names the Exchange Notes, including
the Global Exchange Notes, are registered as the owners thereof for the purpose
of receiving such payments and for any and all other purposes whatsoever.
Consequently, neither the Company, the Trustee nor any agent of the Company or
the Trustee has or will have any responsibility or liability for (i) any aspect
of DTC's records or any Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interest in the
Global Exchange Notes, or for maintaining, supervising or reviewing any of
DTC's records or any Participant's or Indirect Participant's records relating
to the beneficial ownership interests in the Global Exchange Notes or
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(ii) any other matter relating to the actions and practices of DTC or any of
its Participants or Indirect Participants. DTC has advised the Company that its
current practice, upon receipt of any payment in respect of securities such as
the Exchange Notes (including principal and interest), is to credit the
accounts of the relevant Participants with the payment on the payment date, in
amounts proportionate to their respective holdings in the principal amount of
beneficial interest in the relevant security as shown on the records of DTC
unless DTC has reason to believe it will not receive payment on such payment
date. Payments by the Participants and the Indirect Participants to the
beneficial owners of Exchange Notes will be governed by standing instructions
and customary practices and will be the responsibility of the Participants or
the Indirect Participants and will not be the responsibility of DTC, the
Trustee or the Company. Neither the Company nor the Trustee will be liable for
any delay by DTC or any of its Participants in identifying the Beneficial
Owners of the Exchange Notes, and the Company and the Trustee may conclusively
rely on and will be protected in relying on instructions from DTC or its
nominee for all purposes.
Except for trades involving only Euroclear and Cedel participants, interest
in the Global Exchange Notes are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will, therefore, settle in immediately available funds, subject in
all cases to the rules and procedures of DTC and its Participants. See "--Same
Day Settlement and Payment."
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same day funds, and transfers between
participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand, and
Euroclear or Cedel participants, on the other hand, will be effected through
DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case
may be, by its respective depositary; however, such cross-market transactions
will require delivery of instructions to Euroclear or Cedel, as the case may
be, by the counterparty in such system in accordance with the rules and
procedures and within the established deadlines (Brussels time) of such system.
Euroclear or Cedel, as the case may be, will, if the transaction meets its
settlement requirements, deliver instructions to its respective depositary to
take action to effect final settlement on its behalf by delivering or receiving
interests in the relevant Global Exchange Note in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to DTC. Euroclear participants and Cedel participants may not
deliver instructions directly to the depositories for Euroclear or Cedel.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Exchange Notes only at the direction of one or more
Participants to whose account DTC has credited the interests in the Global
Exchange Notes and only in respect of such portion of the aggregate principal
amount of the Exchange Notes as to which such Participant or Participants has
or have given such direction. However, if there is an Event of Default under
the Exchange Notes, DTC reserves the right to exchange the Global Exchange
Notes for Exchange Notes in certificated form, and to distribute such Exchange
Notes to its Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Exchange Notes among
Participants in DTC, Euroclear and Cedel, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee nor any of their
respective agents will have any responsibility for the performance by DTC,
Euroclear or Cedel or their respective participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
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Exchange of Book-Entry Notes for Certificated Notes
A Global Exchange Note is exchangeable for definitive Exchange Notes in
registered certificated form ("Certificated Notes") if (i) DTC (x) notifies the
Company that it is unwilling or unable to continue as depositary for the Global
Exchange Notes and the Company thereupon fails to appoint a successor
depositary or (y) has ceased to be a clearing agency registered under the
Exchange Act, (ii) the Company, at its option, notifies the Trustee in writing
that it elects to cause the issuance of the Certificated Notes or (iii) there
shall have occurred and be continuing a Default or Event of Default with
respect to the Exchange Notes. In addition, beneficial interests in a Global
Exchange Note may be exchanged for Certificated Notes upon request but only
upon prior written notice given to the Trustee by or on behalf of DTC in
accordance with the Indenture. In all cases, Certificated Notes delivered in
exchange for any Global Exchange Note or beneficial interests therein will be
registered in the names, and issued in any approved denominations, requested by
or on behalf of the depositary (in accordance with its customary procedures).
Same Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Exchange Notes (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
funds to the accounts specified by the Global Note Holder. With respect to
Exchange Notes in certificated form, the Company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available funds to the accounts specified by the
Holders thereof or, if no such account is specified, by mailing a check to each
such Holder's registered address. The Notes represented by the Global Exchange
Notes are expected to be eligible to trade in the PORTAL market and to trade in
the Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Exchange Notes will, therefore, be required by
the Depositary to be settled in immediately available funds. The Company
expects that secondary trading in any certificated Exchange Notes will also be
settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Exchange Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear and Cedel)
immediately following the settlement date of DTC. DTC has advised the Company
that cash received in Euroclear or Cedel as a result of sales of interests in a
Global Exchange Note by or through a Euroclear or Cedel participant to a
Participant in DTC will be received with value on the settlement date of DTC
but will be available in the relevant Euroclear or Cedel cash account only as
of the business day for Euroclear or Cedel following DTC's settlement date.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Accrued Bankruptcy Interest" means, with respect to any Senior Debt, all
interest accruing thereon after the filing of a petition or commencement of any
other proceeding by or against any Obligor under any Bankruptcy Law, in
accordance with and at the rate (including any rate applicable upon any default
or event of default, to the extent lawful) specified in the documents
evidencing or governing such Indebtedness or Hedging Obligations, whether or
not the claim for such interest is allowed as a claim after such filing in any
proceeding under such Bankruptcy Law.
"Acquired Debt" means, with respect to any specified Person, Indebtedness of
another Person and any of such other Person's Subsidiaries existing at the time
such other Person becomes a Subsidiary of such Person or at the time it merges
or consolidates with such Person or any of such Person's Subsidiaries or is
assumed by
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such Person or any Subsidiary of such Person in connection with the acquisition
of assets from such other Person and in each case not Incurred by such Person
or any Subsidiary of such Person or such other Person in connection with, or in
anticipation or contemplation of, such other Person becoming a Subsidiary of
such Person or such acquisition, merger or consolidation.
"Affiliate" means, when used with reference to any Person:
(1) any other Person directly or indirectly controlling, controlled by,
or under direct or indirect common control with, the referent Person or
such other Person, as the case may be, or
(2) any director, officer or partner of such Person or any Person
specified in clause (1) above.
For the purposes of this definition, the term "control" when used with respect
to any specified Person means the power to direct or cause the direction of
management or policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"affiliated," "controlling," and "controlled" have meanings correlative of the
foregoing. None of the Initial Purchasers nor any of their respective
Affiliates shall be deemed to be an Affiliate of any Obligor or of any of their
respective Affiliates.
"Asset Acquisition" means:
(1) an Investment by any Obligor in any other Person pursuant to which
such Person shall become an Obligor or a Restricted Subsidiary of an
Obligor or shall be merged into, or with any Obligor or Restricted
Subsidiary of an Obligor, or
(2) the acquisition by any Obligor of assets of any Person comprising a
division or line of business of such Person or all or substantially all of
the assets of such Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other disposition (for purposes of this
definition, each a "disposition") by any Obligor (including, without
limitation, pursuant to any sale and leaseback transaction or any merger or
consolidation of any Restricted Subsidiary of the Company with or into another
Person (other than another Obligor) whereby such Restricted Subsidiary shall
cease to be a Restricted Subsidiary of the Company) to any Person of:
(1) any property or assets of any Obligor to the extent that any such
disposition is not in the ordinary course of business of such Obligor, or
(2) any Capital Stock of any Restricted Subsidiary,
other than, in both cases:
(A) any disposition to the Company,
(B) any disposition to any Obligor or Restricted Subsidiary,
(C) any disposition that constitutes a Restricted Payment or a Permitted
Investment that is made in accordance with the covenant described above
under the caption "--Restricted Payments",
(D) any transaction or series of related transactions resulting in Net
Cash Proceeds to such Obligor of less than $1 million,
(E) any transaction that is consummated in accordance with the covenant
described above under the caption "--Merger, Consolidation or Sale of
Assets,"
(F) the sale or discount, in each case without recourse (direct or
indirect), of accounts receivable arising in the ordinary course of
business of the Company or such Restricted Subsidiary, as the case may be,
but only in connection with the compromise or collection thereof,
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(G) any pledge, assignment by way of collateral security, grant of
security interest, hypothecation or mortgage, permitted by the Indenture or
any foreclosure, judicial or other sale, public or private, by the pledgee,
assignee, mortgagee or other secured party of the subject assets,
(H) a disposition of assets constituting a Permitted Investment, or
(I) any disposition of undeveloped or substantially undeveloped real
estate, provided that in such disposition:
(i) the Obligor making such disposition receives consideration at the
time of such disposition at least equal to the fair market value of the
real estate assets disposed of (as determined reasonably and in good
faith by the Board of such Obligor), and
(ii) at least 60% of the consideration received from such disposition
by the Obligor making such disposition is cash or Cash Equivalents and
is received at the time of the consummation of such disposition. (For
purposes of this provision, each of the following shall be deemed to be
cash: (A) any liabilities as shown on such Obligors' most recent
balance sheet (or in the notes thereto) (other than (i) Indebtedness
subordinate in right of payment to the Notes, (ii) contingent
liabilities, (iii) liabilities or Indebtedness to Affiliates of the
Company and (iv) Non-Recourse Indebtedness) that are assumed by the
transferee of any such assets, and (B) to the extent of the cash
received, any notes or other obligations received by the Obligor making
the disposition from such transferee that are converted by such Obligor
into cash within 60 days of receipt.)
"Bank Credit Facility" means the Credit Facility provided to the Company
pursuant to the Amended and Restated Reducing Revolving Loan Agreement, dated
as of October 14, 1998, by and among the Company, the financial institutions
from time to time named therein (the "Banks"), Bank of Scotland and Societe
General, as Managing Agents, First National Bank of Commerce, as Co-Agent, and
Bank of America NT&SA, as Administrative Agent, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time
by the same or different institutional lenders.
"Bankruptcy Law" means the United States Bankruptcy Code and any other
bankruptcy, insolvency, receivership, reorganization, moratorium or similar law
providing relief to debtors, in each case, as from time to time amended and
applicable to the relevant case.
"Board" means the Board of Directors or similar governing entity of an
Obligor, the members of which are elected by the holders of Capital Stock of
such Obligor or, if applicable, a duly-appointed committee of such Board of
Directors or similar governing body, having jurisdiction over the subject
matter at issue.
"Capital Stock" means:
(1) with respect to any Person that is a corporation, any and all shares,
rights, interests, participations or other equivalents (however designated
and whether or not voting) of corporate stock, including each class of
common stock and preferred stock of such Person, and
(2) with respect to any Person that is not a corporation, any and all
partnership, membership or other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the discounted
rental stream payable by such Person that is required to be classified and
accounted for as a capital lease obligation under GAAP and, for purposes of
this definition, the amount of such obligation at any date shall be the
capitalized amount of such obligation at such date, determined in accordance
with GAAP. The final maturity of any such obligation shall be the date of the
last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without
penalty.
"Cash Equivalents" means:
(1) Government Securities;
(2) certificates of deposit, eurodollar time deposits and bankers
acceptances maturing within 12 months from the date of acquisition thereof
by any Obligor and issued by any commercial bank
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organized under the laws of the United States of America or any state
thereof or the District of Columbia or any U.S. branch of foreign bank
having, at the date of acquisition of the applicable Cash Equivalent,
(A) combined capital and surplus of not less than $500 million and (B) a
commercial paper rating of at least A-1 from S&P or at least P-1 from
Moody's;
(3) repurchase obligations with a term of not more than seven days after
the date of acquisition thereof by any Obligor for underlying securities of
the types described in clauses (1), (2) and (4) hereof, entered into with
any financial institution meeting the qualifications specified in clause
(2) above;
(4) commercial paper having a rating of at least P-1 from Moody's or a
rating of at least A-1 from S&P on the date of acquisition thereof by any
Obligor;
(5) debt obligations of any corporation maturing within 12 months after
the date of acquisition thereof by any Obligor, having a rating of at least
P-1 or aaa from Moody's or A-1 or AAA from S&P on the date of such
acquisition; and
(6) mutual funds and money market accounts investing at least 90% of the
funds under management in instruments of the types described in clauses (1)
through (5) above and, in each case, maturing within the period specified
above for such instrument after the date of acquisition thereof by any
Obligor.
"Change of Control" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one transaction or a series of
related transactions, of all or substantially all of the assets of the
Company, or the Company and its Restricted Subsidiaries taken as a whole,
to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) (as defined below),
(2) the adoption, or, if applicable, the approval of any requisite
percentage of the Company's stockholders of a plan relating to the
liquidation or dissolution of the Company,
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any "person" (as
defined above), other than a Principal, becomes the "beneficial owner" (as
such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a
subsequent condition), directly or indirectly, of more than 50% of the
Voting Stock of the Company (measured by voting power rather than number of
shares), or
(4) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of the Company (together
with any new directors whose election to such Board or whose nomination for
election by the stockholders of the Company was approved by a vote of a
majority of the directors of the Company then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of the Company then in office.
"Casino" means any gaming establishment and other property or assets
directly ancillary thereto or used in connection therewith, including any
building, restaurant, hotel, theater, parking facilities, retail shops, land,
golf courses and other recreation and entertainment facilities, marina,
vessel, barge, ship and equipment.
"Consolidated Coverage Ratio" means, with respect to any Person on any date
of determination, the ratio of:
(1) Consolidated EBITDA for the period of four fiscal quarters most
recently ended prior to such date for which internal financial reports are
available, ended not more than 135 days prior to such date, to
(2)(A) Consolidated Interest Expense during such period plus (B)
dividends on or in respect of any Capital Stock of any such Person paid in
cash during such period; provided that the Consolidated Coverage Ratio
shall be calculated giving pro forma effect, as of the beginning of the
applicable period, to
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any acquisition, Incurrence or redemption of Indebtedness (including the
Notes), issuance or redemption of Disqualified Capital Stock, acquisition,
Asset Sale, purchases of assets that were previously leased or re-
designation of a Restricted Subsidiary as an Unrestricted Subsidiary, at
any time during or subsequent to such period, but on or prior to the
applicable Determination Date.
In making such computation, Consolidated Interest Expense:
(1) attributable to any Indebtedness bearing a floating interest rate
shall be computed on a pro forma basis as if the rate in effect on the date
of computation had been the applicable rate for the entire period, or
(2) attributable to interest on any Indebtedness under a revolving Credit
Facility shall be computed on a pro forma basis based upon the average
daily balance of such Indebtedness outstanding during the applicable
period.
For purposes of calculating Consolidated EBITDA of the Company for the most
recently completed period of four full fiscal quarters ending on the last day
of the last quarter for which internal financial statements are available
(such period of four fiscal quarters, the "Measurement Period"), not more than
135 days prior to the transaction or event giving rise to the need to
calculate the Consolidated EBITDA,
(1) any Person that is a Restricted Subsidiary on such Determination Date
(or would become a Restricted Subsidiary on such Determination Date in
connection with the transaction that requires the determination of the
Consolidated Coverage Ratio) shall be deemed to have been a Restricted
Subsidiary at all times during such Measurement Period,
(2) any Person that is not a Restricted Subsidiary on such Determination
Date (or would cease to be a Restricted Subsidiary on such Determination
Date in connection with the transaction that requires the determination of
the Consolidated Coverage Ratio) will be deemed not to have been a
Restricted Subsidiary at any time during such Measurement Period,
(3) if the Company or any Restricted Subsidiary shall have in any manner
(A) acquired (including through an Asset Acquisition or the
commencement of activities constituting such operating business) or
(B) disposed of (including by way of an Asset Sale or the termination
or discontinuance of activities constituting such operating business)
any operating business during such Measurement Period or after the end of
such Measurement Period and on or prior to the Determination Date, such
calculation shall be made on a pro forma basis in accordance with GAAP as
if, in the case of an Asset Acquisition or the commencement of activities
constituting such operating business, all such transactions had been
consummated on the first day of such Measurement Period and, in the case of
an Asset Sale or termination or discontinuance of activities constituting
such operating business, all such transactions had been consummated prior
to the first day of such Measurement Period; provided, however, that such
pro forma adjustment shall not give effect to the Consolidated EBITDA of
any acquired Person to the extent that such Person's net income would be
excluded pursuant to clause (6) of the definition of Consolidated Net
Income and
(4) any Indebtedness Incurred and proceeds thereof received and applied
as a result of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio will be deemed to have been so Incurred,
received and applied on the first day of such Measurement Period.
"Consolidated EBITDA" means, with respect to any Person for any period, the
sum (without duplication) of:
(1) the Consolidated Net Income of such Person for such period, plus
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(2) to the extent that any of the following shall have been taken into
account in determining such Consolidated Net Income, and without
duplication:
(A) all income taxes of such Person and its Restricted Subsidiaries
paid or accrued in accordance with GAAP for such period (other than
income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses or taxes attributable to sales or dispositions of
assets outside the ordinary course of business),
(B) the Consolidated Interest Expense of such Person for such period,
(C) the amortization expense (including the amortization of deferred
financing charges) and depreciation expense for such Person and its
Restricted Subsidiaries for such period,
(D) other non-cash items (other than non-cash interest) of such
Person or any of its Restricted Subsidiaries (including any non-cash
compensation expense attributable to stock option or other equity
compensation arrangements), other than any non- cash item for such
period that requires the accrual of or a reserve for cash charges for
any future period (except as otherwise provided in clause (E) below)
and other than any non-cash charge for such period constituting an
extraordinary item of loss, and
(E) any non-recurring costs or expenses of an acquired company or
business incurred in connection with the purchase or acquisition of
such acquired company or business by such Person and any non-recurring
adjustments necessary to conform the accounting policies of the
acquired company or business to those of such Person, less
(3)(A) all non-cash items of such Person or any of its Restricted
Subsidiaries increasing such Consolidated Net Income for such period and
(B) all cash payments during such period relating to non-cash items that
were added back in determining Consolidated EBITDA in any prior period.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non- cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capitalized Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net
payments (if any) pursuant to Hedging Obligations) and
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period, and
(3) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries
(whether or not such Support Obligation or Lien is called upon) and
(4) the product of:
(A) all dividend payments on any series of preferred stock of such
Person or any of its Restricted Subsidiaries, times
(B) a fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, however, that there shall be excluded therefrom:
(1) net after-tax gains and losses from all sales or dispositions of
assets outside of the ordinary course of business,
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(2) net after-tax extraordinary or non-recurring gains or losses,
(3) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary of
such Person or is merged or consolidated with or into such Person or any
Restricted Subsidiary,
(4) the cumulative effect of a change in accounting principles,
(5) any net income of any other Person if such other Person is not a
Restricted Subsidiary and is accounted for by the equity method of
accounting, except that such Person's equity in the net income of any such
other Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
other Person during such period to such Person or a Restricted Subsidiary
as a dividend or other distribution, (subject, in case of a dividend or
other distribution to a Restricted Subsidiary, to the limitation that such
amount so paid to a Restricted Subsidiary shall be excluded to the extent
that such amount could not at that time be paid to the Company due to the
restrictions set forth in clause (6) below (regardless of any waiver of
such conditions)),
(6) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, by contract,
operation of law, pursuant to its charter or otherwise on the payment of
dividends or the making of distributions by such Restricted Subsidiary to
such Person except that:
(A) such Person's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash that could have been paid or
distributed during such period to such Person as a dividend or other
distribution (provided that such ability is not due to a waiver of such
restriction) and
(B) such Person's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income regardless of any such restriction,
(7) any restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of Consolidated Net
Income accrued at any time following the Issue Date,
(8) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or
not such operations were classified as discontinued),
(9) in the case of a successor to such Person by consolidation or merger
or as a transferee of such Person's assets, any net income or loss of the
successor corporation prior to such consolidation, merger or transfer of
assets and
(10) the net income (but not loss) of any Unrestricted Subsidiary, except
that the Company's or any Restricted Subsidiary's equity in the net income
of any Unrestricted Subsidiary or other Person for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Unrestricted Subsidiary or Person during such
period to the Company or a Restricted Subsidiary as a dividend or other
distribution.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of:
(1) the consolidated equity of the common stockholders of such Person and
its consolidated Subsidiaries as of such date, plus
(2) the respective amounts reported on such Person's consolidated balance
sheet as of such date with respect to any series of preferred stock (other
than Disqualified Capital Stock) that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and paid only
out of net earnings in respect of the year of such declaration and payment,
but only to the extent of any cash received by such Person upon issuance of
such preferred stock,
less:
(1) all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern business
made within 12 months after the acquisition of such business)
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subsequent to the Issue Date in the book value of any asset owned by such
Person or a consolidated Subsidiary of such Person,
(2) all investments as of such date in unconsolidated Subsidiaries and in
Persons that are not Subsidiaries (except, in each case, Permitted
Investments), and
(3) all unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined in accordance with
GAAP.
"Core Businesses" means the gaming, card club, racing, sports,
entertainment, lodging, restaurant, riverboat operations, real estate
development and all other businesses and activities necessary for or reasonably
related or incident thereto, including, without limitation, related
acquisition, construction, development or operation of related truck stop,
transportation, retail and other facilities designed to enhance any of the
foregoing.
"Credit Facilities" means, with respect to any Obligor, one or more debt
facilities or commercial paper facilities with any combination of banks, other
institutional lenders and other Persons extending financial accommodations or
holding corporate debt obligations in the ordinary course of their business,
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special
purpose entities formed to borrow from such lenders against such receivables)
or letters of credit, in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time by the
same or different institutional lenders.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Determination Date" means, with respect to any calculation, the date on or
as of which such calculation is made in accordance with the terms hereof.
"Designated Senior Debt" means any Indebtedness under the Bank Credit
Facility (which is outstanding or which the lenders thereunder have a
commitment to extend) and, if applicable, any other Senior Debt permitted under
the Indenture, the principal amount (committed or outstanding) of which is $25
million or more and that has been designated by the Company as "Designated
Senior Debt."
"Disqualified Capital Stock" means any Capital Stock which by its terms (or
by the terms of any security into which it is, by its terms, convertible or for
which it is, by its terms, exchangeable at the option of the holder thereof),
or upon the happening of any specified event, is required to be redeemed or is
redeemable (at the option of the holder thereof) at any time prior to the
earlier of the repayment of all Notes or the stated maturity of the Notes or is
exchangeable at the option of the holder thereof for Indebtedness at any time
prior to the earlier of the repayment of all Notes or the stated maturity of
the Notes.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Event of Default" means the occurrence of any of the events described under
the caption "--Events of Default and Remedies", after giving effect to any
applicable grace periods or notice requirements.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Gaming Approval" means any governmental approval relating to any gaming
business or enterprise.
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"Gaming Authority" means any governmental authority with regulatory
oversight of, authority to regulate or jurisdiction over any gaming businesses
or enterprises, including the State Gaming Control Board of Nevada, Washoe
County, Nevada gaming authorities, the Nevada Gaming Commission, Mississippi
Gaming Commission, Indiana Gaming Commission, California Gambling Control
Commission, Louisiana Gaming Control Board, California Horse Racing Board and
the Arizona Racing Commission, with regulatory oversight of, authority to
regulate or jurisdiction over any gaming operation (or proposed gaming
operation) owned, managed or operated by any Obligor.
"Gaming Laws" means all applicable provisions of all:
(1) constitutions, treaties, statutes or laws governing gaming operations
(including without limitation card club casinos and pari mutuel race
tracks) and rules, regulations and ordinances of any Gaming Authority,
(2) Gaming Approvals and
(3) orders, decisions, judgments, awards and decrees of any Gaming
Authority.
"Global Note" means a permanent global note in registered form deposited
with the Trustee, as a custodian for The Depositary Trust Company or any other
designated depositary.
"Government Securities" means marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency or instrumentality thereof and backed by the full faith and credit of
the United States, in each case maturing within 12 months from the date of
acquisition thereof by any Obligor.
"Guarantor" means any existing or future Material Restricted Subsidiary of
the Company, which has guaranteed the obligations of the Company arising under
or in connection with the Notes, as required by the Indenture.
"Guaranty" means a guaranty by a Guarantor of the Obligations of the
Company arising under or in connection with the Notes.
"Hedging Obligations" means all obligations of the Obligors arising under
or in connection with any rate or basis swap, forward contract, commodity swap
or option, equity or equity index swap or option, bond, note or bill option,
interest rate option, foreign currency exchange transaction, cross currency
rate swap, currency option, cap, collar or floor transaction, swap option,
synthetic trust product, synthetic lease or any similar transaction or
agreement.
"Incur" means, with respect to any Indebtedness of any Person or any Lien,
to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or Lien
or the recording, as required pursuant to GAAP or otherwise, of any such
Indebtedness on the balance sheet of such Person (and "Incurrence,"
"Incurred," "Incurrable" and "Incurring" shall have meanings correlative to
the foregoing).
"Indebtedness" means with respect to any Person, without duplication,
whether contingent or otherwise,
(1) any obligations for money borrowed,
(2) any obligation evidenced by bonds, debentures, notes, or other
similar instruments,
(3) Letter of Credit Obligations and obligations in respect of other
similar instruments,
(4) any obligations to pay the deferred purchase price of property or
services, including Capitalized Lease Obligations,
(5) the maximum fixed redemption or repurchase price of Disqualified
Capital Stock,
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(6) Indebtedness of other Persons of the types described in clauses (1)
through (5) above, secured by a Lien on the assets of such Person or its
Restricted Subsidiaries, valued, in such cases where the recourse thereof
is limited to such assets, at the lesser of the principal amount of such
Indebtedness or the fair market value of the subject assets,
(7) indebtedness of other Persons of the types described in clauses (1)
through (5) above, guaranteed by such Person or any of its Restricted
Subsidiaries and
(8) the net obligations of such Person under Hedging Obligations;
provided that the amount of any Indebtedness at any date shall be
calculated as the outstanding balance of all unconditional obligations and
the maximum liability supported by any contingent obligations at such date.
Notwithstanding the foregoing, "Indebtedness" shall not be construed to include
trade payables, credit on open account, accrued liabilities, provisional
credit, daylight overdrafts or similar items. For purposes of this definition,
the "maximum fixed redemption or repurchase price" of any Disqualified Capital
Stock that does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were repurchased on the date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in
good faith by the Board of the issuing Person. Unless otherwise specified in
the Indenture, the amount outstanding at any time of any Indebtedness issued
with original issue discount is the full amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP.
"Interest Swap Obligations" means the net obligations of any Person under
any interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap, collar or floor transaction or
other interest rate Hedging Obligation.
"Investment" by any Person means any direct or indirect:
(1) loan, advance or other extension of credit or capital contribution
(valued at the fair market value thereof as of the date of contribution or
transfer) (by means of transfers of cash or other property or services for
the account or use of other Persons, or otherwise);
(2) purchase or acquisition of Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by any other Person
(whether by merger, consolidation, amalgamation or otherwise and whether or
not purchased directly from the issuer of such securities or evidences of
Indebtedness);
(3) guarantee or assumption of any Indebtedness or any other obligation
of any other Person (except for an assumption of Indebtedness for which the
assuming Person receives consideration at the time of such assumption in
the form of property or assets with a fair market value at least equal to
the principal amount of the Indebtedness assumed); and
(4) all other items that would be classified as investments (including,
without limitation, purchases of assets outside the ordinary course of
business) on a balance sheet of such Person prepared in accordance with
GAAP.
Notwithstanding the foregoing, the purchase or acquisition of any securities,
Indebtedness or Productive Assets of any other Person solely with Qualified
Capital Stock shall not be deemed to be an Investment. The term "Investments"
shall also exclude extensions of trade credit and advances to customers and
suppliers to the extent made in the ordinary course of business on ordinary
business terms. The amount of any non-cash Investment shall be the fair market
value of such Investment, as determined conclusively in good faith by
management of the Company or the affected Restricted Subsidiary, as applicable,
unless the fair market value of such Investment exceeds $5 million, in which
case the fair market value shall be determined conclusively in good faith by
the Board of such Person as of the time such Investment is made or such other
time as specified in the Indenture. Unless otherwise required by the Indenture,
the amount of any Investment shall not be
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adjusted for increases or decreases in value, or write-ups, write-downs or
write-offs subsequent to the date such Investment is made with respect to such
Investment.
"Issue Date" means February 18, 1999.
"Letter of Credit Obligations" means Obligations of an Obligor arising under
or in connection with letters of credit.
"Lien" means, with respect to any assets, any mortgage, lien, pledge,
charge, security interest or other similar encumbrance (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof, any option or other agreement to sell, and any filing of or
agreement to give, any security interest).
"Limited Real Estate Development" means the development or improvement of
(1) any undeveloped or substantially undeveloped real estate held by the
Company or a Subsidiary on the date of the Indenture or (2) any undeveloped or
substantially undeveloped real estate that is acquired by the Company or a
Subsidiary in an acquisition of a company that is primarily in the Casino
business.
"Material Restricted Subsidiary" means any Subsidiary which is both a
Material Subsidiary and a Restricted Subsidiary.
"Material Subsidiary" means any Subsidiary of the Company other than a Non-
Material Subsidiary.
"Moody's" means Moody's Investors Services, Inc., and its successors.
"Net Cash Proceeds" means with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
received by any Obligor from such Asset Sale, net of:
(1) reasonable out-of- pocket expenses, fees and other direct costs
relating to such Asset Sale (including, without limitation, brokerage,
legal, accounting and investment banking fees and sales commissions),
(2) taxes paid or payable after taking into account any reduction in tax
liability due to available tax credits or deductions and any tax sharing
arrangements,
(3) repayment of Indebtedness (other than any intercompany Indebtedness)
that is required by the terms thereof to be repaid or pledged as cash
collateral, or the holders of which otherwise have a contractual claim that
is legally superior to any claim of the holders (including a restriction on
transfer) to the proceeds of the subject assets, in connection with such
Asset Sale, and
(4) appropriate amounts to be provided by any applicable Obligor, as a
reserve, in accordance with GAAP, against any liabilities associated with
such Asset Sale and retained by limitation, pension and other post-
employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated
with such Asset Sale and any reserve for adjustment to the sale price
received in such Asset Sale for so long as such reserve is held.
"Non-Material Subsidiaries" means all Subsidiaries not designated as
Material Subsidiaries by the Company; provided, that all such Subsidiaries
(other than Unrestricted Subsidiaries) may not, in the aggregate at any time
have assets (attributable to the Company's and its Restricted Subsidiaries'
equity interest in such entity) constituting more than 5% of the Company's
total assets on a consolidated basis based on the Company's most recent
internal financial statements. As of the Issue Date, the Non-Material
Subsidiaries shall be all the Company's Subsidiaries existing as of the Issue
Date other than the Guarantors as of the Issue Date and the Unrestricted
Subsidiaries as of the Issue Date.
"Non-Recourse Indebtedness" means Indebtedness of an Unrestricted Subsidiary
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(1) as to which none of the Obligors:
(A) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness),
(B) is directly or indirectly liable (as a guarantor or otherwise),
or
(C) constitutes the lender;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness (other than the Notes being offered hereby) of any
Obligor to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity,
and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of any Obligor.
The foregoing notwithstanding, if an Obligor or a Restricted Subsidiary makes a
loan to an Unrestricted Subsidiary that is permitted under the covenant
described under the caption "Restricted Payments" and is otherwise permitted to
be incurred under the Indenture, such loan shall constitute Non-Recourse
Indebtedness.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities, whether
absolute or contingent, payable under the documentation governing any
Indebtedness.
"Obligor" means the Company or any Guarantor.
"Paying Agent" means the Person so designated by the Company in accordance
with the Indenture, initially the Trustee.
"Permitted Indebtedness" means, without duplication, each of the following:
(1) Indebtedness of the Company or any Restricted Subsidiary outstanding
on the Issue Date and reflected in the financial statements set forth in
the offering memorandum relating to the Old Notes as in effect on the Issue
Date as reduced by the amount of any scheduled amortization payments or
mandatory prepayments when actually paid or permanent reductions thereof;
(2) Indebtedness Incurred by the Company under the Notes and by the
Guarantors under the Guaranties;
(3) Indebtedness Incurred by the Company or any Restricted Subsidiary
pursuant to the Bank Credit Facility; provided that the aggregate principal
amount of Indebtedness outstanding thereunder as of any date of Incurrence
shall not exceed $350 million, to be reduced dollar-for-dollar by the
amount of (A) any increase to the face amount of Support Obligations
permitted to be Incurred pursuant to clause (11) of this definition and (B)
the aggregate amount of all Net Cash Proceeds of Asset Sales applied by an
Obligor to permanently prepay or repay Indebtedness under the Bank Credit
Facility pursuant to the covenant described above under the caption "--
Asset Sales."
(4) Indebtedness of the Company to any Obligor or of any Guarantor to any
other Obligor for so long as such Indebtedness is held by the Company or by
another Obligor; provided that:
(A) any Indebtedness of the Company to any other Obligor is unsecured
and evidenced by an intercompany promissory note that is subordinated,
pursuant to a written agreement, to the Company's obligations under the
Indenture and the Notes and the Registration Rights Agreement, and
(B) if as of any date any Person other than the Company or a
Guarantor owns or holds any such Indebtedness or holds a Lien in
respect of such Indebtedness, such date shall be deemed to be an
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Incurrence of Indebtedness not constituting Permitted Indebtedness
under this clause (4) by the issuer of such Indebtedness;
(5) Indebtedness of a Restricted Subsidiary to the Company for so long as
such Indebtedness is held by an Obligor; provided that if as of any date
any Person other than an Obligor acquires any such Indebtedness or holds a
Lien in respect of such Indebtedness, such acquisition shall be deemed to
be an Incurrence of Indebtedness not constituting Permitted Indebtedness
under this clause (5) by the issuer of such Indebtedness;
(6) Permitted Refinancing Indebtedness;
(7) the Incurrence by Unrestricted Subsidiaries of Non-Recourse
Indebtedness; provided that, if any such Indebtedness ceases to be Non-
Recourse Indebtedness of an Unrestricted Subsidiary, such event shall be
deemed to constitute an Incurrence of Indebtedness that is not permitted by
this clause (7);
(8) Indebtedness Incurred by the Company or any Restricted Subsidiary
solely to finance the construction or acquisition or improvement of, or
consisting of Capitalized Leased Obligations Incurred to acquire rights of
use in, capital assets useful in the Company's or such Subsidiary's
business, as applicable, and, in any such case, Incurred prior to or within
180 days after the construction, acquisition, improvement or leasing of the
subject assets, not to exceed in aggregate principal amount outstanding at
any time:
(A) $15 million for each of the Company or any Restricted Subsidiary,
or
(B) $60 million in the aggregate for all of the Company and its
Restricted Subsidiaries, and additional Indebtedness of the kind
described in this clause (8) with respect to which neither the Company
nor any Restricted Subsidiary is directly or indirectly liable, and
which is expressly made non-recourse to all of such Person's assets,
except the asset so financed;
(9) Interest Swap Obligations entered into not as speculative Investments
but as hedging transactions designed to protect the Company and its
Restricted Subsidiaries against fluctuations in interest rates in
connection with Indebtedness otherwise permitted hereunder;
(10) Indebtedness of the Company or any Restricted Subsidiary arising in
respect of performance bonds and completion guaranties (to the extent that
the Incurrence thereof does not result in the Incurrence of any obligation
for the payment of borrowed money of others), in the ordinary course of
business, in amounts and for the purposes customary in such Person's
industry; provided, that such Indebtedness shall be Incurred solely in
connection with the development, construction, improvement or enhancement
of assets useful in such Person's business; and
(11) other Indebtedness consisting of Support Obligations not exceeding
$25 million in aggregate principal amount at any time, which may be
increased by the Company in its discretion, subject to availability under,
and a corresponding reduction to, the principal amount of Indebtedness
permitted to be Incurred under the Bank Credit Facility pursuant to clause
(3) of this definition.
"Permitted Investments" means, without duplication, each of the following:
(1) Investments in cash (including deposit accounts with major commercial
banks) and Cash Equivalents;
(2) Investments by the Company or a Restricted Subsidiary in the Company
or any Restricted Subsidiary or any Person that is or will immediately
become upon giving effect to such Investment, or as a result of which, such
Person is merged, consolidated or liquidated into, or conveys substantially
of all its assets to, an Obligor or a Restricted Subsidiary; provided that
Investments in any such Person (other than the Company or any Restricted
Subsidiary) made prior to such Investment shall not be "Permitted
Investments"; and provided further that for purposes of calculating at any
date the aggregate amount of Investments made since the Issue Date pursuant
to the covenant described above under the caption "--Restricted Payments,"
such Investment shall be a Permitted Investment only so long as any
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Subsidiary in which any such Investment has been made continues to be an
Obligor or a Restricted Subsidiary;
(3) Investments existing on the Issue Date, each such Investment to be:
(A) in an amount less than $1 million,
(B) listed on a schedule to the Indenture, or
(C) an existing Investment by any one or combination of the Company
and its consolidated subsidiaries in any other such Person;
(4) accounts receivable created or acquired in the ordinary course of
business of the Company or any Restricted Subsidiary on ordinary business
terms;
(5) Investments arising from transactions by the Company or a Restricted
Subsidiary with trade creditors or customers in the ordinary course of
business (including any such Investment received pursuant to any plan of
reorganization or similar arrangement pursuant to the bankruptcy or
insolvency of such trade creditors or customers or otherwise in settlement
of a claim);
(6) Investments made as the result of non-cash consideration received
from an Asset Sale that was made pursuant to and in compliance with the
covenant described above under the caption "--Assets Sales"; and
(7) Investments consisting of advances to officers, directors and
employees of the Company or a Restricted Subsidiary for travel,
entertainment, relocation, purchases of Capital Stock of the Company or a
Restricted Subsidiary permitted by the Indenture and analogous ordinary
business purposes.
"Permitted Junior Securities" means Equity Interests in the Obligors or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to substantially the same extent as, or to
a greater extent than, the Notes and the Guaranties are subordinated to Senior
Debt pursuant to the Indenture.
"Permitted Liens" means:
(1) Liens in favor of the Company or Liens on the assets of any Guarantor
so long as such Liens are held by another Obligor;
(2) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or a Restricted Subsidiary;
provided that such Liens were not Incurred in anticipation of such merger
or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company or such Restricted
Subsidiary, as applicable;
(3) Liens on property existing at the time of acquisition thereof by any
Obligor or Restricted Subsidiary; provided that such Liens were not
Incurred in anticipation of such acquisition;
(4) Liens Incurred to secure Indebtedness permitted by clause (8) of the
definition of Permitted Indebtedness, attaching to or encumbering only the
subject assets and directly related property such as proceeds and products
thereof and accessions and replacements thereto;
(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens created by "notice" or "precautionary" filings in connection
with operating leases or other transactions pursuant to which no
Indebtedness is Incurred by the Company or any Restricted Subsidiary;
(7) Liens existing on the Issue Date;
(8) Liens for taxes, assessments or governmental charges or claims
(including, without limitation, Liens securing the performance of workers
compensation, social security, or unemployment insurance
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obligations) that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded; provided that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made therefor;
(9) Liens on shares of any equity security or any warrant or option to
purchase an equity security or any security which is convertible into an
equity security issued by any Obligor that holds, directly or indirectly
through a holding company or otherwise, a license under any applicable
Gaming Laws; provided that this clause (9) shall apply only so long as such
Gaming Laws provide that the creation of any restriction on the disposition
of any of such securities shall not be effective and, if such Gaming Laws
at any time cease to so provide, then this clause (9) shall be of no
further effect;
(10) Liens on securities constituting "margin stock" within the meaning
of Regulation T, U or X promulgated by the Board of Governors of the
Federal Reserve System, to the extent that (i) prohibiting such Liens would
result in the classification of the obligations of the Company under the
Notes as a "purpose credit" and (ii) the Investment by any Obligor in such
margin stock is permitted by the Indenture;
(11) Liens securing Permitted Refinancing Indebtedness; provided that any
such Lien attaches only to the assets encumbered by the predecessor
Indebtedness, unless the Incurrence of such Liens is otherwise permitted
under the Indenture;
(12) Liens securing stay and appeal bonds or judgment Liens in connection
with any judgment not giving rise to an Event of Default under paragraph
(5) of the Events of Default;
(13) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business, in respect of obligations not
constituting Indebtedness and not past due; provided that adequate reserves
shall have been established therefor in accordance with GAAP;
(14) easements, rights-of-way, zoning restrictions, reservations,
encroachments and other similar charges or encumbrances in respect of real
property which do not individually or in the aggregate, materially
interfere with the conduct of business by any Obligor;
(15) any interest or title of a lessor under any Capitalized Lease
Obligation permitted to be incurred hereunder;
(16) Liens upon specific items of inventory or equipment and proceeds
thereof, Incurred to secure obligations in respect of bankers' acceptances
issued or created for the account of any Obligor or Restricted Subsidiary
in the ordinary course of business to facilitate the purchase, shipment, or
storage of such inventory or equipment;
(17) Liens securing Letter of Credit Obligations permitted to be Incurred
hereunder Incurred in connection with the purchase of inventory or
equipment by an Obligor or Restricted Subsidiary in the ordinary course of
the business and secured only by such inventory or equipment, the documents
issued in connection therewith and the proceeds thereof and
(18) Liens in favor of the Trustee arising under the Indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any Restricted Subsidiary issued in exchange for, or the net proceeds of
which are used to repay, redeem, extend, refinance, renew, replace, defease or
refund other Permitted Indebtedness of such Person arising under clauses (1),
(2), (6), (8), (10) or (11) of the definition of "Permitted Indebtedness" or
Indebtedness Incurred under the Consolidated Coverage Ratio test in the
covenant described above under the heading "--Incurrence of Indebtedness and
Issuance of Preferred Stock" (any such Indebtedness, "Existing Indebtedness");
provided that:
(1) the principal amount of such Permitted Refinancing Indebtedness does
not exceed the principal amount of such Existing Indebtedness (plus the
amount of prepayment penalties, premiums and expenses incurred or paid in
connection therewith), except to the extent that the Incurrence of such
excess is otherwise permitted by the Indenture;
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(2) if such Indebtedness is subordinated to, or pari passu in right of
payment with, the Notes, such Permitted Refinancing Indebtedness has a
final maturity date on or later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, such Existing Indebtedness;
(3) if such Existing Indebtedness is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity
date on or later than the final maturity date of, and is subordinated in
right of payment to, the Notes on terms at least as favorable to the
holders of Notes as those contained in the documentation governing the
Indebtedness being repaid, redeemed, extended, refinanced, renewed,
replaced, defeased or refunded; and
(4) such Permitted Refinancing Indebtedness shall be Indebtedness solely
of the Obligor or Restricted Subsidiary originally obligated thereunder,
unless otherwise permitted by the Indenture.
"Plan of Liquidation" means, with respect to any Person, a plan (including
by operation of law) that provides for, contemplates or the effectuation of
which is preceded or accomplished by (whether or not substantially
contemporaneously):
(1) the sale, lease or conveyance of all or substantially all of the
assets of such Person otherwise than as an entirety or substantially as an
entirety, and
(2) the distribution of all or substantially all of the proceeds of such
sale, lease, conveyance, or other disposition and all or substantially all
of the remaining assets of such Person to holders of Capital Stock of such
Person.
"Principals" means:
(1) R.D. Hubbard,
(2) any spouse, parent or child of such Principal, or
(3) any trust, corporation, partnership or other Person, the
beneficiaries, stockholders, partners, owners or other Persons holding an
80% or more controlling interest in which are Persons described in clause
(1) or (2) of this definition.
"Productive Assets" means assets (including assets owned directly or
indirectly through Capital Stock of a Restricted Subsidiary) of a kind used or
usable in the businesses of the Obligors as they are conducted on the date of
the Asset Sale.
"Public Equity Offering" means a public equity offering, underwritten by a
nationally recognized underwriter pursuant to an effective registration
statement under the Securities Act of Qualified Capital Stock.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Related Business" means the gaming (including pari-mutuel betting) business
and any and all reasonably related businesses necessary for, in support or
anticipation of and ancillary to or in preparation for, the gaming business
including, without limitation, the development, expansion or operation of any
Casino (including any land-based, dockside, riverboat or other type of Casino),
owned, or to be owned, by the Company or one of its Subsidiaries.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary. If no referent Person is
specified, "Restricted Subsidiary" means a Subsidiary of the Company.
"S&P" means Standard & Poors Rating Group, a division of The McGraw-Hill
Industries, Inc., and its successors.
"Senior Debt" means:
(1) all Indebtedness outstanding under Credit Facilities and all Hedging
Obligations with respect thereto,
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(2) any other Indebtedness permitted to be Incurred by the Company under
the terms of the Indenture, unless the instrument under which such
Indebtedness is Incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes, and
(3) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will
not include:
(1) any liability for federal, state, local or other taxes owed or owing
by the Company,
(2) any Indebtedness of any Obligor to any of its Restricted Subsidiaries
or other Affiliates,
(3) any trade payables,
(4) any Indebtedness that is incurred in violation of the Indenture, and
(5) Indebtedness which, when Incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without recourse
to any Obligor.
Notwithstanding anything in the Indenture to the contrary Senior Debt shall
not include the 9 1/2% Notes. The Indenture will expressly provide that the
Obligations in respect of the Notes and the Guarantees will be on a parity
with the Obligations in respect of the 9 1/2% Notes and the guarantees
thereof in right of payment.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary," with respect to any Person, means:
(1) any corporation or comparably organized entity, a majority of whose
voting stock (defined as any class of capital stock having voting power
under ordinary circumstances to elect a majority of the Board of such
Person) is owned, directly or indirectly, by any one or more of the
Obligors, and
(2) any other Person (other than a corporation) in which any one or more
of the Obligors, directly or indirectly, has at least a majority ownership
interest entitled to vote in the election of directors, managers or
trustees thereof or of which such Obligor is the managing general partner.
"Support Obligation" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and, without limiting the generality of the foregoing, any obligation, direct
or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness of such other Person (whether arising by
virtue of partnership arrangements, or by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions or otherwise), or
(2) entered into for purposes of assuring in any other manner the obligee
of such Indebtedness of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); provided that the
term "Support Obligation" shall not include:
(A) endorsements for collection or deposit in the ordinary course of
business, or
(B) commitments to make Permitted Investments in Obligors or their
Restricted Subsidiaries.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the Board of the Company as its Unrestricted Subsidiary pursuant
to a Board resolution; but only to the extent that such Subsidiary:
(A) has, or will have after giving effect to such designation, no
Indebtedness other than Non-Recourse Indebtedness,
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(B) is not party to any agreement, contract, arrangement or
understanding with any Obligor unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to such
Obligor than those that might be obtained at the time from Persons who
are not Affiliates of such Obligor,
(C) is a Person with respect to which none of the Obligors has any
direct or indirect obligation (i) to subscribe for additional equity
interests or (ii) to maintain or preserve such Person's financial
condition or to cause such Person to achieve any specified levels of
operating results,
(D) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of any Obligor, and
(E) has at least one director on its Board who is not a director or
executive officer of any Obligor and has at least one executive officer
who is not a director or executive officer of any Obligor.
Any such designation by the Board of the Company shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the Board resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions and was permitted by
the covenant described above under "--Restricted Payments." If at any time any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such
Subsidiary shall be deemed to be Incurred by a Restricted Subsidiary as of such
time (and, if such Indebtedness is not permitted to be Incurred as of such date
under the covenant described above under "--Incurrence of Indebtedness and
Issuance of Preferred Stock," the Company shall be in default of such
covenant). The Board of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an Incurrence of Indebtedness by a Restricted Subsidiary of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if
(1) such Indebtedness is permitted under the covenant described above
under the heading "--Incurrence of Indebtedness and Issuance of Preferred
Stock," calculated on a pro forma basis as if such designation had occurred
at the beginning of the reference period, and
(2) no Default or Event of Default would be in existence following such
designation.
As of the Issue Date, the following entities shall be Unrestricted
Subsidiaries: Jefferson Casino Corporation, Casino Magic of Louisiana, Corp.,
Casino Magic Management Services Corp., Sunflower Racing, Inc., SR Food &
Beverage Company, Casino Magic Neuquen S.A. and Casino Magic Support Services
S.A.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the Company's calculations of the number of years obtained by
dividing:
(1) the then outstanding aggregate principal amount of such Indebtedness
into:
(2) the total of the products obtained by multiplying:
(A) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including
payment at final maturity, in respect thereof, by
(B) the number of years (calculated to the nearest one-twelfth) which
will elapse between such date and the making of such payment.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax consequences
resulting from the Exchange Offer and from the ownership of the Notes. This
discussion is a general summary only and does not address all tax aspects of
ownership of the Notes that may be relevant to a prospective investor's
particular circumstances. This discussion deals only with Notes held as capital
assets and does not deal with the consequences to special classes of holders of
the Notes, such as dealers in securities or currencies, life insurance
companies, tax exempt entities, financial institutions, persons with a
functional currency other than the U.S. dollar, or investors in pass-through
entities such as partnerships. It does not deal with the effects of any
arrangement entered into by a holder of the Notes that partially or completely
hedges the Notes, or otherwise holding the Notes as part of a synthetic
security or other integrated investment. The discussion is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations,
rulings, and judicial decisions thereunder as of the date hereof, any of which
may be repealed or modified in a manner resulting in federal income tax
consequences that differ from those described below. In addition, the
discussion relies upon the description provided to the Company by the DTC,
Euroclear, and Cedel of their depository procedures and the procedures of their
Participants and Indirect Participants in maintaining a book-entry system
reflecting the beneficial ownership of the Notes.
Holders tendering their Old Notes or prospective purchasers of Exchange
Notes should consult their own tax advisors concerning the federal income tax
consequences resulting from their particular situations, and concerning the
state or local income or franchise tax consequences, gift and estate tax
consequences, or the consequences under the laws of any other taxing
jurisdiction.
U.S. Holders
The following discussion addresses the United States federal income tax
consequences to a U.S. Holder of a Note. For purposes of this discussion, a
U.S. Holder is a Holder that is (i) a citizen or resident of the United States,
(ii) a corporation, partnership, or other entity organized under the laws of
the United States or any political subdivision of the United States, (iii) an
estate taxed by the United States without regard to the source of its income,
or (iv) a trust if a court within the United States can exercise primary
supervision over its administration and one or more United States persons have
authority to control all of its substantial decisions.
Payments of Interest
Payments of stated interest on a Note will be taxable as ordinary interest
income at the time it is received or accrued, depending upon the method of
accounting applicable to the holder of the Note.
Exchange Offer in Connection with Registration of the Notes
The exchange of the Old Notes for the Exchange Notes (with substantially
identical terms) in connection with the registration of the Exchange Notes
should not be a taxable event for federal income tax purposes, and a Holder
should have the same tax basis and holding period in the Exchange Notes that
the Holder had in the Old Notes.
Market Discount
Any gain or loss on a disposition of a Note would generally be capital gain
or loss. However, a subsequent purchaser of a Note who did not acquire the Note
at its original issue, and who acquires such Note at a price that is less than
the stated redemption price of the Note at its maturity (that is, its face
amount if issued at par), may be required to treat the Note as a "market
discount bond". Any recognized gain on a disposition of the Note would then be
treated as ordinary income to the extent that it does not exceed the "accrued
market discount" on the Note. In general, accrued market discount is that
amount that bears the same ratio to the excess of the stated redemption price
of the Note over the purchaser's basis in the Note immediately after its
acquisition, as the number of days the purchaser holds the Note bears to the
number of days after the date the purchaser acquired the Note up to (and
including) the date of its maturity. In addition, there are rules deferring the
deduction of all or part of the interest expense on indebtedness incurred or
continued to purchase or carry such bond, and permitting a holder to elect to
include accrued market discount in income on a current basis.
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Backup Withholding and Information Reporting
In general, a U.S. Holder of a Note will be subject to backup withholding at
the rate of 31% with respect to interest, principal and premium, if any, paid
on a Note, unless the holder (a) is an entity (including corporations, tax-
exempt organizations and certain qualified nominees) that is exempt from
withholding and, when required, demonstrates this fact, or (b) provides the
Company with its Taxpayer Identification Number ("TIN") (which, for an
individual, would be the holder's Social Security number), certifies that the
TIN provided to the Company is correct and that the holder has not been
notified by the Internal Revenue Service that it is subject to backup
withholding due to underreporting of interest or dividends, and otherwise
complies with applicable requirements of the backup withholding rules. In
addition, such payments of interest, principal and premium to U.S. Holders that
are not corporations, tax-exempt organizations or qualified nominees will
generally be subject to information reporting requirements.
The amount of any backup withholding from a payment to a U.S. Holder will be
allowed as a credit against such holder's federal income tax liability and may
entitle such holder to a refund, provided that the required information is
furnished to the Internal Revenue Service.
Non-U.S. Holders
The following discussion addresses the principal U.S. federal income tax
consequences to a Holder of a Note that is not a U.S. Holder--referred to in
this discussion as a Non-U.S. Holder. As discussed above, this discussion does
not address all tax aspects of ownership of the Notes that may be relevant to a
prospective investor's particular circumstances, including holding the Notes
through a partnership or holding the Notes through a hybrid entity (an entity
that is a pass-through entity for U.S. tax purposes but not for foreign tax
purposes).
Payments of Interest
Generally, payments of stated interest on a Note will not be subject to U.S.
federal income tax if the interest qualifies as portfolio interest. Interest on
the Notes will qualify as portfolio interest if the Non-U.S. Holder (i) does
not actually or constructively own 10 percent of more of the total combined
voting power of all voting stock of the Company, (ii) is not a "controlled
foreign corporation" with respect to which the Company is a "related person" as
such terms are defined in the Code, and (iii) provides the required
certifications that the beneficial owner of the Notes is not a U.S. person.
However, the interest on the Notes will be taxed at regular U.S. federal income
tax rates if the interest constitutes income that is effectively connected with
the conduct of a U.S. trade or business and, if the Non-U.S. Holder can claim
the benefit of an income tax treaty, is attributable to a U.S. permanent
establishment or fixed base. Such income is referred to in this discussion as
U.S. trade or business income. If the Non-U.S. Holder is a corporation,
interest that constitutes U.S. trade or business income may also be subject to
the "branch profits tax" at 30 percent or, if applicable, a lower rate
determined by an income tax treaty.
Interest that neither qualifies as portfolio interest nor constitutes U.S.
trade or business income will be subject to U.S. withholding tax at the rate of
30 percent, unless such withholding tax is reduced or eliminated by an
applicable income tax treaty. To claim the protection of an income tax treaty,
a Non-U.S. Holder must provide a properly executed Form 1001 prior to the
payment of interest, and must periodically update the filing. New regulations
scheduled to take effect on January 1, 2000, will replace these forms with new
forms and procedures, and may require a Non-U.S. Holder to obtain a taxpayer
identification number and to provide documentary evidence of residence in order
to claim a treaty benefit.
Sale, Exchange or Redemption of Notes
Gain realized by a Non-U.S. Holder on the sale, exchange, redemption or
other disposition of a Note will generally not be subject to U.S. federal
income tax, unless (i) such gain constitutes U.S. trade or business income,
(ii) the Non-U.S. Holder is an individual who holds the Note as a capital asset
and is present in the United States for 183 days or more in the taxable year of
the disposition, or (iii) the Non-U.S. Holder is a former citizen or resident
of the United States subject to certain rules related to that status.
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Federal Estate Tax
Notes held by an individual who is not a citizen or resident of the United
States for federal estate tax purposes at the time of his or her death will not
be subject to U.S. federal estate tax if the interest on the Notes qualifies
for the portfolio interest exemption from U.S. federal income tax under the
rules described above.
Information Reporting and Backup Withholding
The Company must report to the Internal Revenue Service and to each Non-U.S.
Holder any interest that is subject to U.S. withholding tax or that is exempt
from withholding tax pursuant to either a tax treaty or the portfolio interest
exemption. Copies of these information returns may also be available to the tax
authorities of the country in which the Non-U.S. Holder resides under the
provisions of various treaties or agreements for the exchange of information.
Non-U.S. Holders other than corporations may be subject to backup
withholding and additional information reporting. Neither backup withholding
nor information reporting will apply to payments of portfolio interest by the
Company to a Non-U.S. Holder, if the Non-U.S. Holder properly certifies that it
is not a U.S. Holder or otherwise establishes an exemption. However, such
certification or exemption is not effective if the Company or its paying agent
has actual knowledge that the Holder is a U.S. Holder or that the conditions of
another exemption relied upon by the Non-U.S. Holder are not satisfied.
Payments of principal on the Notes by the Company to a Non-U.S. Holder may
be subject to backup withholding and information reporting unless the Non-U.S.
Holder properly certifies as to those items described below in connection with
payments made by brokers or otherwise establishes an exemption (provided that
neither the Company nor its paying agent has actual knowledge that the Holder
is a U.S. Holder or that the conditions of another exemption relied upon by the
Non-U.S. Holder are not satisfied).
Neither backup withholding nor information reporting will apply to the
payment of the proceeds from the disposition of the Notes to or through the
United States office of any broker if the Non-U.S. Holder (i) properly
certifies (A) that he is not a U.S. Holder, (B) that he does not expect to be
present within the U.S. for 183 days or more during the calendar year and (C)
none of his gains from transactions effected with the payor during the calendar
year are expected to be effectively connected with a U.S. trade or business; or
(ii) otherwise establishes an exemption, and neither the Company nor its paying
agent has actual knowledge that the conditions of any claimed exemption are not
satisfied. If proceeds from the disposition of the Notes are paid to or through
the foreign office of a U.S. broker, information reporting (but not backup
withholding) is required unless the broker has documentary evidence that the
owner is a foreign person and the broker has no actual knowledge to the
contrary. Similar rules apply to the foreign office of a foreign broker if
either (i) the foreign broker is a controlled foreign corporation within the
meaning of the Code, or (ii) 50 percent or more of the gross income of the
foreign broker during a specified testing period was effectively connected with
the conduct of a trade or business within the United States. If proceeds from
the disposition of the Notes are paid to or through the foreign office of a
foreign broker that does not have these characteristics, neither information
reporting nor backup withholding is required.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or credit against such Non-U.S.
Holder's federal income tax liability.
New regulations revising the information and reporting rules will become
effective on January 1, 2000. In general, these new regulations will not
materially change the withholding and information reporting requirements, but
will change various forms and certification procedures.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities (other than Old Notes acquired directly from the
Company). To the extent any such broker-dealer participates in the Exchange
Offer and so notifies the Company, or causes the Company to be so notified in
writing, the Company has agreed that, subject to certain exceptions, a period
of 180 days after the date of this prospectus, it will make this prospectus, as
amended or supplemented, available to such broker-dealer for use in connection
with any such resale, and will promptly send additional copies of this
prospectus and any amendment or supplement to this prospectus to any broker-
dealer that requests such documents in the Letter of Transmittal.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at prevailing market prices at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers or any such Exchange Notes. Any broker-
dealer that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act, and any profit on any such resale of
Exchange Notes and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act. The
Letter of Transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
By its acceptance of the Exchange Offer, any broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby agrees to notify the
Company prior to using the prospectus in connection with the sale or transfer
of Exchange Notes, and acknowledges and agrees that, upon receipt of notice
from the Company of the happening of any event which makes any statement in
this prospectus untrue in any material respect or which requires the making of
any changes in this prospectus in order to make the statements therein not
misleading or which may impose upon the Company disclosure obligations that the
Company determines in good faith may not be in the best interests of the
Company (which notice the Company agrees to deliver promptly to such broker-
dealer), such broker-dealer will suspend use of this prospectus until the
Company has notified such broker-dealer that delivery of this prospectus may
resume and has furnished copies of any amendment or supplement to this
prospectus to such broker-dealer.
144
<PAGE>
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
Hollywood Park by Irell & Manella LLP, Los Angeles, California.
EXPERTS
Hollywood Park's consolidated financial statements as of December 31, 1997
and 1996, and for each of the three years in the period ended December 31,
1997, included in this prospectus, to the extent and for the periods indicated
in their report with respect thereto have been audited by Arthur Andersen LLP,
independent public accountants, as stated in their report appearing herein, and
are included herein, in reliance upon authority of said firm as experts in
giving said report.
Casino Magic's consolidated financial statements as of December 31, 1997 and
1996, and for each of the three years in the period ended December 31, 1997,
appearing in this prospectus, to the extent and for the periods indicated in
their report with respect thereto, have been audited by Arthur Andersen LLP,
independent public accountants, as stated in their report appearing herein and
are included herein in reliance upon the authority of said firm as experts in
giving said report.
The consolidated financial statements (including schedule) of Boomtown as of
September 30, 1996 and 1995 and for each of the three years in the period ended
September 30, 1996, incorporated by reference into this prospectus and
Registration Statement from Amendment No. 4 to the Registration Statement (Form
S-4 No. 333-34471) of Hollywood Park have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing therein.
Such consolidated financial statements (including schedule) are incorporated by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
145
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Hollywood Park, Inc.
Consolidated Balance Sheets as of September 30, 1998 and December 31,
1997................................................................... F-2
Consolidated Statements of Operations for the three and nine months
ended September 30, 1998 and 1997...................................... F-3
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997............................................ F-4
Notes to Consolidated Financial Statements.............................. F-5
Calculation of Earnings Per Share....................................... F-17
Report of Independent Public Accountants, Arthur Andersen LLP........... F-18
Consolidated Balance Sheets as of December 31, 1997 and 1996............ F-19
Consolidated Statements of Operations for the years ended December 31,
1997, 1996 and 1995.................................................... F-20
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1997, 1996 and 1995................................. F-21
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995.................................................... F-22
Notes to Consolidated Financial Statements.............................. F-23
Schedule II............................................................. F-47
Calculation of Earnings Per Share....................................... F-48
Casino Magic Corp.
Condensed Consolidated Balance Sheets as of September 30, 1998 and
December 31, 1997...................................................... F-49
Condensed Consolidated Statements of Operations for the three months
ended September 30, 1998 and 1997...................................... F-50
Condensed Consolidated Statements of Operations for the nine months
ended September 30, 1998 and 1997...................................... F-51
Condensed Consolidated Statement of Cash Flows for the nine months ended
September 30, 1998 and 1997............................................ F-52
Notes to Consolidated Financial Statements.............................. F-53
Report of Independent Public Accountants, Arthur Andersen LLP........... F-55
Consolidated Statements of Operations for the years ended December 31,
1997, 1996 and 1995.................................................... F-56
Consolidated Balance Sheets as of December 31, 1997 and 1996............ F-57
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1997, 1996 and 1995....................................... F-58
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995.................................................... F-60
Notes to Consolidated Financial Statements.............................. F-63
</TABLE>
F-1
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of
--------------------------
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
(in thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................... $ 20,126 $ 23,749
Restricted cash................................... 798 407
Short term investments............................ 3,459 0
Other receivables, net............................ 7,061 9,417
Prepaid expenses and other assets................. 16,160 10,948
Deferred tax assets............................... 10,250 8,118
Current portion of notes receivable............... 2,340 42
-------- --------
Total current assets............................ 60,194 52,681
Notes receivable.................................... 18,250 9,548
Property, plant and equipment, net.................. 301,125 300,666
Goodwill, net....................................... 50,341 33,017
Other assets........................................ 23,009 23,117
-------- --------
$452,919 $419,029
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................. $ 8,848 $ 11,277
Accrued lawsuit settlement........................ 0 2,750
Accrued compensation.............................. 7,620 7,627
Accrued liabilities............................... 26,986 19,105
Accrued interest.................................. 2,642 5,175
Gaming liabilities................................ 3,698 3,853
Racing liabilities................................ 263 4,093
Current portion of notes payable.................. 2,058 3,437
-------- --------
Total current liabilities....................... 52,115 57,317
Notes payable....................................... 168,574 132,102
Deferred tax liabilities............................ 6,606 6,310
-------- --------
Total liabilities............................... 227,295 195,729
Minority interests.................................. 0 1,946
Stockholders' Equity:
Capital stock--
Preferred--$1.00 par value, authorized 250,000
shares; none issued and outstanding............ 0 0
Common--$.10 par value, authorized 40,000,000
shares; 25,800,069 issued and outstanding in
1998, and 26,220,528 in 1997................... 2,580 2,622
Capital in excess of par value.................... 218,023 222,350
Retained earnings (accumulated deficit)........... 5,338 (3,532)
Accumulated other comprehensive loss.............. (317) (86)
-------- --------
Total stockholders' equity...................... 225,624 221,354
-------- --------
$452,919 $419,029
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three
months ended For the nine months
September 30, ended September 30,
------------------- --------------------
1998 1997 1998 1997
--------- --------- ---------- ---------
(in thousands, except per share data--
unaudited)
<S> <C> <C> <C> <C>
Revenues:
Gaming............................. $ 58,846 $ 57,143 $ 173,552 $ 83,990
Racing............................. 11,371 12,216 48,085 48,084
Food and beverage.................. 7,383 6,156 21,245 13,016
Hotel and recreational vehicle
park.............................. 637 581 1,362 581
Truck stop and service station..... 4,525 4,897 11,071 4,897
Other income....................... 4,705 4,217 13,434 7,781
--------- --------- ---------- ---------
87,467 85,210 268,749 158,349
--------- --------- ---------- ---------
Expenses:
Gaming............................. 30,604 29,956 93,920 45,117
Racing............................. 5,562 6,206 21,244 21,615
Food and beverage.................. 10,065 8,101 27,601 16,920
Hotel and recreational vehicle
park.............................. 212 199 499 199
Truck stop and service station..... 4,177 4,461 10,164 4,461
Administration..................... 20,088 20,091 62,209 38,622
Other.............................. 2,011 1,823 5,586 3,262
REIT restructuring................. 0 609 469 609
Depreciation and amortization...... 6,825 6,159 19,874 11,939
--------- --------- ---------- ---------
79,544 77,605 241,566 142,744
--------- --------- ---------- ---------
Operating income..................... 7,923 7,605 27,183 15,605
Loss on write off of assets........ 1,586 0 1,586 0
Interest expense................... 4,112 3,653 11,827 3,782
--------- --------- ---------- ---------
Income before minority interests and
income taxes........................ 2,225 3,952 13,770 11,823
Minority interests................. 0 17 0 80
Income tax expense................. 253 1,524 4,903 4,624
--------- --------- ---------- ---------
Net income........................... $ 1,972 $ 2,411 $ 8,867 $ 7,119
========= ========= ========== =========
Dividend requirements on convertible
preferred stock..................... $ 0 $ 558 $ 0 $ 1,520
Net income available to common
shareholders........................ $ 1,972 $ 1,853 $ 8,867 $ 5,599
Per common share:
Net income--basic.................. $ 0.08 $ 0.08 $ 0.34 $ 0.27
Net income--diluted................ $ 0.08 $ 0.08 $ 0.34 $ 0.27
Number of shares--basic.............. 26,101 24,706 26,115 20,596
Number of shares--diluted............ 26,101 24,706 26,277 20,596
</TABLE>
F-3
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the nine
months ended
September 30,
-------------------
1998 1997
-------- ---------
(in thousands--
unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 8,867 $ 7,119
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization............................ 19,874 11,939
Minority interests....................................... 0 17
Loss on sale or disposal of property, plant and
equipment............................................... 985 488
(Increase) decrease in restricted cash................... (391) 3,277
Decrease (increase) in other receivables, net............ 2,356 (944)
(Increase) decrease in prepaid expenses and other
assets.................................................. (5,648) 894
Increase in deferred tax assets.......................... (2,132) (1,681)
Decrease in accounts payable............................. (2,429) (2,151)
Decrease in accrued lawsuit settlement................... (2,750) 0
Decrease in accrued compensation......................... (7) (1,788)
Increase (decrease) in accrued liabilities............... 2,287 (10,381)
(Decrease) increase in gaming liabilities................ (155) 1,197
Decrease in racing liabilities........................... (3,830) (3,496)
Decrease in accrued interest payable..................... (2,533) 0
Increase in deferred tax liabilities..................... 296 1,569
-------- ---------
Net cash provided by operating activities............... 14,790 6,059
-------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment............... (34,981) (23,059)
Receipts from sale of property, plant and equipment...... 650 114
Principal collected on notes receivable.................. 2,071 31
Note receivable, Paul Alanis............................. (3,232) 0
Note receivable, HP Yakama investment.................... (8,012) 0
Purchase of short term investments....................... (3,690) (1,946)
Proceeds from short term investments..................... 0 6,712
Payment to buy-out minority interest in Crystal Park
LLC..................................................... (1,946) 0
Cash acquired in the purchase of a business, net of
transaction and other costs............................. 0 12,264
-------- ---------
Net cash used in investing activities................... (49,140) (5,884)
-------- ---------
Cash flows from financing activities:
Proceeds from secured Bank Credit Facility............... 40,000 112,000
Payment of secured Bank Credit Facility.................. 0 (112,000)
Redemption of Boomtown 11.5% First Mortgage Notes........ (1,253) (110,924)
Proceeds from issuance of 9.5% Notes..................... 0 125,000
Payment of secured notes payable......................... 0 (4,282)
Payment of unsecured notes payable....................... (3,654) (31)
Common stock options exercised........................... 1,174 1,667
Purchase and retirement of Hollywood Park common stock... (5,540) 0
Dividends paid to preferred stockholders................. 0 (1,520)
-------- ---------
Net cash provided by financing activities............... 30,727 9,910
-------- ---------
(Decrease) increase in cash and cash equivalents......... (3,623) 10,085
Cash and cash equivalents at the beginning of the
period.................................................. 23,749 11,922
-------- ---------
Cash and cash equivalents at the end of the period....... $ 20,126 $ 22,007
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1--Summary of Significant Accounting Policies
General Hollywood Park, Inc. (the "Company" or "Hollywood Park") is a
diversified gaming, sports and entertainment company engaged in the ownership
and operation of casinos (including card club casinos), pari-mutuel racing
facilities, and the development of other gaming and sports related
opportunities. Hollywood Park owns and operates, through its Boomtown, Inc.
("Boomtown") subsidiary, land-based, riverboat and dockside gaming operations
in Verdi, Nevada ("Boomtown Reno"), Harvey, Louisiana ("Boomtown New Orleans")
and Biloxi, Mississippi ("Boomtown Biloxi"), respectively. As of October 15,
1998, the Company expanded its gaming operations through the acquisition of
Casino Magic Corp. ("Casino Magic"). Casino Magic operates dockside gaming in
Bay St. Louis, Mississippi ("Casino Magic Bay St. Louis") and in Biloxi,
Mississippi ("Casino Magic Biloxi"); riverboat gaming in Bossier City,
Louisiana ("Casino Magic Bossier"); and is 51% owner of two land-based casinos
in Argentina ("Casino Magic Argentina"). Hollywood Park also owns two card club
casinos located in the Los Angeles metropolitan area. The Hollywood Park-Casino
is operated by the Company, and is located on the same property as the
Hollywood Park Race Track. The Company also owns the Crystal Park Hotel and
Casino (the "Crystal Park Casino"), which is leased to an unaffiliated
operator. Presently, Hollywood Park is the only company that owns and operates
both California card club casinos and traditional casinos in Nevada, Louisiana
and Mississippi. The Company's premier thoroughbred racing facilities are, the
Hollywood Park Race Track, which the Company has owned for 60 years, and Turf
Paradise, Inc. ("Turf Paradise"), located in Phoenix, Arizona.
The financial information included herein has been prepared in conformity
with generally accepted accounting principles as reflected in Hollywood Park's
consolidated Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, for the year ended December 31, 1997.
The information furnished herein is unaudited; however, in the opinion of
management it reflects all normal and recurring adjustments necessary to
present a fair statement of the financial results for the interim periods. It
should be understood that accounting measurements at interim dates inherently
involve greater reliance on estimates than at year end. The interim racing
results of operations are not indicative of the results for the full year, due
to the seasonality of the Company's horse racing business.
Consolidation The consolidated financial statements presented herein,
include the accounts of Hollywood Park and its wholly owned subsidiaries: (a)
Boomtown, and Boomtown's six active subsidiaries; (1) Boomtown Hotel & Casino,
Inc., (2) Bayview Yacht Club, Inc., (3) Mississippi--I Gaming, L.P., (4)
Louisiana Gaming Enterprises, Inc., (5) Louisiana--I Gaming, and (6) Boomtown
Hoosier, Inc.; (b) Hollywood Park Operating Company and its two wholly owned
subsidiaries, Hollywood Park Food Services, Inc. and Hollywood Park Fall
Operating Company; (c) Turf Paradise, Inc.; (d) HP Yakama, Inc.; and (e)
HP/Compton, Inc. and HP Casino, Inc., which own 89.8% and 10.2%, respectively,
of the Crystal Park Hotel and Casino Development Company LLC ("Crystal Park
LLC"). The Hollywood Park-Casino is a division of Hollywood Park, Inc.
As of October 15, 1998, the consolidated financial statements will also
include Casino Magic's thirteen active subsidiaries: (1) Mardi Gras Casino
Corp., (2) Biloxi Casino Corp., (3) Casino Magic Finance Corp., (4) Jefferson
Casino Corp., (5) Casino Magic of Louisiana, Corp., (6) Casino Magic Neuquen,
(7) Casino Magic Support Services SA, (8) Casino Magic American Corp., (9)
Casino Magic Management Services Corp., (10) Bay St. Louis Casino Corp., (11)
Boston Casino Corp., (12) Casino One Corporation, and (13) St. Louis Casino
Corp.
F-5
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Restricted Cash Restricted cash as of September 30, 1998 and December 31,
1997, was for amounts due to horsemen for purses, stakes and awards.
Capitalized Interest During the three and nine months ended September 30,
1998, the Company capitalized interest related to construction projects of
approximately $295,000 and $802,000, respectively. Capitalized interest for
both the three and nine months ended September 30, 1997 was $15,000.
Comprehensive Income Statement of Financial Accounting Standards No. 130,
("SFAS 130") Reporting Comprehensive Income, requires that the Company disclose
comprehensive income and its components. The objective of SFAS 130 is to report
a measure of all changes in equity of an enterprise that result from
transactions and other economic events of the period other than transactions
with owners. Comprehensive income is the sum of the following; net income
(loss) and other comprehensive income (loss), which is defined as all other
nonowner changes in equity.
The Company has recorded unrealized gain (loss) on securities as other
comprehensive income (loss) in the accompanying financial statements.
Comprehensive income was computed as follows:
<TABLE>
<CAPTION>
For the
Three Months
Ended
September 30,
--------------
1998 1997
------ ------
(in
thousands,
unaudited)
<S> <C> <C>
Net income.................................................. $1,972 $2,411
Other comprehensive income (loss):
Unrealized loss on securities............................. (315) 0
Less reclassification adjustment for realized (gain)
loss..................................................... 0 0
------ ------
Comprehensive income........................................ $1,657 $2,411
====== ======
</TABLE>
<TABLE>
<CAPTION>
For the
Nine Months
Ended
September 30,
--------------
1998 1997
------ ------
(in
thousands,
unaudited)
<S> <C> <C>
Net income................................................... $8,867 $7,119
Other comprehensive income (loss):
Unrealized loss on securities.............................. (231) 0
Less reclassification adjustment for realized loss......... 0 1
------ ------
Comprehensive income......................................... $8,636 $7,120
====== ======
</TABLE>
Estimates Financial statements prepared according to generally accepted
accounting principles require the use of management estimates, including
estimates used to evaluate the recoverability of property, plant and equipment,
to determine the fair value of financial instruments, to account for the
valuation allowance for deferred tax assets and to determine litigation related
obligations. Actual results could differ from these estimates.
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
of Whenever there are recognized events or changes in circumstances that
indicate the carrying amount of an asset may not be recoverable, management
reviews the asset for possible impairment. In accordance with current
accounting standards, management uses estimated expected future net cash flows
(undiscounted and excluding interest
F-6
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
costs, and grouped at the lowest level for which there are identifiable cash
flows that are as independent as possible of other asset groups) to measure the
recoverability of the asset. If the expected future net cash flows are less
than the carrying amount of the asset, an impairment loss would be recognized.
An impairment loss would be measured as the amount by which the carrying amount
of the asset exceeded the fair value of the asset, with fair value measured as
the amount at which the asset could be bought or sold in a current transaction
between willing parties, other than in a forced liquidation sale. The
estimation of expected future net cash flows is inherently uncertain and relies
to a considerable extent on assumptions regarding current and future net cash
flows, market conditions, and the availability of capital. If, in future
periods, there are changes in the estimates or assumptions incorporated into
the impairment review analysis, the changes could result in an adjustment to
the carrying amount of the asset, but at no time would previously recognized
impairment losses be restored.
Earnings Per Share Basic earnings per share were computed by dividing net
income available to common shareholders (net income less preferred dividend
requirements) by the weighted average number of common shares outstanding
during the period. Diluted per share amounts were similarly computed, but
include the effect, when dilutive, of the conversion of the convertible
preferred shares (which is applicable to the three and nine months ended
September 30, 1997, only), and the assumed exercise of stock options.
Redemption of Depositary Shares As of August 28, 1997, the Company's
2,749,900 outstanding depositary shares were converted into 2,291,492 shares of
the Company's common stock, thereby, eliminating future annual preferred stock
cash dividend payments of approximately $1,925,000.
Cash Flows Cash and cash equivalents included certificates of deposit and
short term investments with maturities of 90 days or less.
Racing Revenues and Expenses The Company records pari-mutuel revenues,
admissions, food and beverage and other income associated with racing on a
daily basis, except for seasonal admissions, which are recorded ratably over
the racing season. Expenses associated with racing revenues were charged
against income in those periods in which racing revenues were recognized.
Gaming Revenue and Promotional Allowances Gaming revenues at the Boomtown
properties consisted of the difference between gaming wins and losses, or net
win from gaming activity, and at the Hollywood Park-Casino consisted of fees
collected from patrons on a per seat or per hand basis. Revenues in the
accompanying statements of operations excluded the retail value of food and
beverage provided to players on a complimentary basis. The estimated cost of
providing these promotional allowances during the three months ended
September 30, 1998 and 1997, was $3,206,000 and $2,745,000, respectively, and
for the nine months ended September 30, 1998 and 1997, was $10,683,000 and
$3,410,000, respectively. (The amount for the nine months ended September 30,
1997, is exclusive of the costs associated with Boomtown's operations, prior to
June 30, 1997.)
Reclassifications Certain reclassifications have been made to the 1997
balances to be consistent with the 1998 financial statement presentation.
Note 2--Acquisition of Casino Magic Corp.
On October 15, 1998, Hollywood Park acquired Casino Magic, pursuant to the
February 19, 1998 Agreement of Merger among Casino Magic Corp., Hollywood Park,
Inc., and HP Acquisition II, Inc. (a wholly owned subsidiary of Hollywood
Park), pursuant to which HP Acquisition II, Inc., was merged into Casino Magic,
with Casino Magic surviving and becoming a wholly owned subsidiary of Hollywood
Park. The Casino Magic Merger will be accounted for under the purchase method
of accounting for a business combination. Hollywood Park paid $2.27 per Casino
Magic common share outstanding, or approximately $81,100,000.
F-7
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Casino Magic owns and operates dockside gaming properties in Bay St. Louis,
Mississippi, and Biloxi, Mississippi, riverboat gaming in Bossier City,
Louisiana, and is a 51% partner in two land-based casinos in Argentina.
Note 3--Acquisition of Boomtown, Inc.
On June 30, 1997, pursuant to the Agreement and Plan of Merger dated as of
April 23, 1996, by and among Hollywood Park, HP Acquisition, Inc., a wholly
owned subsidiary of the Company, and Boomtown, HP Acquisition, Inc. was merged
with and into Boomtown (the "Boomtown Merger"). As a result of the Boomtown
Merger, Boomtown became a wholly owned subsidiary of the Company and each share
of Boomtown common stock was converted into the right to receive 0.625 of a
share of Hollywood Park's common stock. Approximately 5,362,850 shares of
Hollywood Park common stock, valued at $9.8125 per share (excluding shares
repurchased from Edward P. Roski, Jr. ("Roski") and subsequently retired) were
issued in the Boomtown Merger.
The Boomtown Merger was accounted for under the purchase method of
accounting for a business combination. The purchase price of the Boomtown
Merger was allocated to the identifiable assets acquired and liabilities
assumed based on their estimated fair values at the date of acquisition. Based
on financial analyses which considered the impact of general economic,
financial and market conditions on the assets acquired and liabilities assumed,
it was determined that the estimated fair values approximated their carrying
value. The Boomtown Merger generated approximately $21,136,000 of excess
acquisition cost over the recorded value of the net assets acquired, all of
which was allocated to goodwill, to be amortized over 40 years. The
amortization of the goodwill is not deductible for income tax purposes. As of
June 30, 1997, the excess acquisition cost over the recorded value of the
assets was estimated at approximately $2,683,000. As of June 30, 1998, the
Company revised its initial estimates of the excess acquisition cost over the
recorded value to $21,136,000, due primarily to a reduction in the valuation of
certain gaming fixed assets and provisions for additional liabilities.
The Company acquired three of the four Boomtown properties; Boomtown Reno,
Boomtown New Orleans, and Boomtown Biloxi. In connection with the Boomtown
Merger, Boomtown's Las Vegas property was divested on July 1, 1997.
Note 4--Short Term Investments
As of September 30, 1998, short term investments consisted of investments in
equity securities. These investments were recorded at fair value in the
accompanying financial statements, as determined by the quoted market price,
and are classified as available-for-sale. As of September 30, 1998, the Company
recorded an unrealized loss on these investments of approximately $231,000.
Included in the portfolio of equity securities were 792,900 shares of Casino
Magic common stock, for which the Company paid approximately $2.00 per common
share, or a total cost of approximately $1,615,000 (inclusive of commissions).
F-8
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 5--Property, Plant and Equipment
Property, plant and equipment held as of September 30, 1998, and December
31, 1997, consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
(in thousands)
<S> <C> <C>
Land and land improvements........................ $ 50,349 $ 50,945
Buildings and building improvements............... 279,451 270,271
Equipment......................................... 88,561 77,337
Vessels........................................... 16,690 18,925
Construction in progress.......................... 15,875 21,896
-------- --------
450,926 439,374
Less accumulated depreciation..................... 149,801 138,708
-------- --------
$301,125 $300,666
======== ========
</TABLE>
Note 6--Secured and Unsecured Notes Payable
Notes payable as of September 30, 1998, and December 31, 1997, consisted of
the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
(in thousands)
<S> <C> <C>
Secured notes payable, Bank Credit Facility..... $ 40,000 $ 0
Secured notes payable, other.................... 2,500 3,750
Unsecured 9.5% Notes............................ 125,000 125,000
Boomtown 11.5% First Mortgage Notes............. 0 1,253
Unsecured notes payable......................... 3,031 4,009
Capital lease obligations....................... 101 1,527
-------- --------
170,632 135,539
Less current maturities......................... 2,058 3,437
-------- --------
$168,574 $132,102
======== ========
</TABLE>
Secured Notes Payable, Bank Credit Facility On October 15, 1998, the
Company executed the Amended and Restated Reducing Revolving Loan Agreement
with a bank syndicate led by Bank of America National Trust and Savings
Association (the "Bank Credit Facility") for up to $300,000,000, with an
option to increase this amount to $375,000,000. The Bank Credit Facility also
provides for sub-facilities for letters of credit up to $30,000,000, and swing
line loans of up to $10,000,000. Prior to the execution of the Bank Credit
Facility, the Company was operating with a previous bank credit facility,
which was initially for $225,000,000, and was reduced to $100,000,000 with the
August 1997 issuance of the 9.5% Hollywood Park Notes. The Bank Credit
Facility extended the maturity of the Bank Credit Facility to December 31,
2003, reduced interest and commitment fee rates, and amended certain
covenants, as compared to the previous bank credit facility.
F-9
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Unsecured 9.5% Notes On August 6, 1997, Hollywood Park, Inc. and Hollywood
Park Operating Company, co-issued $125,000,000 of Series A 9 1/2% Senior
Subordinated Notes due 2007 (the "Series A 9 1/2% Notes"). On March 20, 1998,
the Company completed a registered exchange offer for the Series A 9 1/2%
Notes, pursuant to which all $125,000,000 principal amount of the Series A 9
1/2% Notes were exchanged by the holders for $125,000,000 aggregate principal
amount of Series B 9 1/2% Senior Subordinated Notes due 2007, of the Company
and Hollywood Park Operating Company (the "Series B 9 1/2% Notes") and,
together with the Series A 9 1/2% Notes, (the "9 1/2% Notes") were registered
under the Securities Act on Form S-4. Interest on the 9 1/2% Notes is payable
semi-annually, on February 1st and August 1st. The Company paid Liquidated
Damages at an annual rate of 0.5% of the principal amount of the 9 1/2% Notes
for the period January 27, 1998 to March 20, 1998 (the date of consummation of
the exchange offer). The 9 1/2% Notes are redeemable, at the option of
Hollywood Park and Hollywood Park Operating Company, in whole or in part, on or
after August 1, 2002, at a premium to face amount, plus accrued interest, as
follows: (a) August 1, 2002 at 104.75%; (b) August 1, 2003 at 102.375%;
(c) August 1, 2004 at 101.188%; and (d) August 1, 2005 and thereafter at 100%.
The 9 1/2% Notes are unsecured obligations of Hollywood Park and Hollywood Park
Operating Company, guaranteed by all other material restricted subsidiaries of
either Hollywood Park or Hollywood Park Operating Company.
The indenture governing the 9 1/2% Notes contains certain covenants that,
among other things, limit the ability of Hollywood Park, Hollywood Park
Operating Company and their restricted subsidiaries to incur additional
indebtedness and issue preferred stock, pay dividends or make other
distributions, repurchase equity interests or subordinated indebtedness, create
certain liens, enter into certain transactions with affiliates, sell assets,
issue or sell equity interests in their respective subsidiaries or enter into
certain mergers and consolidations. The Casino Magic Merger and the execution
of the Bank Credit Facility, were permitted under the terms of the indenture,
given the redemption of the $135,000,000 Casino Magic Notes and establishing
certain Casino Magic subsidiaries as Unrestricted Subsidiaries, as defined in
the indenture.
Boomtown 11.5% First Mortgage Notes As permitted in the indenture (the
"Boomtown Indenture") governing the Boomtown 11.5% First Mortgage Notes (the
"Boomtown Notes") in June 1998, Boomtown elected to satisfy and discharge its
obligation regarding the $1,253,000 of Boomtown Notes. As of June 9, 1998,
Boomtown had satisfied all conditions required to discharge its obligations
under the Boomtown Indenture. The total cost to redeem the Boomtown Notes was
$1,378,000.
F-10
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 7--Consolidating Condensed Financial Information
Hollywood Park's subsidiaries (excluding non-material subsidiaries) have
fully and unconditionally guaranteed the payment of all obligations under the 9
1/2% Notes. Hollywood Park's subsidiaries (excluding certain subsidiaries) have
fully and unconditionally guaranteed the payment of all obligations under
Hollywood Park's 9 1/4% Senior Subordinated Notes (the "Notes"). Hollywood Park
Operating Company co-issued the 9 1/2% Notes and is a guarantor on the Notes.
The following is the consolidating information for the co-obligors and their
respective subsidiaries:
Hollywood Park, Inc.
Consolidating Condensed Financial Information
For the Three and Nine Months Ended September 30, 1998 and 1997
and Balance Sheets as of September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Hollywood
Park (c)
Operating Co. (a) (b) Wholly
Hollywood (co-obligor 9 Wholly Majority Owned Consolidating
Park, Inc. 1/2% Notes/ Owned Owned Non- and Hollywood
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating Park, Inc.
co-obligor) on the Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ------------- ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet
As of September 30, 1998
Current assets.......... $ 16,057 $ 4,670 $ 33,143 $ 6,272 $ 69 $ (17) $ 60,194
Property, plant and
equipment, net......... 65,513 22,010 169,060 44,542 0 0 301,125
Other non-current
assets................. 33,683 4,564 39,662 2,061 1,294 10,336 91,600
Investment in
subsidiaries........... 207,061 15,373 97,687 0 0 (320,121) 0
Inter-company........... 129,610 142,200 128,587 13 0 (400,410) 0
-------- -------- -------- ------- ------ --------- --------
$451,924 $188,817 $468,139 $52,888 $1,363 $(710,212) $452,919
======== ======== ======== ======= ====== ========= ========
Current liabilities..... $ 12,730 $ 10,509 $ 21,350 $ 5,485 $ 0 $ (17) $ 50,057
Notes payable, current.. 693 32 67 1,266 0 0 2,058
Notes payable, long
term................... 42,079 125,228 17 1,250 0 0 168,574
Other non-current
liabilities............ 13,312 0 3,853 0 (10,559) 6,606
Inter-company........... 142,174 21,004 188,551 48,681 0 (400,410) 0
Equity (deficit)........ 240,936 32,044 254,301 (3,794) 1,363 (299,226) 225,624
-------- -------- -------- ------- ------ --------- --------
$451,924 $188,817 $468,139 $52,888 $1,363 $(710,212) $452,919
======== ======== ======== ======= ====== ========= ========
Statement of Operations
For the three months
ended
September 30, 1998
Revenues:
Gaming................ $ 11,542 $ 0 $ 33,977 $13,327 $ 0 $ 0 $ 58,846
Racing................ 0 10,112 1,259 0 0 0 11,371
Food and beverage..... 1,228 0 4,817 1,338 0 0 7,383
Equity in
subsidiaries......... 6,408 4 8,370 0 0 (14,782) 0
Inter-company
interest............. 0 0 1,352 0 0 (1,352) 0
Other................. 939 240 7,874 814 0 0 9,867
-------- -------- -------- ------- ------ --------- --------
20,117 10,356 57,649 15,479 0 (16,134) 87,467
-------- -------- -------- ------- ------ --------- --------
Expenses:
Gaming................ 6,617 0 16,934 7,053 0 0 30,604
Racing................ 0 4,807 755 0 0 0 5,562
Food and beverage..... 2,857 0 5,488 1,720 0 0 10,065
Administrative and
other................ 3,985 4,420 13,155 4,561 367 0 26,488
REIT restructuring.... 0 0 0 0 0 0 0
Depreciation and
amortization......... 1,041 993 3,710 945 0 136 6,825
-------- -------- -------- ------- ------ --------- --------
14,500 10,220 40,042 14,279 367 136 79,544
-------- -------- -------- ------- ------ --------- --------
Operating income
(loss)................. 5,617 136 17,607 1,200 (367) (16,270) 7,923
Loss on write off of
assets................. 1,586 0 0 0 0 1,586
Interest expense........ 1,050 3,194 (211) 79 0 0 4,112
Inter-company interest.. 0 0 0 1,352 0 (1,352) 0
-------- -------- -------- ------- ------ --------- --------
Income (loss) before
taxes.................. 2,981 (3,058) 17,818 (231) (367) (14,918) 2,225
Income tax expense
(benefit).............. 973 0 (720) 0 0 0 253
-------- -------- -------- ------- ------ --------- --------
Net income (loss)....... $ 2,008 $ (3,058) $ 18,538 $ (231) $ (367) $ (14,918) $ 1,972
======== ======== ======== ======= ====== ========= ========
</TABLE>
F-11
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hollywood Park, Inc.
Consolidating Condensed Financial Information--(Continued)
For the Three and Nine Months Ended September 30, 1998 and 1997
and Balance Sheets as of September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Hollywood
Park
Operating Co. (c)
Hollywood (co-obligor 9 (a) (b) Majority Wholly Owned Consolidating
Park, Inc. 1/2% Notes/ Wholly Owned Owned Non- and Hollywood
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating Park, Inc.
co-obligor) on the Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ------------- ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
For the nine months
ended September 30,
1998
Revenues:
Gaming................ $34,659 $ 0 $ 97,296 $41,597 $ 0 $ 0 $173,552
Racing................ 0 37,984 10,101 0 0 0 48,085
Food and beverage..... 3,527 0 13,894 3,824 0 0 21,245
Equity in
subsidiaries......... 22,688 240 7,031 0 0 (29,959) 0
Inter-company
interest............. 0 0 4,053 0 0 (4,053) 0
Other................. 2,836 1,706 19,040 2,285 0 0 25,867
------- ------- -------- ------- ----- -------- --------
63,710 39,930 151,415 47,706 0 (34,012) 268,749
------- ------- -------- ------- ----- -------- --------
Expenses:
Gaming................ 20,078 0 51,906 21,936 0 0 93,920
Racing................ 0 16,588 4,656 0 0 0 21,244
Food and beverage..... 7,608 0 15,201 4,792 0 0 27,601
Administrative and
other................ 13,505 13,179 38,154 13,160 460 0 78,458
REIT restructuring.... 469 0 0 0 0 0 469
Depreciation and
amortization......... 3,248 2,981 10,709 2,727 0 209 19,874
------- ------- -------- ------- ----- -------- --------
44,908 32,748 120,626 42,615 460 209 241,566
------- ------- -------- ------- ----- -------- --------
Operating income
(loss)................. 18,802 7,182 30,789 5,091 (460) (34,221) 27,183
Loss on write off of
assets................. 1,586 0 0 0 0 0 1,586
Interest expense........ 2,598 9,377 (412) 264 0 0 11,827
Inter-company interest.. 0 0 0 4,053 0 (4,053) 0
------- ------- -------- ------- ----- -------- --------
Income (loss) before
taxes.................. 14,618 (2,195) 31,201 774 (460) (30,168) 13,770
Income tax expense
(benefit).............. 5,613 0 (710) 0 0 0 4,903
------- ------- -------- ------- ----- -------- --------
Net income (loss)....... $ 9,005 $(2,195) $ 31,911 $ 774 $(460) $(30,168) $ 8,867
======= ======= ======== ======= ===== ======== ========
Statement of Cash Flows:
For the nine months
ended September 30,
1998
Net cash provided by
(used in) operating
activities............. $(2,921) $ 2,053 $ 35,132 $ 2,110 $(460) $(21,124) $ 14,790
Net cash used in
investing activities... (9,020) (1,266) (37,139) (1,715) 0 0 (49,140)
Net cash provided by
(used in) financing
activities............. 34,909 0 (2,902) (745) 0 (535) 30,727
</TABLE>
F-12
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hollywood Park, Inc.
Consolidating Condensed Financial Information
For the Three and Nine Months Ended September 30, 1998 and 1997
and Balance Sheets as of September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Hollywood
Park
Operating Co. (c)
Hollywood (co-obligor 9 (a) (b) Majority Wholly Owned Consolidating
Park, Inc. 1/2% Notes/ Wholly Owned Owned Non and Hollywood
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating Park, Inc.
co-obligor) on the Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ------------- ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
For the three months
ended September 30, 1997
Revenues:
Gaming................. $12,676 $ 0 $30,460 $14,007 $ 0 $ 0 $57,143
Racing................. 0 10,791 1,425 0 0 0 12,216
Food and beverage...... 1,129 0 4,112 915 0 0 6,156
Equity in
subsidiaries.......... 9,108 (167) 7,911 0 0 (16,852) 0
Inter-company
interest.............. 0 0 2,354 0 0 (2,354) 0
Other.................. 1,282 92 7,513 808 0 0 9,695
------- ------- ------- ------- --- -------- -------
24,195 10,716 53,775 15,730 0 (19,206) 85,210
------- ------- ------- ------- --- -------- -------
Expenses:
Gaming................. 6,600 0 16,163 7,193 0 0 29,956
Racing................. 0 5,357 849 0 0 0 6,206
Food and beverage...... 2,316 0 4,591 1,194 0 0 8,101
Administrative and
other................. 4,900 4,266 13,340 4,280 0 0 26,786
REIT restructuring..... 397 0 0 0 0 0 397
Depreciation and
amortization.......... 1,118 950 2,733 1,341 0 17 6,159
------- ------- ------- ------- --- -------- -------
15,331 10,573 37,676 14,008 0 17 77,605
------- ------- ------- ------- --- -------- -------
Operating income........ 8,864 143 16,099 1,722 0 (19,223) 7,605
Interest expense........ 1,252 2,080 232 89 0 0 3,653
Inter-company interest.. 102 0 974 1,278 0 (2,354) 0
------- ------- ------- ------- --- -------- -------
Income (loss) before
taxes.................. 7,510 (1,937) 14,893 355 0 (16,869) 3,952
Minority interests...... 0 0 0 0 0 17 17
Income tax expense
(benefit).............. (1,085) 0 2,609 0 0 0 1,524
------- ------- ------- ------- --- -------- -------
Net income (loss)....... $ 8,595 $(1,937) $12,284 $ 355 $ 0 $(16,886) $ 2,411
======= ======= ======= ======= === ======== =======
</TABLE>
F-13
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hollywood Park, Inc.
Consolidating Condensed Financial Information--(Continued)
For the Three and Nine Months Ended September 30, 1998 and 1997
and Balance Sheets as of September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Hollywood
Park
Operating
Co.
(co-obligor
9 (c)
Hollywood 1/2% Notes/ (a) (b) Majority Wholly Owned Consolidating
Park, Inc. Guarantor Wholly Owned Owned Non and Hollywood
(Parent on the Guarantor Guarantor Guarantor Eliminating Park, Inc.
co-obligor) Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ----------- ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
For the nine months ended
September 30, 1997
Revenues:
Gaming.................. $38,023 $ 0 $30,460 $15,507 $ 0 $ 0 $ 83,990
Racing.................. 0 38,195 9,889 0 0 0 48,084
Food and beverage....... 3,376 0 8,725 915 0 0 13,016
Equity in subsidiaries.. 11,961 126 8,505 0 0 (20,592) 0
Inter-company interest.. 0 0 2,354 0 0 (2,354) 0
Other................... 3,428 1,274 7,749 808 0 0 13,259
------- ------- ------- ------- --- -------- --------
56,788 39,595 67,682 17,230 $ 0 (22,946) 158,349
======= ======= ======= ======= === ======== ========
Expenses:
Gaming.................. 21,761 0 16,163 7,193 $ 0 0 45,117
Racing.................. 0 16,895 4,720 0 0 0 21,615
Food and beverage....... 7,069 0 8,657 1,194 0 0 16,920
Administrative and
other.................. 13,175 13,557 15,491 4,321 0 0 46,544
REIT restructuring...... 609 0 0 0 0 0 609
Depreciation and
amortization........... 3,512 2,815 3,452 2,143 0 17 11,939
------- ------- ------- ------- --- -------- --------
46,126 33,267 48,483 14,851 0 17 142,744
------- ------- ------- ------- --- -------- --------
Operating income......... 10,662 6,328 19,199 2,379 0 (22,963) 15,605
Interest expense......... 1,368 2,093 232 89 0 0 3,782
Inter-company interest... 102 0 974 1,278 0 (2,354) 0
------- ------- ------- ------- --- -------- --------
Income before taxes...... 9,192 4,235 17,993 1,012 0 (20,609) 11,823
Minority interests....... 0 0 0 0 0 80 80
Income tax expense....... 2,020 0 2,604 0 0 0 4,624
------- ------- ------- ------- --- -------- --------
Net income............... $ 7,172 $ 4,235 $15,389 $ 1,012 $ 0 $(20,689) $ 7,119
======= ======= ======= ======= === ======== ========
</TABLE>
F-14
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hollywood Park, Inc.
Consolidating Condensed Financial Information
For the Three and Nine Months Ended September 30, 1998 and 1997
and Balance Sheets as of September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Hollywood
Park
Operating
Co.
(co-obligor
9 (a) (c)
Hollywood 1/2% Notes/ Wholly (b) Majority Wholly Consolidating
Park, Inc. Guarantor Owned Owned Owned Non- and Hollywood
(Parent on the Guarantor Guarantor Guarantor Eliminating Park, Inc.
co-obligor) Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ----------- ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Cash Flows:
For the nine months ended
September 30, 1997
Net cash provided by
(used in) operating
activities............. $ 16,964 $(131,497) $ 128,142 $ 8,070 $ 0 $ (15,620) $ 6,059
Net cash provided by
(used in) investing
activities............ 16,619 (4,036) (14,091) (4,376) 0 0 (5,884)
Net cash provided by
(used in) financing
activities............ 147 124,968 (113,720) (2,100) 0 615 9,910
Balance Sheet
As of December 31, 1997
Current assets.......... $ 17,020 $ 3,867 $ 25,074 $ 6,720 $ 0 $ 0 $ 55,505
Property, plant and
equipment, net........ 68,515 23,753 140,105 68,293 0 0 300,666
Other non-current
assets................ 25,130 4,701 29,320 7,611 0 (1,080) 62,858
Investment in
subsidiaries.......... 126,121 15,132 116,020 0 0 (257,273) 0
Inter-company.......... 125,210 148,380 122,035 0 0 (395,625) 0
-------- --------- --------- ------- --- --------- --------
$361,996 $ 195,833 $ 432,554 $82,624 $ 0 $(653,978) $419,029
======== ========= ========= ======= === ========= ========
Current liabilities..... $ 16,890 $ 14,232 $ 19,583 $ 6,612 $ 0 $ 0 $ 57,317
Notes payable, long
term.................. 2,406 125,256 1,936 2,504 0 0 132,102
Other non-current
liabilities........... 4,753 5,202 83 0 0 (3,728) 6,310
Inter-company.......... 146,145 21,589 178,448 49,443 0 (395,625) 0
Minority interest...... 0 0 0 0 0 1,946 1,946
Equity................. 191,802 29,554 232,504 24,065 0 (256,571) 221,354
-------- --------- --------- ------- --- --------- --------
$361,996 $ 195,833 $ 432,554 $82,624 $ 0 $(653,978) $419,029
======== ========= ========= ======= === ========= ========
</TABLE>
- --------
(a) The Company's wholly owned guarantor subsidiaries on the 9 1/2% Notes are:
HP Casino, Inc., HP/Compton, Inc., Turf Paradise, Inc., Hollywood Park Food
Services, Inc., Hollywood Park Fall Operating Company, Boomtown, Inc.,
Boomtown Hotel & Casino, Inc., Louisiana--I Gaming, Louisiana Enterprises,
Inc., Bayview Yacht Club, Inc., and for periods after December 31, 1997,
Crystal Park Hotel and Casino Development Company, LLC. Due to the June 30,
1997, Boomtown Merger being accounted for under the purchase method of
accounting for a business combination, the 1997 financial results do not
include the financial results of Boomtown, Inc., Boomtown Hotel & Casino,
Inc., Louisiana--I Gaming, Louisiana Enterprises, Inc., and Bayview Yacht
Club, Inc., prior to June 30, 1997.
(b) As of December 31, 1997, Mississippi--I Gaming, L.P. which was added as of
the June 30, 1997, Boomtown Merger, was the Company's only majority owned
guarantor subsidiary on the 9 1/2% Notes. Due to the
F-15
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Boomtown Merger being accounted for under the purchase method of accounting
for a business combination, Mississippi--I Gaming, L.P.'s financial results
were not included for the period prior to June 30, 1997. Prior to December
31, 1997, Crystal Park Hotel and Casino Development Company, LLC was also a
majority owned guarantor subsidiary.
(c) As of 1998, Boomtown Hoosier, Inc. was the Company's only wholly owned non-
guarantor subsidiary on the 9 1/2% Notes with financial activity. Boomtown
Hoosier, Inc.'s prior financial activity was not material.
F-16
<PAGE>
HOLLYWOOD PARK, INC.
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the three months ended
September 30,
---------------------------------------
Basic Diluted(a)
------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Average number of common shares
outstanding........................... 26,101 24,706 26,101 24,706
Average common shares due to assumed
conversion of convertible preferred
shares (b)............................ 0 0 0 0
Average common shares due to assumed
conversion of stock options........... 0 0 0 0
--------- --------- --------- ---------
Total shares........................... 26,101 24,706 26,101 24,706
========= ========= ========= =========
Net income............................. $ 1,972 $ 2,411 $ 1,972 $ 2,411
Less dividend requirements on
convertible preferred shares.......... 0 558 0 0
--------- --------- --------- ---------
Net income available to common
shareholders.......................... $ 1,972 $ 1,853 $ 1,972 $ 2,411
========= ========= ========= =========
Net income per share................... $ 0.08 $ 0.08 $ 0.08 $ 0.10
========= ========= ========= =========
<CAPTION>
For the nine months ended September 30,
---------------------------------------
Basic Diluted(a)
------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Average number of common shares
outstanding........................... 26,115 20,596 26,115 20,596
Average common shares due to assumed
conversion of convertible preferred
shares (b)............................ 0 0 0 0
Average common shares due to assumed
conversion of stock options........... 0 0 162 0
--------- --------- --------- ---------
Total shares........................... 26,115 20,596 26,277 20,596
========= ========= ========= =========
Net income............................. $ 8,867 $ 7,119 $ 8,867 $ 7,119
Less dividend requirements on
convertible preferred shares.......... 0 1,520 0 0
--------- --------- --------- ---------
Net income available to common
shareholders.......................... $ 8,867 $ 5,599 $ 8,867 $ 7,119
========= ========= ========= =========
Net income per share................... $ 0.34 $ 0.27 $ 0.34 $ 0.35
========= ========= ========= =========
</TABLE>
- --------
(a) When the computed diluted values are anti-dilutive, the basic per share
values are presented on the face of the consolidated statements of
operations.
(b) As of August 28, 1997, the Company's 2,749,000 outstanding depositary
shares were converted into 2,291,492 shares of the Company's common stock.
F-17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors and Stockholders of
Hollywood Park, Inc.:
We have audited the accompanying consolidated balance sheets of Hollywood
Park, Inc. (a Delaware corporation) and subsidiaries (the "Company") as of
December 31, 1997, and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hollywood Park, Inc. and
subsidiaries as of December 31, 1997, and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Los Angeles, California
February 27, 1998
F-18
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of December
31,
------------------
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents................................ $ 23,749 $ 11,922
Restricted cash.......................................... 407 4,486
Short term investments................................... 0 4,766
Other receivables, net................................... 9,417 7,110
Prepaid expenses and other assets........................ 18,473 6,215
Deferred tax assets...................................... 8,118 6,422
Current portion of notes receivable...................... 42 38
-------- --------
Total current assets................................... 60,206 40,959
Notes receivable........................................... 9,428 819
Property, plant and equipment, net......................... 300,666 130,835
Goodwill, net.............................................. 33,017 20,370
Other assets............................................... 15,712 12,903
-------- --------
$419,029 $205,886
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable......................................... $ 11,277 $ 10,043
Accrued lawsuit settlement............................... 2,750 2,750
Accrued compensation..................................... 7,627 4,198
Accrued liabilities...................................... 19,105 9,733
Accrued interest......................................... 5,175 0
Gaming liabilities....................................... 3,853 2,499
Racing liabilities....................................... 4,093 6,106
Current portion of notes payable......................... 3,437 35
-------- --------
Total current liabilities.............................. 57,317 35,364
Notes payable.............................................. 132,102 282
Deferred tax liabilities................................... 6,310 9,065
-------- --------
Total liabilities...................................... 195,729 44,711
Minority interests......................................... 1,946 3,015
Stockholders' Equity:
Capital stock--
Preferred--$1.00 par value, authorized 250,000 shares;
none issued and outstanding as of year end 1997,
27,499 issued and outstanding during 1996............. 0 28
Common--$.10 par value, authorized 40,000,000 shares;
26,220,528 issued and outstanding in 1997, and
18,332,016 in 1996.................................... 2,622 1,833
Capital in excess of par value........................... 222,350 167,074
Accumulated deficit...................................... (3,618) (10,775)
-------- --------
Total stockholders' equity............................. 221,354 158,160
-------- --------
$419,029 $205,886
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-19
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(in thousands, except per
share data)
<S> <C> <C> <C>
Revenues:
Gaming........................................ $137,659 $ 50,717 $ 26,656
Racing........................................ 68,844 71,308 77,036
Food and beverage............................. 19,894 13,947 19,783
Hotel and recreational vehicle park........... 937 0 0
Truck stop and service station................ 8,633 0 0
Other income.................................. 12,161 7,253 7,097
-------- -------- --------
248,128 143,225 130,572
-------- -------- --------
Expenses:
Gaming........................................ 74,733 27,249 5,291
Racing........................................ 30,304 30,167 30,960
Food and beverage............................. 25,745 19,573 24,749
Hotel and recreational vehicle park........... 356 0 0
Truck stop and service station................ 7,969 0 0
Administration................................ 61,514 41,477 45,447
Other......................................... 5,048 2,485 3,200
Depreciation and amortization................. 18,157 10,695 11,384
REIT restructuring............................ 2,483 0 0
Write off of investment in Sunflower.......... 0 11,412 0
Lawsuit settlement............................ 0 0 6,088
-------- -------- --------
226,309 143,058 127,119
-------- -------- --------
Operating income................................ 21,819 167 3,453
Interest expense................................ 7,302 942 3,922
-------- -------- --------
Income (loss) before minority interests and
income taxes................................... 14,517 (775) (469)
Minority interests............................ (3) 15 0
Income tax expense............................ 5,850 3,459 693
-------- -------- --------
Net income (loss)............................... $ 8,670 $ (4,249) $ (1,162)
======== ======== ========
Dividend requirements on convertible preferred
stock.......................................... $ 1,520 $ 1,925 $ 1,925
Net income (loss) attributable to (allocated to)
common shareholders............................ $ 7,150 $ (6,174) $ (3,087)
Per common share:
Net income (loss)--basic...................... $ 0.33 $ (0.33) $ (0.17)
Net income (loss)--diluted.................... $ 0.32 $ (0.33) $ (0.17)
Number of shares--basic......................... 22,010 18,505 18,399
Number of shares--diluted....................... 22,340 20,797 20,691
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Capital
in
Excess Total
Preferred Common of Par Accumulated Stockholders'
Stock Stock Value Deficit Equity
--------- ------ -------- ----------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance at year end
1994.................... $ 28 $1,837 $166,892 $ (1,502) $167,255
Net loss................ 0 0 0 (1,162) (1,162)
Issuance of common stock
to acquire--Pacific
Casino Management,
Inc.................... 0 13 1,587 0 1,600
Investment in bonds--
unrealized holding
loss................... 0 0 0 (22) (22)
Preferred stock
dividends--$70.00 per
share.................. 0 0 0 (1,925) (1,925)
---- ------ -------- -------- --------
Balance at year end
1995.................... 28 1,850 168,479 (4,611) 165,746
Net loss................ 0 0 0 (4,249) (4,249)
Issuance of common stock
to acquire--Pacific
Casino Management,
Inc.................... 0 5 535 0 540
Repurchase and
retirement of common
stock.................. 0 (22) (1,940) 0 (1,962)
Investment in bonds--
unrealized holding
gain................... 0 0 0 10 10
Preferred stock
dividends--$70.00 per
share.................. 0 0 0 (1,925) (1,925)
---- ------ -------- -------- --------
Balance at year end
1996.................... 28 1,833 167,074 (10,775) 158,160
Net income.............. 0 0 0 8,670 8,670
Issuance of common stock
to acquire--Pacific
Casino Management,
Inc.................... 0 3 497 0 500
Issuance of common stock
to acquire--Boomtown,
Inc.................... 0 582 56,425 0 57,007
Repurchase and
retirement of common
stock.................. 0 (45) (3,420) 0 (3,465)
Common stock options
exercised.............. 0 20 1,975 0 1,995
Conversion of
convertible preferred
stock.................. (28) 229 (201) 0 0
Investment in bonds--
unrealized holding
gain................... 0 0 0 7 7
Preferred stock
dividends--$55.27 per
share.................. 0 0 0 (1,520) (1,520)
---- ------ -------- -------- --------
Balance at year end
1997.................... $ 0 $2,622 $222,350 $ (3,618) $221,354
==== ====== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE>
HOLLYWOOD PARK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended
December 31,
-----------------------------
1997 1996 1995
--------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).......................... $ 8,670 $ (4,249) $ (1,162)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization............. 18,157 10,027 10,857
Minority interests........................ (3) 15 0
Changes in accounts due to
deconsolidation of subsidiary in
bankruptcy:
Property, plant and equipment........... 0 58,380 0
Secured notes payable................... 0 (28,918) 0
Unsecured notes payable................. 0 (15,323) 0
Goodwill and lease with TRAK East....... 0 6,908 0
Unrealized (gain) loss on short term bond
investing................................ 10 (2) 64
Loss on sale or disposal of property,
plant and equipment...................... 632 10 0
Changes in assets and liabilities, net of
the effects of the purchase of a
business:
Decrease (increase) in restricted cash.. 4,079 (1,360) (2,427)
Increase in casino lease and related
interest receivable, net............... 0 0 (9,204)
Decrease (increase) in other
receivables, net....................... (312) 1,037 77
Increase in prepaid expenses and other
assets................................. (452) (3,524) (304)
Increase in deferred tax assets......... (1,696) (1,534) (349)
(Decrease) increase in accounts
payable................................ (2,468) (2,475) 5,685
(Decrease) increase in accrued lawsuit
settlement............................. 0 (2,482) 5,232
(Decrease) increase in accrued
compensation........................... (1,004) 903 (761)
(Decrease) increase in accrued
liabilities............................ (8,460) (3,489) 6,437
Increase (decrease) in gaming
liabilities............................ 1,354 (1,499) 3,998
Increase (decrease) in racing
liabilities............................ (2,013) 2,270 1,404
Increase in accrued interest payable.... 5,175 0 0
Payments to minority members............ (89) 0 0
Increase (decrease) in deferred tax
liabilities............................ (3,126) (1,018) 744
--------- -------- --------
Net cash provided by operating
activities........................... 18,454 13,677 20,291
--------- -------- --------
Cash flows from investing activities:
Additions to property, plant and
equipment................................. (32,505) (23,786) (25,150)
Receipts from sale of property, plant and
equipment................................. 187 9 98
Principal collected on notes receivable.... 52 34 31
Purchase of short term investments......... (1,946) (16,888) (35,875)
Proceeds from short term investments....... 6,712 18,569 29,428
Payment to buy-out minority interest in
Crystal Park LLC.......................... (1,000) 0 0
Long term gaming assets.................... 0 2,169 (2,169)
Cash acquired in the purchase of a
business, net of transaction and other
costs..................................... 12,264 0 715
--------- -------- --------
Net cash used in investing
activities........................... (16,236) (19,893) (32,922)
--------- -------- --------
Cash flows from financing activities:
Proceeds from secured Bank Credit
Facility.................................. 112,000 0 0
Proceeds from secured notes payable........ 0 0 3,358
Proceeds from unsecured notes payable...... 0 0 1,681
Payment of secured Bank Credit Facility.... (112,000) (3,358) (1,386)
Payment of secured notes payable........... (4,917) 0 0
Payment of unsecured notes payable......... (25) (23) (3,813)
Proceeds from issuance of 9.5% Notes....... 125,000 0 0
Payment of 11.5% Boomtown First Mortgage
Notes..................................... (110,924) 0 0
Payments from minority interest partners... 0 3,000 0
Common stock options exercised............. 1,995 0 0
Common stock repurchase and retirement..... 0 (1,962) 0
Dividends paid to preferred stockholders... (1,520) (1,925) (1,925)
--------- -------- --------
Net cash provided by (used in)
financing activities................. 9,609 (4,268) (2,085)
--------- -------- --------
Increase (decrease) in cash and cash
equivalents............................... 11,827 (10,484) (14,716)
Cash and cash equivalents at the beginning
of the period............................. 11,922 22,406 37,122
--------- -------- --------
Cash and cash equivalents at the end of the
period.................................... $ 23,749 $ 11,922 $ 22,406
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-22
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1--Summary of Significant Accounting Policies
General Hollywood Park, Inc. (the "Company" or "Hollywood Park") is a
diversified gaming, sports and entertainment company engaged in the ownership
and operation of casinos (including card club casinos) and pari-mutuel racing
facilities, and the development of other gaming and sports related
opportunities. The Company owns and operates through its Boomtown, Inc.
("Boomtown") subsidiary land-based, dockside and riverboat gaming operations in
Verdi, Nevada ("Boomtown Reno"), Biloxi, Mississippi ("Boomtown Biloxi"), and
Harvey, Louisiana ("Boomtown New Orleans"), respectively. Hollywood Park owns
two card club casinos in the Los Angeles metropolitan area. The Hollywood Park-
Casino is operated by the Company and the Crystal Park Hotel and Casino (the
"Crystal Park Casino"), which as of December 31, 1997, was 100% owned by the
Company (previously it was 93% owned by the Company) is leased to an
unaffiliated third party operator. The Company owns two premier thoroughbred
racing facilities, the Hollywood Park Race Track (the Hollywood Park-Casino is
located adjacent to the Hollywood Park Race Track), and Turf Paradise, Inc.
("Turf Paradise") which is located in Phoenix, Arizona. The Company also owns
Sunflower Racing, Inc. ("Sunflower") a greyhound and thoroughbred racing
facility in Kansas City, Kansas, though due to intense competition from nearby
Missouri riverboat gaming, on May 17, 1996, Sunflower filed for reorganization
under Chapter 11 of the Bankruptcy Code. Sunflower is operating as a debtor in
possession during the bankruptcy.
Consolidation The consolidated financial statements for the year ended
December 31, 1997, included the accounts of Hollywood Park and its wholly owned
subsidiaries: (a) Boomtown, which was acquired by the Company on June 30, 1997,
and was accounted for under the purchase method of accounting for a business
combination, and Boomtown's six active subsidiaries (1) Boomtown Hotel &
Casino, Inc., (2) Bayview Yacht Club, Inc., (3) Mississippi--I Gaming, L.P.,
(4) Louisiana Gaming Enterprises, Inc., (5) Louisiana--I Gaming and (6)
Boomtown Hoosiers, Inc.; (b) Hollywood Park Operating Company, and its two
wholly owned subsidiaries, Hollywood Park Food Services, Inc. and Hollywood
Park Fall Operating Company; (c) Turf Paradise, Inc.; (d) HP Yakama, Inc.; (e)
HP Kansas, Inc.; (f) HP/Compton, Inc. and HP Casino, Inc., which as of December
31, 1997, own 89.8% and 10.2%, respectively, of the Crystal Park Hotel and
Casino Development Company LLC, ("Crystal Park LLC"), which built and presently
leases the Crystal Park Casino, to an unaffiliated third party. As of March 31,
1996, the Company wrote off its investment in Sunflower and its wholly owned
subsidiary SR Food and Beverage, Inc., due to Sunflower's inability to compete
with nearby Missouri riverboat gaming, and as of April 1, 1996, no longer
consolidated Sunflower's operating results with the Company's. The Hollywood
Park-Casino is a division of Hollywood Park, Inc.
Restricted Cash Restricted cash as of December 31, 1997 and 1996, was for
amounts due to horsemen for purses, stakes and awards.
Racing Revenues and Expenses The Company records pari-mutuel revenues,
admissions, food and beverage and other racing income associated with racing on
a daily basis, except for seasonal admissions, which were recorded ratably over
the racing season. Expenses associated with racing revenues were charged
against income in those periods in which racing revenues were recognized. Other
expenses were recognized as they occurred throughout the year.
Gaming Revenue and Promotional Allowances Gaming revenues at the three
Boomtown properties consisted of the difference between gaming wins and losses,
or net win from gaming activity, and at the Hollywood Park-Casino consisted of
fees collected from patrons on a per seat or per hand basis. Revenues in the
accompanying statements of operations exclude the retail value of food and
beverage, hotel rooms and other items provided to patrons on a complimentary
basis. The estimated cost of providing these promotional allowances during the
years ended December 31, 1997, and 1996, was $8,285,000 (which includes
Boomtown's promotional allowances as of June 30, 1997), and $1,316,000,
respectively. There were no comparable costs for the year ended December 31,
1995.
F-23
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Capitalized Interest Interest of $425,000 was capitalized during the year
ended December 31, 1997. No capitalized interest was recorded during the years
ended December 31, 1996, and 1995, because the Company had no outstanding debt,
other than Sunflower's debt, which was non-recourse to the Company, and
Sunflower did not make any capital improvements during the periods covered.
Estimates Financial statements prepared in accordance with generally accepted
accounting principles require the use of management estimates, including
estimates used to evaluate the recoverability of property, plant and equipment,
to determine the fair value of financial instruments, to account for the
valuation allowance for deferred tax assets and to determine litigation related
obligations.
Property, Plant and Equipment Property, plant and equipment are depreciated
on the straight line method over their estimated useful lives as follows:
<TABLE>
<CAPTION>
Years
-------
<S> <C>
Land improvements.............................................. 3 to 25
Buildings...................................................... 5 to 40
Equipment...................................................... 3 to 10
</TABLE>
Maintenance and repairs were charged to expense, and betterments were
capitalized. The cost of property sold or otherwise disposed of and its
associated accumulated depreciation were eliminated from both the property and
accumulated depreciation accounts with any gain or loss recorded in the expense
accounts.
Property, plant and equipment is carried on the Company's balance sheets at
depreciated cost. Whenever there are recognized events or changes in
circumstances that affect the carrying amount of the property, plant and
equipment, management reviews the assets for possible impairment. In accordance
with current accounting standards, management uses estimated expected future
net cash flows to measure the recoverability of property, plant and equipment.
The estimation of expected future net cash flows is inherently uncertain and
relies to a considerable extent on assumptions regarding current and future
economic and market conditions, and the availability of capital. In future
periods, if there are changes in the estimates or assumptions incorporated into
the impairment review analysis, the changes could result in an adjustment to
the carrying amount of the property, plant and equipment.
Income Taxes The Company accounts for income taxes under Statement of
Financial Accounting Standards ("SFAS") 109, Accounting for Income Taxes,
whereby deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS 109, the effect
on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that included the enactment date.
Earnings Per Share Basic earnings per share were computed by dividing income
(loss) attributable to (allocated to) common shareholders (net income (loss)
less preferred stock dividend requirements) by the weighted average number of
common shares outstanding during the period. Diluted per share amounts were
similarly computed, but include the effect, when dilutive, of the conversion of
the convertible preferred shares and the exercise of stock options.
Cash Flows Cash and cash equivalents consisted of certificates of deposit and
short term investments with original maturities of 90 days or less.
F-24
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock Repurchase On July 22, 1996, the Company announced its intention to
repurchase, and to retire up to 2,000,000 shares of its common stock on the
open market or in negotiated transactions. As of December 31, 1996, the Company
had repurchased and retired (with the last purchase being made on November 13,
1996) 222,300 common shares, at a cost of approximately $1,962,000.
Reclassifications Certain reclassifications have been made to the 1996 and
1995 balances to be consistent with the 1997 financial statement presentation.
Note 2--Acquisitions
Acquisition of Boomtown, Inc. On June 30, 1997, pursuant to the Agreement
and Plan of Merger dated as of April 23, 1996, by and among Hollywood Park, HP
Acquisition, Inc., a wholly owned subsidiary of the Company, and Boomtown, HP
Acquisition, Inc. was merged with and into Boomtown (the "Boomtown Merger"). As
a result of the Boomtown Merger, Boomtown became a wholly owned subsidiary of
the Company and each share of Boomtown common stock was converted into the
right to receive 0.625 of a share of Hollywood Park's common stock.
Approximately 5,362,850 shares of Hollywood Park common stock, valued at
$9.8125 per share (excluding shares repurchased from Edward P. Roski, Jr.
("Roski") and subsequently retired, as described below) were issued in the
Boomtown Merger.
The Boomtown Merger was accounted for under the purchase method of
accounting for a business combination. The purchase price of the Boomtown
Merger was allocated to the identifiable assets acquired and liabilities
assumed based on their estimated fair values at the date of acquisition. Based
on financial analyses which considered the impact of general economic,
financial and market conditions on the assets acquired and liabilities assumed,
the Company determined that the estimated fair values approximated their
carrying value. The Boomtown Merger generated approximately $2,683,000 of
excess acquisition cost over the recorded value of the net assets acquired, all
of which was allocated to goodwill, to be amortized over 40 years. The
amortization of the goodwill is not deductible for income tax purposes.
The Company acquired three of the four Boomtown properties; Boomtown Reno,
Boomtown New Orleans, and Boomtown Biloxi. Boomtown's Las Vegas property was
divested on July 1, 1997 because it had generated significant operating losses
since it opened, thus reducing the overall profitability of Boomtown. Boomtown
and its subsidiaries exchanged substantially all of their interest in the Las
Vegas property, including substantially all of the operating assets and notes
receivable of approximately $27,300,000 from the landowner/lessor of the Las
Vegas property, IVAC, a California general partnership of which Roski, a former
Boomtown director, is a general partner, for, among other things, two unsecured
notes receivable totaling approximately $8,465,000, cash, assumption of certain
liabilities and release from certain lease obligations. The first note
receivable is for $5,000,000, bearing interest at Bank of America National
Trust and Savings Association's ("Bank of America") reference rate plus 1.5%
per year, with annual principal receipts of $1,000,000 plus accrued interest
commencing on July 1, 1998. The second note is for approximately $3,465,000,
bearing interest at Bank of America's reference rate plus 0.5% per year, with
the principal and accrued interest payable to the Company, in full, on July 1,
2000. In addition, concurrently with the divestiture of the Las Vegas property,
Hollywood Park purchased and retired 446,491 shares of Hollywood Park common
stock received by Roski in the Boomtown Merger for a price of approximately
$3,465,000, payable in the form of a Hollywood Park promissory note. The
promissory note bears interest at Bank of America's reference rate plus 1.0%.
Interest is payable annually and annual principal payments in five equal
installments of approximately $693,000 are due commencing July 1, 1998.
Acquisition of Pacific Casino Management, Inc. The Hollywood Park-Casino was
opened in July 1994 under a third party leasing arrangement with Pacific Casino
Management, Inc. ("PCM"); whereby PCM leased
F-25
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
and operated the gaming floors of the Hollywood Park-Casino, and the Company
operated all other aspects of the business. In 1994, under the California
Gaming Registration Act, it was then the position of the California Attorney
General that as a publicly traded company, Hollywood Park was not eligible to
register as an operator of a card club, but could lease the site to a
registered operator unaffiliated with the Company. On August 3, 1995, Senate
Bill ("SB") 100 was enacted into law and among other things allowed a publicly
traded racing association, such as Hollywood Park, to operate a card club
casino on the same premises as a race track. On November 17, 1995, Hollywood
Park purchased the gaming floor business from PCM for $2,640,000, which was
paid for with 218,099 shares of the Company's common stock. The approximately
$21,658,000 of excess acquisition cost over the recorded value of net assets
acquired from PCM was allocated to goodwill, and is being amortized over 40
years. The amortization of the goodwill is not deductible for income tax
purposes.
Pro Forma Results of Operations The following pro forma results of
operations were prepared under the assumption that the acquisition of Boomtown
had occurred at the beginning of the period presented. The historical results
of operations of Boomtown (excluding the results of operations of Boomtown's
Las Vegas property, which was divested in connection with the Boomtown Merger)
were combined with Hollywood Park's. Pro forma adjustments were made for the
following: elimination of the amortization of the issuance costs associated
with Boomtown's 11.5% First Mortgage Notes; amortization of the issuance costs
associated with the $125,000,000 of Hollywood Park and Hollywood Park Operating
Company Series A 9.5% Senior Subordinated Notes due 2007 (the "Notes") (see
Note 6. Secured and Unsecured Notes Payable); amortization of the excess
purchase price over net assets acquired in the Boomtown Merger; elimination of
the amortization of the discount associated with the Boomtown 11.5% First
Mortgage Notes; interest expense associated with the promissory notes from
Hollywood Park to Roski; elimination of the interest expense associated with
the Boomtown 11.5% First Mortgage Notes; amortization of the up-front loan fees
associated with the Company's Bank Credit Facility; interest expense associated
with the Notes at 9.5%; and the estimated 40% tax expense associated with the
pro forma adjustments.
Hollywood Park, Inc.
Unaudited Pro Forma Combined Consolidated Results of Operations
<TABLE>
<CAPTION>
1997 1996
-------- --------
(in thousands,
except per share
data)
<S> <C> <C>
Revenues:
Gaming................................................. $221,008 $208,699
Racing................................................. 68,844 71,308
Other.................................................. 59,232 56,576
-------- --------
349,084 336,583
-------- --------
Operating income (loss)(a)............................... 30,889 (18,083)
Net income (loss)........................................ $ 9,264 $(37,523)
======== ========
Dividend requirements on preferred stock................. $ 1,520 $ 1,925
Net income (loss) to common shareholders................. $ 7,744 $(39,448)
======== ========
Per common share:
Net income (loss)--basic............................... $ 0.31 $ (1.65)
Net income (loss)--diluted............................. $ 0.31 $ (1.65)
</TABLE>
- --------
(a) The 1996 operating loss included the non-recurring write off of Hollywood
Park's investment in Sunflower of $11,412,000, and the non-recurring loss
on Boomtown's sale of its Las Vegas property of $36,562,000.
F-26
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Pending Merger with Casino Magic Corp. On February 19, 1998, the respective
Boards of Directors of Hollywood Park and Casino Magic Corp. ("Casino Magic")
approved and signed an Agreement and Plan of Merger among Casino Magic Corp.,
Hollywood Park, Inc., and HP Acquisition II, Inc. (a wholly owned subsidiary of
Hollywood Park), pursuant to which HP Acquisition II, Inc., will merge into
Casino Magic, and Casino Magic will survive and become a wholly owned
subsidiary of Hollywood Park. Hollywood Park will pay cash of $2.27 for each
issued and outstanding share of Casino Magic common stock, or approximately
$81,000,000.
On February 23, 1998, Hollywood Park entered into a voting agreement (the
"Voting Agreement") with Marlin F. Torguson ("Mr. Torguson") pursuant to which,
among other things, Mr. Torguson has agreed to vote the 7,954,500 shares of
Casino Magic common stock he beneficially owns in favor of approval and
adoption of the Agreement and Plan of Merger and the Casino Magic Merger and
any matter that could reasonably be expected to facilitate the Casino Magic
Merger. Mr. Torguson also agreed to continue to serve as an employee of Casino
Magic for three years following the Casino Magic Merger, and not to compete
with Hollywood Park or Casino Magic in any jurisdictions in which either
presently operates.
Casino Magic owns and operates dockside and riverboat gaming properties in
Bay St. Louis, Mississippi ("Casino Magic Bay St. Louis"), Biloxi, Mississippi
("Casino Magic Biloxi") and Bossier City, Louisiana, ("Casino Magic Bossier")
respectively, and is a 51% partner in two land-based casinos in Argentina.
Casino Magic Bay St. Louis, started operations in September 1992, on a
permanently moored barge in a 17 acre marina with the adjoining land based
facilities situated on 591 acres. Bay St. Louis is approximately 46 miles east
of New Orleans and 40 miles west of Biloxi. Casino Magic Bay St. Louis offers
approximately 39,500 square feet of gaming space, with 1,132 slot machines and
42 table games. The land based building is three stories with a restaurant,
buffet, snack bar, gift shop, and a live entertainment lounge. In December
1994, Casino Bay St. Louis also opened the Casino Magic Inn; a 201 room hotel,
including four deluxe and 20 junior suites. The property also contains the
Magic Dome, an 1,800 seat arena, which hosts approximately 50 events annually,
including nationally televised boxing matches, concerts and other special
events. With the late 1997 addition of the 18 hole Bridges Golf Resort, Casino
Magic Bay St. Louis is positioned as a full service vacation destination.
Casino Magic Biloxi began casino operations in June 1993 and is located on
the Gulf of Mexico in the Mississippi Gulf Coast Region. The property is
situated on the Front Bay on the beach of the Gulf of Mexico in a strip with
four other casinos, and is located on the major highway running through the
Mississippi Gulf Coast. (Boomtown Biloxi is located on the Back Bay of Biloxi.)
Casino Magic Biloxi conducts gaming from a permanently moored barge with
approximately 47,700 square feet of gaming space with 1,174 slot machines and
41 gaming tables. The land based facility is located adjacent to the barge on
the approximately 11.5 acre site. In late spring 1998, Casino Magic Biloxi
expects to open its 378 room luxury hotel (Casino Magic is anticipating a four-
star rating for this hotel), to include 16 master suites, 70 junior suites,
6,600 square feet of convention and meeting space, a full service restaurant
and numerous themed retail shops. The casino's land based facility is
approximately 21,600 square feet. Casino Magic Biloxi offers buffets, full
service restaurants and nationally franchised fast food services.
Casino Magic Bossier opened in October 1996, with casino operations
conducted from a dockside riverboat. The property is highly visible with
convenient access from Interstate Highway 20, a major thoroughfare between
Bossier City/Shreveport and the Dallas-Fort Worth area approximately 180 miles
to the west. The Casino Magic Bossier riverboat measures 254 feet long and 78
feet wide with approximately 30,000 square feet of gaming space, and offers 980
slot machines and 44 table games. The Casino Magic Bossier facility includes a
55,000 square foot entertainment pavilion connected to a garage providing
parking for approximately 1,400 vehicles. The entertainment pavilion includes
the 350 seat Abracadabra buffet
F-27
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
restaurant, a gift shop, a bar and lounge area, and a 300 seat live
entertainment theater. The entertainment pavilion also includes two smaller
full service restaurants. Casino Magic Bossier is just beginning construction
on an 188 room hotel with four master suites, 88 junior suites and additional
full service restaurants.
In December 1994, Casino Magic, through its wholly owned subsidiary, Casino
Magic Neuquen SA, ("Casino Magic Argentina") entered into a twelve year
concession agreement with the Province of Neuquen, Argentina. Casino Magic
Argentina operates two casinos in the Province of Neuquen in the cities of
Neuquen and San Martin de los Andes in west-central Argentina. Neuquen Province
is the gateway to the well established resort, tour destinations and ski
resorts of the Andes Mountains. There are approximately 900,000 residents
within a 50 mile radius of the two cities. Casino Magic Argentina, which began
operations in January 1995, includes approximately 29,000 square feet of gaming
space and contains approximately 64 table games, 400 slot machines and a 384
seat bingo facility.
Note 3--Supplemental Disclosure of Cash Flow Information
<TABLE>
<CAPTION>
For the years
ended December 31,
------------------
1997 1996 1995
------ ---- ------
(in thousands)
<S> <C> <C> <C>
Cash paid during the year for:
Interest............................................... $1,321 $299 $2,098
Income taxes........................................... 827 40 143
------ ---- ------
$2,148 $339 $2,241
====== ==== ======
</TABLE>
Note 4--Short Term Investments
As of December 31, 1997, Hollywood Park had liquidated its investments in
corporate bonds. During the year ended December 31, 1997, net proceeds from the
sale or redemption of corporate bond investments was approximately $4,766,000,
with gross realized gains and losses of approximately $9,000, and $88,000,
respectively.
As of December 31, 1996, short term investments consisted of corporate bonds
valued at $4,766,000, with Moody's ratings of Ba2 to B3, and Standard and Poors
ratings of BB+ to B-, though some of the bonds were not rated by either agency.
Investments in corporate bonds carry a greater amount of principal risk than
other investments made by the Company, and yield a corresponding higher return.
The corporate bond investment as of December 31, 1996, had a weighted average
maturity of 1.5 years, and because the Company reasonably expected to liquidate
these investments in its normal operating cycle the investments were classified
as short term, were held as available for sale, and recorded in the
accompanying financial statements at their fair value, as determined by the
quoted market price.
For the year ended December 31, 1996, proceeds from the sale or redemption
of corporate bond investments were approximately $8,429,000, all of which was
reinvested, and gross realized gains and gross realized losses were $28,000 and
$39,000, respectively.
F-28
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 5--Property, Plant and Equipment
Property, plant and equipment held at December 31, 1997, and 1996 consisted
of the following:
<TABLE>
<CAPTION>
December 31,
-----------------
1997(a) 1996
-------- --------
(in thousands)
<S> <C> <C>
Land and land improvements................................ $ 50,945 $ 32,215
Buildings................................................. 270,271 150,935
Equipment................................................. 77,337 31,531
Vessel.................................................... 18,925 0
Construction in progress.................................. 21,896 128
-------- --------
439,374 214,809
Less accumulated depreciation............................. 138,708 83,974
-------- --------
$300,666 $130,835
======== ========
</TABLE>
- --------
(a) Includes Boomtown's assets.
Note 6--Secured and Unsecured Notes Payable
Notes payable as of December 31, 1997, and 1996 consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------
1997(a) 1996
--------- -----
(in thousands)
<S> <C> <C>
Secured notes payable....................................... $ 3,750 $ 0
9.5% Series A Notes......................................... 125,000 0
11.5% Boomtown First Mortgage Notes......................... 1,253 0
Capital lease obligations................................... 1,527 0
Unsecured note payable...................................... 4,009 317
--------- -----
135,539 317
Less current maturities..................................... 3,437 35
--------- -----
$ 132,102 $ 282
========= =====
</TABLE>
- --------
(a) Includes notes payable related to Boomtown.
Hollywood Park On June 30, 1997, Hollywood Park and a bank syndicate led by
Bank of America finalized the Bank Credit Facility, a reducing revolving credit
facility allowing for drawings up to $225,000,000. On August 7, 1997, the Bank
Credit Facility was reduced by $125,000,000 (the aggregate principal amount of
the Series A 9.5% Senior Subordinated Notes due 2007 (the "Notes") issued as
described below) to $100,000,000. Of the $100,000,000, as a result of covenant
limitations, approximately $88,800,000 was available as of December 31, 1997.
As of December 31, 1997, the Company did not have outstanding borrowings under
the Bank Credit Facility, except for a $2,035,000 letter of credit. The Bank
Credit Facility is secured by substantially all of the assets of Hollywood Park
and its significant subsidiaries, and imposes certain customary affirmative and
negative covenants.
On February 19, 1998, Hollywood Park announced the Casino Magic Merger, and
under the terms of the Agreement and Plan of Merger, Hollywood Park will pay
cash of $2.27 for each issued and outstanding share of Casino Magic common
stock, or approximately $81,000,000. The Company has begun discussions to amend
F-29
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
the Bank Credit Facility to increase the borrowing capacity to provide the
funds required for the Casino Magic Merger. A formal amendment has not yet been
signed, and there is no assurance that such an amendment will be completed,
although the bank group has given verbal assurance of its intent to provide
such an increased facility.
The Bank Credit Facility has been amended twice. The first amendment, among
other matters, reduced the availability of the facility until the Bank Credit
Facility was approved by the Louisiana Gaming Control Board. Hollywood Park
received this approval on July 10, 1997. The second amendment, among other
things, allowed the co-issuance of the Notes by Hollywood Park Operating
Company with Hollywood Park.
Debt service requirements on the Bank Credit Facility consist of current
interest payments on outstanding indebtedness through September 30, 1999. As of
September 30, 1999, and on the last day of each third calendar month
thereafter, through June 30, 2001, the Bank Credit Facility will decrease by
7.5% of the commitment in effect on September 30, 1999. As of September 30,
2001, and on the last day of each third calendar month thereafter, the Bank
Credit Facility will decrease by 10% of the commitment in effect on September
30, 1999. Any principal amounts outstanding in excess of the Bank Credit
Facility commitment, as so reduced, will be payable on such quarterly reduction
dates.
The Bank Credit Facility provides for a letter of credit sub-facility of
$10,000,000, of which $2,035,000 is currently outstanding for the benefit of
Hollywood Park's California self insured workers' compensation program. The
facility also provides for a swing line sub-facility of up to $10,000,000.
Borrowings under the Bank Credit Facility bear interest at an annual rate
determined, at the election of Hollywood Park, by reference to the "Eurodollar
Rate" (for interest periods of 1, 2, 3 or 6 months) or the "Reference Rate", as
such terms are respectively defined in the Bank Credit Facility, plus margins
which vary depending upon Hollywood Park's ratio of funded debt to earnings
before interest, taxes, depreciation and amortization ("EBITDA"). The margins
start at 1.25% for Eurodollar loans and at 0.25% for Base Rate loans, at a
funded debt to EBITDA ratio of less than 1.50. Thereafter, the margin for each
type of loan increases by 25 basis points for each increase in the ratio of
funded debt to EBITDA of 50 basis points or more, up to 2.625% for Eurodollar
loans and 1.625% for Base Rate loans. However, if the ratio of senior funded
debt to EBITDA exceeds 2.50, the applicable margins will increase to 3.25% for
Eurodollar loans, and 2.25% for Base Rate loans. Thereafter, the margins would
increase by 25 basis points for each increase in the ratio of senior funded
debt to EBITDA of 50 basis points or more, up to a maximum of 4.25% for
Eurodollar loans and 3.25% for Base Rate loans. The applicable margins as of
December 31, 1997, were 2.00% with respect to the Eurodollar Rate based
interest rate and 1.00% with respect to the Base Rate interest rate.
The Bank Credit Facility allows for interest rate swap agreements, or other
interest rate protection agreements, up to a maximum notional amount of
$125,000,000. Presently, Hollywood Park does not utilize such financial
instruments.
Hollywood Park pays a quarterly commitment fee for the average daily amount
of unused portions of the Bank Credit Facility. The commitment fee is also
dependent upon Hollywood Park's ratio of funded debt to EBITDA. The commitment
fee for the Bank Credit Facility starts at 31.25 basis points when the ratio is
less than 1.00, and increases by 6.25 basis points for each increase in the
ratio of 0.50, up to a maximum of 50 basis points. For the quarter beginning
January 1, 1998, the commitment fee is 50 basis points.
On July 3, 1997, Hollywood Park borrowed $112,000,000 from the Bank Credit
Facility to fund Boomtown's offer to purchase the 11.5% Boomtown First Mortgage
Notes (the "Boomtown Notes"), and repaid this amount on August 7, 1997, with a
portion of the proceeds from the August 6, 1997, issuance of $125,000,000 of
Series A 9.5% Senior Subordinated Notes due 2007 (the "Series A Notes"). The
Series A
F-30
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Notes were co-issued by Hollywood Park and Hollywood Park Operating Company,
and were issued pursuant to a private offering under the Securities Act of
1933, as amended (the "Securities Act"). The balance of the proceeds from the
issuance of the Series A Notes was used primarily for the purchase of a new
riverboat for Boomtown New Orleans, and other general corporate needs.
On March 20, 1998, the Company completed a registered exchange offer for the
Series A Notes, pursuant to which all $125,000,000 principal amount of the
Series A Notes were exchanged by the holders for $125,000,000 aggregate
principal amount of Series B 9.5% Senior Subordinated Notes due 2007 of the
Company and Hollywood Park Operating Company (together with the Series A Notes,
the "Notes") which were registered under the Securities Act on Form S-4.
Interest on the Notes is payable semi-annually, on February 1st and August 1st.
The Notes will be redeemable at the option of Hollywood Park and Hollywood Park
Operating Company, in whole or in part, on or after August 1, 2002, at a
premium to face amount, plus accrued interest, with the premium to face amount
decreasing on each subsequent anniversary date. The Notes are unsecured
obligations of Hollywood Park and Hollywood Park Operating Company, guaranteed
by all other material restricted subsidiaries of either Hollywood Park or
Hollywood Park Operating Company.
The indenture governing the Notes contains certain covenants that, among
other things, limit the ability of Hollywood Park, Hollywood Park Operating
Company and their restricted subsidiaries to incur additional indebtedness and
issue preferred stock, pay dividends or make other distributions, repurchase
equity interests or subordinated indebtedness, create certain liens, enter into
certain transactions with affiliates, sell assets, issue or sell equity
interests in their respective subsidiaries or enter into certain mergers and
consolidations. There are no provisions in the indenture governing the Notes
which will prevent the previously mentioned Casino Magic Merger.
On July 1, 1997, in connection with the divestiture of Boomtown's Las Vegas
property, Hollywood Park issued an unsecured promissory note of approximately
$3,465,000 to purchase the Hollywood Park common stock issued to Roski in the
Boomtown Merger. The promissory note bears interest equal to the
Bank of America reference rate plus 1.0%. Interest is payable annually with
five annual principal payments of approximately $693,000 commencing July 1,
1998.
Boomtown In November 1993, Boomtown issued $103,500,000 of 11.5% Boomtown
Notes. On July 3, 1997, pursuant to a tender offer, Boomtown repurchased and
retired approximately $102,142,000 in principal amount of the Boomtown Notes,
at a purchase price of $1,085 per $1,000, along with accrued interest thereon.
An additional $105,000 of the remaining Boomtown Notes were tendered in the
post Boomtown Merger change of control purchase offer, at a price of $1,010 for
each $1,000, completed August 12, 1997. As of December 31, 1997, there were
$1,253,000 of 11.5% Boomtown Notes outstanding.
On August 4, 1997, Hollywood Park executed a promissory note for the
purchase of the barge and the building shell at Boomtown Biloxi for a total
cost of $5,250,000. A payment of $1,500,000 was made on August 4, 1997, with
the balance due of $3,750,000 payable in three equal annual installments of
$1,250,000. Interest on the promissory note is equal to the prime interest rate
in effect on the first day of each year. The principal amount of the promissory
note, together with accrued interest, may be repaid, without penalty, in whole
or in part, at any time.
On August 7, 1997, Boomtown New Orleans prepaid a 13.0% note secured by the
former riverboat, then in use, for approximately $2,107,000 (inclusive of a
1.0% prepayment penalty).
As of December 31, 1997, Boomtown had a note payable of approximately
$252,000 along with various capital lease obligations for gaming and other
operating equipment, totaling approximately $1,527,000.
Sunflower On March 24, 1994, an Amended and Restated Credit and Security
Agreement (the "Sunflower Senior Credit") was executed between Sunflower and
five banks in connection with Hollywood
F-31
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Park's acquisition of Sunflower. As of December 31, 1997, the outstanding
balance of the Sunflower Senior Credit was $28,667,000. The Sunflower Senior
Credit is non-recourse to Hollywood Park.
On May 17, 1996, Sunflower filed for reorganization under Chapter 11 of the
Bankruptcy Code. The Cash Collateral Agreement suspended any interest or
principal payments on the Sunflower Senior Credit until August 12, 1997. The
Bankruptcy Court has issued an order extending the Cash Collateral Agreement
until it issues its pending ruling regarding approval of Sunflower's proposed
plan of reorganization. The Cash Collateral Agreement requires Sunflower to
make certain cash payments to Wyandotte County, Kansas, the creditors under the
Sunflower Credit and TRAK East (the unaffiliated non-profit holder of the pari-
mutuel racing license in Kansas, and operator of racing at Sunflower).
On July 15, 1997, Sunflower presented to the Bankruptcy Court a plan of
reorganization (the "Plan") which provides for the sale of Sunflower's property
to the Wyandotte Tribe of Oklahoma (the "Wyandotte Tribe"). The Plan was
amended on October 31, 1997. Under the Plan, some or all of the land would be
held by the United States Government in trust for the Wyandotte Tribe, and a
casino would be developed on the property. Upon completion of the casino, HP
Kansas, Inc. ("HP Kansas") (a wholly-owned subsidiary of Hollywood Park) and a
partner (North American Sports Management or an affiliate) will provide
financing and consulting services for the development and operation of a
casino. Under this arrangement, HP Kansas would be entitled to receive a share
of the revenues of the casino. Under the plan, in order to allow the property
to be released as collateral and sold to the Wyandotte Tribe, Sunflower will be
required to have standby letters of credit issued to support certain payments
to be made to the lenders under the Sunflower Senior Credit and the Wyandotte
County Treasurer's office. The aggregate amount of such letters of credit is
anticipated to be in excess of $29,000,000. Hollywood Park will arrange for the
issuance of such letters of credit on behalf of Sunflower. It is anticipated
that the earliest that the bankruptcy court will rule on the Plan is in the
second quarter of 1998.
In 1995, under a promissory note executed in December 1994, between
Hollywood Park and Sunflower, Hollywood Park advanced $2,500,000 to Sunflower
to make certain payments due on the Sunflower Senior Credit. The amounts
borrowed under the promissory note, along with accrued interest, are
subordinate to the Sunflower Senior Credit. Although Hollywood Park will
continue to pursue payment of the promissory note, for financial reporting
purposes the outstanding balance of the promissory note was written off as of
March 31, 1996.
Annual Maturities As of December 31, 1997, annual maturities of total notes
and loans payable are as follows:
<TABLE>
<CAPTION>
Year ending:
------------ (in thousands)
<S> <C>
December 31, 1998........................................... $ 3,437
December 31, 1999........................................... 2,162
December 31, 2000........................................... 2,050
December 31, 2001........................................... 805
December 31, 2002........................................... 776
Thereafter.................................................. 126,309
</TABLE>
The fair values of the Company's various debt instruments discussed above
approximate their carrying amounts based on the fact that borrowings bear
interest at variable market based rates.
Note 7--Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of
In 1995, Statement of Financial Accounting Standards No. 121 ("SFAS") 121
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, was issued which established
F-32
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets. SFAS 121, which
became effective for Hollywood Park in the quarter ended March 31, 1996,
addresses when impairment losses should be recognized and how impairment losses
should be measured. Whenever there are recognized events or changes in
circumstances that indicate the carrying amount of an asset may not be
recoverable, management reviews the asset for possible impairment. In
accordance with current accounting standards, management uses estimated
expected future net cash flows (undiscounted and excluding interest costs, and
grouped at the lowest level for which there are identifiable cash flows that
are as independent as possible of other asset groups) to measure the
recoverability of the asset. If the expected future net cash flows are less
than the carrying amount of the asset an impairment loss would be recognized.
An impairment loss would be measured as the amount by which the carrying amount
of the asset exceeded the fair value of the asset, with fair value measured as
the amount at which the asset could be bought or sold in a current transaction
between willing parties, other than in a forced liquidation sale. The
estimation of expected future net cash flows is inherently uncertain and relies
to a considerable extent on assumptions regarding current and future net cash
flows, market conditions, and the availability of capital. If, in future
periods, there are changes in the estimates or assumptions incorporated into
the impairment review analysis the changes could result in an adjustment to the
carrying amount of the asset, but at no time would previously recognized
impairment losses be restored.
Note 8--Accounting for Stock-Based Compensation
Statement of Financial Accounting Standards No. 123 ("SFAS") 123 Accounting
for Stock-Based Compensation, requires that the Company disclose additional
information about employee stock-based compensation plans. The objective of
SFAS 123 is to estimate the fair value, based on the stock price at the grant
date, of the Company's stock options to which employees become entitled when
they have rendered the requisite service and satisfied any other conditions
necessary to earn the right to benefit from the stock options. The fair market
value of a stock option is to be estimated using an option-pricing model that
takes into account, as of the grant date, the exercise price and expected life
of the option, the current price of the underlying stock and its expected
volatility, expected dividends on the stock, and the risk-free interest rate
for the expected term of the options.
In computing the stock-based compensation, the following assumptions were
made:
<TABLE>
<CAPTION>
Risk-Free
Interest Expected Expected Expected
Rate Life Volatility Dividends
--------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Options granted in the following
periods:
Second quarter 1995............. 5.0% 3 years 36.1% None
First quarter 1996.............. 5.0% 3 years 36.1% None
Second quarter 1996............. 5.1% 3 years 46.4% None
Fourth quarter 1996(a).......... 5.0% 10 years 47.4% None
</TABLE>
- --------
(a) The options granted during the fourth quarter of 1996 were to the Company's
directors, and it is expected that the directors will hold options for a
longer period of time than the Company's employees.
F-33
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following sets forth the pro forma financial results under the
implementation of SFAS 123:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------------------
1997 1996 1995
------- ------- -------
(in thousands, except
per share data)
<S> <C> <C> <C>
Net income (loss) before stock-based
compensation expense........................... $ 8,670 $(4,249) $(1,162)
Stock-based compensation expense................ 543 81 4
------- ------- -------
Pro forma net income (loss)..................... $ 8,127 $(4,330) $(1,166)
======= ======= =======
Dividend requirements on convertible preferred
stock.......................................... $ 1,520 $ 1,925 $ 1,925
Pro forma net income (loss) to common
shareholders................................... $ 6,607 $(6,255) $(3,091)
======= ======= =======
Per common share:
Pro forma net income (loss)--basic............ $ 0.30 $ (0.34) $ (0.17)
Pro forma net income (loss)--diluted.......... $ 0.30 $ (0.34) $ (0.17)
Number of shares--basic......................... 22,010 18,505 18,399
Number of shares--diluted....................... 22,340 20,797 20,691
</TABLE>
Note 9--Racing Operations
The Company conducts thoroughbred racing at its Hollywood Park and Turf
Paradise race tracks, located in California and Arizona, respectively.
Sunflower race track, in Kansas, is primarily a greyhound racing facility with
a limited number of days of thoroughbred racing each summer. On May 17, 1996,
due to competition from Missouri riverboat gaming, Sunflower filed for
reorganization under Chapter 11 of the Bankruptcy Code, and as of April 1,
1996, Sunflower's operating results were no longer consolidated with Hollywood
Park's; therefore, Sunflower's racing results and statistics are included in
this note for 1995 only. Sunflower is operating as a debtor in possession
during the bankruptcy. Under Kansas racing law, Sunflower is not granted any
race days and does not generate any pari-mutuel commissions. The Kansas Racing
Commission granted Sunflower the facility ownership and management licenses;
with all race days until the year 2014 granted to TRAK East, a Kansas not-for-
profit corporation. Sunflower has an agreement, which was entered into in
September 1989, with TRAK East to provide the physical race tracks along with
management and consulting services for twenty-five years with options to renew
for one or more successive terms.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Live on-track race days
Hollywood Park race track..................................... 102 103 97
Turf Paradise race track...................................... 159 166 171
Sunflower--Horses............................................. -- -- 49
Sunflower--Greyhounds......................................... -- -- 294
</TABLE>
F-34
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A summary of the pari-mutuel handle and deductions, by racing facility for
the year ended December 31, are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Hollywood Park--live horse racing
Total pari-mutuel handle........................... $663,175 $677,827 $643,246
Less patrons' winning tickets...................... 535,816 547,775 520,291
-------- -------- --------
127,359 130,052 122,955
Less:
State pari-mutuel tax............................ 15,923 19,263 20,691
City of Inglewood pari-mutuel tax................ 1,176 1,287 1,384
Racing purses and awards......................... 25,881 26,300 26,888
Satellite wagering fees.......................... 11,738 12,784 13,545
Interstate location fees......................... 47,524 44,815 34,170
Other fees....................................... 356 390 419
-------- -------- --------
Pari-mutuel commissions............................ 24,761 25,213 25,858
Add off-track independent handle commissions....... 2,195 2,280 2,251
-------- -------- --------
Total pari-mutuel commissions...................... $ 26,956 $ 27,493 $ 28,109
======== ======== ========
<CAPTION>
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Turf Paradise--live horse racing
Total pari-mutuel handle........................... $166,976 $147,748 $111,509
Less patrons' winning tickets...................... 129,212 114,585 86,460
-------- -------- --------
37,764 33,163 25,049
Less:
State pari-mutuel tax............................ 0 18 345
Racing purses and awards......................... 4,339 4,501 4,757
State sales tax.................................. 183 302 415
Off-track commissions............................ 316 115 117
Interstate location fees......................... 24,790 20,034 10,943
-------- -------- --------
Pari-mutuel commissions............................ 8,136 8,193 8,472
Add off-track independent handle commissions....... 193 166 699
-------- -------- --------
Total pari-mutuel commissions including charity
days.............................................. 8,329 8,359 9,171
Less charity day pari-mutuel commissions........... 18 17 0
-------- -------- --------
Total pari-mutuel commissions net of charity days.. $ 8,311 $ 8,342 $ 9,171
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Greyhounds Horses
1995 1995
---------- ------
(in thousands)
<S> <C> <C>
TRAK East at Sunflower--live racing
Total pari-mutuel handle..................................... $47,406 $2,844
Less patrons' winning tickets................................ 37,379 2,273
------- ------
10,027 571
Less:
State pari-mutuel tax...................................... 1,721 104
Racing purses and awards................................... 2,230 190
------- ------
Total pari-mutuel commissions................................ $ 6,076 $ 277
======= ======
</TABLE>
F-35
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As a stipulation to the granting of race dates, the California Horse Racing
Board ("CHRB") requires that Hollywood Park designate three days from both the
live Spring/Summer Meet and the Autumn Meeting as charity days. The charity day
payments are not to exceed 2/10 of 1.0% of the total live on-track pari-mutuel
handle for the respective race meet. Charity day payments must be made to a
distributing agent approved by the CHRB. The Company made charity day payments
of $310,000, $338,000 and $370,000 for the years ended December 31, 1997, 1996
and 1995, respectively.
Arizona racing law requires that 1.0% of the total in-state pari-mutuel
handle (on-track live pari-mutuel handle and off-track within the state pari-
mutuel handle) of three charity days be paid to a distributing agent approved
by the Arizona Racing Commission. The Arizona Department of Racing did not
assign any charity days in 1995, therefore no payments were required. Turf
Paradise paid $18,000 to the distributing agent in 1997, and paid $17,000 in
1996.
Hollywood Park Race Track conducts simulcast meets of live races held at
local southern California race tracks and simulcasts races from northern
California tracks concurrent with the Company's live race meets.
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Hollywood Park--simulcast racing
Pari-mutuel handle:
Thoroughbred meets................................ $371,716 $375,910 $379,263
Quarter Horse meets............................... 22,821 23,067 22,793
Harness meets..................................... 7,402 6,165 4,391
-------- -------- --------
$401,939 $405,142 $406,447
======== ======== ========
Pari-mutuel commissions:
Thoroughbred meets................................ $ 12,863 $ 12,669 $ 11,527
Quarter Horse meets............................... 449 454 457
Harness meets..................................... 144 120 86
-------- -------- --------
$ 13,456 $ 13,243 $ 12,070
======== ======== ========
</TABLE>
TRAK East at Sunflower operates year round simulcasting of both greyhounds
and horses. Pari-mutuel handle and commissions earned by TRAK East for the year
ended December 31, 1995 are as follows:
<TABLE>
<CAPTION>
1995
--------------
(in thousands)
<S> <C>
TRAK East at Sunflower--simulcast racing
Pari-mutuel handle:
Greyhounds................................................ $10,871
Horses.................................................... 29,600
-------
$40,471
=======
Pari-mutuel commission:
Greyhounds................................................ $ 2,342
Horses.................................................... 5,742
-------
$ 8,084
=======
</TABLE>
F-36
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Turf Paradise accepts simulcasts of live races from other tracks
concurrently with live on-track racing as well as operating as a simulcast site
for Prescott Downs between live meets. Turf Paradise also accepts simulcast
signals on the two dark days (days without live racing) a week during the live
on-track meet.
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Turf Paradise--simulcast racing
Pari-mutuel handle all meets........................... $60,493 $55,814 $55,093
Pari-mutuel commissions all meets...................... 5,020 4,768 3,909
</TABLE>
Note 10--Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 Accounting for Income Taxes, whereby deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
The composition of the Company's income tax expense for the years ended
December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- ------
(in thousands)
<S> <C> <C> <C>
Year ended December 31, 1997:
U.S. Federal...................................... $(1,616) $ 6,972 $5,356
State............................................. (698) 1,192 494
------- ------- ------
$(2,314) $ 8,164 $5,850
======= ======= ======
Year ended December 31, 1996:
U.S. Federal...................................... $ 4,341 $(1,681) $2,660
State............................................. (3,293) 4,092 799
------- ------- ------
$ 1,048 $ 2,411 $3,459
======= ======= ======
Year ended December 31, 1995:
U.S. Federal...................................... $ 0 $ 473 $ 473
State............................................. 42 178 220
------- ------- ------
$ 42 $ 651 $ 693
======= ======= ======
</TABLE>
The following table reconciles the Company's income tax expense (based on
its effective tax rate) to the federal statutory tax rate of 34%:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -----
(in thousands)
<S> <C> <C> <C>
Income (loss) before income tax expense, at the
statutory rate.................................... $4,935 $ (269) $(159)
Employee meals................................... 192 0 0
Goodwill amortization............................ 317 195 72
Political and lobbying costs..................... 246 291 353
State income taxes, net of federal tax benefits.. 494 800 145
Other non-deductible expenses.................... (334) 105 260
Additional provisions............................ 0 2,337 22
------ ------ -----
Income tax expense................................. $5,850 $3,459 $ 693
====== ====== =====
</TABLE>
F-37
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1997, and 1996, the tax effects of
temporary differences that gave rise to significant portions of the deferred
tax assets and deferred tax liabilities are presented below, along with a
summary of activity in the valuation allowance.
<TABLE>
<CAPTION>
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Current deferred tax assets:
Workers' compensation insurance reserve.................... $ 790 $ 790
General liability insurance reserve........................ 1,012 690
Legal accrual.............................................. 58 58
Write off of investment in Sunflower....................... 3,111 3,111
Development costs.......................................... 0 0
Lawsuit settlement......................................... 1,104 1,104
Vacation and sick pay accrual.............................. 872 270
Bad debt allowance......................................... 528 437
Other...................................................... 1,999 435
-------- --------
Current deferred tax assets................................ 9,474 6,895
Less valuation allowance................................... (306) (120)
-------- --------
Current deferred tax assets................................ 9,168 6,775
Current deferred tax liabilities:
Business insurance and other............................... (1,050) (353)
-------- --------
Net current deferred tax assets............................ $ 8,118 $ 6,422
======== ========
Non-current deferred tax assets:
Net operating loss carryforwards........................... $ 5,489 $ 0
General business investment tax credits.................... 828 36
Alternative minimum tax credits............................ 3,946 1,244
Los Angeles revitalization zone tax credits................ 11,798 9,299
Boomtown Merger costs...................................... 2,406 0
Capital loss divestiture of Boomtown Las Vegas............. 3,147 0
Other...................................................... 2,717 42
-------- --------
Non-current deferred tax assets............................ 30,331 10,621
Less valuation allowance................................... (13,524) (5,511)
-------- --------
Non-current deferred tax assets............................ 16,807 5,110
-------- --------
Non-current deferred tax liabilities:
Expansion plans............................................ (400) (400)
Los Angeles revitalization zone accelerated write-off...... (461) (461)
Excess book value over tax basis of acquired assets........ (4,048) 0
Depreciation and amortization.............................. (17,382) (10,580)
Other...................................................... (826) (2,734)
-------- --------
Non-current deferred tax liabilities....................... (23,117) (14,175)
-------- --------
Net non-current deferred tax liabilities................... $ (6,310) $ (9,065)
======== ========
</TABLE>
The Company is located in the Los Angeles revitalization tax zone and is
entitled to special state of California income tax credits related to sales tax
paid on operating materials and supplies, on construction assets and wages paid
to staff who reside within the zone. With the construction of the Hollywood
Park-Casino and Crystal Park, the Company earned substantial tax credits
related to sales tax paid on the assets acquired and on wages paid to
construction employees.
F-38
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
December 31,
--------------
1997 1996
------- ------
(in thousands)
<S> <C> <C>
Valuation allowance at beginning of period.................. $ 5,632 $5,330
Valuation allowance for Boomtown NOL carryforwards and tax
credits.................................................... 5,699 0
Los Angeles revitalization zone tax credit.................. 2,499 302
------- ------
Valuation allowance at end of period........................ $13,830 $5,632
======= ======
</TABLE>
As of December 31, 1997, the Company had federal net operating loss ("NOL")
and capital loss ("CL") carryforwards of approximately $17,800,000, and
$8,600,000, respectively, comprised principally of NOL carryforwards acquired
in the Boomtown Merger, and CL carryforwards resulting from the disposition of
Boomtown's Las Vegas property. The NOL carryforwards expire on various dates
through 2012, and the CL carryforwards expire on various dates through 2002. In
addition, the Company has approximately $400,000 of general business tax
credits, comprised principally of FICA credits, and approximately $3,800,000 of
alternative minimum tax credits available to reduce future federal income
taxes. These tax credits generally cannot reduce federal taxes paid below the
amount of alternative minimum tax. The general business tax credits expire in
2000. The alternative minimum tax credits do not expire.
Under several provisions of the Internal Revenue Code (the "Code") and the
regulations promulgated thereunder, the utilization of NOL, CL and tax credit
carryforwards to reduce tax liability is restricted under certain
circumstances. Events which cause such a limitation include, but are not
limited to, certain changes in the ownership of a corporation. The Boomtown
Merger caused such a change in ownership with respect to Boomtown. As a result,
the Company's use of approximately $14,800,000 of Boomtown's NOL carryforwards,
$1,400,000 of Boomtown's CL carryforwards, and $3,400,000 of Boomtown's tax
credit carryforwards is subject to certain limitations imposed by Sections 382
and 383 of the Code and by the separate return limitation year rules of the
consolidated return regulations. These limitations restrict the amount of such
carryforwards that may be used by the Company in any taxable year and,
consequently, are expected to defer the Company's use of a substantial portion
of such carryforwards and may ultimately prevent the Company's use of a portion
thereof. Therefore, a valuation allowance has been recorded related to the
Boomtown carryforwards.
For California tax purposes, as of December 31, 1997, the Company also had
approximately $11,700,000 of Los Angeles Revitalization Zone ("LARZ") tax
credits. The LARZ tax credits can only be used to reduce certain California tax
liability and cannot be used to reduce federal tax liability. A valuation
allowance has been recorded with respect to the LARZ tax credits because the
Company may not generate enough income subject to California tax to utilize the
LARZ tax credits before they expire.
Note 11--Stockholders' Equity
On June 30, 1997, the Company acquired Boomtown and each share of Boomtown
common stock was converted into the right to receive 0.625 of a share of
Hollywood Park's common stock. Approximately 5,362,850 net shares of Hollywood
Park common stock were issued. In connection with the Boomtown Merger, the
Company purchased and retired 446,491 shares of Hollywood Park common stock
received by a former Boomtown shareholder.
During 1996 the Company announced its intention to repurchase and retire up
to 2,000,000 shares of its common stock on the open market or in negotiated
transactions. As of December 31, 1996, the Company had repurchased and retired
(with the last purchase in 1996 made on November 13, 1996) 222,300 common
shares at a cost of approximately $1,962,000.
F-39
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 12--Lease Obligations
The Company leases certain equipment for use in gaming and racing operations
and general office equipment. Minimum lease payments required under operating
leases that have initial terms in excess of one year as of December 31, 1997
are as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1998..................................... $1,870
1999..................................... 1,104
2000..................................... 422
2001..................................... 380
2002..................................... 366
Thereafter............................... 529
</TABLE>
Total rent expense for these long term lease obligations for the years ended
December 31, 1997, 1996 and 1995 was $2,453,000, $1,378,000, and $1,318,000,
respectively.
Note 13--Retirement Plans
As of January 31, 1997, Hollywood Park terminated its Pension Plan, which
was a non-contributory defined benefit Pension Plan covering certain employees
of Hollywood Park, Inc. and Hollywood Park Operating Company. Pension Plan
participants' accrued Pension Plan benefits were frozen as of September 1,
1996, except for certain retained participants (participants who, because of
legal requirements, including the provisions of the National Labor Relations
Act, were represented by a collective bargaining agent), whose accrued Pension
Plan benefits were frozen as of December 31, 1996. The funds accumulated under
the Pension Plan were distributed to the Pension Plan participants, and no
Pension Plan assets were paid to the Company. During 1996, the Pension Plan was
subject to the full funding limitation and thus no contributions were made.
Retirement Plans Funded Status
<TABLE>
<CAPTION>
December 31,
-------------
1997 1996
----- -------
(in
thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of
$2,627,000 at December 31, 1996.............................. $0 $ 2,627
===== =======
Projected benefit obligation for service rendered to date....... $0 $ 2,627
Less Pension Plan assets at fair value.......................... 0 4,436
Less Pension Plan contribution.................................. 0 0
----- -------
Pension Plan assets in excess of projected benefit obligation... 0 1,809
Unrecognized net gain from past experience different from that
assumed and effects of changes in assumptions.................. 0 (1,052)
Unrecognized net asset being recognized over 15 years........... 0 (452)
----- -------
Pension Plan asset.............................................. $0 $ 305
===== =======
Net pension expense--Service cost............................... $0 $ 698
Net pension expense--Interest cost.............................. 0 325
Actual return on assets......................................... 0 (784)
Net amortization and deferral................................... 0 255
----- -------
Net periodic pension cost....................................... $0 $ 494
===== =======
</TABLE>
F-40
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The December 31, 1996, reserve liabilities and related asset values for the
annuity contract were not included in the table above, because the Company
executed an agreement with the insurance company holding the annuity contracts
to no longer participate in the annual adjustments to the contract values.
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligations was 8.0% at December 31, 1996. The
expected long term rate of return on assets was 8.0% at December 31, 1996.
The Company also contributed to several collectively-bargained multi-
employer pension and retirement plans (covering full and part-time employees)
which are administered by unions, and to a pension plan covering non-union
employees which is administered by an association of race track owners. Amounts
charged to pension cost and contributed to these plans for the years ended
December 31, 1997, 1996 and 1995 totaled $1,842,000, $1,872,000, and
$1,781,000, respectively. Contributions to the collectively-bargained plans
were determined in accordance with the provisions of negotiated labor contracts
and generally are based on the number of employee hours or days worked.
Contributions to the non-union plans are based on the covered employees'
compensation.
Information from the plans administrators was not available to permit the
Company to determine its share of unfunded vested benefits or prior service
liability. It is the opinion of management that no material liability exists.
Effective January 31, 1997, in conjunction with the termination of the
Pension Plan, Hollywood Park elected to terminate its non-qualified
Supplementary Employment Retirement Plan ("SERP"). The SERP was an unfunded
plan, established primarily for the purpose of restoring the retirement
benefits for highly compensated employees that were eliminated by the Internal
Revenue Service in 1994, when the maximum annual earnings allowed for qualified
pension plans was reduced to $150,000 from $235,850. Messers, Hubbard, Finnigan
and Robbins participated in the SERP prior to its termination.
Note 14--Related Party Transactions
In November 1993, Hollywood Park entered into an aircraft time sharing
agreement with R.D. Hubbard Enterprises, Inc. ("Hubbard Enterprises"), which is
wholly owned by Mr. Hubbard. The agreement automatically renews each month
unless written notice of termination is given by either party at least two
weeks before a renewal date. Hollywood Park reimburses Hubbard Enterprises for
expenses incurred as a result of Hollywood Park's use of the aircraft, which
totaled approximately $106,000 in 1997, $120,000 in 1996, and $126,000 in 1995.
In May 1988, Boomtown acquired all of the outstanding stock of Boomtown
Hotel & Casino, Inc. which owns and operates Boomtown Reno for $16,700,000 in
cash (the "1988 Acquisition"). In order to finance the 1988 Acquisition,
including the retirement of existing debt, Boomtown sold equity securities to
Kenneth Rainin and Timothy J. Parrott, and Boomtown Reno entered into various
loan documents with Merrill Lynch Interfunding, Inc. Pursuant to a stock
purchase agreement, Mr. Rainin purchased 2,000 shares of Boomtown preferred
stock and 3,042,000 shares of Boomtown common stock for an aggregate purchase
price of approximately $4,000,000 in cash, and Mr. Parrott purchased 270,738
shares of Boomtown common stock for an aggregate purchase price of $222,000, of
which $1,000 was paid in cash and $221,000 by a promissory note (the "Parrott
Note") secured by a pledge to Boomtown of all of the shares owned by Mr.
Parrott. The Parrott Note, as amended in April 1997, provides that (I) interest
on the Parrott Note, which accrues at a rate of 6.0% per annum, compounded
annually, is payable in arrears on April 7th of each year, commencing April 7,
1998, and (ii) principal is payable in four annual installments beginning April
7, 1998. The Parrott Note was previously amended in November 1994 to provide
that the shares owned by Mr. Parrott would be released from the pledge and
would no longer secure the amounts outstanding under the Parrott Note.
Hollywood Park notes
F-41
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
that the interest rate of 6% under the amended Parrott Note is less than
Hollywood Park's current borrowing rate. However, this interest rate was in
effect under the original version of the Parrott Note executed in 1988 prior to
Boomtown's public offering and Hollywood Park's subsequent acquisition of
Boomtown.
With the exception of the interest rate on the Parrott Note, Hollywood Park
believes that the terms of the following transactions were at least as
favorable as could have been obtained by Hollywood Park from third parties in
arms length transactions.
Note 15--Stock Option Plan
In 1996, the shareholders of the Company adopted the 1996 Stock Option Plan
(the "1996 Plan"), which provides for the issuance of up to 900,000 shares.
Except for the provisions governing the number of shares issuable under the
1996 Plan and except for provisions which reflect changes in tax and securities
laws, the provisions of the 1996 Plan are substantially similar to the
provision of the prior plan adopted in 1993. The 1996 Plan is administered and
terms of option grants are established by the Board of Directors' Compensation
Committee. Under the terms of the 1996 Plan, options alone or coupled with
stock appreciation rights may be granted to selected key employees, directors,
consultants and advisors of the Company. Options become exercisable ratably
over a vesting period as determined by the Compensation Committee and expire
over terms not exceeding ten years from the date of grant, one month after
termination of employment, or six months after the death or permanent
disability of the optionee. The purchase price for all shares granted under the
1996 Plan shall be determined by the Compensation Committee, but in the case of
incentive stock options, the price will not be less than the fair market value
of the common stock at the date of grant. On April 26, 1996, the Company
amended the non-qualified stock option agreements issued through this date, to
lower the per share price of the outstanding options to $10.00. On May 19,
1995, the Company amended the non-qualified stock option agreements issued
through this date, to reflect the substantial decline in the fair market value
of the common stock, lowering the per share price of the outstanding options to
$13.00.
As of December 31, 1997, all of the 625,000 shares eligible for issuance
under the 1993 Plan had either been issued or were subject to outstanding
options, and of the 900,000 shares eligible for issuance under the 1996 Plan,
40,000 were subject to outstanding options. In addition, 1,008,454 shares of
Hollywood Park common stock were issuable upon exercise of options granted
before the Boomtown Merger under Boomtown's 1990 Stock Option Plan and the 1992
Director Option Plan, these options were assumed by Hollywood Park in the
Boomtown Merger.
The following table summarizes information related to shares under option
and shares available for grant under the Plan.
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- -------
<S> <C> <C> <C>
Options outstanding at beginning of year.... 622,500 249,000 235,000
Options granted during the year............. 261,000 413,500 15,000
Options expired or forfeited during the
year....................................... (26,001) (40,000) (1,000)
--------- --------- -------
Options outstanding at end of year.......... 857,499 622,500 249,000
========= ========= =======
Shares available for issuance under the 1993
Plan....................................... 625,000 625,000 625,000
Shares available for issuance under the 1996
Plan....................................... 900,000 900,000 0
--------- --------- -------
Total shares available for issuance....... 1,525,000 1,525,000 625,000
========= ========= =======
Per share price of outstanding options
issued in prior year....................... $ 10.00 $ 10.00 $ 13.00
Per share price of outstanding options
issued in prior year....................... $ 11.50 $ 10.00 $ 13.25
Per share price of outstanding options
issued in current year..................... $ 14.75 $ 11.50 --
Number of shares subject to exercisable
options at end of year..................... 696,813 188,332 128,000
</TABLE>
F-42
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 16--Commitments and Contingencies
On August 6, 1997, Hollywood Park and Hollywood Park Operating Company, as
co-obligors, issued $125,000,000 of Notes (as previously discussed). The Notes
are fully and unconditionally, jointly and severally, guaranteed on a senior
subordinated basis by all of Hollywood Park's material subsidiaries.
Note 17--Unaudited Quarterly Information
The following is a summary of unaudited quarterly financial data for the
years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997
--------------------------------
Dec. Sept. June
31, 30, 30, Mar. 31,
------- ------- ------- --------
(in thousands, except per share
data)
<S> <C> <C> <C> <C>
Revenues................................. $89,779 $85,210 $46,324 $ 26,815
======= ======= ======= ========
Net income (loss)........................ $ 1,551 $ 2,411 $ 5,603 $ (895)
======= ======= ======= ========
Net income (loss) available to (allocated
to) common shareholders................. $ 1,551 $ 1,853 $ 5,122 $ (1,376)
======= ======= ======= ========
Per common share:
Net income (loss)--basic............... $ 0.06 $ 0.08 $ 0.28 $ (0.07)
======= ======= ======= ========
Net income (loss)--diluted............. $ 0.06 $ 0.08 $ 0.27 $ (0.07)
======= ======= ======= ========
Cash dividends........................... $ 0.00 $ 0.00 $ 0.00 $ 0.00
======= ======= ======= ========
<CAPTION>
1996
--------------------------------
Dec. Sept. June
31, 30, 30, Mar. 31,
------- ------- ------- --------
(in thousands, except per share
data)
<S> <C> <C> <C> <C>
Revenues................................. $38,698 $30,247 $46,427 $ 27,853
======= ======= ======= ========
Net income (loss)........................ $ 3,277 $ 603 $ 5,249 $(13,378)
======= ======= ======= ========
Net income (loss) available to (allocated
to) common shareholders................. $ 2,795 $ 122 $ 4,768 $(13,859)
======= ======= ======= ========
Per common share:
Net income (loss)--basic............... $ 0.15 $ 0.01 $ 0.26 $ (0.74)
======= ======= ======= ========
Net income (loss)--diluted............. $ 0.15 $ 0.01 $ 0.25 $ (0.74)
======= ======= ======= ========
Cash dividends......................... $ 0.00 $ 0.00 $ 0.00 $ 0.00
======= ======= ======= ========
</TABLE>
The primary reason for the loss for the quarter ended March 31, 1996, was
the $11,346,000 write off of the Company's investment in Sunflower.
Historically, the three months ended March 31, produce a loss, because the
Company does not operate live on-track racing at Hollywood Park Race Track.
Note 18--Consolidating Condensed Financial Information
Hollywood Park's subsidiaries (excluding Sunflower and other inconsequential
subsidiaries) have fully and unconditionally guaranteed the payment of all
obligations under the Hollywood Park 9.5% Senior Subordinated Notes due 2007.
The following is the consolidating financial information for the co-obligors
and their respective subsidiaries:
F-43
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hollywood Park, Inc.
Consolidating Condensed Financial Information
As of and For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Hollywood (b) (c)
Hollywood Park (a) Majority Wholly Consolidating
Park, Inc. Operating Wholly Owned Owned Owned Non- and Hollywood
(Parent Co. Guarantor Guarantor Guarantor Eliminating Park, Inc.
co-obligor) (co-obligor) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ------------ ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
As of and for the year
ended Dec. 31, 1997
Balance Sheet
Current assets.......... $ 19,844 $ 8,568 $ 25,074 $ 6,720 $ 0 $ 0 $ 60,206
Property, plant and
equipment, net......... 68,515 23,753 140,105 68,293 0 0 300,666
Other non-current
assets................. 22,306 0 29,320 7,611 0 (1,080) 58,157
Investment in
subsidiaries........... 126,121 15,132 116,020 0 0 (257,273) 0
Inter-company........... 125,210 148,380 122,035 0 0 (395,625) 0
-------- --------- --------- ------- --- --------- --------
$361,996 $ 195,833 $ 432,554 $82,624 $ 0 $(653,978) $419,029
======== ========= ========= ======= === ========= ========
Current liabilities..... $ 16,890 $ 14,232 $ 19,583 $ 6,612 $ 0 $ 0 $ 57,317
Notes payable, long
term................... 2,406 125,256 1,936 2,504 0 0 132,102
Other non-current
liabilities............ 4,753 5,202 83 0 0 (3,728) 6,310
Inter-company........... 146,145 21,589 178,448 49,443 0 (395,625) 0
Minority interest....... 0 0 0 0 0 1,946 1,946
Equity.................. 191,802 29,554 232,504 24,065 0 (256,571) 221,354
-------- --------- --------- ------- --- --------- --------
$361,996 $ 195,833 $ 432,554 $82,624 $ 0 $(653,978) $419,029
======== ========= ========= ======= === ========= ========
Statement of Operations
Revenues:
Gaming................. $ 50,820 $ 0 $ 58,622 $28,217 $ 0 $ 0 $137,659
Racing................. 0 39,930 28,914 0 0 0 68,844
Food and beverage...... 4,659 0 13,483 1,752 0 0 19,894
Equity in
subsidiaries.......... 13,963 3,735 (43) 0 0 (17,655) 0
Inter-company.......... 0 0 4,823 0 0 (4,823) 0
Other.................. 4,601 1,808 13,789 1,533 0 0 21,731
-------- --------- --------- ------- --- --------- --------
74,043 45,473 119,588 31,502 0 (22,478) 248,128
Expenses:
Gaming................. 28,353 0 32,370 14,010 0 0 74,733
Racing................. 0 17,822 12,482 0 0 0 30,304
Food and beverage...... 9,658 0 13,784 2,303 0 0 25,745
Administrative and
other................. 18,282 14,536 33,277 8,792 0 0 74,887
REIT restructuring..... 2,483 0 0 0 0 0 2,483
Depreciation and
amortization.......... 4,632 3,804 6,229 3,459 0 33 18,157
-------- --------- --------- ------- --- --------- --------
63,408 36,162 98,142 28,564 0 33 226,309
-------- --------- --------- ------- --- --------- --------
Operating income
(loss)................. 10,635 9,311 21,446 2,938 0 (22,511) 21,819
Interest expense........ 1,789 5,368 (37) 182 0 0 7,302
Inter-company interest.. 0 0 2,244 2,579 0 (4,823) 0
-------- --------- --------- ------- --- --------- --------
Income (loss) before
minority interests and
taxes.................. 8,846 3,943 19,239 177 0 (17,688) 14,517
Minority interests...... 0 0 0 0 0 (3) (3)
Income tax expense...... 4,124 0 1,726 0 0 0 5,850
-------- --------- --------- ------- --- --------- --------
Net income (loss)....... $ 4,722 $ 3,943 $ 17,513 $ 177 $ 0 $ (17,685) $ 8,670
======== ========= ========= ======= === ========= ========
Statement of Cash Flows:
Net cash provided by
(used in) operating
activities............ $ 19,559 $(117,960) $ 129,260 $ 5,250 $ 0 $ (17,655) $ 18,454
Net cash provided by
(used in) investing
activities............ 14,747 (3,139) (23,516) (4,328) 0 0 (16,236)
Net cash provided by
(used in) financing
activities............ 475 124,975 (114,345) (2,373) 0 877 9,609
</TABLE>
F-44
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hollywood Park, Inc.
Consolidating Condensed Financial Information
As of and For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Hollywood (b) (c)
Hollywood Park (a) Majority Wholly Consolidating
Park, Inc. Operating Wholly Owned Owned Owned Non- and Hollywood
(Parent Co. Guarantor Guarantor Guarantor Eliminating Park, Inc.
co-obligor) (co-obligor) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ------------ ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
As of and for the year
ended Dec. 31, 1996
Balance Sheet
Current assets.......... $ 23,522 $ 7,362 $ 9,646 $ 429 $ 0 $ 0 $ 40,959
Property, plant and
equipment, net......... 70,443 24,353 12,786 23,253 0 0 130,835
Other non-current
assets................. 23,322 0 5,108 5,662 0 0 34,092
Investment in
subsidiaries........... 28,723 45,432 23,852 0 0 (98,007) 0
Inter-company........... 72,099 11,386 0 0 0 (83,485) 0
-------- ------- ------- ------- ------- --------- --------
$218,109 $88,533 $51,392 $29,344 $ 0 $(181,492) $205,886
======== ======= ======= ======= ======= ========= ========
Current liabilities..... $ 16,324 $ 7,032 $11,807 $ 201 $ 0 $ 0 $ 35,364
Notes payable, long
term................... 0 282 0 0 0 0 282
Other non-current
liabilities............ 3,859 5,206 0 0 0 0 9,065
Inter-company........... 39,851 50,479 7,677 0 0 (98,007) 0
Minority interest....... 0 0 0 0 0 3,015 3,015
Equity.................. 158,075 25,534 31,908 29,143 0 (86,500) 158,160
-------- ------- ------- ------- ------- --------- --------
$218,109 $88,533 $51,392 $29,344 $ 0 $(181,492) $205,886
======== ======= ======= ======= ======= ========= ========
Statement of Operations
Revenues:
Gaming................. $ 50,272 $ 0 $ 0 $ 445 $ 0 $ 0 $ 50,717
Racing................. 0 41,423 28,568 0 1,317 0 71,308
Food and beverage...... 4,956 0 8,533 0 458 0 13,947
Equity in
subsidiaries.......... 1,751 3,408 0 0 0 (5,159) 0
Other.................. 4,993 1,915 338 0 7 0 7,253
-------- ------- ------- ------- ------- --------- --------
61,972 46,746 37,439 445 1,782 (5,159) 143,225
-------- ------- ------- ------- ------- --------- --------
Expenses:
Gaming................. 27,249 0 0 0 0 0 27,249
Racing................. 0 17,999 11,903 0 265 0 30,167
Food and beverage...... 10,930 0 8,235 0 408 0 19,573
Administrative and
other................. 18,316 15,059 9,556 1 1,030 0 43,962
Write off of investment
in Sunflower.......... 11,412 0 0 0 0 0 11,412
Depreciation and
amortization.......... 4,665 3,645 1,479 319 536 51 10,695
-------- ------- ------- ------- ------- --------- --------
72,572 36,703 31,173 320 2,239 51 143,058
-------- ------- ------- ------- ------- --------- --------
Operating income
(loss)................. (10,600) 10,043 6,266 125 (457) (5,210) 167
Interest expense........ 134 27 0 0 781 0 942
-------- ------- ------- ------- ------- --------- --------
Income (loss) before
minority interests and
taxes.................. (10,734) 10,016 6,266 125 (1,238) (5,210) (775)
Minority interests...... 0 0 0 0 0 15 15
Income tax expense...... 3,421 0 38 0 0 0 3,459
-------- ------- ------- ------- ------- --------- --------
Net income (loss)....... $(14,155) $10,016 $ 6,228 $ 125 $(1,238) $ (5,225) $ (4,249)
======== ======= ======= ======= ======= ========= ========
Statement of Cash Flows:
Net cash provided by
(used in) operating
activities............ $ (6,205) $ 4,956 $ 2,426 $ 200 $(3,588) $ 15,888 $ 13,677
Net cash used in
investing activities.. (963) (5,992) (354) 0 0 (12,584) (19,893)
Net cash used in
financing activities.. (4,245) (23) 0 0 0 0 (4,268)
</TABLE>
F-45
<PAGE>
HOLLYWOOD PARK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Hollywood Park, Inc.
Consolidating Condensed Financial Information
As of and For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Hollywood (b) (c)
Hollywood Park (a) Majority Wholly Consolidating
Park, Inc. Operating Wholly Owned Owned Owned Non- and Hollywood
(Parent Co. Guarantor Guarantor Guarantor Eliminating Park, Inc.
co-obligor) (co-obligor) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ------------ ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
As of and for the year
ended Dec. 31, 1995
Statement of Operations
Revenues:
Gaming................. $ 26,656 $ 0 $ 0 $ 0 $ 0 $ 0 $ 26,656
Racing................. 0 42,648 27,542 0 6,846 0 77,036
Food and beverage...... 7,422 0 9,489 0 2,872 0 19,783
Equity in
subsidiaries.......... (3,610) 1,983 0 0 0 1,627 0
Other.................. 2,420 4,176 444 0 57 0 7,097
-------- ------- ------- --- ------- ------- --------
32,888 48,807 37,475 0 9,775 1,627 130,572
-------- ------- ------- --- ------- ------- --------
Expenses:
Gaming................. 5,291 0 0 0 0 0 5,291
Racing................. 0 16,745 12,830 0 1,385 0 30,960
Food and beverage...... 12,964 0 9,288 0 2,497 0 24,749
Administrative and
other................. 16,411 17,746 9,184 0 5,306 0 48,647
Lawsuit settlement..... 6,088 0 0 0 0 0 6,088
Depreciation and
amortization.......... 3,887 3,236 1,586 0 2,468 207 11,384
-------- ------- ------- --- ------- ------- --------
44,641 37,727 32,888 0 11,656 207 127,119
-------- ------- ------- --- ------- ------- --------
Operating income
(loss)................. (11,753) 11,080 4,587 0 (1,881) 1,420 3,453
Interest expense........ 172 29 30 0 3,691 0 3,922
-------- ------- ------- --- ------- ------- --------
Income (loss) before
taxes.................. (11,925) 11,051 4,557 0 (5,572) 1,420 (469)
Income tax expense...... 510 0 182 0 1 0 693
-------- ------- ------- --- ------- ------- --------
Net income (loss)....... $(12,435) $11,051 $ 4,375 $ 0 $(5,573) $ 1,420 $ (1,162)
======== ======= ======= === ======= ======= ========
Statement of Cash Flows:
Net cash provided by
(used in) operating
activities............ $ 2,575 $11,864 $ 2,794 $ 0 $ 1,431 $ 1,627 $ 20,291
Net cash provided by
(used in) investing
activities............ (40,218) (5,371) (1,831) 0 0 14,498 (32,922)
Net cash provided by
(used in) financing
activities............ 1,433 21 (1,913) 0 (1,626) 0 (2,085)
</TABLE>
- -------
(a) The following wholly owned guarantor subsidiaries were included in each
period presented: Turf Paradise, Inc., Hollywood Park Food Services, Inc.,
and Hollywood Park Fall Operating Company. As of and for the year ended
December 31, 1997, the following wholly owned guarantor subsidiaries were
also included: HP Yakama, Inc., Boomtown, Inc., Boomtown Hotel & Casino,
Inc., Louisiana--I Gaming, HP/Compton, Inc. (included as of October 1996)
and Louisiana Gaming Enterprises, Inc. Due to the June 30, 1997, Boomtown
Merger being accounted for under the purchase method of accounting for a
business combination, the financial results as of and for the year ended
December 31, 1997, included Boomtown, Inc.'s, Boomtown Hotel & Casino,
Inc.'s, Louisiana--I Gaming's, and Louisiana Gaming Enterprises, Inc.'s
financial results for the six months ended December 31, 1997, only.
(b) The Company's majority owned guarantor subsidiaries are Crystal Park Hotel
and Casino Development Company, LLC (which as of December 31, 1997, became
a wholly owned subsidiary) and Mississippi--I Gaming, L.P., (which was
added as of the June 30, 1997, Boomtown Merger). As a result of the
Boomtown Merger, Mississippi--I Gaming, L.P.'s financial results are
included for the six months ended December 31, 1997, only.
(c) Sunflower Racing, Inc. and its wholly owned subsidiary, SR Food and
Beverage, Inc., were the Company's only wholly owned non-guarantor
subsidiaries with material financial activity during the periods presented.
As of March 31, 1996, the financial results of these two wholly owned non-
guarantor subsidiaries were no longer consolidated with the Company's
financial results, due to the write off of Hollywood Park's investment in
these subsidiaries. All other wholly owned non-guarantor subsidiaries are
either empty companies established for potential development projects that
were subsequently abandoned, or the subsidiary's financial activity was
immaterial.
F-46
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Allowance for bad debts:
Balance as of December 31, 1994.................................. $ (159)
Charges to expense............................................. (2,294)
Write offs..................................................... 612
-------
Balance as of December 31, 1995.................................. (1,841)
Charges to expense(a).......................................... (783)
Write offs..................................................... 1,535
-------
Balance as of December 31, 1996.................................. (1,089)
Add Boomtown balance as of June 30, 1997(b).................... (225)
Charges to expense............................................. (189)
Write offs..................................................... 754
-------
Balance as of December 31, 1997.................................. $ (749)
=======
</TABLE>
- --------
(a) Hollywood Park assumed the bad debt allowance related to the Hollywood
Park-Casino gaming business in the November 17, 1995, acquisition of PCM.
(b) Hollywood Park acquired Boomtown as of June 30, 1997.
F-47
<PAGE>
HOLLYWOOD PARK, INC.
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the three months ended December 31,
------------------------------------------------
Basic Diluted
----------------------- -----------------------
1997 1996 1995 1997 1996 1995
------- ------- ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Average number of common
shares outstanding.......... 26,209 18,365 18,486 26,705 18,365 18,486
Average common shares due to
assumed conversion of
convertible preferred
shares...................... 0 0 0 0 2,291 2,291
------- ------- ------- ------- ------- -------
Total shares................. 26,209 18,365 18,486 26,705 20,656 20,777
======= ======= ======= ======= ======= =======
Net income................... $ 1,551 $ 3,277 $ 212 $ 1,551 $ 3,277 $ 212
Less dividend requirements on
convertible preferred
shares...................... 0 482 482 0 0 0
------- ------- ------- ------- ------- -------
Net income (loss) available
to (allocated to) common
shareholders................ $ 1,551 $ 2,795 $ (270) $ 1,551 $ 3,277 $ 212
======= ======= ======= ======= ======= =======
Net income (loss) per share.. $ 0.06 $ 0.15 $ (0.01) $ 0.06 $ 0.16 $ 0.01
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------------------
Basic Diluted
------------------------ ------------------------
1997 1996 1995 1997 1996 1995
------- ------- ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Average number of common
shares outstanding........ 22,010 18,505 18,399 22,340 18,505 18,399
Average common shares due
to assumed conversion of
convertible preferred
shares.................... 0 0 0 0 2,291 2,291
------- ------- ------- ------- ------- -------
Total shares............... 22,010 18,505 18,399 22,340 20,796 20,690
======= ======= ======= ======= ======= =======
Net income (loss).......... $ 8,670 $(4,249) $(1,162) $ 8,670 $(4,249) $(1,162)
Less dividend requirements
on convertible preferred
shares.................... 1,520 1,925 1,925 1,520 0 0
------- ------- ------- ------- ------- -------
Net income (loss)
attributable to (allocated
to) common shareholders... $ 7,150 $(6,174) $(3,087) $ 7,150 $(4,249) $(1,162)
======= ======= ======= ======= ======= =======
Net income (loss) per
share..................... $ 0.33 $ (0.33) $ (0.17) $ 0.32 $ (0.20) $ (0.06)
======= ======= ======= ======= ======= =======
</TABLE>
- --------
Note: As of August 28, 1997, the Company's 2,749,900 outstanding depositary
shares were converted into 2,291,492 shares of the Company's common stock.
F-48
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September
30, December 31,
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents........................ $ 25,295,310 $ 20,986,510
Restricted marketable securities................. 1,599,185 10,629,405
Other current assets............................. 7,419,491 8,124,872
------------ ------------
Total current assets............................. 34,313,986 39,740,787
Property and equipment, net...................... 290,070,366 263,993,452
Other long term assets........................... 63,153,166 68,970,578
------------ ------------
$387,537,518 $372,704,817
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities................................ $ 56,129,525 $ 51,031,097
Other long term liabilities and minority interest.. 8,295,675 8,748,212
Long term debt, net of current maturities.......... 260,907,007 253,471,219
Shareholders' Equity:
Common stock, $0.01 par, 50,000,000 shares
authorized, 35,722,124 issued and outstanding... 357,221 357,221
Undesignated stock, 2,500,000 shares authorized,
none issued..................................... 0 0
Additional paid in capital....................... 67,122,856 67,122,852
Retained deficit................................. (5,182,721) (7,762,270)
Less unearned compensation....................... (92,045) (263,514)
------------ ------------
62,205,311 59,454,289
------------ ------------
$387,537,518 $372,704,817
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
F-49
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended
September 30,
------------------------
1998 1997
----------- -----------
(unaudited)
<S> <C> <C>
Revenues:
Casino............................................ $72,680,370 $62,680,205
Food and beverage................................. 2,634,965 2,404,469
Rooms............................................. 1,387,192 328,578
Other operating income............................ 1,188,888 1,081,882
----------- -----------
Total revenues.................................. 77,891,415 66,495,134
----------- -----------
Costs and expenses:
Casino............................................ 36,807,824 30,658,015
Food and beverage................................. 3,300,242 1,767,142
Rooms............................................. 674,773 140,554
Other operating costs and expenses................ 778,737 1,017,571
Advertising and marketing......................... 8,627,711 7,112,014
General and administrative........................ 6,011,762 6,181,399
Hollywood Park/Casino Magic merger costs.......... 4,838,200 0
Property operation, maintenance and energy cost... 3,100,368 2,625,158
Rents, property taxes and insurance............... 2,273,863 1,906,446
Development expenses.............................. 211,010 56,750
Depreciation and amortization..................... 5,710,806 4,905,523
----------- -----------
Total costs and expenses........................ 72,335,296 56,370,572
----------- -----------
Income from operations.............................. 5,556,119 10,124,562
----------- -----------
Other (Income) Expenses:
Equity loss from unconsolidated subsidiary........ 104,929 176,005
Interest expense, net............................. 8,452,613 7,954,345
Loss (gain) from sale of assets................... 154,733 (1,337,687)
Other............................................. (1,111,410) (57,828)
----------- -----------
Total other expense............................. 7,600,865 6,734,835
----------- -----------
Income (loss) before income taxes and minority
interest of subsidiary............................. (2,044,746) 3,389,727
Income tax expense.................................. 341,034 0
Minority interest................................... 230,189 715,023
----------- -----------
Net income (loss)................................... $(2,615,969) $ 2,674,704
=========== ===========
Net income (loss) per common share:
Basic............................................. $ (0.07) $ 0.07
=========== ===========
Diluted........................................... $ (0.07) $ 0.07
=========== ===========
Average shares and equivalents outstanding:
Basic............................................. 35,722,124 35,654,174
=========== ===========
Diluted........................................... 35,722,124 35,735,741
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
F-50
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------------------
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
Revenues:
Casino........................................... $210,889,320 $186,411,356
Food and beverage................................ 7,738,947 7,391,186
Rooms............................................ 2,948,279 1,103,592
Other operating income........................... 3,812,725 3,327,423
------------ ------------
Total revenues................................. 225,389,271 198,233,557
------------ ------------
Costs and expenses:
Casino........................................... 100,672,992 88,899,256
Food and beverage................................ 9,033,811 8,364,166
Rooms............................................ 1,355,063 509,219
Other operating costs and expenses............... 2,965,292 3,326,192
Advertising and marketing........................ 26,593,631 28,517,336
General and administrative....................... 19,811,647 20,261,984
Hollywood Park/Casino Magic merger costs......... 4,838,200 0
Property operation, maintenance and energy cost.. 8,581,279 8,669,605
Rents, property taxes and insurance.............. 6,724,510 5,866,014
Development expenses............................. 430,858 511,882
Depreciation and amortization.................... 16,058,414 15,258,905
------------ ------------
Total costs and expenses....................... 197,065,697 180,184,559
------------ ------------
Income from operations............................. 28,323,574 18,048,998
------------ ------------
Other (Income) Expenses:
Equity loss from unconsolidated subsidiary....... 349,236 405,066
Interest expense, net............................ 23,432,882 23,703,909
Loss (gain) from sale of assets.................. 154,733 (2,578,231)
Other............................................ 0 (244,461)
------------ ------------
Total other expense............................ 23,936,851 21,286,283
------------ ------------
Income (loss) before income taxes and minority
interest of subsidiary............................ 4,386,723 (3,237,285)
Income tax expense (benefit)....................... 1,453,207 (1,935,000)
Minority interest.................................. 1,081,962 916,535
------------ ------------
Net income (loss).................................. $ 1,851,554 $ (2,218,820)
============ ============
Net income (loss) per common share:
Basic............................................ $ 0.05 $ (0.06)
============ ============
Diluted.......................................... $ 0.05 $ (0.06)
============ ============
Average shares and equivalents outstanding:
Basic............................................ 35,722,124 35,642,780
============ ============
Diluted.......................................... 35,722,124 35,642,780
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
F-51
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
September 30,
--------------------------
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
Cash flows from Operating Activities:
Net income (loss)................................ $ 1,851,554 $ (2,218,828)
Adjustments for non-cash charges................. 31,074,459 14,574,699
Changes in assets and liabilities................ (9,733,526) 5,728,959
------------ ------------
Net Cash Provided by Operating Activities.......... 23,192,487 18,084,830
------------ ------------
Cash Flows from Investing Activities:
Acquisitions of property and equipment........... (33,789,422) (28,996,109)
Proceeds from sale of subsidiary and property and
equipment....................................... 0 19,833,971
Decrease in marketable securities................ 9,030,220 0
Other, net....................................... 2,068,230 145,313
------------ ------------
Net Cash Used in Investing Activities.............. (22,690,972) (9,016,825)
------------ ------------
Cash Flows from Financing Activities:
Principal payments on notes payable and long term
debt............................................ (6,410,856) (12,285,515)
Net proceeds from issuance of long term debt..... 10,270,979 6,514,988
Other, net....................................... (52,837) (346,958)
------------ ------------
Net Cash Provided by (Used in) Financing
Activities........................................ 3,807,286 (6,117,485)
------------ ------------
Net Increase in Cash and Cash Equivalents.......... 4,308,801 2,950,520
Cash and Cash Equivalents, Beginning of Period..... 20,986,510 34,546,166
------------ ------------
Cash and Cash Equivalents, End of Period........... $ 25,295,311 $ 37,496,686
============ ============
Supplemental Cash Flow Information
Cash Paid During the Period for:
Interest (net of amount capitalized)........... $ 21,678,773 $ 25,104,711
Income taxes (net of refunds).................. 0 (6,382,324)
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Property and equipment and other asset
acquisitions included in accounts and
construction payable and accrued expenses....... 6,404,228 1,658,604
Property and equipment financed with long term
debt............................................ 6,142,215 946,004
Common stock grants to officers.................. 0 171,469
</TABLE>
See notes to condensed consolidated financial statements.
F-52
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with Respect to the Three and Nine Months Ended
September 30, 1998 and 1997 is Unaudited)
1. Summary of significant accounting policies:
Organization and basis of presentation:
Casino Magic Corp. and Subsidiaries is an international gaming company with
operations in Bay Saint Louis, Mississippi ("Casino Magic Bay St. Louis"),
Biloxi, Mississippi ("Casino Magic Biloxi"), Bossier City, Louisiana ("Casino
Magic Bossier"), and the Argentina Province of Neuquen in the cities of Neuquen
City and San Martin de los Andes ("Casino Magic Argentina").
Unless the context requires otherwise, reference in this report to the
"Company" means Casino Magic Corp. and its relevant subsidiaries, and reference
to "Casino Magic" means Casino Magic Corp.
The consolidated financial statements include the accounts of Casino Magic
and its wholly-owned and majority-owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated.
The accompanying unaudited consolidated financial statements contain all
adjustments which are, in the opinion of management, necessary for a fair
statement of the results of the interim periods. The results of operations for
the interim periods are not necessarily indicative of results of operations for
an entire year. It is suggested that these consolidated financial statements be
read in conjunction with the consolidated financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, and Form 10-Q for June 30, 1998.
Certain reclassifications have been made to 1997 amounts to conform with the
September 30, 1998 presentation.
2. New Accounting Pronouncements
(a) Accounting for Start-Up Costs:
During April 1998, the Accounting Standards Executive Committee of the AICPA
issued Statement of Position 98-5 ("SOP"), "Reporting on the Costs of Start-Up
Activities." The SOP requires costs of start-up activities and organization
costs to be expensed as incurred. The SOP is effective for financial statements
for fiscal years beginning after December 15, 1998. The company has adopted the
SOP.
(b) Accounting for Derivative Instruments and Hedging Activities:
In September 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16,
F-53
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1998 and thereafter). Statement 133 cannot be applied retroactively. Statement
133 must be applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired or
substantively modified after December 31, 1997 (and, at the company's election,
before January 1, 1998).
The Company's management believes the impact of adopting Statement 133 on
the financial statements is expected to be immaterial.
3. Long Term Debt:
Additions to long-term debt during the first nine months of 1998 consist of
the following:
<TABLE>
<CAPTION>
Ending
Balances at
September 30,
1998
-------------
<S> <C>
Notes payable, bank(a)....................................... $2,727,038
Notes payable, equipment contracts(b)........................ $1,842,636
Notes payable, other(c)...................................... $6,931,889
</TABLE>
- --------
(a) Consists of one note payable to The Peoples Bank, collateralized by certain
parcels of land, payable in fifty-nine monthly payments of $61,100
including interest at 8.5% through February 2002 with a final balloon
payment of $60,120 in March 2002.
(b) Consists of three notes payable collateralized by equipment. The details of
these notes is as follows: (i) Original balance of $2,021,744 note payable
in twenty-three monthly payments of $92,795, including interest of 10.5%
with final balloon payment at term of note. This note replaces two previous
notes with original balances of $946,005 and $1,075,740. (ii) Original
balance of $57,584.04 note payable in twelve monthly payments of $4,798.67,
including interest of 12%. (iii) Original balance of $239,760 note payable
in twenty-three monthly principal payments of $9,990 including interest at
3% over prime (11.25% at 9/30/98) and a final balloon payment at term of
note.
(c) Consists of six notes payable to Boeing Capital Corp. All notes
collateralized by furniture and equipment used at the 378 room hotel at
Casino Magic Biloxi. The Notes are as follows:
1) Note in the original balance of $4,347,833, payable in forty-seven
monthly installments of $110,523.04 including interest of 10.12% through
April 2002 with a final balloon payment of $112,400 in May 2002.
2) Note in the original balance of $733,516.63, payable in one
installment of $21,616.66 on July 1, 1998, and forty-seven monthly
installments of $18,714.77 including interest at 10.314% through April
2002.
3) Note in the original balance of $391,024.97, payable in one
installment of $2,885.61 on August 1, 1998, and forty-eight installments of
$9,958.37 including interest at 10.2179% through August 2002.
4) Note in the original balance of $328,148.41, payable in one
installment of $1,769.63 on July 1, 1998, and forty-eight monthly
installments of $8,357.07 including interest at 10.2179% through August
2001.
5) Note in the original balance of $559,191,80, payable in forty-eight
monthly installments beginning October 1, 1998 including interest at
9.9384% through September 2002.
6) Progress loan balance of $933,769.16. Interest payable monthly at 3%
above prime rate (11.25% as of 9/30/98).
F-54
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Casino Magic Corp.:
We have audited the accompanying consolidated balance sheets of Casino Magic
Corp. (a Minnesota corporation) and subsidiaries (the Company) as of December
31, 1997 and 1996, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Casino Magic Corp. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Arthur Andersen LLP
New Orleans, Louisiana
February 27, 1998
F-55
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Casino.............................. $246,320,048 $167,153,012 $165,997,836
Food, beverage and rooms............ 10,784,762 8,080,067 8,392,529
Royalty and management fees......... -- 3,099,407 2,224,351
Other Operating revenues............ 4,369,206 1,945,357 1,108,049
------------ ------------ ------------
261,474,016 180,277,843 177,722,765
------------ ------------ ------------
Costs and expenses:
Casino.............................. 118,467,492 74,943,304 69,654,888
Food and beverage................... 10,756,505 7,351,838 6,795,164
Rooms............................... 639,778 1,039,081 1,224,685
Other operating costs and expenses.. 4,292,276 2,807,038 1,333,183
Advertising and marketing........... 36,427,434 20,901,821 25,873,832
General and administrative.......... 26,425,200 24,216,613 28,501,308
Property operation, maintenance and
energy cost........................ 11,210,297 7,433,262 4,057,144
Rents, property taxes and
insurance.......................... 7,891,199 5,991,261 4,314,355
Depreciation and amortization....... 20,246,663 18,346,202 15,768,546
Preopening expenses................. -- 6,554,535 1,818,715
Development expenses................ 562,419 1,849,583 2,228,549
Write-off capitalized costs relating
to inactive developments........... -- -- 11,381,945
------------ ------------ ------------
236,919,263 171,434,538 172,952,314
------------ ------------ ------------
Income from operations................ 24,554,753 8,843,305 4,770,451
Other (income) expense:
Interest expense.................... 34,723,613 25,071,767 17,436,904
Interest capitalized................ (1,963,955) (5,717,494) (867,236)
Interest income..................... (1,375,100) (1,436,468) (803,624)
Loss from unconsolidated
subsidiaries....................... 505,424 26,501,808 112,250
Write-off of capitalized costs
primarily relating to joint
ventures........................... -- -- 2,210,219
Other............................... (1,555,201) 689,221 204,981
------------ ------------ ------------
30,334,781 45,108,834 18,293,494
------------ ------------ ------------
Income (loss) before income taxes and
Minority interest in income of
subsidiary........................... (5,780,028) (36,265,529) (13,523,043)
Income tax benefit.................... (1,935,000) (4,676,182) (3,230,864)
Minority Interest..................... 1,404,180 -- --
------------ ------------ ------------
Net loss.............................. $ (5,249,208) $(31,589,347) $(10,292,179)
============ ============ ============
Net loss per common share:
Basic............................... $ (0.15) $ (0.89) $ (0.31)
============ ============ ============
Diluted............................. $ (0.15) $ (0.89) $ (0.31)
============ ============ ============
Average shares and equivalents
outstanding:
Basic............................... 35,662,616 35,448,068 33,260,904
============ ============ ============
Diluted............................. 35,662,616 35,448,068 33,260,904
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-56
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents........................ $ 20,901,510 $ 17,561,512
Restricted Cash.................................. 85,000 16,984,654
Restricted Marketable Securities................. 10,629,405 --
Prepaid expenses................................. 3,330,041 2,844,995
Notes and accounts receivable, net............... 3,781,945 2,889,486
Other current assets............................. 1,012,886 873,676
------------ ------------
Total current assets............................ 39,740,787 41,154,323
------------ ------------
Property and equipment, net........................ 263,993,452 243,692,571
------------ ------------
Other long-term assets:
Notes receivable................................. 3,385,198 4,119,700
Investments in unconsolidated subsidiaries....... 713,035 957,831
Options and land deposits........................ -- 2,282,244
Foreign casino concession agreement, net of
accumulated amortization of $2,846,685 in 1997
and $1,897,790 in 1996.......................... 8,540,055 9,488,950
Deferred gaming license cost, net of accumulated
amortization of $2,013,838 in 1997 and $395,489
in 1996......................................... 38,048,426 38,337,333
Property held for development.................... 525,000 3,040,357
Property held for sale........................... 5,606,265 15,108,541
Debt issuance costs, net of accumulated
amortization of $4,289,382 in 1997 and
$2,506,133 in 1996.............................. 8,957,645 10,195,688
Deposits and other............................... 3,194,954 1,421,979
------------ ------------
Total other long-term assets.................... 68,970,578 84,952,623
------------ ------------
$372,704,817 $369,799,517
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes and contracts payable...................... $ 305,925 $ 4,708,603
Current maturities of long-term debt............. 8,590,945 4,648,638
Accounts Payable................................. 9,323,949 7,945,068
Accrued Expenses................................. 11,522,887 11,320,101
Accrued Interest................................. 9,783,784 8,830,040
Accrued payroll and related benefits............. 7,719,441 8,341,720
Accrued progressive gaming liabilities........... 1,445,257 1,121,623
Other current liabilities........................ 2,338,909 731,018
------------ ------------
Total current liabilities....................... 51,031,097 47,646,811
------------ ------------
Deferred income taxes.............................. -- 266,761
------------ ------------
Other long-term liabilities and minority interest.. 8,748,212 --
------------ ------------
Long-term debt, net of current maturities.......... 253,471,219 258,261,231
------------ ------------
Commitments and contingencies
Shareholders' equity:
Common stock, $0.01 par, 50,000,000 shares,
authorized 35,722,124 issued and outstanding in
1997 and 35,637,083 in 1996 issued and
outstanding..................................... 357,221 356,371
Undesignated stock, 2,500,000 shares authorized,
None issued..................................... -- --
Additional paid-in capital....................... 67,122,852 67,123,702
Retained earnings (deficit)...................... (7,762,270) (2,513,062)
Unrealized holding loss on securities............ -- (850,156)
Less unearned compensation....................... (263,514) (492,141)
------------ ------------
Total shareholders' equity...................... 59,454,289 63,624,714
------------ ------------
$372,704,817 $369,799,517
============ ============
</TABLE>
See notes to consolidated financial statements.
F-57
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Foreign
------------------- paid-in currency
Shares Amount capital adjustment
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 29,961,750 $299,618 $41,127,168 --
Amortization of unearned
compensation..................... -- -- -- --
Write-off of unearned
compensation..................... -- -- (1,642,886) --
Stock options granted to executive
officers......................... -- -- 101,563 --
Vested stock grants to executive
officers......................... 16,250 162 (162) --
Net proceeds from exercise of
employee stock options........... 308,564 3,086 376,726 --
Net proceeds from common stock
issued pursuant to Reg. S........ 1,771,000 17,710 8,303,095 --
Stock issued for consultants'
compensation..................... 12,000 120 63,632 --
Stock issued for land............. 3,210,000 32,100 17,758,277 --
Foreign currency translation...... -- -- -- (224,195)
Net loss.......................... -- -- -- --
---------- -------- ----------- --------
Balance at December 31, 1995 35,279,564 $352,796 $66,087,413 (224,195)
Amortization of unearned
compensation..................... -- -- -- --
Stock options granted to executive
officers......................... -- -- 567,188 --
Net proceeds from exercise of
warrants......................... -- -- 500 --
Net proceeds from exercise of
employee and non-employee
director stock options........... 357,519 3,575 453,654 --
Casino One Corp. acquisition...... -- -- 14,947 --
Unrealized Holding Loss on
Securities Available for Sale.... -- -- -- --
Foreign currency translation
adjustment....................... -- -- -- 224,195
Net loss.......................... -- -- -- --
---------- -------- ----------- --------
Balance at December 31, 1996 35,637,083 $356,371 $67,123,702 --
Amortization of unearned
compensation
Vested stock grants to executive
officers......................... 85,041 850 (850)
Available for Sale................ -- -- -- --
Loss on Securities................ -- -- -- --
Net loss.......................... -- -- -- --
Balance at December 31, 1997....... 35,722,124 $357,221 $67,122,852 --
========== ======== =========== ========
</TABLE>
See notes to consolidated financial statements.
F-58
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY--(Continued)
<TABLE>
<CAPTION>
Unrealized
holding loss
on securities Retained Less
available for (deficit) Unearned
sale earnings compensation Total
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31,
1994 -- $ 39,368,464 $(1,218,751) $ 79,576,499
Amortization of
unearned
compensation.......... -- -- 470,962 470,962
Write-off of unearned
compensation.......... -- -- 735,819 (907,067)
Stock options granted
to executive
officers.............. -- -- (101,563) --
Vested stock grants to
executive officers.... -- -- -- --
Net proceeds from
exercise of employee
stock options......... -- -- -- 379,812
Net proceeds from
common stock issued
pursuant to Reg. S.... -- -- -- 8,320,805
Stock issued for
consultants'
compensation.......... -- -- -- 63,752
Stock issued for land.. -- -- -- 17,790,377
Foreign currency
translation........... -- -- -- (224,195)
Net loss............... -- (10,292,179) -- (10,292,179)
-------- ------------ ----------- ------------
Balance at December 31,
1995 -- $ 29,076,285 $ (113,533) $ 95,178,766
Amortization of
unearned
compensation.......... -- -- 188,580 188,580
Stock options granted
to executive
officers.............. -- -- (567,188) --
Net proceeds from
exercise of warrants.. -- -- -- 500
Net proceeds from
exercise of employee
and non-employee
director stock
options............... -- -- -- 457,229
Casino One Corp.
acquisition........... -- -- -- 14,947
Unrealized Holding Loss
on Securities
Available for Sale.... (850,156) -- -- (850,156)
Foreign currency
translation
adjustment............ -- -- -- 224,195
Net loss............... (31,589,347) (31,589,347)
-------- ------------ ----------- ------------
Balance at December 31,
1996 (850,156) $ (2,513,062) $ (492,141) $ 63,624,714
Amortization of
unearned
compensation.......... 228,627 228,627
Vested stock grants to
executive officers.... --
Loss on Securities..... --
Available for Sale..... 850,156 850,156
Net loss............... (5,249,208) (5,249,208)
-------- ------------ ----------- ------------
Balance at December 31,
1997................... -- $ (7,762,270) $ (263,514) $ 59,454,289
======== ============ =========== ============
</TABLE>
See notes to consolidated financial statements.
F-59
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................ $(5,249,208) $(31,589,347) $(10,292,179)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation........................ 17,655,235 16,263,270 13,387,345
Amortization........................ 2,591,428 2,082,932 2,381,201
Loss (gain) on disposal of property
and equipment...................... (2,632,633) 339,056 466,712
Amortization of original issue
discount and deferred debt issuance
costs.............................. 1,966,074 1,496,259 94,351
Amortization of unearned stock
compensation, net of recoveries.... 228,627 188,580 (436,105)
Consultants' compensation recognized
on issuance of stock............... -- -- 63,752
Gain on contract settlement......... -- -- (855,000)
Write-off of preopening costs,
development project costs, land
options and deposits & property
held for development............... -- 7,054,532 12,104,212
Net loss on investment in
unconsolidated subsidiaries........ 505,424 22,436,241 112,250
Minority interest................... 1,404,180 -- --
Decrease in income tax receivable... -- 4,225,047 1,899,459
(Increase) decrease in prepaid
expenses........................... (507,361) 88,861 1,634,019
Decrease in notes and accounts
receivable, net.................... 2,327,826 (147,705) (4,753,232)
Decrease in deferred income taxes--
current............................ 3,157,856 2,923,171 (720,628)
Increase in other current assets.... (139,210) (277,793) (129,225)
Decrease in net deferred income tax
liability--non current............. (266,759) (4,173,197) (1,063,610)
Increase (decrease) in accounts
payable............................ (2,251,299) 2,924,820 (389,241)
Increase (decrease) in accrued
expenses........................... 3,595,066 (4,278,518) (2,026,436)
Increase in accrued interest........ 888,886 3,487,883 208,449
Increase (decrease) in accrued
payroll and related benefits....... (622,279) 1,255,364 2,236,447
Increase (decrease) in accrued
progressive gaming liabilities..... 323,634 55,376 (393,866)
Decrease in income taxes payable.... 805,716 (228,591) 959,609
----------- ------------ ------------
Net cash provided by operating
activities....................... $23,781,203 $ 24,126,241 $ 15,348,284
=========== ============ ============
</TABLE>
See notes to consolidated financial statements.
F-60
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from investing activities:
Proceeds from sale of property and
equipment......................... $ 19,895,616 $ 1,436,821 $ 173,389
Acquisitions of property and
equipment......................... (37,176,995) (67,850,010) (11,396,332)
Acquisitions of gaming license..... -- (15,250,000) --
Acquisitions of property held for
sale.............................. (126,400) 40,437 --
Investments in unconsolidated
subsidiaries...................... (260,628) (651,206) (6,117,636)
Expenditures for organizational and
acquisition cost.................. -- (359) (80,788)
Expenditures for land options and
deposits.......................... -- (480,000) (1,326,130)
Expenditures for development and
preopening costs.................. -- (6,554,535) (130,794)
(Increase) decrease in deposits and
other long-term assets............ (2,920,936) 2,530,873 (1,898,786)
(Increase) decrease in marketable
securities........................ (10,629,405) -- 10,244,233
------------ ------------ ------------
Net cash used in investing
activities...................... (31,218,748) (86,777,979) (10,532,844)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of debt or
notes payable..................... 6,350,000 121,043,749 202,011
Payments of debt issuance costs.... (349,955) (5,419,575) (2,000)
Principal payments on notes
payable........................... (4,606,480) (1,010,180) (1,185,342)
Principal payments on long-term
debt.............................. (7,515,676) (48,644,469) (2,261,096)
Net proceeds from sale of common
stock............................. -- 14,947 8,320,805
Net proceeds from exercise of
employee stock options............ -- 457,734 379,812
------------ ------------ ------------
Net cash provided by (used in)
financing activities............ (6,122,111) 66,442,206 5,454,190
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents.................... (13,559,656) 3,790,468 10,269,630
Cash and cash equivalents, beginning
of period........................... 34,546,166 30,755,698 20,486,068
------------ ------------ ------------
Cash and cash equivalents, including
restricted cash,
end of period....................... $ 20,986,510 $ 34,546,166 $ 30,755,698
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-61
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Interest paid, net of amount
capitalized............................ $29,551,551 $12,379,128 $15,406,868
Income taxes paid, net of refunds....... (6,382,324) (7,604,043) (4,236,206)
Supplemental schedule of non-cash
operating, investing, and financing
activities:
Other current assets.................... 22,315 -- --
Other current liabilities............... 302,758 -- --
Property and equipment and other asset
acquisitions financed with short-term
notes payable.......................... -- -- 850,208
Property and equipment and other asset
acquisitions included in accounts and
construction payable and accrued
expenses............................... 1,805,945 5,455,469 177,091
Gaming license acquisition financed with
long-term debt......................... -- 21,617,612 --
Land acquired through the issuance of
common stock........................... -- -- 22,140,969
Property and equipment under capital
leases................................. 375,891 81,114 63,632
Property and equipment and property held
for sale financed with long-term debt.. -- 30,728,879 --
Consulting services performed for common
stock.................................. -- -- 63,752
Common stock granted to officers........ -- 567,188 101,563
Commitment for land options............. $ -- $ -- $ (156,725)
</TABLE>
See notes to consolidated financial statements.
F-62
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies:
Organization and basis of presentation:
Casino Magic Corp. and Subsidiaries is an international gaming company with
operations in Bay Saint Louis, Mississippi ("Casino Magic-BSL"), Biloxi,
Mississippi ("Casino Magic-Biloxi"), Bossier City, Louisiana ("Casino Magic-
Bossier City"), and the Argentina Province of Neuquen in the cities of
Neuquen City and San Martin de los Andes ("Casino Magic-Neuquen").
Unless the context requires otherwise, reference in this Annual Report to
the "Company" means Casino Magic Corp. and its relevant subsidiaries, and
reference to "Casino Magic" means Casino Magic Corp.
The consolidated financial statements include the accounts of Casino Magic
Corp. and its wholly-owned and majority-owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated.
Casino revenues and complimentaries:
In accordance with common industry practice, casino revenues are the net of
gaming wins less losses. Revenues exclude the retail value of complimentary
rooms, food and beverage furnished gratuitously to customers. The estimated
departmental costs of providing rooms is not significant, and the estimated
departmental costs of providing food and beverage services are included in
casino expense as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
$ 21,846,000 $13,838,000 $12,072,000
============ =========== ===========
</TABLE>
Cash and cash equivalents:
For purposes of the consolidated balance sheets and statements of cash
flows, the Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Marketable Securities:
The Company holds U.S. agency securities as held to maturity and as such,
the investments are recorded at amortized costs, which, based on the short term
nature of the investments approximates fair value.
Restricted Funds:
The Louisiana First Mortgage Notes (See Note 8), restrict the use of certain
cash amounts. At December 31, 1997, funds relating to the net proceeds from the
sale of the Crescent City Queen Riverboat ($11.7 million) are restricted to be
used for capital improvements at Casino Magic-Bossier City. The balances that
remain in these restricted accounts at December 31, 1997 are shown as
restricted marketable securities. At December 31, 1996, funds shown as
restricted cash relate to proceeds from the issuance of the Louisiana First
Mortgage Notes and were restricted for use in the original construction of the
land based pavilion and facilities at Casino Magic-Bossier City.
Property and equipment:
Property and equipment are stated at cost. Depreciation, including
amortization of capital leases and leasehold improvements, is computed using
the straight-line method. Estimated useful lives for property and
F-63
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
equipment are 15-31 1/2 years for barges and buildings, life of the lease for
leasehold improvements and 5-7 years for furniture and equipment.
Normal repairs and maintenance are charged to expense when incurred.
Expenditures which materially extend the useful life of capital assets are
capitalized.
In June 1997, the Company changed the depreciable lives on the asset
categories, land improvements, buildings and improvements, and barges and
improvements from originally estimated useful lives of 10 or 15 years to 31
years. The useful lives for these assets originally reflected their tax lives
and have been changed to anticipated useful lives. These changes reduced the
December 31, 1997, net loss by $859,796 and the loss share by $0.02. Excluding
the change in depreciable lives net loss and earnings per share would have been
$(6,109,004) and $(0.17), respectively.
Investments in unconsolidated subsidiaries:
Investments in unconsolidated subsidiaries where the Company exercises
significant influence are accounted for under the equity method.
Options and land deposits:
The costs of land options are amortized over the life of the option until
such time as the option is exercised or considered impaired by Management. As
of December 31, 1997, all land options were fully reserved.
Amortization of intangibles:
Deferred charges relating to debt issuance costs and original issue
discounts on long-term debt instruments are amortized over the life of the
related debt using the effective interest rate method to provide a constant
yield.
Included under other long term assets is "Deferred gaming license cost."
Deferred gaming license cost represents the estimated fair value of the
Louisiana gaming license, an asset acquired in conjunction with the purchase of
Crescent City Development Corporation ("Crescent City" see Note 5). This cost
is being amortized on a straight-line basis over twenty-five years, the
estimated period to be benefited by the license which commenced at the time
gaming operations began in Bossier City.
The costs capitalized to acquire the foreign casino concession agreement are
being amortized on a straight-line basis over the twelve-year life of the
agreement.
Development and preopening costs:
All internal salary and related costs of the Company's development
activities are expensed as incurred. Amounts paid for outside consultants and
professional fees are expensed until gaming has been legalized in the
jurisdiction, the Company has an approved site and there is a reasonable
likelihood that the Company will be granted a gaming license. Preopening costs
are capitalized then expensed when the related business commences operations.
Income taxes:
Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis.
F-64
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
Earnings per share:
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 ("FAS 128"), "Earnings Per Share", which simplifies the computation of
earnings per share ("EPS"). FAS 128 is effective for financial statements
issued for periods ending after December 15, 1997, and requires restatement for
all prior period earnings per share data presented. Under FAS 128, the Company
computes two earnings per share amounts--basic EPS and EPS assuming dilution.
Basic Weighted average number of shares of common stock outstanding for the
1997, 1996 and 1995 periods were 35,662,616, 35,448,068 and 33,260,904
respectively. EPS assuming dilution is based on the weighted average number of
shares of common stock outstanding for the periods, including common equivalent
shares which reflect the dilutive effect of stock options granted to certain
employees and outside directors on various dates through December 31, 1997.
Dilutive options that are issued during a period or that expire or are
cancelled during a period are reflected in EPS assuming dilution computations
for the time they were outstanding during the periods being reported. There
were no common equivalent shares for 1997, 1996 and 1995. For the years ended
December 31, 1997, 1996 and 1995, the Company had 2,943,535, 2,320,292, and
2,2107,642 options which were considered antidilutive as a result of the
exercise price of the options exceeding the average price for the period, or
that the Company had a net loss for the period and therefore are not included
in the calculation of common stock outstanding.
Certain significant risks and uncertainties:
Gaming regulation licensing. The Company has gaming operations in the United
States and abroad that depend on the continued licensability or qualification
of the Company and subsidiaries that hold gaming licenses in various
jurisdictions. Such licensing and qualifications are reviewed periodically by
the gaming authorities in those jurisdictions.
Competition. The gaming industry is extremely competitive and the Company
faces competition from new developments in both the United States, specifically
on the Mississippi Gulf Coast and in Louisiana, and abroad.
Foreign operations. The Company has investments and net assets of
approximately $9 million in gaming operations outside of the United States
which are subject to risks associated with the distance of these casino
facilities from the Company's executive offices, the stability of the relevant
government, regulations imposed by foreign governments, the continued ability
to repatriate cash, and currency exchange issues.
Severe weather. The Mississippi Gulf Coast is subject to severe weather,
including hurricanes. Severe weather could cause damage to one or both of the
Company's Mississippi casino facilities. The Company maintains insurance
against casualty losses resulting from severe weather and against business
interruption. Such insurance may not adequately compensate the Company for loss
of profits resulting from severe weather.
Construction. Risk include cost overruns, delay in receipt of governmental
approvals, shortages in materials or skilled labor, labor disputes, unforeseen
environmental or engineering problems, work stoppage, fire and other natural
disasters, construction scheduling problems and weather interferences, any of
which, if it occurred, could delay construction or result in a substantial
increase in costs to the Company.
Pervasiveness of estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial
F-65
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications:
Certain reclassifications have been made to the 1996 and 1995 amounts to
conform with the December 31, 1997 presentation.
2. Proposed Merger:
On February 19, 1998, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Hollywood Park, Inc. ("Hollywood"), and
Acquisition II, Inc. ("HP") a wholly-owned subsidiary of Hollywood. Under the
Merger Agreement, the Company has agreed to merge (the "Merger") with HP. Upon
such Merger, the Company shall be the surviving entity and will become a
wholly-owned subsidiary of Hollywood. Upon the Merger, the shareholders of the
Company will be entitled to receive $2.27 for each share of the Company's stock
held.
The Merger is subject to the approval of the Company's shareholders prior to
October 31, 1998, and to the approval of the Mississippi Gaming Commission, the
Nevada Gaming Commission, and the Louisiana Gaming Control Board. If the Merger
Agreement is terminated for certain reasons, the Company will be required to
pay Hollywood $3,500,000.
The Merger Agreement restricts the ability of the Company to engage in
certain transactions prior to the time of the Merger, except those which are in
the ordinary course of business consistent with past practice, unless the
Company obtains the consent of Hollywood, which consent may not be unreasonably
withheld. The Merger Agreement also imposes limits on the capital expenditures
and borrowing which the Company may effect, which are not inconsistent with the
Company's current plans.
3. Notes and Accounts Receivable:
Notes and accounts receivable consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1996
---------- ----------
<S> <C> <C>
Current:
Notes receivable.................................... $ 885,995 $ 790,228
Accounts receivable--air charter.................... 156,818 548,239
Accounts receivable--trade.......................... 3,601,778 2,505,463
Other............................................... 581,376 606,631
---------- ----------
5,225,967 4,450,561
Less allowance for doubtful accounts.................. 1,444,022 1,561,075
---------- ----------
Total Notes and Accounts Receivable (current)......... 3,781,945 2,889,486
Noncurrent:
Notes receivable.................................... 3,385,198 4,119,700
---------- ----------
Total Notes and Accounts Receivable................. $7,167,143 $7,009,186
========== ==========
</TABLE>
Included in notes receivable is a commercial loan in which the Company,
through a wholly-owned subsidiary, participated in the initial amount of $5
million. The entire loan amount is $17,500,000. A
F-66
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
consortium of lenders made the loan to the Sisseton-Wahpeton Dakota Nation, a
Native American Tribe, for the construction of a casino facility on Tribal
land. The term loan is repayable over a sixty-month period beginning February
1997, in monthly installments of $105,230 including principal and interest at a
fixed rate of 10% through February 2002.
4. Property and Equipment:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Land and improvements... $ 85,020,923 $ 67,658,624
Buildings and
improvements........... 69,193,225 44,554,665
Barges and
improvements........... 57,568,009 55,203,063
Leasehold improvements.. 300,801 382,907
Furniture and
equipment.............. 75,876,943 69,663,192
Construction in
progress............... 33,843,154 48,549,525
------------ ------------
321,803,055 286,011,976
Less accumulated
depreciation and
amortization........... (57,809,603) (42,319,405)
------------ ------------
$263,993,452 $243,692,571
============ ============
</TABLE>
5. Stock Acquisitions:
In May 1996, Casino Magic, through its wholly-owned subsidiary, Jefferson
Casino Corporation ("Jefferson Corp") acquired Crescent City Capital
Development Corp.("Crescent City") for $50 million plus the assumption of $5.7
million in equipment liabilities. Jefferson Corp paid $15 million in cash at
closing and caused Crescent City to issue $35 million of 11.5% secured, three
year notes. Crescent City, which was the subject of a plan of reorganization
under Chapter 11 of the U.S. Bankruptcy Code, owned the Crescent City Queen
riverboat ("Crescent City Riverboat"), gaming and related equipment and
surveillance equipment and a license to conduct riverboat gaming operations in
Louisiana. Crescent City emerged from the Bankruptcy proceedings as Casino
Magic of Louisiana Corp. ("Casino Magic-Bossier City"). The Company is using
Casino Magic-Bossier City's gaming license in Bossier City, Louisiana, where it
currently owns 23 acres of land. Although Jefferson Corp. was required to
purchase the Crescent City Riverboat to obtain the Louisiana gaming license,
the Crescent City Riverboat could not be used at Casino Magic-Bossier City
because of its width. Therefore, the Company purchased a casino riverboat (the
"Bossier Riverboat") for use at Casino Magic-Bossier City for $20 million. The
Crescent City Riverboat, was sold and the proceeds will be used to assist in
the funding of the pavilion expansion and construction of a hotel at Casino
Magic-Bossier City.
No assurances can be given that the proceeds from the sale of the Crescent
City Riverboat and the cash flow from the operations of Casino Magic-Bossier
City will be sufficient to complete such hotel and related facilities.
6. Dispositions:
In September 1997, the Company sold the Crescent City Riverboat for $11.7
million. Other income for the period ended December 31, 1997, includes the gain
on the sale of $1.4 million. The proceeds from the sale are restricted by the
Indenture governing the $115 First Mortgage Notes issued by Casino Magic-
Bossier City. The
F-67
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Indenture restriction requires the proceeds from the sale of the Crescent City
Riverboat to be used for capital improvements at the Casino Magic-Bossier City
facility or returned to the Indenture trustee.
On June 1, 1997, the Company sold a 49% interest in its wholly-owned
subsidiary, Casino Magic Neuquen S.A., for $7.0 million. The Company retained a
controlling interest in Casino Magic-Neuquen and manages its two facilities
located in Neuquen City and San Martin de Los Andes, Argentina for a fee equal
to two percent of Casino Magic-Neuquen's gross monthly revenues. The gain of
$1.3 million is recorded in other income.
At September 30, 1996, management determined that its 49% equity investment
in Porto Carras Casino S.A., and notes and accounts receivable relating to
unpaid management fees and royalties were impaired. Because of this impairment,
management wrote off its investment in such gaming facilities in Porto Carras,
Greece, ("Porto Carras") and all unpaid notes and receivables related thereto.
The total charge recorded relating to the write off of Porto Carras was $26.1
million. Management's decision was based, primarily, on the results from Porto
Carras after the opening of a competing casino. Although the Company
anticipated some revenue loss as a result of this increased competition, the
actual effects were much greater than anticipated and resulted in a $2.0
million loss from operations at Porto Carras for the month of September 1996.
Despite new marketing and cost containment efforts, these losses continued;
furthermore, the majority owner in Porto Carras venture was unwilling or unable
to advance any funds to the operation. Additionally, the majority owner
informed the Company that it did not intend to operate a substantial portion of
the Porto Carras resort area, consisting of two hotels and amenities, during
the 1997 season. These factors, among others, led to the Company's decision to
write off its investment in Porto Carras and led to the sale of Porto Carras,
for a nominal amount in December 1996.
7. Notes and Contracts Payable:
Short-term notes and contracts payable consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1997 1996
-------- ----------
<S> <C> <C>
Construction contracts (a).............................. $ 382 $4,540,434
Other (b)............................................... 305,543 168,169
-------- ----------
$305,925 $4,708,603
</TABLE>
- --------
(a) Consists of various payables relating to both fixed and cost plus
contracts.
(b) In 1997, the balance consisted of five notes payable. The detail of these
notes is as follows: (i) $199,763 equipment, payable in monthly
installments of $15,814. (ii) $164,989 note collateralized by equipment,
payable in monthly installments of $14,892. (iii) three notes totaling
$12,000 collateralized by equipment, payable in total monthly installments
of $500.
F-68
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Long-Term Debt:
Long-term debt, including capital lease obligations, consists of the
following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Notes payable, bank(a)........................... $ 8,170,063 $ 9,585,130
Equipment contracts(b)........................... 2,099,465 622,274
Notes payable, land(c)........................... 2,052,569 3,470,415
Other(d)......................................... 920,422 308,514
Capital lease obligations (Note 9)............... 726,018 1,207,986
Louisiana First Mortgage Notes(e)................ 115,000,000 115,000,000
First Mortgage Notes(f).......................... 135,000,000 135,000,000
Unamortized original issue discount.............. (1,906,373) (2,284,450)
------------ ------------
262,062,164 262,909,869
Less current maturities.......................... (8,590,945) (4,648,638)
------------ ------------
$253,471,219 $258,261,231
============ ============
</TABLE>
- --------
(a) Consists of four notes payable to banks. The detail of these notes is as
follows: (i) Original balance of $3,000,000 uncollateralized promissory
note, payable in monthly installments of interest only through July 1996;
thereafter, principal and interest based on a 60 month amortization through
February 2000. The promissory note bears interest at prime plus 1% (9.5% at
December 31, 1997) throughout the life of the note with a final balloon
payment of $305,243 due in February 2000. (ii) Original balance of
$1,700,000 note collateralized by gaming equipment. Payments of principal
and interest based on a 36 month amortization through May 1998. The note
bears interest at prime plus .25%. (8.75% at December 31, 1997) with a
final balloon payment of $1,065,807 due in May 1998. (iii) Original balance
of $3,850,000 note collateralized by the equipment. The note is payable in
10 quarterly payments of $385,000, including interest at 8.25%. (iv)
Original balance of $2,500,000 uncollateralized line of credit due in March
1998 bearing interest at prime plus 1/4% (8.75% at December 31, 1997). In
March 1998 this note was refinanced to a term loan payable in eighteen
monthly installments of $142,760 bearing interest at 8.75%.
During 1997 the Company was not in compliance with certain debt covenants
relating to notes (iii) and (iv). The Company has received a waiver of the
covenants at December 31, 1997, and has restructured these covenants to
allow the Company to maintain compliance.
(b) Consists of two notes payable collateralized by equipment. The detail of
these notes is as follows: (i) Original balance of $946,005 note payable in
eleven monthly payments of $78,833, including interest at prime plus 3%.
(11.5% at December 31, 1997) with final balloon payment due at term of
note. (ii) Original balance of $1,075,740 note collateralized by equipment,
payable in twenty-three monthly payments of $44,823, including interest at
prime plus 1%. (9.50% at December 31, 1997) with final balloon payment due
at term of note. In March 1998 these notes were refinanced to a term loan
payable in twenty-three monthly installments of $93,465 bearing interest at
10.5% with a final balloon payment of $101,319 due in March 2000.
(c) Consists of three notes payable for land acquisitions. The detail of the
three notes is as follows: (i) Original balance of $700,000 note payable in
monthly installments of $14,959 including interest at prime plus 2% (10.50%
at December 31, 1997), through April 1999. (ii) Original balance of
$870,942 note payable in monthly installments of $12,134 including interest
at 8% through July 2003. (iii) Original
F-69
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
balance of $3,000,000 note payable in monthly installments of $111,699
including interest at 8.75% through November 1998.
(d) Consists of various collateralized notes payable through the year 2004. The
interest rates on these notes vary from 9.5% to 13.25% at fixed rates.
(e) On August 22, 1996, a wholly owned subsidiary of the Company, Casino Magic-
Bossier City, sold $115,000,000 aggregate principal amount of 13%, First
Mortgage Notes securities due in 2003 ("Louisiana First Mortgage Notes").
Contingent Interest is payable on the Louisiana First Mortgage Notes, on
each interest payment date, in an aggregate amount equal to 5% of Casino
Magic-Bossier City's Adjusted Consolidated Cash Flow (as defined in the
Louisiana First Mortgage Notes Indenture ("Louisiana Indenture") for the
Accrual Period (as defined in the Louisiana Indenture, but generally a
six month period) last completed prior to such interest payment date;
provided that no Contingent Interest is payable with respect to any period
prior to the Commencement Date (as defined in the Louisiana Indenture).
Payment of all or a portion of any installment of Contingent Interest may
be deferred, at the option of Casino Magic-Bossier City, if, and only to
the extent that, (i) the payment of such portion of Contingent Interest
will cause Casino Magic-Bossier City's Adjusted Fixed Charge Coverage Ratio
(as defined in the Louisiana Indenture) for Casino Magic-Bossier City's
most recently completed Reference Period prior to such interest payment
date to be less than 1.5 to 1.0 on a pro forma basis after giving effect to
the assumed payment of such Contingent Interest and (ii) the principal
amount of the Louisiana First Mortgage Notes corresponding to such
Contingent Interest has not then matured and become due and payable (at
stated maturity, upon acceleration, upon redemption, upon maturity of a
repurchase obligation or otherwise). The aggregate amount of Contingent
Interest payable in any Semiannual Period will be reduced pro rata for
reductions in the outstanding principal amount of notes prior to the close
of business on the record date immediately preceding such payment of
Contingent Interest. During 1997, the Company accrued $677,251 of
contingent interest, none of which was paid.
The Louisiana First Mortgage Notes are secured by a first priority security
interest, subject to permitted liens, in substantially all of the existing
and future assets of Bossier City, including the Bossier Riverboat and
substantially all of the other assets that comprise Casino Magic-Bossier
City.. The Jefferson Guarantee will be secured by a pledge of all of the
capital stock of Jefferson Casino Corp., a wholly owned subsidiary of the
Company.
Casino Magic-Bossier City has contractually committed to apply net proceeds
from the asset sale of the Crescent City Riverboat to the construction of
an entertainment facility or hotel.
The Louisiana First Mortgage Notes are governed by the Louisiana Indenture.
The Louisiana Indenture pursuant to which the Louisiana First Mortgage
Notes have been issued contains certain covenants that will limit the
ability of Casino Magic-Bossier City and its subsidiaries to, among other
things, incur additional indebtedness and issue preferred stock, pay
dividends, make investments or make other restricted payments, incur liens,
enter into mergers or consolidations, enter into transactions with
affiliates or sell assets.
The proposed Merger (See Note 2), if effected, is a Change of Control as
defined in the Louisiana Induenture. Upon a Change of Control, each holder
of Louisiana First Mortgage Notes will have the right to require Casino
Magic-Bossier City to repurchase all or any part of the Louisiana First
Mortgage Notes at a price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest, if any, thereon to the
date of repurchase. Within 30 days following any Change of Control, the
Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to
repurchase the Louisiana First Mortgage Notes pursuant to the procedures
required by the Louisiana Indenture and described in such notice.
F-70
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Louisiana First Mortgage Notes are redeemable at the option of the
Company. The redemption amounts are as follows:
<TABLE>
<S> <C>
August 15,
2000............................................................. 106.500%
2001............................................................. 104.332%
2002............................................................. 102.166%
</TABLE>
(f) On October 14, 1993, a wholly owned indirect subsidiary of the Company,
Casino Magic Finance Corp. ("Finance Corp."), sold $135,000,000 in
aggregate principal amount of 11 1/2% First Mortgage Notes due in 2001
(the "Finance Notes") and warrants to purchase 810,000 shares of Casino
Magic Corp. common stock. Proceeds from the Notes were allocated by the
underwriter between the Finance Corp. and the Company based on the
estimated fair market value at the time of issuance of the Finance Notes
and the warrants in the amounts of $131,760,000 and $3,240,000 ($4 per
warrant), respectively. The value of the warrants is treated as original
issue discount for financial statement purposes, and is reflected in the
balance sheet net of amortization as an adjustment to the carrying value
of long-term debt. The Finance Notes are governed by an Indenture (the
"Indenture") entered into on the same date between Finance Corp., the
Company and IBJ Schroder Bank & Trust Company as the Trustee. Under
Section 4.10 of the Indenture, the Company's ability to pay dividends on
its common stock is restricted to an amount which is determined under a
formula based primarily on the Company's future income, and is precluded
upon the occurrence of an "Event of Default" as defined under the
Indenture. Events of Default include, among other things, the failure to
pay the interest or principal due on the Finance Notes, the entry of a
judgment in excess of $10,000,000 against the Company or Casino Magic-BSL,
Casino Magic-Biloxi and Finance Corp., which is not discharged within 60
days after entry, and the default by the Casino Magic or Casino Magic-BSL,
Casino Magic-Biloxi and Finance Corp. under indebtedness due to third
parties. The Indenture also contains certain covenants that restrict,
among other things, the making of certain investments, payments of
dividends and other distributions, the incurrence of additional
indebtedness and future guarantees of indebtedness, certain transactions
with shareholders and affiliates, certain mergers and consolidations,
certain asset sales and the creation of certain liens. The Finance Notes
are secured by a pledge of the stock of Finance Corp., Bay Saint Louis and
Biloxi along with the accounts receivable, inventories, property and
equipment, property held for development and deposits of Casino Magic-BSL
and Casino Magic-Biloxi.
The Merger (See Note 2) if completed would constitute a Change in Control
under the Finance Notes Induenture. If there is a decrease by one or more
gradations by a rating agency within 90 days of the public notice of the
Merger (February 19, 1998) would required Finance Corp to make an offer to the
holders of the Finance Notes to redemm them at a price equal to 101% of the
principal balance together with accrued and unpaid interest. The offer would
be required to be made, if at all, within 30 days after the Change of Control.
The Finance Notes are redeemable at the option of the Company. The
redemption amounts are as follows:
<TABLE>
<S> <C>
October 15,
1997............................................................ 105.750%
1998............................................................ 103.833%
1999............................................................ 101.917%
2000 and thereafter............................................. 100.000%
</TABLE>
F-71
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Maturities of the Company's long-term debt, including capital lease
obligations, as of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1998.......................................................... $ 8,590,945
1999.......................................................... 3,503,955
2000.......................................................... 1,017,061
2001.......................................................... 250,963
2002.......................................................... 135,273,782
Thereafter.................................................... 115,331,829
------------
263,968,535
Unamortized Original Issue Discount........................... (1,906,371)
------------
$262,062,164
============
</TABLE>
9. Lease commitments:
The Company has long-term lease agreements for land for the site of Casino
Magic-Biloxi and additional land at Casino Magic-BSL. The Casino Magic-Biloxi
land is classified as an operating lease. The annual rental payments for the
initial five-year term of the Casino Magic-Biloxi land lease began June 5,
1993, and are $550,000, $250,000, $450,000, $450,000 and $200,000 for the first
through fifth year. The land lease contains seventeen, five-year renewal
options at contractually higher rentals, plus inflation adjustments not to
exceed 4.5% per year.
On June 4, 1993, the Company entered into a long-term agreement with the
State of Mississippi to lease 283,217 square foot of submerged lands or
tidelands for Casino Magic-Biloxi. The initial lease term expires May 31, 2003,
with one five year extension. Annual rental payments are due in advance on the
first of June in the amount of $595,000, plus an annual increase of $45,000 for
the first five years. In May 1998 the lease amount will be determined under
Mississippi law regarding the leasing of public trust tidelands.
The following is a schedule of future minimum lease payments for capital and
operating leases (with initial or remaining terms in excess of one year) as of
December 31, 1997:
<TABLE>
<CAPTION>
Year ending
December 31,
-------------------
Capital Operating
Leases Leases
-------- ----------
<S> <C> <C>
1998.................................................... $192,065 $1,479,257
1999.................................................... 207,325 1,164,357
2000.................................................... 153,856 1,026,287
2001.................................................... 20,348 782,454
2002.................................................... 22,007 775,000
Thereafter.............................................. 130,417 4,650,000
-------- ----------
Total minimum lease payments............................ 726,018 $9,877,355
==========
Less amount representing interest (9% to 13%)........... 145,059
--------
Present value of net minimum capital lease payments..... $580,959
========
</TABLE>
Rent expense for all non-cancelable operating leases were $3,644,000
$1,800,000, and $3,048,000 for the years ended December 31, 1997, 1996 and
1995, respectively.
F-72
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Other Commitments and Contingencies:
Ongoing legal proceedings:
A class action lawsuit was filed on April 26, 1994, in the United States
District Court, Middle District of Florida (the "Poulos Lawsuit"), naming as
defendants 41 manufacturers, distributors and casino operators of video poker
and electronic slot machines, including the Company. The lawsuit alleges that
such defendants have engaged in a course of fraudulent and misleading conduct
intended to induce people to play such games based on a false belief concerning
the operation of the gaming machines, as well as the extent to which there is
an opportunity to win. The suit alleges violations of the Racketeer Influenced
and Corrupt Organization Act, as well as claims of common law fraud, unjust
enrichment and negligent misrepresentation, and seeks damages in excess of $6
billion. On May 10, 1994, a second class action lawsuit was filed in the United
States District Court, Middle District of Florida (the "Ahern Lawsuit"), naming
as defendants the same defendants who were named in the Poulos Lawsuit and
adding as defendants the owners of certain casino operations in Puerto Rico and
the Bahamas, who were not named as defendants in the Poulos Lawsuit. The claims
in the Ahern Lawsuit are identical to the claims in the Poulos Lawsuit. Because
of the similarity of parties and claims, the Poulos Lawsuit and Ahern Lawsuit
were consolidated into one case file in the United States District Court,
Middle District of Florida. On December 9, 1994 a motion by the defendants for
change of venue was granted, transferring the case to the United States
District Court for the District of Nevada, in Las Vegas. In response to a
motion to dismiss the Complaint brought by the Company and other defendants,
the United States District Court for the District of Nevada entered an order
dated April 17, 1996, granting the motions and dismissing the complaint without
prejudice.
The plaintiffs then filed an amended Complaint on May 31, 1996, in which the
plaintiffs sought damages against the Company and other defendants in excess of
$1 billion and punitive damages for violations of the Racketeer Influenced and
Corrupt Organizations Act and for state common law claims for fraud, unjust
enrichment and negligent misrepresentation. The Company and other defendants
have moved to dismiss the amended Complaint. The Company believes that the
claims are without merit and does not expect that the lawsuit will have a
material adverse effect on the financial condition or results of operations of
the Company.
On or about September 6, 1996, Casino America, Inc. commenced litigation in
the Chancery Court of Harrison County, Mississippi, Second Judicial District,
against the Company, and James Edward Ernst, its Chief Executive Officer
(collectively "Defendants"), seeking injunctive relief and unspecified
compensatory damages in an amount to be proven at trial as well as punitive
damages. Plaintiff claims, among other things, that Defendants (i) breached the
terms of an agreement they had with Plaintiff, (ii) tortiously interfered with
certain business relations of plaintiff; and (iii) breached covenants of good
faith and fair dealing they allegedly owed to plaintiff. On or about October 8,
1996, Defendants interposed an answer to plaintiff's complaint denying the
allegations contained in the complaint. The discovery phase of this litigation
is continuing and a trial date has been set for August 1998. While the
Company's management cannot predict the outcome of this action, management
believes plaintiff's claims are without merit and the Company intends to
vigorously defend this action.
In addition, the Company is a litigant in legal matters arising in the
normal course of business. In the opinion of management, all such pending legal
matters are either adequately covered by insurance, or if not insured, will not
have a material adverse effect on the financial position or results of
operations of the Company.
Contractual agreements:
Argentina. In December 1994, the Company, through its wholly-owned
subsidiary, Casino Magic-Neuquen, entered into a 12-year concession agreement
with the Province of Neuquen, Argentina. Casino
F-73
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Magic-Neuquen which began operations in January 1995 operates two casinos in
the Province of Neuquen in the cities of Neuquen City and San Martin de los
Andes. The Company has unrestricted rights to increase the number of gaming
positions at both locations.
Camptown Greyhound Racing, Inc. On July 7, 1994, the Company and Alliance
Gaming Corp. (formerly United Gaming) formed two joint ventures ("KGP" and
"KFP") to lend Camptown Greyhound Racing, Inc. ("Camptown') approximately $3.2
million. On October 28, 1994, KFP executed a loan agreement with Boatmen's Bank
of Kansas City ("Boatmen's") whereby Boatmen's lent $3.2 million to Camptown.
KFP had collateralized the loan with a $3.1 million certificate of deposit
(one-half funded by each party to the joint venture) and, in addition,
guaranteed the repayment of the loan. In January 1996, Camptown filed for
protection under Chapter 11 of U.S. Bankruptcy Code. The Company's $1,580,000
share of the amount lent by KFP to Camptown was expensed in 1995.
In January 1997, the Company transferred all of its interest in KGP and KFP
to Alliance Gaming Corp., an unrelated third party, except for a deminimus
interest. The consideration for the transfer was Alliance Gaming Corp.'s
agreement to assume certain current financial obligations and to repay the
Company all of its cost in the project if they are successful in commencing
gaming operations at Camptown.
Indiana. The Company, through its wholly owned subsidiary, Crawford County
Casino, Corp. ("Indiana Corp.") is one of two applicants for the tenth gaming
license expected to be issued in the State of Indiana. If successful in
obtaining this gaming license, the Company has entered into an option agreement
to sell to Harrah's Operating Company the common stock of Indiana Corp. for
approximately $5.0 million. The option expires on January 2001. The Company can
give no assurances that a gaming license will be obtained in Indiana. All land
options held by Indiana Corp. associated with a possible gaming site are fully
reserved at December 31, 1997.
Land Acquisitions.
In 1993, the Company exercised its option to purchase of approximately 3.5
acres of unimproved land in downtown St. Louis, Missouri at a cost of
approximately $4,000,000. At December 31, 1997, approximately $4,000,000 is
included in property held for sale related to this transaction.
In 1994, the Company exercised an option and to purchase additional real
estate located in Downtown St. Louis, Missouri at a cost of approximately
$800,000. At December 31, 1997, approximately $800,000 is included in property
held for sale related to this transaction.
In 1992, the Company purchased real estate located in downtown Bay Saint
Louis, Mississippi at a cost of approximately $1,200,000. At December 31, 1997,
the Company had written down the value of the property to $800,000 and this
value is included in property held for sale.
The Company had acquired land and options to purchase land in order to
enhance the Company's developmental and licensing procurement potential in
various States. Management has significantly reduced its development of new
gaming venues and because of this all land options are reserved for on the
Company's financial statements at December 31, 1997.
11. Stock and employee benefit plans:
Incentive stock option plan:
In 1992, the Company adopted an incentive stock option plan (the "Plan") in
which directors, officers, and key employees of the Company participate. The
Company has registered 3,700,000 shares of the Company's common stock currently
authorized for issuance under the Plan pursuant to stock options.
F-74
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation," effective in
1996. Under SFAS 123, companies can either record expense based on the fair
value of stock based compensation upon issuance or elect to remain under the
current "APB Opinion No. 25" method whereby no compensation cost is recognized
upon grant if certain requirements are met. The Company is continuing to
account for its stock-based compensation plans under APB Opinion No. 25.
However, pro forma disclosures as if the Company adopted the cost recognition
requirements under SFAS 123 are presented below.
A summary of the status of the Company's stock options, non-qualified
options, and warrants as of December 31, 1997, 1996 and 1995 and changes during
the years ended on those dates is presented below (shares in thousands):
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------
1997 1996 1995
---------------------- ---------------------- ----------------------
Weighted Average Weighted Average Weighted Average
---------------------- ---------------------- ----------------------
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 4,200 $ .67 5,108 $ 7.60 4,943 $7.42
Granted................. 400 $1.69 1,998 $ 3.56 950 $5.06
Exercised............... (239) $1.59 (424) $ 1.72 (344) $1.43
Canceled................ (915) $2.23 (2,482) $12.00 (441) $4.61
Outstanding at end of
year................... 3,446 $3.96 4,200 $ 3.67 5,108 $7.60
Options exercisable at
end of year............ 1,985 $3.96 2,655 $ 3.11 3,072 $9.12
Options available for
future grants.......... 2,582 2,068 1,583
Weighted average fair
value of options
granted during the
year................... $1.69 $1.11 $1.28
</TABLE>
The following table summarizes information about stock options and warrants
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------- ---------------------------------
Number Wgtd. Avg. Wgtd. Avg. Number Wgtd. Avg.
Exercise Outstanding Remaining Exercise Exercisable Exercise
Price at 12/31/97 Contr. Life Price at 12/31/97 Price
-------- ----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
$ 1.69............... 399,500 4.77 1.69 15,000 $ 1.69
2.75............... 980,000 0.81 2.75 980,000 2.75
3.50............... 150,000 4.56 3.50 30,000 3.50
3.63............... 1,288,200 3.70 3.63 575,375 3.63
3.75............... 3,000 4.66 3.75 600 3.75
5.81............... 200,000 4.48 5.81 200,000 5.81
7.20............... 69,100 1.30 7.20 69,100 7.20
7.35............... 50,000 1.88 7.35 50,000 7.35
15.30............... 200,000 6.30 15.30 60,000 15.30
--------- ---- ------ --------- ------
Totals............. 3,339,800 3.15 $ 3.96 1,980,075 $ 3.96
========= ==== ====== ========= ======
</TABLE>
F-75
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Had compensation cost for the Company's 1997, 1996 and 1995 grants for
stock-based compensation plans been determined consistent with SFAS 123, the
Company's net income and net earnings (loss) per common share for the years
ended December 31, 1997, 1996 and 1995 would approximate the pro forma amounts
below (in thousands, except per share data):
The fair value of each option granted during the periods presented is
estimated on the date of grant using the Black-Scholes option-pricing model
with the following assumptions: (1) dividend yield of 0%, (2) expected
volatility of 20%, (3) risk-free interest rates of 5.2%, 5.26%, 5.47% and 5.5%,
and (4) expected life of 2.25, 4.5, 6.75, and 9 years.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1997 1996 1995
---------------- ------------------ ------------------
As Reported As Reported As Reported
Pro Forma Pro Forma Pro Forma
---------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income (Loss)....... $(5,249) $(5,958) $(31,589) $(32,563) $(10,292) $(10,660)
Earnings per common
share
Basic................. $ (0.15) $ (0.17) $ (0.89) $ (0.92) $ (0.31) $ (0.32)
Diluted............... $ (0.15) $ (0.17) $ (0.89) $ (0.92) $ (0.31) $ (0.32)
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to 1995,
and additional awards in future years are anticipated.
Pensions and other benefits:
In July 1993, the Company adopted The Casino Magic Corp. 401(k) Plan (the
"401(k) Plan"), a defined contribution plan covering all eligible employees of
the Company who have one year of service and are age twenty-one or older. The
401(k) Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). Each year, participants may contribute up to 15%
of pretax annual compensation, as defined in the 401(k) Plan. The Company's
matching and/or additional contributions may be contributed at the discretion
of the Company's Board of Directors. The Company's contributions to the 401(k)
Plan are allocated to employed participants' accounts as of the last day of the
plan year. Total employer contributions to the 401(k) Plan at December 31,
1997, 1996 and 1995 were approximately $201,000, $176,000, and $177,000,
respectively.
12. Write-off of capitalized costs relating to inactive developments:
In 1995, the Company decided to terminate development efforts with respect
to specific properties and jurisdictions. Because of this determination,
significant capitalized amounts relating to land, land options, joint ventures
and construction projects were written-off or revalued. In addition, certain
consulting agreements that were entered into to pursue gaming opportunities in
new jurisdictions were terminated. The amount expensed in the fourth quarter of
1995 was $14,542,164.
13. Advertising:
The company expenses all production and communication costs of advertising
as incurred. Advertising expense was approximately $7,815,000, $5,470,000, and
$4,472,000 for years ended December 31, 1997, 1996, and 1995, respectively.
14. Related Party Transactions:
During the years ended December 31, 1997, 1996, and 1995, the Company
incurred $7,247, $1,346,861 and $353,888, respectively, for architectural and
design services provided by an architectural firm that is wholly-owned by an
outside director and shareholder of the Company. The director resigned in
October 1996.
F-76
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During the years ended December 31, 1997, 1996, and 1995, the Company
incurred $145,744, $154,028 and $388,944, respectively, for legal services
provided by a law firm in which an outside director of the Company is a
shareholder.
During the year ended December 31, 1996 and 1995, the Company incurred
$219,800, and $387,422, respectively, for charter plane rentals provided by a
company that is wholly owned by the Company's Chairman.
The Company purchased a jet airplane in February 1996 from the Company's
Chairman. The Company paid $1.7 million for the airplane which approximated
fair value at the date of purchase. The plane was sold in February 1997 to an
unrelated third party for $1.4 million, which approximated fair value.
15. Income taxes:
Pretax financial income (loss) generated from domestic and foreign sources
was as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Domestic........................... $(12,132,945) $(15,322,992) $(15,336,975)
Foreign............................ 4,948,737 (20,942,537) 1,813,932
------------ ------------ ------------
Total pretax loss.................. $ (7,184,208) $(36,265,529) $(13,523,043)
============ ============ ============
</TABLE>
Provision (benefit) for income taxes for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Federal and state current............ $(2,733,203) $(4,253,704) $(2,546,443)
Foreign current...................... 1,064,963 827,548 1,099,816
Federal deferred..................... (266,760) (1,250,026) (1,221,514)
Foreign deferred..................... -- -- (562,723)
----------- ----------- -----------
Total................................ $(1,935,000) $(4,676,182) $(3,230,864)
=========== =========== ===========
</TABLE>
Components of deferred tax liabilities (assets) are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Depreciation and amortization.................. $ 12,154,826 $ 9,535,121
Foreign source income.......................... 257,949 257,949
------------ ------------
Gross deferred tax liabilities................. 12,412,775 9,793,070
------------ ------------
Write-off of preopening costs.................. (1,781,870) (2,493,074)
Tax benefits related to non-statutory stock
Options....................................... (504,000) (504,000)
Accrued employee benefits and liabilities...... (1,428,370) (1,433,067)
Abandoned development projects................. (1,515,657) (10,229,821)
Net operating loss carry-forward............... (21,299,675) (2,269,344)
Other.......................................... (902,737) (798,293)
------------ ------------
Gross deferred tax assets...................... (27,432,309) (17,727,599)
------------ ------------
Less valuation allowance....................... 15,019,534 8,201,290
============ ============
Net deferred tax liabilities................... $ -- $ 266,761
============ ============
</TABLE>
F-77
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate
to pre-tax income from continuing operations as a result of the following
differences:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996 1995
----------- ------------ -----------
<S> <C> <C> <C>
Statutory U.S. tax rate (35%)...... $(2,023,010) $(12,692,935) $(4,733,065)
Increase (decrease) in rates
resulting from:
Expenses which were non-deductible
for tax purposes.................. 1,299,010 357,805 733,876
Expenses which were deductible for
tax purposes and not book......... (6,988,244) -- --
Foreign taxes...................... 1,064,963 827,548 1,099,816
Valuation allowance................ 6,818,244 8,201,290 --
State tax benefit.................. -- (802,174) --
Other.............................. (2,105,996) (567,716) (331,491)
----------- ------------ -----------
Effective tax rate (33%), (13%) and
(24%), respectively............... $(1,935,000) $ (4,676,182) $(3,230,864)
=========== ============ ===========
</TABLE>
The valuation allowance against net deferred tax assets was recorded in
recognition of the significant operating losses incurred by the Company for
the last three years.
Mississippi State taxes were offset by a tax credit for state gaming taxes
based on gross revenues realized by Casino Magic-BSL and Casino Magic-Biloxi.
The credit is the lesser of the annual total gaming taxes paid or the state
income tax. Credit carry-forwards are not permitted.
Louisiana State taxes do not allow for an offset of state gaming taxes
based on gross revenues realized by Louisiana.
16. Fair value of financial instruments:
The carrying amounts and fair values of the Company's financial instruments
at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
-------- -------
(in thousands)
<S> <C> <C>
Cash and cash equivalents............................... 20,902 20,902
Marketable securities................................... 10,629 10,629
Notes receivable........................................ 3,385 3,385
Notes payable and current maturities of long-term debt
and long-term debt..................................... 262,368 247,568
</TABLE>
The following methods and assumptions were used by the Company in
estimating its fair value disclosure:
Cash and cash equivalents, and marketable securities. The carrying amount
reported on the consolidated balance sheet approximates its fair value
because of the short term nature of these instruments.
Notes receivable. This is a long-term note receivable from an Indian
Tribe. The fair value of the note approximates market value based on the
interest rate of the note and the collateral securing the note.
F-78
<PAGE>
CASINO MAGIC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Notes payable and current maturities of long-term debt and long-term
debt. The fair value of the Company's debt either approximates its carrying
value or is based upon the market price of the debt instruments.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
17. Selected quarterly financial information (Unaudited):
<TABLE>
<CAPTION>
Year ended December 31, 1997
-------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Totals
------- ------- ------- ------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenue....................... $65,781 $65,958 $66,495 $63,240 $261,474
Income from operations........ 1,997 5,927 10,125 6,506 24,555
Income (loss) before tax and
minority interest............ (5,607) (1,020) 3,390 (2,543) (5,780)
Net income (loss)............. (3,672) (1,222) 2,675 (3,030) (5,249)
Earnings (loss) per share:
Basic....................... (0.10) (0.03) 0.08 (.08) (0.15)
Diluted..................... (0.10) (0.03) 0.08 (.08) (0.15)
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31, 1996
------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Totals
------- ------- ------- ------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenue......................... $43,125 42,368 $43,271 $51,514 $180,278
Income from operations.......... 5,565 6,473 5,355 (8,550) 8,843
Income (loss) before tax........ 2,352 2,456 (26,024) (15,050) (36,266)
Net income (loss)............... 1,644 1,660 (20,683) (14,210) (31,589)
Earnings (loss) per share:
Basic......................... 0.05 0.05 (0.57) (0.40) (0.89)
Diluted....................... 0.05 0.05 (0.57) (0.40) (0.89)
</TABLE>
NOTE: Earnings (loss) per share totals will not necessarily agree to the
sum of the quarterly information
F-79
<PAGE>
We have not authorized any dealer, salesperson or other person to give any
information or to make any representations not contained in this prospectus in
connection with the exchange offer made by this prospectus and you must not
rely on any such information or representations as having been authorized by
us. Neither the delivery of this prospectus nor any sale made hereunder will,
under any circumstances, create any implication that there has been no change
in our affairs since the date as of which information is given in this
prospectus. This prospectus does not constitute an offer or solicitation by
anyone in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so or to any person to whom it is unlawful to make such
solicitation.
----------------
Dealer Prospectus Delivery Obligation
Until , 1999 (90 days after commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in the exchange offer, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to any unsold allotments or
subscriptions.
$350,000,000
[LOGO OF HOLLYWOOD PARK, INC.]
HOLLYWOOD PARK, INC.
Offer to Exchange
9 1/4% Senior Subordinated Notes
due 2007
------------------
PROSPECTUS
------------------
, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that the person is or was a director, officer, employee or agent of the
corporation or is or was serving at its request in such capacity in another
corporation or business association, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if
the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe the person's conduct was unlawful.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit.
As permitted by Section 102(b)(7) of the DGCL, the Company's Certificate of
Incorporation, as amended, includes a provision that limits a director's
personal liability to the Company or its stockholders for monetary damages for
breaches of his or her fiduciary duty as a director. Article XIII of the
Company's Certificate of Incorporation, as amended, provides that no director
of the Company shall be personally liable to such Issuer or its stockholders
for monetary damages for breach of fiduciary duty to the fullest extent
permitted by the DGCL.
As permitted by Section 145 of the DGCL, the Company's Bylaws provide that,
to the fullest extent permitted by the DGCL, directors, officers and certain
other persons who are made, or are threatened to be made, parties to, or are
involved in, any action, suit or proceeding will be indemnified by the Company
with respect thereto.
The Company maintains insurance policies under which its directors and
officers are insured, within the limits and subject to the limitations of the
policies, against expenses in connection with the defense of actions, suits or
proceedings, and certain liabilities that might be imposed as a result of such
actions, suits or proceedings, to which they are parties by reason of being or
having been directors or officers of the Company.
ITEM 21. EXHIBITS
A list of exhibits included as part of the Registration Statement is set
forth below:
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
2.1 Agreement and Plan of Merger, by and among Hollywood Park, Inc., HP
Acquisition, Inc., and Boomtown, Inc., dated April 23, 1996, is hereby
incorporated by reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K, filed May 3, 1996.
2.2 Agreement and Plan of Merger, dated as of February 19, 1998, among
Casino Magic Corp., Hollywood Park, Inc. and HP Acquisition II, Inc.,
is hereby incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K, filed February 26, 1998.
3.1 Certificate of Incorporation of Hollywood Park, Inc., is hereby
incorporated by reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-1 dated January 29, 1993.
3.2 Amended By-laws of Hollywood Park, Inc. are hereby incorporated by
reference to Exhibit 3.2 to the Company's Registration Statement on
Form S-1 dated January 29, 1993.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
3.3 Certificate of Incorporation of Hollywood Park Operating Company, is
hereby incorporated by reference to Exhibit 3.3 to the Company's
Amendment No. 4 to Form S-4 Registration Statement dated February 6,
1998.
3.4 Amended By-laws of Hollywood Park Operating Company, are hereby
incorporated by reference to Exhibit 3.4 to the Company's Amendment
No. 4 to Form S-4 Registration Statement dated February 6, 1998.
3.5 Certificate of Incorporation of Hollywood Park Fall Operating Company,
is hereby incorporated by reference to Exhibit 3.5 to the Company's
Amendment No. 4 to Form S-4 Registration Statement dated February 6,
1998.
3.6 By-laws of Hollywood Park Fall Operating Company are hereby
incorporated by reference to Exhibit 3.6 to the Company's Amendment
No. 4 to Form S-4 Registration Statement dated February 6, 1998.
3.7 Articles of Incorporation of Hollywood Park Food Services, Inc., are
hereby incorporated by reference to Exhibit 3.7 to the Company's
Amendment No. 4 to Form S-4 Registration Statement dated February 6,
1998.
3.8 By-laws of Hollywood Park Food Services, Inc., are hereby incorporated
by reference to Exhibit 3.8 to the Company's Amendment No. 4 to Form
S-4 Registration Statement dated February 6, 1998.
3.9 Articles of Incorporation of HP/Compton, Inc., are hereby incorporated
by reference to Exhibit 3.9 to the Company's Amendment No. 4 to Form
S-4 Registration dated February 6, 1998.
3.10 By-laws of HP/Compton, Inc., are hereby incorporated by reference to
Exhibit 3.10 to the Company's Amendment No. 4 to Form S-4 Registration
Statement dated February 6, 1998.
3.11 Articles of Organization of Crystal Park Hotel and Casino Development
Company, LLC, are hereby incorporated by reference to Exhibit 3.11 to
the Company's Amendment No. 4 to Form S-4 Registration Statement dated
February 6, 1998.
3.12 Operating Agreement of Crystal Park Hotel and Casino Development
Company, LLC, are hereby incorporated by reference to Exhibit 3.12 to
the Company's Amendment No. 4 to Form S-4 Registration Statement dated
February 6, 1998.
3.13 Restated Articles of Incorporation of Turf Paradise, Inc., are hereby
incorporated by reference to Exhibit 3.13 to the Company's Amendment
No. 4 to Form S-4 Registration Statement dated February 6, 1998.
3.14 By-laws of Turf Paradise, are hereby incorporated by reference to
Exhibit 3.14 to the Company's Amendment No. 4 to Form S-4 Registration
Statement dated February 6, 1998.
3.15 Certificate of Incorporation of HP Yakama, Inc., is hereby
incorporated by reference to Exhibit 3.15 to the Company's Amendment
No. 4 to Form S-4 Registration Statement dated February 6, 1998.
3.16 By-laws of HP Yakama, Inc., are hereby incorporated by reference to
Exhibit 3.16 to the Company's Amendment No. 4 to Form S-4 Registration
Statement dated February 6, 1998.
3.17 Amended and Restated Certificate of Incorporation of Boomtown, Inc.,
is hereby incorporated by reference to Exhibit 3.17 to the Company's
Amendment No. 4 to Form S-4 Registration Statement dated February 6,
1998.
3.18 By-laws of Boomtown, Inc., are hereby incorporated by reference to
Exhibit 3.18 to the Company's Amendment No. 4 to Form S-4 Registration
Statement dated February 6, 1998.
3.19 Certificate of Amended and Restated Articles of Incorporation of
Boomtown Hotel & Casino, Inc., are hereby incorporated by reference to
Exhibit 3.19 to the Company's Amendment No. 4 to Form S-4 Registration
Statement dated February 6, 1998.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
3.20 Revised and Restated By-laws of Boomtown Hotel & Casino, Inc., are
hereby incorporated by reference to Exhibit 3.20 to the Company's
Amendment No. 4 to Form S-4 Registration Statement dated February 6,
1998.
3.21 Articles of Incorporation of Bayview Yacht Club, Inc., are hereby
incorporated by reference to Exhibit 3.21 to the Company's Amendment
No. 4 to Form S-4 Registration Statement dated February 6, 1998.
3.22 By-laws of Bayview Yacht Club, Inc., are hereby incorporated by
reference to Exhibit 3.22 to the Company's Amendment No. 4 to Form S-4
Registration Statement dated February 6, 1998.
3.23 Certificate of Mississippi Limited Partnership of Mississippi-I
Gaming, L.P., are hereby incorporated by reference to Exhibit 3.23 to
the Company's Amendment No. 4 to Form S-4 Registration Statement dated
February 6, 1998.
3.24 Amended and Restated Agreement of Limited Partnership of Mississippi-I
Gaming, L.P., is hereby incorporated by reference to Exhibit 10.31 to
the Company's Quarterly Report on Form 10-Q for quarter ended June 30,
1997.
3.25 Articles of Incorporation of Louisiana Gaming Enterprises, Inc., are
hereby incorporated by reference to Exhibit 3.25 to the Company's
Amendment No. 4 to Form S-4 Registration Statement dated February 6,
1998.
3.26 Amended and Restated Partnership Agreement of Louisiana-I Gaming, a
Louisiana Partnership in Commendam, is hereby incorporated by
reference to Exhibit 3.26 to the Company's Amendment No. 4 to Form S-4
Registration Statement dated February 6, 1998.
3.27* Certificate of Incorporation of HP Yakama Consulting, Inc.
3.28* By-laws of HP Yakama Consulting, Inc.
3.29* Articles of Incorporation of Casino Magic Corp.
3.30* Amended By-laws of Casino Magic Corp.
3.31* Articles of Incorporation of Casino Magic American Corp.
3.32* By-laws of Casino Magic American Corp.
3.33* Articles of Incorporation of Biloxi Casino Corp.
3.34* By-laws of Biloxi Casino Corp.
3.35* Articles of Incorporation of Casino Magic Finance Corp.
3.36* By-laws of Casino Magic Finance Corp.
3.37* Articles of Incorporation of Casino One Corporation
3.38* By-laws of Casino One Corporation
3.39* Articles of Incorporation of Bay St. Louis Casino Corp.
3.40* By-laws of Bay St. Louis Casino Corp.
3.41* Articles of Incorporation of Mardi Gras Casino Corp.
3.42* By-laws of Mardi Gras Casino Corp.
3.43* Articles of Incorporation of Boomtown Hoosier, Inc.
3.44* By-laws of Boomtown Hoosier, Inc.
3.45* Articles of Organization of Indiana Ventures LLC
3.46* Operating Agreement of Indiana Ventures LLC
3.47* Amended Articles of Incorporation of Switzerland County Development
Corp. (f/k/a Conrad (New Zealand) Corporation)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
3.48* By-laws of Switzerland County Development Corp. (f/k/a Conrad (New
Zealand)
Corporation)
3.49* Amended Articles of Incorporation of Pinnacle Gaming Development Corp.
3.50* By-laws of Pinnacle Gaming Development Corp.
3.51* Articles of Incorporation of HP Casino, Inc.
3.52* By-laws of HP Casino, Inc.
4.1 Hollywood Park 1996 Stock Option Plan is hereby incorporated by
reference to Exhibit 10.24 to the Company's Registration Statement on
Form S-4 dated September 18, 1996.
4.2 Hollywood Park 1993 Stock Option Plan is hereby incorporated by
reference to Appendix A to the Notice of Annual Meeting to
Shareholders and Proxy Statement relating to the Annual Meeting of
Stockholders of Hollywood Park, Inc. held on May 17, 1993.
4.3 Indenture, dated August 1, 1997, by and among the Company, Hollywood
Park Operating Company, Hollywood Park Food Services, Inc., Hollywood
Park Fall Operating Company, HP/Compton, Inc., Crystal Park Hotel and
Casino Development Company, LLC, HP Yakama, Inc., Turf Paradise, Inc.,
Boomtown, Inc., Boomtown Hotel & Casino, Inc., Louisiana-I Gaming,
Louisiana Gaming Enterprises, Inc., Mississippi-I Gaming, L.P.,
Bayview Yacht Club, Inc. and The Bank of New York, as trustee, is
hereby incorporated by reference to Exhibit 10.37 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
4.4 First Supplemental Indenture, dated as of February 5, 1999, to
Indenture dated as of August 1, 1997 governing the 9 1/2% Senior
Subordinated Notes due 2007, by and among the Company and Hollywood
Park Operating Company, as co-issuers, and Bayview Yacht Club, Inc.,
Boomtown Hotel & Casino, Inc., Boomtown, Inc., Crystal Park Hotel and
Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP/Compton, Inc., HP Yakama, Inc., Louisiana Gaming
Enterprises, Inc., Louisiana-I Gaming, a Louisiana Partnership in
Commendam, Mississippi-I Gaming, LP., and Turf Paradise, Inc. as
guarantors, and The Bank of New York, as trustee.
4.5 Form of Series B 9 1/2% Senior Subordinated Note due 2007 (included in
Exhibit 4.3), is hereby incorporated by reference to the Company's
Amendment No. 1 to Registration Statement on Form S-4 dated October
30, 1997.
4.6 Indenture, dated as of February 18, 1999, governing the 9 1/4% Senior
Subordinated Notes due 2007, by and among the Company as issuer, and
Bay St. Louis Casino Corp., Bayview Yacht Club, Inc., Biloxi Casino
Corp., Boomtown Hoosier, Inc., Boomtown Hotel & Casino, Inc.,
Boomtown, Inc., Casino Magic American Corp., Casino Magic Corp.,
Casino Magic Finance Corp., Casino One Corporation, Crystal Park Hotel
and Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP Casino, Inc., HP/Compton, Inc., HP Yakama, Inc., HP Yakama
Consulting, Inc., Indiana Ventures LLC, Louisiana Gaming Enterprises,
Inc., Louisiana-I Gaming, a Louisiana Partnership in Commendam, Mardi
Gras Casino Corp., Mississippi-I Gaming, L.P., Pinnacle Gaming
Development Corp., Switzerland County Development Corp., and Turf
Paradise, Inc. as initial guarantors, and The Bank of New York, as
trustee.
4.7 Form of Series B 9 1/4% Senior Subordinated Note due 2007 (included in
Exhibit 4.6).
5* Opinion of Irell & Manella LLP
10.1 Directors Deferred Compensation Plan for Hollywood Park, Inc. is
hereby incorporated by reference to Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.2 Aircraft rental agreement dated November 1, 1993, by and between
Hollywood Park, Inc. and R.D. Hubbard Enterprises, Inc. is hereby
incorporated by reference to Exhibit 10.7 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.
10.3 Amended and Restated Disposition and Development Agreement of Purchase
and Sale, and Lease with Option to Purchase, dated August 2, 1995, by
and between The Community Redevelopment Agency of the City of Compton
and Compton Entertainment, Inc., is hereby incorporated by reference
to Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995.
10.4 Guaranty, dated July 31, 1995, by Hollywood Park, Inc., in favor of
the Community Redevelopment Agency of the City of Compton, is hereby
incorporated by reference to Exhibit 10.17 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995.
10.5 Assignment, Assumption and Consent Agreement, by and among HP/Compton,
Inc., and Crystal Park Hotel and Casino Development Company LLC,
Hollywood Park, Inc. and The Community Redevelopment Agency of the
City of Compton, dated July 18, 1996, is hereby incorporated by
reference to Exhibit 10.20 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996.
10.6 Operating Agreement for Crystal Park Hotel and Casino Development
Company, LLC, a California Limited Liability Company, dated July 18,
1996, effective August 28, 1996, is hereby incorporated by reference
to Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996.
10.7 Lease, by and between Crystal Park Hotel and Casino Development
Company, LLC and California Casino Management, Inc., dated December
19, 1997, is hereby incorporated by reference to Exhibit 10.41 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1997.
10.8 Addendum to the Lease Agreement dated December 19, 1997, by and
between Crystal Park Hotel and Casino Development Company, LLC and
California Casino Management, Inc., dated June 30, 1998, is hereby
incorporated by reference to Exhibit 10.46 of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998.
10.9 Blue Diamond Swap Agreement by and among Boomtown, Inc., Blue Diamond
Hotel & Casino, Inc., Hollywood Park, Inc., Edward P. Roski, Jr., IVAC
and Majestic Realty Co., dated August 12, 1996, is hereby incorporated
by reference to Exhibit 10.22 to the Company's Registration Statement
on Form S-4 filed September 18, 1996.
10.10 Stock Purchase Agreement, by and between Hollywood Park, Inc. and
Edward P. Roski, Jr., dated August 12, 1996, is hereby incorporated by
reference to Exhibit 10.23 to the Company's Registration Statement on
Form S-4 filed September 18, 1996.
10.11 Amended and Restated Agreement of Limited Partnership of Mississippi-I
Gaming, L.P., is hereby incorporated by reference to Exhibit 10.31 to
the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997.
10.12 Ground Lease, dated October 19, 1993, between Raphael Skrmetta as
Landlord and Mississippi-I Gaming, L.P. as Tenant, is hereby
incorporated by reference to Exhibit 10.33 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
10.13 First Amendment to Ground Lease dated October 19, 1993, between
Raphael Skrmetta and Mississippi-I Gaming, L.P., is hereby
incorporated by reference to Exhibit 10.34 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
10.14 Second Amendment to Ground Lease dated October 19, 1993, between
Raphael Skrmetta and Mississippi-I Gaming, L.P., is hereby
incorporated by reference to Exhibit 10.35 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.15 Purchase Agreement, dated August 1, 1997, by and among the Company,
Hollywood Park Operating Company, Hollywood Park Food Services, Inc.,
HP/Compton, Inc., Crystal Park Hotel and Casino Development Company,
LLC, Hollywood Park Fall Operating Company, HP Yakama, Inc., Turf
Paradise, Inc., Boomtown, Inc., Boomtown Hotel & Casino, Inc.,
Louisiana Gaming-I Gaming, Louisiana Gaming Enterprises, Inc.,
Mississippi-I Gaming, L.P., Bayview Yacht Club, Inc., and the Initial
Purchasers named therein, is hereby by incorporated by reference to
Exhibit 10.36 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
10.16 Registration Rights Agreement, dated August 1, 1997, by and among the
Company, Hollywood Park Operating Company, Hollywood Park Food
Services, Inc., HP/Compton, Inc., Crystal Park Hotel and Casino
Development Company, LLC, Hollywood Park Fall Operating Company, HP
Yakama, Inc., Turf Paradise, Inc., Boomtown, Inc., Boomtown Hotel &
Casino, Inc., Louisiana-I Gaming, Louisiana Gaming Enterprises, Inc.,
Mississippi-I Gaming, L.P., Bayview Yacht Club, Inc., and the Initial
Purchasers named therein is hereby incorporated by reference to
Exhibit 10.38 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
10.17 Profit Participation Agreement, by and between Hollywood Park, Inc.,
and North American Sports Management, Inc., dated July 14, 1997, is
hereby incorporated by reference to Exhibit 10.40 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
10.18 Loan Agreement, by and between Yakama Tribal Gaming Corporation and HP
Yakama, Inc., dated September 11, 1997, is hereby incorporated by
reference Exhibit 10.41 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997.
10.19 Security Agreement, by and between Yakama Tribal Gaming Corporation
and HP Yakama, Inc., dated September 11, 1997, is hereby incorporated
by reference to Exhibit 10.42 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997.
10.20 Master Lease, by and between The Confederated Tribes and Bands of the
Yakama Indian Nation and HP Yakama, Inc., dated September 11, 1997, is
hereby incorporated by reference to Exhibit 10.43 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
10.21 Sublease, by and between HP Yakama, Inc. and Yakama Tribal Gaming
Corporation, dated September 11, 1997, is hereby incorporated by
reference to Exhibit 10.44 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997.
10.22 Construction and Development Agreement, by and between Yakama Tribal
Gaming Corporation and HP Yakama Consulting, Inc., dated September 11,
1997, is hereby incorporated by reference to Exhibit 10.45 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
10.23 Consulting Agreement, by and between Yakama Tribal Gaming Corporation
and HP Yakama Consulting, Inc., dated September 11, 1997, is hereby
incorporated by reference to Exhibit 10.46 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997.
10.24 Termination of Consulting Agreement, among Yakama Tribal Gaming
Corporation, HP Yakama, Inc., and the Confederated Tribes and Bands of
the Yakama Indians, dated January 1, 1998, is hereby incorporated by
reference to Exhibit 10.42 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
10.25 Voting Agreement, dated as of February 25, 1998, by and between
Hollywood Park, Inc., and Marlin F. Torguson, is hereby incorporated
by reference to Exhibit 10.1 to the Company's Current Report on Form
8-K, filed February 26, 1998.
10.26 Public Trust Tidelands Lease, dated August 15, 1994, by and between
the Secretary of State on behalf of the State of Mississippi and
Mississippi-I Gaming, L.P., is hereby incorporated by reference to
Exhibit 10.43 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.27 Public Trust Tidelands Lease Amendment, dated March 31, 1997, by and
between the Secretary of State on behalf of the State of Mississippi
and Mississippi-I Gaming, L.P., is hereby incorporated by reference to
the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
10.28 Option agreement, by and among The Webster Family Limited Partnership
and The Diuguid Family Limited Partnership, and Pinnacle Gaming
Development Corp., dated June 2, 1998, is hereby incorporated by
reference to Exhibit 10.47 of the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
10.29 Memorandum of Option Agreement, by and between the Webster Family
Limited Partnership and The Duiguid Family Limited Partnership, and
Pinnacle Gaming Development Corp., dated June 2, 1998, is hereby
incorporated by reference to Exhibit 10.48 of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998.
10.30 Amended and Restated Option Agreement, by and among Daniel Webster,
Marsho S. Webster, William G. Duiguid, Sara T. Diuguid, J.R. Showers,
III and Carol A. Showers, and Pinnacle Gaming Development Corp., dated
June 2, 1998, is hereby incorporated by reference to Exhibit 10.49 of
the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998.
10.31 Memorandum of Amended and Restated Option Agreement, by and between
Daniel Webster, Marsha S. Webster, William Diuguid, Sara T. Diuguid,
J.R. Showers, III and Carol A. Showers, and Pinnacle Gaming
Development Corp., dated June 4, 1998, is hereby incorporated by
reference to Exhibit 10.50 of the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
10.32 Assignment of Option Agreement, by Daniel Webster and Marsha S.
Webster, and Pinnacle Gaming Development Corp., dated June 2, 1998, is
hereby incorporated by reference to Exhibit 10.51 of the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
10.33 Amended and Restated Reducing Revolving Loan Agreement, dated October
14, 1998, among Hollywood Park, Inc., and the banks named therein,
Societe Generale and Bank of Scotland (as Managing Agents), First
National Bank of Commerce (as Co-Agent), and Bank of America National
Trust and Savings Association (as Administrative Agent), is hereby
incorporated by reference to Exhibit 2 of the Company's Current Report
on Form 8-K, filed October 30, 1998.
10.34 Purchase Agreement, dated February 12, 1999, by and among the Company
Bay St. Louis Caisno Corp., Bayview Yacht Club, Inc., Biloxi Casino
Corp., Boomtown Hoosier, Inc., Boomtown Hotel & Casino, Inc.,
Boomtown, Inc., Casino Magic American Corp., Casino Magic Corp.,
Casino Magic Finance Corp., Casino One Corporation, Crystal Park Hotel
and Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP Casino, Inc., HP/Compton, Inc., HP Yakama, Inc., HP Yakama
Consulting, Inc., Indiana Ventures LLC, Louisiana Gaming Enterprises,
Inc., Louisiana-I Gaming, a Louisiana Partnership in Commendam, Mardi
Gras Casino Corp., Mississippi-I Gaming, L.P., Pinnacle Gaming
Development Corp., Switzerland County Development Corp., and Turf
Paradise, Inc., and Lehman Bothers, Inc., CIBC Oppenheimer Corp.,
Morgan Stanley & Co., Incorporated, NationsBanc Montgomery Securities
LLC, SG Cowen Securities Corporation, and Wasserstein Perella
Securities, Inc., as initial purchasers.
10.35 Registration Rights Agreement, dated as of February 18, 1999, by and
among the Company and Bay St. Louis Casino Corp., Bayview Yacht Club,
Inc., Biloxi Casino, Corp., Boomtown Hoosier, Inc., Boomtown Hotel &
Casino, Inc., Boomtown, Inc., Casino Magic American Corp., Casino
Magic Finance Corp., Casino One Corporation, Crystal Park Hotel and
Casino Development Company, LLC, Hollywood Park Fall Operating
Company, Hollywood Park Food Services, Inc., Hollywood Park Operating
Company, HP Casino, Inc., HP/Compton, Inc., HP Yakama, Inc., HP Yakama
Consulting, Inc., Indiana Ventures LLC, Louisiana Gaming Enterprises,
Inc., Louisiana-I Gaming, a Louisiana Partnership in Commendam, Mardi
Gras Casino Corp., Mississippi-I Gaming L.P. Pinnacle Gaming
Development Corp., Switzerland County Development Corp., and Turf
Paradise, Inc., and Lehman
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
Brothers Inc., CIBS Oppenheimer Corp., Morgan Stanley & Co.
Incorporated, NationsBanc Montgomery Securities LLC, SG Cowen
Securities Corporation and Wasserstein Perella Securities, Inc., as
initial purchasers.
10.36* Employment Agreement, dated December 23, 1998, by and between
Hollywood Park, Inc. and G. Michael Finnigan.
10.37* Employment Agreement, dated September 10, 1998, by and between
Hollywood Park, Inc. and Paul Alanis.
10.38* Employment Agreement, dated September 10, 1998, by and between
Hollywood Park, Inc. and Mike Allen.
12.1 Calculation of Historical Ratio of Earnings to Fixed Charges
12.2 Calculation of Pro Forma Ratio of Earnings to Fixed Charges
21.1 Subsidiaries of Hollywood Park, Inc.
23.1* Consent of Irell & Manella LLP (included in Exhibit 5).
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Ernst & Young LLP
24.1 Powers of Attorney of officers and directors of Hollywood Park, Inc.
(appears on signature page)
24.2 Powers of Attorney of officers and directors of Hollywood Park
Operating Company (appears on signature page)
24.3 Powers of Attorney of officers and directors of Hollywood Park Fall
Operating Company (appears on signature page)
24.4 Powers of Attorney of officers and directors of Hollywood Park Food
Services, Inc. (appears on signature page)
24.5 Powers of Attorney of officers and directors of HP/Compton, Inc.
(appears on signature page)
24.6 Powers of Attorney of directors of HP/Compton, Inc. in the capacity of
manager of Crystal Park Hotel and Casino Development Company, LLC
(appears on signature page)
24.7 Powers of Attorney of officers and directors of Turf Paradise, Inc.
(appears on signature page)
24.8 Powers of Attorney of officers and directors of HP Yakama, Inc.
(appears on signature page)
24.9 Powers of Attorney of officers and directors of Boomtown, Inc.
(appears on signature page)
24.10 Powers of Attorney of officers and directors of Boomtown Hotel &
Casino, Inc. (appears on signature page)
24.11 Powers of Attorney of officers and directors of Bayview Yacht Club,
Inc. (appears on signature page)
24.12 Powers of Attorney of directors of Bayview Yacht Club, Inc. in the
capacity of General Partner of Mississippi I-Gaming, L.P. (appears on
signature page)
24.13 Powers of Attorney of officers and directors of Louisiana Gaming
Enterprises, Inc. (appears on signature page)
24.14 Powers of Attorney of directors of Louisiana Gaming Enterprises, Inc.
in the capacity of General Partner of Louisiana I-Gaming, a Louisiana
Partnership in Commendam (appears on signature page)
24.15 Powers of Attorney of officers and directors of Bay St. Louis Casino
Corp. (appears on signature page)
</TABLE>
II-8
<PAGE>
<TABLE>
<C> <S>
24.16 Powers of Attorney of officers and directors of Biloxi Casino Corp.
(appears on signature page)
24.17 Powers of Attorney of officers and directors of Boomtown Hoosier, Inc.
(appears on signature page)
24.18 Powers of Attorney of officers and directors of Casino Magic American
Corp. (appears on signature page)
24.19 Powers of Attorney of officers and directors of Casino Magic Corp.
(appears on signature page)
24.20 Powers of Attorney of officers and directors of Casino Magic Finance
Corp. (appears on signature page)
24.21 Powers of Attorney of officers and directors of Casino One Corporation
(appears on signature page)
24.22 Powers of Attorney of officers and directors of HP Casino, Inc. (appears
on signature page)
24.23 Powers of Attorney of officers and directors of HP Yakama Consulting,
Inc. (appears on signature page)
24.24 Powers of Attorney of directors of Boomtown Hoosier, Inc. in the
capacity of manager of Indiana Ventures LLC (appears on signature page)
24.25 Powers of Attorney of officers and directors of Mardi Gras Casino Corp.
(appears on signature page)
24.26 Powers of Attorney of officers and directors of Pinnacle Gaming
Development Corp. (appears on signature page)
24.27 Powers of Attorney of officers and directors of Switzerland County
Development Corp. (appears on signature page)
25.1 Form T-1 Statement of Eligibility and Qualification, under the Trust
Indenture Act of 1939, of The Bank of New York, as Trustee
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
</TABLE>
- --------
* To be filed by amendment
ITEM 22. UNDERTAKINGS
1. The undersigned Registrants hereby undertake:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
II-9
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(b) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(c) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(d) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Issuers' annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of an action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(f) The undersigned Registrants hereby undertake to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with
the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Trust Indenture Act.
II-10
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
HOLLYWOOD PARK, INC.,
a Delaware corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard Chairman of the Board and March 2, 1999
____________________________________ Chief Executive Officer
R.D. Hubbard (Principal Executive
Officer)
/s/ G. Michael Finnigan Chief Financial Officer March 2, 1999
____________________________________ (Principal Financial and
G. Michael Finnigan Accounting Officer)
/s/ Michael Ornest Director March 2, 1999
____________________________________
Michael Ornest
Director
____________________________________
J.R. Johnson
/s/ Robert T. Manfuso Director March 2, 1999
____________________________________
Robert T. Manfuso
/s/ Timothy J. Parrott Director March 2, 1999
____________________________________
Timothy J. Parrott
</TABLE>
II-11
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Lynn P. Reitnouer Director March 2, 1999
____________________________________
Lynn P. Reitnouer
/s/ Warren B. Williamson Director March 2, 1999
____________________________________
Warren B. Williamson
/s/ Herman Sarkowsky Director March 2, 1999
____________________________________
Herman Sarkowsky
/s/ Marlin Torguson Director March 2, 1999
____________________________________
Marlin Torguson
</TABLE>
II-12
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
BAY ST. LOUIS CASINO CORP.,
a Mississippi corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Marlin F. Torguson Chairman of the Board, March 2, 1999
____________________________________ President and
Marlin F. Torguson Chief Executive Officer
(Principal Executive
Officer)
/s/ G. Michael Finnigan Vice President and Assistant March 2, 1999
____________________________________ Treasurer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
II-13
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
BAYVIEW YACHT CLUB, INC.,
a Mississippi corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Timothy J. Parrott Chairman of the Board and March 2, 1999
____________________________________ Chief Executive Officer
Timothy J. Parrott (Principal Executive
Officer)
/s/ Robert F. List Director March 2, 1999
____________________________________
Robert F. List
/s/ G. Michael Finnigan Vice President, and Chief March 2, 1999
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
II-14
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
BILOXI CASINO CORP.,
a Mississippi corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Marlin F. Torguson Chairman of the Board, March 2, 1999
____________________________________ President and
Marlin F. Torguson Chief Executive Officer
(Principal Executive
Officer)
/s/ G. Michael Finnigan Vice President and Assistant March 2, 1999
____________________________________ Treasurer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
II-15
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
BOOMTOWN, INC.,
a Delaware corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Timothy J. Parrott Chairman of the Board and March 2 , 1999
____________________________________ Chief Executive Officer
Timothy J. Parrott (Principal Executive
Officer)
/s/ Robert F. List Director March 2 , 1999
____________________________________
Robert F. List
/s/ G. Michael Finnigan Vice President, and Chief March 2 , 1999
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
II-16
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
BOOMTOWN HOOSIER, INC.,
a Nevada corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Timothy J. Parrott Director and President March 2, 1999
____________________________________ (Principal Executive
Timothy J. Parrott Officer)
/s/ Robert F. List Director March 2, 1999
____________________________________
Robert F. List
/s/ G. Michael Finnigan Vice President and Chief March 2, 1999
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
II-17
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
BOOMTOWN HOTEL & CASINO, INC.,
a Nevada corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Senior Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Timothy J. Parrott Chairman of the Board and March 2, 1999
____________________________________ Chief Executive Officer
Timothy J. Parrott (Principal Executive
Officer)
/s/ Robert F. List Director March 2, 1999
____________________________________
Robert F. List
/s/ G. Michael Finnigan Senior Vice President and March 2, 1999
____________________________________ Chief Financial Officer
G. Michael Finnigan (Principal Financial and
Accounting Officer)
</TABLE>
II-18
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
CASINO MAGIC AMERICAN CORP.,
a Minnesota corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Marlin F. Torguson Chairman of the Board, March 2, 1999
____________________________________ President and
Marlin F. Torguson Chief Executive Officer
(Principal Executive
Officer)
/s/ G. Michael Finnigan Vice President and Assistant March 2, 1999
____________________________________ Treasurer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
II-19
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
CASINO MAGIC CORP.,
a Minnesota corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Marlin F. Torguson Chairman of the Board, March 2, 1999
____________________________________ President and
Marlin F. Torguson Chief Executive Officer
(Principal Executive
Officer)
/s/ G. Michael Finnigan Vice President and Assistant March 2, 1999
____________________________________ Treasurer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
II-20
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
CASINO MAGIC FINANCE CORP.,
a Mississippi corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Marlin F. Torguson Chairman of the Board, March 2, 1999
____________________________________ President and
Marlin F. Torguson Chief Executive Officer
(Principal Executive
Officer)
/s/ G. Michael Finnigan Vice President and Assistant March 2, 1999
____________________________________ Treasurer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
II-21
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
CASINO ONE CORPORATION,
a Mississippi corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Marlin F. Torguson Chairman of the Board, March 2, 1999
____________________________________ President and
Marlin F. Torguson Chief Executive Officer
(Principal Executive
Officer)
/s/ G. Michael Finnigan Vice President and Assistant March 2, 1999
____________________________________ Treasurer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
II-22
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
CRYSTAL PARK HOTEL AND CASINO
DEVELOPMENT COMPANY, LLC
By: its Manager
HP/COMPTON, INC.,
a California corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
HP/COMPTON, INC. MANAGER of Crystal Park March 2, 1999
Hotel & Casino Development
Company, LLC
/s/ R.D. Hubbard Director and President of March 2, 1999
____________________________________ HP/Compton, Inc.
R.D. Hubbard
</TABLE>
II-23
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
HOLLYWOOD PARK FALL OPERATING
COMPANY,
a Delaware corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Executive Vice President,
Treasurer and
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard Director and President March 2, 1999
____________________________________ (Principal Executive
R.D. Hubbard Officer)
/s/ Warren B. Williamson Director March 2, 1999
____________________________________
Warren B. Williamson
/s/ G. Michael Finnigan Executive Vice President, March 2, 1999
____________________________________ Treasurer and Assistant
G. Michael Finnigan Secretary (Principal
Financial and Accounting
Officer)
</TABLE>
II-24
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
HOLLYWOOD PARK FOOD SERVICES, INC.,
a California corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Executive Vice President,
Treasurer and
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard Director and President March 2, 1999
____________________________________ (Principal Executive
R.D. Hubbard Officer)
/s/ Warren B. Williamson Director March 2, 1999
____________________________________
Warren B. Williamson
/s/ G. Michael Finnigan Executive Vice President, March 2, 1999
____________________________________ Treasurer and Assistant
G. Michael Finnigan Secretary (Principal
Financial and Accounting
Officer)
</TABLE>
II-25
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
HOLLYWOOD PARK OPERATING COMPANY,
a Delaware corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Executive Vice President,
Treasurer and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard Chairman of the Board and March 2, 1999
____________________________________ Chief Executive Officer
R.D. Hubbard (Principal Executive
Officer)
/s/ G. Michael Finnigan Executive Vice President, March 2, 1999
____________________________________ Treasurer and Chief
G. Michael Finnigan Financial Officer (Principal
Financial and Accounting
Officer)
/s/ Warren B. Williamson Director March 2, 1999
____________________________________
Warren B. Williamson
</TABLE>
II-26
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
HP CASINO, INC.,
a California corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard President (Principal March 2, 1999
____________________________________ Executive Officer)
R.D. Hubbard
/s/ Robert F. List Director March 2, 1999
____________________________________
Robert F. List
/s/ Timothy J. Parrott Director March 2, 1999
____________________________________
Timothy J. Parrott
/s/ G. Michael Finnigan Vice President and Chief March 2, 1999
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
II-27
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
HP/COMPTON INC.,
a California corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard Director and President March 2, 1999
____________________________________ (Principal Executive
R.D. Hubbard Officer)
/s/ G. Michael Finnigan Vice President and Chief March 2, 1999
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
II-28
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
HP YAKAMA, INC.,
a Delaware corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President, Treasurer and
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard Director, President and March 2, 1999
____________________________________ Chief Executive Officer
R.D. Hubbard (Principal Executive
Officer)
/s/ Bruce Rimbo Director March 2, 1999
____________________________________
Bruce Rimbo
/s/ G. Michael Finnigan Director, Vice President, March 2, 1999
____________________________________ Treasurer and Assistant
G. Michael Finnigan Secretary (Principal
Financial and Accounting
Officer)
</TABLE>
II-29
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
HP YAKAMA CONSULTING, INC.,
a Delaware corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President, Treasurer and
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard Director, President and March 2, 1999
____________________________________ Chief Executive Officer
R.D. Hubbard (Principal Executive
Officer)
/s/ Bruce Rimbo Director, Vice President and March 2, 1999
____________________________________ Secretary
Bruce Rimbo
/s/ G. Michael Finnigan Director, Vice President, March 2, 1999
____________________________________ Treasurer and Assistant
G. Michael Finnigan Secretary (Principal
Financial and Accounting
Officer)
</TABLE>
II-30
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
INDIANA VENTURES LLC
By: its Manager
BOOMTOWN HOOSIER, INC.
a Nevada corporation
/s/ G. Michael Finnigan
By: _______________________________
G. Michael Finnigan
Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
BOOMTOWN HOOSIER, INC. MANAGER of Indiana Ventures March 2, 1999
LLC
/s/ Timothy J. Parrott Director of Boomtown March 2, 1999
____________________________________ Hoosier, Inc.
Timothy J. Parrott
/s/ Robert F. List Director of Boomtown March 2, 1999
____________________________________ Hoosier, Inc.
Robert F. List
</TABLE>
II-31
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
LOUISIANA GAMING ENTERPRISES, INC.,
a Louisiana corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Timothy J. Parrott Chairman of the Board and March 2,1999
____________________________________ Chief Executive Officer
Timothy J. Parrott (Principal Executive
Officer)
/s/ Robert F. List Director March 2,1999
____________________________________
Robert F. List
/s/ G. Michael Finnigan Vice President and Chief March 2,1999
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
II-32
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
LOUISIANA-I GAMING, A LOUISIANA
PARTNERSHIP IN COMMENDAM
By: its General Partner
LOUISIANA GAMING ENTERPRISES,
INC.,
a Louisiana corporation
/s/ G. Michael Finnigan
By: ___________________________
G. Michael Finnigan
Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
LOUISIANA GAMING ENTERPRISES, INC. GENERAL PARTNER of March 2, 1999
Louisiana-I Gaming, a
Louisiana Partnership in
Commendam
/s/ Timothy J. Parrott Director of Louisiana March 2, 1999
______________________________________ Gaming Enterprises, Inc.
Timothy J. Parrott
/s/ Robert F. List Director of Louisiana March 2, 1999
______________________________________ Gaming Enterprises, Inc.
Robert F. List
</TABLE>
II-33
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
MARDI GRAS CASINO CORP.,
a Mississippi corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President and Assistant
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Marlin F. Torguson Chairman of the Board, March 2, 1999
____________________________________ President and
Marlin F. Torguson Chief Executive Officer
(Principal Executive
Officer)
/s/ G. Michael Finnigan Vice President and Assistant March 2, 1999
____________________________________ Treasurer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
II-34
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
MISSISSIPPI-I GAMING, L.P.
By: its General Partner
BAYVIEW YACHT CLUB, INC.,
a Mississippi corporation
/s/ G. Michael Finnigan
By: ___________________________
G. Michael Finnigan
Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
BAYVIEW YACHT CLUB, INC. GENERAL PARTNER of March 2, 1999
Mississippi-I Gaming,
L.P.
/s/ Timothy J. Parrott Director of Bayview March 2, 1999
______________________________________ Yacht Club, Inc.
Timothy J. Parrott
/s/ Robert F. List Director of Bayview March 2, 1999
______________________________________ Yacht Club, Inc.
Robert F. List
</TABLE>
II-35
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
PINNACLE GAMING DEVELOPMENT CORP.,
a Colorado corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard Chairman of the Board and March 2, 1999
____________________________________ Chief Executive Officer
R.D. Hubbard (Principal Executive
Officer)
/s/ Timothy J. Parrott Director March 2, 1999
____________________________________
Timothy J. Parrott
/s/ Robert F. List Director March 2, 1999
____________________________________
Robert F. List
/s/ G. Michael Finnigan Director and President March 2, 1999
____________________________________ (Principal Financial and
G. Michael Finnigan Accounting Officer)
</TABLE>
II-36
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and
resubstitution, in his name and on his behalf, to sign in any and all
capacities this Registration Statement and any and all amendments (including
post-effective amendments) and exhibits to this Registration Statement, any
subsequent Registration Statement for the same offering which may be filed
under Rule 462(b) under the Securities Act of 1933, as amended, and any and
all amendments (including post-effective amendments) and exhibits thereto, and
any and all applications and other documents relating thereto, with the
Securities and Exchange Commission, with full power and authority to perform
and do any and all acts and things whatsoever which any such attorney or
substitute may deem necessary or advisable to be performed or done in
connection with any or all of the above-described matters, as fully as each of
the undersigned could do if personally present and acting, hereby ratifying
and approving all acts of any such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
SWITZERLAND COUNTY DEVELOPMENT CORP.,
a Nevada corporation
/s/ G. Michael Finnigan
By: __________________________________
G. Michael Finnigan
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Timothy J. Parrott Director and President March 2, 1999
____________________________________ (Principal Executive
Timothy J. Parrott Officer)
/s/ Robert F. List Director March 2, 1999
____________________________________
Robert F. List
/s/ G. Michael Finnigan Vice President and Chief March 2, 1999
____________________________________ Financial Officer (Principal
G. Michael Finnigan Financial and Accounting
Officer)
</TABLE>
II-37
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
R.D. Hubbard and G. Michael Finnigan and each of them, severally, as his
attorney-in-fact and Agent, with full power of substitution and resubstitution,
in his name and on his behalf, to sign in any and all capacities this
Registration Statement and any and all amendments (including post-effective
amendments) and exhibits to this Registration Statement, any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b) under the Securities Act of 1933, as amended, and any and all amendments
(including post-effective amendments) and exhibits thereto, and any and all
applications and other documents relating thereto, with the Securities and
Exchange Commission, with full power and authority to perform and do any and
all acts and things whatsoever which any such attorney or substitute may deem
necessary or advisable to be performed or done in connection with any or all of
the above-described matters, as fully as each of the undersigned could do if
personally present and acting, hereby ratifying and approving all acts of any
such attorney or substitute.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California on the 2nd day of March, 1999.
TURF PARADISE, INC.,
an Arizona corporation
/s/ G. Michael Finnigan
By: _________________________________
G. Michael Finnigan
Vice President, Treasurer and
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ R.D. Hubbard Director and Chief March 2, 1999
____________________________________ Executive Officer
R.D. Hubbard (Principal Executive Officer)
/s/ G. Michael Finnigan Director, Vice President, March 2, 1999
____________________________________ Treasurer and Assistant
G. Michael Finnigan Secretary
(Principal Financial and
Accounting Officer)
/s/ Donald M. Robbins Director March 2, 1999
____________________________________
Donald M. Robbins
</TABLE>
II-38
<PAGE>
EXHIBIT 4.4
FIRST SUPPLEMENTAL INDENTURE
Dated as of February 5, 1999
TO
INDENTURE,
Dated as of August 1, 1997
HOLLYWOOD PARK, INC.
HOLLYWOOD PARK OPERATING COMPANY
Issuers,
BAYVIEW YACHT CLUB, INC.
BOOMTOWN HOTEL & CASINO, INC.
BOOMTOWN, INC.
CRYSTAL PARK HOTEL & CASINO DEVELOPMENT COMPANY, LLC
HOLLYWOOD PARK FALL OPERATING COMPANY
HOLLYWOOD PARK FOOD SERVICES, INC.
HP/COMPTON, INC.
HP YAKAMA, INC.
LOUISIANA GAMING ENTERPRISES, INC.
LOUISIANA-I GAMING, A LOUISIANA PARTNERSHIP IN COMMENDAM
MISSISSIPPI-I GAMING, L.P.
TURF PARADISE, INC.
Guarantors,
and
THE BANK OF NEW YORK
Trustee
<PAGE>
This First Supplemental Indenture (the "Supplemental Indenture"), dated as
of February 5, 1999, by and among Hollywood Park, Inc., a Delaware corporation
("HPI"), Hollywood Park Operating Company, a Delaware corporation ("HPOC" and
collectively, together with HPI, the "Companies"), all of the existing and
future Material Restricted Subsidiaries of the Companies (other than HPOC)
(collectively, the "Guarantors" and collectively, together with the Companies,
the "Obligors") and The Bank Of New York, a New York banking corporation, as
Trustee (the "Trustee"), to that certain Indenture, dated as of August 1, 1997,
by and between the Companies, the Guarantors and the Trustee (the "Indenture").
W I T N E S S E T H:
--------------------
WHEREAS, the Companies. as co-issuers have issued and outstanding, pursuant
to the Indenture, $125 million aggregate principal amount of 9 1/2% Senior
Subordinated Notes due 2007 (the "Notes");
WHEREAS, the Obligors desire to amend certain covenants contained in the
Indenture;
WHEREAS, Section 9.02 of the Indenture provides that a supplemental
indenture may be entered into by the Obligors and the Trustee to amend or
supplement certain provisions of the Indenture with the consent of Holders of at
least a majority in aggregate principal amount of the then outstanding Notes;
WHEREAS, pursuant to a consent solicitation by the Companies, consents of
Holders of at least a majority in aggregate principal amount of the then
outstanding Notes have been received consenting to the amendments to the
Indenture pursuant to this Supplemental Indenture which require such consent;
WHEREAS, Section 9.01 of the Indenture provides that the Indenture may be
amended or supplemented without notice to or the consent of any Holder to make
any change that would provide additional benefit or rights to the Holders or to
make any change that does not adversely affect the rights of any Holder under
the Indenture; and the remaining amendments pursuant to this Supplemental
Indenture are of such a nature; and
WHEREAS, all things necessary to make this Supplemental Indenture a valid
agreement of the Obligors and the Trustee and a valid amendment to the Indenture
have been done.
NOW, THEREFORE, the parties hereto hereby amend the Indenture as follows:
Section 1. Definitions, Etc. Terms defined (whether directly or indirectly
by reference) in the Indenture and used without other definition herein shall
have the respective meanings assigned to such terms in the Indenture. The rules
of construction set forth in the Indenture shall likewise govern this
Supplemental Indenture.
<PAGE>
Section 2. Amendments to Section 1.01 of the Indenture. Section 1.01 of the
Indenture is hereby amended as follows:
Section 2.1 The definition of "Asset Sale" set forth in Section 1.01 of the
Indenture is amended by deleting subsection (9) therefrom in its entirety,
inserting the word "or" at the end of clause (7), deleting the word "or" at the
of clause (8) and inserting a period after the words "Permitted Investment" in
clause (8).
Section 2.2 The definition of "Consolidated EBITDA" set forth in Section
1.01 of the Indenture is amended by (I) deleting the word "and" before clause
(ii)(D) and inserting a comma instead and (II) deleting clause (ii)(D) in its
entirety and substituting in its place the following new clause (D) and clause
(E):
(D) other non-cash items (other than non-cash interest) of such Person
or any of its Restricted Subsidiaries (including any non-cash compensation
expense attributable to stock option or other equity compensation
arrangements), other than (except as otherwise provided in clause (E)
below) any non-cash item for such period that requires the accrual of or a
reserve for cash charges for any future period and other than any non-cash
charge for such period constituting an extraordinary item of loss, and (E)
any non-recurring costs or expenses of an acquired company or business
incurred in connection with the purchase or acquisition of such acquired
company or business by such Person and any non-recurring adjustments
necessary to conform the accounting policies of the acquired company or
business to those of such Person, less
Section 2.3 The definition of "Non-Recourse Indebtedness" set forth in
Section 1.01 of the Indenture is amended by inserting, at the end of the
definition, the following sentence:
The foregoing notwithstanding, if an Obligor or a Restricted
Subsidiary makes a loan to an Unrestricted Subsidiary that is permitted
under Section 4.07 herein and is otherwise permitted to be incurred under
the Indenture, such loan shall constitute Non-Recourse Indebtedness.
Section 2.4 The definition of "Permitted Indebtedness" set forth in Section
1.01 of the Indenture is amended by (I) deleting the words "$100 million" in
clause (iii) thereof and substituting in place thereof the words "$350 million",
(II) deleting the words "any Obligor" in clause (iii) thereof and substituting
in place thereof the words "the Company or any Restricted Subsidiary" and (III)
deleting the words "$100 million" in clause (viii)(B) thereof and substituting
in place thereof the words "$60 million."
Section 3. Amendment to Section 4.07 of the Indenture. Section 4.07(b) of
the Indenture is hereby amended by (I) deleting the text in clause (7) in its
entirety and substituting in its place the following new clause (7) and (II)
deleting from the first sentence of clause (12) the phrase "as in effect on the
Issue Date."
(7) Restricted Payments, not to exceed $20 million in the aggregate at
any one time outstanding, in connection with the development, operation,
financing, ownership or acquisition of a Core Business; provided, however,
that up to $10
-2-
<PAGE>
million of such $20 million may be used by HPI under this
clause (7) to make repurchases of its common stock on a cumulative basis
from January 1, 1999;
Section 4. Amendment to Section 4.08 of the Indenture. The text of Section
4.08 of the Indenture is hereby amended by deleting the second paragraph and the
accompanying table of required Companies' Consolidated Coverage Ratios in its
entirety, and substituting the following in its place:
Notwithstanding the foregoing limitations, either Company may issue
Disqualified Capital Stock and any Obligor may Incur Indebtedness
(including, without limitation, Acquired Debt) or issue preferred stock, if
(i) no Default or Event of Default shall have occurred and be continuing on
the date of the proposed Incurrence or issuance or would result as a
consequence of such proposed Incurrence or issuance and (ii) immediately
after giving pro forma effect to such proposed Incurrence or issuance and
the receipt and application of the net proceeds therefrom, the Companies'
Consolidated Coverage Ratio would not be less than 2.00:1.00.
Section 5. Amendment to Section 5.01 of the Indenture. Section 5.01 of the
Indenture is hereby amended by deleting the last sentence of the first paragraph
following Section 5.01(iv), which sentence begins with the words
"Notwithstanding any other provision of this Section 5.01, the Companies may
effect the REIT Restructuring ...."
Section 6. Amendment to Section 9.01. The text of Section 9.01 of the
Indenture is hereby deleted in its entirety and the following text is
substituted in its place thereof:
Notwithstanding Section 9.02 of this Indenture, the Obligors, when
authorized by a resolution of the Board, and the Trustee, together, may
amend or supplement this Indenture, a Guaranty or the Notes without notice
to or consent of any Holder: (i) to cure any ambiguity, defect or
inconsistency; provided, however, that such amendment or supplement does
not adversely affect the rights of any Holder, (ii) to effect the
assumption by a successor Person of all obligations of the Obligors under
the Notes, the Guaranties, this Indenture and the Registrations Rights
Agreement in connection with any transaction complying with Article 5
hereof, (iii) to provide for uncertificated Notes in addition to or in
place of Certificated Notes; (iv) to comply with any requirements of the
SEC in order to effect or maintain the qualification of this Indenture
under the TIA, or to comply with any other requirement of applicable law;
(v) to make any change that would provide any additional benefit or rights
to the Holders; (vi) to provide for issuance of Series B Senior
Subordinated Notes pursuant to the Registration Rights Agreement (which
will have terms substantially identical in all material respects to the
Notes except that the transfer restrictions contained in the Notes will be
modified or eliminated, as appropriate), and which will be treated together
with any outstanding Notes as a single issue of securities; or (vii) to
make any other change that does not adversely affect the rights of any
Holder under this Indenture; provided, however, that the Obligors shall, in
any of the foregoing cases, have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that such amendment or
supplement is authorized by the provisions of this Indenture.
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Upon the request of the Companies accompanied by resolutions of their
Boards of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 9.06 hereof, the Trustee shall join with the Obligors
in the execution of any amended or supplemental Indenture authorized or
permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be therein contained, but
the Trustee shall not be obligated to enter into any such amended or
supplemental Indenture that affects its own rights, duties or immunities
under this Indenture or otherwise.
Section 7. Amendment to Section 12.03(a). Section 12.03(a) is hereby
amended by deleting in its entirety the second parenthetical reference that
begins with the words "including without limitation, one or more supplemental
indentures ...."
Section 8. Ratification, Etc. Except as expressly modified or waived
hereby, each term and provision of the Indenture is hereby ratified and
confirmed and shall continue in full force and effect. No waiver of any
condition set forth herein shall extend beyond the immediate circumstances on
which this Supplemental Indenture is predicated or support any inference that
similar waivers would be granted in the future. From and after the date of this
Supplemental Indenture, all references to the Indenture shall be deemed to be
references to the Indenture as amended by this Supplemental Indenture.
Section 9. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE AND THE NOTES,
SUBJECT TO APPLICABLE GAMING LAWS.
Section 10. No Representations by Trustee. The recitals contained
herein shall be construed as statements of the Companies, and the Trustee
assumes no responsibility for the correctness of the same.
Section 11. Counterparts. This Supplemental Indenture may be executed
in any number of counterparts, which shall together constitute but one and the
same instrument. To make proof of this Supplemental Indenture, it shall only be
necessary to produce one such counterpart.
Section 12. Successors and Assigns. This Supplemental Indenture shall
be binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.
Section 13. Severability Clause. In case any provision in this
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed all as of the day and year first above written.
HOLLYWOOD PARK, INC.
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HOLLYWOOD PARK OPERATING
COMPANY
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Executive Vice President, Treasurer and
Chief Financial Officer
BAYVIEW YACHT CLUB, INC.
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Vice President, Chief Financial Officer
and Assistant Secretary
BOOMTOWN HOTEL & CASINO, INC.
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Vice President, Chief Financial Officer
and Assistant Secretary
BOOMTOWN, INC.
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Vice President, Chief Financial Officer
and Assistant Secretary
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CRYSTAL PARK HOTEL & CASINO
DEVELOPMENT COMPANY, LLC
By: HP/Compton, Inc., a California
corporation
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Vice President, Chief Financial Officer
and Assistant Secretary
HOLLYWOOD PARK FALL OPERATING
COMPANY
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Executive Vice President, Treasurer and
Assistant Secretary
HOLLYWOOD PARK FOOD SERVICES, INC.
By: /s/ G. Michael Finnigan
----------------------------
Name: G. Michael Finnigan
Title: Executive Vice President, Treasurer and
Assistant Secretary
HP/COMPTON, INC.
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Vice President, Chief Financial Officer
and Assistant Secretary
HP YAKAMA, INC.
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Vice President, Treasurer and Assistant
Secretary
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LOUISIANA GAMING ENTERPRISES, INC.
By: /s/ G. Michael Finnigan
--------------------------------
Name: G. Michael Finnigan
Title: Vice President, Chief Financial Officer
and Assistant Secretary
LOUISIANA-1 GAMING, A LOUISIANA
PARTNERSHIP IN COMMENDAM
By: Louisiana Gaming Enterprises, Inc., a
Louisiana corporation
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Vice President, Chief Financial Officer
and Assistant Secretary
MISSISSIPPI-I GAMING, L.P.
By: Bayview Yacht Club, Inc., a Mississippi
Corporation
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Vice President, Chief Financial Officer
and Assistant Secretary
TURF PARADISE, INC.
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Vice President, Treasurer and Assistant
Secretary
THE BANK OF NEW YORK, as Trustee
By: /s/ Thomas C. Knight
-------------------------
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Name: Thomas C. Knight
Title: Assistant Vice President
-8-
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EXHIBIT 4.6
================================================================================
HOLLYWOOD PARK, INC.
COMPANY
BAY ST. LOUIS CASINO CORP.
BAYVIEW YACHT CLUB, INC.
BILOXI CASINO CORP.
BOOMTOWN HOOSIER, INC.
BOOMTOWN HOTEL & CASINO, INC.
BOOMTOWN, INC.
CASINO MAGIC AMERICAN CORP.
CASINO MAGIC CORP.
CASINO MAGIC FINANCE CORP.
CASINO ONE CORPORATION
CRYSTAL PARK HOTEL & CASINO DEVELOPMENT COMPANY, LLC
HOLLYWOOD PARK FALL OPERATING COMPANY
HOLLYWOOD PARK FOOD SERVICES, INC.
HOLLYWOOD PARK OPERATING COMPANY
HP CASINO, INC.
HP/COMPTON, INC.
HP YAKAMA, INC.
HP YAKAMA CONSULTING, INC.
INDIANA VENTURES LLC
LOUISIANA GAMING ENTERPRISES, INC.
LOUISIANA-I GAMING, A LOUISIANA PARTNERSHIP IN COMMENDAM
MARDI GRAS CASINO CORP.
MISSISSIPPI-I GAMING, L.P.
PINNACLE GAMING DEVELOPMENT CORP.
SWITZERLAND COUNTY DEVELOPMENT CORP.
TURF PARADISE, INC.
INITIAL GUARANTORS
9 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2007
9 1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
_________________
INDENTURE
DATED AS OF FEBRUARY 18, 1999
__________________________________
THE BANK OF NEW YORK
TRUSTEE
===============================================================================
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE............................................................... 1
Section 1.1. Definitions................................................................................... 1
Section 1.2. Other Definitions............................................................................. 21
Section 1.3. Incorporation by Reference of Trust Indenture Act............................................. 22
Section 1.4. Rules of Construction......................................................................... 23
ARTICLE 2. THE NOTES................................................................................................ 23
Section 2.1. Form and Dating............................................................................... 23
Section 2.2. Execution and Authentication.................................................................. 24
Section 2.3. Registrar and Paying Agent.................................................................... 24
Section 2.4. Paying Agent to Hold Money in Trust........................................................... 25
Section 2.5. Holder Lists.................................................................................. 25
Section 2.6. Transfer and Exchange......................................................................... 26
Section 2.7. Replacement Notes............................................................................. 36
Section 2.8. Outstanding Notes............................................................................. 36
Section 2.9. Treasury Notes................................................................................ 37
Section 2.10. Temporary Notes............................................................................... 37
Section 2.11. Cancellation.................................................................................. 37
Section 2.12. Defaulted Interest............................................................................ 37
Section 2.13. CUSIP Numbers................................................................................. 38
ARTICLE 3. REDEMPTION AND PREPAYMENT............................................................................... 38
Section 3.1. Notices to Trustee............................................................................ 38
Section 3.2. Selection of Notes to Be Redeemed............................................................. 38
Section 3.3. Notice of Redemption.......................................................................... 38
Section 3.4. Effect of Notice of Redemption................................................................ 39
Section 3.5. Deposit of Redemption Price................................................................... 39
Section 3.6. Notes Redeemed in Part........................................................................ 40
Section 3.7. Redemption.................................................................................... 40
Section 3.8. Mandatory Redemption.......................................................................... 41
Section 3.9. Offer to Purchase by Application of Excess Proceeds........................................... 42
ARTICLE 4. COVENANTS................................................................................................ 43
Section 4.1. Payment of Notes.............................................................................. 43
Section 4.2. Maintenance of Office or Agency............................................................... 44
Section 4.3. Reports....................................................................................... 44
Section 4.4. Compliance Certificate........................................................................ 44
Section 4.5. Taxes......................................................................................... 45
Section 4.6. Stay, Extension and Usury Laws................................................................ 45
Section 4.7. Restricted Payments........................................................................... 45
Section 4.8. Incurrence of Indebtedness and Issuance of Preferred Stock.................................... 50
Section 4.9. Asset Sales................................................................................... 51
Section 4.10. Transactions with Affiliates.................................................................. 52
Section 4.11. Continued Existence........................................................................... 53
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Section 4.12. Offer to Repurchase Upon Change of Control.................................................... 53
Section 4.13. Limitation on Liens........................................................................... 54
Section 4.14. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries....... 55
Section 4.15. No Subordinated Debt Senior To The Notes or Guarantees........................................ 55
Section 4.16. Material Restricted Subsidiaries To Become Guarantors........................................ 55
Section 4.17. Lines of Business............................................................................. 55
ARTICLE 5. SUCCESSORS............................................................................................... 56
Section 5.1. Merger, Consolidation, or Sale of Assets...................................................... 56
Section 5.2. Successor Corporation Substituted............................................................. 57
ARTICLE 6. DEFAULTS AND REMEDIES.................................................................................... 58
Section 6.1. Events of Default............................................................................. 58
Section 6.2. Acceleration.................................................................................. 59
Section 6.3. Other Remedies................................................................................ 60
Section 6.4. Waiver of Past Defaults....................................................................... 60
Section 6.5. Control by Majority........................................................................... 60
Section 6.6. Limitation on Suits........................................................................... 61
Section 6.7. Rights of Holders of Notes to Receive Payment................................................. 61
Section 6.8. Collection Suit by Trustee.................................................................... 61
Section 6.9. Trustee May File Proofs of Claim.............................................................. 61
Section 6.10. Priorities.................................................................................... 62
Section 6.11. Undertaking for Costs......................................................................... 63
ARTICLE 7. TRUSTEE.................................................................................................. 63
Section 7.1. Duties of Trustee............................................................................. 63
Section 7.2. Rights of Trustee............................................................................. 64
Section 7.3. Individual Rights of Trustee.................................................................. 64
Section 7.4. Trustee's Disclaimer.......................................................................... 64
Section 7.5. Notice of Defaults............................................................................ 65
Section 7.6. Reports by Trustee to Holders of the Notes.................................................... 65
Section 7.7. Compensation and Indemnity.................................................................... 65
Section 7.8. Replacement of Trustee........................................................................ 66
Section 7.9. Successor Trustee by Merger, etc.............................................................. 67
Section 7.10. Eligibility; Disqualification................................................................. 67
Section 7.11. Preferential Collection of Claims Against Company............................................. 67
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE................................................................. 67
Section 8.1. Option to Effect Legal Defeasance or Covenant Defeasance...................................... 67
Section 8.2. Legal Defeasance and Discharge................................................................ 67
Section 8.3. Covenant Defeasance........................................................................... 68
Section 8.4. Conditions to Legal or Covenant Defeasance.................................................... 68
Section 8.5. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. 69
Section 8.6. Repayment to Company.......................................................................... 70
Section 8.7. Reinstatement................................................................................. 70
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ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER......................................................................... 70
Section 9.1. Without Consent of Holders of Notes........................................................... 70
Section 9.2. With Consent of Holders of Notes.............................................................. 71
Section 9.3. Compliance with Trust Indenture Act........................................................... 73
Section 9.4. Revocation and Effect of Consents............................................................. 73
Section 9.5. Notation on or Exchange of Notes.............................................................. 73
Section 9.6. Trustee to Sign Amendments, etc............................................................... 73
ARTICLE 10. SUBORDINATION........................................................................................... 73
Section 10.1. Agreement to Subordinate...................................................................... 73
Section 10.2. Certain Definitions........................................................................... 74
Section 10.3. Liquidation; Dissolution; Bankruptcy.......................................................... 74
Section 10.4. Default on Designated Senior Debt............................................................. 75
Section 10.5. Acceleration of Notes......................................................................... 76
Section 10.6. When Distribution Must Be Paid Over........................................................... 76
Section 10.7. Notice by Company............................................................................. 77
Section 10.8. Subrogation................................................................................... 77
Section 10.9. Relative Rights............................................................................... 77
Section 10.10. Subordination May Not Be Impaired by Obligors................................................. 78
Section 10.11. Distribution or Notice to Representative...................................................... 78
Section 10.12. Rights of Trustee and Paying Agent............................................................ 79
Section 10.13. Authorization to Effect Subordination......................................................... 79
Section 10.14. Amendments.................................................................................... 79
Section 10.15. Notes are Pari Passu with the 9 1/2% Notes.................................................... 80
ARTICLE 11. MISCELLANEOUS........................................................................................... 80
Section 11.1. Trust Indenture Act Controls.................................................................. 80
Section 11.2. Notices....................................................................................... 80
Section 11.3. Communication by Holders of Notes with Other Holders of Notes................................. 81
Section 11.4. Certificate and Opinion as to Conditions Precedent............................................ 81
Section 11.5. Statements Required in Certificate or Opinion................................................. 82
Section 11.6. Rules by Trustee and Agents................................................................... 82
Section 11.7. No Personal Liability of Directors, Officers, Employees and Stockholders...................... 82
Section 11.8. Governing Law................................................................................. 82
Section 11.9. No Adverse Interpretation of Other Agreements................................................. 82
Section 11.10. Successors.................................................................................... 83
Section 11.11. Severability.................................................................................. 83
Section 11.12. Counterpart Originals......................................................................... 83
Section 11.13. Table of Contents, Headings, etc.............................................................. 83
ARTICLE 12. GUARANTY................................................................................................ 83
Section 12.1. The Guaranty.................................................................................. 83
Section 12.2. Nature of Guaranty............................................................................ 84
Section 12.3. Authorization................................................................................. 85
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Section 12.4. Certain Waivers............................................................................... 85
Section 12.5. No Subrogation; Certain Agreements............................................................ 86
Section 12.6. Bankruptcy No Discharge....................................................................... 87
Section 12.7. Execution and Delivery of Guaranty............................................................ 87
Section 12.8. Severability of Void Guaranteed Obligations Under Guaranty.................................... 88
Section 12.9. Right of Contribution......................................................................... 88
Section 12.10. Additional Guarantors......................................................................... 89
Section 12.11. Release of a Guarantor........................................................................ 89
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INDENTURE dated as of February 18, 1999, among Hollywood Park, Inc., a
Delaware corporation (the "Company"), all of the existing and future Material
Restricted Subsidiaries (as defined below) of the Company (collectively, the
"Guarantors") and The Bank of New York, a New York banking corporation, as
trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the Company's 9 1/4% Series A Senior Subordinated Notes due 2007 (the "Series A
Notes") and the 9 1/4% Series B Senior Subordinated Notes due 2007 (the "Series
B Notes," and together with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
"9 1/2% Notes" means the existing 9 1/2% Senior Subordinated Notes due 2007
issued by the Company and Hollywood Park Operating Company.
"144A Global Note" means a global note substantially in the form of Exhibit
A hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, Indebtedness
of another Person and any of such other Person's Subsidiaries existing at the
time such other Person becomes a Subsidiary of such Person or at the time it
merges or consolidates with such Person or any of such Person's Subsidiaries or
is assumed by such Person or any Subsidiary of such Person in connection with
the acquisition of assets from such other Person and in each case not Incurred
by such Person or any Subsidiary of such Person or such other Person in
connection with, or in anticipation or contemplation of, such other Person
becoming a Subsidiary of such Person or such acquisition, merger or
consolidation.
"Affiliate" means, when used with reference to any Person (a) any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, the referent Person or such other Person, as the
case may be, or (b) any director, officer or partner of such Person or any
Person specified in clause (a) above. For the purposes of this definition, the
term "control" when used with respect to any specified Person means the power to
direct or cause the direction of management or policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "affiliated," "controlling," and "controlled" have
meanings correlative of the foregoing. None of the Initial Purchasers nor any
of their respective Affiliates shall be deemed to be an Affiliate of any Obligor
or of any of their respective Affiliates.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Acquisition" means (a) an Investment by any Obligor in any other
Person pursuant to which such Person shall become an Obligor or a Restricted
Subsidiary of an Obligor or shall be merged
- 1 -
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into, or with any Obligor or Restricted Subsidiary of an Obligor, or (b) the
acquisition by any Obligor of assets of any Person comprising a division or line
of business of such Person or all or substantially all of the assets of such
Person.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other disposition (for purposes of this definition,
each a "disposition") by any Obligor (including, without limitation, pursuant to
any Sale and Leaseback Transaction or any merger or consolidation of any
Restricted Subsidiary of the Company with or into another Person (other than
another Obligor) whereby such Restricted Subsidiary shall cease to be a
Restricted Subsidiary of the Company) to any Person of (a) any property or
assets of any Obligor to the extent that any such disposition is not in the
ordinary course of business of such Obligor, or (b) any Capital Stock of any
Restricted Subsidiary, other than, in both cases:
(a) any disposition to the Company,
(b) any disposition to any Obligor or Restricted Subsidiary,
(c) any disposition that constitutes a Restricted Payment or a Permitted
Investment that is made in accordance with Section 4.7 hereof,
(d) any transaction or Series of related transactions resulting in Net
Cash Proceeds to such Obligor of less than $1 million,
(e) any transaction that is consummated in accordance with Section 5.1
hereof,
(f) the sale or discount, in each case without recourse (direct or
indirect), of accounts receivable arising in the ordinary course of business of
the Company or such Restricted Subsidiary, as the case may be, but only in
connection with the compromise or collection thereof,
(g) any pledge, assignment by way of collateral security, grant of
security interest, hypothecation or mortgage, permitted by this Indenture or any
foreclosure, judicial or other sale, public or private, by the pledgee,
assignee, mortgagee or other secured party of the subject assets,
(h) a disposition of assets constituting a Permitted Investment, or
(i) any disposition of undeveloped or substantially undeveloped real
estate, provided that in such disposition (A) the Obligor making such
disposition receives consideration at the time of such disposition at least
equal to the fair market value of the real estate assets disposed of (as
determined reasonably and in good faith by the Board of such Obligor), and (B)
at least 60% of the consideration received from such disposition by the Obligor
making such disposition is cash or Cash Equivalents and is received at the time
of the consummation of such disposition. (For purposes of this provision, each
of the following shall be deemed to be cash: (x) any liabilities as shown on
such Obligors' most recent balance sheet (or in the notes thereto) (other than
(i) Indebtedness subordinate in right of payment to the Notes, (ii) contingent
liabilities, (iii) liabilities or Indebtedness to Affiliates of the Company and
(iv) Non-Recourse Indebtedness) that are assumed by the transferee of any such
assets, and (y) to the extent of the cash received, any notes or other
obligations received by the Obligor making the disposition from such transferee
that are converted by such Obligor into cash within 60 days of receipt.)
- 2 -
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"Bank Credit Facility" means the Credit Facility provided to the Company
pursuant to the Amended and Restated Reducing Revolving Loan Agreement, dated as
of October 14, 1998, by and among the Company, the financial institutions from
time to time named therein (the "Banks"), Bank of Scotland and Societe General,
as Managing Agents, First National Bank of Commerce, as Co-Agent, and Bank of
America NT&SA, as Administrative Agent, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time by the
same or different institutional lenders.
"Bankruptcy Law" means the United States Bankruptcy Code and any other
bankruptcy, insolvency, receivership, reorganization, moratorium or similar law
providing relief to debtors, in each case, as from time to time amended and
applicable to the relevant case.
"Board" means the Board of Directors or similar governing entity of an
Obligor, the members of which are elected by the holders of Capital Stock of
such Obligor or, if applicable, a duly-appointed committee of such Board of
Directors or similar governing body, having jurisdiction over the subject matter
at issue.
"Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capitalized Lease Obligation" means, as to any Person, the discounted
rental stream payable by such Person that is required to be classified and
accounted for as a capital lease obligation under GAAP and, for purposes of this
definition, the amount of such obligation at any date shall be the capitalized
amount of such obligation at such date, determined in accordance with GAAP. The
final maturity of any such obligation shall be the date of the last payment of
rent or any other amount due under such lease prior to the first date upon which
such lease may be terminated by the lessee without penalty.
"Capital Stock" means (a) with respect to any Person that is a corporation,
any and all shares, rights, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of common stock and preferred stock of such Person, and (b) with
respect to any Person that is not a corporation, any and all partnership,
membership or other equity interests of such Person.
"Cash Equivalents" means (a) Government Securities; (b) certificates of
deposit, eurodollar time deposits and bankers acceptances maturing within 12
months from the date of acquisition thereof by any Obligor and issued by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia or any U.S. branch of foreign bank
having, at the date of acquisition of the applicable Cash Equivalent, (i)
combined capital and surplus of not less than $500 million and (ii) a commercial
paper rating of at least A-1 from S&P or at least P-1 from Moody's; (c)
repurchase obligations with a term of not more than seven days after the date of
acquisition thereof by any Obligor for underlying securities of the types
described in clauses (a) , (b) and (d) of this definition, entered into with any
financial institution meeting the qualifications specified in clause (b) of this
definition; (d) commercial paper having a rating of at least P-1 from Moody's or
a rating of at least A-1 from S&P on the date of acquisition thereof by any
Obligor; (e) debt obligations of any corporation maturing within 12 months after
the date of acquisition thereof by any Obligor, having a rating of at least P-1
or aaa from Moody's or A-1 or AAA from S&P on the date of such acquisition; and
(f) mutual funds and money market accounts investing at least 90% of the funds
under management in instruments of the
- 3 -
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types described in clauses (a) through (e) above and, in each case, maturing
within the period specified above for such instrument after the date of
acquisition thereof by any Obligor.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following (a) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one transaction or a Series of related
transactions, of all or substantially all of the assets of the Company, or the
Company and its Restricted Subsidiaries taken as a whole, to any "person" (as
such term is used in Section 13(d) (3) of the Exchange Act) (as defined below),
(b) the adoption, or, if applicable, the approval of any requisite percentage of
the Company's stockholders of a plan relating to the liquidation or dissolution
of the Company, (c) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than a Principal, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by voting power rather than number of shares), or (d) during
any consecutive two-year period, individuals who at the beginning of such period
constituted the Board of the Company (together with any new directors whose
election to such Board or whose nomination for election by the stockholders of
the Company was approved by a vote of a majority of the directors of the Company
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of the Company then in
office.
"Casino" means any gaming establishment and other property or assets
directly ancillary thereto or used in connection therewith, including any
building, restaurant, hotel, theater, parking facilities, retail shops, land,
golf courses and other recreation and entertainment facilities, marina, vessel,
barge, ship and equipment.
"Company" means Hollywood Park, Inc., a Delaware corporation, and any and
all successors thereto.
"Consolidated Coverage Ratio" means, with respect to any Person on any date
of determination, the ratio of (a) Consolidated EBITDA for the period of four
fiscal quarters most recently ended prior to such date for which internal
financial reports are available, ended not more than 135 days prior to such
date, to (b) (i) Consolidated Interest Expense during such period plus (ii)
dividends on or in respect of any Capital Stock of any such Person paid in cash
during such period; provided that the Consolidated Coverage Ratio shall be
calculated giving pro forma effect, as of the beginning of the applicable
period, to any acquisition, Incurrence or redemption of Indebtedness (including
the Notes), issuance or redemption of Disqualified Capital Stock, acquisition,
Asset Sale, purchases of assets that were previously leased or re-designation of
a Restricted Subsidiary as an Unrestricted Subsidiary, at any time during or
subsequent to such period, but on or prior to the applicable Determination Date.
In making such computation, Consolidated Interest Expense (a) attributable to
any Indebtedness bearing a floating interest rate shall be computed on a pro
forma basis as if the rate in effect on the date of computation had been the
applicable rate for the entire period, or (b) attributable to interest on any
Indebtedness under a revolving Credit Facility shall be computed on a pro forma
basis based upon the average daily balance of such Indebtedness outstanding
during the applicable period.
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For purposes of calculating Consolidated EBITDA of the Company for the most
recently completed period of four full fiscal quarters ending on the last day of
the last quarter for which internal financial statements are available (such
period of four fiscal quarters, the "Measurement Period"), not more than 135
days prior to the transaction or event giving rise to the need to calculate the
Consolidated EBITDA, (a) any Person that is a Restricted Subsidiary on such
Determination Date (or would become a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of the Consolidated Coverage Ratio) shall be deemed to have been a
Restricted Subsidiary at all times during such Measurement Period, (b) any
Person that is not a Restricted Subsidiary on such Determination Date (or would
cease to be a Restricted Subsidiary on such Determination Date in connection
with the transaction that requires the determination of the Consolidated
Coverage Ratio) will be deemed not to have been a Restricted Subsidiary at any
time during such Measurement Period, (c) if the Company or any Restricted
Subsidiary shall have in any manner (i) acquired (including through an Asset
Acquisition or the commencement of activities constituting such operating
business) or (ii) disposed of (including by way of an Asset Sale or the
termination or discontinuance of activities constituting such operating
business) any operating business during such Measurement Period or after the end
of such Measurement Period and on or prior to the Determination Date, such
calculation shall be made on a pro forma basis in accordance with GAAP as if, in
the case of an Asset Acquisition or the commencement of activities constituting
such operating business, all such transactions had been consummated on the first
day of such Measurement Period and, in the case of an Asset Sale or termination
or discontinuance of activities constituting such operating business, all such
transactions had been consummated prior to the first day of such Measurement
Period; provided, however, that such pro forma adjustment shall not give effect
to the Consolidated EBITDA of any acquired Person to the extent that such
Person's net income would be excluded pursuant to clause (f) of the definition
of Consolidated Net Income and (d) any Indebtedness Incurred and proceeds
thereof received and applied as a result of the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio will be deemed to have been so
Incurred, received and applied on the first day of such Measurement Period.
"Consolidated EBITDA" means, with respect to any Person for any period, the
sum (without duplication) of (a) the Consolidated Net Income of such Person for
such period, plus (b) to the extent that any of the following shall have been
taken into account in determining such Consolidated Net Income, and without
duplication (i) all income taxes of such Person and its Restricted Subsidiaries
paid or accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary, unusual or nonrecurring gains or losses or taxes
attributable to sales or dispositions of assets outside the ordinary course of
business), (ii) the Consolidated Interest Expense of such Person for such
period, (iii) the amortization expense (including the amortization of deferred
financing charges) and depreciation expense for such Person and its Restricted
Subsidiaries for such period, (iv) other non-cash items (other than non-cash
interest) of such Person or any of its Restricted Subsidiaries (including any
non-cash compensation expense attributable to stock option or other equity
compensation arrangements), other than any non- cash item for such period that
requires the accrual of or a reserve for cash charges for any future period
(except as otherwise provided in clause (v) below) and other than any non-cash
charge for such period constituting an extraordinary item of loss, and (v) any
non-recurring costs or expenses of an acquired company or business incurred in
connection with the purchase or acquisition of such acquired company or business
by such Person and any non-recurring adjustments necessary to conform the
accounting policies of the acquired company or business to those of such Person,
less (c) (i) all non-cash items of such Person or any of its Restricted
Subsidiaries increasing such Consolidated Net Income for such period and (ii)
all cash payments during such period relating to non-cash items that were added
back in determining Consolidated EBITDA in any prior period.
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"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of (a) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non- cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capitalized Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), and (b) the consolidated interest of
such Person and its Restricted Subsidiaries that was capitalized during such
period, and (c) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such Support Obligation or Lien is called upon), and (d) the product of (i)
all dividend payments on any Series of preferred stock of such Person or any of
its Restricted Subsidiaries, times (ii) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, however, that there shall be excluded therefrom:
(a) net after-tax gains and losses from all sales or dispositions of
assets outside of the ordinary course of business,
(b) net after-tax extraordinary or non-recurring gains or losses,
(c) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary of such
Person or is merged or consolidated with or into such Person or any Restricted
Subsidiary,
(d) the cumulative effect of a change in accounting principles,
(e) any net income of any other Person if such other Person is not a
Restricted Subsidiary and is accounted for by the equity method of accounting,
except that such Person's equity in the net income of any such other Person for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such other Person during such
period to such Person or a Restricted Subsidiary as a dividend or other
distribution, (subject, in case of a dividend or other distribution to a
Restricted Subsidiary, to the limitation that such amount so paid to a
Restricted Subsidiary shall be excluded to the extent that such amount could not
at that time be paid to the Company due to the restrictions set forth in clause
(f) below (regardless of any waiver of such conditions)),
(f) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, by contract,
operation of law, pursuant to its charter or otherwise on the payment of
dividends or the making of distributions by such Restricted Subsidiary to such
Person except that (i) such Person's equity in the net income of any such
Restricted Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash that could have been paid or
distributed during such period to such Person as a dividend or other
distribution (provided that such ability is not due to a waiver of such
restriction) and (ii) such Person's equity in a net loss of
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<PAGE>
any such Restricted Subsidiary for such period shall be included in determining
such Consolidated Net Income regardless of any such restriction,
(g) any restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of Consolidated Net Income
accrued at any time following the Issue Date,
(h) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued),
(i) in the case of a successor to such Person by consolidation or merger
or as a transferee of such Person's assets, any net income or loss of the
successor corporation prior to such consolidation, merger or transfer of assets
and
(j) the net income (but not loss) of any Unrestricted Subsidiary, except
that the Company's or any Restricted Subsidiary's equity in the net income of
any Unrestricted Subsidiary or other Person for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Unrestricted Subsidiary or Person during such period to the
Company or a Restricted Subsidiary as a dividend or other distribution.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (a) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date, plus (b) the respective
amounts reported on such Person's consolidated balance sheet as of such date
with respect to any Series of preferred stock (other than Disqualified Capital
Stock) that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (i) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the Issue Date in the book
value of any asset owned by such Person or a consolidated Subsidiary of such
Person, (ii) all investments as of such date in unconsolidated Subsidiaries and
in Persons that are not Subsidiaries (except, in each case, Permitted
Investments), and (iii) all unamortized debt discount and expense and
unamortized deferred charges as of such date, all of the foregoing determined in
accordance with GAAP.
"Core Businesses" means the gaming, card club, racing, sports,
entertainment, lodging, restaurant, riverboat operations, real estate
development and all other businesses and activities necessary for or reasonably
related or incident thereto, including, without limitation, related acquisition,
construction, development or operation of related truck stop, transportation,
retail and other facilities designed to enhance any of the foregoing.
"Corporate Trust Office of the Trustee" shall mean the address of the
Trustee specified in Section 11.2 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Facilities" means, with respect to any Obligor, one or more debt
facilities or commercial paper facilities with any combination of banks, other
institutional lenders and other Persons extending financial accommodations or
holding corporate debt obligations in the ordinary course of their business,
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed,
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<PAGE>
refunded, replaced or refinanced in whole or in part from time to time by the
same or different institutional lenders.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Definitive Note" means a Certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.6 hereof, substantially
in the form of Exhibit A hereto except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.3 hereof as the
Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provisions of this Indenture.
"Determination Date" means, with respect to any calculation, the date on or
as of which such calculation is made in accordance with the terms hereof.
"Disqualified Capital Stock" means any Capital Stock which by its terms (or
by the terms of any security into which it is, by its terms, convertible or for
which it is, by its terms, exchangeable at the option of the holder thereof), or
upon the happening of any specified event, is required to be redeemed or is
redeemable (at the option of the holder thereof) at any time prior to the
earlier of the repayment of all Notes or the stated maturity of the Notes or is
exchangeable at the option of the holder thereof for Indebtedness at any time
prior to the earlier of the repayment of all Notes or the stated maturity of the
Notes.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant to
Section 2.6(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
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<PAGE>
"Gaming Approval" means any governmental approval relating to any gaming
business or enterprise.
"Gaming Authority" means any governmental authority with regulatory
oversight of, authority to regulate or jurisdiction over any gaming businesses
or enterprises, including the State Gaming Control Board of Nevada, Washoe
County, Nevada gaming authorities, the Nevada Gaming Commission, Mississippi
Gaming Commission, Indiana Gaming Commission, California Gambling Control
Commission, Louisiana Gaming Control Board, the California Horse Racing Board
and the Arizona Racing Commission with regulatory oversight of, authority to
regulate or jurisdiction over any gaming operation (or proposed gaming
operation) owned, managed or operated by any Obligor.
"Gaming Laws" means all applicable provisions of all (a) constitutions,
treaties, statutes or laws governing gaming operations (including, without
limitation, card club casinos and pari-mutuel race tracks) and, rules,
regulations and ordinances of any Gaming Authority, (b) Gaming Approvals and (c)
orders, decisions, judgments, awards and decrees of any Gaming Authority.
"Global Note" means a permanent global note in registered form deposited
with the Trustee, as a custodian for The Depositary Trust Company or any other
designated depositary.
"Government Securities" means marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency or instrumentality thereof and backed by the full faith and credit of the
United States, in each case maturing within 12 months from the date of
acquisition thereof by any Obligor.
"Guarantor" means any existing or future Material Restricted Subsidiary of
the Company, which has guaranteed the obligations of the Company arising under
or in connection with the Notes, as required by this Indenture.
"Guaranty" means a guaranty by a Guarantor of the Obligations of the
Company arising under or in connection with the Notes.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note substantially in the form of
Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend
and deposited with or on behalf of and registered in the name of the Depositary
or its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"Incur" means, with respect to any Indebtedness of any Person or any Lien,
to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or Lien or
the recording, as required pursuant to GAAP or otherwise, of any such
Indebtedness on the balance sheet of such Person (and "Incurrence," "Incurred,"
"Incurrable" and "Incurring" shall have meanings correlative to the foregoing).
"Indebtedness" means with respect to any Person, without duplication,
whether contingent or otherwise, (a) any obligations for money borrowed, (b) any
obligation evidenced by bonds, debentures, notes, or other similar instruments,
(c) Letter of Credit Obligations and obligations in respect of other similar
instruments, (d) any obligations to pay the deferred purchase price of property
or services, including Capitalized Lease Obligations, (e) the maximum fixed
redemption or repurchase price of
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<PAGE>
Disqualified Capital Stock, (f) Indebtedness of other Persons of the types
described in clauses (a) through (e) of this definition, secured by a Lien on
the assets of such Person or its Restricted Subsidiaries, valued, in such cases
where the recourse thereof is limited to such assets, at the lesser of the
principal amount of such Indebtedness or the fair market value of the subject
assets, (g) indebtedness of other Persons of the types described in clauses (a)
through (e) of this definition, guaranteed by such Person or any of its
Restricted Subsidiaries and (h) the net obligations of such Person under Hedging
Obligations; provided that the amount of any Indebtedness at any date shall be
calculated as the outstanding balance of all unconditional obligations and the
maximum liability supported by any contingent obligations at such date.
Notwithstanding the foregoing, "Indebtedness" shall not be construed to include
trade payables, credit on open account, accrued liabilities, provisional credit,
daylight overdrafts or similar items. For purposes hereof, the "maximum fixed
redemption or repurchase price" of any Disqualified Capital Stock that does not
have a fixed repurchase price shall be calculated in accordance with the terms
of such Disqualified Capital Stock as if such Disqualified Capital Stock were
repurchased on the date on which Indebtedness shall be required to be determined
pursuant to this Indenture, and if such price is based upon, or measured by, the
fair market value of such Disqualified Capital Stock, such fair market value
shall be determined reasonably and in good faith by the Board of the issuing
Person. Unless otherwise specified herein, the amount outstanding at any time of
any Indebtedness issued with original issue discount is the full amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"Initial Purchasers" means Lehman Brothers Inc., CIBC Oppenheimer Corp.,
Morgan Stanley & Co. Incorporated, NationsBanc Montgomery Securities LLC, SG
Cowen Securities Corporation, and Wasserstein Perella Securities, Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a) (1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Notes.
"Interest Swap Obligations" means the net obligations of any Person under
any interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap, collar or floor transaction or
other interest rate Hedging Obligation.
"Investment" by any Person means any direct or indirect (a) loan, advance
or other extension of credit or capital contribution (valued at the fair market
value thereof as of the date of contribution or transfer) (by means of transfers
of cash or other property or services for the account or use of other Persons,
or otherwise), (b) purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by any other
Person (whether by merger, consolidation, amalgamation or otherwise and whether
or not purchased directly from the issuer of such securities or evidences of
Indebtedness), (c) guarantee or assumption of any Indebtedness or any other
obligation of any other Person (except for an assumption of Indebtedness for
which the assuming Person receives consideration at the time of such assumption
in the form of property or assets with a fair market value at least equal to the
principal amount of the Indebtedness assumed), and (d) all other items that
would be classified as investments (including, without limitation, purchases of
assets outside the ordinary course
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<PAGE>
of business) on a balance sheet of such Person prepared in accordance with GAAP.
Notwithstanding the foregoing, the purchase or acquisition of any securities,
Indebtedness or Productive Assets of any other Person solely with Qualified
Capital Stock shall not be deemed to be an Investment. The term "Investments"
shall also exclude extensions of trade credit and advances to customers and
suppliers to the extent made in the ordinary course of business on ordinary
business terms. The amount of any non-cash Investment shall be the fair market
value of such Investment, as determined conclusively in good faith by management
of the Company or the affected Restricted Subsidiary, as applicable, unless the
fair market value of such Investment exceeds $5 million, in which case the fair
market value shall be determined conclusively in good faith by the Board of such
Person as of the time such Investment is made or such other time as specified in
this Indenture. Unless otherwise required by this Indenture, the amount of any
Investment shall not be adjusted for increases or decreases in value, or write-
ups, write-downs or write-offs subsequent to the date such Investment is made
with respect to such Investment.
"Issue Date" means February 18, 1999.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Letter of Credit Obligations" means Obligations of an Obligor arising
under or in connection with letters of credit.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any assets, any mortgage, lien, pledge,
charge, security interest or other similar encumbrance (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof, any option or other agreement to sell, and any filing of or
agreement to give, any security interest).
"Limited Real Estate Development" means the development or improvement of
(a) any undeveloped or substantially undeveloped real estate held by the Company
or a Subsidiary on the date of this Indenture or (b) any undeveloped or
substantially undeveloped real estate that is acquired by the Company or a
Subsidiary in an acquisition of a company that is primarily in the Casino
business.
"Liquidated Damages" means, on any date of reference thereto, any
liquidated damages then owing pursuant to Section 5 of the Registration Rights
Agreement.
"Material Restricted Subsidiary" means any Subsidiary which is both a
Material Subsidiary and a Restricted Subsidiary.
"Material Subsidiary" means any Subsidiary of the Company other than a Non-
Material Subsidiary.
"Moody's" means Moody's Investors Services, Inc., and its successors.
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<PAGE>
"Net Cash Proceeds" means with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
received by any Obligor from such Asset Sale, net of (a) reasonable out-of-
pocket expenses, fees and other direct costs relating to such Asset Sale
(including, without limitation, brokerage, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after taking into
account any reduction in tax liability due to available tax credits or
deductions and any tax sharing arrangements, (c) repayment of Indebtedness
(other than any intercompany Indebtedness) that is required by the terms thereof
to be repaid or pledged as cash collateral, or the holders of which otherwise
have a contractual claim that is legally superior to any claim of the holders
(including a restriction on transfer) to the proceeds of the subject assets, in
connection with such Asset Sale, and (d) appropriate amounts to be provided by
any applicable Obligor, as a reserve, in accordance with GAAP, against any
liabilities associated with such Asset Sale and retained by limitation, pension
and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale and any reserve for adjustment to the sale price
received in such Asset Sale for so long as such reserve is held.
"Non-Material Subsidiaries" means all Subsidiaries not designated as
Material Subsidiaries by the Company; provided, that all such Subsidiaries
(other than Unrestricted Subsidiaries) may not, in the aggregate at any time
have assets (attributable to the Company's and its Restricted Subsidiaries'
equity interest in such entity) constituting more than 5% of the Company's total
assets on a consolidated basis based on the Company's most recent internal
financial statements. As of the Issue Date, the Non-Material Subsidiaries shall
be all the Company's Subsidiaries existing as of the Issue Date other than the
Guarantors as of the Issue Date and the Unrestricted Subsidiaries as of the
Issue Date.
"Non-Recourse Indebtedness" means Indebtedness of an Unrestricted
Subsidiary (a) as to which none of the Obligors (i) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (ii) is directly or indirectly liable (as a guarantor
or otherwise), or (iii) constitutes the lender, (b) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of any Obligor to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity, and (c) as to which the lenders have been notified
in writing that they will not have any recourse to the stock or assets of any
Obligor. The foregoing notwithstanding, if an Obligor or a Restricted
Subsidiary makes a loan to an Unrestricted Subsidiary that is permitted under
Section 4.7 hereof and is otherwise permitted to be incurred under this
Indenture, such loan shall constitute Non-Recourse Indebtedness.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Notes" means the Series A Notes and the Series B Notes, as amended or
supplemented from time to time in accordance with the terms of this Indenture,
that are issued pursuant to this Indenture, treated as a single class of
securities for all purposes and in particular, for voting and exercise of other
consensual rights, which may be exercised by the Holders of Series A Notes and
Series B Notes only as a single class.
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<PAGE>
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities, whether
absolute or contingent, payable under the documentation governing any
Indebtedness.
"Obligor" means the Company or any Guarantor.
"Offering Memorandum" means the Offering Memorandum dated February 12,
1999, of the Company relating to the offering of the Notes.
"Officer" means, (i) with respect to any Person that is a corporation, the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary, the Assistant Secretary or any Vice-
President of such Person and (ii) with respect to any other Person, the
individuals selected by the Board of Directors or corresponding governing or
managing body of such Person to perform functions similar to those of the
officers listed in clause (i).
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company, that meets the requirements of Sections 11.4
and 11.5 hereof.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Sections
11.4 and 11.5 hereof. The counsel may be an employee of or counsel to the
Company, any Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Indebtedness" means, without duplication, each of the following:
(a) Indebtedness of the Company or any Restricted Subsidiary outstanding
on the Issue Date and reflected in the financial statements set forth in the
Offering Memorandum as in effect on the Issue Date as reduced by the amount of
any scheduled amortization payments or mandatory prepayments when actually paid
or permanent reductions thereof;
(b) Indebtedness Incurred by the Company under the Notes and by the
Guarantors under the Guarantees;
(c) Indebtedness Incurred by the Company or any Restricted Subsidiary
pursuant to the Bank Credit Facility; provided that the aggregate principal
amount of Indebtedness outstanding thereunder as of any date of Incurrence shall
not exceed $350 million, to be reduced dollar-for-dollar by the amount of (i)
any increase to the face amount of Support Obligations permitted to be Incurred
pursuant to clause (k) of this definition and (ii) the aggregate amount of all
Net Cash Proceeds of Asset Sales applied by an Obligor to permanently prepay or
repay Indebtedness under the Bank Credit Facility pursuant to Section 4.9;
(d) Indebtedness of the Company to any Obligor or of any Guarantor to any
other Obligor for so long as such Indebtedness is held by the Company or by
another Obligor; provided that (i) any
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<PAGE>
Indebtedness of the Company to any other Obligor is unsecured and evidenced by
an intercompany promissory note that is subordinated, pursuant to a written
agreement, to the Company's obligations under this Indenture and the Notes and
the Registration Rights Agreement, and (ii) if as of any date any Person other
than the Company or a Guarantor owns or holds any such Indebtedness or holds a
Lien in respect of such Indebtedness, such date shall be deemed to be an
Incurrence of Indebtedness not constituting Permitted Indebtedness under this
clause (d) by the issuer of such Indebtedness;
(e) Indebtedness of a Restricted Subsidiary to the Company for so long as
such Indebtedness is held by an Obligor; provided that if as of any date any
Person other than an Obligor acquires any such Indebtedness or holds a Lien in
respect of such Indebtedness, such acquisition shall be deemed to be an
Incurrence of Indebtedness not constituting Permitted Indebtedness under this
clause (e) by the issuer of such Indebtedness;
(f) Permitted Refinancing Indebtedness;
(g) the Incurrence by Unrestricted Subsidiaries of Non-Recourse
Indebtedness; provided that, if any such Indebtedness ceases to be Non- Recourse
Indebtedness of an Unrestricted Subsidiary, such event shall be deemed to
constitute an Incurrence of Indebtedness that is not permitted by this clause
(g);
(h) Indebtedness Incurred by the Company or any Restricted Subsidiary
solely to finance the construction or acquisition or improvement of, or
consisting of Capitalized Leased Obligations Incurred to acquire rights of use
in, capital assets useful in the Company's or such Subsidiary's business, as
applicable, and, in any such case, Incurred prior to or within 180 days after
the construction, acquisition, improvement or leasing of the subject assets, not
to exceed in aggregate principal amount outstanding at any time (i) $15 million
for each of the Company or any Restricted Subsidiary, or (ii) $60 million in the
aggregate for all of the Company and its Restricted Subsidiaries, and additional
Indebtedness of the kind described in this clause (h) with respect to which
neither the Company nor any Restricted Subsidiary is directly or indirectly
liable, and which is expressly made non-recourse to all of such Person's assets,
except the asset so financed;
(i) Interest Swap Obligations entered into not as speculative Investments
but as hedging transactions designed to protect the Company and its Restricted
Subsidiaries against fluctuations in interest rates in connection with
Indebtedness otherwise permitted hereunder;
(j) Indebtedness of the Company or any Restricted Subsidiary arising in
respect of performance bonds and completion guaranties (to the extent that the
Incurrence thereof does not result in the Incurrence of any obligation for the
payment of borrowed money of others), in the ordinary course of business, in
amounts and for the purposes customary in such Person's industry; provided, that
such Indebtedness shall be Incurred solely in connection with the development,
construction, improvement or enhancement of assets useful in such Person's
business; and
(k) other Indebtedness consisting of Support Obligations not exceeding $25
million in aggregate principal amount at any time, which may be increased by the
Company in its discretion, subject to availability under, and a corresponding
reduction to, the principal amount of Indebtedness permitted to be Incurred
under the Bank Credit Facility pursuant to clause (c) of this definition.
- 14 -
<PAGE>
"Permitted Investments" means, without duplication, each of the following:
(a) Investments in cash (including deposit accounts with major commercial
banks) and Cash Equivalents;
(b) Investments by the Company or a Restricted Subsidiary in the Company
or any Restricted Subsidiary or any Person that is or will immediately become
upon giving effect to such Investment, or as a result of which, such Person is
merged, consolidated or liquidated into, or conveys substantially of all its
assets to, an Obligor or a Restricted Subsidiary; provided that Investments in
any such Person (other than the Company or any Restricted Subsidiary) made prior
to such Investment shall not be "Permitted Investments"; and provided further
that for purposes of calculating at any date the aggregate amount of Investments
made since the Issue Date pursuant Section 4.7 hereof, such Investment shall be
a Permitted Investment only so long as any Subsidiary in which any such
Investment has been made continues to be an Obligor or a Restricted Subsidiary;
(c) Investments existing on the Issue Date, each such Investment to be (i)
in an amount less than $1 million, (ii) listed on Schedule I to this Indenture,
or (iii) an existing Investment by any one or combination of the Company and its
consolidated subsidiaries in any other such Person;
(d) accounts receivable created or acquired in the ordinary course of
business of the Company or any Restricted Subsidiary on ordinary business terms;
(e) Investments arising from transactions by the Company or a Restricted
Subsidiary with trade creditors or customers in the ordinary course of business
(including any such Investment received pursuant to any plan of reorganization
or similar arrangement pursuant to the bankruptcy or insolvency of such trade
creditors or customers or otherwise in settlement of a claim);
(f) Investments made as the result of non-cash consideration received from
an Asset Sale that was made pursuant to and in compliance with the covenant
described in Section 4.9; and
(g) Investments consisting of advances to officers, directors and
employees of the Company or a Restricted Subsidiary for travel, entertainment,
relocation, purchases of Capital Stock of the Company or a Restricted Subsidiary
permitted by this Indenture and analogous ordinary business purposes.
"Permitted Junior Securities" means Equity Interests in the Obligors or
debt securities that are subordinated to all Senior Debt (and any debt
securities issued in exchange for Senior Debt) to substantially the same extent
as, or to a greater extent than, the Notes and the Guaranties are subordinated
to Senior Debt pursuant to Article 10 hereof.
"Permitted Liens" means:
(a) Liens in favor of the Company or Liens on the assets of any Guarantor
so long as such Liens are held by another Obligor;
(b) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or a Restricted Subsidiary;
provided that such Liens were not Incurred in anticipation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company or such Restricted Subsidiary, as
applicable;
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<PAGE>
(c) Liens on property existing at the time of acquisition thereof by any
Obligor or Restricted Subsidiary; provided that such Liens were not Incurred in
anticipation of such acquisition;
(d) Liens Incurred to secure Indebtedness permitted by clause (h) of the
definition of Permitted Indebtedness, attaching to or encumbering only the
subject assets and directly related property such as proceeds and products
thereof and accessions and replacements thereto;
(e) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business;
(f) Liens created by "notice" or "precautionary" filings in connection
with operating leases or other transactions pursuant to which no Indebtedness is
Incurred by the Company or any Restricted Subsidiary;
(g) Liens existing on the Issue Date;
(h) Liens for taxes, assessments or governmental charges or claims
(including, without limitation, Liens securing the performance of workers
compensation, social security, or unemployment insurance obligations) that are
not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded; provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor;
(i) Liens on shares of any equity security or any warrant or option to
purchase an equity security or any security which is convertible into an equity
security issued by any Obligor that holds, directly or indirectly through a
holding company or otherwise, a license under any Gaming Law; provided that this
clause (i) shall apply only so long as the Gaming Laws provide that the creation
of any restriction on the disposition of any of such securities shall not be
effective and, if such Gaming Laws at any time cease to so provide, then this
clause (i) shall be of no further effect;
(j) Liens on securities constituting "margin stock" within the meaning of
Regulation G, T, U or X promulgated by the Board of Governors of the Federal
Reserve System, to the extent that (i) prohibiting such Liens would result in
the classification of the Obligations of the Company under the Notes as a
"purpose credit" and (ii) the Investment by any Obligor in such margin stock is
permitted by this Indenture;
(k) Liens securing Permitted Refinancing Indebtedness; provided that any
such Lien attaches only to the assets encumbered by the predecessor
Indebtedness, unless the Incurrence of such Liens is otherwise permitted
hereunder;
(l) Liens securing stay and appeal bonds or judgment Liens in connection
with any judgment not giving rise to an Event of Default under Section 6.1(e) ;
(m) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business, securing obligations not
constituting Indebtedness and not past due; provided that adequate reserves
shall have been established therefor in accordance with GAAP;
- 16 -
<PAGE>
(n) easements, rights of way, zoning restrictions, reservations,
encroachments and other similar charges or encumbrances in respect of real
property which do not individually or in the aggregate, materially interfere
with the conduct of business by any Obligor;
(o) any interest or title of a lessor under any Capitalized Lease
Obligation permitted to be Incurred hereunder;
(p) Liens upon specific items of inventory or equipment and proceeds
thereof, Incurred to secure obligations in respect of bankers' acceptances
issued or created for the account of any Obligor or Restricted Subsidiary in the
ordinary course of business to facilitate the purchase, shipment, or storage of
such inventory or equipment;
(q) Liens securing Letter of Credit Obligations permitted to be Incurred
hereunder Incurred in connection with the purchase of inventory or equipment by
an Obligor or Restricted Subsidiary in the ordinary course of business and
secured only by such inventory or equipment, the documents issued in connection
therewith and the proceeds thereof; and
(r) Liens in favor of the Trustee arising under Section 7.7 hereof.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any Restricted Subsidiary issued in exchange for, or the net proceeds of
which are used to repay, redeem, extend, refinance, renew, replace, defease or
refund other Permitted Indebtedness of such Person arising under clauses (a),
(b), (f), (h), (j) or (k) of the definition of "Permitted Indebtedness" or
Indebtedness Incurred under the Consolidated Coverage Ratio test in Section 4.8
hereof (any such Indebtedness, "Existing Indebtedness"); provided that:
(a) the principal amount of such Permitted Refinancing Indebtedness does
not exceed the principal amount of such Existing Indebtedness (plus the amount
of prepayment penalties, premiums and expenses incurred or paid in connection
therewith), except to the extent that the Incurrence of such excess is otherwise
permitted by this Indenture;
(b) if such Indebtedness is subordinated to, or pari passu in right of
payment with, the Notes, such Permitted Refinancing Indebtedness has a final
maturity date on or later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, such Existing Indebtedness;
(c) if such Existing Indebtedness is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date on
or later than the final maturity date of, and is subordinated in right of
payment to, the Notes on terms at least as favorable to the holders of Notes as
those contained in the documentation governing the Indebtedness being repaid,
redeemed, extended, refinanced, renewed, replaced, defeased or refunded; and
(d) such Permitted Refinancing Indebtedness shall be Indebtedness solely
of the Obligor or Restricted Subsidiary originally obligated thereunder, unless
otherwise permitted by this Indenture.
"Person" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
- 17 -
<PAGE>
"Plan of Liquidation" means, with respect to any Person, a plan (including
by operation of law) that provides for, contemplates or the effectuation of
which is preceded or accomplished by (whether or not substantially
contemporaneously) (a) the sale, lease or conveyance of all or substantially all
of the assets of such Person otherwise than as an entirety or substantially as
an entirety, and (b) the distribution of all or substantially all of the
proceeds of such sale, lease, conveyance, or other disposition and all or
substantially all of the remaining assets of such Person to holders of Capital
Stock of such Person.
"Principals" means (a) R.D. Hubbard, (b) any spouse, parent or child of
such Principal, or (c) any trust, corporation, partnership or other Person, the
beneficiaries, stockholders, partners, owners or other Persons holding an 80% or
more controlling interest in which are Persons described in clause (a) or (b) of
this definition.
"Private Placement Legend" means the legend set forth in Section 2.6(g)(i)
to be placed on all Notes issued under this Indenture except where otherwise
permitted by the provisions of this Indenture.
"Productive Assets" means assets (including assets owned directly or
indirectly through Capital Stock of a Restricted Subsidiary) of a kind used or
usable in the businesses of the Obligors as they are conducted on the date of
the Asset Sale.
"Public Equity Offering" means a public equity offering, underwritten by a
nationally recognized underwriter pursuant to an effective registration
statement under the Securities Act of Qualified Capital Stock.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of February 18, 1999, by and among the Company, the Guarantors and the
Initial Purchasers, as such agreement may be amended, modified or supplemented
from time to time.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Global Note bearing the Private
Placement Legend and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
"Related Business" means the gaming (including pari-mutuel betting)
business and any and all reasonably related businesses necessary for, in support
or anticipation of and ancillary to or in preparation for, the gaming business
including, without limitation, the development, expansion or operation of any
Casino (including any land-based, dockside, riverboat or other type of Casino),
owned, or to be owned, by the Company or one of its Subsidiaries.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the corporate trust department of the Trustee (or any successor
group of the Trustee) or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
- 18 -
<PAGE>
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary. If no referent Person is
specified, "Restricted Subsidiary" means a Subsidiary of the Company.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"S&P" means Standard & Poors Rating Group, a division of The McGraw-Hill
Industries, Inc., and its successors.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party providing for the leasing
pursuant to a capitalized lease to the Company or a Subsidiary of any property,
whether owned by such Company or such Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by such Company or such
Subsidiary to such Person or to any other Person by whom funds have been or are
to be advanced on the security of such property.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Stated Maturity" means, with respect to any installment of interest or
principal on any Series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary," with respect to any Person, means (a) any corporation or
comparably organized entity, a majority of whose voting stock (defined as any
class of capital stock having voting power under ordinary circumstances to elect
a majority of the Board of such Person) is owned, directly or indirectly, by any
one or more of the Obligors, and (b) any other Person (other than a corporation)
in which any one or more of the Obligors, directly or indirectly, has at least a
majority ownership interest entitled to vote
- 19 -
<PAGE>
in the election of directors, managers or trustees thereof or of which such
Obligor is the managing general partner.
"Support Obligation" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise), or (b)
entered into for purposes of assuring in any other manner the obligee of such
Indebtedness of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "Support
Obligation" shall not include (i) endorsements for collection or deposit in the
ordinary course of business, or (ii) commitments to make Permitted Investments
in Obligors or their Restricted Subsidiaries.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA, except as provided in Section 9.3.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note substantially in
the form of Exhibit A attached hereto that bears the Global Note Legend and that
has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a Series of Notes that do not bear and are not
required to bear the Private Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the Board of the Company as its Unrestricted Subsidiary pursuant
to a Board resolution; but only to the extent that such Subsidiary (a) has, or
will have after giving effect to such designation, no Indebtedness other than
Non-Recourse Indebtedness, (b) is not party to any agreement, contract,
arrangement or understanding with any Obligor unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to such
Obligor than those that might be obtained at the time from Persons who are not
Affiliates of such Obligor, (c) is a Person with respect to which none of the
Obligors has any direct or indirect obligation (i) to subscribe for additional
equity interests or (ii) to maintain or preserve such Person's financial
condition or to cause such Person to achieve any specified levels of operating
results, (d) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of any Obligor, and (e) has at least one
director on its Board who is not a director or executive officer of any Obligor
and has at least one executive officer who is not a director or executive
officer of any Obligor. Any such designation by the Board of the Company shall
be evidenced to the Trustee by filing with the Trustee a certified copy of the
Board resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by Section 4.7 hereof. If at any time any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of this
Indenture and any Indebtedness of such Subsidiary shall be deemed to be Incurred
by a Restricted Subsidiary as of such time (and, if such Indebtedness is not
- 20 -
<PAGE>
permitted to be Incurred as of such date under Section 4.8 hereof, the Company
shall be in default of such Section 4.8).
The Board of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed to
be an Incurrence of Indebtedness by a Restricted Subsidiary of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (a) such Indebtedness is permitted under Section 4.8 calculated on
a pro forma basis as if such designation had occurred at the beginning of the
reference period, and (b) no Default or Event of Default would be in existence
following such designation.
As of the Issue Date, the following entities shall be Unrestricted
Subsidiaries: Jefferson Casino Corporation, Casino Magic of Louisiana, Corp.,
Casino Magic Neuquen SA, Casino Magic Support Services SA, Casino Magic
Management Services Corp., Sunflower Racing, Inc. and SR Food & Beverage
Company.
"U.S. Person" means a U.S. person as defined in Rule 902(k) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of such
Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the Company's calculations of the number of years obtained by
dividing (a) the then outstanding aggregate principal amount of such
Indebtedness into (b) the total of the products obtained by multiplying (i) the
amount of each then remaining installment, sinking fund, serial maturity or
other required payment of principal, including payment at final maturity, in
respect thereof, by (ii) the number of years (calculated to the nearest one-
twelfth) which will elapse between such date and the making of such payment.
Section 1.2. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Accrued Bankruptcy Interest"........................................................ 10.2
"Affiliate Transaction".............................................................. 4.10
"Amount Limitation".................................................................. 4.7
"Amount Limitation Restoration"...................................................... 4.7
"Asset Sale Offer"................................................................... 3.9
"Authentication Order"............................................................... 2.2
"Beneficiary"........................................................................ 12.1
"Change of Control Offer"............................................................ 4.12
"Change of Control Payment".......................................................... 4.12
"Change of Control Payment Date"..................................................... 4.12
"Covenant Defeasance"................................................................ 8.3
"Designated Senior Debt"............................................................. 10.2
"DTC"................................................................................ 2.3
"Event of Default"................................................................... 6.1
"Funding Guarantor".................................................................. 12.9
"Guaranteed Obligations"............................................................. 12.1
"Hedging Obligations"................................................................ 10.2
</TABLE>
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<PAGE>
<TABLE>
<CAPTION> Defined in
Term Section
---- ----------
<S> <C>
"Legal Defeasance"................................................................... 8.2
"Maximum Net Worth".................................................................. 12.9
"Net Proceeds Offer"................................................................. 4.9
"Net Proceeds Offer Amount".......................................................... 4.9
"Net Proceeds Offer Payment Date".................................................... 4.9
"Net Proceeds Offer Trigger Date".................................................... 4.9
"Net Worth".......................................................................... 12.9
"Offer Amount"....................................................................... 3.9
"Offer Period"....................................................................... 3.9
"Other Guaranty"..................................................................... 12.2
"Paying Agent"....................................................................... 2.3
"Payment Blockage Notice"............................................................ 10.4
"Payment Default".................................................................... 6.1
"Payment Restriction"................................................................ 4.14
"Purchase Date"...................................................................... 3.9
"Registrar".......................................................................... 2.3
"Remaining Guarantor"................................................................ 12.9
"Representative"..................................................................... 10.2
"Restricted Payments"................................................................ 4.7
"Senior Debt"........................................................................ 10.2
"Series A Notes"..................................................................... Preamble
"Series B Notes"..................................................................... Preamble
</TABLE>
Section 1.3. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Guarantees means the Company and the
Guarantors, respectively, and any successor obligor upon the Notes and the
Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC Rule under the TIA have
the meanings so assigned to them.
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<PAGE>
Section 1.4. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and transactions;
(6) references to sections of or rules under the Securities
Act, the Exchange Act, the TIA or any other applicable statute shall be
deemed to include substitute, replacement or successor sections or rules
adopted from time to time; and
(7) references to any contract, instrument or agreement
shall be deemed to include any amendments, modifications or supplements
thereto or restatements thereof not prohibited hereby, through the date of
reference thereto.
ARTICLE 2.
THE NOTES
Section 2.1. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange Rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company, the Guarantors
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby. However, to the
extent any provision of any Note conflicts with the express provisions of this
Indenture, the provisions of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibit A attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto"). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time
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be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the aggregate principal amount of outstanding Notes represented
thereby shall be made by the Trustee or the Note Custodian, at the direction of
the Trustee, in accordance with instructions given by the Holder thereof as
required by Section 2.6 hereof.
(c) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Global Notes that are held by
Participants through Euroclear or Cedel Bank.
Section 2.2. Execution and Authentication.
An Officer shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an Officer
of the Company (an "Authentication Order"), authenticate Notes for original
issue up to the aggregate principal amount stated in paragraph 4 of the Notes.
The aggregate principal amount of Notes outstanding at any time may not exceed
such amount except as provided in Section 2.7 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with the Company, Holders or an Affiliate of
the Company.
Section 2.3. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
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The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
Section 2.4. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal,
premium or Liquidated Damages, if any, or interest on the Notes, and will notify
the Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee. Upon payment over to the Trustee,
the Paying Agent (if other than the Company or a Subsidiary) shall have no
further liability for the money. If the Company or a Subsidiary acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Paying Agent. Upon any bankruptcy or
reorganization proceedings relating to the Company, the Trustee shall serve as
Paying Agent for the Notes.
Section 2.5. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each Interest Payment Date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA (S) 312(a) .
Section 2.6. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee. Upon the occurrence of either of
the preceding events in (i) or (ii) above, Definitive Notes shall be issued in
such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.7 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.6 or
Section 2.7 or 2.10 hereof, shall be authenticated and delivered in the form of,
and shall be, a Global Note. A Global Note may not be exchanged for another Note
other than as provided in this Section 2.6(a) , however, beneficial interests in
a Global Note may be transferred and exchanged as provided in Section 2.6(b),
(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The
transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in
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accordance with the provisions of this Indenture and the Applicable Procedures.
Beneficial interests in the Restricted Global Notes shall be subject to
restrictions on transfer comparable to those set forth herein to the extent
required by the Securities Act. Transfers of beneficial interests in the Global
Notes also shall require compliance with either subparagraph (i) or (ii) below,
as applicable, as well as one or more of the other following subparagraphs, as
applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Regulation S Global Note may not be made to a
U.S. Person or for the account or benefit of a U.S. Person (other than an
Initial Purchaser). Beneficial interests in any Unrestricted Global Note
may be transferred to Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.6(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.6(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A)(1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B)(1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to effect the transfer
or exchange referred to in (1) above. Upon consummation of an Exchange
Offer by the Company in accordance with Section 2.6(f) hereof, the
requirements of this Section 2.6(b)(ii) with respect to the exchange of
Series A Notes for a like principal amount of Series B Notes shall be
deemed to have been satisfied upon receipt by the Registrar of the
instructions contained in the Letter of Transmittal delivered by the Holder
of such beneficial interests in the Restricted Global Notes. Upon
satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture and the
Notes or otherwise applicable under the Securities Act, the Trustee shall
adjust the principal amount of the relevant Global Note(s) pursuant to
Section 2.6(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.6(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
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(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications and certificates and Opinion of Counsel required by
item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.6(b) (ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
Broker-Dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof;
or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note,
a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D) , if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
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<PAGE>
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.2 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to
the aggregate principal amount of beneficial interests transferred pursuant
to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the Securities
Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
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<PAGE>
(G) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section 2.6(h)
hereof, and the Company shall execute and the Trustee shall authenticate
and deliver to the Person designated in the instructions a Definitive Note
in the appropriate principal amount. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note pursuant to
this Section 2.6(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.6(c) (i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a Broker-
Dealer, (2) a Person participating in the distribution of the Exchange
Notes or (3) a Person who is an affiliate (as defined in Rule 144) of
the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item
(1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the
form of a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in item (4)
thereof;
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and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in an
Unrestricted Global Note proposes to exchange such beneficial interest for
a Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.6(b)(ii) hereof, the
Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.6(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.6(c)(iii) shall be registered in such
name or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the Persons
in whose names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this Section 2.6(c)(iii)
shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Definitive Notes to a Person who
takes delivery thereof in the form of a beneficial interest in a Restricted
Global Note, then, upon receipt by the Registrar of the following
documentation:
(A) if the Holder of such Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred
to a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred
to a Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (2) thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
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(E) if such Restricted Definitive Note is being transferred
to an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other than
those listed in subparagraphs (B) through (D) above, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred
to the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (C) above, the
Regulation S Global Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a Broker-
Dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined
in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes
to exchange such Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in
the form of Exhibit C hereto, including the certifications in
item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes
to transfer such Notes to a Person who shall take delivery
thereof in the form of a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in
the form of Exhibit B hereto, including the certifications in
item (4) thereof;
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<PAGE>
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.6(d) (ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D)
or (iii) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an Authentication
Order in accordance with Section 2.2 hereof, the Trustee shall authenticate
one or more Unrestricted Global Notes in an aggregate principal amount
equal to the principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.6(e) , the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.6(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes.
Any Restricted Definitive Note may be transferred to and registered in the
name of Persons who take delivery thereof in the form of a Restricted
Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under
the Securities Act, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act,
then the transferor must deliver a
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<PAGE>
certificate in the form of Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes.
Any Restricted Definitive Note may be exchanged by the Holder thereof for
an Unrestricted Definitive Note or transferred to a Person or Persons who
take delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a Broker-Dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(d) thereof;
or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests, an Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to
a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register such a transfer, the
Registrar shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.2, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in
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an aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not Broker-
Dealers, (y) they are not participating in a distribution of the Exchange Notes
and (z) they are not affiliates (as defined in Rule 144) of the Company, and
accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each
Global Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or
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(f) of this Section 2.6 (and all Notes issued in exchange therefor or
substitution thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.7 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.6, 3.9, 4.9, 4.12 and 9.5 hereof).
(iii) The Registrar shall not be required to register the transfer
of or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or
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exchange of Global Notes or Definitive Notes shall be the valid obligations
of the Company, evidencing the same debt, and entitled to the same benefits
under this Indenture, as the Global Notes or Definitive Notes surrendered
upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register
the transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.2 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part or (C) to register the transfer
of or to exchange a Note between a record date and the next succeeding
Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.2 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.6 to effect
a registration of transfer or exchange may be submitted by facsimile.
Section 2.7. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Company to
protect the Company, the Trustee, any Agent and any authenticating agent from
any loss that any of them may suffer if a Note is replaced. The Company may
charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
Section 2.8. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section as
not outstanding. Except as set forth in Section 2.9 hereof, a Note does not
cease to be outstanding because a Company or an Affiliate of a Company holds the
Note.
If a Note is replaced pursuant to Section 2.7 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
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If the principal amount of any Note is considered paid under Section 4.1
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
Section 2.9. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the Company
may prepare and the Trustee, upon receipt of an Authentication Order, shall
authenticate temporary Notes. Temporary Notes shall be substantially in the
form of certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate Definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall return
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the return of all canceled Notes shall be delivered to
the Company upon the Company's written instruction. The Company may not issue
new Notes to replace Notes that it has paid or that have been delivered to the
Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall pay
the defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.1 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or,
upon the written request of the Company, the Trustee in the name and at the
expense of the Company) shall mail or cause to be mailed to Holders a
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notice that states the special record date, the related payment date and the
amount of such interest to be paid.
Section 2.13. CUSIP Numbers
The Company in issuing the Notes may use "CUSIP" numbers (if then generally
in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of
redemption as a convenience to Holders; provided that any such notice may state
--------
that no representation is made as to the correctness of such numbers either as
printed on the Notes or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Trustee of any
change in the "CUSIP" numbers.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.1. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.7 hereof, it shall furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
Section 3.2. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an offer
to purchase at any time, the Trustee will select the Notes to be redeemed or
purchased among the Holders of Notes in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed,
or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance
with any other method the Trustee considers fair and appropriate. In the event
of partial redemption by lot, the particular Notes to be redeemed shall be
selected, unless otherwise provided herein, not less than 10 nor more than 60
days prior to the redemption date by the Trustee from the outstanding Notes not
previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in principal amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding principal amount of Notes held by such Holder, even if not a
multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Notes called for redemption
also apply to portions of Notes called for redemption.
Section 3.3. Notice of Redemption.
Subject to the provisions of Section 3.9 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
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The notice shall identify the Notes to be redeemed (including CUSIP number,
if applicable), and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal amount
of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original
Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying Agent to
collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) The paragraph of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of the
CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date (unless a shorter period is acceptable to the Trustee), an Officers'
Certificate requesting that the Trustee give such notice and setting forth the
information to be stated in such notice as provided in the preceding paragraph.
Section 3.4. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.3 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. A notice of redemption may not be conditional.
Section 3.5. Deposit of Redemption Price.
On or before 10:00 a.m. New York time on the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money, to be held in
trust, uninvested, sufficient to pay the redemption price of and accrued
interest on all Notes to be redeemed on that date. Funds so deposited later
than 12 noon New York time on the day prior to a redemption will not be
invested. The Trustee or the Paying Agent shall promptly return to the Company
any money deposited with the Trustee or the Paying Agent by the Company in
excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related
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Interest Payment Date, then any accrued and unpaid interest shall be paid to the
Person in whose name such Note was registered at the close of business on such
record date. If any Note called for redemption shall not be so paid upon
surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, interest shall be paid on the unpaid principal, from
the redemption date until such principal is paid, and to the extent lawful on
any interest not paid on such unpaid principal, in each case at the rate
provided in the Notes and in Section 4.1 hereof.
The Company may obtain a satisfaction and discharge from all of its
obligations under this Indenture and the Notes concurrently with its issuance of
any notice to redeem all of the outstanding Notes by (i) depositing cash or Cash
Equivalents in an amount sufficient to pay and discharge the entire indebtedness
on the outstanding Notes without any further reinvestment thereof for principal,
premium (if any), and interest to the redemption date set forth in the notice of
redemption, (ii) paying or providing for the payment of all other sums payable
under this Indenture or the Notes including, without limitation, the expenses
and fees of the Trustee and its agent, if any, and its counsel and (iii)
delivering an Officer's Certificate and Opinion of Counsel, each stating that
all conditions precedent herein provided for the satisfaction and discharge of
this Indenture have been complied with, and otherwise complying with any
additional provisions of Section 314(c) of the TIA in connection with such
satisfaction and discharge. Upon compliance with the foregoing, the Trustee
shall execute proper instrument(s) acknowledging the satisfaction and discharge
of this Indenture.
Section 3.6. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.7. Redemption.
(a) Except as set forth in clause (b) of this Section 3.7, the Company
shall not have the option to redeem the Notes prior to February 15, 2003.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on February 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.625%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.083%
2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.542%
2006 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section 3.7, at
any time during the first 36 months after the Issue Date, the Company may redeem
up to 25% of the initially outstanding aggregate principal amount of Notes with
the net cash proceeds of one or more Public Equity Offerings of common stock of
the Company at a redemption price in cash equal to 109.25% of the aggregate
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date; provided that:
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(i) at least 75% of the initially outstanding aggregate
principal amount of Notes remains outstanding immediately after the
occurrence of such redemption;
(ii) written notice of any such redemption shall be given by the
Company to the Holders and the Trustee within 15 days after the
consummation of any such Public Equity Offering; and
(iii) such redemption shall occur within 60 days of the date of
such notice.
In addition to the foregoing, if any Gaming Authority requires that a
Holder or beneficial owner of Notes must be licensed, qualified or found
suitable under any applicable Gaming Laws and such holder or beneficial owner:
(i) fails to apply for a license, qualification or a finding of
suitability within 30 days (or such shorter period as may be required by
the applicable Gaming Authority) after being requested to do so by the
Gaming Authority, or
(ii) is denied such license or qualification or not found
suitable, the Company shall have the right, at its option:
(i) to require any such Holder or beneficial owner to dispose of
its Notes within 30 days (or such earlier date as may be required by the
applicable Gaming Authority) of receipt of such notice or finding by such
Gaming Authority, o r
(ii) to call for the redemption of the Notes of such Holder or
beneficial owner at a redemption price equal to the least of:
(A) the principal amount thereof,
(B) the price at which such Holder or beneficial owner acquired
the Notes, in the case of either clause (a) above or this clause (b),
together with accrued interest and Liquidated Damages, if any, to the
earlier of the date of redemption or the date of the denial of license
or qualification or of the finding of unsuitability by such Gaming
Authority, or
(C) such other lesser amount as may be required by any Gaming
Authority.
The Company shall notify the Trustee in writing of any such redemption as
soon as practicable. The holder or beneficial owner applying for license,
qualification or a finding of suitability must pay all costs of the licensure or
investigation for such qualification or finding of suitability.
(c) Any redemption made pursuant to this Section 3.7 shall be made
pursuant to the provisions of Sections 3.1 through 3.6 hereof.
Section 3.8. Mandatory Redemption.
The Company shall not be required to make mandatory redemption payments
with respect to the Notes.
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Section 3.9. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.9 hereof, the Company shall be
required to commence a Net Proceeds Offer, it shall follow the procedures
specified below.
The Net Proceeds Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). The Net Proceeds
Offer Payment Date shall be no later than five Business Days after the
termination of the Offer Period. On the Net Proceeds Offer Payment Date, the
Company shall purchase the principal amount of Notes (and 9 1/2% Notes, if
applicable) required to be purchased pursuant to Section 4.9 hereof and the
indenture governing the 9 1/2% Notes (the "Offer Amount") or, if less than the
Offer Amount has been tendered, all Notes (and 9 1/2% Notes, if applicable)
tendered in response to the Net Proceeds Offer. Payment for any Notes so
purchased shall be made in the same manner as interest payments are made.
If the Net Proceeds Offer Payment Date is on or after an interest record
date and on or before the related Interest Payment Date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest or Liquidated
Damages, if any, shall be payable to Holders who tender Notes pursuant to the
Net Proceeds Offer.
Upon the commencement of a Net Proceeds Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Net Proceeds
Offer. The Net Proceeds Offer shall be made to all Holders. The notice, which
shall govern the terms of the Net Proceeds Offer, shall state:
(a) that the Net Proceeds Offer is being made pursuant to this
Section 3.9 and Section 4.9 hereof and the length of time the Net Proceeds
Offer shall remain open;
(b) the Offer Amount, the purchase price and the Net Proceeds Offer
Payment Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Net Proceeds Offer shall cease to
accrue interest or Liquidated Damages, if applicable, after the Net
Proceeds Offer Payment Date;
(e) that Holders electing to have a Note purchased pursuant to a
Net Proceeds Offer may elect to have Notes purchased in principal amounts
of $1,000 and integral multiples thereof;
(f) that Holders electing to have a Note purchased pursuant to any
Net Proceeds Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice at least three Business Days before the Net
Proceeds Offer Payment Date;
(g) that Holders shall be entitled to withdraw their election if
the Company, the depositary or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the
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Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
On or before the Net Proceeds Offer Payment Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Net
Proceeds Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.9. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than three Business Days after the Net Proceeds Offer Payment Date) mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Note, and the Trustee, upon written request
from the Company shall authenticate and mail or deliver such new Note to such
Holder, in a principal amount equal to any unpurchased portion of the Note
surrendered. Any Note not so accepted shall be promptly mailed or delivered by
the Company to the Holder thereof. The Company shall publicly announce the
results of the Net Proceeds Offer on the Net Proceeds Offer Payment Date.
Other than as specifically provided in this Section 3.9, any purchase
pursuant to this Section 3.9 shall be made pursuant to the provisions of
Sections 3.1 through 3.6 hereof.
ARTICLE 4.
COVENANTS
Section 4.1. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay
all Liquidated Damages, if any, in the same manner on the dates and in the
amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
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Section 4.2. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.3.
Section 4.3. Reports.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall furnish to the Trustee for
mailing to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing or filings by the
Company with the SEC on Forms 10-Q and 10-K if the Company was required to file
such forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual information
only, a report thereon by the Company's certified independent accountants and
(ii) all current reports that would be required to be filed by the Company with
the SEC on Form 8-K if the Company were required to file such reports, in each
case, within 15 days of the time periods specified in the SEC's rules and
regulations. In addition, following consummation of the Exchange Offer, whether
or not required by the rules and regulations of the SEC, the Company shall file
a copy of all such information and reports with the SEC for public availability
within the time periods specified in the SEC's rules and regulations (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall at
all times comply with TIA (S) 314(a).
(b) For so long as any Notes remain outstanding, the Company shall
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d) (4) under the Securities Act. For the purpose of compliance with the
reporting requirements of the foregoing subsections (a) and (b), the Company may
deliver consolidated reports of the Company.
Section 4.4. Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such Guarantor is
so required under the TIA) shall deliver to the Trustee, within 120 days after
the end of each fiscal year, beginning April 29, 2000, an Officers' Certificate
stating that a review of the activities of the Company and its
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Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes are
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, as determined by the Company
and its independent public accountants, the year-end financial statements
delivered pursuant to Section 4.3(a) above shall be accompanied by a written
statement of the Company's independent public accountants (who shall be a firm
of established national reputation) that in making the examination necessary for
certification of such financial statements, nothing has come to their attention
that would lead them to believe that the Company has violated any provisions of
Article 4 hereof or, if any such violation has occurred, specifying the nature
and period of existence thereof, it being understood that such accountants shall
not be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.5. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
Section 4.6. Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
Section 4.7. Restricted Payments.
Neither the Company nor any Restricted Subsidiary will, directly or
indirectly:
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(a) declare or pay any dividend or make any other payment or distribution
(other than dividends or distributions payable solely in Qualified Capital Stock
of the Company or dividends or distributions payable to the Company or a
Restricted Subsidiary) in respect of the Company's or any Restricted
Subsidiary's Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company or such
Restricted Subsidiary, as applicable) or to the direct or indirect holders of
the Company's or such Restricted Subsidiary's Equity Interests in their capacity
as such,
(b) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company or any Restricted Subsidiary) Equity Interests of the
Company or any Restricted Subsidiary or of any direct or indirect parent or
Affiliate of the Company or any Restricted Subsidiary (other than any such
Equity Interests owned by the Company or any Restricted Subsidiary),
(c) make any payment on or with respect to, or purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value any Indebtedness that
is subordinate in right of payment to the Notes, except a payment of principal,
interest or other amounts required to be paid at Stated Maturity, o r
(d) make any Investment (other than Permitted Investments) (each of the
foregoing prohibited actions set forth in clauses (a) , (b) , (c) and (d) being
referred to as a "Restricted Payment"),
if at the time of such proposed Restricted Payment or immediately after giving
effect thereto,
(a) a Default or an Event of Default has occurred and is continuing or would
result therefrom,
(b) the Company is not, or would not be, able to Incur at least $1.00 of
additional Indebtedness under the Consolidated Coverage Ratio test described in
the second paragraph of Section 4.8 hereof, or
(c) the aggregate amount of Restricted Payments (including such proposed
Restricted Payment) made subsequent to the Issue Date (the amount expended for
such purposes, if other than in cash, being the fair market value of such
property as determined reasonably and in good faith by the Board of the Company)
exceeds or would exceed the sum, without duplication, of:
(i) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of the
Company and the Restricted Subsidiaries during the period (treating such
period as a single accounting period) beginning on the Issue Date and
ending on the last day of the most recent fiscal quarter of the Company
ending immediately prior to the date of the making of such Restricted
Payment for which internal financial statements are available ending not
more than 135 days prior to the date of determination, plus
(ii) 100% of the aggregate net cash proceeds received by the Company from
any Person (other than from a Subsidiary of the Company) from the issuance
and sale of Qualified Capital Stock of the Company or the conversion of
debt securities or Disqualified Capital Stock into Qualified Capital Stock
(to the extent that proceeds of the issuance of such Qualified Capital
Stock would have been includable in this clause if such Qualified Capital
Stock had been initially issued for cash) subsequent to the Issue Date and
on or prior to the date of the making of
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such Restricted Payment (excluding any Qualified Capital Stock of the
Company the purchase price of which has been financed directly or
indirectly using funds (a) borrowed from the Company or any Restricted
Subsidiary, unless and until and to the extent such borrowing is repaid, or
(b) contributed, extended, guaranteed or advanced by the Company or any
Restricted Subsidiary (including, without limitation, in respect of any
employee stock ownership or benefit plan)), plus
(iii) 100% of the aggregate cash received by the Company subsequent to
the Issue Date and on or prior to the date of the making of such Restricted
Payment upon the exercise of options or warrants (whether issued prior to
or after the Issue Date) to purchase Qualified Capital Stock of the
Company, plus
(iv) to the extent that any Restricted Investment that was made after
the Issue Date is sold for cash or Cash Equivalents or otherwise liquidated
or repaid for cash or Cash Equivalents, or any dividends, distributions,
principal repayments, or returns of capital are received by the Company or
any Restricted Subsidiary in respect of any Restricted Investment, in each
such case (a) reduced by the amount of any Amount Limitation Restoration
(as defined below) for such Restricted Investment and (b) valued at the
cash or marked-to-market value of Cash Equivalents received with respect to
such Restricted Investment (less the cost of disposition, if any), plus
(v) to the extent that any Person becomes a Restricted Subsidiary or an
Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after
the date of this Indenture, the lesser of (A) the fair market value of the
Restricted Investment of the Company and its Restricted Subsidiaries in
such Person as of the date it becomes a Restricted Subsidiary or in such
Unrestricted Subsidiary on the date of redesignation as a Restricted
Subsidiary or (B) the fair market value of such Restricted Investments as
of the date such Restricted Investment was originally made in such Person
or, in the case of the redesignation of an Unrestricted Subsidiary into a
Restricted Subsidiary which Subsidiary was designated as an Unrestricted
Subsidiary after the date of this Indenture, the amount of the Company's
Restricted Investment therein as determined under the last paragraph of
this Section 4.7, plus the aggregate fair market value of any additional
Restricted Investments (each valued as of the date made) by the Company and
its Restricted Subsidiaries in such Unrestricted Subsidiary after the date
of this Indenture; provided that any amount so determined in (A) or (B)
shall be reduced to the extent that such Investment shall have been
recouped as an Amount Limitation Restoration to the Amount Limitations of
clause (d) (including (d)(i)) or (f) below.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph will not prohibit:
(a) the payment of any dividend or the making of any distribution within
60 days after the date of declaration of such dividend or distribution if the
making thereof would have been permitted on the date of declaration; provided
such dividend will be deemed to have been made as of its date of declaration or
the giving of such notice for purposes of this clause (a);
(b) the redemption, repurchase, retirement or other acquisition of Capital
Stock of the Company or warrants, rights or options to acquire Capital Stock of
the Company either (i) solely in exchange for shares of Qualified Capital Stock
of the Company or warrants, rights or options to acquire Qualified Capital Stock
of the Company, or (ii) through the application of net proceeds of a
substantially
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concurrent sale for cash (other than to a Subsidiary of the Company) of shares
of Qualified Capital Stock of the Company or warrants, rights or options to
acquire Qualified Capital Stock of the Company; provided that no Default or
Event of Default shall have occurred and be continuing at the time of such
Restricted Payment or would result therefrom;
(c) the redemption, repurchase, retirement, defeasance or other
acquisition of Indebtedness of any Obligor that is subordinate or junior in
right of payment to the Notes or the Guarantees either (i) solely in exchange
for shares of Qualified Capital Stock of the Company or for Permitted
Refinancing Indebtedness, or (ii) through the application of the net proceeds of
a substantially concurrent sale for cash (other than to an Obligor) of (A)
shares of Qualified Capital Stock of the Company or warrants, rights or options
to acquire Qualified Capital Stock of the Company or (B) Permitted Refinancing
Indebtedness; provided that no Default or Event of Default shall have occurred
and be continuing at the time of such Restricted Payment pursuant to this clause
(c) and would not result therefrom;
(d) Restricted Payments in an amount not in excess of $50 million in the
aggregate for all such Restricted Payments made in reliance upon this clause (d)
, for the purpose of (i) Limited Real Estate Development not to exceed $25
million or (ii) developing, constructing, improving or acquiring (a) a Casino or
Casinos or, if applicable, any Related Business in connection with such Casino
or Casinos or (b) a Related Business to be used primarily in connection with an
existing Casino or Casinos;
(e) redemptions, repurchases or repayments to the extent required by any
Gaming Authority having jurisdiction over the Company or any Restricted
Subsidiary or deemed necessary by the Board of the Company in order to avoid the
suspension, revocation or denial of a gaming license by any Gaming Authority;
(f) other Restricted Payments not to exceed $20 million in the aggregate;
provided no Default or Event of Default then exists or would result therefrom;
(g) repurchases by the Company of its common stock, options, warrants or
other securities exercisable or convertible into such common stock from
employees and directors of the Company or any of its respective Subsidiaries
upon death, disability or termination of employment or directorship of such
employees or directors;
(h) the payment of any amounts in respect of Equity Interests by any
Restricted Subsidiary organized as a partnership or a limited liability company
or other pass-through entity:
(i) to the extent of capital contributions made to such Restricted
Subsidiary (other than capital contributions made to such Restricted
Subsidiary by the Company or any Restricted Subsidiary),
(ii) to the extent that they constitute dividends or other
distributions on minority interests in Equity Interests of Restricted
Subsidiaries pursuant to requirements under partnership agreements or
organizational or membership agreements of other pass-through entities,
(iii) to the extent required by applicable law, or
(iv) to the extent necessary for holders thereof to pay taxes with
respect to the net income of such Restricted Subsidiary, the payment of
which amounts under this clause (iv) is required by the terms of the
relevant partnership agreement, limited liability company operating
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agreement or other governing document;
provided, that except in the case of clause (iii), no Default or Event of
Default has occurred and is continuing at the time of such Restricted
Payment or would result therefrom, and provided further that, except in the
case of clause (iii) or (iv), such distributions are made pro rata with the
distributions paid contemporaneously to the Company or a Restricted
Subsidiary or their Affiliates holding an interest in such Equity
Interests;
(i) Investments in Unrestricted Subsidiaries, joint ventures, partnerships
or limited liability companies consisting of conveyances of substantially
undeveloped real estate in a number of acres which, after giving effect to any
such conveyance, would not exceed in the aggregate for all such conveyances
after the Issue Date, 50% of the sum of (i) the acres of undeveloped real estate
held by the Company and its Restricted Subsidiaries on the date of such
conveyance plus (ii) the acres of undeveloped real estate previously so conveyed
by the Company and its Restricted Subsidiaries after the Issue Date; provided,
that no Default or Event of Default has occurred and is continuing at the time
of such Restricted Payment or would result therefrom; or
(j) Investments, not to exceed $15 million in the aggregate, in any
combination of (i) readily marketable equity securities and (ii) assets of the
kinds described in the definition of "Cash Equivalents"; provided, that for the
purposes of this clause (j), such Investments may be made without regard to the
rating requirements or the maturity limitations set forth in such definition .
In determining the aggregate amount of Restricted Payments made subsequent to
the Issue Date, Restricted Payments made pursuant to clauses (b), (c), (d), (f),
(h) and (i) of this paragraph shall, in each case, be excluded from such
calculation; provided, that any amounts expended or liabilities incurred in
respect of fees, premiums or similar payments in connection therewith shall be
included in such calculation. Restricted Payments under clauses (d), (d)(i),
(f) and (j) shall be limited to the respective amounts of $50 million, $25
million, $20 million and $15 million set forth in such clauses (each, an "Amount
Limitation"). The Amount Limitation for each clause shall be permanently
reduced at the time of any Restricted Payment made under such clause; provided,
however, that to the extent that a Restricted Investment made under such clause
is sold for cash or Cash Equivalents or otherwise liquidated or repaid for cash
or Cash Equivalents, or principal repayments or returns of capital are received
by the Company or any Restricted Subsidiary in respect of such Restricted
Investment, valued, in each such case at the cash or marked-to-market value of
Cash Equivalents received with respect to such Restricted Investment (less the
cost of disposition, if any), then the Amount Limitation for such clause shall
be increased by the amount so received by the Company or a Restricted Subsidiary
(an "Amount Limitation Restoration"). In no event shall the aggregate Amount
Limitation Restorations for a Restricted Investment exceed the original amount
of such Restricted Investment.
With respect to clauses (d), (d)(i) and (f) above, the respective Amount
Limitation under each such clause, as applicable, shall also be increased when
any Person becomes a Restricted Subsidiary or an Unrestricted Subsidiary is
redesignated as a Restricted Subsidiary (each such increase also referred to as
an "Amount Limitation Restoration") by the lesser of (i) the fair market value
of the Restricted Investment made under clause (d), (d)(i) or (f) in such Person
as of the date it becomes a Restricted Subsidiary or in such Unrestricted
Subsidiary as of the date of redesignation, as the case may be, or (ii) the fair
market value of such Restricted Investment as of the date such Restricted
Investment was originally made in such Person or, in the case of the
redesignation of an Unrestricted Subsidiary into a Restricted Subsidiary which
Subsidiary was designated as an Unrestricted Subsidiary after the date of
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this Indenture, the amount of the Company's Restricted Investment therein as
determined under the last paragraph of this Section 4.7, plus the aggregate fair
market value of any additional Investments (each valued as of the date made)
made under clause (d), (d)(i) or (f) in such Unrestricted Subsidiary after the
date of this Indenture.
Not less than once each fiscal quarter, the Company shall deliver to the
Trustee an Officers' Certificate stating that each Restricted Payment (and any
Amount Limitation Restoration relied upon in making such Restricted Payment)
made during the prior fiscal quarter complies with this Indenture and setting
forth in reasonable detail the basis upon which the required calculations were
computed (upon which the Trustee may conclusively rely without any investigation
whatsoever), which calculations may be based upon the Company's latest available
internal quarterly financial statements. In the event that the Company makes
one or more Restricted Payments in an amount exceeding $3 million that have not
been covered by an Officers' Certificate issued pursuant to the immediately
preceding sentence, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payments (and any Amount Limitation
Restoration relied upon in making such Restricted Payment) comply with this
Indenture and setting forth in reasonable detail the basis upon which the
required calculations were computed (upon which the Trustee may conclusively
rely without any investigation whatsoever), which calculations may be based upon
the Company's latest available internal quarterly financial statements.
The Board of the Company may designate any of its Restricted Subsidiaries
to be Unrestricted Subsidiaries if such designation would not cause a Default.
For purposes of making such determination, all outstanding Investments by the
Obligors (except to the extent repaid in cash or in kind) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this Section 4.7. All such outstanding Investments will
be deemed to constitute Investments in an amount equal to the greatest of (a)
the net book value of such Investments at the time of such designation, (b) the
fair market value of such Investments at the time of such designation, and (c)
the original fair market value of such Investments at the time they were made.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
Section 4.8. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company will not, directly or indirectly (a) Incur any Indebtedness or
issue any Disqualified Capital Stock, other than Permitted Indebtedness, or (b)
cause or permit any of its Subsidiaries to Incur any Indebtedness or issue any
Disqualified Capital Stock or preferred stock, in each case, other than
Permitted Indebtedness.
Notwithstanding the foregoing limitations, the Company may issue
Disqualified Capital Stock, and any Obligor may Incur Indebtedness (including,
without limitation, Acquired Debt) or issue preferred stock, if (a) no Default
or Event of Default shall have occurred and be continuing on the date of the
proposed Incurrence or issuance or would result as a consequence of such
proposed Incurrence or issuance, and (b) immediately after giving pro forma
effect to such proposed Incurrence or issuance and the receipt and application
of the net proceeds therefrom, the Company's Consolidated Coverage Ratio would
not be less than 2.00:1.00.
Any Indebtedness of any Person existing at the time it becomes a Restricted
Subsidiary (whether by merger, consolidation, acquisition of capital stock or
otherwise) shall be deemed to be Incurred as of the date such Person becomes a
Restricted Subsidiary. For purposes of determining compliance with this
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covenant, in the event that an item of Indebtedness meets the criteria of more
than one of the categories of Permitted Indebtedness described in clauses (a)
through (k) of such definition or is entitled to be Incurred pursuant to the
second paragraph of this Section 4.8, the Company will, in its sole discretion,
classify such item of Indebtedness in any manner that complies with this
covenant and such item of Indebtedness will be treated as having been Incurred
pursuant to only one of such clauses or pursuant to the second paragraph hereof.
The Company may reclassify such Indebtedness from time to time in its sole
discretion. Accrual of interest and the accretion of principal amount will not
be deemed to be an Incurrence of Indebtedness for purposes of this Section 4.8.
Section 4.9. Asset Sales.
No Obligor will, directly or indirectly, consummate or enter into a binding
commitment to consummate an Asset Sale unless (a) such Obligor, as the case may
be, receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets sold or of which other disposition is made (as
determined reasonably and in good faith by the Board of such Obligor), and (b)
at least 75% of the consideration received by such Obligor from such Asset Sale
will be cash or Cash Equivalents and will be received at the time of the
consummation of any such Asset Sale. For purposes of this provision, each of
the following shall be deemed to be cash: (i) any liabilities as shown on the
Obligors' most recent balance sheet (or in the notes thereto) (other than (A)
Indebtedness subordinate in right of payment to the Notes, (B) contingent
liabilities, (C) liabilities or Indebtedness to Affiliates of the Company and
(D) Non-Recourse Indebtedness) that are assumed by the transferee of any such
assets, and (ii) to the extent of the cash received, any notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are converted by such Obligor into cash within 60 days of
receipt.
Notwithstanding the foregoing, an Obligor will be permitted to consummate
an Asset Sale without complying with the foregoing provisions if (a) such
Obligor receives consideration at the time of such Asset Sale at least equal to
the fair market value of the assets or other property sold, issued or otherwise
disposed of (as evidenced by a resolution of the Board of such Obligor) as set
forth in an Officers' Certificate delivered to the Trustee, (b) the transaction
constitutes a "like-kind exchange" of the type contemplated by Section 1031 of
the Internal Revenue Code, and (c) the consideration for such Asset Sale
constitutes Productive Assets; provided that any non-cash consideration not
constituting Productive Assets received by such Obligor in connection with such
Asset Sale that is converted into or sold or otherwise disposed of for cash or
Cash Equivalents at any time within 360 days after such Asset Sale and any
Productive Assets constituting cash or Cash Equivalents received by such Obligor
in connection with such Asset Sale shall constitute Net Cash Proceeds subject to
the provisions set forth above.
Upon the consummation of an Asset Sale, the Company or the affected Obligor
will be required to apply all Net Cash Proceeds that are received from such
Asset Sale within 360 days of the receipt thereof either (a) to reinvest (or
enter into a binding commitment to invest, if such investment is effected within
360 days after the date of such commitment) in Productive Assets or in Asset
Acquisitions not otherwise prohibited by this Indenture, or (b) to permanently
prepay or repay Indebtedness of any Obligor other than Indebtedness that is
subordinate in right of payment to the Notes. Pending the final application of
any such Net Cash Proceeds, the Obligors may temporarily reduce revolving
Indebtedness or otherwise invest such Net Cash Proceeds in any manner not
prohibited by this Indenture.
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On the 361st day after an Asset Sale or such earlier date, if any, as the
Board of the Company or the affected Obligor determines not to apply the Net
Cash Proceeds relating to such Asset Sale as set forth in clauses (a) or (b) of
the preceding paragraph (each a "Net Proceeds Offer Trigger Date"), such
aggregate amount of Net Cash Proceeds which have not been applied on or before
such Net Proceeds Offer Trigger Date as permitted in clauses (a) or (b) of the
preceding paragraph (each a "Net Proceeds Offer Amount"), will be applied by the
Company to make an offer to purchase (the "Net Proceeds Offer"), in accordance
with the procedures set forth in Section 3.9 hereof, on a date (the "Net
Proceeds Offer Payment Date") not less than 30 nor more than 60 days following
the applicable Net Proceeds Offer Trigger Date, on a pro rata basis (A) Notes at
a purchase price in cash equal to 100% of the aggregate principal amount of
Notes, in each case, plus accrued and unpaid interest and Liquidated Damages, if
any, thereon on the Net Proceeds Offer Payment Date and (B) 9 1/2% Notes to the
extent required by the terms thereof; provided that if at any time within 360
days after an Asset Sale any non-cash consideration received by the Company or
the affected Obligor in connection with such Asset Sale is converted into or
sold or otherwise disposed of for cash, then such conversion or disposition will
be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds
thereof will be applied in accordance with this covenant. To the extent that
the aggregate principal amount of Notes tendered pursuant to the Net Proceeds
Offer is less than the Net Proceeds Offer Amount, the Obligors may use any
remaining proceeds of such Asset Sales for general corporate purposes (but
subject to the other terms of this Indenture). Upon completion of a Net
Proceeds Offer, the Net Proceeds Offer Amount relating to such Net Proceeds
Offer will be deemed to be zero for purposes of any subsequent Asset Sale. In
the event that a Restricted Subsidiary consummates an Asset Sale, only that
portion of the Net Cash Proceeds therefrom (including any Net Cash Proceeds
received upon the sale or other disposition of any non-cash proceeds received in
connection with an Asset Sale) that are distributed to or received by any
Obligor will be required to be applied by the Obligors in accordance with the
provisions of this paragraph.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than
$10 million the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time as
such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds
Offer Amounts arising subsequent to the Issue Date of the Notes from all Asset
Sales by the Obligors in respect of which a Net Proceeds Offer has not been made
aggregate at least $10 million at which time the affected Obligor will apply all
Net Cash Proceeds constituting all Net Proceeds Offer Amounts that have been so
deferred to make a Net Proceeds Offer (each date on which the aggregate of all
such deferred Net Proceeds Offer Amounts is equal to $10 million or more will be
deemed to be a Net Proceeds Offer Trigger Date). In connection with any Asset
Sale with respect to assets having a book value in excess of $10 million or as
to which it is expected that the aggregate consideration therefor to be received
by the affected Obligor will exceed $10 million in value, such Asset Sale will
be approved, prior to the consummation thereof, by the Board of the applicable
Obligor.
Section 4.10. Transactions with Affiliates.
No Obligor will make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(a) such Affiliate Transaction is, considered in light of any Series of related
transactions of which it comprises a part, on terms that are fair and reasonable
and no less favorable to such Obligor than those that might reasonably have been
obtained at such time in a comparable transaction or Series of related
transactions on an arms-length
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basis from a Person that is not such an Affiliate, (b) with respect to any
Affiliate Transaction involving aggregate consideration of $5 million or more, a
majority of the disinterested members of the Board of the Company (and of any
other affected Obligor, where applicable) shall, prior to the consummation of
any portion of such Affiliate Transaction, have reasonably and in good faith
determined, as evidenced by a resolution of its Board, that such Affiliate
Transaction meets the requirements of the foregoing clause, and (c) with respect
to any Affiliate Transaction involving value of $15 million or more, the Board
of the applicable Obligor shall have received prior to the consummation of any
portion of such Affiliate Transaction, a written opinion from an independent
investment banking, accounting or appraisal firm of recognized national standing
that such Affiliate Transaction is on terms that are fair to such Obligor from a
financial point of view.
The foregoing restrictions will not apply to (a) reasonable fees and
compensation (including any such compensation in the form of Equity Interests
not derived from Disqualified Capital Stock, together with loans and advances,
the proceeds of which are used to acquire such Equity Interests) paid to, and
indemnity provided on behalf of, officers, directors, employees or consultants
of the Obligors as determined in good faith by the Board or senior management of
the Company, (b) any transaction solely between or among Obligors and Restricted
Subsidiaries to the extent any such transaction is otherwise in compliance with,
or not prohibited by, this Indenture, (c) any Restricted Payment permitted by
the terms of Section 4.7 hereof or (d) provision of management services
(including any agreements therefor) to an Unrestricted Subsidiary in connection
with the development, construction and operation of gaming facilities, provided
the Obligor is reimbursed for all costs and expenses it incurs in providing such
services.
Section 4.11. Continued Existence.
Except as otherwise provided in Article 5 hereof, each of the Obligors
shall do or shall cause to be done all things necessary to preserve and keep in
full force and effect (i) its corporate existence, and the corporate,
partnership, limited liability company or other existence of each of its
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of each such Obligor and each such
Subsidiary and (ii) the material rights (charter and statutory), licenses and
franchises of each Obligor and each Subsidiary; provided, however, that no
Obligor shall be required to preserve any such right, license or franchise, or
the corporate, partnership or other existence of any of its Subsidiaries, if its
Board shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and its Subsidiaries, taken as a
whole, and that the loss thereof is not adverse in any material respect to the
Holders.
Section 4.12. Offer to Repurchase Upon Change of Control.
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash (the
"Change of Control Payment") equal to 101% of the aggregate principal amount of
Notes plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of repurchase. Within 30 days following any of a Change of Control,
the Company shall mail a notice to the Trustee and each Holder stating that the
Change of Control Offer is being made pursuant to this Section 4.12 and that all
Notes tendered will be accepted for payment; the purchase price and the purchase
date, which shall be no earlier than 30 days nor later than 60 days from the
date such notice is mailed (the "Change of Control Payment Date"); that any Note
not tendered will continue to accrue interest; that, unless the Company
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defaults in the payment of the Change of Control Payment, all Notes accepted for
payment pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date; that Holders electing to have any
Notes purchased pursuant to a Change of Control Offer will be required to
surrender the Notes, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes completed, or transfer by book entry transfer, to
the Company, the depository (if appointed by the Company) or to the Paying Agent
at the address specified in the notice prior to the close of business on the
third Business Day preceding the Change of Control Payment Date; that Holders
will be entitled to withdraw their elections if either the Company, the
depository or the Paying Agent receives, not later than the close of business on
the second Business Day preceding the Change of Control Payment Date, a
facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Notes delivered for purchase, and a statement that such
Holder is withdrawing its election to have the Notes purchased; that Holders
whose Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an integral
multiple thereof; and a brief summary of the circumstances and relevant facts
regarding such Change of Control. The Company will comply with all applicable
laws, including, without limitation, Section 14(e) of the Exchange Act and the
rules thereunder and all applicable federal and state securities laws, and will
include all instructions and materials necessary to enable Holders to tender
their Notes.
On the Change of Control Payment Date, the Company will, to the extent
lawful (a) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (b) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered, and (c) deliver or cause to be delivered to the
Trustee the Notes so accepted, together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered by such Holder, if any; provided that each such new Note will be in
a principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
Prior to complying with the provisions of this Section 4.12, but in any
event within 90 days following a Change of Control, the Company will either (a)
repay all Obligations outstanding with respect to Senior Debt, (b) obtain the
requisite consents, if any, from the holders of Senior Debt to permit the
Company to repurchase Notes under this Section 4.12; or (c) deliver to the
Trustee an Officer's Certificate to the effect that no action of the kind
described in clause (a) or (b) is necessary.
Section 4.13. Limitation on Liens.
No Obligor will, directly or indirectly, create, Incur or assume any Lien,
except a Permitted Lien, securing Indebtedness that is pari passu with or
subordinate in right of payment to the Notes or the Guarantees, on or with
respect to any of its property or assets including any shares of stock or
Indebtedness of any Restricted Subsidiary, whether owned on the Issue Date or
thereafter acquired, or any income, profits or proceeds therefrom, unless (a) in
the case of any Lien securing Indebtedness that is pari passu in right of
payment with the Notes or the Guarantees, the Notes or the Guarantees are
secured by a Lien on such property, assets or proceeds that is senior in
priority to or pari passu with such
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Lien, and (b) in the case of any Lien securing Indebtedness that is subordinate
in right of payment to the Notes or the Guarantees, the Notes or the Guarantees
are secured by a Lien on such property, assets or proceeds that is senior in
priority to such Lien.
Section 4.14. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
No Obligor will, directly or indirectly, create or otherwise cause or
permit or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on its Capital Stock, (b) make loans or advances to or pay any
Indebtedness or other obligations owed to any Obligor or to any Restricted
Subsidiary, or (c) transfer any of its property or assets to any Obligor or to
any Restricted Subsidiary (each such encumbrance or restriction in clause (a),
(b) or (c), a "Payment Restriction"). However, the preceding restrictions will
not apply to encumbrances or restrictions existing under or by reason of (i)
applicable law or required by any Gaming Authority; (ii) this Indenture; (iii)
customary non-assignment provisions of any purchase money financing contract or
lease of any Restricted Subsidiary entered into in the ordinary course of
business of such Restricted Subsidiary; (iv) any instrument governing Acquired
Debt Incurred in connection with an acquisition by any Obligor or Restricted
Subsidiary in accordance with this Indenture as the same is in effect on the
date of such Incurrence; provided that such encumbrance or restriction is not,
and will not be, applicable to any Person, or the properties or assets of any
Person, other than the Person and its Subsidiaries or the property or assets,
including directly-related assets, such as accessions and proceeds so acquired
or leased; (v) any restriction or encumbrance contained in contracts for the
sale of assets to be consummated in accordance with this Indenture solely in
respect of the assets to be sold pursuant to such contract; (vi) any
restrictions of the nature described in clause (c) above with respect to the
transfer of assets secured by a Lien that is permitted by this Indenture to be
Incurred; (vii) any encumbrance or restriction contained in Permitted
Refinancing Indebtedness; provided that the provisions relating to such
encumbrance or restriction contained in any such Permitted Refinancing
Indebtedness are no less favorable to the holders of the Notes in any material
respect in the good faith judgment of the Board of the Company than the
provisions relating to such encumbrance or restriction contained in the
Indebtedness being refinanced; or (viii) Indebtedness or Investments existing on
the Issue Date, as in effect on the Issue Date.
Section 4.15. No Subordinated Debt Senior To The Notes or Guarantees.
Notwithstanding the provisions of Section 4.8 hereof, no Obligor shall
Incur any Indebtedness that is subordinate or junior in right of payment to any
Senior Debt and senior in any respect in right of payment to the Notes or the
Guarantees.
Section 4.16. Material Restricted Subsidiaries To Become Guarantors.
The Company shall cause each Person which becomes a Material Restricted
Subsidiary after the Issue Date to become a Guarantor by executing and
delivering an Addendum to Guaranty in accordance with Section 12.10 hereof,
subject to applicable Gaming Laws. The Company shall use its best efforts to
obtain all Gaming Approvals necessary to permit their Material Restricted
Subsidiaries to become Guarantors as promptly as is practicable.
Section 4.17. Lines of Business.
No Obligor will engage in any lines of business other than the Core
Businesses.
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ARTICLE 5.
SUCCESSORS
Section 5.1. Merger, Consolidation, or Sale of Assets.
No Obligor may, in a single transaction or a Series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of such
Obligor's properties or assets whether as an entirety or substantially as an
entirety to any Person or adopt a Plan of Liquidation unless:
(a) either (i) in the case of a consolidation or merger, such Obligor
shall be the surviving or continuing corporation, or (ii) the Person (if other
than such Obligor) formed by such consolidation or into which such Obligor is
merged or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition of the properties and assets of such Obligor and
of such Obligor's Subsidiaries substantially as an entirety, or in the case of a
Plan of Liquidation, the Person to which assets of such Obligor and such
Obligor's Subsidiaries have been transferred (A) shall be a corporation
organized and validly existing under the laws of the United States or any State
thereof or the District of Columbia and (B) shall expressly assume, by
supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Notes and, if
applicable, the Guarantees and the performance of every covenant of the Notes,
this Indenture and the Registration Rights Agreement on the part of such Obligor
to be performed or observed;
(b) immediately after giving effect to such transaction and the assumption
contemplated by clause (a)(ii)(B) above (including giving effect to any
Indebtedness and Acquired Debt Incurred or anticipated to be Incurred in
connection with or in respect of such transaction), the Obligors, including any
such other Person becoming an Obligor through the operation of clause (a)(ii)
above would have a Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of such Obligor immediately
preceding the transaction;
(c) in the event that such transaction involves (i) the incurrence by the
Company or any Restricted Subsidiary, directly or indirectly, of additional
Indebtedness (and treating any Indebtedness not previously an obligation of the
Company or any of its Restricted Subsidiaries incurred in connection with or as
a result of such transaction as having been incurred at the time of such
transaction) and/or (ii) the assumption contemplated by clause (a)(ii)(B) above
(including giving effect to any Indebtedness and Acquired Debt Incurred or
anticipated to be Incurred in connection with or in respect of such
transaction), then immediately after giving effect to such incurrence and/or
assumption under clauses (i) and (ii), (A) the Obligors, including any such
other Person becoming an Obligor through the operation of clause (a)(ii) above
could Incur at least $1.00 of Indebtedness (other than Permitted Indebtedness)
pursuant to the Consolidated Coverage Ratio test set forth in Section 4.8 hereof
or (B) any other Person which would, as a result of the applicable transaction,
properly classify such Obligor as a consolidated subsidiary in accordance with
GAAP, satisfied the conditions set forth in clause (a)(ii)(A) above and either
(1) also satisfied the condition set forth in clause (a)(ii)(B) above and caused
each acquired Person to become a Guarantor or (2) became a Guarantor, and, in
either such case, after giving effect to such assumption of the Notes or
Incurrence of Obligations under the Guaranty, such assuming or guarantying
Person would be able to Incur at least $1.00 of Indebtedness pursuant to the
Consolidated Coverage Ratio test described in Section 4.8 hereof;
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(d) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (a) (ii)(B) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Debt Incurred or anticipated to be Incurred and any Lien granted in connection
with or in respect of the transaction) no Default and no Event of Default shall
have occurred or be continuing; and
(e) such Obligor or such other Person shall have delivered to the Trustee
(i) an Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance, other
disposition or Plan of Liquidation and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture, comply with
the applicable provisions of this Indenture and that all conditions precedent in
this Indenture relating to such transaction have been satisfied and (ii) a
certificate from the Company's independent certified public accountants stating
that such Obligor has made the calculations required by clause (b) above in
accordance with the terms of this Indenture and the Notes after the consummation
of such transaction.
Notwithstanding clauses (b) and (c) above (i) any Restricted Subsidiary may
consolidate with, or merge with or into, or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its assets to the
Company or to a Restricted Subsidiary, and (ii) any Obligor may consolidate with
or merge with or into any Person that has conducted no business and Incurred no
Indebtedness or other liabilities if such transaction is solely for the purpose
of effecting a change in the state of incorporation of such Obligor.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or Series of transactions) of all or
substantially all of the properties and assets of one or more Subsidiaries of
the Company, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
Section 5.2. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of any
Obligor in accordance with Section 5.1 hereof, the successor corporation formed
by such consolidation or into or with which such Obligor is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made,
or any successor Person described in Section 5.1(a)(ii) above, shall succeed to,
and be substituted for (so that from and after the date of such consolidation,
merger, sale, lease, conveyance or other disposition, the provisions of this
Indenture referring to such Obligor shall refer instead to the successor Person
and not to such Obligor), and may exercise every right and power of such Obligor
under this Indenture with the same effect as if such successor Person had been
named as an Obligor herein; provided, however, that the predecessor Obligor
shall not be relieved from the obligation to pay the principal of and interest
on the Notes except in the case of a sale of all or substantially all of such
Obligor's assets that meets the requirements of Section 5.1 hereof.
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ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.1. Events of Default.
An event of default (an "Event of Default") shall occur upon the happening
of any of the following (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, Rule or
regulation of any administrative or governmental body):
(a) the failure to pay interest or Liquidated Damages on any Note or
Guaranty for a period of 30 days or more after the same becomes due and payable
(whether or not such payment is prohibited by the provisions of Article 10
hereof); or
(b) the failure to pay the principal or premium, if any, on any Note or
Guaranty when such principal or premium amount becomes due and payable, at
maturity, upon acceleration or redemption, pursuant to a Net Proceeds Offer, a
Change of Control Offer or otherwise (whether or not such payment is prohibited
by the provisions of Article 10 hereof); or
(c) a default in the observance or performance of any other covenant or
agreement contained in this Indenture, the Notes or the Guarantees for 60 days
after notice to the Company by the Trustee or by Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding voting as a single
class; or
(d) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by any Obligor (or the payment of which is guaranteed by any
Obligor), whether such Indebtedness or guarantee now exists, or is created after
the Issue Date, which default (i) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (ii) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $10 million or more; or
(e) one or more judgments in an aggregate amount in excess of $10 million
(which are not paid or covered by third-party insurance by financially sound
carriers or underwriters that have acknowledged liability in writing) being
rendered against any Obligor and such judgment or judgments remain undischarged,
or unstayed or unsatisfied for a period of 60 days after such judgment or
judgments become final and non-appealable; or
(f) any Obligor (i) commences a voluntary case or proceeding under any
Bankruptcy Law with respect to itself, (ii) consents to the entry of a judgment,
decree or order for relief against it in an involuntary case or proceeding under
any Bankruptcy Law, (iii) consents to the appointment of a custodian of it or
for substantially all of its property, (iv) consents to or acquiesces in the
institution of a bankruptcy or an insolvency proceeding against it, (v) makes a
general assignment for the benefit of its creditors, or (F) takes any formal
corporate action to authorize or effect any of the foregoing; or
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(g) a court of competent jurisdiction enters a judgment, decree or order
for relief in respect of any Obligor in an involuntary case or proceeding under
any Bankruptcy Law, which shall (i) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of any
Obligor, (ii) appoint a custodian of any Obligor or for substantially all of its
property, or (iii) order the winding-up or liquidation of its affairs; and such
judgment, decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(h) any Holder of at least $10 million in aggregate principal amount of
Indebtedness of any Obligor shall commence judicial proceedings to foreclose
upon assets of any Obligor having an aggregate fair market value, individually
or in the aggregate, of at least $10 million or shall have exercised any right
under applicable law or applicable security documents to take ownership of any
such assets in lieu of foreclosure.
The Company shall provide an Officers' Certificate to the Holders and the
Trustee promptly upon any Officer of the Company obtaining knowledge of any
Default or Event of Default (provided, however, that pursuant to the reporting
requirements of Section 4.4 hereof such Officer shall provide such certification
at least annually whether or not they know of any Default or Event of Default)
that has occurred and, if applicable, describe such Default or Event of Default
and the status thereof.
Section 6.2. Acceleration.
If an Event of Default (other than an Event of Default specified in clauses
(f) or (g) of Section 6.1 hereof) occurs and is continuing, then and in every
such case, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the then outstanding Notes may declare the principal amount,
together with any accrued and unpaid interest, premium and Liquidated Damages on
all the Notes and Guarantees then outstanding to be due and payable, by a notice
in writing to the Company (and to the Trustee, if given by Holders) specifying
the Event of Default and that it is a "notice of acceleration" and on the fifth
Business Day after delivery of such notice the principal amount, in either case,
together with any accrued and unpaid interest, premium and Liquidated Damages on
all the Notes or the Guarantees then outstanding will become immediately due and
payable, notwithstanding anything contained in this Indenture, the Notes or the
Guarantees to the contrary. Upon the occurrence of any Event of Default
specified in clauses (f) or (g) of Section 6.1 hereof, the principal amount,
together with any accrued and unpaid interest, premium and Liquidated Damages,
will immediately and automatically become due and payable, without the necessity
of notice or any other action by any Person. Holders of the Notes may not
enforce this Indenture, the Notes or the Guarantees except as provided herein.
After a declaration of acceleration, but before a judgment decree of money
due in respect to the Notes has been obtained, the Holders of not less than a
majority in aggregate principal amount of the Notes then outstanding by written
notice to the Trustee may rescind an acceleration and its consequences if all
existing Events of Default (other than the nonpayment of principal of and
premium, if any, interest and Liquidated Damages, if any, on the Notes which has
become due solely by virtue of such acceleration) have been cured or waived and
if the rescission would not conflict with any judgment or decree. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
If an Event of Default occurs on or after February 15, 2003 by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of any
Obligor with the intention of avoiding payment of the premium that the Company
would have had to pay had the Company then elected to redeem the Notes pursuant
to Section 3.7 hereof, then, upon acceleration of the Notes, an equivalent
premium shall also become and be immediately due and payable, to the extent
permitted by law, anything in this
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Indenture or in the Notes to the contrary notwithstanding. If an Event of
Default occurs prior to February 15, 2003 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of any Obligor with the intention
of avoiding the prohibition on redemption of the Notes prior to such date, then,
upon acceleration of the Notes, an additional premium shall also become and be
immediately due and payable in an amount, for each of the years beginning on
February 15 of the years set forth below, as set forth below (expressed as a
percentage of the principal to the date of payment that would otherwise be due
but for the provisions of this sentence):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- -----------
<S> <C>
1999. 109.25%
2000. 108.09375%
2001. 106.9375%
2002. 105.78125%
</TABLE>
Section 6.3. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.4. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive any existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes or Guarantees (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted solely from such
acceleration). The waiver by the holders of any Indebtedness described in
clause (d) of Section 6.1 of the predicating default under such Indebtedness
shall be deemed a waiver of such Default or Event of Default arising under, and
a rescission of any acceleration resulting from the application of clause (d) ,
from the effective date, during the effective period and to the extent of, the
waiver by the holders of such other Indebtedness. Upon any waiver granted or
deemed granted in accordance with the terms hereof, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured and waived for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
Section 6.5. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or
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exercising any trust or power conferred on it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture that the
Trustee determines may be unduly prejudicial to the rights of other Holders of
Notes or that may involve the Trustee in personal liability.
Section 6.6. Limitation on Suits.
A Holder of a Note may pursue a remedy (including, without limitation, the
institution of any proceeding, judicial or otherwise, with respect to the Notes
or this Indenture or for the appointment of a receiver or trustee) with respect
to this Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal amount
of the then outstanding Notes do not give the Trustee a direction inconsistent
with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
Section 6.7. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in such Note (including in connection with an offer to purchase), or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
Section 6.8. Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.9. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to any
Obligor, its creditors or its
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property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.7 hereof. To the extent that the payment
of any such compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section 7.7
hereof out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of, any
and all distributions, dividends, money, securities and other properties that
the Holders may be entitled to receive in such proceeding whether in liquidation
or under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall,
subject to the provisions of Section 10.6 hereof, pay out the money in the
following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.7 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Third: to or at the direction of the Company, or to such party as a court
of competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.7 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
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ARTICLE 7.
TRUSTEE
Section 7.1. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture (but need not
confirm the mathematical accuracy thereof).
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 7.1;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
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Section 7.2. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel of its selection and the advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from any Obligor shall be sufficient if signed by
an Officer of such Obligor.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
Section 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with any Obligor or any Affiliate of any
Obligor with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
trustee or resign. Any Agent may do the same with like rights and duties. The
Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.4. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to any Obligor or upon any Obligor's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.5. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after the
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Trustee obtains knowledge thereof. Except in the case of a Default or Event of
Default in payment of principal of, premium, if any, or interest on any Note,
the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of the Holders of the Notes.
Section 7.6. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA (S)313(a) (but if no event described in TIA (S)
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA (S) 313(b)
(2). The Trustee shall also transmit by mail all reports as required by TIA (S)
313(c) .
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA (S) 313(d) . The Company
shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
Section 7.7. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such reasonable
compensation as shall be agreed between the Company and the Trustee for its
acceptance of this Indenture and services hereunder. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee promptly upon request for all
reasonable disbursements, advances and expenses incurred or made by it in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Obligors shall indemnify each of the Trustee and any predecessor
Trustee against any and all losses, damages, claims, liabilities or expenses,
including taxes (other than taxes based on the income of the Trustee) incurred
by it arising out of or in connection with the acceptance or administration of
its duties under this Indenture, including the costs and expenses of enforcing
this Indenture, the Registration Rights Agreement or the Notes against any
Obligor (including this Section 7.7) and defending itself against any claim
(whether asserted by any Obligor or any Holder or any other Person) or liability
in connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Obligors of their
obligations hereunder. The Obligors shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Obligors shall pay the reasonable fees and expenses of such counsel. No Obligor
need pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of any Obligor under this Section 7.7 shall survive the
satisfaction and discharge of this Indenture.
To secure the Obligor's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay
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principal and interest on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the
extent applicable.
Section 7.8. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged bankrupt or insolvent or an order for relief
is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder who has been a Holder
for at least six months, fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders. The retiring Trustee shall promptly transfer all property held by it
as Trustee to the successor Trustee; provided that all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided in Section 7.7 hereof.
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Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the
Obligors' obligations under Section 7.7 hereof shall continue for the benefit of
the retiring Trustee.
Section 7.9. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board evidenced by resolutions set
forth in an Officers' Certificate, at any time, elect to have either Section 8.2
or 8.3 hereof be applied to all outstanding Notes upon compliance with the
conditions set forth below in this Article Eight.
Section 8.2. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.4 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.5 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders
of outstanding Notes to receive solely from the trust fund described in Section
8.4 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest on such Notes when such payments
are due,
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(b) the Company's obligations with respect to such Notes under Article 2 and
Section 4.2 hereof, (c) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Company's obligations in connection therewith and (d)
this Article Eight. Subject to compliance with this Article Eight, the Company
may exercise its option under this Section 8.2 notwithstanding the prior
exercise of its option under Section 8.3 hereof.
Section 8.3. Covenant Defeasance.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.4 hereof, be released from its
obligations under the covenants contained in Sections 4.7, 4.8, 4.9, 4.10, 4.12,
4.13, 4.14, and 4.15 hereof and (b) and (c) of Section 5.1 hereof with respect
to the outstanding Notes on and after the date the conditions set forth in
Section 8.4 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes
shall thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.1 hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.1 hereof of the option applicable to this Section 8.3 hereof, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, Sections 6.1(c)
through 6.1(e) and 6.1(h) hereof shall not constitute Events of Default.
Section 8.4. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.2 or 8.3 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages, if any,
and interest on the outstanding Notes on the stated date for payment thereof or
on the applicable redemption date, as the case may be as well as the fees and
expense of the Trustee and its counsel;
(b) in the case of an election under Section 8.2 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in
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the same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.3 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default resulting
from the incurrence of Indebtedness all or a portion of the proceeds of which
will be used to defease the Notes pursuant to this Article Eight concurrently
with such incurrence) or insofar as Sections 6.1(f) or 6.1(g) hereof is
concerned, at any time in the period ending on the 91st day after the date of
deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of Counsel
(which may be subject to customary exceptions) to the effect that on the 91st
day following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.5. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.6 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.5, the
"Trustee") pursuant to Section 8.4 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including any Obligor acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.4
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hereof or the principal and interest received in respect thereof other than any
such tax, fee or other charge which by law is for the account of the Holders of
the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.4 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.4(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.6. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium or Liquidated
Damages, if any, or interest on any Note and remaining unclaimed for two years
after such principal, premium or Liquidated Damages, if any, or interest has
become due and payable shall be paid to the Company on its request or (if then
held by the Company) shall be discharged from such trust; and the Holder of such
Note shall thereafter look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
editions), notice that such money remains unclaimed and that, after a date
specified therein which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 8.7. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.2 or 8.3
hereof, as the case may be, by reason of an order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the obligations of the Obligors under this Indenture, the
Guarantees and the Notes shall be revived and reinstated as though no deposit
had occurred pursuant to Section 8.2 or 8.3 hereof until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 8.2 or 8.3 hereof, as the case may be; provided, however, that, if the
Company makes any payment of principal of, premium, if any, or interest on any
Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.1. Without Consent of Holders of Notes.
Notwithstanding Section 9.2 of this Indenture, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency; provided that such
amendment or supplement does not adversely affect the rights of any Holder;
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(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the Notes by a successor to the Company pursuant
to Article 5 or Article 10 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA;
(f) to provide for issuance of Series B Senior Subordinated Notes pursuant
to the Registration Rights Agreement (which will have terms substantially
identical in all material respects to the Notes except that the transfer
restrictions contained in the Notes will be modified or eliminated, as
appropriate), and which will be treated together with any outstanding Notes as a
single issue of securities; or
(g) to allow any Guarantor to execute a supplemental indenture and/or a
Guaranty with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its Board
authorizing the execution of any such amended or supplemental Indenture, and
upon receipt by the Trustee of the documents described in Section 9.6 hereof,
the Trustee shall join with the Company and the Guarantors in the execution of
any amended or supplemental Indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations
that may be therein contained, but the Trustee shall not be obligated to enter
into such amended or supplemental Indenture that affects its own rights, duties
or immunities under this Indenture or otherwise.
Section 9.2. With Consent of Holders of Notes.
Except as provided below in this Section 9.2, the Company and the Trustee
may amend or supplement this Indenture (including Section 3.9, 4.9 and 4.12
hereof, including the defined terms used therein), the Guarantees and the Notes
may be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding voting as a single
class (including consents obtained in connection with a tender offer or exchange
offer for, or purchase of, the Notes), and, subject to Sections 6.4 and 6.7
hereof, any existing Default or Event of Default (other than a Default or Event
of Default in the payment of the principal of, premium, if any, or interest on
the Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture, the Guarantees or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes voting as a single class
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Notes). Without the consent of at least 66 2/3% in
principal amount of the Notes then outstanding (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, such
Notes), no waiver or amendment to this Indenture may (a) make any change to
Article 10 hereof or (b) release any Guarantor from its obligations under any
Guaranty, in either case if such amendment or waiver would adversely affect the
rights of any Holder. Section 2.8 hereof shall determine which Notes are
considered to be "outstanding" for purposes of this Section 9.2.
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Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 9.6 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.2 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.4 and 6.7 hereof, and except as
otherwise provided in this Section 9.2 the Holders of a majority in aggregate
principal amount of the Notes then outstanding voting as a single class may
waive compliance in a particular instance by any Obligor with any provision of
this Indenture, any Guaranty or the Notes. However, without the consent of each
Holder affected, an amendment or waiver under this Section 9.2 may not (with
respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the Notes
(except as provided above with respect to Sections 3.9, 4.9 and 4.12 hereof);
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of the then outstanding Notes and a waiver of the payment default that resulted
from such acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other than
payment required by Sections 3.9, 4.9 and 4.12 hereof); or
(h) make any change in Section 6.4 or 6.7 hereof or in the foregoing
amendment and waiver provisions.
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Section 9.3. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental indenture that complies with the TIA as then
in effect.
Section 9.4. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date upon which the requisite consents for the applicable
amendment, supplement or waiver have been obtained. An amendment, supplement or
waiver becomes effective in accordance with its terms and thereafter binds every
Holder.
Section 9.5. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.6. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The
Obligors may not sign an amendment or supplemental indenture until their Boards
approve it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.1) shall be fully
protected in relying upon an Officers' Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
SUBORDINATION
Section 10.1. Agreement to Subordinate.
Each Obligor agrees, and each Holder by accepting a Note agrees, that the
Indebtedness evidenced by the Note and the Guarantees is subordinated in right
of payment, to the extent and in the manner provided in this Article, to the
prior payment in full of all Senior Debt (whether outstanding on the date hereof
or hereafter Incurred), and that the subordination is for the benefit of the
holders of Senior Debt. No holder of Senior Debt need prove its reliance on
this Article 10 to enforce the provisions hereof.
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Section 10.2. Certain Definitions.
"Accrued Bankruptcy Interest" means, with respect to any Senior Debt, all
interest accruing thereon after the filing of a petition or commencement of any
other proceeding by or against any Obligor under any Bankruptcy Law, in
accordance with and at the rate (including any rate applicable upon any default
or event of default, to the extent lawful) specified in the documents evidencing
or governing such Indebtedness or Hedging Obligations, whether or not the claim
for such interest is allowed as a claim after such filing in any proceeding
under such Bankruptcy Law.
"Designated Senior Debt" means any Indebtedness under the Bank Credit
Facility (which is outstanding or which the lenders thereunder have a commitment
to extend) and, if applicable, any other Senior Debt permitted under this
Indenture, the principal amount (committed or outstanding) of which is $25
million or more and that has been designated by the Company as "Designated
Senior Debt."
"Hedging Obligations" means all obligations of the Obligors arising under
or in connection with any rate or basis swap, forward contract, commodity swap
or option, equity or equity index swap or option, bond, note or bill option,
interest rate option, foreign currency exchange transaction, cross currency rate
swap, currency option, cap, collar or floor transaction, swap option, synthetic
trust product, synthetic lease or any similar transaction or agreement.
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
"Senior Debt" means, with respect to any Obligor, (a) all Indebtedness of
such Obligor outstanding under Credit Facilities and all Hedging Obligations
with respect thereto, (b) any other Indebtedness permitted to be Incurred by
such Obligor under the terms of this Indenture, unless the instrument under
which such Indebtedness is Incurred expressly provides that it is on a parity
with or subordinated in right of payment to the Notes and (c) all Obligations
with respect to the foregoing. Notwithstanding anything to the contrary in the
foregoing, Senior Debt will not include (i) any liability for federal, state,
local or other taxes owed or owing by such Obligor, (ii) any Indebtedness of
such Obligor to any of its Restricted Subsidiaries or other Affiliates, (iii)
any trade payables, (iv) any Indebtedness that is incurred in violation of this
Indenture and (v) Indebtedness which, when Incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to such Obligor. Notwithstanding anything in this Indenture to the
contrary, Senior Debt shall not include the 9 1/2% Notes.
A distribution may consist of cash, securities or other property, by set-
off or otherwise.
All Designated Senior Debt now or hereafter existing and all other
Obligations relating thereto shall not be deemed to have been paid in full
unless the holders or owners thereof shall have received payment in full in cash
with respect to such Designated Senior Debt and all other Obligations with
respect thereto including, without limitation, all Accrued Bankruptcy Interest.
Section 10.3. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of any Obligor in a liquidation or
dissolution of such Obligor or in a proceeding under Bankruptcy Law relating to
such Obligor or its property, in an assignment for the benefit of creditors or
any marshaling of such Obligor's assets and liabilities:
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(a) holders of Senior Debt shall be entitled to receive payment in full of
all Obligations in respect of such Senior Debt (including Accrued Bankruptcy
Interest) and to have all outstanding Letter of Credit Obligations and
applicable Hedging Obligations fully cash collateralized before the Trustee or
the Holders shall be entitled to receive any payment or distribution on
Obligations with respect to the Notes and the Guarantees (except that the
Trustee or the Holders may receive payments and other distributions made from
any defeasance or redemption trust created pursuant to Article 8 or the last
paragraph of Section 3.5 hereof and the issuance of Permitted Junior
Securities); and
(b) until all Obligations with respect to Senior Debt (as provided in
clause (a) above) are paid in full and all outstanding Letter of Credit
Obligations and applicable Hedging Obligations are fully cash collateralized,
any distribution to which the Trustee or the Holders would be entitled but for
this Article, including any such distribution that is payable or deliverable by
reason of the payment of any other Indebtedness of such Obligor being
subordinated to the payment of the Notes and Guarantees, shall be made to
holders of Senior Debt or their Representatives, ratably in accordance with the
respective amounts of the principal of such Senior Debt, interest (including,
without limitation, Accrued Bankruptcy Interest) thereon and all other
Obligations with respect thereto (except that Holders may receive payments and
other distributions made from any defeasance or redemption trust created
pursuant to Article 8 or the last paragraph of Section 3.5 hereof and the
issuance of Permitted Junior Securities hereof), as their respective interests
may appear.
Any holder of Designated Senior Debt may file any proof of claim or similar
document on behalf of the Trustee or any Holder if such a document has not been
filed by the date which is 30 days prior to the last day specified for filing of
such documents. In any proceeding under Bankruptcy Law, neither the Trustee nor
any Holder shall initiate, or vote in support of, any challenge to the rights of
the holders of Senior Debt.
Section 10.4. Default on Designated Senior Debt.
The Obligors may not make any payment or distribution to the Trustee or any
Holder in respect of Obligations arising under in connection with the Notes or
the Guarantees and may not acquire from the Trustee or any Holder any Notes or
Guarantees for cash or property (other than payments and other distributions
made from any defeasance or redemption trust created pursuant Article 8 or the
last paragraph of Section 3.5 hereof and the issuance of Permitted Junior
Securities) until all principal and other Obligations arising under or in
connection with the Senior Debt have been paid in full or fully cash-
collateralized, if not yet due if:
(a) a default in the payment of any Obligations with respect to Designated
Senior Debt occurs and is continuing (including any default in payment upon the
maturity of any Designated Senior Debt by lapse of time, acceleration or
otherwise), or any judicial proceeding is pending to determine whether any such
default has occurred; or
(b) a default or event of default (as such terms may be defined in any
agreement, indenture or other document governing such Designated Senior Debt),
other than a payment default described in subSection (a) above, on Designated
Senior Debt, including any default or event of default that would result upon
any payment or distribution with respect to the Notes or the Guarantees, that
would cause or permit the acceleration of the maturity of the Designated Senior
Debt, occurs and is continuing with respect to Designated Senior Debt that
permits holders of the Designated Senior Debt as to which such default relates
to accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the affected Obligors or the holders of any
Designated Senior Debt. If the
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Trustee receives any such Payment Blockage Notice, no subsequent Payment
Blockage Notice shall be effective for purposes of this Section unless and until
at least 360 days shall have elapsed since the first day of effectiveness of the
immediately prior Payment Blockage Notice. No nonpayment default that existed or
was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice
unless such default shall have been waived for a period of not less than 180
days.
If the Company is prohibited from making payments on or distributions in
respect of the Notes or from acquiring any Notes under subSection (a) or (b)
above, the Company may and shall resume payments on and distributions in respect
of the Notes and may acquire them upon:
(i) in the case of any prohibition referred to in Section 10.4(a)
hereof, the date upon which the default, event of default or other event
giving rise to such prohibition is cured or waived or shall have ceased to
exist, unless another default, event of default or other event that would
prohibit such payment, distribution or acquisition under Section 10.4(a)
has occurred and is continuing, or all Obligations in respect of such
Designated Senior Debt shall have been discharged or paid in full, o r
(ii) in the case of any prohibition referred to in Section 10.4(b)
hereof, the earlier of the date on which the default, event of default or
other event giving rise to such prohibition is cured or waived or 179 days
pass after the relevant Payment Blockage Notice is received by the Trustee
thereunder, unless the maturity of any Designated Senior Debt has been
accelerated, in each such case, if this Article otherwise permits the
payment, distribution or acquisition.
The provisions of this Article shall not be construed to prohibit the
Company from repurchasing, redeeming, repaying or prepaying any or all of the
Notes to the extent required to do so by any Gaming Authority having authority
over any Obligor.
Section 10.5. Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of Default, the
Company shall promptly notify holders of Senior Debt of the acceleration.
Section 10.6. When Distribution Must Be Paid Over.
If, notwithstanding the provisions of Sections 10.3 and 10.4, any direct or
indirect payment or distribution on account of principal of or interest on or
other Obligations with respect to the Notes or Guarantees or acquisition,
repurchase, redemption, retirement or defeasance of any of the Notes or
Guarantees shall be made by or on behalf of any Obligor (including any payments
or distribution by any liquidating trustee or agent or other Person in a
proceeding referred to in Section 10.3) and received by the Trustee or any
Holder at a time when such payment or distribution was prohibited by the
provisions of Section 10.3 or 10.4 or such payment or distribution was required
to be made to holders of Senior Debt or their Representatives, then, unless and
until such payment or distribution is no longer prohibited by Section 10.3 or
10.4, such payment or distribution shall be received, segregated from other
funds or assets and held in trust by the Trustee or such Holder, as the case may
be, for the benefit of, and shall be immediately paid or delivered over to,
those Persons known to the Trustee or, as the case may be, such Holder, as, or
identified by the Company as, or to a fund for the benefit of, the holders of
Senior Debt or their Representatives, ratably in accordance with the respective
amounts of the principal of such Senior Debt, interest (including, without
limitation, Accrued Bankruptcy Interest) thereon and all other Obligations with
respect thereto held or represented by each, until the principal of all Senior
Debt, interest (including Accrued Bankruptcy Interest) thereon and all other
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Obligations with respect thereto have been paid in full and all outstanding
Letter of Credit Obligations and applicable Hedging Obligations have been fully
cash collateralized. Any distribution to the holders of Senior Debt or their
Representatives of assets other than cash may be held by such holders or such
Representatives as additional collateral without any duty to the Holder to
liquidate or otherwise realize on such assets or to apply such assets to any
Senior Debt or other Obligations relating thereto.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall in good faith mistakenly pay over or distribute to or on behalf of
Holders or any Obligor or any other Person money or assets to which any holders
of Senior Debt shall be entitled by virtue of this Article 10, except if such
payment is made as a result of the willful misconduct or gross negligence of the
Trustee. Nothing in this Section 10.6 shall affect the obligation of any Person
other than the Trustee to hold such payment or distribution for the benefit of,
and to pay or deliver such payment or distribution over to, the holders of
Senior Debt or their Representatives.
Section 10.7. Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent of any
facts known to the Company that would cause a payment of any Obligations with
respect to the Notes or Guarantees to violate this Article, but failure to give
such notice shall not affect the subordination of the Notes and the Guarantees
to the Senior Debt as provided in this Article.
Section 10.8. Subrogation.
After all Senior Debt is paid in full and until the Notes are paid in full,
Holders shall be subrogated (equally and ratably with all other Indebtedness
pari passu with the Notes and Guarantees) to the rights of holders of Senior
Debt to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Debt. A distribution made under this Article to holders of Senior
Debt that otherwise would have been made to Holders is not, as between the
Obligors and Holders, a payment by any Obligor on the Notes or the Guarantees.
Section 10.9. Relative Rights.
This Article 10 defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Article 10 shall:
(a) impair, as between the Obligors and Holders, the obligation of the
Obligors, which is absolute and unconditional, to pay principal of and interest,
including Liquidated Damages, if any, on the Notes and the Guarantees in
accordance with their terms;
(b) affect the relative rights of Holders and creditors of the Obligors
other than their rights in relation to holders of Senior Debt; or
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(c) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of holders
and owners of Senior Debt to receive distributions and payments otherwise
payable to Holders.
If any Obligor fails because of this Article to pay principal of or
interest, including Liquidated Damages, if any, on a Note or Guaranty on the due
date, the failure is still a Default or Event of Default.
Section 10.10. Subordination May Not Be Impaired by Obligors.
No right of any present or future holder of Senior Debt to enforce the
subordination of the Indebtedness evidenced by the Notes and the Guarantees
shall be impaired by any act or failure to act by any Obligor or any Holder of
Notes and Guarantees or any holder of Senior Debt or by the failure of any
Obligor or any Holder of Notes and Guarantees or any holder of Senior Debt to
comply with this Indenture regardless of any knowledge thereof that any such
Holder of Notes or holder of Senior Debt, as the case may be, may have or be
otherwise charged with. The holders of Senior Debt may extend, renew, restate,
supplement, modify or amend the terms of the Senior Debt or any Obligations with
respect thereto or any security therefor and release, sell or exchange such
security and otherwise deal freely with any Obligor and its Subsidiaries and
Affiliates all without affecting the liabilities and obligations of the parties
to this Indenture or the Holders. No provision in any supplemental indenture
that adversely affects the subordination of the Notes and Guarantees or other
provisions of this Article 10 shall be effective against the holders of the
Designated Senior Debt unless the requisite percentage of such holders have
consented thereto.
Each Holder of the Notes and Guarantees by its acceptance thereof: (a)
acknowledges and agrees that the holders of any Senior Debt or their
Representative, in its or their discretion, and without affecting any rights of
any holder of Senior Debt under this Article 10, may foreclose any mortgage or
deed of trust covering interest in real property securing such Senior Debt or
any guarantee thereof by judicial or nonjudicial sale, even though such action
may release an Obligor or any guarantor of such Senior Debt from further
liability under such Senior Debt or any guarantee thereof or may otherwise limit
the remedies available to the holders thereof; and (b) hereby waives any defense
that such Holder may otherwise have to the enforcement of this Article 10 by any
holder of any Senior Debt or any Representative of such holder against such
Holder after or as a result of any action, including any such defense based on
any loss or impairment of rights of subrogation.
If at any time any payment of Obligations with respect to any Senior Debt
is rescinded or must otherwise be returned upon the insolvency, bankruptcy,
reorganization or liquidation of any Obligor or otherwise, the provisions of
this Article 10 shall continue to be effective or reinstated, as the case may
be, to the same extent as though such payments had not been made.
Section 10.11. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of any Obligor referred to in
this Article 10, the Trustee and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and
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other Indebtedness of such Obligor, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10.
Subject to the provisions of Section 7.1, the Trustee shall be entitled to
rely on the delivery to it of a written notice by a Person representing himself
to be a holder of Senior Debt (or a trustee or agent on behalf of such holder)
to establish that such notice has been given by a holder of Senior Debt (or a
trustee or agent on behalf of any such holder). In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any Person as a holder of Senior Debt to participate in any payment or
distribution pursuant to this Article 10, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Debt held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and any other facts pertinent to
the rights of such Person under this Article 10, and if such evidence is not
furnished, the Trustee may defer any payment which it may be required to make
for the benefit of such Person pursuant to the terms of this Indenture pending
judicial determination as to the rights of such Person to receive such payment.
Section 10.12. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment or distribution by
the Trustee, and the Trustee and the Paying Agent may continue to make payments
on the Notes and Guarantees, unless a Responsible Officer of the Trustee shall
have received at its Corporate Trust Office at least two Business Days prior to
the date of such payment written notice of facts that would cause the payment of
any Obligations with respect to the Notes and Guarantees to violate this
Article. Only the Company or a Representative may give the notice. Nothing in
this Article 10 shall impair the claims of, or payments to, the Trustee under or
pursuant to Section 7.7 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
Section 10.13. Authorization to Effect Subordination.
Each Holder of a Note by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for
any and all such purposes.
Each Obligor, the Trustee and each Holder by their acceptance of the Notes
acknowledge that damages would be inadequate to compensate the holders of Senior
Debt for any breach or default by any Obligor, the Trustee or any such Holder of
its obligations under this Article 10, and, therefore, agree that the holders of
Senior Debt and their Representatives shall be entitled to equitable relief,
including injunctive relief and specific performance, in the enforcement
thereof.
Section 10.14. Amendments.
(a) The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt unless such
amendment or modification does not adversely affect the holders of such Senior
Debt.
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(b) Without the consents of the Holders of at least 66 2/3% in principal
amount of the Notes then outstanding, no Obligor will amend, modify or
alter the terms of any indebtedness subordinated to the Notes or the
Guarantees in any way that will (i) increase the rate of or change the time
for payment of interest on any indebtedness subordinated to the Notes, (ii)
increase the principal of, advance the final maturity date of or shorten
the Weighted Average Life to Maturity of any such subordinated
indebtedness, (iii) alter the redemption provisions or the price or terms
at which the Company is required to offer to purchase such subordinated
indebtedness or (iv) amend the subordination provisions of any documents,
instruments or agreements governing any such subordinated indebtedness,
except to the extent that any of the foregoing would be required to permit
any Obligor to make a Restricted Payment permitted by Section 4.7 hereof.
Section 10.15. Notes are Pari Passu with the 9 1/2% Notes.
The Obligations in respect of the Notes and the Guarantees are on a parity
with the Obligations in respect of the 9 1/2% Notes and the guarantees thereof
in right of payment.
ARTICLE 11.
MISCELLANEOUS
Section 11.1. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S) 318(c) , the imposed duties shall control.
Section 11.2. Notices.
Any notice or communication by the Company, any Guarantor or the Trustee to
the other is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telecopier or
overnight air courier guaranteeing next day delivery, to the other's address:
If to the Company and/or any Guarantor:
Hollywood Park, Inc.
1050 South Prairie Avenue
P.O. Box 369
Inglewood, CA 90306-0369
Telecopier No.: 310/673-2582
Attention: G. Michael Finnigan
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Telecopier No.: 310/203-7199
Attention: Alvin G. Segel, Esq.
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If to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Telecopier No.: (212) 815-5915
Attention: Corporate Trust Administration
Either the Company, any Guarantor or the Trustee, by notice to the other
may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt is acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class mail
or by overnight air courier guaranteeing next day delivery to its address shown
on the register kept by the Registrar. Any notice or communication shall also
be so mailed to any Person described in TIA (S) 313(c), to the extent required
by the TIA. Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
Section 11.3. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, any
Guarantor, the Trustee, the Registrar and anyone else shall have the protection
of TIA (S) 312(c).
Section 11.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, except the initial authentication and delivery of
the Notes on the Issue Date, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 11.5
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 11.5
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied. Such counsel may rely on
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representations, warranties and certificates of other Persons as to matters of
fact, and may qualify the Opinion of Counsel with customary assumptions and
exceptions.
Section 11.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided in this Indenture (other than a certificate provided pursuant
to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S) 314(e) and
shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
Section 11.6. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 11.7. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, agent, manager,
partner, member, incorporator or stockholder of any Obligor, in such capacity,
will have any liability for any obligations of any Obligor under the Notes, this
Indenture or the Guarantees or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes and the Guarantees.
Section 11.8. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE NOTES, AND THE GUARANTEES WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 11.9. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of any Obligor or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
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Section 11.10. Successors.
All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of each Guarantor in this Indenture shall bind
its successors, except as otherwise provided in Section 10.5. All agreements of
the Trustee in this Indenture shall bind its successors.
Section 11.11. Severability.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 11.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
ARTICLE 12.
GUARANTY
Section 12.1. The Guaranty.
Each Guarantor hereby absolutely and unconditionally, jointly and severally
Guarantees and promises to pay to each Holder and the Trustee (each a
"Beneficiary"), as their respective interests appear, on demand, in lawful money
of the United States of America, any and all Guaranteed Obligations of the
Company from time to time owed to the Beneficiaries. The term "Guaranteed
Obligations" means any and all present and future obligations and liabilities of
the Company of every type and description to the Beneficiaries under this
Indenture, the Notes and the Registration Rights Agreement, whether for
principal, premium (if any), interest, expenses, indemnities or other amounts,
in each case whether due or not due, absolute or contingent, voluntary or
involuntary, liquidated or unliquidated, determined or undetermined, now or
hereafter existing, renewed or restructured, whether or not from time to time
decreased or extinguished and later increased, created or incurred, whether or
not arising after the commencement of a proceeding under Bankruptcy Law
(including post-petition interest) and whether or not allowed or allowable as a
claim in any such proceeding, and whether or not recovery of any such obligation
or liability may be barred by a statute of limitations or such obligation or
liability may otherwise be unenforceable. All Guaranteed Obligations shall be
conclusively presumed to have been created in reliance on this Guaranty. This
Guaranty is a continuing guaranty of the Guaranteed Obligations and, except as
otherwise provided in Section 9.2 or 12.10, may not be revoked and shall not
otherwise terminate unless and until any and all Guaranteed Obligations have
been indefeasibly paid and performed in full. Failing payment when due of any
Guaranteed Obligation or any performance of any Guaranteed Obligation for
whatever reason, the Guarantors shall be jointly and severally obligated to pay
or perform the same immediately. Each Guarantor agrees that this is a guarantee
of payment and not a guarantee of collection.
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The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
covenants that this Guaranty shall not be discharged except by complete
performance of the obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Guaranty, to the extent theretofore discharged, shall be reinstated in full
force and effect.
Each Guarantor further agrees that, as between the Guarantors, on the one
hand, and the Holders and the Trustee, on the other hand, (x) the maturity of
the obligations guaranteed hereby may be accelerated as provided in Article 6
hereof for the purposes of this Guaranty, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6 hereof, such obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Guaranty.
Section 12.2. Nature of Guaranty.
The liability of each Guarantor under this Guaranty is independent of and
not in consideration of or contingent upon the liability of the Company or any
other Obligor and a separate action or actions may be brought and prosecuted
against any Guarantor, whether or not any action is brought or prosecuted
against the Company or any other Obligor or whether the Company or any other
Obligor is joined in any such action or actions. This Guaranty given by each
Guarantor shall be construed as a continuing, absolute and unconditional
guaranty of payment (and not merely of collection) without regard to:
(a) the legality, validity or enforceability of the Notes, this Indenture
or any of the Guaranteed Obligations, or the Guaranty given by any other
Guarantor (an "Other Guaranty");
(b) any defense (other than payment), set-off or counterclaim that may at
any time be available to the Company or any other Obligor against, and any right
of set-off at any time held by, any Beneficiary; or
(c) any other circumstance whatsoever (with or without notice to or
knowledge of any Guarantor or any other Obligor), whether or not similar to any
of the foregoing, that constitutes, or might be construed to constitute, an
equitable or legal discharge of the Company or any other Obligor, in bankruptcy
or in any other instance.
Any payment by any Obligor or other circumstance that operates to toll any
statute of limitations applicable to such Obligor shall also operate to toll the
statute of limitations applicable to each Guarantor.
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Section 12.3. Authorization.
Each Guarantor authorizes each Beneficiary, without notice to or further
assent by such Guarantor, and without affecting any Guarantor's liability
hereunder (regardless of whether any subrogation or similar right that such
Guarantor may have or any other right or remedy of such Guarantor is
extinguished or impaired or the risk to such Guarantor is materially increased),
from time to time to do any or all of the following:
(a) permit the Company to increase or create Guaranteed Obligations
(including by issuing Series B Notes), or terminate, release, compromise,
subordinate, extend, accelerate or otherwise change the amount or time, manner
or place of payment of, or rescind any demand for payment or acceleration of,
the Guaranteed Obligations or any part thereof, consent or enter into
supplemental indentures or otherwise amend the terms and conditions of this
Indenture, the Notes or the Registration Rights Agreement or any provision
thereof;
(b) take and hold collateral security from the Company or any other
Person, perfect or refrain from perfecting a Lien on any such collateral
security, and exchange, enforce, subordinate, release (whether intentionally or
unintentionally), or take or fail to take any other action in respect of, any
such collateral security or Lien or any part thereof;
(c) exercise in such manner and order as it elects in its sole discretion,
fail to exercise, waive, suspend, terminate or suffer expiration of, any of the
remedies or rights of such Beneficiary against the Company or any other Obligor
in respect of any Guaranteed Obligations or any collateral security;
(d) release, add or settle with any Obligor in respect of the Guaranty or
the Guaranteed Obligations;
(e) accept partial payments on the Guaranteed Obligations and apply any
and all payments or recoveries from such Obligor or collateral security to such
of the Guaranteed Obligations as any Beneficiary may elect in its sole
discretion, whether or not such Guaranteed Obligations are secured or entitled
to the benefits of Support Obligations;
(f) refund at any time, at such Beneficiary's sole discretion, any
payments or recoveries received by such Beneficiary in respect of any Guaranteed
Obligations or collateral security; and
(g) otherwise deal with the Company, any other Obligor and any collateral
security as such Beneficiary may elect in its sole discretion.
Section 12.4. Certain Waivers.
Each Guarantor waives:
(a) the right to require the Beneficiaries to proceed against the Company
or any other Obligor, to proceed against or exhaust any collateral security or
to pursue any other remedy in any Beneficiary's power whatsoever and the right
to have the property of the Company or any other Obligor first applied to the
discharge of the Guaranteed Obligations;
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(b) all rights and benefits under applicable law purporting to reduce a
guarantor's obligations in proportion to the obligation of the principal or
providing that the obligation of a surety or guarantor must neither be larger
nor in other respects more burdensome than that of the principal;
(c) the benefit of any statute of limitations affecting the Guaranteed
Obligations or any Guarantor's liability hereunder;
(d) any requirement of marshaling or any other principle of election of
remedies;
(e) any right to assert against any Beneficiary any defense (legal or
equitable), set-off, counterclaim and other right that any Guarantor may
now or any time hereafter have against the Company or any other Obligor;
(f) presentment, demand for payment or performance (including diligence in
making demands hereunder), notice of dishonor or nonperformance, protest,
acceptance and notice of acceptance of this Guaranty, filing of claims with
a court in the event of insolvency or bankruptcy of the Company and, except
to the extent expressly required by this Indenture, the Notes or the
Registration Rights Agreement, all other notices of any kind, including (i)
notice of any action taken or omitted by the Beneficiaries in reliance
hereon, (ii) notice of any default by the Company or any other Obligor,
(iii) notice that any portion of the Guaranteed Obligations is due, (iv)
notice of any action against the Company or any other Obligor, or any
enforcement of other action with respect to any collateral security, or the
assertion of any right of any Beneficiary hereunder; and
(g) all defenses that at any time may be available to any Guarantor by
virtue of any valuation, stay, moratorium or other law now or hereafter in
effect.
Section 12.5. No Subrogation; Certain Agreements.
(a) EACH GUARANTOR WAIVES ANY AND ALL RIGHTS OF SUBROGATION, INDEMNITY OR
REIMBURSEMENT, AND ANY AND ALL BENEFITS OF AND RIGHTS TO ENFORCE ANY POWER,
RIGHT OR REMEDY THAT ANY BENEFICIARY MAY NOW OR HEREAFTER HAVE IN RESPECT
OF THE GUARANTEED OBLIGATIONS AGAINST THE COMPANY OR OTHER OBLIGOR (OTHER
THAN RIGHTS OF CONTRIBUTION FROM OTHER GUARANTORS), ANY AND ALL BENEFITS OF
AND RIGHTS TO PARTICIPATE IN ANY COLLATERAL, WHETHER REAL OR PERSONAL
PROPERTY, NOW OR HEREAFTER HELD BY ANY BENEFICIARY, AND ANY AND ALL OTHER
RIGHTS AND CLAIMS (WITHIN THE MEANING OF APPLICABLE BANKRUPTCY LAW) ANY
GUARANTOR MAY HAVE AGAINST THE COMPANY, UNDER APPLICABLE LAW OR OTHERWISE,
AT LAW OR IN EQUITY, BY REASON OF ANY PAYMENT UNDER THE GUARANTY, WHETHER
OR NOT THE GUARANTEED OBLIGATIONS SHALL HAVE BEEN PAID IN FULL.
(b) Each Guarantor assumes the responsibility for being and keeping itself
informed of the financial condition of each other Obligor and of all other
circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations that diligent inquiry would reveal, and agrees that the
Beneficiaries shall have no duty to advise any Guarantor of information
regarding such condition or any such circumstances.
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Section 12.6. Bankruptcy No Discharge.
(a) Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Guaranty of
such Guarantor not constitute a fraudulent transfer or conveyance for
purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Guaranty. To effectuate the foregoing intention,
the Trustee, the Holders and the Guarantors hereby irrevocably agree that
the obligations of such Guarantor will, after giving effect to such maximum
amount and all other contingent and fixed liabilities of such Guarantor
that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by
or on behalf of any other Guarantor in respect of the obligations of such
other Guarantor under this Article 12, result in the obligations of such
Guarantor under its Guaranty not constituting a fraudulent transfer or
conveyance.
(b) Without limiting Section 12.2, the Guaranty shall not be discharged or
otherwise affected by any bankruptcy, reorganization or similar proceeding
commenced by or against the Company or any other Obligor, including (i) any
discharge of, or bar or stay against collecting, all or any part of the
Guaranteed Obligations in or as a result of any such proceeding, whether or
not assented to by any Beneficiary, (ii) any disallowance of all or any
portion of any Beneficiary's claim for repayment of the Guaranteed
Obligations, (iii) any use of cash or other collateral in any such
proceeding, (iv) any agreement or stipulation as to adequate protection in
any such proceeding, (v) any failure by any Beneficiary to file or enforce
a claim against the Company or any other Obligor or its estate in any
bankruptcy or reorganization case, (vi) any amendment, modification, stay
or cure of any Beneficiary's rights that may occur in any such proceeding,
(vii) any election by any Beneficiary under Section 1111(b)(2) of the
Bankruptcy Code, or (viii) any borrowing or grant of a Lien under Section
364 of the Bankruptcy Code. Each Guarantor understands and acknowledges
that by virtue of this Guaranty, it has specifically assumed any and all
risks of any such proceeding with respect to the Company and each other
Obligor.
(c) Notwithstanding anything in this Article Twelve to the contrary, any
Event of Default under Section 6.1(f) or (g) of this Indenture shall render all
Guaranteed Obligations automatically due and payable for purposes of the
Guaranty, without demand on the part of the Trustee or any Holder.
(d) Notwithstanding anything to the contrary herein contained, the
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment, or any part thereof, of any or all of the Guaranteed
Obligations is rescinded, invalidated, declared to be fraudulent or preferential
or otherwise required to be restored or returned by any Beneficiary in
connection with any bankruptcy, reorganization or similar proceeding involving
the Company, any other Obligor or otherwise, if the proceeds of any collateral
security are required to be returned by such Beneficiary under any such
circumstances, or if any Beneficiary elects to return any such payment or
proceeds or any part thereof in its sole discretion, all as though such payment
had not been made or such proceeds not been received.
Section 12.7. Execution and Delivery of Guaranty.
To evidence its Guaranty set forth in Section 12.1, each Guarantor hereby
agrees that a notation of such Guaranty substantially in the form included in
Exhibit D shall be endorsed by an Officer of such Guarantor on each Note
authenticated and delivered by the Trustee and that this Indenture shall be
executed on behalf of such Guarantor by its President, Chief Financial Officer
or one of its Vice Presidents.
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Each Guarantor hereby agrees that its Guaranty set forth in Section 12.1
shall remain in full force and effect notwithstanding any failure to endorse on
each Note a notation of such Guaranty.
If an Officer whose signature is on this Indenture or on the Guaranty no
longer holds that office at the time the Trustee authenticates the Note on which
a Guaranty is endorsed, the Guaranty shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Guaranty set forth in this
Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.16 hereof,
the Company shall cause such Subsidiaries to execute supplemental indentures to
this Indenture and Guaranty in accordance with Section 4.16 hereof and this
Article 12, to the extent applicable.
Section 12.8. Severability of Void Guaranteed Obligations Under Guaranty.
The obligations of any Guarantor hereunder shall be limited to the maximum
amount that would not render its obligations hereunder subject to avoidance
under Section 548 of the Bankruptcy Code or any applicable provisions of other
Bankruptcy Law or comparable state law.
Section 12.9. Right of Contribution.
In order to provide for just and equitable contribution among the
Guarantors in connection with the Guaranty, the Guarantors have agreed among
themselves that if any Guarantor satisfies some or all of the Guaranteed
Obligations (a "Funding Guarantor"), the Funding Guarantor shall be entitled to
contribution from the other Guarantors that have positive Maximum Net Worth (as
defined below) for all payments made by the Funding Guarantor in satisfying the
Guaranteed Obligations, so that each Guarantor that remains obligated under the
Guaranty at the time that a Funding Guarantor makes such payment (a "Remaining
Guarantor") and has a positive Maximum Net Worth shall bear a portion of such
payment equal to the percentage that such Remaining Guarantor's Maximum Net
Worth bears to the aggregate Maximum Net Worth of all Remaining Guarantors that
have positive Maximum Net Worth.
As used herein, "Net Worth" means, with respect to any Guarantor, the
amount, as of any date of calculation, by which the sum of a Person's assets
(including subrogation, indemnity, contribution, reimbursement and similar
rights that such Guarantor may have notwithstanding Section 12.5), determined on
the basis of a "fair valuation" or their "fair salable value" (whichever is the
applicable test under Section 548 and other relevant provisions of the
Bankruptcy Code or other Bankruptcy Law and the relevant state fraudulent
conveyance or transfer laws) is greater than the amount that will be required to
pay all of such Person's debts, in each case matured or unmatured, contingent or
otherwise, as of the date of calculation, but excluding liabilities arising
under the Guaranty and excluding, to the maximum extent permitted by applicable
law with the objective of avoiding rendering such Person insolvent, liabilities
subordinated to the Guaranteed Obligations arising out of loans or advances made
to such Person by any other Person. "Maximum Net Worth" means, with respect to
any Guarantor, the greatest of the Net Worths calculated as of the following
dates: (A) the date on which the Guarantor becomes a Guarantor hereunder, (B)
the date on which such Guarantor expressly reaffirms the Guaranty, (C) the date
on which demand for payment is made on such Guarantor hereunder, (D) the date on
which payment is made by such Guarantor hereunder or (E) the date on which any
judgment, order or decree is entered requiring such Guarantor to make payment
hereunder or in respect hereof. The meaning of the terms
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"fair valuation" and "fair salable value" and the calculation of assets and
liabilities shall be determined and made in accordance with the relevant
provisions of the Bankruptcy Code, other Bankruptcy Law and applicable state
fraudulent conveyance or transfer laws.
Section 12.10. Additional Guarantors.
Each Subsidiary that executes and delivers to the Trustee from time to time
an Addendum to Guaranty after the Issue Date shall, from and after the date of
such execution and delivery, be a Guarantor with the same effect as if such
Subsidiary had been a signatory to this Indenture, and no such Addendum to
Guaranty must be executed and delivered by any other Obligors. Each Obligor
hereby consents to the execution, delivery and effectiveness of any such
Addendum, whether or not it receives notice thereof. Subject to compliance with
applicable Gaming Laws, each Person that becomes a Material Restricted
Subsidiary of the Company after the date hereof shall automatically be deemed to
be a Guarantor for all purposes of this Indenture, notwithstanding any such
Material Restricted Subsidiary's failure to execute and deliver an Addendum to
Guaranty as required by Section 4.16 hereof.
Section 12.11. Release of a Guarantor.
Upon either (a) the designation of a Guarantor as an Unrestricted
Subsidiary in accordance with the provisions of this Indenture or (b) the
substitution of a successor Person for any Guarantor as contemplated by Section
5.2 hereof, such Guarantor shall be released from, and thereupon cease to have
or accrue any further liability under, its Guaranty. Upon receipt of an
Officers' Certificate and Opinion of Counsel as to compliance with this Section
12.11 and, if applicable, the definition of "Unrestricted Subsidiary", the
Trustee shall deliver to the Company an appropriate instrument evidencing such
release.
[Signatures on following pages]
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SIGNATURES
THE ISSUER
----------
Dated as of February 18, 1999 HOLLYWOOD PARK, INC.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
THE GUARANTORS
--------------
BAY ST. LOUIS CASINO CORP.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
BAYVIEW YACHT CLUB, INC.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
BILOXI CASINO CORP.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
BOOMTOWN HOOSIER, INC.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
BOOMTOWN HOTEL & CASINO, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
S-1
<PAGE>
BOOMTOWN, INC.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
CASINO MAGIC AMERICAN CORP.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
CASINO MAGIC CORP.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
CASINO MAGIC FINANCE CORP.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
CASINO ONE CORPORATION
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
CRYSTAL PARK HOTEL & CASINO DEVELOPMENT
COMPANY, LLC
By its Manager
HP/COMPTON, INC.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
S-2
<PAGE>
HOLLYWOOD PARK FALL OPERATING COMPANY
By: /s/ G. Michael Finnigan
----------------------------
Name: G. Michael Finnigan
Title: Executive Vice President
HOLLYWOOD PARK FOOD SERVICES, INC.
By: /s/ G. Michael Finnigan
----------------------------
Name: G. Michael Finnigan
Title: Executive Vice President
HOLLYWOOD PARK OPERATING COMPANY
By: /s/ G. Michael Finnigan
----------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HP CASINO, INC.
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Chief Financial Officer
HP/COMPTON, INC.
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HP YAKAMA, INC.
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Vice President
S-3
<PAGE>
HP YAKAMA CONSULTING, INC.
By: /s/ G. Michael Finnigan
----------------------------
Name: G. Michael Finnigan
Title: Vice President
INDIANA VENTURES LLC
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Vice President
LOUISIANA GAMING ENTERPRISES, INC.
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
LOUISIANA-I GAMING, A LOUISIANA
PARTNERSHIP IN COMMENDAM
By its General Partner
LOUISIANA GAMING ENTERPRISES, INC.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
MARDI GRAS CASINO CORP.
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Vice President
MISSISSIPPI I-GAMING, L.P.
By its General Partner
BAYVIEW YACHT CLUB, INC.
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Vice President
S-4
<PAGE>
PINNACLE GAMING DEVELOPMENT CORP.
By: /s/ G. Michael Finnigan
-------------------------------
Name: G. Michael Finnigan
Title: President
SWITZERLAND COUNTY DEVELOPMENT CORP.
By: /s/ G. Michael Finnigan
-------------------------------
Name: G. Michael Finnigan
Title: Vice President
TURF PARADISE, INC.
By: /s/ G. Michael Finnigan
-------------------------------
Name: G. Michael Finnigan
Title: Vice President
THE TRUSTEE
-----------
Dated as of February 18, 1999 THE BANK OF NEW YORK,
By: /s/ Thomas C. Knight
------------------------
Name: Thomas C. Knight
Title: Assistant Vice President
S-5
<PAGE>
Exhibit A
(Face of Note)
CUSIP NO. _______
[Series A] [Series B] 9 1/4% Senior Subordinated Notes due 2007
No. _____ $__________
HOLLYWOOD PARK, INC.
promises to pay to___________________________________________________________
or registered assigns,
the principal sum of_________________________________________________________
Dollars on February 15, 2007.
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
Dated as of February 18, 1999
THE ISSUER
----------
HOLLYWOOD PARK, INC.
By: _____________________
Name:
Title:
Dated: ________________________
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
THE BANK OF NEW YORK,
as Trustee
By: ______________________________
Authorized Signatory
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<PAGE>
[Back of Note]
[Series A] [Series B] 9 1/4% Senior Subordinated Notes due 2007
["THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.7 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED
IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.6(a) OF THE INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (iv) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."]/1/
[THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT), IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE.]/2/
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
- --------------------------------
/1/ To be included only if the Note is issued in Global form.
/2/ This legend should be included on the Series A Notes and omitted from the
Series B Notes.
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<PAGE>
1. Interest. Hollywood Park, Inc., a Delaware corporation (the "Company")
promises (i) to pay interest on the principal amount of this Note at 9 1/4% per
annum, accruing from the Issue Date until maturity and (ii) to pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually in arrears on February 15 and August 15 of each year, or
if any such day is not a Business Day, on the next succeeding Business Day (each
an "Interest Payment Date"). Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be August 15, 1999. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months. Upon consummation of the
Exchange Offer, the Series A Notes accepted for exchange shall cease to accrue
interest, and all accrued and unpaid interest thereon shall, subject to the
provisions of Article 3, 4 and 6 of the Indenture, be payable on the first
Interest Payment Date for the Series B Notes, and interest on the Series B Notes
shall accrue from the date of consummation of the Exchange Offer.
2. Method of Payment. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on February 1 or August 1 next
preceding the Interest Payment Date, even if such Notes are canceled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes will
be payable as to principal, premium, interest and Liquidated Damages, if any, at
the office or agency of the Company maintained for such purpose within or
without the City and State of New York, or, at the option of the Company,
payment of interest and Liquidated Damages may be made by check mailed to the
Holders at their addresses set forth in the register of Holders; provided that
payment by wire transfer of immediately available funds will be required with
respect to principal of and interest, premium and Liquidated Damages on, all
Global Notes and all other Notes the Holders of which shall have provided wire
transfer instructions to the Company or the Paying Agent. Such payment shall be
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company or any of its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated as of
February 18, 1999 (the "Indenture") among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of
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<PAGE>
the Indenture shall govern and be controlling. The Notes are obligations of the
Company limited to $350 million in aggregate principal amount.
5. Optional Redemption. The Company shall have the option to redeem the
Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed as percentages of the principal amount
thereof) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on February 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003.............................. 104.625%
2004.............................. 103.083%
2005.............................. 101.542%
2006 and thereafter............... 100.000%
</TABLE>
Notwithstanding the foregoing, (a) the Company may, during the first 36
months after the Issue Date, redeem up to 25% of the initially outstanding
aggregate principal amount of Notes with the net cash proceeds of one or more
Public Equity Offerings of the common stock of the Company at a redemption price
in cash of 109.25% of the aggregate principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date;
provided that at least 75% of the initially outstanding aggregate principal
amount of Notes remains outstanding immediately after the occurrence of such
redemption; and provided, further, that written notice of any such redemption
shall be given by the Company to the Holders and the Trustee within 15 days
after the consummation of any such Public Equity Offering and redemption shall
occur within 60 days after the date of such notice and (b) if any Gaming
Authority requires that a Holder or beneficial owner of Notes must be licensed,
qualified or found suitable under any applicable Gaming Law and such Holder or
beneficial owner (i) fails to apply for a license, qualification or a finding of
suitability within 30 days (or such shorter period as may be required by the
applicable Gaming Authority) after being requested to do so by the Gaming
Authority or (ii) is denied such license or qualification or not found suitable,
the Company shall have the right, at its option, (A) to require such Holder or
beneficial owner to dispose of its Notes within 30 days (or such earlier date as
may be required by the applicable Gaming Authority) of receipt of such notice or
finding by such Gaming Authority or (B) to call for the redemption of the Notes
of such Holder or beneficial owner at a redemption price equal to the least of
(x) the principal amount thereof, (y) the price at which such Holder or
beneficial owner acquired the Notes, in either case, together with, accrued
interest and Liquidated Damages, if any, to the earlier of the date of
redemption or the date of the denial of license or qualification or of the
finding of unsuitability by such Gaming Authority or (z) such other lesser
amount as may be required by any Gaming Authority. The Company shall notify the
Trustee in writing of any such redemption as soon as practicable. The Holder or
beneficial owner applying for license, qualification or a finding of suitability
must pay all costs of the licensure or investigation for such qualification or
finding of suitability.
6. Mandatory Redemption. Except as set forth in paragraph 7 below, the
Company shall not be required to make mandatory redemption payments with respect
to the Notes.
7. Repurchase at Option of Holders.
(a) Upon the occurrence of a Change of Control, each Holder will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of
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<PAGE>
such Holder's Notes pursuant to the offer described below (the "Change of
Control Offer") at an offer price in cash (the "Change in Control Payment")
equal to 101% of the aggregate principal amount of Notes, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of
repurchase. Within 30 days following any Change of Control, the Company will
mail a notice to each Holder describing the transactions or transactions that
constitute the Change of Control and offering to repurchase Notes on the date
specified in such notice, which date shall be no earlier than 30 days from the
date such notice is mailed (the "Change of Control Payment Date"), pursuant to
the procedures required by this Indenture and described in such notice.
(b) If the Company or a Subsidiary consummates any Asset Sales and
the aggregate amount of Net Proceeds Offer Amount exceeds $10 million, the
Company shall commence an offer to all Holders of Notes (as "Net Proceeds
Offer") pursuant to Section 3.9 of the Indenture to purchase the maximum
principal amount of Notes that may be purchased out of the Net Proceeds Offer
Amount at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date fixed for
the closing of such offer, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of Notes tendered pursuant to
a Net Proceeds Offer is less than the Net Proceeds Offer Amount, the Company (or
such Subsidiary) may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Net Proceeds Offer Amount, the Trustee shall select the Notes to be
purchased on a pro rata basis. Holders of Notes that are the subject of an offer
to purchase will receive an Net Proceeds Offer from the Company prior to any
related purchase date and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes.
8. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be treated
as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture, the Guarantees or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes voting as a single class, and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes, voting as a single class.
A-5
<PAGE>
Without the consent of any Holder of a Note, the Indenture or the Notes may be
amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
the Notes in case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of the Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder, or to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
12. Defaults and Remedies. Events of Default include: (i) default for 30
days in the payment when due of interest on or Liquidated Damages with respect
to the Notes or the Guarantees; (ii) default in payment when due of principal of
or premium, if any, on the Notes or the Guarantees when the same becomes due and
payable at maturity, upon acceleration, redemption (including in connection with
an offer to purchase) or otherwise, (iii) failure by any Obligor for 60 days
after notice to the Company by the Trustee or the Holders of at least 25% in
principal amount of the Notes then outstanding to comply with certain agreements
in the Indenture or the Notes; (iv) default under certain other agreements
relating to Indebtedness of the Obligors which default results in the
acceleration of such Indebtedness prior to its express maturity; (v) certain
final judgments for the payment of money that remain undischarged for a period
of 60 days; and (vi) certain events of bankruptcy or insolvency. If any Event
of Default occurs and is continuing, the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Notes may declare all the Notes to
be due and payable. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy, insolvency or cross-
acceleration, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest. The
Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes. The Company are required to
deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company are required upon becoming aware of any Default or
Event of Default to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. Subordination of Notes and Guarantees. The Indebtedness evidenced by
this Note and the Guarantees in respect hereof is, to the extent and in the
manner provided in the Indenture, subordinate in right of payment to the prior
payment in full of all Senior Debt and subject to the other subordination
provisions set forth in Article 10 of the Indenture. The Holder of this Note, by
its acceptance hereof, (a) agrees to be bound by such provisions, (b) authorizes
and directs the Trustee, on behalf of such Holder, to take such action as may be
necessary to or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for the
purpose of taking any such action in the name of the Holder.
14. Trustee Dealings with Obligors. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Obligors or their Affiliates, and may otherwise deal with the Obligors
or their Affiliates, as if it were not the Trustee.
A-6
<PAGE>
15. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company or any of the Guarantors, as such,
shall not have any liability for any obligations of the Company or such
Guarantor under the Notes, the Guarantees or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
16, Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17, Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18, Additional Rights of Holders of Restricted Global Notes and Restricted
Definitive Notes. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have all the rights set forth in the Registration Rights Agreement
dated as of February 18, 1999, among the Company, the Guarantors and the Initial
Purchasers (the "Registration Rights Agreement").
19, CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Assistant Treasurer
Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
Telephone: 301-419-1609
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THE NOTES AND THE INDENTURE.
A-7
<PAGE>
Assignment Form
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:___________________________________
(Insert assignee's legal name)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:_______________
Your Signature:_______________________________
(Sign exactly as your name appears on the face
of this Note)
Signature Guarantee*:______________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.9 or 4.12 of the Indenture, check the appropriate box below:
[ ] Section 4.9 [ ] Section 4.12
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.9 or Section 4.12 of the Indenture, state the
amount you elect to have purchased:
$_________________
Date:____________
Your Signature:___________________________________
(Sign exactly as your name appears on the face
of this Note)
Tax Identification No.:___________________________
Signature Guarantee*:____________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-9
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Principal Amount
Amount of decrease Amount of increase of Signature of
in in this Global Note authorized officer
Principal Amount Principal Amount following such of
of of decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ------------------- -------------------- -------------------- ---------------------- -------------------
</TABLE>
* This schedule should be included only if the Note is issued in global form.
A-10
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
[Registrar address block]
Re: 9 1/4% Senior Subordinated Notes due 2007 of Hollywood Park, Inc.
------------------------------------------------------------------
Reference is hereby made to the Indenture, dated as of February 18, 1999
(the "Indenture"), among Hollywood Park, Inc., as issuer (the "Company"), all of
the existing and future Material Restricted Subsidiaries (as defined in the
Indenture) of the Company, and The Bank of New York, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
___________________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to ___________________________ (the "Transferee"), as further specified in
Annex A hereto. In connection with the Transfer, the Transferor hereby
certifies that:
[CHECK ALL THAT APPLY]
1. [ ] Check if Transferee will take delivery of a beneficial interest in
------------------------------------------------------------------
the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer
- ---------------------------------------------------------------
is being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] Check if Transferee will take delivery of a beneficial interest in
------------------------------------------------------------------
the Regulation S Global Note or a Definitive Note pursuant to Regulation S. The
- --------------------------------------------------------------------------
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act and, (iii) the transaction is not part of a plan or
scheme to evade the registration
B-1
<PAGE>
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note and/or the
Definitive Note and in the Indenture and the Securities Act.
3. [ ] Check and complete if Transferee will take delivery of a beneficial
-------------------------------------------------------------------
interest in the IAI Global Note or a Definitive Note pursuant to any provision
- ------------------------------------------------------------------------------
of the Securities Act other than Rule 144A or Regulation S. The Transfer is
- ----------------------------------------------------------
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
-
with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a
-
subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
-
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional
-
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule
904, and the Transferor hereby further certifies that it has not engaged in
any general solicitation within the meaning of Regulation D under the
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption claimed,
which certification is supported by (1) a certificate executed by the
Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the IAI Global Note and/or the Definitive Notes and in the Indenture and
the Securities Act.
4.[ ] Check if Transferee will take delivery of a beneficial interest in
- ------------------------------------------------------------------
an Unrestricted Global Note or of an Unrestricted Definitive Note.
- -----------------------------------------------------------------
(a)[ ] Check if Transfer is pursuant to Rule 144. (i) The Transfer is
-
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the
B-2
<PAGE>
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
(b) [ ] Check if Transfer is Pursuant to Regulation S. (i) The Transfer
-
is being effected pursuant to and in accordance with Rule 903 or Rule 904 under
the Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any state of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
(c) [ ] Check if Transfer is Pursuant to Other Exemption. (i) The
-
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
___________________________________________
[Insert Name of Transferor]
By:________________________________________
Name:
Title:
Dated:_______________________
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b) ]
(a) [ ] a beneficial interest in the:
-
(i) [ ] 144A Global Note (CUSIP_________________), or
-
(ii) [ ] Regulation S Global Note (CUSIP________________), or
-
(iii) [ ] IAI Global Note (CUSIP____________________); or
-
(b) [ ] a Restricted Definitive Note.
-
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
-
(i) [ ] 144A Global Note (CUSIP________________), or
-
(ii) [ ] Regulation S Global Note (CUSIP_________________), or
-
(iii)[ ] IAI Global Note (CUSIP________________); or
-
(iv) [ ] Unrestricted Global Note (CUSIP______________); or
-
(b) [ ] a Restricted Definitive Note; or
-
(c) [ ] an Unrestricted Definitive Note,
-
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
[Registrar address block]
Re: 9 1/4% Senior Subordinated Notes due 2007 of Hollywood Park, Inc.
------------------------------------------------------------------
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of February 18, 1999
(the "Indenture"), among Hollywood Park, Inc., as issuer (the "Company"), all of
the existing and future Material Restricted Subsidiaries (as defined in the
Indenture) of the Company, and The Bank of New York, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
__________________________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
--------------------------------------------------------------------
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
- --------------------------------------------------------------------------------
in an Unrestricted Global Note
- ------------------------------
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Note to beneficial interest in an Unrestricted Global Note. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Note to Unrestricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
C-1
<PAGE>
(c) [ ] Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ] Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
------------------------------------------------------------------
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
- -------------------------------------------------------------------------------
in Restricted Global Notes
- --------------------------
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Note to Restricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) Check if Exchange is from Restricted Definitive Note to beneficial
interest in a Restricted Global Note. In connection with the Exchange of the
Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE]
[ ] 144A Global Note, [ ] Regulation S Global Note, [ ] IAI Global Note with an
equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer and (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
_____________________________________
[Insert Name of Transferor]
By:__________________________________
Name:
Title:
Dated:____________
C-3
<PAGE>
EXHIBIT D
FORM OF NOTATION OF GUARANTY
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture, dated as of February 18, 1999 (the "Indenture"),
among Hollywood Park, Inc., as issuer, all of the existing and future Material
Restricted Subsidiaries (as defined in the Indenture) of Hollywood Park, Inc.,
as Guarantors and The Bank of New York, as trustee (the "Trustee"), any and all
present and future obligations and liabilities of the Company of every type and
description to the Beneficiaries under the Indenture, the Notes and the
Registration Rights Agreement, whether for principal, premium (if any),
interest, expenses, indemnities or other amounts, in each case whether due or
not due, absolute or contingent, voluntary or involuntary, liquidated or
unliquidated, determined or undetermined, now or hereafter existing, renewed or
restructured, whether or not from time to time decreased or extinguished and
later increased, created or incurred, whether or not arising after the
commencement of a proceeding under Bankruptcy Law (including post-petition
interest) and whether or not allowed or allowable as a claim in any such
proceeding, and whether or not recovery of any such obligation or liability may
be barred by a statute of limitations or such obligation or liability may
otherwise be unenforceable. Each Holder of a Note, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee, on behalf of such Holder, to take such action as may be necessary or
appropriate to effectuate the subordination as provided in the Indenture and (c)
appoints the Trustee attorney-in-fact of such Holder for such purpose; provided,
however, that the Indebtedness evidenced by this Guaranty shall cease to be so
subordinated and subject in right of payment upon any defeasance of this Note in
accordance with the provisions of the Indenture.
BAY ST. LOUIS CASINO CORP.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
BAYVIEW YACHT CLUB, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
BILOXI CASINO CORP.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
D-1
<PAGE>
BOOMTOWN HOOSIER, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
BOOMTOWN HOTEL & CASINO, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
BOOMTOWN, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
CASINO MAGIC AMERICA CORP.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
CASINO MAGIC CORP.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
CASINO MAGIC FINANCE CORP.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
D-2
<PAGE>
CASINO ONE CORPORATION
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
CRYSTAL PARK HOTEL & CASINO
DEVELOPMENT COMPANY, LLC
By its Manager
HP/COMPTON, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HOLLYWOOD PARK FALL OPERATING COMPANY
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Executive Vice President
HOLLYWOOD PARK FOOD SERVICES, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Executive Vice President
D-3
<PAGE>
HOLLYWOOD PARK OPERATING COMPANY
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HP CASINO, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HP/COMPTON, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HP YAKAMA, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
HP YAKAMA CONSULTING, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
INDIANA VENTURES LLC
By its Managing Member
BOOMTOWN HOOSIER, INC.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
D-4
<PAGE>
LOUISIANA GAMING ENTERPRISES, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
LOUISIANA-I GAMING, A LOUISIANA
PARTNERSHIP IN COMMENDAM
By its General Partner
LOUISIANA GAMING ENTERPRISES, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
MARDI GRAS CASINO CORP.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
MISSISSIPPI I-GAMING, L.P.
BY ITS GENERAL PARTNER
BAYVIEW YACHT CLUB, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
PINNACLE GAMING DEVELOPMENT CORP.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
D-5
<PAGE>
SWITZERLAND COUNTY DEVELOPMENT CORP.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
TURF PARADISE, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
D-6
<PAGE>
SCHEDULE I
EXISTING INVESTMENTS
Schedule-1
<PAGE>
EXHIBIT 10.34
EXECUTION VERSION
HOLLYWOOD PARK, INC.
9 1/4% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
February 12, 1999
Lehman Brothers Inc.
Cibc Oppenheimer Corp.
Morgan stanley & Co. Incorporated
NationsBANC MONTGOMERY SECURITIES LLC
SG COWEN SECURITIES CORPORATION
WASSERSTEIN PERELLA SECURITIES, INC.
C/O LEHMAN BROTHERS INC.
THREE WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
DEAR SIRS:
Hollywood Park, Inc., a Delaware corporation (the "Company"), proposes
-------
to issue and sell to Lehman Brothers Inc., CIBC Oppenheimer Corp., Morgan
Stanley & Co. Incorporated, NationsBanc Montgomery Securities LLC, SG Cowen
Securities Corporation, and Wasserstein Perella Securities, Inc. (collectively,
the "Initial Purchasers"), upon the terms and conditions set forth in this
------------------
agreement ("Agreement"), $350,000,000 in aggregate principal amount of its
---------
Series A 9 1/4% Senior Subordinated Notes due 2007 (the "Series A Notes")
--------------
guaranteed (the "Series A Guarantees") by each of the Restricted Subsidiaries of
-------------------
the Company other than Hollywood Park Kansas, Inc., Sunflower Racing, Inc. and
its subsidiary SR Food & Beverage Company, Jefferson Casino Corporation and its
subsidiary Casino Magic of Louisiana, Corp., Casino Magic Neuquen S.A. and its
subsidiary Casino Magic Support Services SA, Casino Magic Management Services
Corp., St. Louis Casino Corp., Boston Casino Corp., Casino Advertising, Inc.,
Boomtown Missouri, Inc., Boomtown Council Bluffs, Inc., Boomtown Iowa, L.C., Old
River Enterprises, Blue Diamond Hotel and Casino, Inc. and Boomtown Las Vegas,
Inc. (collectively, the "Guarantors"), in minimum denominations of $1,000
----------
principal amount pursuant to the terms of an Indenture (the "Indenture") among
---------
the Company, the Guarantors and The Bank of New York, as trustee (the
"Trustee"), relating to the Series A Notes. Capitalized terms used but not
-------
defined herein shall have the meanings given to such terms in the Indenture.
The Series A Notes will be offered and sold to you pursuant to an
exemption from the registration requirements under the Securities Act of 1933,
as amended (the "Securities Act"). The Company has prepared a preliminary
--------------
offering memorandum, dated January 29, 1999 (the "Preliminary Offering
--------------------
Memorandum") and will prepare a final offering memorandum (as it may be amended
- ----------
or supplemented from time to time, the "Offering Memorandum"), to be dated
-------------------
February 12, 1999, relating to the Company, the Series A Notes and the Series A
Guarantees. As described in the Offering Memorandum,
<PAGE>
the Company will first use the net proceeds from the offering of the Series A
Notes to repay outstanding borrowings under the Company's Amended and Restated
Reducing Revolving Loan Agreement with a syndicate of banks led by Bank of
America National Trust & Savings Association, as Administrative Agent (the "Bank
----
Credit Facility"). The balance of the net proceeds will be used for general
- ---------------
corporate purposes.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act, the
Series A Notes (and all securities issued in exchange therefor or in
substitution thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE."
You have advised the Company that you will make offers and sales (the
"Exempt Resales") of the Series A Notes purchased by you hereunder on the terms
--------------
set forth in the Offering Memorandum, as amended or supplemented, solely (i) to
persons whom you
-2-
<PAGE>
reasonably believe to be "qualified institutional buyers" as defined in Rule
144A under the Securities Act ("QIBs") and (ii) outside the United States to
-----
persons other than U.S. persons in offshore transactions meeting the
requirements of Rule 904 of Regulation S ("Regulation S") under the Securities
------------
Act (such persons specified in clauses (i) and (ii) being referred to herein as
the "Eligible Purchasers"). As used herein, the terms "offshore transaction,"
-------------------
"United States" and "U.S. person" have the respective meanings given to them in
Regulation S. You will offer the Series A Notes to Eligible Purchasers initially
at a price equal to 100% of the principal amount thereof. Such price may be
changed at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will
have the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated February 18, 1999 (the "Closing
----------------------------- -------
Date"), in the form of Exhibit A hereto, for so long as such Series A Notes
- ----
constitute "Transfer Restricted Securities" (as defined in the Registration
------------------------------
Rights Agreement). Pursuant to the Registration Rights Agreement, the Company
and the Guarantors will agree to file with the Securities and Exchange
Commission (the "Commission") under the circumstances set forth therein, (i) a
----------
registration statement under the Securities Act (the "Exchange Offer
--------------
Registration Statement") relating to the Company's Series B 9 1/4% Senior
- ----------------------
Subordinated Notes due 2007 (the "Series B Notes" and, together with the Series
--------------
A Notes, the "Notes") to be offered in exchange for the Series A Notes, (such
-----
offer to exchange being referred to collectively as the "Registered Exchange
-------------------
Offer") and (ii) a shelf registration statement pursuant to Rule 415 under the
- -----
Securities Act (the "Shelf Registration Statement") relating to the resale by
----------------------------
certain holders of the Series A Notes, and to use their best efforts to cause
such Registration Statements to be declared effective. This Agreement, the
Notes, the Guarantees (as defined herein), the Indenture and the Registration
Rights Agreement are hereinafter referred to collectively as the "Operative
---------
Documents." This is to confirm the agreements concerning the purchase of the
- ---------
Series A Notes from the Company by you.
1. Representations, Warranties and Agreements of the Company and the
Guarantors. The Company and the Guarantors jointly and severally represent,
warrant and agree that:
(a) The Offering Memorandum will be prepared by the Company for use by
the Initial Purchasers in connection with the Exempt Resales and will not differ
substantially from the Preliminary Offering Memorandum, unless otherwise agreed
to by the Initial Purchasers. No order or decree preventing the use of the
Offering Memorandum, or any order asserting that the transactions contemplated
by this Agreement are subject to the registration requirements of the Securities
Act has been issued and no proceeding for that purpose has commenced or is
pending or, to the knowledge of the Company and the Guarantors, is contemplated.
(b) The Offering Memorandum as of its date and as of the Closing Date
(in each case taken together with the documents expressly incorporated by
reference therein ("Incorporated Documents")), will not contain an untrue
statement of a material fact or omit to state a material fact necessary, in
order to make the statements, in light of the circumstances under which they
were made, not misleading, except that this representation and warranty does not
apply to statements in or omissions from the Offering Memorandum
-3-
<PAGE>
made in reliance upon and in conformity with information relating to the Initial
Purchasers furnished to the Company in writing by or on behalf of the Initial
Purchasers expressly for use therein.
(c) The market-related and customer-related data and estimates included
in the Offering Memorandum are based on or derived from sources which the
Company believes to be reliable and accurate in all material respects.
(d) The Company and each Guarantor have been duly organized and are
validly existing as corporations, limited liability companies or partnerships,
as applicable, in good standing under the laws of their respective jurisdictions
of organization, are duly qualified to do business and are in good standing as
foreign corporations in each jurisdiction in which their respective ownership or
lease of property or the conduct of their respective businesses requires such
qualification except for such qualification and good standing the failure of
which, individually or in the aggregate, would not reasonably be expected to
result in a material adverse effect on the condition (financial or other),
business, prospects, properties, stockholders' equity or results of operations
of the Company and its subsidiaries taken as a whole (a "Material Adverse
----------------
Effect"), and have all power and authority necessary to own or hold their
- ------
respective properties and to conduct the businesses in which they are engaged.
(e) All of the issued shares of capital stock of the Company have been
duly and validly authorized and issued, are fully paid and non-assessable and
conform to the description thereof contained in the Offering Memorandum or the
Incorporated Documents; and (i) approximately 51% of the capital stock of Casino
Magic Neuquen S.A., (ii) approximately 97% of the outstanding membership
interests in Indiana Ventures LLC and (iii) 100% of the issued shares of capital
stock of each other subsidiary of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable and (except for
directors' qualifying shares) are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims, other than (A)
liens, encumbrances, equities or claims described in the Offering Memorandum or
the Incorporated Documents and (B) such other liens, encumbrances, equities or
claims as are not, individually or in the aggregate, material to the Company and
its subsidiaries, taken as a whole.
(f) The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement, the Indenture, the
Notes, the Guarantees and the Registration Rights Agreement.
(g) This Agreement has been duly authorized, executed and delivered by
the Company and the Guarantors.
(h) The Registration Rights Agreement will be duly authorized by the
Company and each of the Guarantors, and when duly executed by the proper
officers of the Company and the Guarantors (assuming due execution and delivery
by the Initial Purchasers) and delivered by the Company and each Guarantor, will
constitute a valid and binding agreement of the Company and each Guarantor,
enforceable against the Company and each Guarantor in accordance with its terms,
subject to the effects of bankruptcy,
-4-
<PAGE>
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) or an
implied covenant of good faith and fair dealing and except as rights to
indemnity and contribution thereunder may be limited by Federal or state
securities laws or principles of public policy.
(i) The Indenture will be duly authorized, and when duly executed by
the proper officers of the Company (assuming due execution and delivery by the
Trustee) and delivered by the Company, will constitute a valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) or an implied covenant of good faith and fair
dealing; no qualification of the Indenture under the Trust Indenture Act of
1939, as amended (the "1939 Act") is required in connection with the Exempt
--------
Resales.
(j) The Series A Notes will be duly and validly authorized by the
Company and when duly executed by the Company in accordance with the terms of
the Indenture and, assuming due authentication of the Series A Notes by the
Trustee, upon delivery to the Initial Purchasers against payment therefor in
accordance with the terms hereof will constitute valid and binding obligations
of the Company entitled to the benefits of the Indenture and enforceable against
the Company in accordance with their terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law) or
an implied covenant of good faith and fair dealing; and the Series A Notes, when
issued and delivered, will conform in all material respects to the description
thereof contained in the Offering Memorandum.
(k) The Series A Guarantees will be duly and validly authorized by the
Guarantors and when duly endorsed on the Series A Notes in accordance with the
terms of the Indenture and, assuming due authentication of the Series A Notes by
the Trustee, upon delivery to the Initial Purchasers against payment therefor in
accordance with the terms hereof will constitute valid and binding obligations
of each of the Guarantors entitled to the benefits of the Indenture and
enforceable against each in accordance with their terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law) or
an implied covenant of good faith and fair dealing; and the Series A Guarantees,
when issued and delivered, will conform in all material respects to the
description thereof contained in the Offering Memorandum. Except as provided in
the Offering Memorandum, each subsidiary of the Company as of the date hereof
will be a Guarantor.
(l) The Series B Notes will be duly and validly authorized by the
Company and if and when duly issued and authenticated in accordance with the
terms of the Indenture and delivered in accordance with the Registered Exchange
Offer provided for in the Registration Rights Agreement, will constitute valid
and binding obligations of the Company entitled to the benefits of the
Indenture, enforceable against the Company in
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<PAGE>
accordance with their terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) or an
implied covenant of good faith and fair dealing.
(m) The guarantees of the Series B Notes (the "Series B Guarantees"
-------------------
and, together with the Series A Guarantees, the "Guarantees") will be duly and
----------
validly authorized by the Guarantors and if and when duly endorsed on the Series
B Notes in accordance with the terms of the Indenture and delivered in
accordance with the Registered Exchange Offer provided for in the Registration
Rights Agreement, will constitute valid and binding obligations of each of the
Guarantors entitled to the benefits of the Indenture and enforceable against
each of the Guarantors in accordance with their terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law) or
an implied covenant of good faith and fair dealing.
(n) The execution, delivery and performance of this Agreement and the
other Operative Documents by the Company and the Guarantors and the consummation
of the transactions contemplated hereby or thereby, and the consummation by the
Company of the transactions contemplated thereby, will not violate or constitute
a breach of, or a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of the Guarantors is
bound or to which any of the property or assets of the Company or any of the
Guarantors is subject, that is material to the financial condition or prospects
of the Company and its subsidiaries, taken as a whole (collectively, the
"Material Agreements"), except for violation or breach of which or default under
-------------------
which, individually, or in the aggregate, would not result in a Material Adverse
Effect, nor will such actions result in any violation of the provisions of the
charter or by-laws, or other organizational documents of the Company or any of
the Guarantors or any law, statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or any of
the Guarantors or any of their properties or assets (collectively, "Law or Legal
------------
Requirements"), except where any such violation could not, singly or in the
- ------------
aggregate with all other such violations, reasonably be expected to have a
Material Adverse Effect, provided, that the provisions for indemnification and
contribution hereunder and thereunder may be limited by federal and state
securities laws and equitable principles and public policy considerations; and
except as may be required in connection with (i) the registration under the
Securities Act of the Series B Notes in accordance with the Registration Rights
Agreement, (ii) qualification of the Indenture under the 1939 Act in connection
with the consummation of the transactions contemplated by the Registration
Rights Agreement, (iii) compliance with the securities or Blue Sky laws of
various jurisdictions, (iv) applicable Gaming Laws and Gaming Authorities in
connection with the registration, sale and issuance of the Series B Notes and
Series B Guarantees and restrictions on the transfer of, and agreements not to
encumber, the equity securities of Boomtown, Inc. and Boomtown Hotel & Casino,
Inc. in connection with the registration, sale and issuance of the Series A
Notes, and (v) the Bank Credit Facility, no consent, approval, authorization or
order of, or filing or registration with, any such court or governmental agency
or body (collectively, "Consents and Filings") is required for the execution,
--------------------
delivery and
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<PAGE>
performance of this Agreement or any of the Operative Documents by the Company
and the Guarantors, as applicable, and the consummation of the transactions
contemplated hereby and thereby.
(o) Except as described in the Offering Memorandum or the Incorporated
Documents and except as provided by the Registration Rights Agreement, there are
no contracts, agreements or understandings between the Company and any person
granting such person the right (other than rights which have been waived or
satisfied or rights not exercisable in connection with the Offering Memorandum)
to require the Company to file a registration statement under the Securities Act
with respect to any debt securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the securities
registered pursuant to the Exchange Offer Registration Statement, the Shelf
Registration Statement or in any securities being registered pursuant to any
other registration statement filed by the Company under the Securities Act.
(p) Except as described in the Offering Memorandum or the Incorporated
Documents, the Company and the Guarantors have not sold or issued any securities
with terms that are substantially similar to the Notes and the Guarantees during
the six-month period preceding the date of the Offering Memorandum, including
any sales pursuant to Rule 144A under, or Regulations D or S of, the Securities
Act.
(q) Neither the Company nor any of the Guarantors has incurred, since
the date of the latest financial statements included in the Offering Memorandum,
any liability or obligation, direct or contingent, or entered into any
transaction, in each case not in the ordinary course of business, that is
material to the Company and its subsidiaries taken as a whole, otherwise than as
set forth or contemplated in the Offering Memorandum or the Incorporated
Documents; and, since such date, there has not been any material change in the
capital stock or material increase in the short-term or long-term debt of the
Company or any of the Guarantors or any material adverse change, or any
development involving or which would reasonably be expected to involve a
Material Adverse Effect, otherwise than as described or contemplated in the
Offering Memorandum or the Incorporated Documents.
(r) The historical and pro forma financial statements, together with
related notes, set forth in the Offering Memorandum comply as to form in all
material respects with the requirements of Regulation S-X under the Securities
Act applicable to registration statements on Form S-1 under the Securities Act.
The historical financial statements of the Company fairly present the financial
position of the Company (or its predecessors) at the respective dates indicated
and the results of operations and cash flows of the Company (or its
predecessors) for the respective periods indicated, in accordance with generally
accepted accounting principles consistently applied throughout such periods.
Such pro forma financial statements have been prepared on a basis consistent
with such historical statements of the Company, except for the pro forma
adjustments specified therein, and give effect to assumptions made on a
reasonable basis and in good faith and present the historical and proposed
transactions contemplated by the Offering Memorandum and this Agreement in
compliance with Regulation S-X in all material respects. The other financial and
statistical information and data included in the Offering Memorandum, historical
and pro forma, have been derived from the financial records of the Company (or
its predecessors)
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<PAGE>
and, in all material respects, have been prepared on a basis consistent with
such books and records of the Company (or its predecessors), except as disclosed
therein.
(s) Arthur Andersen LLP, who have audited certain financial statements
of the Company and the Guarantors, whose report appears in the Offering
Memorandum and who will deliver the letter referred to in Section 7(h) hereof,
are independent public accountants under Rule 101 of the AICPA's Code of
Professional Conduct, and its interpretation and rulings.
(t) The Company and each of the Guarantors have good and marketable
title to all property (real and personal) described in the Offering Memorandum
as being owned by them, free and clear of all liens, claims, security interests
or other encumbrances except such as are described in the Offering Memorandum or
the Incorporated Documents or, to the extent of any such liens, claims, security
interests or other encumbrances, such as would not reasonably be expected to
have a Material Adverse Effect (individually or in the aggregate) and all the
material property described in the Offering Memorandum as being held under lease
by the Company and the Guarantors is held by them under valid, subsisting and
enforceable leases, with only such exceptions as would not reasonably be
expected to have a Material Adverse Effect (individually or in the aggregate).
(u) The Company and each of the Guarantors own or possess adequate
rights to use all material patents, trademarks, service marks, trade names,
copyrights, licenses, inventions, trade secrets and other rights, and all
registrations or applications relating thereto, described in the Offering
Memorandum as being owned by them or necessary for the conduct of their
business, except as such would not reasonably be expected to have a Material
Adverse Effect (individually or in the aggregate), and the Company is not aware
of any pending or threatened claim to the contrary or any pending or threatened
challenge by any other person to the rights of the Company and the Guarantors
with respect to the foregoing which, if determined adversely to the Company and
the Guarantors would reasonably be expected to have a Material Adverse Effect
(individually or in the aggregate).
(v) Except as described in the Offering Memorandum or the Incorporated
Documents, there are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any of its
subsidiaries or to which the Company or any of its subsidiaries is a party or of
which any property or assets of the Company or any of its subsidiaries is the
subject which are reasonably likely to cause a Material Adverse Effect.
(w) There are no contracts or other documents which would be required
to be described in a prospectus contained in a registration statement on Form S-
1 by the Securities Act or by the rules and regulations thereunder which have
not been described in the Offering Memorandum or the Incorporated Documents
(other than certain contracts or documents required by Item 402 of Regulation S-
K under the Securities Act).
(x) No material relationship, direct or indirect, exists between or
among the Company on the one hand, and the directors, officers, stockholders,
customers or
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<PAGE>
suppliers of the Company on the other hand, except as described in the Offering
Memorandum or the Incorporated Documents.
(y) The Company is not involved in any strike, job action or labor
dispute with any group of employees that would reasonably be expected to have a
Material Adverse Effect, and, to the Company's knowledge, no such action or
dispute is threatened.
(z) Except as disclosed in the Offering Memorandum or the Incorporated
Documents, the Company is in compliance with all presently applicable provisions
of the Employee Retirement Income Security Act of 1974, as amended, including
the regulations and published interpretations thereunder ("ERISA"), where
failure to so comply would have a Material Adverse Effect; no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan" (as
defined in ERISA) for which the Company would have any material liability; the
Company has not incurred and does not expect to incur any material liability
under (i) Title IV of ERISA with respect to termination of, or withdrawal from,
any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of
1986, as amended, including the regulations and published interpretations
thereunder (the "Code") (other than contributions in the normal course which are
not in default); and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred, whether by action or by failure to act,
which would reasonably be expected to result in any loss of such qualification
where such failure to qualify or loss of qualification would reasonably be
expected to have a Material Adverse Effect.
(aa) The Company and the Guarantors have filed all federal, state and
local income and franchise tax returns required to be filed through the date
hereof and have paid all taxes due thereon, and no tax deficiency has been
determined adversely to the Company or any of the Guarantors nor does the
Company have any knowledge of any proposed or asserted tax deficiency which, if
determined adversely to the Company and its subsidiaries, might have a Material
Adverse Effect.
(bb) Neither the Company nor any of the Guarantors (i) is in violation
of its charter or by-laws or other organizational document, (ii) is in default
in any material respect, and no event has occurred which, with notice or lapse
of time or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any Material
Agreement or (iii) is in violation in any material respect of any law,
ordinance, governmental rule, regulation or court decree to which it or its
property or assets may be subject, except as any such violation or default (i)
is disclosed in the Offering Memorandum or the Incorporated Documents, or (ii)
could not, singly or in the aggregate with all other such violations and
defaults, reasonably be expected to have a Material Adverse Effect.
(cc) Neither the Company nor any of the Guarantors has failed to
obtain any material license, permit, certificate, franchise or other approvals
or authorizations of governmental or regulatory authorities as are necessary
under applicable law to own their respective properties and to conduct their
respective businesses in the manner conducted as of the Closing Date as
described in the Offering Memorandum or the Incorporated Documents, including
all governmental licenses, permits, approvals and authorizations
-9-
<PAGE>
necessary for the operation of their respective gaming and racing facilities and
for the operation of their respective hotel, restaurant, entertainment,
truckstop and related facilities (the "Permits") except to the extent that the
-------
failure to have any such Permit could not, singly or in the aggregate with all
other such failures, reasonably be expected to have a Material Adverse Effect;
the Company and each of the Guarantors has fulfilled and performed, in all
material respects, all their respective material obligations with respect to the
Permits and no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or has resulted or after notice
or lapse of time would result in any other material impairment of the rights of
the holder of any such Permit subject in each case to such qualification as may
be set forth in the Offering Memorandum or the Incorporated Documents and except
to the extent that any such revocation or termination could not, singly or in
the aggregate with all other such revocations and terminations, reasonably be
expected to have a Material Adverse Effect; and, except as described in the
Offering Memorandum or the Incorporated Documents, none of the Permits contains
any restriction more burdensome than the restrictions typically applicable to
operators of gaming businesses or enterprises, the compliance with which could
reasonably be expected to have a Material Adverse Effect.
(dd) To the best of the Company's knowledge, neither the Company nor
any of the Guarantors, nor any director, officer, agent, employee or other
person associated with or acting on behalf of the Company or any of its
subsidiaries, has used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity or has
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds or violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, except
as such that would not reasonably be expected to have a Material Adverse Effect.
(ee) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by the Company or any of the
Guarantors (or, to the knowledge of the Company, any of their predecessors in
interest) at, upon or from any of the property now or previously owned or leased
by the Company or its subsidiaries in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or which would
require remedial action under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except for any violation or remedial action
that would not have, or would not be reasonably likely to have, singularly or in
the aggregate with all such violations and remedial actions, a Material Adverse
Effect. There has been no material spill, discharge, leak, emission, injection,
escape, dumping or release of any kind onto such property or into the
environment surrounding such property of any toxic wastes, medical wastes, solid
wastes, hazardous wastes or hazardous substances due to or caused by the Company
or any of its subsidiaries or with respect to which the Company has knowledge,
except for any such spill, discharge, leak, emission, injection, escape, dumping
or release which would not have or would not be reasonably likely to have,
singularly or in the aggregate with all such spills, discharges, leaks,
emissions, injections, escapes, dumpings and releases, a Material Adverse
Effect. The terms "hazardous wastes," "toxic wastes," "hazardous substances" and
"medical wastes" shall have the meanings specified in any applicable local,
state, federal and foreign laws or regulations with respect to environmental
protection.
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<PAGE>
(ff) Neither the Company nor any Guarantor has violated any Federal,
state or local law relating to discrimination in hiring, promotion or pay of
employees except where such violation could not reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any Guarantor has caused or
permitted any goods to be manufactured, sold or distributed by any of its
employees in violation of the minimum wage or overtime laws of Sections 6 and 7
of the Federal Fair Labor Standards Act, except where such violation could not
reasonably be expected to have a Material Adverse Effect.
(gg) Neither the Company nor any Guarantor is and upon sale of the
Series A Notes to be issued and sold thereby in accordance herewith and the
application of the net proceeds to the Company of such sale as described in the
Offering Memorandum under the caption "Use of Proceeds," will not be, an
"investment company" within the meaning of such term under the United States
Investment Company Act of 1940 and the rules and regulations of the Commission
thereunder.
(hh) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D ("Regulation D") under the Securities Act) of the Company has
-----------
directly, or through any agent (provided that no representation is made as to
the Initial Purchasers or any person acting on its behalf), (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or could be integrated with
the offering and sale of the Notes in a manner that would require the
registration of the Series A Notes under the Securities Act or (ii) engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D, including, but not limited to, advertisements, articles, notices
or other communications published in any newspaper, magazine, or similar medium
or broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising) in
connection with the offering of the Series A Notes.
(ii) Except as permitted by the Securities Act, the Company has not
distributed and, prior to the later to occur of the Closing Date and completion
of the distribution of the Series A Notes, will not distribute any offering
material in connection with the offering and sale of the Series A Notes other
than the Offering Memorandum.
(jj) When the Series A Notes are issued and delivered pursuant to this
Agreement, such Series A Notes will not be of the same class (within the meaning
of Rule 144A under the Securities Act) as securities of the Company that are
listed on a national securities exchange registered under Section 6 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or that are
------------
quoted in a U.S. automated inter-dealer quotation system.
(kk) Assuming (i) that your representations and warranties in Section
2 are true, (ii) compliance by you with your covenants set forth in Section 2
and (iii) that each of the Eligible Purchasers is a QIB or a person who is not a
"U.S. person" who acquires the Series A Notes outside the United States in an
"offshore transaction" (within the meaning of Rule 904 of Regulation S), the
purchase of the Series A Notes by you pursuant hereto and the resale of the
Series A Notes pursuant hereto pursuant to the Exempt Resales is exempt from the
registration requirements of the Securities Act.
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<PAGE>
(ll) None of the Company or any of its affiliates or any person acting
on its or their behalf has engaged or will engage in any directed selling
efforts within the meaning of Regulation S with respect to the Notes, and the
Company and its affiliates and all persons acting on its of their behalf have
complied with and will comply with the offering restrictions requirements of
Regulation S in connection with the offering of the Notes outside of the United
States. The sales of the Series A Notes pursuant to Regulation S are "offshore
transactions" and are not part of a plan or scheme to evade the registration
provision of the Securities Act. The Company makes no representation in this
paragraph (ll) with respect to the Initial Purchasers.
(mm) The Company is a "reporting issuer" as defined in Rule 902 under
the Securities Act.
(nn) The Company is not, nor will it be, as a result of or after
giving effect to the issuance of the Notes and the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, (i) insolvent, (ii) left with an unreasonably small capital
with which to engage in its existing and anticipated businesses or (iii)
incurring debts beyond its ability to pay such debts as they mature. The Company
is not issuing the Notes in anticipation of insolvency.
(oo) The Guarantors taken as a whole, are not, nor will they be as a
result of or after giving effect to the issuance of the Notes, or the incurrence
of liabilities thereunder, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby, (i)
insolvent, (ii) left with an unreasonably small capital with which to engage in
their existing and anticipated businesses or (iii) incurring debts beyond their
ability to pay such debts as they mature. None of the Guarantors is issuing its
guaranty of the Notes in anticipation of insolvency.
(pp) The Offering Memorandum, as of its date, and each amendment or
supplement thereto, as of its date, in each case taken together with the
documents incorporated by reference therein, contains all the information
specified in, and meets the requirements of, Rule 144A(d)(4) under the
Securities Act.
2. Representations, Warranties and Agreements of the Initial Purchasers.
Each Initial Purchaser represents and warrants with respect to itself that:
(a) Such Initial Purchaser is a QIB or an institutional accredited
investor as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities Act
(each, an "Accredited Institution"), in either case with such knowledge and
----------------------
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Series A Notes.
(b) Such Initial Purchaser (i) is not acquiring the Series A Notes
with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Notes in a transaction that would
violate the Securities Act or the securities laws of any State of the United
States or any other applicable jurisdiction; (ii) in connection with the Exempt
Resales, will solicit offers to buy the Notes only from, and will offer, sell or
deliver the Notes only to, the Eligible Purchasers in accordance with this
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<PAGE>
Agreement and on the terms contemplated by the Offering Memorandum; and (iii)
will not offer or sell the Notes, nor has it offered or sold the Notes by, or
otherwise engaged in, any form of general solicitation or general advertising
(within the meaning of Regulation D; including, but not limited to,
advertisements, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising) in connection with the offering of the
Series A Notes.
(c) The Series A Notes have not been and will not be registered under
the Securities Act and may not be offered or sold within the United States or
to, or for the account or benefit of, U.S. persons except in accordance with
Regulation S under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act. The Initial Purchasers
represent that they have not offered, sold or delivered the Series A Notes, and
will not offer, sell or deliver the Series A Notes (i) as part of its
distribution at any time or (ii) otherwise until 40 days after the later of the
commencement of the offering of the Series A Notes and the Closing Date (such
period, the "Restricted Period"), within the United States or to, or for the
-----------------
account or benefit of U.S. persons, except in accordance with Rule 144A under
the Securities Act, or to Accredited Institutions in transactions that are
exempt from the registration requirements of the Securities Act. Accordingly,
each Initial Purchaser represents and agrees that neither it, its affiliates nor
any persons acting on its or their behalf has engaged or will engage in any
directed selling efforts within the meaning of Rule 901(b) of Regulation S with
respect to the Notes, and it, its affiliates and all persons acting on its
behalf have complied and will comply with the offering restriction requirements
of Regulation S.
(d) Such Initial Purchaser agrees that, at or prior to confirmation of
a sale of Notes (other than a sale pursuant to Rule 144A in transactions that
are exempt from the registration requirements of the Securities Act), it will
have sent to each distributor, dealer or person receiving a selling concession,
fee or other remuneration that purchases Notes from it during the Restricted
Period a confirmation or notice substantially to the following effect:
"The Notes covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and may not be offered
and sold within the United States or to, or for the account or benefit
of, U.S. persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of the
offering or the closing date, except in either case in accordance with
Regulation S (or Rule 144A if available) under the Securities Act.
Terms used above have the meanings assigned to them in Regulation S."
Such Initial Purchaser further agrees that it has not entered and will
not enter into any contractual arrangement with respect to the distribution or
delivery of the Notes, except with its affiliates or with the prior written
consent of the Company.
(e) Such Initial Purchaser further represents and agrees that (i) it
has not offered or sold and will not offer or sell any Notes to persons in the
United Kingdom prior to the expiry of the period of six months from the issue
date of the Notes, except to
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<PAGE>
persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995, (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Notes in, from or otherwise
involving the United Kingdom, and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issuance of the Notes to a person who is of a kind described
in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 or is a person to whom the document may otherwise
lawfully be issued or passed on.
(f) Such Initial Purchaser agrees not to cause any advertisement of
the Notes to be published in any newspaper or periodical or posted in any public
place and not to issue any circular relating to the Notes, except such
advertisements as include the statements required by Regulation S.
(g) The sales of the Series A Notes pursuant to Regulation S are
"offshore transactions" and are not part of a plan or scheme to evade the
registration provisions of the Securities Act.
(h) Such Initial Purchaser understands that the Company and, for
purposes of the opinions to be delivered to you pursuant to Section 7 hereof,
counsel to the Company and counsel to the Initial Purchasers, will rely upon the
accuracy and truth of the foregoing representations and hereby consents to such
reliance.
The terms used in this Section 2 that have meanings assigned to them
in Regulation S are used herein as so defined.
Each Initial Purchaser further agrees that, in connection with the
Exempt Resales, it will solicit offers to buy the Series A Notes only from, and
will offer to sell the Series A Notes only to, the Eligible Purchasers in Exempt
Resales. Such Initial Purchaser will deliver an Offering Memorandum, as amended
or supplemented through the date of each Exempt Resale, contemporaneously with
or prior to each such Exempt Resale (to the extent made available by the
Company) if the Company has not already done so, and it has not delivered, and
will not after the date of this Agreement deliver any offering materials other
than the Offering Memorandum or any amendment or supplement thereto in
connection with any Exempt Resale without the prior consent of the Company. In
addition, upon the Company's request, the Initial Purchasers shall advise the
Company (which advice may be by telephone) when their initial distribution of
the Notes has been completed.
3. Purchase of the Notes and the Guarantees by the Initial Purchasers. On
the basis of the representations and warranties contained in, and subject to the
terms and conditions of, this Agreement, the Company agrees to sell the Series A
Notes (and cause the Guarantors to issue the Series A Guarantees) to the several
Initial Purchasers and each of the Initial Purchasers, severally and not
jointly, agrees to purchase the aggregate principal amount of Series A Notes set
opposite that Initial Purchaser's name in Schedule 1 hereto. Each Initial
Purchaser will purchase such aggregate principal amount of Series A Notes at
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<PAGE>
an aggregate purchase price equal to 97 5/8% of the aggregate principal amount
thereof (the "Purchase Price").
--------------
The Company shall not be obligated to deliver any of the Series A
Notes and Series A Guarantees to be delivered on the Closing Date (as defined
herein), except upon payment for all the Series A Notes to be purchased on the
Closing Date as provided herein.
4. Delivery of and Payment for the Notes and the Guarantees.
(a) Delivery of and payment for the Series A Notes and the Series A
Guarantees shall be made at the office of Irell & Manella LLP, 1800 Avenue of
the Stars, Suite 900, Los Angeles, California 90067 at 8:00 A.M., California
time, on the third full business day following the date of this Agreement or at
such other date or place as shall be determined by agreement between the Initial
Purchasers and the Company.
(b) On the Closing Date, one or more Series A Notes in definitive
form, registered in the name of Cede & Co., as nominee of the Depository Trust
Company ("DTC"), or such other names as the Initial Purchasers may request upon
at least one business day's notice to the Company, having an aggregate principal
amount corresponding to the aggregate principal amount of Series A Notes sold
pursuant to Eligible Resales (collectively, the "Global Note"), shall be
delivered by the Company to the Initial Purchasers against payment by the
Initial Purchasers of the purchase price thereof by wire transfer of immediately
available funds as the Company may direct by written notice delivered to you two
business days prior to the Closing Date. The Global Note in definitive form
shall be made available to you for inspection not later than 2:00 p.m. on the
business day prior to the Closing Date.
(c) Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation of
each Initial Purchaser hereunder.
5. Further Agreements of the Company. The Company agrees:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, of (i) the issuance by any state securities commission of any
stop order suspending the qualification or exemption from qualification of any
Series A Notes or Series A Guarantees for offering or sale in any jurisdiction,
or the initiation or threatening of any proceeding for such purpose by the
Commission or any state securities commission or other regulatory authority, and
(ii) the happening of any event that makes any statement of a material fact made
in the Offering Memorandum untrue or which requires the making of any additions
to or changes in the Offering Memorandum in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company shall use all commercially reasonable efforts to prevent
the issuance of any stop order or order suspending the qualification or
exemption of the Series A Notes or Series A Guarantees under any state
securities or Blue Sky laws and, if at any time any state securities commission
shall issue any stop order suspending the qualification or exemption of the
Series A Notes or Series A Guarantees under any state securities or Blue Sky
laws,
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<PAGE>
the Company shall use every reasonable effort to obtain the withdrawal or
lifting of such order at the earliest possible time.
(b) To furnish to you, as many copies of the Offering Memorandum, and
any amendments or supplements thereto, as you may reasonably request. Such
copies shall be furnished without charge for use in connection with the Exempt
Resales for the nine month period immediately following the Closing Date. The
Company consents to the use of the Offering Memorandum, and any amendments and
supplements thereto required pursuant to this Agreement, by you in connection
with the Exempt Resales that are in compliance with this Agreement.
(c) Not to amend or supplement the Offering Memorandum prior to the
Closing Date or during the period referred to in (d) below unless you shall
previously have been advised of, and shall not have reasonably objected to, such
amendment or supplement within a reasonable time, but in any event not longer
than five days after being furnished a copy of such amendment or supplement. The
Company shall promptly prepare, upon any reasonable request by you, any
amendment or supplement to the Offering Memorandum that may be necessary or
advisable in connection with Exempt Resales.
(d) If, in connection with any Exempt Resales, any event shall occur
that, in the judgment of the Company or in the judgment of counsel to you, makes
any statement of a material fact in the Offering Memorandum untrue or that
requires the making of any additions to or changes in the Offering Memorandum in
order to make the statements in the Offering Memorandum, in light of the
circumstances under which they were made at the time that the Offering
Memorandum is delivered to prospective Eligible Purchasers, not misleading, or
if it is necessary to amend or supplement the Offering Memorandum to comply with
applicable law, the Company shall promptly notify you of such event and prepare
an appropriate amendment or supplement to the Offering Memorandum so that (i)
the statements in the Offering Memorandum as amended or supplemented will, in
light of the circumstances under which they were made at the time that the
Offering Memorandum is delivered to prospective Eligible Purchasers, not be
misleading and (ii) the Offering Memorandum will comply with applicable law.
(e) For a period of 90 days from the date of the Offering Memorandum,
not to, directly or indirectly, sell, contract to sell, grant any option to
purchase, issue any instrument convertible into or exchangeable for, or
otherwise transfer or dispose of, any debt securities of the Company or any of
its subsidiaries, except (i) for the Series B Notes in connection with the
Registered Exchange Offer or (ii) with the prior consent of Lehman Brothers Inc.
(f) Promptly from time to time to take such action as the Initial
Purchasers may reasonably request to qualify the Series A Notes and the Series A
Guarantees for offering and sale under the securities laws of such jurisdictions
as the Initial Purchasers may request (provided, however, that the Company shall
not in any event be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not now so qualified or to take any action that
would subject it to taxation or service of process in any jurisdiction in which
it is not now so subject, other than service of process with respect to the
offering and sale of the Notes) and to comply with such laws so as to permit the
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continuance of sales and dealings therein in such jurisdictions for as long as
may be necessary to complete the distribution of the Series A Notes and the
Series A Guarantees.
(g) Prior to the Closing Date, to furnish to you, as soon as they have
been prepared, a copy of any internal consolidated financial statements of the
Company for any period subsequent to the period covered by the financial
statements appearing in the Offering Memorandum.
(h) To use all commercially reasonable efforts to do and perform all
things required to be done and performed under this Agreement by it prior to or
after the Closing Date and to satisfy all conditions precedent on its part to
the delivery of the Series A Notes.
(i) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act) that
would be integrated with the sale of the Series A Notes in a manner that would
require the registration under the Securities Act of the sale to you or the
Eligible Purchasers of Series A Notes.
(j) The Company and each Guarantor agrees to comply in all material
respects with the terms and conditions of the Operative Documents applicable to
it and all agreements set forth in the representation letters of the Company to
the DTC relating to the approval of the Notes by DTC for "book entry" transfer.
(k) The Company and each Guarantor agree that in connection with any
registration of the Notes pursuant to the Registration Rights Agreement, or at
such earlier time as may be so required by law, the Indenture shall be qualified
under the 1939 Act and the Company and Guarantors will enter into any necessary
supplemental indentures and take any other necessary action in connection
therewith.
(l) Except as stated in this Agreement and in the Offering Memorandum,
neither the Company nor any Guarantor has taken or will take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Notes to
facilitate the sale or resale of the Notes. Except as permitted by the
Securities Act, neither the Company, nor any Guarantor will permit any person
acting on its behalf to solicit any offers to buy and will not offer to sell the
Notes by means of any form of general solicitation or general advertising or by
means of any directed selling efforts (as defined in Regulation S and the
Commission's releases related thereto).
(m) During any period in which the Company is not subject to Section
13 or 15(d) of the Exchange Act within the two year period following the Closing
Date, to make available to any registered holder or beneficial owner of Series A
Notes in connection with any sale thereof and any prospective purchaser of such
Series A Notes from such registered holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act.
(n) To use best efforts to effect the inclusion of the Notes in the
National Association of Securities Dealers, Inc. Automated Quotation System -
PORTAL ("PORTAL").
------
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<PAGE>
(o) To apply the net proceeds from the sale of the Series A Notes
being sold by the Company as set forth in the Offering Memorandum under the
caption "Use of Proceeds."
(p) To take such steps as shall be necessary to ensure that neither
the Company nor any subsidiary shall become an "investment company" within the
meaning of such term under the United States Investment Company Act of 1940 and
the rules and regulations of the Commission thereunder.
(q) To assist the Initial Purchasers and counsel for the Initial
Purchasers in connection with their continuing due diligence.
(r) To take such steps as shall be necessary to ensure that all the
subsidiaries of the Company that are not designated as "unrestricted
subsidiaries" in accordance with the Indenture will be guarantors of the Notes,
to the extent required by the Indenture.
(s) To use its reasonable best efforts to obtain a consent under the
Bank Credit Facility to the issuance and sale of the Notes and the use of
proceeds therefrom.
(t) Neither the Company nor any Guarantor will claim voluntarily, and
the Company and each Guarantor will, subject to the fiduciary duties of the
Board of Directors of the Company and each Guarantor and applicable law, resist
actively any attempts to claim the benefit of any usury laws against the holders
of any Notes.
6. Expenses. The Company agrees to pay: (a) the costs incident to the
authorization, issuance, sale and delivery of the Notes and the Guarantees and
any taxes payable in that connection; (b) the costs incident to the preparation,
printing and filing of the Offering Memorandum and any amendments and
supplements thereto; (c) the costs of distributing the Offering Memorandum and
any amendment or supplement to the Offering Memorandum, all as provided in this
Agreement; (d) the fees, disbursements and expenses of the Company's counsel and
accountants; (e) all expenses and listing fees in connection with the
application for quotation of the Series A Notes in PORTAL; (f) all fees and
expenses (including fees and expenses of counsel) of the Company in connection
with approval of the Notes by DTC for "book-entry" transfer; (g) the fees and
expenses of qualifying the Notes and Guarantees under the securities laws of the
several jurisdictions as provided in Section 5(f) and of preparing, printing and
distributing a Blue Sky Memorandum (including related fees and expenses of
counsel to the Initial Purchasers); (h) any fees charged by securities rating
services for rating the Notes and Guarantees; (i) all costs and expenses
incident to the performance of the Company's obligations under Section 11 and
(j) all other costs and expenses incident to the performance of the obligations
of the Company and the Guarantors. Except as provided in Section 11 hereof, the
Initial Purchasers shall pay their own costs and expenses (including the costs
and expenses of their counsel). Notwithstanding the foregoing, the Company and
the Initial Purchasers shall each pay their own expenses relating to the road
show, provided, however, that the Initial Purchasers shall pay all of the costs
of renting the chartered plane and of the investor meetings (including meals
with investors).
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<PAGE>
7. Conditions of Initial Purchasers' Obligations. The respective
obligations of the Initial Purchasers hereunder are subject to each of the
following terms and conditions:
(a) At the time of execution of this Agreement and on the Closing
Date, no order or decree preventing the use of the Offering Memorandum or any
amendment or supplement thereto, nor any order asserting that the transactions
contemplated by this Agreement are subject to the registration requirements of
the Securities Act shall have been issued, and no proceedings for that purpose
shall have been commenced or shall be pending or, to the knowledge of the
Company or any Guarantor, be contemplated. No order suspending the sale of the
Notes in any jurisdiction shall have been issued, and no proceedings for that
purpose shall have been commenced or shall be pending or, to the knowledge of
either the Company or any Guarantor, shall be contemplated.
(b) No Initial Purchaser shall have discovered and disclosed to the
Company on or prior to the Closing Date that the Offering Memorandum (taken
together with the Incorporated Documents) or any amendment or supplement thereto
contains an untrue statement of a fact which, in the opinion of Latham &
Watkins, counsel for the Initial Purchasers, is material or omits to state a
fact which, in the opinion of such counsel, is material and is necessary to make
the statements, in the light of the circumstances under which they were made,
not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the other Operative
Documents, the Offering Memorandum, and all other legal matters relating to this
Agreement and the transactions contemplated hereby shall be reasonably
satisfactory in all material respects to counsel for the Initial Purchasers, and
the Company shall have furnished to such counsel all documents and information
that they may reasonably request to enable them to pass upon such matters.
(d) Irell & Manella LLP shall have furnished to the Initial
Purchasers, its written opinion, as counsel to the Company, addressed to the
Initial Purchasers and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, to the effect that:
(i) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware with full corporate power and authority to own, lease
and operate its properties and to conduct its business as
described in the Offering Memorandum and is duly registered
and qualified to conduct its business and is in good standing
as a foreign corporation in each jurisdiction listed on a
schedule to the opinion;
(ii) Each Guarantor is an entity duly incorporated, validly
existing and in good standing under the laws of its
jurisdiction of incorporation or organization with full
corporate, limited liability company or partnership, as
applicable, power and
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authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum
and is duly registered and qualified to conduct its business
and is in good standing as a foreign corporation, partnership
or other entity in each jurisdiction listed on a schedule to
the opinion;
(iii) The Company has the corporate power and authority to
enter into this Agreement and the other Operative Documents
and to issue, sell and deliver the Notes to be sold by it to
the Initial Purchasers as provided herein, and this Agreement
and each of the other Operative Documents (other than the
Notes) have been duly authorized, executed and delivered by
the Company and such Operative Documents (other than this
Agreement) are valid and legally binding agreements of the
Company, enforceable against the Company in accordance with
their respective terms;
(iv) Each Guarantor has the corporate, limited liability
company or partnership, as applicable, power and authority to
enter into this Agreement and the other Operative Documents,
and this Agreement and each of the other applicable Operative
Documents (other than the Guarantees) have been duly
authorized, executed and delivered by each Guarantor and such
Operative Documents (other than this Agreement) is valid and
legally binding agreement of each Guarantor, enforceable
against each Guarantor in accordance with its respective
terms;
(v) The Notes have been duly authorized, executed and issued
by the Company and, assuming due authentication thereof by the
Trustee and upon payment and delivery in accordance with the
terms of the Purchase Agreement, will constitute valid and
legally binding obligations of the Company enforceable against
the Company in accordance with their terms and entitled to the
benefits of the Indenture; and the Notes, when issued and
delivered, will conform to the description thereof contained
in the Offering Memorandum in all material respects.
(vi) The Guarantees have been duly authorized and executed by
the respective Guarantors and, assuming due authentication of
the Notes by the Trustee, upon payment and delivery in
accordance with the terms of the Purchase Agreement will
constitute valid and legally binding obligations of each of
the Guarantors enforceable in accordance with their terms.
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<PAGE>
(vii) (x) The offer, sale or delivery of the Notes as of the
Closing Date, and (y) the execution, delivery and performance
by the Company and the Guarantors of this Agreement and the
other Operative Documents, and (z) compliance by the Company
and the Guarantors with the provisions hereof or thereof and
consummation by the Company and the Guarantors of the
transactions contemplated hereby or thereby, do not and will
not violate and do not and will not constitute a breach of, or
a default under (including any event which, with notice or
lapse of time or both, would be a breach of or a default
under), (a) the certificate or articles of incorporation or
partnership or membership agreement or bylaws or other
organizational documents of the Company or any of its
subsidiaries as in effect on the Closing Date or (b) any
agreement or instrument listed under Items 4 or 10 in the
exhibit index to the Company's 1997 Form 10-K or in the
exhibit index to the Company's subsequently filed Forms 10-Q
as in effect on the Closing Date, except, with respect to this
clause (b) any such violation, breach or default that could
not, singly or in the aggregate, with all such other
violations, breaches and defaults, reasonably be expected to
have a Material Adverse Effect; and other than as described in
the Offering Memorandum, and, based solely on facts known to
such counsel, no such action will result in any violation of
any Law or Legal Requirement in effect as of the Closing Date
which in such counsel's experience is customarily applicable
to transactions of the type contemplated by the Operative
Documents (assuming for the purposes of this paragraph
compliance with all applicable state securities and Blue Sky
laws and, in the case of the Registration Rights Agreement,
the Securities Act, the Exchange Act and the 1939 Act);
(viii) No Consent or Filing based on Law or Legal Requirements
(including California Gaming Laws) as in effect on the Closing
Date which in such counsel's experience is customarily
applicable to transactions of the type contemplated by the
Operative Documents is required on the part of the Company or
any of its subsidiaries for the valid issuance and sale of the
Notes to the Initial Purchasers as contemplated by this
Agreement or the execution, delivery or performance by the
Company and the Guarantors of each of the Operative Documents,
to which each is a party, except (A) as have been obtained and
are in full force and effect, (B) as may be required under
state securities or Blue Sky laws governing the purchase and
distribution of the Notes or such as may be required under the
Securities Act, the Exchange Act or the 1939 Act in connection
with the performance by the Company of its obligations under
the Registration Rights
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<PAGE>
Agreement and (C) as may be required by applicable Gaming Laws
and Gaming Authorities in connection with the registration,
sale and issuance of the Series B Notes and any Guarantees
thereof, as to which such counsel need not express an opinion;
(ix) To the knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the
Company or any of its subsidiaries, or to which the Company or
any of its subsidiaries or any of their respective property or
assets is subject, which are not disclosed in the Offering
Memorandum or the Incorporated Documents and which could,
singly or in the aggregate with all other such proceedings,
reasonably be expected to have a Material Adverse Effect or
materially adversely affect the consummation of the
transactions contemplated by the Operative Documents;
(x) To such counsel's knowledge, there are no contracts or
documents of a character required by the Securities Act or by
the rules and regulations thereunder to be described in a
prospectus included in a registration statement on Form S-1
which are not described in the Offering Memorandum or the
Incorporated Documents (other than certain contracts or
documents required by Item 402 of Regulation S-K under the
Securities Act);
(xi) The statements in the Offering Memorandum, insofar as
they are descriptions of contracts, agreements or other legal
documents, or refer to statements of law or legal conclusions
are true and accurate in all material respects and summarize
fairly the information required to be shown in all material
respects, except statements of law or legal conclusions in the
section entitled "Business" under the heading "Regulation and
Licensing" that address jurisdictions other than California,
as to which such counsel need express no opinion;
(xii) Except as described in the Offering Memorandum, to the
knowledge of such counsel, no holder of any securities of the
Company (except for the holders of the Notes) or any other
person has the right to have any securities of the Company
included in any registration statement contemplated by the
Registration Rights Agreement;
(xiii) No registration of any of the Notes under the
Securities Act is required for the sale of the Notes to the
Initial Purchasers as contemplated in this Agreement or for
the Exempt Resales (assuming (A) that each Initial Purchaser
is a
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<PAGE>
Qualified Institutional Buyer, (B) that any person who buys
the Notes in the Exempt Resales is an Eligible Purchaser, (C)
the accuracy of the Initial Purchasers' representations in
this Agreement, (D) the accuracy of the representations of the
Company and the Guarantors in this Agreement regarding the
absence of general solicitation in connection with the Exempt
Resales and (E) the accuracy of the representations made by,
and in compliance with the agreements made by, all purchasers
under the terms set forth in the Offering Memorandum under the
caption "Notice to Investors");
(xiv) Except for issuances of Notes pursuant to the Registered
Exchange Offer, as defined in the Indenture, no qualification
of the Indenture under the 1939 Act is required in connection
with the offer and sale of the Notes contemplated hereby or in
connection with the Exempt Resales;
(xv) Assuming that the proceeds of issuance of the Notes are
used as set forth in the Offering Memorandum, neither the
consummation of the transactions contemplated hereby nor the
sale, issuance, execution or delivery of the Notes, nor the
application of the proceeds therefrom (if applied as described
in the Offering Memorandum under the caption "Use of
Proceeds"), will violate Regulation T (12 C.F.R. Part 220), U
(12 C.F.R. Part 221) or X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System;
Such counsel shall also have furnished to the Initial
Purchasers a written statement, addressed to the Initial
Purchasers and dated the Closing Date to the effect that in
the course of the preparation by the Company of the Offering
Memorandum, such counsel participated in conferences with
certain officers and employees of the Company, representatives
of Arthur Andersen LLP and representatives of the Initial
Purchasers and their counsel at which the contents of the
Offering Memorandum and related matters were discussed and,
although such counsel need not pass upon or assume any
responsibility for the accuracy, completeness or fairness of
the statements contained or incorporated in the Offering
Memorandum, no facts have come to such counsel's attention
that lead it to believe that the Offering Memorandum (and the
Incorporated Documents), as of its date and as of the Closing
Date, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact required to
be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading. Such counsel need not assume any responsibility
for or independently verify the accuracy, completeness or
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fairness of the financial statements and schedules and other
financial data included or incorporated in the Offering
Memorandum and need express no view as to the accounting or
financial records from which such financial statements,
schedules and data are derived.
In rendering such opinion, such counsel will state that,
except as set forth in the next sentence, its opinions are
limited to, and do not express any opinion as to any laws
other than, the Federal Law of the United States, the laws of
the State of California, and the General Corporation Law of
the State of Delaware, in each case as in effect on the date
thereof. Notwithstanding the foregoing, (A) the opinions in
Paragraphs (iii), (iv), (v) and (vi) above relating to the
enforceability of the agreements named therein may be limited
to, and such counsel need not express any opinion as to such
matters under any laws other than, the laws of the State of
New York as in effect on the date thereof, (B) the opinions in
Paragraphs (iii), (iv), (v) and (vi) above relating to the
valid and legally binding nature of the agreements named
therein on the entities executing the same (as distinguished
from the enforceability of such agreements) shall also be
expressed as to the laws of the State of New York as in effect
on the date thereof and (C) the term "Law and Legal
Requirements" as used in Paragraph (vii) above shall include
the laws of the State of New York as in effect on the date
thereof.
(e) The Company shall have received from the lenders under the Bank
Credit Facility all consents, waivers and authorizations necessary for the
consummation of the transactions contemplated hereby, in form and substance
reasonably satisfactory to the Initial Purchasers.
(f) The Initial Purchasers shall have received on the Closing Date the
following opinions, dated the Closing Date, addressed to the Initial Purchasers
and in form and substance reasonably satisfactory to the Initial Purchasers,
with respect to certain gaming matters and matters of local law:
(i) Opinion of Schreck Morris, gaming counsel for the Company
and the Guarantors in the State of Nevada;
(ii) Opinion of Smith Martin, gaming counsel for the Company
and the Guarantors in the State of Louisiana;
(iii) Opinion of Watkins Ludlam Winter & Stennis, P.A., gaming
counsel for the Company and the Guarantors in the State of
Mississippi;
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(iv) Opinion of Jennings, Strouss & Salmon, P.L.C., counsel
for the Company and the Guarantors in the State of Arizona;
(v) Opinion of Johnson Smith Pence Densborn Wright & Heath
LLP, counsel for the Company and the Guarantors in the State
of Indiana;
(vi) Opinion of Leonard, Street and Deinard, counsel for the
Company and the Guarantors in the State of Minnesota; and
(vii) Opinion of Davis, Graham & Stubbs LLP, counsel for the
Company and the Guarantors in the State of Colorado.
(g) The Initial Purchasers shall have received from Latham & Watkins,
counsel for the Initial Purchasers, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Series A Notes, the Series A
Guarantees, the Offering Memorandum and other related matters as the Initial
Purchasers may reasonably require, and the Company shall have furnished to such
counsel such documents as they reasonably request for the purpose of enabling
them to pass upon such matters.
(h) On the Closing Date, the Initial Purchasers shall have received
from Arthur Andersen LLP, a letter, in form and substance satisfactory to the
Initial Purchasers, addressed to the Initial Purchasers (i) confirming that they
are independent public accountants under Rule 101 of the AICPA's Code of
Professional Conduct, and its interpretation and rulings and (ii) stating, as of
the Closing Date, the conclusions and findings of such firm with respect to the
financial information and other matters ordinarily covered by accountants'
"comfort letters" to Initial Purchasers in connection with registered public
offerings.
(i) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the respective dates as of which information is given in the
Offering Memorandum any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Offering Memorandum or in the
Incorporated Documents or (ii) since such date there shall not have been any
change in the capital stock or long-term debt of the Company or any of the
Guarantors or any change, or any development involving a prospective change, in
or affecting the business, management, financial position, stockholders' equity
or results of operations of the Company and the Guarantors taken as a whole,
otherwise than as set forth or contemplated in the Offering Memorandum or the
Incorporated Documents, the effect of which, in any such case described in
clause (i) or (ii), is, in the judgment of the Initial Purchasers, so material
and adverse as to make it impracticable or inadvisable to proceed with the sale
or the delivery of the Notes and the Guarantees being delivered on the Closing
Date on the terms and in the manner contemplated in the Offering Memorandum.
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<PAGE>
(j) Subsequent to the execution and delivery of this Agreement (i) no
downgrading shall have occurred in the rating accorded the Company's debt
securities by any "nationally recognized statistical rating organization," as
that term is defined by the Commission for purposes of Rule 436(g)(2) under the
Securities Act and (ii) no such organization shall have publicly announced that
it has under surveillance or review, with possible negative implications, its
rating of any of the Company's debt securities.
(k) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or in
the over-the-counter market, or trading in any securities of the Company on any
exchange or in the over-the-counter market, shall have been suspended or minimum
prices shall have been established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body or governmental
authority having jurisdiction; (ii) a banking moratorium shall have been
declared by Federal or New York state authorities; or (iii) the United States
shall have become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a declaration
of a national emergency or war by the United States or there shall have occurred
such a material adverse change in general economic, political or financial
conditions, the effect of any of the items in this clause (iii) on the financial
markets of the United States or the market for the Notes is such as to make it,
in the judgment of the Initial Purchasers, impracticable or inadvisable to
proceed with the sale or delivery of the Notes being delivered on the Closing
Date on the terms and in the manner contemplated in the Offering Memorandum.
(l) (i) There shall not have been any material increase in the
consolidated short-term or consolidated long-term debt of the Company or any
Guarantor (other than in the ordinary course of business) from that set forth in
or contemplated by the Offering Memorandum or the Incorporated Documents; (ii)
there shall not have been, since the respective dates as of which information is
given in the Offering Memorandum, except as otherwise expressly stated in the
Offering Memorandum or the Incorporated Documents, (A) any material adverse
change in the condition (financial or other), business, prospects, liabilities
(contingent or otherwise), properties, net worth, solvency or results of
operations of the Company and the Guarantors taken as a whole or (B) any other
event which should have been set forth in a supplement or amendment to the
Offering Memorandum; (iii) the Company and the Guarantors shall not have any
liabilities or obligations, direct or contingent (whether or not in the ordinary
course of business), that are material to the Company and the Guarantors taken
as a whole, other than those reflected in the Offering Memorandum or the
Incorporated Documents; (iv) each of the representations and warranties of the
Company and each of the Guarantors contained in this Agreement shall be true and
correct (A) on and as of the date hereof and (B) in all material respects
(except for those representations and warranties that are qualified as to
materiality or Material Adverse Effect, which shall be true and correct as
written) on and as of the Closing Date as if made on and as of the Closing Date
and the Company and the Guarantors have complied with all their agreements
contained herein, and the conditions set forth in Section 7(b) and 7(i); (v) the
Company and each Guarantor shall have executed and delivered each other
Operative Document to which the Company or such Guarantor is or is required to
be a party; (vi) as of the Closing Date the Company is not, nor will it be, as a
result of or after giving effect to the issuance of the Notes and the execution,
delivery and performance of this Agreement and
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the consummation of the transactions contemplated hereby and thereby, (x)
insolvent, (y) left with an unreasonably small capital with which to engage in
its existing and anticipated businesses or (z) incurring debts beyond its
ability to pay such debts as they mature; (vii) collectively, the Guarantors are
not as of the Closing Date nor will they be, after giving effect to the issuance
of the Notes and the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby, (x) insolvent, (y)
left with an unreasonably small capital with which to engage in their respective
existing and anticipated businesses or (z) incurring debts beyond their ability
to pay such debts as such debts mature; and (viii) the Initial Purchasers shall
have received a certificate, dated the Closing Date and signed on behalf of the
Company by the chief executive officer and the chief financial officer of the
Company and by the chief financial officer or a vice president of each Guarantor
(or such other officers as are acceptable to the Initial Purchasers), certifying
each of the matters set forth in this Section 7(l) and to the effect that, such
individuals have carefully examined the Offering Memorandum and, in their
opinion the Offering Memorandum (including the Incorporated Documents) as of its
date and as of the Closing Date, did not include any untrue statement of a
material fact and did not omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
(m) The Notes shall have been approved for trading on PORTAL.
(n) The Company and the Guarantors shall have furnished or caused to
be furnished to the Initial Purchasers such further certificates, documents and
opinions as the Initial Purchasers shall have reasonably requested.
(o) There shall not have been made any amendment or supplement to the
Offering Memorandum to which any of the Initial Purchasers has objected.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchasers.
8. Indemnification and Contribution.
(a) The Company and the Guarantors shall jointly and severally
indemnify and hold harmless each Initial Purchaser, its officers, employees and
agents and each person, if any, who controls any Initial Purchaser within the
meaning of the Securities Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which that
Initial Purchaser, officer, agent, employee or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in the
Offering Memorandum or in any amendment or supplement thereto or (B) in any blue
sky application or other document prepared or executed by the Company (or based
upon any written information furnished by the Company) specifically for the
purpose of qualifying any or all of the Series A Notes under the securities laws
of any state or other jurisdiction (any such application, document or
information being hereinafter called a "Blue Sky Application"), or (ii) the
--------------------
omission or
-27-
<PAGE>
alleged omission to state in the Offering Memorandum, or in any amendment or
supplement thereto, or in any Blue Sky Application any material fact required to
be stated therein or necessary to make the statements therein not misleading,
and shall reimburse each Initial Purchaser and each such officer, employee,
agent or controlling person promptly upon demand for any legal or other expenses
reasonably incurred by that Initial Purchaser, officer, employee, agent or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company and the Guarantors
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission made (i)
in the Offering Memorandum, or in any such amendment or supplement, or in any
Blue Sky Application, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Initial Purchaser
specifically for inclusion therein, or (ii) in the Preliminary Offering
Memorandum or the Offering Memorandum, as the case may be, if a copy of the
Offering Memorandum (as then amended or supplemented and provided by the Company
through the Closing Date) was not sent or given by or on behalf of such Initial
Purchasers to the person asserting any such loss, claim, damage, liability or
expense, at or prior to the written confirmation of the sale of the Notes and
the Offering Memorandum (as of the Closing Date) could have corrected such
untrue or alleged untrue statement or such omission or alleged omission. The
foregoing indemnity agreement is in addition to any liability which the Company
and the Guarantors may otherwise have to any Initial Purchaser or to any
officer, employee or controlling person of that Initial Purchaser.
(b) Each Initial Purchaser, severally and not jointly, shall indemnify
and hold harmless the Company, the Guarantors, their officers, employees, and
agents, each of their directors, and each person, if any, who controls the
Company and the Guarantors within the meaning of the Securities Act, from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof, to which the Company, the Guarantors or any such director,
officer or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in the Offering Memorandum or in any amendment or
supplement thereto, or (B) in any Blue Sky Application or (ii) the omission or
alleged omission to state in the Offering Memorandum, or in any amendment or
supplement thereto, or in any Blue Sky Application any material fact required to
be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
that Initial Purchaser specifically for inclusion therein, and shall reimburse
the Company, the Guarantors and any such director, officer or controlling person
for any legal or other expenses reasonably incurred by the Company, such
Guarantor or any such director, officer or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which any Initial Purchaser
may otherwise have to the Company, the Guarantors or any such director, officer,
employee or controlling person.
-28-
<PAGE>
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided, however, any indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of the
indemnified party unless (i) the employment thereof has been specifically
authorized by the indemnifying party in writing, (ii) such indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party and in the reasonable judgment of such
counsel it is advisable, under applicable standards of professional conduct, for
such indemnified party to employ separate counsel or (iii) the indemnifying
party has failed to assume the defense of such action and employ counsel
reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to one local counsel) at any time for all such indemnified parties,
which firm shall be designated in writing by Lehman Brothers Inc., if the
indemnified parties under this Section 8 consist of Initial Purchasers or any of
their respective officers, employees or controlling persons, or by the Company,
if the indemnified parties under this Section consist of the Company, the
Guarantors or any of the Company's or the Guarantors' directors, officers,
employees or controlling persons. No indemnifying party shall (i) without the
prior written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with the consent of
the indemnifying party or if there be a final judgment of the plaintiff in any
such action, the indemnifying party
-29-
<PAGE>
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 8(a) or 8(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and the Guarantors on the one hand and the Initial
Purchasers on the other from the offering of the Series A Notes and the Series A
Guarantees or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Guarantors on the one hand and the Initial
Purchasers on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative benefits
received by the Company and the Guarantors on the one hand and the Initial
Purchasers on the other with respect to such offering shall be deemed to be in
the same proportion as the total net proceeds from the offering of the Series A
Notes purchased under this Agreement (before deducting expenses) received by the
Company and the Guarantors, on the one hand, and the total discounts and
commissions received by the Initial Purchasers with respect to the Series A
Notes and the Series A Guarantees purchased under this Agreement, on the other
hand, bear to the total gross proceeds from the offering of the Series A Notes
under this Agreement. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company, the Guarantors or the Initial Purchasers, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Guarantors and the Initial
Purchasers agree that it would not be just and equitable if contributions
pursuant to this Section 8(d) were to be determined by pro rata allocation (even
if the Initial Purchasers were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section shall be deemed to include, for
purposes of this Section 8(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8(d), no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Series A Notes purchased by it were resold to
Eligible Purchasers exceeds the amount of any damages which such Initial
Purchaser has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations
to contribute as provided in this Section 8(d) are several in proportion to
their respective underwriting obligations and not joint.
-30-
<PAGE>
(e) The Initial Purchasers severally confirm and the Company and the
Guarantors acknowledge that the last paragraph on the cover page, the
stabilization legend on page iv and the seventh, eighth, and last paragraphs
under the caption "Plan of Distribution" constitute the only information
concerning such Initial Purchasers furnished in writing to the Company by or on
behalf of the Initial Purchasers specifically for inclusion in the Offering
Memorandum.
9. Default By One or More of the Initial Purchasers. If any Initial
Purchaser shall default in its obligation to purchase the Notes which it has
agreed to purchase hereunder, and if the aggregate principal amount of the Notes
to remain unpurchased does not exceed 10% of the aggregate principal amount of
all the Notes to be purchased hereunder, each non-defaulting Initial Purchaser
shall be required to purchase its pro rata share (based upon the principal
amount of Notes which such Initial Purchaser agreed to purchase hereunder) of
the Notes of such defaulting Initial Purchaser or Initial Purchasers. If after
giving effect to the foregoing, any of the Notes remain unpurchased, each of the
Company and any non-defaulting Initial Purchaser shall have the right, but not
the obligation, to terminate this Agreement, without liability on the part of
any non-defaulting Initial Purchaser or the Company, except for the expenses to
be borne by the Company and the Initial Purchasers as provided in Section 6
hereof and the indemnity and contribution agreements in Section 8 hereof.
Nothing herein shall relieve a defaulting Initial Purchaser from liability for
its default.
10. Termination. The obligations of the Initial Purchasers hereunder may be
terminated by Lehman Brothers Inc. by notice given to and received by the
Company prior to delivery of and payment for the Series A Notes and the Series A
Guarantees if, prior to that time, any of the events described in Sections 7(i),
7(j) or 7(k) shall have occurred, the lenders under the Bank Credit Facility
shall not have consented to the issuance and sale of the Notes and the use of
proceeds therefrom or if the Initial Purchasers shall decline to purchase the
Series A Notes for any reason permitted under this Agreement. The obligations of
the Company and the Guarantors hereunder may be terminated by the Company by
notice given to and received by Lehman Brothers Inc. prior to delivery of and
payment for the Series A Notes and the Series A Guarantees.
11. Reimbursement of Initial Purchasers' Expenses. If the Company and the
Guarantors shall fail to tender the Series A Notes and the Series A Guarantees
for delivery to the Initial Purchasers by reason of any failure, refusal or
inability on the part of the Company and the Guarantors to perform any agreement
on its part to be performed, or because any other condition of the Initial
Purchasers' obligations hereunder required to be fulfilled by the Company and
the Guarantors is not fulfilled, the Company and the Guarantors will reimburse
the Initial Purchasers for all reasonable out-of-pocket expenses (including
reasonable fees and disbursements of counsel) incurred by the Initial Purchasers
in connection with this Agreement and the proposed purchase of the Series A
Notes and the Series A Guarantees, and upon demand the Company and the
Guarantors shall pay the full amount thereof to Lehman Brothers Inc. The
Company's refusal to tender the Series A Notes and Series A Guarantees pursuant
to Section 9 hereof shall not trigger any obligation by the Company to reimburse
the Initial Purchasers' expenses.
-31-
<PAGE>
12. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by
mail, telex or facsimile transmission to Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate Department
(Fax: 212-526-6588), with a copy to Latham & Watkins, 633 West Fifth
Street, Suite 4000, Los Angeles, California 90071, Attention: Gary Olson,
Esq. (Fax: 213-891-8763) and, in the case of any notice pursuant to Section
8, to the Director of Litigation, Office of the General Counsel, Lehman
Brothers Inc., Three World Financial Center, 10th Floor, New York, NY
10285; and
(b) if to the Company and the Guarantors, shall be delivered or
sent by mail, telex or facsimile transmission to Hollywood Park, Inc. 1050
South Prairie Avenue, Inglewood, California 90301, Attention: G. Michael
Finnigan (Fax: 310-671-4460), with a copy to Irell & Manella LLP, 1800
Avenue of the Stars, Suite 900, Los Angeles, California 90067, Attention:
Alvin G. Segel, Esq. (Fax: 310-203-7199).
Any such statements, requests, notices or agreements shall take effect
at the time of receipt thereof. The Company shall be entitled to act and rely
upon any request, consent, notice or agreement given or made on behalf of the
Initial Purchasers by Lehman Brothers Inc.
13. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of and be binding upon the Initial Purchasers, the Company, the
Guarantors and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(A) the representations, warranties, indemnities and agreements of the Company
and the Guarantors contained in this Agreement shall also be deemed to be for
the benefit of the person or persons, if any, who control any Initial Purchaser
within the meaning of Section 15 of the Securities Act and (B) the indemnity
agreement of the Initial Purchasers contained in Section 8(b) of this Agreement
shall be deemed to be for the benefit of directors of the Company and the
Guarantors and any person controlling the Company and the Guarantors within the
meaning of Section 15 of the Securities Act. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 13, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
14. Survival. The respective indemnities, representations, warranties and
agreements of the Company, the Guarantors and the Initial Purchasers contained
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall survive the delivery of and payment for the Notes and the
Guarantees and shall remain in full force and effect, regardless of any
investigation made by or on behalf of any of them or any person controlling any
of them.
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<PAGE>
15. Definitions. For purposes of this Agreement: (a) "business day" means
each Monday, Tuesday, Wednesday, Thursday or Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close; (b) "subsidiary" has the meaning set forth in Rule 405
of the rules and regulations of the Commission under the Securities Act; and
(c), unless otherwise defined, the phrase "to the Company's knowledge" and
similar phrases refer to the knowledge of the senior executives of the Company.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of New York.
17. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
[Signature pages follow]
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<PAGE>
If the foregoing correctly sets forth the agreement among the Company,
the Guarantors and the Initial Purchasers, please indicate your acceptance in
the space provided for that purpose below.
Very truly yours,
HOLLYWOOD PARK, INC.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HOLLYWOOD PARK OPERATING COMPANY
By: /s/ G. Michael Finnigan
-----------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HP CASINO, INC.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HOLLYWOOD PARK FALL OPERATING COMPANY
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Executive Vice President
HOLLYWOOD PARK FOOD SERVICES, INC.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Executive Vice President
S-1
<PAGE>
TURF PARADISE, INC.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY,
LLC
By: HP/Compton, Inc.
its Manager
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HP/COMPTON, INC.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HP YAKAMA, INC.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
HP YAKAMA CONSULTING, INC.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
BOOMTOWN, INC.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
S-2
<PAGE>
BOOMTOWN HOTEL & CASINO, INC.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
LOUISIANA GAMING ENTERPRISES, INC.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
LOUISIANA-I GAMING, A LOUISIANA PARTNERSHIP IN
COMMENDAM
BY: Louisiana Gaming Enterprises, Inc.
its general partner
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
BAYVIEW YACHT CLUB, INC.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
MISSISSIPPI-I GAMING, LP
By: Bayview Yacht Club, Inc.
its general partner
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
S-3
<PAGE>
BOOMTOWN HOOSIER, INC.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
INDIANA VENTURES LLC
BY: Boomtown Hoosier, Inc.
its Manager
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
PINNACLE GAMING DEVELOPMENT CORP.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: President
SWITZERLAND COUNTY DEVELOPMENT CORP.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
CASINO MAGIC CORP.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
MARDI GRAS CASINO CORP.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
S-4
<PAGE>
BILOXI CASINO CORP.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
CASINO MAGIC FINANCE CORP.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
CASINO MAGIC AMERICAN CORP.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
BAY ST. LOUIS CASINO CORP.
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
CASINO ONE CORPORATION
By: /s/ G. Michael Finnigan
------------------------------
Name: G. Michael Finnigan
Title: Vice President
S-5
<PAGE>
Accepted:
LEHMAN BROTHERS INC.
CIBC OPPENHEIMER CORP.
MORGAN STANLEY & CO. INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES LLC
SG COWEN SECURITIES CORPORATION
WASSERSTEIN PERELLA SECURITIES, INC.
By: LEHMAN BROTHERS INC.
BY: /s/ Robert Heller
----------------------------
Authorized Representative
S-6
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
Principal
Initial Purchasers: Amount of Notes
- ------------------ ---------------
<S> <C>
Lehman Brothers Inc................................................ $175,000,000
------------
CIBC Oppenheimer Corp.............................................. $ 35,000,000
------------
Morgan Stanley & Co. Incorporated.................................. $ 35,000,000
------------
NationsBanc Montgomery Securities LLC.............................. $ 35,000,000
------------
SG Cowen Securities Corporation.................................... $ 35,000,000
------------
Wasserstein Perella Securities, Inc................................ $ 35,000,000
------------
Total $350,000,000
============
</TABLE>
I-1
<PAGE>
EXHIBIT 10.35
================================================================================
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
DATED AS OF FEBRUARY 18, 1999
BY AND AMONG
HOLLYWOOD PARK, INC.
THE GUARANTORS LISTED ON THE SIGNATURE PAGES HERETO
AND
LEHMAN BROTHERS INC.,
CIBC OPPENHEIMER CORP.,
MORGAN STANLEY & CO. INCORPORATED,
NATIONSBANC MONTGOMERY SECURITIES LLC,
SG COWEN SECURITIES CORPORATION,
AND
WASSERSTEIN PERELLA SECURITIES, INC.
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of February 18, 1999 by and among Hollywood Park, Inc., a Nevada
corporation (the "Company"), Bay St. Louis Casino Corp., a Mississippi
corporation, Bayview Yacht Club, Inc., a Mississippi corporation, Biloxi Casino
Corp., a Mississippi corporation, Boomtown Hoosier, Inc., a Nevada corporation,
Boomtown Hotel & Casino, Inc., a Nevada corporation, Boomtown, Inc., a Delaware
corporation, Casino Magic American Corp., a Minnesota corporation, Casino Magic
Corp., a Minnesota corporation, Casino Magic Finance Corp., a Mississippi
corporation, Casino One Corporation, a Mississippi corporation, Crystal Park
Hotel & Casino Development Company, LLC, a California limited liability
corporation, Hollywood Park Fall Operating Company, a Delaware corporation,
Hollywood Park Food Services, Inc., a California corporation, Hollywood Park
Operating Company, a Delaware corporation, HP Casino, Inc., a California
corporation, HP/Compton, Inc., a California corporation, HP Yakama, Inc., a
Delaware corporation, HP Yakama Consulting, Inc., a Delaware corporation,
Indiana Ventures LLC, a Nevada limited liability corporation, Louisiana Gaming
Enterprises, Inc., a Louisiana corporation, Louisiana-I Gaming, A Louisiana
Partnership in Commendam, Mardi Gras Casino Corp., a Mississippi corporation,
Mississippi-I Gaming, L.P., a Mississippi limited partnership, Pinnacle Gaming
Development Corp., a Colorado corporation, Switzerland County Development Corp.,
a Nevada corporation, Turf Paradise, Inc., an Arizona corporation (collectively,
the "Existing Guarantors"), and Lehman Brothers Inc., CIBC Oppenheimer Corp.,
Morgan Stanley & Co. Incorporated, NationsBanc Montgomery Securities LLC, SG
Cowen Securities Corporation, and Wasserstein Perella Securities, Inc.
(together, the "Initial Purchasers"), each of whom has agreed to purchase
severally and not jointly the Company's Series A 9 1/4% Senior Subordinated
Notes due 2007 (the "Series A Notes") pursuant to the Purchase Agreement (as
defined below).
This Agreement is made pursuant to the Purchase Agreement, dated as of
February 12, 1999 (the "Purchase Agreement"), by and among the Company, the
Existing Guarantors and the Initial Purchasers. In order to induce the Initial
Purchasers to purchase the Series A Notes, the Company and the Existing
Guarantors have agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchasers set forth in Section 7(l)(v) of the
Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Additional Guarantor: Any subsidiary of the Company that executes a
Subsidiary Guarantee under the Indenture after the date of this Agreement.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
<PAGE>
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: A Registered Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the Registrar under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes that were
tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series A Notes, each Interest
Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Company under the Act of the
Series B Notes (including the Subsidiary Guarantees) pursuant to a Registration
Statement pursuant to which the Company offers the Holders of all outstanding
Transfer Restricted Securities the opportunity to exchange all such outstanding
Transfer Restricted Securities held by such Holders for Series B Notes and
registered Subsidiary Guarantees in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
to sell the Series A Notes to (i) certain "qualified institutional buyers," as
such term is defined in Rule 144A under the Act, and to (ii) outside the United
States to Persons other than U.S. Persons in offshore transactions meeting the
requirements of rule 904 of Regulation S under the Act.
Guarantors: The Additional Guarantors and the Existing Guarantors.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of February 18, 1999, among the
Company, the Existing Guarantors and The Bank of New York, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such Indenture is
- --------
amended or supplemented from time to time in accordance with the terms thereof.
<PAGE>
Initial Purchasers: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person: An individual, partnership, corporation, trust or unincorporated
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement including,
without limitation, a Market-Maker Prospectus, as amended or supplemented by any
prospectus supplement and by all other amendments thereto, including post-
effective amendments, and all material incorporated by reference into such
Prospectus.
Record Holder: With respect to any Damages Payment Date relating to Notes,
each Person who is a Holder of Notes on the record date with respect to the
Interest Payment Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any Registration Statement of the Company relating
to (a) an offering of Series B Notes pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, which is filed pursuant to the provisions of this
Agreement, in each case including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
Series B Notes: The Company's Series B 9 1/4% Senior Subordinated Notes
due 2007 to be issued pursuant to the Indenture in the Exchange Offer.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Subsidiary Guarantee: The Guarantee by a Guarantor of the Company's
obligations under the Notes and Indenture.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note (including the Subsidiary
Guarantees), until the earliest to occur of (a) the date on which such Note is
exchanged in the Exchange Offer and entitled to be resold to the public by the
Holder thereof without complying with the prospectus delivery requirements of
the Act, (b) the date on which such Note (including the Subsidiary Guarantees)
has been effectively registered under the Act and disposed of in accordance with
a
<PAGE>
Shelf Registration Statement and (c) the date on which such Note (including
the Subsidiary Guarantees) may be distributed to the public pursuant to Rule 144
under the Act or by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including delivery of
the Prospectus contained therein).
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be
a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy (after the procedures set forth in Section 6(a)(i)
below have been complied with), the Company and the Guarantors shall (i) cause
to be filed with the Commission as soon as practicable after the Closing Date,
but in no event later than 45 days after the Closing Date, a Registration
Statement under the Act relating to the Series B Notes (including the Subsidiary
Guarantees) and the Exchange Offer, (ii) use best efforts to cause such
Registration Statement to become effective at the earliest possible time, but in
no event later than 150 days after the Closing Date, (iii) in connection with
the foregoing, file (A) all pre-effective amendments to such Registration
Statement as may be necessary in order to cause such Registration Statement to
become effective, (B) file, if applicable, a post-effective amendment to such
Registration Statement pursuant to Rule 430A under the Act and (C) cause all
necessary filings in connection with the registration and qualification of the
Series B Notes (including the Subsidiary Guarantees) to be made under the Blue
Sky laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer (subject to the limitations of Section 6(d)(x)), and (iv) upon
the effectiveness of such Registration Statement, commence and Consummate the
Exchange Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the Series B Notes (including the Subsidiary Guarantees) to be
offered in exchange for the Notes that are Transfer Restricted Securities and to
permit resales of Notes held by Broker-Dealers (other than unsold allotments
held by the Initial Purchasers) as contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall cause the Exchange Offer
Registration Statement to be effective continuously and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 20 business
days. The Company and the Guarantors shall cause the Exchange Offer to comply
with all applicable federal and state securities laws. No securities other than
the Notes
<PAGE>
(including the Subsidiary Guarantees) shall be included in the
Exchange Offer Registration Statement. The Company and the Guarantors shall use
their best efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 business days thereafter.
(c) The Company and the Guarantors shall indicate in a "Plan of
Distribution" section contained in the Prospectus contained in the Exchange
Offer Registration Statement that any Broker-Dealer who holds Series A Notes
that are Transfer Restricted Securities and that were acquired for its own
account as a result of market-making activities or other trading activities
(other than Transfer Restricted Securities acquired directly from the Company),
may exchange such Series A Notes pursuant to the Exchange Offer. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer, except to the extent required by the Commission. See Shearman &
Sterling no-action letter (available July 2, 1993).
The Company and the Guarantors shall use their best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 6(d) below to the extent
necessary to ensure that it is available for resales of Notes acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities (other than Transfer Restricted Securities acquired
directly from the Company), and to ensure that it conforms with the requirements
of this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for the lesser of (i) a period of 180
days from the date on which the Exchange Offer Registration Statement is
declared effective or (ii) such period of time as such Broker-Dealer must comply
with the prospectus delivery requirements of the Act in order to resell the
Series B Notes received in exchange for Series A Notes acquired for their own
account as a result of such market-making or other trading activities; subject
in the case of either clause (i) or (ii), to any suspension of the effectiveness
or usability of the Exchange Offer Registration Statement or the Prospectus
contained therein pursuant to Section 6(d)(i) hereof..
The Company and the Guarantors shall provide sufficient copies of the
latest version of such Prospectus to Broker-Dealers promptly upon request at any
time during such period in order to facilitate such resales. The Initial
Purchasers shall use reasonable efforts to ensure that Broker-Dealers effecting
such resales cooperate with the Company in responding to inquiries by the
Company as to whether such Series B Notes have been disposed of pursuant to such
Prospectus.
Upon Consummation of the Exchange Offer in accordance with this Section 3,
subject to Section 4(a), the Company shall have no further obligation to
register Transfer Restricted Securities pursuant to Section 4 of this Agreement
or, with respect to Transfer Restricted Securities not tendered in the Exchange
Offer, to register Series B Notes in another Exchange Offer pursuant to Section
3 of this Agreement; provided that the other provisions of this Agreement shall
continue to apply as set forth in such provisions.
<PAGE>
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company and the Guarantors are not
required to file an Exchange Offer Registration Statement or to Consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy (after the procedures set forth in Section 6(a)(i) below have
been complied with) or (ii) if any Holder of Transfer Restricted Securities that
is a "qualified institutional buyer," as such term is defined in Rule 144A under
the Act shall notify the Company prior to the 20th business day following the
Consummation of the Exchange Offer that such Holder alone or together with
holders who hold in the aggregate at least $1.0 million in principal amount of
Series A Notes (A) was prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) may not resell the Series B Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and that the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder, or
(C) is a Broker-Dealer and holds Series A Notes acquired directly from the
Company or one of its affiliates, then the Company and the Guarantors shall:
(x) cause to be filed a shelf Registration Statement pursuant to Rule
415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration
Statement") on or prior to the earliest to occur of (1) the 30th day after
the date on which the Company determines that it is not required to file
the Exchange Offer Registration Statement, or permitted to Consummate the
Exchange Offer and (2) the 30th day after the date on which the Company
receives notice from a Holder of Transfer Restricted Securities as
contemplated by clause (ii) of paragraph (a) above (such earliest date
being the "Shelf Filing Deadline"), which Shelf Registration Statement
shall provide for resales of all Transfer Restricted Securities the Holders
of which shall have provided the information required pursuant to Section
4(b) hereof; and
(y) use their best efforts to cause such Shelf Registration Statement
to be declared effective by the Commission on or before the 90th day after
the Shelf Filing Deadline.
The Company and the Guarantors shall use their best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (d) hereof to the extent
necessary to ensure that it is available for resales of Notes by the Holders of
Transfer Restricted Securities entitled to the benefit of this Section 4(a), and
to ensure that it conforms with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to
time, for a period of at least two years following the Closing Date or such
shorter period that will terminate when all Notes covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement or become eligible for resale pursuant to Rule 144 without volume or
other restrictions, subject to any suspension of the effectiveness or usability
of the Shelf Registration Statement or the Prospectus contained therein pursuant
to Section 6(d)(i) hereof.
Upon the filing of the Shelf Registration Statement in accordance with this
Section 4, the Company shall have no further obligation to register Series B
Notes in an Exchange Offer
<PAGE>
pursuant to Section 3 of this Agreement; provided that the other provisions of
this Agreement shall continue to apply as set forth in such provisions.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 10 business days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information. Each Holder as to which any Shelf Registration Statement
is being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading and shall promptly
supply such other information as the Company may from time to time reasonably
request.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
sections 3(a) and 4(a), as applicable, (ii) any of such required Registration
Statements has not been declared effective by the Commission on or prior to the
date specified for such effectiveness in sections 3(a) and 4(a), as applicable,
(the "Effectiveness Target Date"), (iii) the Exchange Offer has not been
Consummated within 30 business days after the Effectiveness Target Date with
respect to the Exchange Offer Registration Statement or (iv) any Registration
Statement required by this Agreement is filed and declared effective but shall
thereafter cease to be effective or fail to be usable for its intended purpose
for the requisite period without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself immediately declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default"), the Company and the Guarantors
jointly and severally agree to pay liquidated damages to each Holder of Transfer
Restricted Securities with respect to the first 90-day period immediately
following the occurrence of the first Registration Default, in an amount equal
to $.05 per week per $1,000 principal amount of Transfer Restricted Securities
held by such Holder for each week or portion thereof that the Registration
Default continues. The amount of the liquidated damages shall increase by an
additional $.05 per week per $1,000 in principal amount of Transfer Restricted
Securities with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of liquidated damages of $.50
per week per $1,000 principal amount of Transfer Restricted Securities. All
accrued liquidated damages shall be paid to Record Holders by the Company and
the Guarantors by wire transfer of immediately available funds or by federal
funds check on each Damages Payment Date, as provided in the Indenture.
Following the cure of all Registration Defaults relating to any particular
Transfer Restricted Securities, the accrual of liquidated damages with respect
to such Transfer Restricted Securities will cease. The applicable Registration
Default will be deemed cured (1) upon the filing of the required Registration
Statement in the case of clause (i) above,
<PAGE>
(2) upon the effectiveness of such required Registration Statement in the case
of clause (ii) above, (3) upon the Consummation of the Exchange Offer in the
case of clause (iii) above and (4) in the case of clause (iv), upon the cure
provided therein.
All payment obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such payment obligations with respect to
such Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantors shall comply with all of the
provisions of Section 6(d) below, shall use their best efforts to effect such
exchange to permit the sale of Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to the Company and the
Guarantors there is a question as to whether the Exchange Offer is
permitted by applicable federal law, the Company and the Guarantors hereby
agree to seek a no-action letter or other favorable decision from the
Commission allowing the Company and the Guarantors to Consummate an
Exchange Offer for such Series A Notes. The Company and the Guarantors
hereby agree to pursue the issuance of such a decision to the Commission
staff level but shall not be required to take commercially unreasonable
action to effect a change of Commission policy. The Company and the
Guarantors hereby agree however, to (A) participate in telephonic
conferences with the Commission, (B) deliver to the Commission staff an
analysis prepared by counsel to the Company and the Guarantors setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable and which need not be a written
resolution) by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer pursuant
to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Company, prior to the
Consummation thereof, a written representation to the Company and the
Guarantors (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the effect
that (A) it is not an affiliate of the Company, (B) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding
with any person to participate in, a distribution of the Series B Notes to
be issued in the Exchange Offer and (C) it is acquiring the Series B Notes
in its ordinary course of business. In addition, all such Holders of
Transfer Restricted Securities shall otherwise cooperate in the Company's
and the Guarantors' preparations for the Exchange Offer. Each Holder hereby
acknowledges and agrees that any Broker-Dealer who acquired Series A Notes
directly from the Company or any affiliate of the Company or the Guarantors
and any such Holder intending to use the
<PAGE>
Exchange Offer to participate in a distribution of the securities to be
acquired in the Exchange Offer (1) could not under Commission policy as in
effect on the date of this Agreement rely on the position of the Commission
enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and
Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted
in the Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including any no-action letter obtained pursuant
to clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a secondary
resale transaction and that such a secondary resale transaction should be
covered by an effective Registration Statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K if the resales are of Series B Notes obtained by such Holder
in exchange for Series A Notes acquired by such Holder directly from the
Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May
13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) and, if
applicable, any no-action letter obtained pursuant to clause (i) above and
(B) including a representation that neither the Company nor any Guarantor
has entered into any arrangement or understanding with any Person to
distribute the Series B Notes to be received in the Exchange Offer and
that, to the best of the Company's and each Guarantor's information and
belief, each Holder participating in the Exchange Offer is acquiring the
Series B Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Series B Notes received in the Exchange Offer.
(iv) The Company and the Guarantors will furnish to each Initial
Purchaser and its counsel the Exchange Offer Registration Statement and all
amendments and supplements thereto before filing such documents with the
Commission, and such documents will be subject to the reasonable review and
comment of each Initial Purchaser and its counsel.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall comply with all the
provisions of Section 6(d) below and shall use their best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Company and the Guarantors will as expeditiously as
possible prepare and file with the Commission a Registration Statement relating
to the registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in accordance with
the intended method or methods of distribution thereof within the time periods
and otherwise in accordance with the provisions hereof.
<PAGE>
(c) [Intentionally omitted.]
(d) General Provisions. In connection with any Registration Statement
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of Notes by
Broker-Dealers), the Company and the Guarantors shall:
(i) use their best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Act or any regulation thereunder, financial
statements of any Guarantors) for the period specified in Section 3 or 4 of
this Agreement, as applicable; upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained therein
(A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company and the Guarantors shall
file promptly an appropriate amendment to such Registration Statement, in
the case of clause (A), correcting any such misstatement or omission, and,
in the case of either clause (A) or (B), use their best efforts to cause
such amendment to be declared effective and such Registration Statement and
the related Prospectus to become usable for their intended purpose(s) as
soon as practicable thereafter. Notwithstanding the foregoing, at any time
after Consummation of the Exchange Offer, the Company and the Guarantors
may allow the Exchange Offer Registration Statement (if otherwise required
to keep it effective) or the Shelf Registration Statement and the related
Prospectus to cease to become effective and usable if (x) the board of
directors of the Company determines in good faith that it is in the best
interests of the Company not to disclose the existence of or facts
surrounding any proposed or pending material corporate transaction
involving the Company and the Guarantors, and the Company mails
notification to the Holders within five business days after the Board of
Directors makes such determination, or (y) the Prospectus contained in the
Exchange Offer Registration Statement or the Shelf Registration Statement,
as the case may be, contains an untrue statement of the material fact or
omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided that 180-day period referred to in Section 3(c) during
which the Exchange Offer Registration Statement is required to be effective
and usable or the two-year period referred to in Section 4(a) hereof during
which the Shelf Registration Statement is required to be effective and
usable shall be extended by the number of days during which such
Registration Statement was not effective or usable pursuant to the
foregoing provisions (which such extension shall be the Holders' sole
remedy hereunder);
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, as applicable; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
the applicable provisions of Rules 424, 430A and 462 under the Act
<PAGE>
in a timely manner; and comply with the provisions of the Act with respect
to the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders of Transfer
Restricted Securities promptly and, if requested by such Persons, to
confirm such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to
any Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes
in the Registration Statement or the Prospectus in order to make the
statements therein not misleading or that requires the making of any
additions to or changes in the Prospectus in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company and the Guarantors shall use their best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) furnish to each of the selling Holders of Transfer Restricted
Securities and each of the underwriter(s), if any, before filing with the
Commission, copies of any Shelf Registration Statement or any Prospectus
included therein or any amendments or supplements to any such Registration
Statement or Prospectus, which documents will be subject to the reasonable
review and comment of such Holders and underwriter(s), if any, for a period
of at least five business days, and the Company and the Guarantors will not
file any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including all
such documents incorporated by reference) if a selling Holder of Transfer
Restricted Securities covered by such Registration Statement or the
underwriter(s), if any, shall not have had an opportunity to participate in
the preparation thereof;
(v) make available at reasonable times at the Company's principal place
of business for inspection by the selling Holders of Transfer Restricted
Securities, any underwriter participating in any disposition pursuant to
such Registration Statement, and
<PAGE>
any single firm of attorneys or any single accounting firm retained by such
selling Holders or any of the underwriter(s) who shall certify to the
Company and the Guarantors that they have a current intention to sell
Transfer Restricted Securities pursuant to a Shelf Registration Statement
such financial and other information of the Company and the Guarantors as
reasonably requested and cause the Company's and the Guarantors' officers,
directors and employees to respond to such inquiries as shall be reasonably
necessary, in the reasonable judgment of counsel to such Holders, to
conduct a reasonable investigation; provided, however, that each such party
shall be required to maintain in confidence and not to disclose to any
other person any information or records reasonably designated by the
Company in writing as being confidential, until such time as (A) such
information becomes a matter of public record (whether by virtue of its
inclusion in such Registration Statement or otherwise), or (B) such person
shall be required so to disclose such information pursuant to the subpoena
or order of any court or other governmental agency or body having
jurisdiction over the matter (subject to the requirements of such order,
and only after such person shall have given the Company prompt prior
written notice of such requirement), or (C) subject to the Company's right
under the last sentence of Section 6(d)(i) to suspend the effectiveness or
usability of such Registration Statement or Prospectus, such information is
required to be set forth in such Registration Statement or the Prospectus
included therein or in an amendment to such Registration Statement or an
amendment or supplement to such Prospectus in order that such Registration
Statement, Prospectus, amendment or supplement, as the case may be, does
not contain an untrue statement of a material fact or omit to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading and provided further, that appropriate
arrangements are made, to the extent required by applicable anti-trust law,
to limit access to such records, information or documents to
representatives of the Holders who are not officers or employees of the
Holders; and provided further that, without limiting the foregoing, no such
records, information or documents shall be used by any person or entity
obtaining access thereto in connection with any market transactions in
securities of the Company or the Guarantors in violation of law; and
provided further that the Company and the Guarantors shall not be required
to provide any information to the Holders or the underwriters that the
Company and the Guarantors are prohibited by law from disclosing;
(vi) if requested by any selling Holders of Transfer Restricted
Securities or the underwriter(s), if any, promptly incorporate in any Shelf
Registration Statement or Prospectus, pursuant to a supplement or post-
effective amendment if necessary, such information as such selling Holders
and underwriter(s), if any, may reasonably request to have included
therein, including, without limitation (in the case of underwriters) and
solely with respect to (in the case of selling Holders), information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities information with respect to the principal amount of Transfer
Restricted Securities being sold to such underwriter(s), the purchase price
being paid therefor and any other terms of the offering of the Transfer
Restricted Securities to be sold in such offering; and make all required
filings of such Prospectus supplement or post-effective amendment as soon
as practicable after the
<PAGE>
Company is notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(vii) furnish to each selling Holder of Transfer Restricted Securities
and each of the underwriter(s), if any, without charge, at least one copy
of the Shelf Registration Statement, as first filed with the Commission,
and of each amendment thereto, including all documents incorporated by
reference therein and all exhibits (including exhibits incorporated therein
by reference);
(viii) deliver to each selling Holder of Transfer Restricted Securities
and each of the underwriter(s), if any, without charge, as many copies of
the Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company and
the Guarantors hereby consent to the use of the Prospectus and any
amendment or supplement thereto by each of the selling Holders and each of
the underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(ix) enter into such agreements (including an underwriting agreement),
and make such representations and warranties, and take all such other
actions in connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement, all to such extent
as may be customarily and reasonably requested by the Initial Purchasers
or, in the case of registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, by any Holder or
Holders of Transfer Restricted Securities who hold at least $25 million in
aggregate principal amount of such class of Transfer Restricted Securities;
provided, that, the Company and the Guarantors shall not be required to
enter into any such agreement more than once with respect to all of the
Transfer Restricted Securities and, in the case of a Shelf Registration
Statement, may delay entering into such agreement if the Board of Directors
of the Company determines in good faith that it is in the best interests of
the Company and the Guarantors not to disclose the existence of or facts
surrounding any proposed or pending material corporate transaction
involving the Company and the Guarantors; and whether or not an
underwriting agreement is entered into and whether or not the registration
is an Underwritten Registration, the Company and the Guarantors shall:
(A) furnish to the Initial Purchaser, the Holders of Transfer
Restricted Securities who hold at least $25 million in aggregate
principal amount of such class of Transfer Restricted Securities (in
the case of a Shelf Registration Statement), and each underwriter, if
any, in such substance and scope as they may request and as are
customarily made in connection with an offering of debt securities
pursuant to a Registration Statement (i) upon the effective date of
any Registration Statement (and if such Registration Statement
contemplates an Underwritten Offering of Transfer Restricted
Securities, upon the date of the
<PAGE>
closing under the underwriting agreement related thereto) and (ii)
upon the filing of any amendment or supplement to any Registration
Statement:
(1) a certificate, dated the date of effectiveness of
the Shelf Registration Statement signed by (y) the respective
Chairman of the Board, the respective President or any Vice
President and (z) the respective Chief Financial Officer of the
Company and each of the Guarantors confirming, as of the date
thereof, the matters set forth in paragraph (j) of Section 7 of
the Purchase Agreement and such other matters as such parties
may reasonably request;
(2) an opinion, dated the date of effectiveness of the
Shelf Registration Statement, as the case may be, of counsel for
the Company covering the matters set forth in paragraph (d) of
Section 7 of the Purchase Agreement and such other matters as
such parties may reasonably request, and in any event including
a statement to the effect that in the course of the preparation
of such Registration Statement and the related Prospectus, such
counsel participated in conferences with certain officers and
employees of the Company, representatives of the independent
public accountants for the Company and representatives of the
underwriters, if any, and their counsel at which the contents of
the Registration Statement and related matters were discussed
and, although such counsel need not pass upon or assume
responsibility for the accuracy, completeness or fairness of the
statements contained or incorporated by reference in such
Registration Statement or the related Prospectus, no facts have
come to such counsel's attention that lead it to believe that
the Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became
effective, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading. Such counsel need not assume any
responsibility for or independently verify the accuracy,
completeness or fairness of the financial statements and
schedules and other financial data included or incorporated in
any Registration Statement or related Prospectus and need
express no view as to the accounting or financial records from
which such financial statements, schedules and data are derived;
and
(3) a customary comfort letter, the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters by underwriters in connection with
primary underwritten offerings, to the extent permitted by
relevant accounting industry rules and guidelines (including the
Statement on Accounting Standards No. 72), and affirming the
matters set forth in
<PAGE>
the comfort letters delivered pursuant to
Section 7 of the Purchase Agreement, without exception;
(B) set forth in full or incorporated by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the
Company and the Guarantors pursuant to this clause (x), if any.
(x) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders of Transfer Restricted Securities, the
underwriter(s), if any, and their respective counsel in connection with the
registration and qualification of the Transfer Restricted Securities under
the securities or Blue Sky laws of such jurisdictions as the selling
Holders of Transfer Restricted Securities or underwriter(s) may reasonably
request and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Transfer
Restricted Securities, covered by the Shelf Registration Statement filed
pursuant to Section 4 hereof; provided, however, that the Company and the
Guarantors shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation, other
than as to matters and transactions relating to the Registration Statement,
in any jurisdiction where it is not now so subject;
(xi) shall issue, upon the request of any Holder of Series A Notes
covered by the Shelf Registration Statement, Series B Notes, having an
aggregate principal amount equal to the aggregate principal amount of
Series A Notes surrendered to the Company by such Holder in exchange
therefor or being sold by such Holder; such Series B Notes to be registered
in the name of such Holder or in the name of the purchaser(s) of such
Notes, as the case may be; in return, the Series A Notes held by such
Holder shall be surrendered to the Company for cancellation;
(xii) in connection with any sale of Transfer Restricted Securities that
will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders of Transfer Restricted
Securities and the underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and enable
such Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders or the underwriter(s), if any, may
request at least two business days prior to any sale of Transfer Restricted
Securities made by such underwriter(s);
(xiii) use its best efforts to cause the Transfer Restricted Securities
covered by the Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof or the
<PAGE>
underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xi)
above;
(xiv) if any fact or event contemplated by clause (d)(iii)(D) above
shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(xv) use their best efforts to provide a CUSIP number for all Transfer
Restricted Securities not later than the effective date of the Registration
Statement and provide the Trustee under the Indenture with printed
certificates for the Transfer Restricted Securities which are in a form
eligible for deposit with the Depository Trust Company;
(xvi) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD;
(xvii) otherwise use their best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
for the twelve-month period (A) commencing at the end of any fiscal quarter
in which Transfer Restricted Securities are sold to underwriters in a firm
or best efforts Underwritten Offering or (B) if not sold to underwriters in
such an offering, beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the Registration
Statement;
(xviii) cause the Indenture to be qualified under the TIA not later than
the effective date of the first Registration Statement required by this
Agreement, and, in connection therewith, cooperate with the Trustee and the
Holders of Notes to effect such changes to the Indenture as may be required
for such Indenture to be so qualified in accordance with the terms of the
TIA; and execute, and use its best efforts to cause the Trustee to execute,
all documents that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner;
(xix) provide promptly to each Holder upon request each document filed
with the Commission pursuant to the requirements of Section 13 and Section
15 of the Exchange Act; and
(xx) cause each Additional Guarantor upon the creation or acquisition by
the Company of such Additional Guarantor, to execute a counterpart to this
Agreement in the
<PAGE>
form attached hereto as Annex A and to deliver such counterpart to the
Initial Purchasers no later than five business days following the execution
thereof.
Each Holder agrees by acquisition of a Transfer Restricted Security that,
upon receipt of any notice from the Company of the existence of any fact of the
kind described in Section 6(d)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(d)(xiv) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If
so directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities, that was current at the time of receipt of such notice. In the
event the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
6(d)(iii)(D) hereof to and including the date when each selling Holder covered
by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(d)(xiv) hereof or
shall have received the Advice (which such extensions shall be the Holders' sole
remedy hereunder).
The Company and the Guarantors may require each Holder of Transfer
Restricted Securities as to which any registration is being effected to furnish
to the Company such information regarding such Holder and such Holder's intended
method of distribution of the applicable Transfer Restricted Securities as the
Company may from time to time reasonably request in writing, but only to the
extent that such information is required in order to comply with the Act. The
Company may exclude from such registration Transfer Restricted Securities of any
selling Holder so long as such Holder fails to furnish such information within a
reasonable time (and in any event within ten business days) after receiving such
request. Each such Holder agrees to notify the Company as promptly as
practicable of (i) any inaccuracy or change in information previously furnished
by such Holder to the Company or (ii) the occurrence of any event, in either
case, as a result of which any Prospectus relating to such registration contains
or would contain an untrue statement of a material fact regarding such Holder or
such Holder's intended method of distribution of the applicable Transfer
Restricted Securities or omits to state any material fact regarding such Holder
or such Holder's intended method of distribution of the applicable Transfer
Restricted Securities required to be stated therein or necessary to make the
statements therein not misleading and promptly to furnish to the Company any
additional information required to correct and update any previously furnish to
the Company any additional information required to correct and update any
previously furnished information or required so that such Prospectus shall not
contain, with respect to such Holder or the distribution of the applicable
Transfer Restricted Securities an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
<PAGE>
SECTION 7. REGISTRATION EXPENSES
All expenses incident to the Company's and the Guarantors' performance of
or compliance with this Agreement will be borne by the Company regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including
filings made by any Initial Purchaser or Holder with the NASD (and, if
applicable, the fees and expenses of any "qualified independent underwriter" and
its counsel that may be required by the rules and regulations of the NASD));
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company and the Guarantors and all
reasonable fees and disbursements of one special counsel for all the Holders of
Transfer Restricted Securities; and (v) all fees and disbursements of
independent certified public accountants of the Company (including the expenses
of any special audit and comfort letters required by or incident to such
performance); provided, however, that in no event shall the Company or the
Guarantors be responsible for any underwriting discounts, commissions or fees
attributable to the sale or other disposition of Transfer Restricted Securities.
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors shall, jointly and severally, indemnify
and hold harmless each selling Holder of Transfer Restricted Securities whose
Transfer Restricted Securities are included in any Registration Statement, its
officers and employees and each person, if any, who controls any such Holders,
within the meaning of the Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which that
Holder, officer, employee or controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in any Registration Statement
or Prospectus or in any amendment or supplement thereto or (B) in any blue sky
application or other document prepared or executed by the Company or any
Guarantor (or based upon any written information furnished by the Company or any
Guarantor) specifically for the purpose of qualifying any or all of the Notes
under the securities laws of any state or other jurisdiction (any such
application, document or information being hereinafter called a "Blue Sky
Application"), or (ii) the omission or alleged omission to state in any
Registration Statement or Prospectus, or in any amendment or supplement thereto,
or in any Blue Sky Application any material fact required to be stated therein
or necessary to make the statements therein not misleading, and shall reimburse
each Holder and each such officer, employee or controlling person promptly upon
demand for any legal or other expenses reasonably incurred by that Holder,
officer, employee or controlling person in connection with investigating or
defending or
<PAGE>
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company and the
Guarantors shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of, or is based upon, any
untrue statement or alleged untrue statement or omission or alleged omission
made (i) in any Registration Statement or Prospectus, or in any such amendment
or supplement, or in any Blue Sky Application, in reliance upon and in
conformity with written information concerning such Holder furnished to the
Company by or on behalf of any Holder specifically for inclusion therein, or
(ii) in the preliminary Prospectus or the final Prospectus, as the case may be,
if a copy of the final Prospectus (as then amended or supplemented and provided
by the Company) was not sent or given by or on behalf of such Holder to the
person asserting any such loss, claim, damage, liability or expense, at or prior
to the written confirmation of the sale of the Transfer Restricted Securities
and the final Prospectus (as then amended or supplemented) could have corrected
such untrue or alleged untrue statement or such omission or alleged omission.
The foregoing indemnity agreement is in addition to any liability which the
Company and the Guarantors may otherwise have to any Holder or to any officer,
employee or controlling person of that Holder.
(b) Each Holder, severally and not jointly, shall indemnify and hold
harmless the Company and the Guarantors, their respective officers and
employees, each of their respective directors, and each person, if any, who
controls the Company or the Guarantors within the meaning of the Securities Act,
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company, the Guarantors or any such
director, officer or controlling person may become subject, under the Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in any Registration Statement or Prospectus, or in
any amendment or supplement thereto, or (B) in any Blue Sky Application or (ii)
the omission or alleged omission to state in any Registration Statement or
Prospectus, or in any amendment or supplement thereto, or in any Blue Sky
Application any material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information concerning
such Holders furnished to the Company by or on behalf of that Holder
specifically for inclusion therein, and shall reimburse the Company, the
Guarantors and any such director, officer or controlling person for any legal or
other expenses reasonably incurred by the Company, the Guarantors or any such
director, officer or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred. The foregoing indemnity agreement is in
addition to any liability which any Holder may otherwise have to the Company,
the Guarantors or any such director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability
<PAGE>
which it may have under this Section 8 except to the extent it has been
materially prejudiced by such failure and, provided further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 8. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided, however, any indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of the
indemnified party unless (i) the employment thereof has been specifically
authorized by the indemnifying party in writing, (ii) such indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party and in the reasonable judgment of such
counsel it is advisable, under applicable standards of professional conduct, for
such indemnified party to employ separate counsel or (iii) the indemnifying
party has failed to assume the defense of such action and employ counsel
reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to one local counsel) at any time for all such indemnified parties, if
the indemnified parties under this Section 8 consist of Holders or any of their
respective officers, employees or controlling persons, or by the Company, if the
indemnified parties under this Section consist of the Company, the Guarantors or
any of their respective directors, officers, employees or controlling persons.
No indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld), settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with the consent of the indemnifying party or if there
be a final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein,
<PAGE>
then each indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability, or action in respect thereof,
(i) in such proportion as shall be appropriate to reflect the relative benefits
received by the Company and the Guarantors, on the one hand, and the Holders on
the other, from the offering of the Notes or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Guarantors, on the one
hand and the Holders on the other with respect to the statements or omissions
which resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Guarantors, on the one hand and the
Holders on the other with respect to such offering shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Series A
Notes purchased under the Purchase Agreement (before deducting expenses)
received by the Company and the Guarantors, on the one hand, bears to the total
proceeds received by the Holders with respect to the Transfer Restricted
Securities sold pursuant to the Registration Statement, on the other hand. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company, the Guarantors or
the Holders, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Guarantors and the Holders agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were to be determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section shall be deemed to
include, for purposes of this Section 8(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8(d), no Holder shall be required to contribute any amount in excess of
the amount by which the proceeds received by it in connection with its sale of
Transfer Restricted Securities exceeds the amount of any damages which such
Holder has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Holders' obligations to
contribute as provided in this Section 8(d) are several and not joint.
SECTION 9. RULE 144A
The Company and each Guarantor hereby agrees with each Holder of Transfer
Restricted Securities, during any period in which the Company or such Guarantor
is not subject to Section 13 or 15(d) of the Exchange Act within the two-year
period following the Closing Date, to make available to any Holder or beneficial
owner of Transfer Restricted Securities or any Holder upon its request, in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities from such Holder or beneficial owner, the information
required by Rule
<PAGE>
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder unless
such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on
the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of such
underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering at such Holders' expense. In any such
Underwritten Offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate principal amount of the Transfer Restricted Securities
included in such offering; provided, that such investment bankers and managers
must be reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors agree that monetary damages
(other than the liquidated damages contemplated hereby) would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agree to waive the defense in any action for
specific performance (other than in connection with a breach or alleged breach
for which Liquidated Damages are otherwise provided) that a remedy at law would
be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor will,
on or after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. Except as
disclosed in the final Offering Memorandum, neither the Company nor any
Guarantor has previously entered into any agreement granting any registration
rights with respect to its securities to any Person. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's or any Guarantor's securities
under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. The Company and the Guarantors will
not take any action, or permit any change to occur, with respect to the Notes
that would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the
<PAGE>
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer or
registered pursuant to the Shelf Registration Statement and that does not affect
directly or indirectly the rights of other Holders whose securities are not
being tendered pursuant to such Exchange Offer or registered pursuant to the
Shelf Registration Statement, respectively, may be given by the Holders of a
majority of the outstanding principal amount of Transfer Restricted Securities
being tendered or registered, as applicable.
(e) Third Party Beneficiary. The Holders shall be third party beneficiaries
to the agreements made hereunder between the Company, on the one hand, and the
Initial Purchasers, on the other hand, and shall have the right to enforce such
agreements directly to the extent they may deem such enforcement necessary or
advisable to protect their rights or the rights of Holders hereunder.
(f) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
Hollywood Park, Inc.
1050 South Prairie Avenue
P.O. Box 369
Inglewood, CA 90306-0369
Telecopier No.: 310/671-4460
Attention: G. Michael Finnigan
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Telecopier No.: 310/203-7199
Attention: Alvin G. Segel, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
<PAGE>
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(g) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders; provided, however, that this Agreement shall not inure to the benefit
of or be binding upon a successor or assign of a Holder unless and to the extent
such successor or assign acquired Transfer Restricted Securities from such
Holder.
(h) Counterparts. This Agreement may be executed in any number of
counterparts and by the 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.
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(k) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) Entire Agreement. This Agreement together with the other Operative
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company and the
Guarantors with respect to the Transfer Restricted Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
[Signature pages follow]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
HOLLYWOOD PARK, INC.
By: /s/ G. Michal Finnigan
-----------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
GUARANTORS:
BAY ST. LOUIS CASINO CORP.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
BAYVIEW YACHT CLUB, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
BILOXI CASINO CORP.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
BOOMTOWN HOOSIER, INC.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
<PAGE>
BOOMTOWN HOTEL & CASINO, INC.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
BOOMTOWN, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
CASINO MAGIC AMERICAN CORP.
By: /s/ G. Michael Finnigan
--------------------------
Name: G. Michael Finnigan
Title: Vice President
CASINO MAGIC CORP.
By: /s/ G. Michael Finnigan
--------------------------
Name: G. Michael Finnigan
Title: Vice President
CASINO MAGIC FINANCE CORP.
By: /s/ G. Michael Finnigan
--------------------------
Name: G. Michael Finnigan
Title: Vice President
<PAGE>
CASINO ONE CORPORATION
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
CRYSTAL PARK HOTEL & CASINO
DEVELOPMENT COMPANY, LLC
By its Manager
HP/COMPTON, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HOLLYWOOD PARK FALL OPERATING
COMPANY
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Executive Vice President
HOLLYWOOD PARK FOOD SERVICES, INC.
By: /s/ G. Michael Finnigan
--------------------------
Name: G. Michael Finnigan
Title: Executive Vice President
HOLLYWOOD PARK OPERATING COMPANY
By: /s/ G. Michael Finnigan
--------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
<PAGE>
HP CASINO, INC.
By: /s/ G. Michael Finnigan
---------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HP/COMPTON, INC.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
HP YAKAMA, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
HP YAKAMA CONSULTING, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
INDIANA VENTURES LLC
By its Managing Member
BOOMTOWN HOOSIER, INC.
BY: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
<PAGE>
LOUISIANA GAMING ENTERPRISES, INC.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
LOUISIANA-I GAMING, A LOUISIANA
PARTNERSHIP IN COMMENDAM
By its General Partner
LOUISIANA GAMING ENTERPRISES, INC.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Chief Financial Officer
MARDI GRAS CASINO CORP.
By: /s/ G. Michael Finnigan
---------------------------
Name: G. Michael Finnigan
Title: Vice President
MISSISSIPPI I-GAMING, L.P.
By its General Partner
BAYVIEW YACHT CLUB, INC.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: Vice President
<PAGE>
PINNACLE GAMING DEVELOPMENT CORP.
By: /s/ G. Michael Finnigan
------------------------
Name: G. Michael Finnigan
Title: President
SWITZERLAND COUNTY DEVELOPMENT
CORP.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
TURF PARADISE, INC.
By: /s/ G. Michael Finnigan
-------------------------
Name: G. Michael Finnigan
Title: Vice President
LEHMAN BROTHERS INC.
CIBC OPPENHEIMER CORP.
MORGAN STANLEY & CO. INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES LLC
SG COWEN SECURITIES CORPORATION
WASSERSTEIN PERELLA SECURITIES, INC.
BY LEHMAN BROTHERS INC.
By: /s/ Raymond C. Mikulich
---------------------------
Authorized Representative
<PAGE>
Annex A
-------
Counterpart To Registration Rights Agreement
--------------------------------------------
The undersigned hereby absolutely, unconditionally and irrevocably agrees
(as a "Guarantor") to use best efforts to include its Subsidiary Guarantee in
any Registration Statement required to be filed by the Company and the
Guarantors pursuant to the Registration Rights Agreement, dated as of February
18, 1999, (the "Registration Rights Agreement") by and among Hollywood Park,
Inc., a Nevada corporation, the guarantors named therein, Lehman Brothers Inc.,
CIBC Oppenheimer Corp., Morgan Stanley & Co. Incorporated, NationsBanc
Montgomery Securities LLC, SG Cowen Securities Corporation, and Wasserstein
Perella Securities, Inc.; to use best efforts to cause such Registration
Statement to become effective as specified in the Registration Rights Agreement;
and to otherwise be bound by the terms and provisions of the Registration Rights
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Counterpart as of
February 18, 1999.
[NAME]
By:
---------------------------
Name:
Title:
<PAGE>
EXHIBIT 12.1
HOLLYWOOD PARK, INC.
CALCULATION OF HISTORICAL RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30,
-------------------------------------- ---------------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------- ------- ------- -------
(in thousands, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Pre-tax income
(loss)............... $7,418 $5,340 $ (469) $ (790) $14,520 $11,743 $13,770
Add fixed charges..... 1,517 3,061 4,515 2,422 8,094 4,352 12,946
Less capitalized
interest............. 0 0 (593) (1,446) (425) (15) (802)
------ ------ ------ ------- ------- ------- -------
Total earnings...... $8,935 $8,401 $3,453 $ 186 $22,189 $16,080 $25,914
====== ====== ====== ======= ======= ======= =======
Fixed Charges:
Interest expense-
inclusive of the
amortization of debt
issuance costs....... $1,517 $3,061 $3,922 $ 1,446 $ 7,302 $ 3,853 $11,827
Capitalized interest.. 0 0 593 942 425 15 802
Estimated interest
factor in rent
expense.............. 0 0 0 34 367 484 317
------ ------ ------ ------- ------- ------- -------
Total fixed
charges............ $1,517 $3,061 $4,515 $ 2,422 $ 8,094 $ 4,352 $12,946
====== ====== ====== ======= ======= ======= =======
Ratio of earnings to
fixed charges (a)...... 5.89x 2.74x -- -- 2.74x 3.69x 2.00x
====== ====== ====== ======= ======= ======= =======
</TABLE>
- --------
(a) In computing the ratio of earnings to fixed charges: (1) earnings were
calculated from income from continuing operations, before income taxes, and
fixed charges, and excluding capitalized interest; and (2) fixed charges
were computed from interest expense, amortization of debt issuance costs,
capitalized interest, and the estimated interest included in rental
expense. For the years ended December 31, 1995 and 1996, earnings were
insufficient to cover fixed charges by $1.1 million and $2.2 million,
respectively.
<PAGE>
EXHIBIT 12.2
HOLLYWOOD PARK, INC.
CALCULATION OF PRO FORMA RATIO OF EARNINGS TO FIXED CHANGES
<TABLE>
<CAPTION>
Total Company Pro Forma Restricted Group Pro Forma
-------------------------- --------------------------
Nine months Nine months
Year ended ended Year ended ended
December 31, September 30, December 31, September 30,
1997 1998 1997 1998
------------ ------------- ------------ -------------
(in thousands, except ratios)
<S> <C> <C> <C> <C>
Earnings:
Pre-tax income (loss).. $(7,501) $ 6,529 $(1,796) $ 1,978
Add fixed charges...... 64,858 51,259 47,627 38,102
Less capitalized
interest.............. (2,389) (3,475) (2,282) (3,075)
------- ------- ------- -------
Total earnings....... $54,968 $54,313 $43,549 $37,005
======= ======= ======= =======
Fixed Charges:
Interest expense--
inclusive of the
amortization of debt
issuance costs........ $61,154 $46,749 $44,227 $34,118
Capitalized interest... 2,389 3,475 2,282 3,075
Estimated interest
factor in rent
expense............... 1,315 1,035 1,118 909
------- ------- ------- -------
Total fixed charges.. $64,858 $51,259 $47,627 $38,102
======= ======= ======= =======
Ratio of earnings to
fixed charges(a)........ -- 1.06x -- --
======= ======= ======= =======
</TABLE>
- --------
(a) In computing the ratio of earnings to fixed charges: (1) earnings were
calculated from income from continuing operations, before income taxes, and
fixed charges, and excluding capitalized interest; and (2) fixed charges
were computed from interest expense, amortization of debt issuance costs,
capitalized interest, and the estimated interest included in rental
expense. Hollywood Park's total company pro forma earnings for the year
ended December 31, 1997, were not sufficient to cover its pro forma fixed
charge requirement by $9.9 million. Hollywood Park's restricted group pro
forma earnings for the year ended December 31, 1997, and for the nine
months ended September 30, 1998, were not sufficient to cover its pro forma
fixed charge requirements by $4.1 million and $1.1 million, respectively.
<PAGE>
EXHIBIT 21.1
List of Subsidiaries
<TABLE>
<CAPTION>
Subsidiary State Of Organization
- ---------- ---------------------
<S> <C>
Bay St. Louis Casino Corp. Mississippi
Bayview Yacht Club, Inc. Mississippi
Biloxi Casino Corp. Mississippi
Boomtown Hoosier, Inc. Nevada
Boomtown Hotel & Casino, Inc. Nevada
Boomtown, Inc. Delaware
Boston Casino Corp. Massachusetts
Casino Advertising, Inc. Mississippi
Casino Magic American Corp. Minnesota
Casino Magic Corp. Minnesota
Casino Magic Finance Corp. Mississippi
Casino Magic Management Services Corp. Minnesota
Casino Magic Neuquen SA Argentina
Casino Magic of Louisiana, Corp. Louisiana
Casino Magic Support Services SA Argentina
Casino One Corporation Mississippi
Crystal Park Hotel and Casino Development Company, LLC California
Hollywood Park Fall Operating Company Delaware
Hollywood Park Food Services, Inc. California
Hollywood Park Kansas, Inc. Delaware
Hollywood Park Operating Company Delaware
HP Casino, Inc. California
HP Yakama Consulting, Inc. Delaware
HP Yakama, Inc. Delaware
HP/Compton, Inc. California
Indiana Ventures LLC Nevada
Jefferson Casino Corporation Louisiana
Louisiana Gaming Enterprises, Inc. Louisiana
Louisiana-I Gaming Louisiana
Mardi Gras Casino Corp. Mississippi
Mississippi-I Gaming, L.P. Mississippi
Pinnacle Gaming Development Corp. Colorado
Sr Food & Beverage Company Kansas
St. Louis Casino Corp. Missouri
Sunflower Racing, Inc. Kansas
Switzerland County Development Corp. Nevada
Turf Paradise, Inc. Arizona
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in
Hollywood Park, Inc.'s Registration Statement on Form S-4 dated March 1999, of
our reports dated February 27, 1998 on the financial statements of Hollywood
Park, Inc. and Casino Magic Corp. We also consent to the incorporation by
reference in Hollywood Park, Inc.'s Registration Statement on Form S-4 dated
March 1999, of our report dated February 27, 1998 included in Hollywood Park,
Inc.'s form 10-K for the year ended December 31, 1997, and to all references to
our Firm included in or made a part of the Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Los Angeles, California
March 2, 1999
<PAGE>
EXHIBIT 23.3
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Hollywood Park,
Inc. for the registration of $350,000,000 Series B 9- 1/4% Senior Subordinated
Notes due 2007 and to the incorporation by reference therein of our report
dated November 15, 1996 (except for the first paragraph of Note 13 and the
first two paragraphs of Note 12 as to which the dates are November 18, 1996 and
January 5, 1998, respectively), with respect to the consolidated financial
statements of Boomtown, Inc. included in Amendment No. 4 to the Registration
Statement (Form S-4 No. 333-34471) of Hollywood Park, Inc. filed with the
Securities and Exchange Commission.
We also consent to the incorporation by reference into this Registration
Statement (Form S-4) and related Prospectus of Hollywood Park, Inc. for the
registration of $350,000,000 Series B 9- 1/4% Senior Subordinated Notes due
2007, of our report dated November 15, 1996 (except for the first paragraph of
Note 13 and the first two paragraphs of Note 12 as to which the dates are
November 18, 1996 and January 5, 1998, respectively), with respect to the
financial statement schedule of Boomtown, Inc. for the years ended September
30, 1994, 1995 and 1996 included in Amendment No. 4 to the Registration
Statement (Form S-4 No. 333-34471) of Hollywood Park, Inc. filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Reno, Nevada
March 1, 1998
<PAGE>
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [_]
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
HOLLYWOOD PARK, INC.
(Exact name of obligor as specified in its charter)
Delaware 95-3667491
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Table of Additional Registrants
-------------------------------
Hollywood Park Operating Company Delaware 95-3667220
Hollywood Park Fall Operating Company Delaware 95-4093972
HP Yakama Consulting, Inc. Delaware 94-4651282
HP Yakama, Inc. Delaware 95-4636368
Boomtown, Inc. Delaware 94-3044204
Hollywood Park Food Services, Inc. California 95-2844591
HP/Compton, Inc. California 95-4545471
HP Casino, Inc. California 94-4548638
Crystal Park Hotel and Casino California 95-4595453
Development Company, LLC
Louisiana Gaming Enterprises, Inc. Louisiana 72-1229201
Louisiana-I Gaming, a Louisiana Louisiana 72-1238179
<PAGE>
Partnership in Commendam
Casino Magic Corp. Minnesota 64-0817483
Casino Magic American Corp. Minnesota 41-1779346
Bayview Yacht Club, Inc. Mississippi 64-0824102
Mississippi-I Gaming, L.P. Mississippi 64-0828954
Biloxi Casino Corp. Mississippi 64-0814408
Casino Magic Finance Corp. Mississippi 64-0835473
Casino One Corporation Mississippi 64-0814345
Bay St. Louis Casino Corp. Mississippi 64-0814409
Mardi Gras Casino Corp. Mississippi 64-0793787
Boomtown Hotel & Casino, Inc. Nevada 88-0101849
Boomtown Hoosier, Inc. Nevada 88-0355622
Indiana Ventures LLC Nevada 93-1199012
Switzerland County Development Corp. Nevada 95-4355039
Pinnacle Gaming Development Corp. Colorado 84-1242274
Turf Paradise, Inc. Arizona 86-0114029
1050 South Prairie Avenue
Inglewood, California 90301
(Address of principal executive offices) (Zip code)
______________________
Series B 9 1/4% Senior Subordinated Notes due 2007
(Title of the indenture securities)
================================================================================
-2-
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Name Address
- ------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-
29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 2nd day of March, 1999.
THE BANK OF NEW YORK
By: /s/ MARY LAGUMINA
---------------------------------
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
4
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1998, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
ASSETS Dollar Amounts
in Thousands
Cash and balances due from depository
institutions:
<S> <C>
Noninterest-bearing balances and currency and
coin................................................... $ 3,951,273
Interest-bearing balances............................... 4,134,162
Securities:
Held-to-maturity securities............................. 932,468
Available-for-sale securities........................... 4,279,246
Federal funds sold and Securities purchased
under agreements to resell.............................. 3,161,626
Loans and lease financing receivables:
Loans and leases, net of unearned
income...............37,861,802
LESS: Allowance for loan and
lease losses............619,791
LESS: Allocated transfer risk
reserve........................3,572
Loans and leases, net of unearned income,
allowance, and reserve................................. 37,238,439
Trading Assets........................................... 1,551,556
Premises and fixed assets (including capitalized
leases)................................................. 684,181
Other real estate owned.................................. 10,404
Investments in unconsolidated subsidiaries and
associated companies.................................... 196,032
Customers' liability to this bank on acceptances
outstanding............................................. 895,160
Intangible assets........................................ 1,127,375
Other assets............................................. 1,915,742
-----------
Total assets............................................. $60,077,664
===========
</TABLE>
<PAGE>
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices..................................... $27,020,578
Noninterest-bearing.........11,271,304
Interest-bearing............15,749,274
In foreign offices, Edge and Agreement
subsidiaries, and IBFs................................. 17,197,743
Noninterest-bearing............103,007
Interest-bearing............17,094,736
Federal funds purchased and Securities sold
under agreements to repurchase.......................... 1,761,170
Demand notes issued to the U.S.Treasury.................. 125,423
Trading liabilities...................................... 1,625,632
Other borrowed money:
With remaining maturity of one year or less............. 1,903,700
With remaining maturity of more than one year
through three years.................................... 0
With remaining maturity of more than three years........ 31,639
Bank's liability on acceptances executed and
outstanding............................................. 900,390
Subordinated notes and debentures........................ 1,308,000
Other liabilities........................................ 2,708,852
-----------
Total liabilities........................................ 54,583,127
===========
EQUITY CAPITAL
Common stock............................................. 1,135,284
Surplus.................................................. 764,443
Undivided profits and capital reserves................... 3,542,168
Net unrealized holding gains (losses) on
available-for-sale securities........................... 82,367
Cumulative foreign currency translation
adjustments............................................. (29,725)
-----------
Total equity capital..................................... 5,494,537
-----------
Total liabilities and equity capital..................... $60,077,664
===========
</TABLE>
<PAGE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni
Gerald L. Hassell Directors
Alan R. Griffith
