SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 1
to
FORM S-4
Registration Statement
Under the
Securities Act of 1933
CASINO MAGIC OF LOUISIANA, CORP.
(Exact Name of registrant as specified in its charter)
Louisiana 7999 64-0878110
- ------------------------- ------------------------- -------------------
(State or other juris- (Primary Standard (I.R.S. Employer
diction of incorporation Industrial Classification Identification No.)
or organization) Code Number)
and as Guarantor,
JEFFERSON CASINO CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 7999 72-1310739
- ------------------------- ------------------------- -------------------
(State or other juris- (Primary Standard (I.R.S. Employer
diction of incorporation Industrial Classification Identification No.)
or organization) Code Number)
1701 Old Minden Road, Bossier City, Louisiana 71111 (318)746-0711
----------------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including Area Code of
Registrants' Principal Executive Offices)
Robert A. Callaway, Vice President/General Counsel,
Casino Magic of Louisiana, Corp.
711 Casino Magic Drive, Bay St. Louis, Mississippi 39520 (601) 466-8000
---------------------------------------------------------------------------
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
copy to:
J. Patrick Ryan
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1500 NationsBank Plaza
300 Convent Street
San Antonio, Texas 78205
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after the effective date of the
Registration Statement.
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. |__|
==============================================================================
THE REGISTRANTS HEREBY AMEND THIS 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.
============================================================================ =
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CASINO MAGIC OF LOUISIANA, CORP.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
FORM S-4 ITEM NUMBER HEADING OR SUBHEADING IN PROSPECTUS
- ---------------------------------- -----------------------------------
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration and
Outside Front Cover Page of
Prospectus............................Facing Page of Registration
Statement; Cross Reference Sheet;
Outside Front Cover Page of
Prospectus.
2. Inside Front and Outside Back
Cover Pages of Prospectus.............Inside Front Cover Page of
Prospectus; Outside Back Cover
Page of Prospectus.
3. Risk Factors, Ratio of Earnings to
Fixed Charges, and Other Information. Prospectus Summary; Risk Factors;
Selected Financial Data; Business.
4. Terms of the Transaction..............Prospectus Summary; The Exchange
Offer; Description of the Notes;
Certain Federal Income Tax
Considerations.
5. Pro Forma Financial Information.......Not Applicable
6. Material Contacts with the Company
Being Acquired........................Not Applicable
7. Additional Information Required For
Reoffering by Persons and Parties
Deemed to be Underwriters.............Not Applicable
8. Interests of Named Experts and
Counsel...............................Not Applicable
9. Disclosure of Commission Position on
Information for Securities Act
Liabilities...........................Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3
Registrants...........................Not Applicable
11. Incorporation of Certain Information
by Reference..........................Not Applicable
12. Information with Respect to S-2 or
S-3 Registrants.......................Not Applicable
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13. Incorporation of Certain Information
by Reference..........................Not Applicable
14. Information With Respect to Registrants
Other Than S-2 or S-3 Registrants......Prospectus Summary; Selected
Financial Data; Capitalization;
Management's Discussion and
Analysis of Financial Condition
and Results of Operations;
Business; Regulatory Matters;
Description of Notes; Financial
Statements.
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3
Companies.............................Not Applicable.
16. Information With Respect to S-2 or
S-3 Companies.........................Not Applicable.
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies.......Not Applicable.
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited....Not Applicable.
19. Information if Proxies, Consents or
Authorization are not to be
Solicited, or in an Exchange Offer... Management; Principal
Shareholders; Certain
Relationships and Related
Transactions.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION DATED FEBRUARY 4, 1997
CASINO MAGIC OF LOUISIANA, CORP.
OFFER TO EXCHANGE
13% SERIES B FIRST MORTGAGE NOTES DUE 2003 WITH CONTINGENT INTEREST
FOR ALL OUTSTANDING
13% SERIES A FIRST MORTGAGE NOTES DUE 2003 WITH CONTINGENT INTEREST
________________________
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON MARCH, 1997, UNLESS EXTENDED
_________________________
Casino Magic of Louisiana, Corp. (the "Company"), a Louisiana corporation,
hereby offers, upon the
(Continued on next page)
See "Risk Factors" beginning on page 9 hereof for a discussion of certain
material factors to be considered by Holders prior to tendering their Series A
Notes in the Exchange Offer.
_____________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAVE THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NEITHER THE LOUISIANA GAMING CONTROL BOARD NOR ANY OTHER GAMING AUTHORITY HAS
PASSED UPON THE ACCURACY OF ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The date of this Prospectus is February 4, 1997
<PAGE>
(Cover page continued)
terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange up to an aggregate of $115,000,000 principal amount of
13% Series B First Mortgage Notes Due 2003 with Contingent Interest (the
"Series B Notes") of the Company for a like principal amount of 13% Series A
First Mortgage Notes due 2003 with Contingent Interest (the "Series A Notes"
and, together with the Series B Notes, the "Notes") of the Company. The form
and terms of the Series B Notes are substantially identical to the Series A
Notes in all material respects, except that the offer and exchange of the
Series B Notes will be registered under the Securities Act of 1933, as amended
(the "Securities Act"), and therefore such Series B Notes will not bear
legends restricting the transfer thereof. The Series B Notes will evidence
the same debt as the Series A Notes, and together with the Series A Notes will
be subject to the terms of the Indenture dated as of August 22, 1996, (the
"Indenture") among the Company, Jefferson Casino Corporation ("Jefferson
Corp.") and First Union Bank of Connecticut as Trustee (the "Trustee").
The Company will accept for exchange any and all Series A Notes which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York City
time, on March , 1997, unless extended by the Company in its sole discretion
(the "Expiration Date"). The Expiration Date will not in any event be
extended to a date later than March , 1997. Tenders of Series A Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. In the event the Company terminates the Exchange Offer and
does not accept for exchange any Series A Notes with respect to the Exchange
Offer, the Company will promptly return the Series A Notes to the holders
thereof. The Exchange Offer is not conditioned upon any minimum principal
amount of Series A Notes being tendered for exchange, but is otherwise subject
to certain customary conditions. The Series A Notes may be tendered only in
integral multiples of $1,000. See "The Exchange Offer."
The Company will not realize any proceeds from the Exchange Offering.
The net proceeds of the offering of Series A Notes in August 1996 (the "Note
Offering") have been or are being used to finance the development,
construction, equipping and opening of a new dockside riverboat casino and
entertainment complex located in Bossier City, Louisiana ("Casino
Magic-Bossier City") and to repay indebtedness incurred by the Company and
Jefferson Corp., the parent of the Company and a wholly owned subsidiary of
Casino Magic Corp. ("Casino Magic"), in connection with the development of the
Company's gaming activities in Bossier City. Casino Magic-Bossier City will
be owned by the Company and managed by Casino Magic Management Services Corp.
(the "Manager"), a wholly owned subsidiary of Casino Magic. Casino Magic,
through its other subsidiaries, owns and operates gaming facilities in Bay St.
Louis and Biloxi, Mississippi, Argentina and manages such a facility in
Greece.
Payment of principal and interest on the Series B Notes will be fully and
unconditionally guaranteed on a senior secured basis by Jefferson Corp.(the
"Jefferson Guarantee"), the parent of the Company and a wholly owned
subsidiary of Casino Magic Corp. ("Casino Magic"), and all future subsidiaries
of the Company (the "Subsidiary Guarantees" and, together with the Jefferson
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Guarantee, the "Guarantees"). However, as of the date of the Indenture and
as of September 30, 1996 Jefferson Corp. had no material assets other than the
capital stock of the Company, had no material liabilities other than the
Jefferson Guarantee, had no subsidiaries other than the Company, and had no
independent operations, the Jefferson Guarantee having been granted primarily
to more effectively secure the Notes rather than to provide financial credit
support; in addition, because of restrictions imposed upon the business
activities of Jefferson Corp. under the Indenture, it is not likely that
Jefferson Corp. will have significant assets at any time in the future. Fixed
interest on the Notes is payable semi-annually on February 15 and August 15 of
each year, commencing February 15, 1997. The Notes will mature on August 15,
2003. Contingent Interest (as defined in the Indenture) is payable on the
Notes, on each such interest payment date, in an aggregate amount equal to 5%
of the Company's Adjusted Consolidated Cash Flow (as defined in the Indenture)
for the Accrual Period (as defined in the Indenture, but generally a six-month
period) last completed prior to such interest payment date; provided that no
Contingent Interest shall be payable with respect to any period prior to the
Commencement Date (as defined in the Indenture). See also "Description of
Notes - Certain Definitions" for the summary definition of capitalized terms
used herein and referred to as defined in the Indenture. The Company, at its
option, may defer payment of all or a portion of any installment of Contingent
Interest then otherwise due subject to certain conditions described herein.
See "Description of Notes-Principal, Maturity and Interest." Except as set
forth below, the Series B Notes will not be redeemable prior to August 15,
2000. The Series B Notes are redeemable at the option of the Company, in
whole or in part, on or after August 15, 2000 at the redemption prices set
forth herein, plus accrued and unpaid interest and Liquidated Damages (as
defined in the Indenture), if any, to the redemption date. Upon the occurrence
of a Change of Control (as defined in the Indenture), each holder of the
Series B Notes (a "Holder") will have the right to require the Company to
repurchase such Holder's Series B Notes at a purchase price equal to 101% of
the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of repurchase. The Company may not have
sufficient funds available to purchase all of the outstanding Notes were
tendered in response to an offer made as a result of a Change in Control.
The Series B Notes will be senior secured obligations of the Company and
will rank pari passu in right of payment with any existing and future senior
Indebtedness (as defined in the Indenture) of the Company. As of September
30, 1996, the total senior Indebtedness of the Company was approximately
$120.7 million, consisting of $115.0 million aggregate principal amount of
Series A Notes and $5.7 million in existing equipment financing of the
Company. In addition, the Company intends to incur approximately $1.8 million
of additional equipment financing. The existing equipment financing contains,
and the contemplated equipment financing is likely to contain,
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cross-default provisions with respect to the Company's other material
indebtedness, including the Notes, so that an Event of Default (as defined in
the Indenture) would also constitute an event of default with respect to such
equipment financing. The existing and contemplated equipment financing will
be effectively senior to the Notes to the extent of the security interest
granted in equipment financed by means of such Indebtedness. The Series B
Notes will rank senior in right of payment to all subordinated Indebtedness of
the Company, if any (the Company had no subordinated Indebtedness at September
30, 1996). The Company's obligations under the Series B Notes will be secured
by, among other things, a first priority security interest, subject to
Permitted Liens (as defined herein), in substantially all of the Company's
existing and future assets, including a recently constructed riverboat (the
"Bossier Riverboat") and substantially all of the other assets that comprise
Casino Magic-Bossier City, and a pledge of the funds in the Cash Collateral
Accounts (as defined in the Indenture). The Jefferson Guarantee will be a
senior secured obligation of Jefferson Corp. (which as of September 30, 1996,
had no Indebtedness other than the Jefferson Guarantee) secured by a pledge of
all of the capital stock of the Company. Any Subsidiary Guarantees will be
secured by a first priority security interest, subject to Permitted Liens, in
substantially all of such subsidiary's existing and future assets.
The Series B Notes are being offered hereunder in order to satisfy
certain obligations of the Company and Jefferson Corp. pursuant to the
Registration Rights Agreement dated August 22, 1996 (the "Registration Rights
Agreement"), entered into in connection with the Note Offering. See
"Description of Notes-Registration Rights; Liquidated Damages." Based on
interpretations by the staff of the Securities and Exchange Commission (the
"SEC"), Series B Notes issued pursuant to the Exchange Offer in exchange for
Series A Notes may be offered for resale, resold and otherwise transferred by
any Holder thereof (other than any broker-dealer who acquired such Series A
Notes directly from the Company to resell pursuant to Rule 144A under the
Securities Act, or any such Holder which 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 Series B Notes are acquired in the ordinary course of
such Holder's business and such Holder has no arrangement with any person to
participate in the distribution of such Series B Notes. Notwithstanding the
foregoing, each broker-dealer that holds Series A Notes acquired for its own
account as a result of market-making activities or other trading activities
and that receives Series B 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 Series B Notes. The Letter of Transmittal states that 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. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with any resale of
Series B Notes received in exchange for Series A Notes where such Series A
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of one year after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale.
See "Plan of Distribution". EXCEPT AS DESCRIBED IN THIS PARAGRAPH, THIS
PROSPECTUS MAY NOT BE USED FOR AN OFFER TO RESELL, RESALE OR OTHER TRANSFER OF
SERIES B NOTES.
Prior to the Exchange Offer, there has been no public market for the
Series B Notes. The Series A Notes are not, and the Series B Notes are not
expected to be, listed on any securities exchange or authorized for trading on
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the Nasdaq Stock Market. There can be no assurances as to the liquidity of
any markets that may develop for the Series B Notes, the ability of Holders to
sell the Series B Notes, or the price at which Holders would be able to sell
the Series B Notes. Future trading prices of the Series B Notes will depend
on many factors, including among other things, prevailing interest rates, the
Company's operating results and the market for similar securities.
Historically, the market for securities similar to the Series B Notes,
including non-investment grade debt, has been subject to disruptions that have
caused substantial volatility in the prices of such securities. There can be
no assurance that any market for the Series B Notes, if such market develops,
will not be subject to similar disruptions. Wasserstein, Perella Securities,
Inc., Jefferies & Company, Inc. and Deutsche Morgan Grenfell (the "Initial
Purchasers") have advised the Company that they currently intend to make a
market in the Series B Notes offered hereby. However, the Initial Purchasers
are not obligated to do so and any such market-making activities may be
discontinued at any time without notice.
The Series A Notes were initially purchased by "accredited investors" (as
such term is defined in Rule 144 under the Securities Act) and "qualified
institutional buyers" (as such term is defined in Rule 144A under the
Securities Act). The Series A Notes purchased by qualified institutional
buyers were initially represented by a single global note in fully registered
form (the "Global Senior Note"), registered in the name of a nominee of The
Depository Trust Company ("DTC"), as depository. The Series B Notes exchanged
for Series A Notes represented by the Global Senior Notes will be represented
by a single global note in fully registered form (the "Global Senior Exchange
Note") registered in the name of the nominee of DTC. The Global Senior
Exchange Note will be exchangeable for Series B Notes in registered form, in
denominations of $1,000 and integral multiples thereof as described herein.
The Series B Notes in global form will trade in DTC's Same-Day Funds
Settlement System, and secondary market trading activity in such Series B
Notes will therefore settle in immediately available funds. See "Description
of Notes -- Form, Denomination and Book-Entry Procedures."
Neither the Company nor Jefferson Corp. will receive any proceeds from
the Exchange Offer, but pursuant to the Registration Rights Agreement, the
Company and Jefferson Corp. will be responsible for certain expenses of the
Exchange Offer (which will not include the expenses of any Holder in
connection with resales of the Series B Notes). No underwriter is being
utilized in connection with the Exchange Offer.
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AVAILABLE INFORMATION
The Company and Jefferson Corp. have jointly filed with the SEC a
Registration Statement on Form S-4 (the "Registration Statement") under the
Securities Act with respect to the Series B Notes being offered by this
Prospectus. This Prospectus does not contain all the information set forth in
the Registration Statement and the exhibits and schedules thereto, to which
reference is hereby made. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete; with respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made
to the exhibit for a more complete description of the matter involved.
Pursuant to the Indenture, the Company has agreed to furnish to the
Trustee and the registered Holders of the Notes, without cost to the Trustee
or such registered Holders, copies of the quarterly and annual reports, and
any other documents it is required to file with the SEC pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), within 15 days after it files the same with the SEC (or documents
containing equivalent information within such time period in the event that
the Company is not required to file such reports with the SEC).
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and
financial statements appearing elsewhere in this Prospectus. Unless the
context otherwise requires, the financial information contained herein as of
June 30, 1996 gives pro forma effect to the transfer on August 22, 1996, at
the closing of the Note Offering, of a 23-acre real estate parcel in Bossier
City, Louisiana from Jefferson Corp. to the Company and the assumption by the
Company of the related obligation of Jefferson Corp. represented by a $6.8
million mortgage note (the "Louisiana Land Note"), which was paid with
proceeds of such Note Offering. The information contained herein relating to
the development and operations of Casino Magic-Bossier City is based upon the
Company's current plans relating thereto, which, subject to limitations in the
Indenture and Collateral Documents (as defined in the Indenture), may change
from time to time. As used herein, the term "Bossier City/Shreveport Market"
means the gaming market in the cities of Bossier City and Shreveport,
Louisiana ("Bossier City/Shreveport"). Statistical information presented in
this Prospectus with respect to average daily win per unit is derived by
management from publicly available revenue and operating data and, with
respect to information regarding Louisiana gaming markets, assumes that 70%
and 30% of casino revenues are attributable to slot machines and table games,
respectively. Prospective investors are urged to read this Prospectus in its
entirety, including, without limitation, the "Risk Factors" beginning on page
9. See also "Description of Notes - Certain Definitions" for the definition
of certain capitalized terms used herein and referred to as defined in the
Indenture.
THE COMPANY
The Company has developed a new dockside riverboat casino and
entertainment complex, Casino Magic-Bossier City, on a 23-acre site in Bossier
City, Louisiana. The Company commenced gaming operations on the completed and
fully equipped Bossier Riverboat on October 4, 1996, using temporary mooring,
boarding and paved parking facilities, and opened the substantially completed
permanent landside portions of its casino and entertainment complex on
December 31, 1996. From October 4, 1996 through December 31, 1996, Casino
Magic-Bossier City was forced to close approximately 15 days due to unusually
high flood stage river levels. Closures due to flood stage river levels
should not occur following the completion of the permanent facility. The
casino site enjoys high visibility and convenient access from Interstate
Highway 20, a major artery between Bossier City/Shreveport and the Dallas-Fort
Worth area approximately 180 miles to the west. The Company conducts its
casino operations on a recently constructed Bossier Riverboat, which measures
254 feet long and 78 feet wide with approximately 58,000 square feet of
interior space, including 30,000 square feet of gaming space (the maximum
allowed under current Louisiana law) with 984 slot machines and 44 table
games. Casino Magic-Bossier City also includes a 37,000 square foot
entertainment pavilion and covered parking for approximately 1,550 cars. The
entertainment pavilion includes a 350-seat buffet restaurant, a gift shop, a
bar and lounge area, and a stage area designed to showcase live entertainment,
including dance
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productions, bands and individual performers, with an open seating area that
will accommodate up to 300 customers. Casino Magic-Bossier City has been
designed to highlight a new "Magic" theme which Casino Magic intends to
implement at its other properties to strengthen the "Casino Magic" brand
identity. Management believes that its premier facility, the first new gaming
facility in more than two years in the Bossier City/Shreveport Market, will
attract a substantial number of customers and that its "Magic" theme will
foster brand identity and customer loyalty.
The Company believes the Bossier City/Shreveport Market presents it with
a significant gaming development opportunity based upon the strong population
density of its target market and the current regulations allowing dockside
riverboat gaming in Bossier City/Shreveport. The Bossier City/Shreveport
Market is the only market in Louisiana that currently permits continuous
dockside gaming without requiring cruising or simulated cruising schedules.
This allows Casino Magic-Bossier City to operate 24 hours a day with
uninterrupted and convenient casino access for gaming patrons. The Company
believes that the Bossier City/Shreveport Market has one of the highest ratios
of adults within a 200-mile radius to gaming positions of any drive-in gaming
market in the United States and that this market is underserved. Based on the
approximately 6,591 gaming positions expected for the Bossier City/Shreveport
market, including those of Casino Magic-Bossier City and the three other
existing casinos, and those assumed for a fifth riverboat which has been
licensed to relocate from the New Orleans market to the Bossier
City/Shreveport market and which is expected to commence gaming operations by
late 1997, there will be approximately one gaming position in the Bossier
City/Shreveport Market for every 1,009 adults within 200 miles (although
additional operators, including competitors operating in Bossier
City/Shreveport, have applied for a license to operate a sixth dockside
riverboat casino in the Bossier City/Shreveport Market which would increase
competition in such market and reduce such ratio of gaming positions to adult
population). According to reports published by the Louisiana State Police,
total gaming revenues for the 12 months ended May 31, 1996 for the three
riverboat casinos operating in the Bossier City/Shreveport Market were $473.3
million. Management estimates that these revenues represent an average daily
win per slot of $309 and win per table of $2,310. The estimated win per unit
figures in the Bossier City/Shreveport Market are second only to the Chicago
area among riverboat gaming markets and compare favorably to Atlantic City,
which generated an average daily win per slot of $244 and win per table of
$2,463 for the same period. See "Business-Bossier City/Shreveport Market."
Excluding amounts expended in May 1996 in connection with Jefferson
Corp.'s acquisition of the Company, the total project cost for Casino
Magic-Bossier City is approximately $72.1 million which includes: (i)
approximately $13.6 million expended for the acquisition of the 23-acre site,
(ii) $20.0 million expended for the acquisition of the Bossier Riverboat, and
(iii) $38.7 million as the amended development and construction budget for the
buildings and other improvements at Casino Magic-Bossier City (including
approximately $8.4 million of preopening costs, opening bankroll and
additional gaming equipment but excluding fees and expenses of the Note
Offering and $11.5 million aggregate remaining reserves for completion costs,
operating expenses
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and fixed interest). At the closing of the Note Offering, approximately $45.2
million of the net proceeds thereof were deposited in collateral accounts (the
"Cash Collateral Accounts") to be disbursed only in accordance with the Cash
Collateral and Disbursement Agreement executed at the closing of the Note
Offering. As of December 31, 1996, all of the originally deposited amounts,
plus accrued interest thereon, remained in the Interest Reserve Account (as
defined in the Indenture, and in which approximately $7.3 million was
deposited at the closing of the Note Offering to fund the first payment of
fixed interest on the Notes in February 1997) and approximately $1.2 million
remained in the Operating Reserve Account (as defined in the Indenture, and in
which approximately $3.2 million was deposited at the closing of the Note
Offering to fund operating losses, if any, occurring during the period of
operations with temporary mooring, boarding and parking facilities which
commenced October 4, 1996). As of October 18, 1996, the Company finalized all
plans and specifications for Casino Magic-Bossier City, agreed upon a
guaranteed maximum price of $19.4 million with its general contractor for
completion of the principal structural improvements at Casino Magic-Bossier
City (the landside pavilion, parking garage and certain of the site
improvements) in accordance with such plans and amended the construction
budget to an extent that will require, in addition to the $29.7 million
deposited at the closing of the Note Offering in the Construction Disbursement
Account (as defined in the Indenture), an additional $4.0 million to be funded
from the Completion Reserve Account (as defined in the indenture and
established at the closing of the Note Offering with an original deposit of
$5.0 million to fund cost overruns arising in connection with developing and
constructing Casino Magic-Bossier City). As of December 31, 1996,
approximately $5.4 million (including $4.7 million transferred from the
Completion Reserve Account and interest earned to date) and $0.3 million
remained on deposit in the Construction Disbursement Account and the
Completion Reserve Account, respectively, although as indicated the Company
has incurred construction commitments which will require expenditure of the
remaining balance of the Construction Disbursement Account. See "Use of
Proceeds - Series A Notes".
In May 1996, Casino Magic, through its wholly owned subsidiary, Jefferson
Corp., acquired the Company (which at the time of acquisition held the
Louisiana gaming license that is being used for Casino Magic-Bossier City) for
$50.0 million and the assumption of $5.7 million in equipment financing. The
assets acquired as a part of such transaction included gaming and related
equipment and surveillance equipment which the Company is using at Casino
Magic-Bossier City and a second riverboat owned by the Company, the Crescent
City Queen riverboat (the "Crescent City Riverboat"). The Crescent City
Riverboat is one of the largest cruising riverboats designed for gaming in
the United States, measuring approximately 430 feet by 100 feet with 88,000
square feet of interior space spread across three decks. While the Crescent
City Riverboat is part of the collateral for the Notes, the Company never
intended to use the Crescent City Riverboat in connection with its gaming
activities at Casino Magic-Bossier City since the Crescent City Riverboat is
too large to navigate the Red River to Bossier City/Shreveport. The Company
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anticipates selling the Crescent City Riverboat, in which case the Company
will be required either to reinvest the proceeds in Casino Magic-Bossier City
or apply such proceeds to a repurchase offer for the Notes. Casino Magic is
currently pursuing a gaming license in Crawford County, Indiana. If Casino
Magic is successful in obtaining a gaming license in Indiana, it is
anticipated that, subject to the availability of adequate financing and the
agreement of corporate partners of Casino Magic, if any, to such purchase, an
affiliated company of Casino Magic would purchase the Crescent City Riverboat
at fair market value. If Casino Magic is not successful in obtaining a
license in Indiana, Casino Magic will actively market the Crescent City
Riverboat. In early 1997, Casino Magic expects to obtain a determination on
its gaming license application in Indiana. The Company can give no assurances
that it will be able to dispose of the Crescent City Riverboat on acceptable
terms or in a timely manner.
The Casino Magic-Bossier City facilities will initially utilize
approximately 12 of the site's 23 acres, allowing substantial room for future
expansion. The Company intends to expand Casino Magic-Bossier City through
the future development of an adjacent 400-room hotel and related amenities,
including restaurants, banquet space, a theater, a swimming pool, a health
club and a child care facility. Subject to the restrictions in the Indenture,
including pro forma compliance with the indebtedness coverage and loan to
value ratios set forth therein, the Company is permitted to incur indebtedness
to finance the costs of constructing the hotel. In the event that the Company
determines to incur such indebtedness on a secured basis, the Indenture
provides that (i) the Trustee will release the land on which the hotel is to
be built from the lien for the benefit of the Notes and (ii) the Company will
have the right to grant a security interest for the benefit of the new lender
in such real property and all improvements constructed thereon, including the
hotel. Under such circumstances, the Holders of the Notes will have no
security interest in the hotel or the land on which it is constructed. The
development and construction of subsequent improvements is largely dependent
upon the availability of financing, which could be obtained from a combination
of sources, including proceeds from a future sale of the Crescent City
Riverboat, financing for the planned hotel and operating cash flow of Casino
Magic-Bossier City; however, no assurances can be given that such funds or
financing will be available or that such hotel and related facilities will
ever be developed. See "Management's Discussion and Analysis - Liquidity and
Capital Resources."
In a referendum on November 5, 1996 (the "Louisiana Referendum"), voters
in both Caddo and Bossier parishes approved a continuation of riverboat gaming
in such parishes; voters in all other Louisiana parishes in which riverboat
gaming is currently conducted also approved a continuation of that form of
gaming in their respective parishes. Current Louisiana law limits the number
of riverboat casino licenses in the state to 15, of which 14 have been
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awarded, and limits the concentration of riverboat casino licenses in any one
parish to six. Five of those licenses (including the Company's and another
recently approved relocation from the New Orleans market) have been granted in
the Bossier City/Shreveport Market which encompasses both Caddo and Bossier
parishes. The relative success of gaming operations in the Bossier
City/Shreveport Market, compared to other Louisiana markets may increase the
possibility that existing licenses may be relocated to the Bossier
City/Shreveport Market. However, the relocation of existing licenses to
another parish or of riverboats within the same parish will be restricted by
an amendment to the Louisiana Constitution passed in September 1996 (the
"Constitutional Amendment") which requires, among other things, a local
parish-wide election to approve by majority vote the licensing of any
additional riverboats in a parish with existing licensed riverboats or the
relocation of any operating riverboat to a different berth in the same parish.
See "Risk Factors-Competition."
The Company was incorporated as a Louisiana corporation on June 11, 1993
under the name Crescent City Capital Development Corporation ("Crescent
City"), and was owned by a corporation with which Jefferson Corp. and Casino
Magic had no affiliation. In April 1995, Crescent City commenced gaming
activities in New Orleans, Louisiana for a 65-day period before a bankruptcy
proceeding was commenced against it in July 1995. In May 1996, Casino Magic,
through Jefferson Corp., purchased all of the capital stock of Crescent City
for $50.0 million, plus the assumption of $5.7 million of equipment financing
pursuant to a court-approved plan of reorganization (the "Plan of
Reorganization"). The purchase price was paid in cash plus the issuance of
$35.0 million principal amount of senior secured notes (the "Louisiana Notes")
which were repaid from proceeds of the Note Offering in August 1996. See
"Business-Background."
The Company's principal executive and administrative offices are located
at 1701 Old Minden Road, Bossier City, Louisiana 71111. The Company's
telephone number is (318)746-0711.
CASINO MAGIC CORP.
Casino Magic, through its wholly owned subsidiaries, develops, owns and
operates casinos and related amenities primarily in the southeastern United
States, including two major facilities on the Mississippi Gulf Coast. Casino
Magic owns and operates a major dockside casino and entertainment complex and
adjacent hotel in Bay St. Louis, Mississippi ("Casino Magic-BSL") and a major
dockside casino and entertainment complex ("Casino Magic-Biloxi") in the midst
of a four-casino "Strip" in Biloxi, Mississippi. Casino Magic also owns and
operates two small casinos in Argentina and until December 1996, managed two
American-style casinos in Greece, in one of which Casino Magic had a 49%
interest. Casino Magic's principal executive and administrative offices are
located at 711 Casino Magic Drive, Bay St. Louis, Mississippi 39520. Casino
Magic's telephone number is (601) 466-8000.
Since late 1995, Casino Magic has strengthened its management team with
the addition of a new Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer, and several other key executives who collectively possess
substantial development and operational experience within the gaming industry.
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The new management team and the Company's Board of Directors have identified
Casino Magic's strategic priorities as (i) focused development of domestic
growth projects, particularly Casino Magic-Bossier City, and (ii) increased
attention to, and investment in, its core Mississippi properties. Management
of Casino Magic believes that establishing a significant brand name presence
will be an increasingly important competitive tool in each of its existing and
future markets.
The Company entered into a management agreement (the "Management Agreement")
with Casino Magic and the Manager, Casino Magic Management Services, Corp, a
wholly owned subsidiary of Casino Magic, on August 22, 1996, pursuant to which
Casino Magic licensed the use of the "Casino Magic" name to the Company and
the Manager will manage Casino Magic-Bossier City. Although the Manager
entity does not itself have significant prior management experience, pursuant
to the Management Agreement each of the principal executive officers of Casino
Magic, who each have significant gaming experience, will provide management
services to the Company. See "Management".
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THE EXCHANGE OFFER
SECURITIES OFFERED:
$115.0 million aggregate principal amount of 13% Series B First Mortgage Notes
due 2003 with Contingent Interest. The form and terms of the Series B Notes
are substantially identical to the Series A Notes in all material respects,
except that the Series B Notes will be registered under the Securities Act,
and therefore will not bear legends restricting the transfer thereof.
THE EXCHANGE OFFER:
Each $1,000 principal amount of the Series B Notes is being offered in
exchange for $1,000 principal amount of the Series A Notes. The issuance of
the Series B Notes is intended to satisfy obligations of the Company and
Jefferson Corp. contained in the Registration Rights Agreement relating to the
Series A Notes. For procedures for tendering, see "The Exchange Offer."
TENDERS, EXPIRATION DATE; WITHDRAWAL:
The Exchange Offer will expire at 5:00 p.m., New York City time, on March __ ,
1997, or such later date and time to which it is extended (the "Expiration
Date"). The Exchange Offer is not conditioned upon any minimum principal
amount of Series A Notes being tendered for exchange. Tenders of Series A
Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. In the event the Company does not accept for exchange any
Series A Notes for any reason, the Company will promptly return such Series A
Notes to the Holders thereof.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER:
The Exchange Offer is subject to certain customary conditions, including, the
absence of any action or proceeding which might materially impair the ability
of the Company to proceed with the Exchange Offer, changes in statutory or
other law which could impair the Company's ability to proceed with the
Exchange Offer or the failure to obtain a governmental approval which the
Company may deem necessary to consummate the Exchange Offer. Such conditions
may be waived by the Company. See "The Exchange Offer -- Certain Conditions
to the Exchange Offer."
PROCEDURES FOR TENDERING SERIES A NOTES:
Each holder of Series A Notes wishing to accept the Exchange Offer must
complete, sign and date the Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or such facsimile, together with
such Series A Notes and any other required documentation to the Exchange Agent
(as defined herein) at the address set forth herein. By executing the Letter
of Transmittal, each holder will represent to the Company that, among other
things, (i) any Series B Notes to be received by it will be acquired in the
ordinary course of its business, (ii) it has no arrangement with any person to
participate in the distribution of the Series B Notes, and (iii) it is not an
"affiliate," as defined in Rule 405 of the Securities Act, of the Company.
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BENEFICIAL OWNERS:
Any beneficial owner whose Series A Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender such Series A Notes in the Exchange Offer should contact such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering his
Series A Notes, either make appropriate arrangements to register ownership of
the Series A Notes in such owner's name or obtain a properly completed bond
power from the registered holder. The transfer of registered ownership may
take considerable time and may not be completed prior to the Expiration Date.
GUARANTEED DELIVERY PROCEDURES:
Holders of Series A Notes who wish to tender their Series A Notes and whose
Series A Notes are not immediately available or who cannot deliver their
Series A Notes, the Letter of Transmittal or any other documents required by
the Letter of Transmittal to the Exchange Agent, prior to the Expiration Date,
must tender their Series A Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer -- Guaranteed Delivery
Procedures."
REGISTRATION OBLIGATIONS:
The Company agreed to use its best efforts to consummate the registered
Exchange Offer pursuant to which holders of the Series A Notes will be offered
an opportunity to exchange their Series A Notes for the Series B Notes which
will be issued without legends restricting the transfer thereof. In the event
that applicable interpretations of the staff of the SEC do not permit the
Company to effect the Exchange Offer or in certain limited circumstances, the
Company has agreed to file a shelf registration statement covering resales of
the Series A Notes and to use its best efforts to cause such shelf
registration statement to be declared effective under the Securities Act and,
subject to certain exceptions, keep such shelf registration statement
effective until the earlier of three years following the date of original
issuance of the Series A notes or such time as all the Series A Notes have
been sold thereunder or are otherwise no longer restricted securities.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS:
For a discussion of certain federal income tax considerations relating to the
exchange of the Series A Notes for the Series B Notes, see "Certain Federal
Income Tax Considerations."
USE OF PROCEEDS:
There will be no proceeds to the Company from the exchange pursuant to the
Exchange Offer.
RISK FACTORS:
For a discussion of certain material factors to be considered by Holders prior
to tendering their Series A Notes, see "Risk Factors."
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EXCHANGE AGENT:
First Union Bank of Connecticut (the "Exchange Agent") has agreed to serve as
Exchange Agent in connection with the Exchange Offer.
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SUMMARY DESCRIPTION OF THE SERIES B NOTES
The form and terms of Series B Notes are substantially identical to the
Series A Notes in all material respects, except that the Series B Notes will
be registered under the Securities Act, and therefore will not bear legends
restricting the transfer thereof. For a more complete description of the
Notes, see "Description of the Notes."
SECURITIES OFFERED:
Up to $115.0 million aggregate amount of the Company's 13% Series B First
Mortgage Notes due 2003 with Contingent Interest.
MATURITY DATE:
August 15, 2003.
FIXED INTEREST:
13% per annum.
CONTINGENT INTEREST:
Contingent Interest is payable on the Notes, on each interest payment date, in
an aggregate amount equal to 5% of the Company's Adjusted Consolidated Cash
Flow (as defined in the Indenture) for the Accrual Period last completed prior
to such interest payment date; provided that no Contingent Interest shall be
payable with respect to any period prior to the Commencement Date. Payment of
all or a portion of any installment of Contingent Interest may be deferred, at
the option of the Company, if, and only to the extent that, (i) the payment of
such portion of Contingent Interest will cause the Company's Adjusted Fixed
Charge Coverage Ratio (as defined in the Indenture) for the Company's most
recently completed Reference Period (as defined in the Indenture) 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 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. The payment of
Contingent Interest is subject to certain restrictions set forth herein. See
"Description of Notes-Principal, Maturity and Interest."
INTEREST PAYMENT DATES:
Each February 15 and August 15, commencing February 15, 1997.
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GUARANTEES:
The Series B Notes will be fully and unconditionally guaranteed on a senior
secured basis by Jefferson Corp. and by all future subsidiaries of the Company
(collectively, the "Guarantors"). However, as of the date of the Indenture
and as of September 30, 1996 Jefferson Corp. had no material assets other than
the capital stock of the Company, had no material liabilities other than the
Jefferson Guarantee, had no subsidiaries other than the Company, and had no
independent operations, the Jefferson Guarantee having been granted primarily
to more effectively secure the Notes rather than to provide financial credit
support; in addition, because of restrictions imposed upon the business
activities of Jefferson Corp. under the Indenture, it is not likely that
Jefferson Corp. will have significant assets at any time in the future. See
"Description of Notes-Guarantees."
RANKING:
The Series B Notes will be senior secured obligations of the Company and will
rank pari passu in right of payment with any existing and future senior
Indebtedness of the Company, including any Series A Notes which are not
tendered for exchange. As of September 30, 1996, the total senior Indebtedness
of the Company was approximately $120.7 million, consisting of $115.0 million
aggregate principal amount of Notes and $5.7 million in existing equipment
financing of the Company. In addition, the Company intends to incur
approximately $1.8 million of additional equipment financing. The existing
and contemplated equipment financing will be effectively senior to the Notes
to the extent of the security interest granted in equipment financed by means
of such Indebtedness. The Series B Notes will rank senior in right of payment
to all subordinated Indebtedness of the Company if any (the Company had no
subordinated Indebtedness at September 30, 1996).
</
In addition, subject to the restrictions in the Indenture, the Company is
permitted to incur indebtedness to finance the costs of constructing a hotel
at Casino Magic-Bossier City on a secured basis. In the event that the
Company determines to incur such indebtedness on a secured basis, the
Indenture provides that (i) The Trustee will release the land on which the
hotel is to be built from the lien for the benefit of the Notes and (ii) the
Company will have the right to grant a security interest for the benefit of
the new lender in such real property and all improvements constructed thereon,
including the hotel. Under such circumstances, the Holders of the Notes will
have no security interest in the hotel or the land on which it is constructed.
Furthermore, construction began before the mortgage on the real estate at
Casino Magic-Bossier City that secures the Notes was recorded. In Louisiana,
the priority of a mechanic's lien arising out of a particular construction
project relates back to the date on which construction of the project was
first commenced by any contractor. Accordingly, contractors, subcontractors
and suppliers providing goods or services in connection with Casino
Magic-Bossier City who otherwise comply with local law requirements may have a
lien on the project senior in priority to the lien of the mortgage. However,
the
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Cash Collateral and Disbursement Agreement requires that no progress payments
be released unless lien subordinations or releases have been obtained from all
material subcontractors and suppliers and the Company has to date obtained
such lien subordinations or release from all subcontractors and suppliers to
whom payments, have been made. With respect to any vessel, or interests
therein, which serve as collateral for the Notes, parties providing goods and
services, as well as tort claimants, could have priority over the lien of the
collateral documents encumbering such vessel, to the extent such parties
remain unpaid.
SECURITY:
The Notes will be secured by a first priority security interest, subject to
Permitted Liens, in substantially all of the existing and future assets of the
Company, including the Bossier Riverboat and substantially all of the other
assets that comprise Casino Magic-Bossier City, the Crescent City Riverboat,
and a pledge of that portion of the net proceeds from the Note Offering
deposited and held as collateral in the Cash Collateral Accounts pending
disposition pursuant to the Cash Collateral and Disbursement Agreement. The
Jefferson Guarantee is secured by a pledge of all of the capital stock of the
Company. See "Description of Notes-Security."
OPTIONAL REDEMPTION:
The Series B Notes will not be redeemable prior to August 15, 2000 (except as
otherwise required by a Gaming Authority). The Series B Notes will be
redeemable at the option of the Company, in whole or in part, on or after
August 15, 2000, at the redemption prices set forth herein plus accrued and
unpaid interest thereon to the redemption date. See "Description of
Notes-Optional Redemption."
CHANGE OF CONTROL:
In the event of a Change of Control, the Holders of the Series B Notes will
have the right to require the Company to purchase such Holders' Series B Notes
at a purchase price equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest thereon to the date of purchase. The
Company may not have sufficient funds available to purchase all of the
outstanding Notes tendered in response to an offer made as a result of a
Change in Control. See "Description of Notes-Repurchase at the Option of
Holders-Change of Control."
CERTAIN COVENANTS:
The Indenture pursuant to which the Series A Notes have been issued and the
Series B Notes will be issued contains certain covenants that limit the
ability of the Company and its subsidiaries to, among other things, incur
additional Indebtedness, 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. See
"Description of Notes-Certain Covenants."
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RISK FACTORS
This Prospectus contains certain forward-looking statements. Discussions
containing such forward-looking statements may be found in the material set
forth under "Summary," "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources,"
"Business" and "Description of Notes," as well as within this Prospectus
generally. Actual results may differ materially from those projected in the
forward-looking statements. Those Holders considering exchanging Series A
Notes for Series B Notes should carefully consider the following factors,
together with other information contained herein, before exchanging the Series
A Notes for Series B Notes.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
After the Note Offering, the Company is highly leveraged, with
substantial debt service in addition to construction and operating expenses.
Prior to May 1996, the Company was owned by entities unaffiliated with Casino
Magic or Jefferson Corp., and in May 1996, Casino Magic, through Jefferson
Corp., purchased all of the capital stock of the Company (formerly known as
Crescent City Capital Development Corporation) pursuant to a court approved
Plan of Reorganization. Pursuant to the Plan of Reorganization, Crescent City
was discharged from substantially all of its liabilities prior to the
acquisition. From the May 1996 acquisition of Crescent City until the October
4, 1996 opening of Casino Magic-Bossier City, the Company's activities were
limited to development activities and, as a result, the Company had no
revenues or earnings. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." As of September 30, 1996, the total
senior Indebtedness of the Company was approximately $120.7 million,
consisting of $115.0 million aggregate principal amount of Series A Notes and
$5.7 million of equipment financing assumed in connection with the May 1996
acquisition of Crescent City. See "Capitalization." In addition, the Company
intends to incur approximately $1.8 million of additional equipment financing
in connection with the initial development of Casino Magic-Bossier City. The
existing equipment financing contains, and the contemplated equipment
financing is likely to contain, cross-default provisions with respect to the
Company's other material indebtedness, including the Notes, so that an Event
of Default (as defined in the Indenture) would also constitute an event of
default with respect to such equipment financing. The existing and
contemplated equipment financing will be effectively senior to the Notes to
the extent of the security interest granted in equipment financed by means of
such indebtedness.
The Company's ability to meet its debt obligations is entirely dependent
upon the Company's future operating performance, which is itself dependent on
a number of factors, many of which are outside of the Company's control,
including prevailing economic conditions and financial, business, regulatory
and other factors affecting the Company's operations and business.
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Assuming Casino Magic-Bossier City's, successful operation, management
believes that the Company's operating cash flow will be sufficient to meet its
expenses, including interest costs. There can be no assurance, however, that
the Company will be profitable or will generate sufficient operating cash flow
to enable the Company to (i) service its Indebtedness, including the Notes or
(ii) purchase Notes tendered pursuant to an offer to repurchase in
circumstances required by the terms of the Indenture. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources" and "Description of Notes."
If the Company is unable to generate sufficient cash flow, it could be
required to adopt one or more alternatives, such as reducing or delaying
planned capital expenditures, selling assets, restructuring debt or obtaining
additional equity capital. There can be no assurance that any of these
alternatives could be effected on satisfactory terms, and any need to resort
to alternative sources of funds could impair the Company's competitive
position and reduce its future cash flow. Jefferson Corp. does not have, and
is not likely in the future to have, significant assets or operations which
could provide a source of liquidity or capital to the Company. Casino Magic
will have no obligations under the Notes, nor does it have any obligation to
provide any financing to the Company. In addition, Casino Magic will be
restricted from providing additional capital to the Company, subject to
certain exceptions, by the terms of certain debt agreements to which it is
subject, including the indenture governing the $135.0 million aggregate
principal amount of 11 % First Mortgage Notes due 2001 issued by an indirect
subsidiary of Casino Magic and guaranteed by Casino Magic (the "Casino Magic
Notes").
The degree to which the Company is leveraged could have important
consequences to the Holders, including, but not limited to, the following: (i)
the Company's increased vulnerability to adverse general economic and industry
conditions, (ii) the dedication of a substantial portion of the Company's
operating cash flow to the payment of principal and interest on Indebtedness,
thereby reducing the funds available for operations and further development of
Casino Magic-Bossier City and (iii) the Company's impaired ability to obtain
additional financing for future working capital, capital expenditures,
acquisitions or other general corporate purposes. There can be no assurance
that any such additional financing will be available in the future on terms
satisfactory to the Company, if at all. Failure by the Company to obtain any
required additional financing in the future could have a material adverse
effect on its financial condition and results of operations.
CONSTRUCTION AND BUDGET RISKS
Construction and Budget. The Company commenced casino operations on
the completed and fully equipped Bossier Riverboat on October 4, 1996 using
temporary mooring, boarding and paved parking facilities and opened the
substantially completed permanent landside portion of its casino and
entertainment complex on December 31, 1996. Excluding amounts expended in May
1996 in connection with Jefferson Corp.'s acquisition of the Company, the
total project cost for Casino Magic-Bossier City is approximately $72.1
million which includes: (i) approximately $13.6 million expended for the
acquisition of the 23-acre site, (ii) $20.0 million expended for the
acquisition of the Bossier Riverboat, and (iii) $38.7 million as the amended
development and construction budget for the buildings and other improvements
at Casino Magic-Bossier City (including approximately $8.4 million of
preopening costs, opening bankroll and additional gaming equipment but
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excluding fees and expenses of the Note Offering and $11.5 million aggregate
remaining reserves for completion costs, operating expenses and fixed
interest)., subject to adjustment as a result of certain final construction or
change orders items still in progress. As of October 18, 1996, the Company
finalized all plans and specifications for Casino Magic-Bossier City, agreed
upon a guaranteed maximum price of $19.4 million with its general contractor
for completion of the principal structural improvements at Casino
Magic-Bossier City (the landside pavilion, parking garage and certain site
improvements) in accordance with such plans and amended the construction
budget to an extent that will require, in addition to the $29.7 million
deposited in the Construction Disbursement Account, an additional $4.0 million
to be funded from the Completion Reserve Account (established at the closing
of the Note Offering with a deposit of $5.0 million to fund cost overruns
arising in connection with developing and constructing Casino Magic-Bossier
City).
The Company purchased the Bossier Riverboat from Boyd Gaming Corporation
for $20.0 million at the closing of the Note Offering. Boyd Gaming
Corporation did not provide the Company with any representations or warranties
with respect to the fitness or suitability of the Bossier Riverboat.
Furthermore, warranties relating to the Bossier Riverboat may not be available
from the builder or any suppliers of engines or any component thereof.
Accordingly, the Company may have no contractual recourse in the event defects
are discovered on the Bossier Riverboat and the Company would be required to
make any required repairs or modifications at its own expense.
Approximately $29.7 million and $5.0 million of the net proceeds from the
Note Offering were deposited in the Construction Disbursement Account and the
Completion Reserve Account, respectively, pending disbursement upon
satisfaction of certain conditions set forth therein, including certain
conditions subject to the satisfaction of an independent construction
consultant (the "Independent Construction Consultant"). Pursuant to the Cash
Collateral and Disbursement Agreement, the Disbursement Agent requires certain
certifications from the Independent Construction Consultant to determine the
satisfaction of conditions for disbursements. The primary purpose of the
Independent Construction Consultant is to ensure that Casino Magic-Bossier
City will be completed on schedule and within budget. There can be no
assurance that the Independent Construction Consultant will discharge its
responsibilities in a manner that will ensure that Casino Magic-Bossier City
will be completed on time and within budget, nor can there be any assurance
that if the Independent Construction Consultant breaches its responsibilities,
that it will have assets sufficient to satisfy the damages created as a
consequence of such breach.
Construction projects such as the Company's entail significant
construction risks, including, but not limited to, cost overruns, delay in
receipt of governmental approvals, shortages of materials or skilled labor,
labor disputes, unforeseen environmental or engineering problems, work
stoppages, fire and other natural disasters, construction scheduling problems
and weather interferences. Such risks may be compounded by the Company's
decision to construct Casino Magic-Bossier City on an accelerated schedule
under which construction has
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progressed while final plans were being completed and which included the use
of multiple shifts, early ordering of materials, fast tracking, and a
seven-day work week (when feasible). An accelerated construction schedule may
cause actual construction costs to exceed budgeted amounts.
RISK OF NEW VENTURE; LACK OF PRIOR OPERATING HISTORY
From the May 1996 acquisition of Crescent City until the October 4, 1996
opening of Casino Magic-Bossier City, the Company's activities were limited to
development activities and, as a result, the Company had no revenues, earnings
or operations. See "Business-Background." Although several members of Casino
Magic's management have experience constructing and operating riverboat
casinos in the Bossier City/Shreveport Market and elsewhere, neither the
Company nor the Manager, which will manage the Company's gaming operations,
has previously been involved in constructing or operating a riverboat casino
in the Bossier City/Shreveport Market. Moreover, Casino Magic-Bossier City is
a start-up development and, as such, will be subject to all of the risks
inherent in establishing a new business enterprise, including, but not limited
to, unanticipated construction, licensing, permitting or operating problems,
as well as having no proven ability to market and operate a new venture in the
Bossier City/Shreveport Market, where neither the Company nor Casino Magic has
previously conducted business. The Company will rely on the Manager to manage
Casino Magic-Bossier City and will grant it a significant degree of
independence in operating matters, including day-to-day financial control and
authority over hiring and training personnel. There can be no assurance that
the Company or the Manager will be able to successfully market Casino
Magic-Bossier City or that the operations thereof will be profitable or will
generate sufficient operating cash flow to enable the Company to make payments
of principal and interest on the Notes. The Series B Notes, like the Series A
Notes, will be without recourse to Casino Magic or its affiliates other than
the Company and Jefferson Corp.
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COMPETITION
General
The Company will be highly dependent on the Bossier City/Shreveport
Market and on the principal markets to which it caters, such as the
Dallas-Fort Worth market. Current Louisiana law limits the number of riverboat
casino licenses in the state to 15, of which 14 have been awarded, and limits
the concentration of riverboat casino licenses in any one parish to six. Five
gaming licenses (including the Company's and another recently approved
relocation from the New Orleans market) have been granted in the Bossier
City/Shreveport Market which encompass both Caddo and Bossier parishes.
Fourteen riverboat casinos (including the Company's) currently operate in
Louisiana, all of which have opened since 1993.
Of these 14 riverboat casinos, three in addition to Casino Magic-Bossier
City are currently licensed and have been operating in the Bossier
City/Shreveport Market since 1994 and offer substantially similar gaming
facilities. Casino Magic-Bossier City will face competition from those
existing operations, particularly to the extent that they add to or enhance
existing amenities. For example, one Bossier City/Shreveport casino operator
recently broke ground on a 606-room all suites hotel at its riverboat casino
location in Bossier City. In addition, in September, 1996, a riverboat located
in the New Orleans market received approval to relocate to the Bossier
City/Shreveport Market. The relocation of this riverboat will occur after the
land-based casino in New Orleans opens or on October 31, 1997, whichever event
occurs first. Furthermore, additional operators, including competitors
operating in Bossier City/Shreveport, have applied for a license to operate a
sixth dockside riverboat casino in the Bossier City/Shreveport Market, which
would further increase the Company's competition. The relative success of
gaming operations in the Bossier City/Shreveport Market compared to other
Louisiana markets may increase the possibility that existing licenses may be
relocated to the Bossier City/Shreveport Market. However, the relocation of
existing licenses to another parish or of riverboats within the same parish
will be restricted by the Constitutional Amendment which requires, among other
things, a local parish-wide election to approve, by majority vote, the
licensing of any additional riverboats in a parish with existing licensed
riverboats or the relocation of any operating riverboat to a different berth
in the same parish.
Certain of the Company's competitors have more experienced management and
greater name recognition, marketing capabilities and financial resources than
the Company. The Company may also face increasing competition from the new and
existing casinos developed elsewhere in Louisiana, on the Mississippi Gulf
Coast (including other casinos operated by Casino Magic) and surrounding
market areas and other jurisdictions throughout the United States and abroad,
including from established gaming centers such as those in Nevada and Atlantic
City, New Jersey. The Company also faces competition from other forms of
lawful gaming, such as state-sponsored lotteries and video lottery terminals,
pari-mutuel betting on horse and dog racing and bingo parlors, as well as from
other forms of entertainment. It is possible that increased competition could
have a material adverse effect on the Company.
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RISK OF TEXAS GAMING LEGALIZATION
Casino gaming is currently prohibited in several nearby jurisdictions
which are important to the Bossier City/Shreveport Market. As a result,
residents of these jurisdictions, principally Texas, comprise a significant
portion of the customers of existing gaming operations in Bossier
City/Shreveport and of the anticipated customers of Casino Magic-Bossier City.
Although casino gaming is not currently permitted in Texas and the Texas
Attorney General has issued an opinion that gaming in Texas would require an
amendment to the Texas Constitution, the Texas Legislature has considered
various proposals to authorize casino gaming. No gaming legislation was
enacted in the most recent legislative session ended May 29, 1995. A
constitutional amendment would require a two-thirds vote of those present and
voting in each house of the Texas Legislature and approval by the electorate
in a referendum. The legalization of casino gaming in Texas and the opening of
one or more casinos in the Dallas-Fort Worth area, which is a major market for
Bossier City/Shreveport gaming operations, would have a material adverse
effect on the Company's results of operations.
DEPENDENCE UPON SINGLE GAMING SITE
The Company does not currently anticipate having operations other than
Casino Magic-Bossier City and therefore may be entirely dependent upon Casino
Magic-Bossier City for its revenues. Because the Company may be entirely
dependent on a single gaming site for its revenues, it will consequently be
subject to greater risks than a geographically diversified gaming operation,
including, but not limited to, risks related to local economic and competitive
conditions, changes in local governmental regulations and natural and other
disasters. Any decline in the number of residents in the Bossier
City/Shreveport Market, a downturn in the overall economy of the Bossier
City/Shreveport Market, a decrease in gaming activities in the Bossier
City/Shreveport Market or an increase in competition could have a material
adverse effect on the Company.
POSSIBLE CONFLICTS OF INTEREST
Affiliates of the Company, including Casino Magic, are actively involved
in the gaming industry. Casinos owned or managed by such affiliated persons
may directly or indirectly compete with the Company. The potential for
conflicts of interest exists among the Company and affiliated persons for
future business opportunities that may not be presented to the Company.
However, the Company and Casino Magic have agreed that Casino Magic and its
other affiliates will not engage in other gaming activities within a 200-mile
radius of Casino Magic-Bossier City, excluding the cities of Lake Charles,
Louisiana and Vicksburg, Mississippi.
GAMING AND OTHER GOVERNMENT REGULATION
Gaming Regulation
Although in the Louisiana Referendum on November 5, 1996 voters in both Caddo
and Bossier parishes approved a continuation of riverboat gaming in such
parishes, Louisiana law does not provide for any moratorium that must expire
before future referenda on gaming could be mandated or allowed. There can be
no assurance that future referenda on gaming activities will not occur, that
voters in the parish in which the Company operates will not subsequently vote
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to discontinue, limit or, alternatively, further expand riverboat gaming in
that parish, or that the Louisiana legislature will not mandate other
referenda or electoral confirmations or otherwise limit, restrict, prohibit
or, alternatively, further expand gaming in Louisiana.
The Company's casino will be subject to extensive regulation by the State
of Louisiana. In May 1996, regulatory oversight of gaming operations in
Louisiana, including riverboat gaming, was transferred to and vested in the
Louisiana Gaming Control Board (the "Louisiana Board"). The Louisiana Board
will consist of nine members appointed by the governor of Louisiana. A
chairman and five other members of the Board, constituting a quorum to conduct
business, had been appointed by the governor as of December 31, 1996. The
Company and certain of its key personnel are required to obtain and hold
various licenses and approvals and are subject to other forms of regulation
under applicable Louisiana law. Additionally, certain beneficial owners,
lenders and landlords of the Company may be required to be licensed.
Generally, Louisiana gaming authorities have broad discretion in granting,
suspending, renewing and revoking licenses and requiring various persons and
entities to be found suitable. The suspension or revocation of the gaming
license held by the Company or the failure to obtain a renewal of its gaming
license would have a material adverse effect on the Company's business. In
some circumstances, the suspension or revocation of a gaming license in one
jurisdiction may trigger the suspension or revocation of a license or affect
eligibility for a license in another jurisdiction and the Company could
accordingly be adversely affected by regulatory actions in other jurisdictions
directed principally at Casino Magic or its employees. If additional gaming
regulations are adopted in Louisiana in the future, those regulations could
impose additional restrictions or costs that could have a material adverse
effect on the Company.
Substantially all loans, leases, private sales of securities, extensions
of credit and similar financing transactions entered into by the Company,
must be reported to the Louisiana Board within thirty days after the
consummation of any such transactions. The Louisiana Board is required to
investigate all reported loans or extensions of credit, and to either approve
or disapprove the same. If disapproved, the pertinent loan or extension of
credit must be rescinded by the Company. The Company's Note Offering was
approved by the Louisiana Board on October 29, 1996.
Gaming companies are typically subject to significant taxes and fees in
addition to normal federal and state corporate income taxes, and such taxes
and fees are subject to increase at any time. Additionally, from time to time,
certain federal legislators have proposed the imposition of a federal tax on
gaming revenues. Any such federal tax or any material increase in existing
taxes or fees would adversely affect the Company.
The operations of the Company are subject to a variety of other
regulations in addition to gaming regulations, including, without limitation,
environmental regulations, alcoholic beverage regulations and regulations
applicable to marine vessels.
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Security Ownership Regulations
Typically, gaming authorities, including those in Louisiana, have
discretionary authority to require a Holder of a security such as the Notes to
file an application, to be investigated and to be found suitable as an owner,
debtholder or landlord of a gaming establishment for any reason, including in
the event of a foreclosure on and the taking of possession of the collateral
by the Trustee following a default under the applicable indenture. While
individual holders of securities such as the Notes are generally not required
to be investigated and found suitable, gaming authorities retain the
discretion to do so for any reason, including but not limited to, a default,
or where the Holder of the debt instrument seeks to exercise a material or
significant influence over the gaming operations of the entity in question or
to elect one or more members of its Board of Directors. Each Holder shall be
deemed to have agreed (to the extent permitted by law) that if the relevant
gaming authorities determine that such Holder or beneficial owner of the Notes
must be licensed, qualified or found suitable under applicable law (whether as
the result of a foreclosure sale or for any other reason), and if such Holder
or beneficial owner is not so licensed, qualified or found suitable, such
Holder shall dispose of such Holder's Notes within the time frame and in
accordance with the procedures prescribed by the applicable gaming regulatory
authorities. Any Holder required to apply for licensing, qualification or a
finding of suitability must pay all investigative fees and costs of the gaming
authorities in connection with such an investigation. In addition, the
Indenture provides that if any Gaming Authority requires a Holder or
beneficial owner of the Notes to be licensed, qualified or found suitable
under any applicable gaming law and such Holder or beneficial owner fails to
apply for a license, qualification or a finding of suitability within 30 days
after being requested to do so by the gaming authority, or if such Holder or
such beneficial owner is not so licensed, qualified or found suitable (a
"Disqualified Holder"), the Disqualified Holder must immediately dispose of
his Notes or the Company shall have the option to redeem all of the
Disqualified Holder's Notes, at the lesser of (i) the aggregate principal
amount of such Notes, or (ii) the Disqualified Holder's cost thereof.
Immediately upon a determination of unsuitability, the Disqualified Holder
shall have no further rights whatsoever with respect to the Notes and shall
not have the right (i) to exercise, directly or indirectly through any
Trustee, nominee or any other person or entity, any right conferred by the
Notes, nor (ii) to receive any interest or any other distribution or payment
with respect to the Notes nor any remuneration in any form from the Company
for services rendered or otherwise.
Possible Legislation
On August 3, 1996, President Clinton signed a bill creating a nine-member
National Gambling Impact Study Commission to study the economic and social
impact of gaming and report its findings to Congress and the President within
two years after the first meeting of the Commission. The Commission could
recommend changes in state or federal gaming policies. The President, House
Speaker and Senate Majority Leader are each to select three of the
Commission's members. Additional federal regulation of the gaming industry
could occur as a result of investigations or hearings by the committee, which
could have a material adverse effect on the Company.
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MECHANICS' LIENS
Laws in Louisiana provide certain contractors, subcontractors and
material suppliers with a lien on the property being improved by their
services or supplies in order to secure their right to be paid. Such parties
may seek foreclosure on their liens if they are not paid in full. The Company
has not obtained and does not intend to obtain payment or performance bonds
for Casino Magic-Bossier City to satisfy such liens.
Furthermore, construction began before the mortgage on the real estate at
Casino Magic-Bossier City that secures the Notes was recorded. In Louisiana,
the priority of a mechanic's lien arising out of a particular construction
project relates back to the date on which construction of the project was
first commenced by any contractor. Accordingly, contractors, subcontractors
and suppliers providing goods or services in connection with Casino
Magic-Bossier City who otherwise comply with local law requirements may have a
lien on the project senior in priority to the lien of the mortgage. However,
the Cash Collateral and Disbursement Agreement requires that no progress
payments be released unless lien subordinations or releases have been obtained
from all material subcontractors and suppliers and the Company has to date
obtained such lien subordinations or releases from all subcontractors and
suppliers to whom payments have been made. With respect to any vessel, or
interests therein, which serve as collateral for the Notes, parties providing
goods and services, as well as tort claimants, could have priority over the
lien of the collateral documents encumbering such vessel, to the extent such
parties remain unpaid.
ABILITY TO REALIZE ON COLLATERAL; BANKRUPTCY CONSIDERATIONS
The Series A Notes are, and the Series B Notes will be, secured by a
first priority lien, subject to Permitted Liens, on substantially all of the
assets of the Company, including the Bossier Riverboat, the real property and
improvements constructed thereon in Bossier City and the Crescent City
Riverboat. The Company's Louisiana gaming license is not pledgeable or
transferable. Under Louisiana gaming laws and the regulations promulgated
thereunder, the Trustee may be precluded from or otherwise limited in selling
collateral at a foreclosure sale. In addition, the Trustee may be delayed in
its efforts to sell collateral due to various legal restrictions, including,
without limitation, requirements that an operator of a gaming facility be
licensed by state authorities or that prior approval of a sale or disposition
of collateral be obtained.
After application of any proceeds from a foreclosure sale, the Trustee
may be entitled to a deficiency judgment under certain circumstances.
However, there can be no assurance that the Trustee would be successful in
obtaining any deficiency judgment, what the amount of any such judgment if
obtained might be, or that the Company or Jefferson Corp. would be able to
satisfy any such judgment, if obtained.
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In addition to being subject to gaming law restrictions, the Trustee's
ability to foreclose upon and sell collateral will be subject to the
procedural and other restrictions of state real estate law or the Uniform
Commercial Code or, in the case of gaming vessels, certain federal admiralty
law statutes. Furthermore, any efforts by the Trustee to demand and foreclose
upon any collateral of Jefferson Corp. could be limited by the invocation of
state law suretyship defenses and fraudulent transfer laws. See "Description
of Notes-Remedies Upon Default Under Notes."
The right of the Trustee under the Indenture, as the secured party under
the Collateral Documents related thereto, to foreclose upon and sell the
collateral subject thereto upon an acceleration after any Event of Default is
likely to be significantly impaired by applicable bankruptcy laws if a
bankruptcy proceeding were to be commenced by or against the Company or
Jefferson Corp. prior to or possibly even after the Trustee has foreclosed
upon and sold the collateral. In view of the broad discretionary powers of a
bankruptcy court, it is impossible to predict if payments under the Notes
would be made following commencement of and during a bankruptcy case, whether
or when the Trustee could foreclose upon or sell the collateral or whether or
to what extent Holders of the Notes would be compensated for any delay in
payment or loss of value of the collateral. Furthermore, to the extent a
bankruptcy court were to determine that the value of the collateral is not
sufficient to repay all amounts due on the Notes, the Holders would hold
"undersecured claims." Applicable federal bankruptcy laws do not permit the
payment and/or accrual of interest, costs and attorneys' fees for
"undersecured claims" during the debtor's bankruptcy case.
In the event of a foreclosure sale of the assets comprising Casino
Magic-Bossier City or of the capital stock of the Company, licensing
requirements of applicable gaming authorities may limit the number of
potential bidders for such assets or such stock and may delay the sale
thereof, which could adversely affect the sale price therefor in such event.
Furthermore, such licensing requirements may limit the Trustee's ability to
foreclose upon the collateral.
The Company intends to expand Casino Magic-Bossier City through the
future development of an adjacent 400-room hotel and related amenities,
including restaurants, banquet space, a theater, a swimming pool, a health
club and a child care facility. Subject to the restrictions in the Indenture,
including pro forma compliance with the indebtedness coverage and loan to
value ratios set forth therein, the Company is permitted to incur indebtedness
to finance the costs of constructing the hotel. In the event that the Company
determines to incur such indebtedness on a secured basis, the Indenture
provides that (i) the Trustee will release the land on which the hotel is to
be built from the lien for the benefit of the Notes and (ii) the Company will
have the right to grant a security interest for the benefit of the new lender
in such real property and all improvements constructed thereon, including the
hotel. Under such circumstances the Holders of the Notes will have no security
interest in the hotel or the land on which it is constructed. The development
and construction of subsequent improvements is largely dependent upon the
availability of financing, which could be obtained from a combination of
sources, including proceeds from a future sale of the Crescent City Riverboat,
financing for the planned hotel and operating cash flow of Casino Magic-
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Bossier City; however, no assurances can be given that such funds or financing
will be available or that such hotel and related facilities will ever be
developed.
Certain of the Company's affiliates are involved in activities that are
related to the Company's business and assets. In addition, the Company and
many of its affiliates have overlapping officers and directors. In the event
that an affiliate of the Company is the subject of a proceeding under the
United States Bankruptcy Code, the creditors of such affiliated entity or the
trustee in bankruptcy may argue that the assets and liabilities of the various
entities, including the Company, should be consolidated so as to cause the
assets of the Company to be available for satisfaction of claims against the
bankrupt affiliate. Although the Company believes that it is a distinct and
separate legal entity from its affiliates, there can be no assurance that in
the event of a bankruptcy of one of its affiliated entities a bankruptcy court
would not order consolidation of the assets of the Company and its affiliates.
FRAUDULENT CONVEYANCE CONSIDERATIONS
The Company and Jefferson Corp. have granted, and all future
subsidiaries of the Company will grant, security interests in collateral to
the Trustee, including, without limitation, in certain after-acquired property
of the Company and its subsidiaries, to secure the Notes. Various fraudulent
conveyance and revocatory laws have been enacted for the protection of
creditors and may be utilized by a court of competent jurisdiction to avoid
any security interest in collateral granted by the Company, Jefferson Corp. or
future subsidiaries of the Company. The requirements for establishing a
fraudulent conveyance or revocatory transfer vary depending on the law of the
jurisdiction which is being applied. Generally, if under federal and certain
state statutes in a bankruptcy, reorganization, rehabilitation or similar
proceeding in respect of the Company, Jefferson Corp. or future subsidiaries
of the Company, or in a lawsuit by or on behalf of creditors against the
Company, Jefferson Corp. or future subsidiaries of the Company, a court were
to find that (a) the Company, Jefferson Corp. or such a future subsidiary of
the Company (each hereinafter referred to as a "Grantor"), as the case may be,
incurred the indebtedness in connection with the Notes (including the
Guarantees thereof) or granted security interests in the collateral with the
intent of hindering, delaying or defrauding current or future creditors of the
Grantor, or (b)(i) the Grantor received less than reasonably equivalent value
or fair consideration for incurring the indebtedness in connection with the
Notes (including the Guarantees thereof) or for granting security interests in
the collateral and (ii) the Grantor, (A) was insolvent or was rendered
insolvent by reason of incurring the indebtedness in connection with the Notes
(including the Guarantees thereof) or the granting of security interests in
the collateral, (B) was engaged or about to engage in a business or
transaction for which its assets constituted unreasonably small capital, (C)
intended to incur, or believed that it would incur, debts beyond its ability
to pay as such debts matured (as all of the foregoing terms are defined in or
interpreted under the applicable fraudulent conveyance or revocatory
statutes), or (D) was a defendant in an action for money damages, or had a
judgment for money damages docketed against it (if, in either case, after
final judgment the judgment is unsatisfied), such court could, subject to
applicable statutes of limitations, with respect to the Grantor, avoid in
whole or in part the security interests granted in the collateral or
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subordinate claims with respect to the Notes (including the Guarantees
thereof) to all other debts of the Grantor. The measures for insolvency for
purposes of the foregoing considerations will vary depending upon the law
applied in any such proceeding. Generally, however, a company will be
considered insolvent if the sum of its debts was greater than the fair salable
value of all of its assets at a fair valuation or if the present fair salable
value of its assets was less than the amount that would be required to pay its
probable liability on its existing debts, as they become fixed in amount and
mature.
CASINO MAGIC INDENTURE VIOLATION
On June 13, 1996, Casino Magic sold the capital stock of Atlantic-Pacific
Corp., which operates "Goldiggers," a small casino-hotel in Deadwood, South
Dakota, with approximately 8,500 square feet of gaming area and nine hotel
rooms, to Royal Casino Group, Inc. ("RCG"), an unaffiliated party whose common
stock trades in the over-the-counter market. Goldiggers generated revenues of
$2.1 million and a loss from operations, excluding depreciation and
amortization expense, of approximately $536,000 during 1995 and, except for
its negative cash flow impact, had not been regarded by Casino Magic as
material to its operations for several years. In consideration for the sale of
such stock, Casino Magic received shares of RCG Series A Convertible Preferred
Stock and warrants to acquire shares of RCG common stock. The indenture
governing the Casino Magic Notes required that at least 85% of the
consideration received by Casino Magic in respect of such asset sale be in the
form of cash. By selling such securities for cash to a subsidiary that is not
subject to the investment covenants of such indenture, Casino Magic has taken
steps which it believes are sufficient to cure such violation, although there
can be no assurance that Holders of the Casino Magic Notes will not allege
that such actions constitute an event of default or seek to accelerate the
payment thereof. If the payment of the Casino Magic Notes were accelerated,
Casino Magic would be required to refinance such obligations, and if such
refinancing could not be obtained, Casino Magic could be forced to seek
bankruptcy protection. In the latter event, Holders of the Notes would be
adversely affected if there were to be a substantive consolidation of the
Company with Casino Magic in Casino Magic's bankruptcy proceeding and no
assurance can be given that such substantive consolidation would not occur.
See "-Ability to Realize on Collateral; Bankruptcy Considerations."
ADVERSE WEATHER CONDITIONS
A flood or other severe weather conditions could adversely affect the
Company's gaming operations. The Company commenced gaming operations on the
completed and fully equipped Bossier Riverboat on October 4, 1996, using
temporary mooring, boarding and paved parking facilities, and opened the
permanent landside portions of its casino and entertainment complex on
December 31, 1996. From October 4, 1996 through December 31, 1996, Casino
Magic-Bossier City was forced to close approximately 15 days due to unusually
high flood stage river levels. Closures due to flood stage river levels
should not occur following the completion of the permanent facility. The
Company maintains insurance policies that provide coverage for casualty losses
resulting from severe weather, including floods. However, floods or other
severe weather could cause significant physical damage to the Company's casino
and for a period of time could potentially result in reduced hours of
operation or access to the casino, or the complete closure of the casino for a
period of time, any of which would have a material adverse effect on the
Company.
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ENVIRONMENTAL MATTERS
The Company is subject to a wide variety of federal, state and local laws
and regulations relating to the use, storage, discharge, emission and disposal
of hazardous materials and the protection of natural resources, such as
wetlands and endangered species. While management believes that the Company is
presently in material compliance with all environmental laws, failure to
comply with such laws could result in the imposition of severe penalties,
conditions or restrictions in connection with project development or
operations by government agencies or courts that could adversely affect such
development or operations. The Company completed a Phase I environmental site
assessment (the "Phase I ESA") at the Bossier City site in November 1993,
prior to the publication of the ASTM Standard Practice for Environmental Site
Assessments: Phase I Site Assessment Process in June 1994 (Designation: E
1527-94) (a current, widely accepted industry standard). The Phase I ESA,
which was updated by visual inspection only, in August 1995, includes certain
suggestions relative to certain conditions and areas of potential
environmental concerns. The Phase I ESA, and subsequent soil and groundwater
sampling conducted in October 1995, did not, however, identify any
environmental conditions or non-compliance at the site, the remediation,
mitigation or correction of which management believes would have a material
adverse impact on the business or financial condition of the Company. The
Company is not aware of any environmental conditions or non-compliance not
identified in the Phase I ESA, the August 1995 update, or the subsequent soil
and groundwater sampling.
Under environmental laws and regulations, a beneficiary of a deed of
trust or mortgage on real property, such as the Trustee, may be held liable,
under certain circumstances, for the costs of remediating or preventing
releases or threatened releases of hazardous materials at a mortgaged
property, and for other rights and liabilities relating to hazardous
materials, although such liability rarely has been imposed. Under the
Indenture and the Collateral Documents, the Trustee is indemnified against its
costs, expenses and liabilities, including environmental cleanup costs and
liabilities. Remediation costs could potentially reduce foreclosure proceeds
available to the Holders of the Notes. If the Holders exercise that right,
they could be subject to the risks discussed above.
RESTRICTIONS ON EXCHANGE OFFER
Issuance of Series B Notes in exchange for Series A Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Exchange Agent
of a properly completed and duly executed Letter of Transmittal, including all
other documents required by such Letter of Transmittal. Therefore, Holders of
Series A Notes desiring to tender such Series A Notes in exchange for Series B
Notes should allow sufficient time to ensure timely delivery. The Exchange
Agent and the Company are under no duty to give notification of defects or
irregularities with respect to the tenders of Series A Notes for exchange.
Each broker-dealer that received Series B Notes for its own account in
exchange for Series A Notes, where such Series A 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 Series B Notes. See "Plan of Distribution." and "The
Exchange Offer."
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CONSEQUENCES OF FAILURE TO EXCHANGE
Series A Notes that are not tendered or are tendered but not accepted will,
following the consummation of the Exchange Offer, continue to be subject to
the existing restrictions upon transfer thereof and the Company will have no
further obligation to provide for the registration under the Securities Act of
such Series A Notes. All untenured Series A Notes will continue to be subject
to the restrictions on transfer set forth in the Indenture and the Series A
Notes.
To the extent that Series A Notes are tendered and accepted in the Exchange
Offer, the trading market for untenured and tendered but unaccepted Series A
Notes, if any, could be adversely affected.
ABSENCE OF PUBLIC MARKET
The Series A Notes are eligible for trading in the Private Offerings,
Resale and Trading through Automated Linkages ("PORTAL") market by "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act,
"QIBs"). The Series B Notes are new securities for which there currently is
no active trading market. The Initial Purchasers have advised the Company
that they currently intend to make a market in the Series B Notes. However,
the Initial Purchasers are not obligated to do so and any market-making may be
discontinued at any time without notice. There can be no assurance as to the
liquidity of any markets that may develop for the Series B Notes, the ability
of Holders to sell their Series B Notes, or the price at which Holders would
be able to sell their Series B Notes. Future trading prices of the Series B
Notes will depend upon many factors including among other things, prevailing
interest rates, the market for similar securities and other factors, including
general economic conditions and the financial condition of, performance of and
prospects for the Company. The Company does not intend to apply for listing
of the Series B Notes on any securities exchange or for quotation through the
National Association of Securities Dealers Automated Quotation System.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Series A Notes were sold by the Company on August 22, 1996, to three
Initial Purchasers, Wasserstein Perella Securities, Inc., Jefferies & Company,
Inc. and Deutsche Morgan Grenfell, which in turn sold the Series A Notes to
institutional investors or certain other accredited investors. In connection
therewith, the Company entered into the Registration Rights Agreement, which
provided that, promptly following the sale of the Series A Notes by the
Initial Purchasers, the Company would file with the SEC a registration
statement under the Securities Act with respect to an issue of Series B Notes
of the Company identical in all material respects to the Series A Notes, would
use its best efforts to cause such registration statement to become effective
under the Securities Act and, upon the effectiveness of that registration
statement, would offer to the Holders of the Series A Notes the opportunity to
exchange their Series A Notes for a like principal amount of Series B Notes
which would be issued without restrictive legends and may be reoffered and
resold by the Holder without restrictions or limitations under the Securities
Act. Copies of the Registration Rights Agreement have been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
term "Holder" with respect to the Exchange Offer means any person in whose
name 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.
Based on interpretations by the staff of the SEC, Series B Notes issued
pursuant to the Exchange Offer in exchange for Series A Notes may be offered
for resale, resold or otherwise transferred by any Holder thereof (other than
any broker-dealer who acquired such Series A Notes directly from the Company
to resell pursuant to Rule 144A under the Securities Act or any such Holder
which 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 Series B Notes
are acquired in the ordinary course of such Holder's business and such Holder
has no arrangement with any person to participate in the distribution of such
Series B Notes. If any Holder has any arrangement or understanding with
respect to the distribution of the Series B Notes to be acquired pursuant to
the Exchange Offer, such Holder (i) could not rely on the applicable
interpretations of the staff of the SEC and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. In addition, each broker-dealer that
holds Series A Notes acquired for its own account as a result of market-making
activities or other trading activities and that receives Series B Notes for
its own account in exchange for Series A Notes, where such Series A 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 Series B Notes. See "Plan of
Distribution."
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By tendering in the Exchange Offer, each Holder of Series A Notes will
represent to the Company that, among other things, (i) the Series B Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Series B Notes, whether or not
such person is such Holder, (ii) neither the Holder of Series A Notes nor any
such other person intends to participate or has an arrangement or
understanding with any person to participate in the distribution of such
Series B Notes, (iii) neither the Holder nor any such other person is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act, and (iv) the Holder and such other person acknowledge that (a) any person
participating in the Exchange Offer for the purpose of distributing the Series
B Notes must, in the absence of an exemption therefrom, comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale of the Series B Notes and cannot rely on
the interpretations by the staff of the SEC referenced above, and (b) failure
to comply with such requirements in such instance could result in such Holder
incurring liability under the Securities Act for which such Holder is not
indemnified by the Company.
Following the consummation of the Exchange Offer, Holders of Series A
Notes not tendered will not have any further registration rights and the
Series A Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for the Series A Notes
could be adversely affected.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING SERIES A NOTES
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 Company will accept for exchange Series A Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York City time, on March __ , 1997; provided, however, that if the
Company, in its sole discretion, has extended the period of time for which the
Exchange Offer is open, the term "Expiration Date" means the latest time and
date to which the Exchange Offer is extended.
As of the date of this Prospectus, an aggregate of $115,000,000 principal
amount of Series A Notes was outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about February 4, 1997, to
all Holders of Series A Notes known to the Company. The Company's obligation
to accept Series A Notes for exchange pursuant to the Exchange Offer is
subject to certain conditions as set forth below under "- Certain Conditions
to the Exchange Offer".
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<PAGE>
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 Series A Notes, by giving written
notice of such extension to the Holders thereof. During any such extension,
all Series A Notes previously tendered will remain subject to the Exchange
Offer and may be accepted for exchange by the Company. Any Series A Notes not
accepted for exchange for any reason will be returned without expense to the
tendering Holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Company reserves the right, in its sole discretion, (i) to delay
accepting for exchange any Series A Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions set forth below under
"Certain Conditions" to the Exchange Offer shall not have been satisfied by
giving oral or written notice of such delay, extension or termination to the
Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by written notice thereof to the
registered holders of Series A Notes. If the Exchange Offer is amended in a
manner determined by the Company to constitute a material change, the Company
will promptly disclose such amendment in a manner reasonably calculated to
inform the Holders of the Series A Notes of such amendment and the Company
will extend the Exchange Offer as necessary to provide the Holders with a
period of five to ten business days, after such amendment, depending upon the
significance of the amendment and the manner of disclosure to the registered
Holders, if the Exchange Offer would otherwise expire during such periods. In
the case of any extension of the Exchange Offer, the Company will also give
written notice by means of a press release or other public announcement no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
PROCEDURES FOR TENDERING SERIES A NOTES
The tender to the Company of Series A 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. Except as set forth below, a Holder who wishes to
tender Series A Notes for exchange pursuant to the Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal,
including all other documents required by such Letter of Transmittal, to First
Union Bank of Connecticut, the Exchange Agent, at the address set forth below
under "Exchange Agent" on or prior to the Expiration Date. In addition,
either (i) certificates for such Series A Notes must be received by the
Exchange Agent along with the Letter of Transmittal, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Series A Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date, or (iii) the
Holder must comply with the guaranteed delivery procedures described below.
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<PAGE>
THE METHOD OF DELIVERY OF SERIES A 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 ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR SERIES A
NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Series A Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered Holder of the
Series A Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution (as defined below). In the
event that signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, are required to be guaranteed, such guarantees must be by a
firm which is a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc. or by a
commercial bank or trust company having an office or correspondent in the
United States (collectively, "Eligible Institutions"). If Series A Notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Series A Notes surrendered for exchange must be endorsed by,
or be accompanied by a written instrument or instruments of transfer or
exchange, in satisfactory form as determined by the Company in its sole
discretion, duly executed by the registered Holder with the signature thereon
guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Series A 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 Series A Notes not properly tendered or to not
accept any particular Series A 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 Series A Notes either before or on the
Expiration Date (including the right to waive the ineligibility of any Holder
who seeks to tender Series A Notes in the Exchange Offer). The interpretation
of the terms and conditions of the Exchange Offer as to any particular Series
A Notes either before or after the Expiration Date (including the Letter 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 Series A 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
Series A 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 Series A Notes, such Series A 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 that
appear on the Series A Notes.
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<PAGE>
If the Letter of Transmittal or any Series A 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 Series B Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such
Series B 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 Series B 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.
ACCEPTANCE OF SERIES A NOTES FOR EXCHANGE; DELIVERY OF SERIES B NOTES
Upon satisfaction or waiver by the Company of all of the conditions to
the Exchange Offer on or prior to the Expiration Date, the Company will
accept, promptly after the Expiration Date, all Series A Notes properly
tendered and will issue the Series B Notes promptly after acceptance of the
Series A Notes. See "- Certain Conditions to the Exchange Offer" below. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted
properly tendered Series A Notes for exchange when, as and if the Company has
given oral or written notice thereof to the Exchange Agent.
In all cases, issuance of Series B Notes for Series A 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 Series A Notes
or a timely Book-Entry Confirmation of such Series A 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 Series A Notes are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer or if Series A Notes are submitted for a
greater principal amount than the Holder desires to exchange, such unaccepted
or non-exchanged Series A Notes will be returned without expense to the
tendering Holder thereof (or, in the case of Series A 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
below, such non-exchanged Series A Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration or termination of the Exchange Offer.
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<PAGE>
BOOK ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with
respect to the Series A Notes at the Book-Entry Transfer Facility for purposes
of the Exchange Offer within two business days after the date of this
Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of Series
A Notes by causing the Book-Entry Transfer Facility to transfer such Series A
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's procedures for transfer.
However, although delivery of Series A Notes may be effected through
book-entry transfer at the Book-Entry Transfer Facility, the Letter of
Transmittal or facsimile thereof, with any required signature guarantees and
any other required documents, must, in any case, be transmitted to and
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent" on, or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Series A Notes desires to tender such
Series A Notes and the Series A Notes are not immediately available, or time
will not permit such Holder's Series A Notes or other required documents 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 (i) the tender is made through an Eligible Institution, (ii) prior
to the Expiration Date, the Exchange Agent receives from such Eligible
Institution a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) and Notice of Guaranteed Delivery, substantially in the
form provided by the Company (by telegram, telex, facsimile transmission, mail
or hand delivery), setting forth the name and address of the Holder of Series
A Notes and the amount of Series A Notes tendered, stating that the tender is
being made thereby and guaranteeing that within five business days after the
date of execution of the Notice of Guaranteed Delivery, the certificates for
all physically tendered Series A Notes, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and any other documents required
by the Letter of Transmittal will be deposited by the Eligible Institution
with the Exchange Agent, and (iii) the certificates for all physically
tendered Series A Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the
Letter of Transmittal, are received by the Exchange Agent within five business
days after the date of execution of the Notice of Guaranteed Delivery.
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 Series A Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Series A Notes to the Company and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Series A 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 Series A
38
<PAGE>
Notes and to acquire Series B Notes issuable upon the exchange of such
tendered Series A Notes, and that, when the same are accepted for exchange,
the Company will acquire good and unencumbered title to the tendered Series A
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 Series A Notes or transfer
ownership of such Series A Notes on the account books maintained by the
Book-Entry Transfer Facility. The Transferor further agrees that acceptance
of any tendered Series A Notes by the Company and the issuance of Series B
Notes in exchange therefor shall constitute the performance in full by the
Company of its obligations under the Registration Rights Agreement and that
the Company shall have no further obligations or liabilities thereunder. All
authority conferred by the Transferor will survive the death, bankruptcy 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.
By executing the letter of Transmittal, each Holder will make to the
Company the representations set forth above under the heading "-Purpose and
Effect of the Exchange Offer."
WITHDRAWAL RIGHTS
Tenders of Series A Notes may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address set forth below under "Exchange
Agent." Any such notice of withdrawal must specify the name of the person
having tendered the Series A Notes to be withdrawn, identify the Series A
Notes to be withdrawn (including the principal amount of such Series A Notes),
and (where certificates for Series A Notes have been transmitted) specify the
name in which such Series A Notes are registered, if different from that of
the withdrawing Holder. If certificates for Series A Notes have been
delivered or otherwise identified to the Exchange Agent, then, prior to the
release of such certificates, the withdrawing Holder must also submit the
serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
unless such Holder is an Eligible Institution. If Series A Notes have been
tendered pursuant to the procedure for book-entry transfer described above,
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 Series A
Notes and otherwise comply with the procedures of such facility. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall
be final and binding on all parties. Any Series A Notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer. Any Series A 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 Series A Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry
39
<PAGE>
Transfer Facility pursuant to the book-entry transfer procedures described
above, such Series A Notes will be credited to an account maintained with such
Book-Entry Transfer Facility for the Series A Notes) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Series A Notes may be re-tendered by following one of the
procedures described under "-Procedures for Tendering Series A Notes" above at
any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue Series B Notes in
exchange for, any Series A Notes and may terminate or amend the Exchange
Offer, if at any time before the Expiration Date , there shall be threatened,
instituted or pending any action or proceeding before, or any injunction,
order or decree shall have been issued by, any court or governmental agency or
other governmental regulatory or administrative agency or commission (i)
seeking to restrain or prohibit the making or consummation of the Exchange
Offer or any other transaction contemplated by the Exchange Offer, or
assessing or seeking any damages as a result thereof, or (ii) resulting in a
material delay in the ability of the Company to accept for exchange or to
exchange some or all of the Series A Notes pursuant to the Exchange Offer, or
any statute, rule, regulation, order or injunction shall be sought, proposed,
introduced, enacted, promulgated or deemed applicable to the Exchange Offer or
any of the transactions contemplated by the Exchange Offer by any government
or governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened by any government, governmental authority,
agency or court, domestic or foreign, that in the sole judgment of the Company
might directly or indirectly result in any of the consequences referred to in
clause (i) or (ii) above or in the sole judgment of the Company, might result
in the Holders of Series B Notes having obligations with respect to resales
and transfers of Series B Notes which exceed those described in the
interpretation of the SEC referred to on the cover page of this Prospectus, or
would otherwise make it inadvisable to proceed with the Exchange Offer.
The foregoing condition is for the sole benefit of the Company and may be
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 prior to the Expiration Date in its reasonable
discretion. The failure of 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 may be asserted at any time and
from time to time.
In addition, the Company will not accept for exchange any Series A Notes
tendered, and no Series B Notes will be issued in exchange for any such Series
A 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 a
part or with respect to the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
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<PAGE>
EXCHANGE AGENT
First Union Bank of Connecticut has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at the address set forth below. 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, addressed as follows:
Delivery to: First Union Bank of Connecticut, Exchange Agent
By Mail or by Hand
10 State Street Square
Hartford, Connecticut 06103-3698
Attention: Corporate Trust Department
By Facsimile:
(860)-247-1356
Confirm By Telephone:
(860)-247-1353
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
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 cash expenses to be incurred in connection with the Exchange Offer
will be paid by the Company and are estimated in the aggregate to be $100,000.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Series A Notes pursuant to the Exchange Offer. If a transfer tax is
imposed for any reason other than the transfer and exchange of Series A Notes
to the Company or its order 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.
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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 Series A 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 Series A Notes in such
jurisdiction. In any jurisdiction 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 must be made on behalf of the Company by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
ACCOUNTING TREATMENT
The Series B Notes will be recorded at the same carrying value as the
Series A Notes. Accordingly, no gain or loss for accounting purposes will be
recognized. The expenses of the Exchange Offer will be amortized over the
term of the Series B Notes.
OTHER
Participation in the Exchange Offer is voluntary and Holders should
carefully consider whether to accept. Holders of the Series A Notes are urged
to consult their financial and tax advisors in making their own decisions on
what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Series A Notes pursuant to the terms of this Exchange Offer,
the Company will have fulfilled a covenant contained in the terms of the
Series A Notes and the Registration Rights Agreement. Holders of the Series A
Notes who do not tender their certificates in the Exchange Offer will continue
to hold such certificates 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. All untenured Series A Notes will
continue to be subject to the restrictions on transfer set forth in the
Indenture and the Series A Notes. To the extent that Series A Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for
untenured Series A Notes could be adversely affected.
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<PAGE>
USE OF PROCEEDS
SERIES B NOTES
The Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the Series B Notes offered hereby. In
consideration for issuing the Series B Notes as contemplated in this
Prospectus, the Company will receive, in exchange, Series A Notes in like
principal amount. The form and terms of the Series B Notes are substantially
identical in all material respects to the form and terms of the Series A
Notes, except as otherwise described herein under "The Exchange Offer -- Terms
of the Exchange Offer." The Series A Notes surrendered in exchange for the
Series B Notes will be retired and cancelled and cannot be reissued.
Accordingly, issuance of the Series B Notes will not result in any increase in
the outstanding debt of the Company.
SERIES A NOTES
On August 22, 1996, the Company received approximately $110,300,000 of
net proceeds from the Note Offering. Of that amount, (i) $20.0 million was
used to purchase the Bossier Riverboat simultaneously with the closing of the
Note Offering, (ii) approximately $45.1 million was applied to repay
indebtedness including accrued interest thereon through the date of closing of
the Note Offering, and (iii) approximately $45.2 million was deposited in the
Cash Collateral Accounts. The Cash Collateral Accounts included $29.7 million
deposited in the Construction Disbursement Account, which has been or is being
used, together with $1.8 million incremental equipment financing and prior
capital contributions from Casino Magic to finance the cost of developing,
constructing, equipping and opening Casino Magic-Bossier City. As of October
18, 1996, the Company finalized all plans and specifications for Casino
Magic-Bossier City, agreed upon a guaranteed maximum price of $19.4 million
with its general contractor for completion of the principal structural
improvements at Casino Magic-Bossier City (the landside pavilion, parking
garage and certain of the site improvements) in accordance with such plans and
amended the construction budget to an extent that required, in addition to the
amount deposited in the Construction Disbursement Account, an additional $4.0
million to be funded from the Completion Reserve Account (established with a
deposit of $5.0 million to fund cost overruns arising in connection with
developing and constructing Casino Magic-Bossier City). As of December 31,
1996, approximately $5.4 million (including $4.0 million transferred from the
Completion Reserve Account and interest earned to date) and $1.0 million
remained on deposit in the Construction Disbursement Account and the
Completion Reserve Account, respectively, although as indicated the Company
has incurred construction commitments which will require expenditure of the
remaining balance of the Construction Disbursement Account. Of the remaining
amount in the Cash Collateral Accounts, approximately $7.3 million was used to
purchase the Pledged Securities deposited in the Interest Reserve Account, and
$3.2 million was deposited in the Operating Reserve Account to provide
liquidity during the period from commencement of operations through the date
when Casino Magic-Bossier City is Operating (as defined in the Indenture). As
of December 31, 1996 all of the funds deposited in the Interest Reserve
Account and the Operating Reserve Account remained in such accounts.
</
>
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The portion of the net proceeds from the Note Offering which were
deposited in the Cash Collateral Accounts have been assigned to the Trustee as
collateral security for the Notes pursuant to an Accounts Pledge Agreement (as
defined in the Indenture) executed at closing of the Notes Offering. Funds
are being disbursed from the pledged Cash Collateral Accounts only upon
satisfaction of certain conditions set forth in the Cash Collateral and
Disbursement Agreement (as defined in the Indenture). Pending disbursement of
the net proceeds deposited in the Cash Collateral Accounts, such proceeds are
invested in Cash Equivalents (as defined in the Indenture) pursuant to an
Accounts Pledge Agreement (as defined in the Indenture). See "Description of
Notes-Cash Collateral and Disbursement Agreement."
The amount of net proceeds used to purchase Pledged Securities deposited
in the Interest Reserve Account is net of interest to be earned on the Pledged
Securities pending disbursement for payment of interest on the Notes through
and including the first interest payment date.
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SOURCES AND USES OF FUNDS
The sources and uses of funds for the development, construction, equipping and
opening of Casino Magic-Bossier City (as adjusted to reflect the budget
amendment and the guaranteed maximum price contract entered into in October
1996 for the completion of the principal structural improvements at Casino
Magic-Bossier City) including the acquisition of the Company by Jefferson
Corp. and the purchase of the land on which Casino Magic-Bossier City is
located, are as follows:
Pre-Note Offering
(through August 21, 1996)
(in millions)
Sources Uses
- -------- -------
Equipment financing $ 5.7 Acquisition of Crescent City $50.0
Louisiana Notes 35.0 Land acquisition 12.7
Louisiana Land Note 6.8 Gaming equipment 5.7
Capital contributions from Casino Magic22.3 Site development 2.5
Advances from Casino Magic 2.0 Purchase of additional land 0.9
---- ----
Total 71.8 Total 71.8
======= =====
Giving Effect to the Note Offering
(in millions)
Sources Uses
- -------- -------
First Mortgage Notes due 2003 $115.0 Repayment of existing indebtedness:
Equipment financing 1.8(1)Louisiana Land Note $ 6.9(3)
Louisiana Notes 36.2(2)
Advances from Casino Magic 2.0
-------
Total repayment of indebtedness 45.1
Purchase of Bossier Riverboat 20.0
Construction of Casino Magic-Bossier City:
Bossier Riverboat improvements 2.2
Pavilion 11.0
Parking 6.7
Gaming equipment 1.6
Furniture, fixtures & equipment 1.3
Site development 4.4
Temporary facilities 2.5
Preopening costs 4.9
Opening bankroll 1.7
-----
Post Note Offering construction cost 36.3(4)
--------
Completion reserve 0.2
Interest reserve 7.3
Operating reserve 3.2
Fees and expenses 4.7
----- -----
Total 116.8 Total 116.8
======= ======
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(1) The Company anticipates incurring approximately $1.8 million of additional
equipment financing in connection with Casino Magic-Bossier City. The Company
presently has no commitments for such financing although it has secured a
commitment from a bank for a $2.5 million unsecured revolving credit facility
which will be available as an alternative financing source.
(2) Includes $1.2 million interest on the Louisiana Notes to August 23, 1996.
(3) Includes $0.1 million interest on the Louisiana Land Note to August
23, 1996.
(4) Gives effect to the amended construction and development budget agreed to
in October 1996 at the time that the Company and its general contractor
entered into a guaranteed maximum price contract for the completion of the
pavilion, parking garage and certain site development work. As a result, the
total construction budget for Casino Magic-Bossier City would be $38.7
million, including $2.5 million expended prior to the Note Offering for site
development but excluding land acquisition costs and the acquisition cost of
Crescent City Capital Development Corporation and concurrent assumption of
gaming equipment financing.
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CAPITALIZATION
The following table sets forth the cash and cash equivalents and
capitalization of the Company: (i) at September 30, 1996, (ii) as adjusted to
give effect to the Exchange Offer, assuming that all of the Series A Notes are
exchanged for Series B Notes
September 30, 1996
---------------------------------
(in thousands)
As
Actual Adjusted (1)
-------- ----------
Cash and cash equivalents $ -- $ --
Restricted cash $ 37,817 $ 37,817
-------- --------
Current maturities of long-term
and capital lease obligations 931 931
-------- --------
Long-term debt
Series A Notes 115,000 -
Series B - 115,000
Gaming equipment financing 4,787 4,787
-------- --------
Total long-term debt, including
current maturities 119,787 119,787
-------- --------
Total shareholder's equity 20,166 20,166
-------- ---------
Total capitalization $ 145,363 $ 145,363
======== ========
______________
(1) As adjusted for the exchange of Series A for Series B Notes.
47
<PAGE>
SELECTED FINANCIAL DATA
Beginning in April 1995, Crescent City conducted gaming activities in New
Orleans, Louisiana for a 65-day period before a bankruptcy proceeding was
commenced against it. Pursuant to the court approved Plan of Reorganization,
Crescent City was acquired by Jefferson Corp. in May 1996. Because the
Company will be operating in a different market, with a different vessel and
facility, with different management, ownership, and employees and using a
different name and marketing theme, management believes that the financial
position and operating results of Crescent City prior to the acquisition are
not meaningful to the Company or prospective investors, and such financial
information is therefore not presented.
The selected financial data of the Company presented below should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
of Jefferson Corp. and notes thereto included elsewhere in this Prospectus.
The historical balance sheet data at June 30, 1996 have been derived from the
consolidated financial statements of Jefferson Corp. which have been audited
by Arthur Andersen LLP, independent auditors of Jefferson Corp. and the
Company. From May 13, 1996 through June 30, 1996, the Company was in the
development stage and capitalized all costs. Accordingly, the Company had no
operating results for such period. The Company had no operations until the
opening of Casino Magic-Bossier City on October 4, 1996. No revenues or
expenses were incurred other than interest income, expense and capitalized
interest prior to October 4, 1996. All normal operating expenses were
capitalized under preopening costs until October 4, 1996, in accordance with
the Company's accounting policies. The ratio of earnings to fixed charges is
not applicable as the Company was in the development stage and, accordingly,
had no operating earnings during the periods presented.
48
<PAGE>
Income Statement Date:
Period Three months
May 13, 1996 (inception) ended September 30,
through September 30, 1996 1996
--------- ------------
(in thousands, except per share data)
Revenues $ -- $ --
Other (income) expense:
Interest income -- --
Interest expense 3,131 2,425
Capitalized interest (2,392) (1,686)
------- --------
Total other expenses 739 739
(Loss) before income taxes (739) (739)
Net (loss) (739) (739)
===== ======
Net (loss) per share ($739.28) ($739.28)
========= ========
-----------------------
June 30, 1996 September 30, 1996
------------- ------------------
(in thousands)
BALANCE SHEET DATA:
Cash and cash equivalents $ -- $ --
Restricted cash -- 37,817
Total assets 57,854 145,363
Total long-term debt, including
current maturities 40,673 120,718
Total liabilities 42,783 125,196
Shareholder's equity 15,071 20,166
Ratio of Earnings to Fixed Charges (a) - -
_______________
(a) Earnings were insufficient to cover fixed charges because there were no
operations during this period.
49
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Company's financial statements, the notes
thereto, and certain other financial information included elsewhere in this
Prospectus.
The discussions regarding proposed Company developments and operations
included in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" and "NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS" contain forward looking statements that involve a number of risks
and uncertainties, including with respect to (i) the construction project at
Bossier City and (ii) the Company's ability to fund planned developments and
debt service obligations over the next twelve months with currently available
cash and marketable securities and with cash flow from operations. Such
construction projects entail significant construction risks, including, but
not limited to, 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. Such
risks may be compounded by the Company's decision to construct Casino
Magic-Bossier City on an accelerated schedule. The Company's ability to meet
its debt obligations is entirely dependent upon Casino Magic-Bossier City's
future operating performance, which is itself dependent on a number of
factors, many of which are outside of the Company's control, including
prevailing economic conditions and financial, business, regulatory and other
factors affecting the Company's operations and business. The development and
construction of subsequent improvements is largely dependent upon the
availability of financing, which could be obtained from a combination of
sources, including proceeds from a future sale of the Crescent City Riverboat,
financing for the planned hotel and operating cash flow of Casino
Magic-Bossier City; however, no assurances can be given that such funds or
financing will be available or that such hotel and related facilities will
ever be developed. See "Risk Factors".
DEVELOPMENT ACTIVITIES
On May 13, 1996 Jefferson Corp. acquired all the outstanding capital
stock of Crescent City pursuant to the Plan of Reorganization. Crescent City
discontinued all of its gaming activities in June 1995 after only a very brief
period of operations in the New Orleans market and its only significant assets
at the time of the Plan of Reorganization consisted of the Crescent City
Riverboat, a Louisiana gaming license, and the furniture, fixtures and gaming
equipment located on the Crescent City Riverboat. As a result of the foregoing
factors and because the Company will be operating in a different market, with
a different vessel and facility, different management and ownership and with a
different name and marketing theme, management believes that the financial
position and operating results of Crescent City prior to the acquisition are
not meaningful to the Company or prospective investors, and such financial
information is therefore not presented.
</
50
<PAGE>
Pursuant to the Plan of Reorganization, Crescent City was discharged from
substantially all of its liabilities prior to the acquisition. From that time
until the October 4, 1996 opening of Casino Magic-Bossier City using temporary
boarding, mooring and paved parking facilities, the Company had been in the
development stage and its activities had been limited to arranging for the
design, preliminary site work, construction, and financing for Casino
Magic-Bossier City.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996:
The Company had no operations until the opening of Casino Magic-Bossier City
on October 4, 1996. No revenues or expenses were incurred other than interest
income, expense and capitalized interest prior to October 4, 1996. All normal
operating expenses were capitalized under preopening costs until October 4,
1996, in accordance with the Company's accounting policies.
The Company is included in a consolidated group subject to a tax sharing
agreement between itself, all affiliated companies and its ultimate parent
Casino Magic. See "Certain Transactions".
The Company had a net loss of $0.7 million, or ($739.28) per share in the
quarter ended September 30, 1996. The net loss is due to the Company having
had no operations until October 4, 1996.
Of the net proceeds from the sale of the Series A Notes, $3.2 million was
deposited in the Operating Reserve Account to provide liquidity during the
period from commencement of operations on October 4, 1996 through the
completion of the construction of the entertainment pavilion and parking
garage, which occurred December 31,1996. The Company anticipated that its
initial results might be adversely affected by opening with limited facilities
while construction was proceeding on the permanent land-based amenities, as
well as by the expensing of preopening costs. However, during the period from
October 4, 1996 through December 31, 1996, Casino Magic-Bossier City generated
revenues of approximately $12.6 million with only limited food, beverage and
retail services and had not had to draw upon such Operating Reserve Account.
Such revenues were achieved in spite of the fact that high water on the Red
River, which flooded the Company's temporary parking area, caused the casino
to be closed for fifteen days in November and December including two weekends,
one the Thanksgiving holiday weekend. The permanent Casino Magic-Bossier City
facility is located above the flood plain so that high water should not cause
a closing in the future. Management believes that the Company's initial
results will not be indicative of future operations.
51
<PAGE>
However, future operating results will be subject to significant business,
economic, regulatory and competitive uncertainties and contingencies, many of
which are beyond the control of the Company. While the Company believes that
Casino Magic-Bossier City will not be subject to closures based on unusually
high river waters and will be able to attract a sufficient number of customers
and achieve the level of activity necessary to permit the Company to meet its
payment obligations in connection with the Notes, including any Contingent
Interest obligations, there can be no assurances with respect thereto.
MAY 13, 1996 (INCEPTION) THROUGH SEPTEMBER 30, 1996:
The Company had no operations until the opening of Casino Magic-Bossier City
on October 4, 1996. No revenues or expenses were incurred other than interest
income, expense and capitalized interest prior to October 4, 1996. All normal
operating expenses were capitalized under preopening costs until October 4,
1996, in accordance with the Company's accounting policies. The Company had a
net loss of $0.7 million, or ($739.28) per share in the period from May 13,
1996 (inception) to September 30, 1996. The net loss is due to the Company
having had no operations until October 4, 1996. The net loss for the period
May 13, 1996 (inception) through September 30, 1996 is identical to the net
loss for the three months ended September 30, 1996. This is the result of all
interest incurred prior to June 30, 1996 having been capitalized. After this
date, the cost allocated to the acquisition of the Crescent City Riverboat was
not subject to capitalization.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had $37.8 million in restricted cash
relating to the Notes to be applied for the construction of Casino
Magic-Bossier City or working capital expenses. Subsequent to the May 13,
1996 acquisition through September 30, 1996, the Company received $116.7
million of proceeds from the issuance of long-term note payables and had spent
$44.3 million for acquisitions of property and equipment and other long-term
assets.
The acquisition of the Company and the land upon which Casino
Magic-Bossier City is located, as well as the Company's other development
stage activities, were initially funded by capital contributions and advances
from Casino Magic, and the issuance or assumption of certain indebtedness,
most of which was repaid with proceeds from the Note Offering. Jefferson Corp.
acquired the initial 20 acres of the Casino Magic-Bossier City site for a
total purchase price of $12.7 million, paid through the issuance of $5.3
million in Casino Magic common stock, $0.6 million in cash and the issuance of
the $6.8 million Louisiana Land Note. In May 1996, Jefferson Corp. acquired
the Company for a purchase price of $50.0 million, of which $15.0 million was
paid in cash and the remainder was funded through the issuance of $35.0
million of Louisiana Notes, plus the assumption of equipment financing, of
which $5.7 million was outstanding at September 30, 1996. In July 1996, the
Company acquired an additional three acres of land which are contiguous with
or within the boundaries of the 20-acre site. This subsequent land acquisition
was funded with a $0.9 million advance from Casino Magic. Through the date of
closing of the Note Offering, the total advances from Casino Magic to the
Company for Casino Magic-Bossier City construction and development activities
were $3.4 million (this amount is exclusive of $20.9 million for Casino
Magic's original capital contributions, consisting of real estate acquired for
Casino Magic common stock and $15 million in cash). Of this $3.4
52
<PAGE>
million advance, $1.4 million was contributed as capital and the balance was
repaid to Casino Magic in August 1996 from the proceeds of the sale of the
Series A Notes.
At the time of the May 1996 acquisition, Crescent City owned the Crescent City
Queen Riverboat, gaming and related equipment and surveillance equipment and a
license to conduct riverboat gaming operations in Louisiana. The Crescent
City Riverboat is one of the largest cruising riverboats designed for gaming
in the United States and could not be used at Casino Magic-Bossier City
because of the Crescent City Riverboat's size. Therefore, the Company
purchased the Bossier Riverboat for use at Casino Magic-Bossier City for $20
million with proceeds of the Note Offering in August 1996. The Company
intends to sell the Crescent City Riverboat and use the proceeds to assist in
the funding of Casino Magic-Bossier City. Casino Magic is currently pursuing
a gaming license in Crawford County, Indiana. If Casino Magic is successful
in obtaining a gaming license in Indiana, it is anticipated that, subject to
the availability of adequate financing and the agreement of corporate partners
of Casino Magic, if any, to such purchase, an affiliated company of the
Company would purchase the Crescent City Riverboat at fair market value. If
Casino Magic is not successful in obtaining a license in Indiana, Casino Magic
will actively market the Crescent City Riverboat. In early 1997, Casino Magic
expects to obtain a determination on its gaming license application in
Indiana. The Company can give no assurances that it will be able to sell the
Crescent City Riverboat on acceptable terms or in a timely manner. The other
assets acquired as a part of the acquisition of Louisiana Corp., which
included gaming, surveillance and related equipment, are being used at Casino
Magic-Bossier City.
</
>
To fund the initial development of Casino Magic-Bossier City, on August 22,
1996, the Company sold $115.0 million aggregate principal amount of Series A
Notes. Contingent Interest is payable on the Notes, on each interest payment
date, in an aggregate amount equal to 5% of the Company's Adjusted
Consolidated Cash Flow for the Accrual 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. Payment of all or a
portion of any installment of Contingent Interest may be deferred, at the
option of the Company, if, and only to the extent that, (i) the payment of
such portion of Contingent Interest will cause the Company's Adjusted Fixed
Charge Coverage Ratio for the Company'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 Notes corresponding to such
Contingent Interest has not then matured and become due and payable (at stated
maturity, upon
53
<PAGE>
acceleration, upon redemption, upon maturity of a repurchase obligation or
otherwise). The aggregate amount of Contingent Interest payable in any
Accrual 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.
The net proceeds received by the Company from the sale of the Series A
Notes, after deducting underwriting discounts and commissions and offering
expenses, were approximately $110.3 million. The Company used $45.1 million of
the net proceeds from the Note Offering to repay in full the $2.0 million
non-equity advances from Casino Magic, the Louisiana Land Note and the
Louisiana Notes, including accrued interest through the closing, and used
$20.0 million to purchase the Bossier Riverboat. The $45.2 million remaining
net proceeds from the sale of the Series A Notes were deposited into the Cash
Collateral Accounts and invested in Cash Equivalents pending disbursement
pursuant to the Cash Collateral and Disbursement Agreement. As of December 31,
1996, all of the originally deposited amounts, plus accrued interest thereon,
remained in the Interest Reserve Account (intended to fund the first payment
of fixed interest on the Notes in February 1997) and approximately $1.2
million remained in the Operating Reserve Account (intended to fund operating
losses occurring during the period of operations with temporary mooring,
boarding and parking facilities which commenced October 4, 1996. As of
October 18, 1996, the Company finalized all plans and specifications for
Casino Magic-Bossier City, agreed upon a guaranteed maximum price of $19.4
million with its general contractor for completion of the principal structural
improvements at Casino Magic-Bossier City (the landside pavilion, parking
garage and certain site improvements) in accordance with such plans and
amended the construction budget to an extent that required, in addition to the
amount deposited in the Construction Disbursement Account, an additional $4.7
million to be funded from the Completion Reserve Account (established with an
original deposit of $5.0 million to fund cost overruns arising in connection
with developing and constructing Casino Magic-Bossier City). As of December
31, 1996, approximately $5.4 million (including $4.7 million transferred from
the Completion Reserve Account) and $0.3 million remained on deposit in the
Construction Disbursement Account and Completion Reserve Account,
respectively, although as indicated the Company has incurred construction
commitments which will require expenditure of the remaining balance of the
Construction Disbursement Account. In addition, the Company has obtained a
commitment from a bank for a $2.5 million unsecured revolving credit facility
which is expected to be available as a financing source for the Company.
The Company opened Casino Magic-Bossier City on October 4, 1996 using a
temporary boarding facility and opened the permanent landside portions of the
casino and entertainment complex on December 31, 1996. Following the initial
interest payment on the Notes, which will be funded from the Interest Reserve
Account, the Company expects to fund its working capital and debt service
requirements from operating cash flow, which management believes will be
sufficient for such purposes. However, the adequacy of the Company's operating
cash flow will depend, among other things, upon customer acceptance of Casino
Magic-Bossier City, efficiency of operations, depth of customer demand, the
effectiveness of marketing and promotional efforts and the successful
performance by the Manager of the responsibilities delegated to it.
54
<PAGE>
The Casino Magic-Bossier City development will initially utilize
approximately 12 of the site's 23 acres, allowing substantial room for future
expansion. The Company intends to expand Casino Magic-Bossier City through the
future development of an adjacent 400-room hotel and related amenities,
including restaurants, banquet space, a theater, a swimming pool, a health
club and a child care facility. Subject to the restrictions in the Indenture,
including pro forma compliance with the indebtedness coverage and loan to
value ratios set forth therein, the Company is permitted to incur indebtedness
to finance the costs of constructing the hotel. In the event that the Company
determines to incur such indebtedness on a secured basis, the Indenture
provides that (i) the Trustee will release the land on which the hotel is to
be built from the lien for the benefit of the Notes and (ii) the Company will
have the right to grant a security interest for the benefit of the new lender
in such real property and all improvements constructed thereon, including the
hotel. Under such circumstances the Holders of the Notes will have no
security interest in the hotel or the land on which it is constructed. The
development and construction of these subsequent improvements is estimated to
range from $35.0 million to $45.0 million and is dependent upon the
availability of financing, which could be obtained from a combination of
sources, including proceeds from a future sale of the Crescent City Riverboat,
financing for the hotel and operating cash flow of Casino Magic-Bossier City;
however, no assurances can be given that such funds or financing will be
available or that such hotel and related amenities will ever be developed.
RECENT PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles to be held and used be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Additionally, long-lived assets and
certain identifiable intangible assets to be disposed of are required to be
reported at the lower of carrying amount or fair value, less selling costs.
SFAS No. 121 is effective for fiscal years beginning after December 15, 1995.
The Company does not anticipate that the adoption of this statement will have
a material impact on the financial statements of the Company.
55
<PAGE>
BUSINESS
GENERAL
The Company has developed a new dockside riverboat casino and
entertainment complex, Casino Magic-Bossier City, on a 23-acre site in Bossier
City, Louisiana. The Company commenced gaming operations on the completed and
fully equipped Bossier Riverboat on October 4, 1996, using temporary mooring,
boarding and paved parking facilities and opened the substantially completed
permanent landside operations of its casino and entertainment complex on
December 31, 1996. The casino site enjoys high visibility and convenient
access from Interstate Highway 20, a major artery between Bossier
City/Shreveport and the Dallas-Fort Worth area approximately 180 miles to the
west. The Company conducts its casino operations on the recently constructed
Bossier Riverboat, which measures 254 feet long and 78 feet wide with
approximately 58,000 square feet of interior space, including 30,000 square
feet of gaming space (the maximum allowed under current Louisiana law) with
984 slot machines and 44 table games. Casino Magic-Bossier City also includes
a 37,000 square foot entertainment pavilion and covered parking for
approximately 1,550 cars. The entertainment pavilion includes a 350-seat
buffet restaurant, a gift shop, a bar and lounge area, and a stage area
designed to showcase live entertainment, including dance productions, bands
and individual performers, with an open seating area that will accommodate up
to 300 customers. Casino Magic-Bossier City has been designed to highlight a
new "Magic" theme which Casino Magic intends to implement at its other
properties to strengthen the "Casino Magic" brand identity. Management
believes that its premier facility, the first new gaming facility in more than
two years in the Bossier City/Shreveport Market, will attract a substantial
number of customers and that its "Magic" theme will foster brand identity and
customer loyalty.
Excluding amounts expended in May 1996 in connection with Jefferson
Corp.'s acquisition of the Company, the total project cost for Casino
Magic-Bossier City's approximately $72.1 million which includes: (i)
approximately $13.6 million expended for the acquisition of the 23-acre site,
(ii) $20.0 million expended for the acquisition of the Bossier Riverboat, and
(iii) $38.7 million as the amended development and construction budget for the
buildings and other improvements at Casino Magic-Bossier City (including
approximately $8.4 million of preopening costs, opening bankroll and
additional gaming equipment but excluding fees and expenses of the Note
Offering and $11.6 million aggregate remaining reserves for completion costs,
operating expenses and fixed interest). At the closing of the Note Offering,
approximately $45.2 million of the net proceeds thereof were deposited in Cash
Collateral Accounts to be disbursed only in accordance with the Cash
Collateral and Disbursement Agreement executed at the closing of the Note
Offering. As of December 31, 1996, all of the originally deposited amounts,
plus accrued interest thereon, remained in the Interest Reserve Account
(intended to fund the first payment of fixed interest on the Notes in February
1997) and approximately $1.2 million remainded in the Operating Reserve
Account (intended to fund operating losses, if any, occurring during the
period of operations with temporary mooring, boarding and parking facilities
which commenced October 4, 1996). As of October 18, 1996, the Company
finalized all plans and specifications for Casino Magic-Bossier City, agreed
upon a guaranteed maximum price of $19.4 million with its general contractor
for completion of the principal structural improvements at Casino
Magic-Bossier City (the
56
<PAGE>
landside pavilion, parking garage and certain site improvements) in accordance
with such plans and amended the construction budget to an extent that
required, in addition to the amount deposited in the Construction Disbursement
Account, an additional $4.7 million funded from the Completion Reserve Account
(established with an original deposit of $5.0 million to fund cost overruns
arising in connection with developing and constructing Casino Magic-Bossier
City).
In May 1996, Casino Magic, through its wholly owned subsidiary, Jefferson
Corp., acquired the Company (which at the time of acquisition held the
Louisiana gaming license that is being used for Casino Magic-Bossier City) for
$50.0 million and the assumption of $5.7 million in equipment financing. The
assets acquired as a part of such transaction included gaming and related
equipment and surveillance equipment which the Company is using at Casino
Magic-Bossier City and a second riverboat owned by the Company, the Crescent
City Riverboat. The Crescent City Riverboat is one of the largest cruising
riverboats designed for gaming in the United States, measuring approximately
430 feet by 100 feet with 88,000 square feet of interior space spread across
three decks. While the Crescent City Riverboat is part of the collateral for
the Notes, the Company has never intended to use the Crescent City Riverboat
in connection with its gaming activities at Casino Magic-Bossier City since
the Crescent City Riverboat is too large to navigate the Red River to Bossier
City/Shreveport. The Company anticipates selling the Crescent City Riverboat,
in which case the Company will be required either to reinvest the proceeds in
Casino Magic-Bossier City or apply such proceeds to a repurchase offer for the
Notes. Casino Magic is currently pursuing a gaming license in Crawford
County, Indiana. If Casino Magic is successful in obtaining a gaming license
in Indiana, it is anticipated that, subject to the availability of adequate
financing and the agreement of corporate partners of Casino Magic, if any, to
such purchase, an affiliated company of Casino Magic would purchase the
Crescent City Riverboat at fair market value. If Casino Magic is not
successful in obtaining a license in Indiana, Casino Magic will actively
market the Crescent City Riverboat. In early 1997, Casino Magic expects to
have a determination on its gaming license application in Indiana. The
Company can give no assurances that it will be able to dispose of the Crescent
City Riverboat on acceptable terms or in a timely manner.
</
The Casino Magic-Bossier City development will initially utilize
approximately 12 of the site's 23 acres, allowing substantial room for future
expansion. The Company intends to expand Casino Magic-Bossier City through the
future development of an adjacent 400-room hotel and related amenities,
including restaurants, banquet space, a theater, a swimming pool, a health
club and a child care facility. Subject to the restrictions in the Indenture,
including pro forma compliance with the indebtedness coverage and loan to
value ratios set forth therein, the Company is permitted to incur indebtedness
to finance the costs of constructing the hotel. In the event that the Company
determines to incur such indebtedness on a secured basis, the Indenture
provides that (i) the Trustee will release the land on which the hotel is to
be built from the lien for the benefit of the Notes and (ii) the Company will
have the right to grant a security interest for the benefit of the new lender
57
<PAGE>
in such real property and all improvements constructed thereon, including the
hotel. Under such circumstances, the Holders of the Notes will have no
security interest in the hotel or the land on which it is constructed. The
development and construction of these subsequent improvements is dependent
upon the availability of financing, which could be obtained from a combination
of sources, including proceeds from a future sale of the Crescent City
Riverboat, the availability of financing for the hotel and operating cash flow
of Casino Magic-Bossier City; however, no assurances can be given that such
funds or financing will be available or that such hotel and related amenities
will ever be developed.
BOSSIER CITY/SHREVEPORT MARKET
The Company believes the Bossier City/Shreveport Market presents it with a
significant gaming development opportunity based upon the strong population
density of its target market and the current regulations allowing dockside
riverboat gaming in Bossier City/Shreveport. The Bossier City/Shreveport
Market is the only market in Louisiana that currently permits continuous
dockside gaming without requiring cruising or simulated cruising schedules.
This allows Casino Magic-Bossier City to operate 24 hours a day with
uninterrupted and convenient casino access for gaming patrons. The Company
believes that the Bossier City/Shreveport Market has one of the highest ratios
of adults within a 200-mile radius to gaming positions of any drive-in gaming
market in the United States and that this market is underserved. Based on the
approximately 6,591 gaming positions expected for the Bossier City/Shreveport
Market, including those of Casino Magic-Bossier City and the three other
existing casinos, and those assumed for a fifth riverboat which has been
licensed to relocate from the New Orleans market to the Bossier
City/Shreveport Market and which is expected to commence gaming operations by
late 1997, there will be approximately one gaming position in the Bossier
City/Shreveport Market for every 1,009 adults within 200 miles (although
additional operators, including competitors operating in Bossier
City/Shreveport, have applied for a license to operate a sixth dockside
riverboat casino in the Bossier City/Shreveport Market which would increase
competition in such market and reduce such ratio of gaming positions to adult
population). According to reports published by the Louisiana State Police,
total gaming revenues for the 12 months ended May 31, 1996 for the three
riverboat casinos operating in the Bossier City/Shreveport Market were $473.3
million. Management estimates that these revenues represent an average daily
win per slot of $309 and win per table of $2,310. The estimated win per unit
figures in the Bossier City/Shreveport Market are second only to the Chicago
area among riverboat gaming markets and compare favorably to Atlantic City,
which generated an average daily win per slot of $244 and win per table of
$2,463 for the same period.
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The table below compares demographic and certain key operating statistics
of the Bossier City/Shreveport Market with other major day-trip gaming markets
for the 12 months ended May 31, 1996.
Adult
Population Win/ Win/
Gaming to Slot/ Table/
Metropolitan Area(1) Slot Tables Positions Positions(2) Day(3) Day(3)
- ----------------- ------ ------ --------- --------- ----- ------
Chicago (4) 10,356 565 13,745 1,097 379 $3,063
BOSSIER CITY/SHREVEPORT(5) 4,983 268 6,591 1,009 309 2,310
Lake Charles (6) 5,510 274 7,154 936 194 1,297
New Orleans 3,652 179 4,726 849 135 1,272
Atlantic City 31,139 1,345 39,209 730 244 2,463
Biloxi 8,624 408 11,072 388 110 975
Tunica 11,483 472 14,315 328 126 1,271
_____________________
(1) Excludes areas in states, such as Iowa and Missouri, which restrict
the amount of individual wagers or aggregate loss. Also excludes the area
served by the Ledyard, Connecticut Indian Casino.
(2) Compares the number of adults within a 200 mile radius to the number
of gaming positions in the metropolitan area for the cities indicated.
(3) Information is derived by management from publicly available revenue
and operating data and, with respect to information regarding the Louisiana
market, assumes that 70% and 30% of casino revenues are attributable to slot
machines and table games, respectively.
(4) Includes 8,503 additional gaming positions added or expected to be
added in northern Indiana from the Hammond, East Chicago, Gary and Michigan
City casinos.
(5) Includes Casino Magic-Bossier City with 984 slots and 44 table games
and a possible fifth riverboat casino with an assumed 1,050 slots and 50
tables.
(6) Includes Grand Coushatta, a land-based Indian casino with 1,911 slots
and 72 tables.
MARKETING STRATEGY
The Company intends to focus its marketing activities on the 6.6 million
adults residing within a 200-mile radius of Bossier City/Shreveport, including
residents of the Dallas-Fort Worth area, located approximately 180 miles to
the west. Casino Magic-Bossier City's convenient location provides easy and
convenient access from Interstate Highway 20, the major east-west artery
connecting Dallas-Fort Worth to Bossier City/Shreveport.
The Company intends to employ marketing programs similar to those which
have been successfully utilized at Casino Magic's other properties. The
Company anticipates engaging in a variety of advertising, direct mail and
promotional programs intended to encourage initial and repeat visits to Casino
Magic-Bossier City, including:
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Magic Money Players Club. The Company intends to utilize the Magic
Money Players Club at Casino Magic-Bossier City. Management believes that this
slot club, which Casino Magic successfully utilizes at its other properties,
will be an important marketing tool. Management believes that, like a frequent
flier airline card or cash-back credit card, it promotes customer loyalty and
frequent use. Guests who enroll in this free club complete a questionnaire
that provides the Company with useful demographic information, including name,
address, age, entertainment interests and gaming preferences. Specific groups
can be targeted for direct-mail offers and promotions, and each member of the
Magic Money Players Club receives a bi-monthly newsletter that includes
upcoming events, entertainment schedules, current membership incentives and
photos of recent winning patrons.
The Magic Money Players Club also provides customer benefits such as cash
rewards and club perquisites designed to increase length of stay and frequency
of visits. Because gaming members earn points that are redeemable for cash,
the Magic Money Players Club provides an effective way to give back to loyal
customers a portion of their play. Active members with high play levels are
also rewarded with complimentary entertainment and event tickets, as well as
free dining. A recent upgrade to the member tracking system will, in the near
future, allow customers to accumulate and redeem rewards at any Casino Magic
property.
Promotions, Special Events and Entertainment. Gaming promotions are
expected to be a major focus of the Company's marketing effort. Similar to
programs employed at Casino Magic's other properties, the Company intends to
schedule mid-week gaming promotions designed to attract players and increase
customer counts. The Company intends to use local advertising and direct mail
to target the player base and general public for large promotions. Additional
direct-mail offers, including gaming packages, car drawings, free buffets,
event tickets and party invitations will be sent to high-end players.
As it has for its other properties, Casino Magic will monitor promotions
utilized for Casino Magic-Bossier City through the Magic Money Players Club
for cost effectiveness. Management believes that the success of each promotion
not only depends on player appeal, but also on the level of internal and
external advertising related to the promotion. The objective of each promotion
is to accomplish at least one of the following strategies: add to the
Company's player base, generate more frequent visits from the existing player
base, or increase the length of stay and play levels of the player base.
Motor Coach Programs. The Company also intends to promote motor coach
group package programs for Casino Magic-Bossier City, which the Company
believes has been an important part of Casino Magic's marketing programs for
its other properties. Intended to maintain customer volume during
traditionally non-peak times, Magic Bus programs typically originate at
locations 50 to 200 miles from the casino, are completed in one day and are
generally organized by one of the participants. The motor coach program
experience that Casino Magic has gained in Mississippi is expected to be
beneficial for the development of similar programs in connection with Casino
Magic-Bossier City.
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Advertising Programs. Casino Magic uses television, radio and outdoor
and print media to promote its services and name recognition. Casino Magic's
advertising programs are designed and executed by Casino Advertising, Inc., a
wholly owned subsidiary of Casino Magic. The Company believes that Casino
Magic's in-house operations will ensure the Company of timely product
delivery, a more focused creative direction, a standardized image and overall
cost efficiency.
COMPETITION
The Company will be highly dependent on the Bossier/Shreveport Market and
on the principal markets to which it caters, such as the Dallas-Fort Worth
market, and it expects to compete most directly with the three other casinos
currently operating in the Bossier/Shreveport market. There are currently 14
riverboat casinos operating in Louisiana, all of which have opened since
September 1993. Of these 14 riverboat casinos, three in addition to Casino
Magic-Bossier City are currently licensed and have been operating in the
Bossier City/Shreveport Market since 1994 and offer substantially similar
gaming facilities. Casino Magic-Bossier City will face competition from those
existing operations, particularly to the extent that they add to or enhance
existing amenities. For example, one Bossier City/Shreveport casino operator
recently broke ground on a 606-room all suites hotel at its riverboat casino
location in Bossier City. In addition, in September, 1996, a riverboat
located in the New Orleans market received approval to relocate to the Bossier
City/Shreveport Market. The relocation of this riverboat will occur after the
land-based casino in New Orleans opens or on October 31, 1997, whichever event
occurs first. Furthermore, additional operators, including competitors
operating in Bossier City/Shreveport, have applied for a license to operate a
sixth dockside riverboat casino in the Bossier City/Shreveport Market, which
would increase competition in such market. Certain of the Company's
competitors have more experienced management and greater name recognition,
marketing capabilities and financial resources. In attempting to attract
customers to its casino, the Company may also face increasing competition from
the new or existing casinos developed elsewhere in Louisiana, on the
Mississippi Gulf Coast (including other casinos operated by Casino Magic) and
surrounding market areas and other jurisdictions throughout the United States
and abroad, and from established gaming centers such as those in Nevada and
Atlantic City, New Jersey. The Company also faces competition from other forms
of lawful gaming, such as state-sponsored lotteries and video lottery
terminals, pari-mutuel betting on horse and dog racing, and bingo parlors, as
well as from other forms of entertainment. It is possible that increased
competition could have a material adverse effect on the Company.
On November 5, 1996, voters in both Caddo and Bossier parishes approved a
continuation of riverboat gaming in such parishes. Voters in all other
Louisiana parishes in which riverboat gaming is currently conducted also
approved a continuation of that form of gaming in their respective parishes.
Current Louisiana law limits the number of riverboat casino licenses in the
state to 15, of which 14 have been awarded, and limits the concentration of
riverboat casino licenses in any one parish to six. Five of those licenses
(including the Company's and another recently approved relocation from the New
Orleans market) have been granted in the Bossier City/Shreveport Market which
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encompasses both the Caddo and Bossier parishes. The relative success of
gaming operations in the Bossier City/Shreveport Market, as compared to other
Louisiana Markets, may increase the possibility that existing licenses may be
relocated to the Bossier City/Shreveport Market. However, the relocation of
existing licenses to another parish or of riverboats within the same parish
will be restricted by the Constitutional Amendment which requires, among other
things, a local parish-wide election to approve, by majority vote, the
licensing of any additional riverboats in a parish with existing licensed
riverboats or the relocation of any operating riverboat to a different berth
in the same parish.
Casino gaming is currently prohibited in several jurisdictions upon which
the Bossier City/Shreveport gaming industry draws. As a result, residents of
these jurisdictions, principally Texas, comprise a significant portion of the
customers of existing gaming operations in the Bossier City/Shreveport area
and of the anticipated customers of Casino Magic-Bossier City. Although casino
gaming is not currently permitted in Texas and the Texas Attorney General has
issued an opinion that gaming in Texas would require an amendment to the Texas
Constitution, the Texas Legislature has considered various proposals to
authorize casino gaming. No gaming legislation was enacted in the most recent
legislative session ended May 29, 1995. A constitutional amendment would
require a two-thirds vote of those present and voting in each house of the
Texas Legislature and approval by the electorate in a referendum. The
legalization of casino gaming in Texas and the opening of one or more casinos
in the Dallas-Fort Worth area, which is a major market for Bossier
City/Shreveport gaming operations, would have a material adverse effect on the
Company's Casino Magic-Bossier City operations.
DESIGN AND CONSTRUCTION TEAM
Kuhlmann design Group, Inc. ("KdG") has been the architect for Casino
Magic-Bossier City and has provided basic architectural, interior design and
in-house engineering services, utilizing local engineers for many of the more
specialized areas such as marine design, surveying, traffic design and
off-site utility design. KdG has substantial experience in the past several
years in projects similar to Casino Magic-Bossier City, including the Isle of
Capri Casino in Bossier City.
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W.S. Bellows Construction Company ("Bellows") is the general contractor
for Casino Magic-Bossier City. Casino Magic and Bellows originally entered
into a standard form AIA cost-plus construction contract, which provided for a
contractor's fee of 4% of the cost of the work. Casino Magic assigned such
contract to the Company on the closing of the Note Offering. As of October 18,
1996, the Company finalized all plans and specifications for Casino
Magic-Bossier City, agreed upon a guaranteed maximum price of $19.4 million
with Bellows for completion of the principal structural improvements at Casino
Magic-Bossier City (the landside pavilion, parking garage and certain site
improvements) in accordance with such plans and amended the construction
budget to an extent that required, in addition to the amount deposited in the
Construction Disbursement Account, an additional $4.0 million to be funded
from the Completion Reserve Account (established with an original deposit of
$5.0 million to fund cost overruns arising in connection with developing and
constructing Casino Magic-Bossier City).
CASINO MAGIC CORP.
Casino Magic, through the Manager, will manage Casino Magic-Bossier City
pursuant to a management agreement entered into with the Company at the
closing of the Note Offering. Casino Magic will have no obligation under the
Notes or the Jefferson Guarantee nor does it have any obligation to provide
financing to the Company. Casino Magic, through its wholly owned
subsidiaries, develops, owns and operates casinos and related amenities
primarily in the southeastern United States, including two major facilities on
the Mississippi Gulf Coast. Casino Magic owns and operates Casino Magic-BSL in
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Bay St. Louis, Mississippi, and Casino Magic-Biloxi in the midst of a
four-casino "Strip" in Biloxi, Mississippi. Casino Magic also owns or operates
two small casinos in Argentina and managed two American-style casinos in
Greece until December 1996, in one of which it had a 49% interest. Casino
Magic incurred an earnings charge of approximately $27.0 million related to
the write-off of the investment in such Greek casino.
The following summarizes certain properties owned or managed by Casino
Magic at September 30, 1996 (excluding the Greek casinos), and as adjusted to
give pro forma effect to Casino Magic-Bossier City:
Casino
square Slot Table Hotel
footage machines games rooms
------- -------- ----- -----
EXISTING OPERATIONS:
Bay St. Louis 39,500 1,108 43 201
Biloxi 47,700 1,190 41 --
Argentina (1) 29,000 401 56 --
------- ----- ---- ----
Total Existing Operations 116,200 2,699 140 201
PRO FORMA ADDITIONS:
Casino Magic-Bossier City 30,000 984 44 --
------- ----- ---- ----
Total including Pro Forma Additions 146,200 3,683 184 201
======= ====== ==== ====
___________________
(1) Represents two casinos.
Since late 1995, Casino Magic has strengthened its management team with
the addition of a new Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer and several other key executives who collectively possess
substantial development and operational experience within the gaming industry.
Casino Magic's new management team and the Company's Board of Directors have
identified its strategic priorities as (i) focused development of domestic
growth projects, particularly Casino Magic-Bossier City, and (ii) increased
attention to, and investment in, its core Mississippi properties. In addition,
management is redefining and developing a new "Magic" theme throughout its
properties to enhance the customer experience, as well as to strengthen the
"Casino Magic" brand identity. Management of Casino Magic believes that
establishing a significant brand name presence will be an increasingly
important competitive tool in each of its existing and future markets.
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MANAGEMENT AGREEMENT
Term. The Company entered into a management agreement with Casino Magic
and the Manager ("Management Agreement") for a ten year term at the closing of
the Note Offering on August 22, 1996. Based upon management agreements which
Casino Magic has negotiated with third parties in its international
operations, the Company believes that the terms hereof are as favorable as
those the Company could have achieved with a non-affiliated third party.
Management Fee. In consideration for the license of the "Casino Magic"
name and the services provided under the Management Agreement, the Company has
agreed to pay the Manager a management fee equal to 10% of Adjusted
Consolidated Cash Flow. The payment of management fees commences at such time
as Casino Magic-Bossier City is Operating (as defined in the Indenture). The
management fee will be paid monthly to the extent that the Company's Fixed
Charge Coverage Ratio (as defined in the Indenture) is at least 1.5 to 1.0
after giving effect to such payment. If the management fee cannot be paid, the
management fee will accrue. No management fee will be payable if a default or
event of default has occurred and is continuing under the Indenture. In the
event of a bankruptcy, reorganization, insolvency, dissolution or other
winding-up of the Company, payment of the management fee will be subordinated
to the prior payment in full in cash of all obligations under the Indenture
and the Notes.
Expenses. Except where the Management Agreement expressly provides
otherwise, all costs, expenses, funding or operating deficits and operating
capital, real property and personal property taxes, insurance premiums and
other liabilities incurred in connection with the operation of Casino
Magic-Bossier City shall be the sole and exclusive financial responsibility of
the Company. The Company will advance to the Manager or otherwise provide, on
a timely and prompt basis, the funds necessary to conduct the affairs and
maintenance of Casino Magic-Bossier City, including legal and accounting fees
incurred by the Company and payable to third parties in connection with the
Company's reporting requirements.
Accounting and Financial Records. The Manager will cause the Company's
employees to maintain a complete accounting system in connection with the
operation of Casino Magic-Bossier City. Books and records will be maintained
in accordance with generally accepted accounting principles, on a calendar
year basis, and will be retained at Casino Magic-Bossier City.
Employees. All persons employed in connection with the operations of
Casino Magic-Bossier City above the General Manager level will not be deemed
employees of the Company, however, all those at the General Manager level and
below will be employees of the Company. The Company will not be responsible
for the compensation of persons who are not deemed employees of the Company.
The Manager will also be responsible for determining the fitness and
qualifications of all casino employees, subject to Louisiana riverboat gaming
licensing standards.
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Bank Accounts. The Company will establish bank accounts that are
necessary for the operation of Casino Magic-Bossier City. Gross revenues from
operations will be deposited in the bank accounts and the Company will pay out
of the bank accounts, to the extent of the funds therein, all of its operating
expenses and other amounts as directed by the Manager.
EVENTS OF DEFAULT
Manager. The Manager will be in default under the Management Agreement
if it fails to perform or materially comply with any of the covenants,
agreements, terms or conditions contained in the Management Agreement
applicable to the Manager and such failure continues for a period of 30 days
after written notice thereof from the Company specifying in detail the nature
of such failure, or, if such failure is of a nature that it cannot, with due
diligence and good faith, be cured within 30 days, if the Manager fails to
proceed promptly and with due diligence and in good faith to cure the same and
thereafter to prosecute the curing of such failure to completion with due
diligence within 90 days thereafter.
The Company. If the Company (a) fails to make any monetary payment
required under the Management Agreement on or before the due date and such
failure continues for five business days after written notice from the Manager
specifying such failure, (b) fails to pay the entire management fee for a
period of six consecutive months, or (c) fails to perform or materially comply
with any of the other covenants, agreements, terms or conditions contained in
the Management Agreement applicable to the Company (other than monetary
payments) and such failure continues for a period of 30 days after written
notice thereof from the Manager to the Company specifying in detail the nature
of such failure, the Company will be in default under the Management
Agreement. Notwithstanding the foregoing, failure to pay any management fee
which is not permitted to be paid under the Indenture will not be a default
under the Management Agreement.
Termination. The Management Agreement shall terminate upon the
occurrence of the following:
(a) upon the occurrence of an event of default under the Management
Agreement and the expiration of the time to cure such event of default; or
(b) upon the consummation of a condemnation of substantially all of
Casino Magic-Bossier City.
BACKGROUND
The Company was incorporated on June 11, 1993, as a Louisiana
corporation, under the name Crescent City Capital Development Corporation (as
defined herein, "Crescent City") and was a wholly owned subsidiary of Capital
Gaming International, Inc., a corporation with which Jefferson Corp. and
Casino Magic had no affiliation. Crescent City obtained a Louisiana gaming
license and on April 4, 1995 began gaming operations on a riverboat docked on
the Mississippi River at New Orleans, Louisiana. On June 9, 1995, Crescent
City ceased gaming operations and on July 26, 1995, an involuntary bankruptcy
petition was filed against Crescent City, which was subsequently converted by
Crescent City into a voluntary proceeding under Chapter 11 of the Bankruptcy
Code in the United States Bankruptcy Court for the Eastern District of
Louisiana (Case No. 95-12735 (TMB)). The Bankruptcy Court confirmed Crescent
City's Plan of Reorganization on April 29, 1996. Casino Magic, through
Jefferson Corp., agreed to purchase Crescent City contingent upon the receipt
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of approvals from the Louisiana State Police and the Louisiana Gaming
Commission of the change of ownership of Crescent City and the relocation of
the gaming license site from New Orleans to Bossier City, Louisiana. All such
approvals were obtained by April 30, 1996 and on May 13, 1996 Jefferson
Corp.'s purchase of the outstanding capital stock of Crescent City was
effected as part of the Plan of Reorganization.
Prior to Jefferson Corp.'s acquisition of Crescent City, Crescent City
had discontinued all gaming activities and its only significant assets
consisted of the Crescent City Riverboat, a three deck self-powered riverboat
upon which Crescent City had conducted its gaming operations, its gaming
license and the furniture, fixtures and gaming equipment which were located on
the Crescent City Riverboat.
PROPERTY
Jefferson Corp. was the fee simple owner of 23 acres of land on the Red
River in Bossier City, Louisiana (with 3 of those acres having been acquired
in July 1996 for $900,000 in cash advanced as a capital contribution to
Jefferson from Casino Magic). Jefferson Corp. transferred the fee simple
interest in the 23 acres to the Company at the closing of the Note Offering.
As part of the Company's acquisition of Crescent City pursuant to the
Plan of Reorganization, the Company acquired the Crescent City Riverboat, one
of the largest cruising riverboats designed for gaming in the United States.
The Crescent City measures approximately 430 feet by 100 feet with a total
area of 88,000 square feet. The Company does not intend to use the Crescent
City Riverboat in connection with its gaming activities at Casino
Magic-Bossier City. The Company anticipates selling the Crescent City
Riverboat. The Crescent City Riverboat is currently berthed in Morgan City,
Louisiana. Casino Magic is currently pursuing a gaming licensing in Crawford
County, Indiana. If Casino Magic is successful in obtaining a gaming license
in Indiana, it is anticipated that, subject to the availability of adequate
financing and the agreement of corporate partners of Casino Magic, if any, to
such purchase, an affiliated company of Casino Magic would purchase the
Crescent City Riverboat at fair market value. If Casino Magic is not
successful in obtaining a license in Indiana, Casino Magic will actively
market the Crescent City Riverboat. In early 1997, Casino Magic expects to
obtain a determination on its gaming license application in Indiana. The
Company can give no assurances that it will be able to dispose of the Crescent
City Riverboat on acceptable terms or in a timely manner.
SERVICE MARKS
Casino Magic is the owner of U.S. service mark registrations for the
service marks "Casino Magic", "A Cut Above" and "Casino Magic Getaways"
granted by the U.S. Patent and Trademark Office on July 13, 1993, June 21,
1994, and October 18, 1994, respectively. Casino Magic is also the owner of a
Canadian service mark registration for "Casino Magic" granted on March 3,
1995. Casino Magic has filed service mark registration applications for the
"Casino Magic" service mark in Greece and Mexico. A service mark application
with respect to the service mark "Magic Money TM"has been filed with the U.S.
Patent and Trademark Office, and an opposition proceeding is currently
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underway in connection with such application. Casino Magic through its
subsidiaries also uses and claims rights to several additional service marks.
Casino Magic licenses the right to use such marks and related marks to the
Company on a royalty-free basis in connection with the operation of Casino
Magic-Bossier City pursuant to the Management Agreement. There are no
assurances that any of the service marks used by the Company, whether or not
registered, will be free from future challenge by others as to prior use or as
otherwise being unprotectable.
PERSONNEL
As of December 31, 1996, the Company had approximately 1,200 employees.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
REGULATORY MATTERS
The ownership and operation of a casino gaming business within the United
States are subject to extensive and complex governmental regulation and
control under federal, state or local laws and regulations. These laws and
regulations are subject to change, including the repeal of laws which permit
gaming. The Company and certain of its officers, directors, key employees,
shareholders and other affiliates ("Regulated Persons") will be subject to
strict legal and regulatory requirements, including mandatory licensing and
approval requirements, suitability requirements, and ongoing regulatory
oversight with respect to its gaming operations. Such legal and regulatory
requirements and oversight will be administered and exercised by the relevant
regulatory agency or agencies in its jurisdiction of operation.
The Company and the Regulated Persons will need to satisfy licensing,
approval and suitability requirements of the Louisiana gaming authorities.
These requirements generally concern the responsibility, financial stability
and character of the owners and managers of gaming operations, as well as
persons financially interested or involved in operations. In general, the
procedures for gaming licensing, approval and findings of suitability require
that the Company and each Regulated Person submit detailed background and
financial information and that the Company demonstrate that the proposed
gaming operation has adequate financial resources generated from suitable
sources and adequate procedures to comply with the operating controls and
requirements imposed by law and regulation in each jurisdiction. This
submission is normally followed by a thorough investigation by the regulatory
authorities. An application for any gaming license, approval or finding of
suitability may be denied for any cause that the regulatory authorities deem
reasonable. There can be no assurance that the Company or the Regulated
Persons will maintain all of the necessary licenses, approvals and findings of
suitability to permit the Company to continue its development plans and casino
operations. Once a license or approval is obtained, the Company will be
required to periodically submit detailed financial and operating reports to
regulatory authorities. Such licenses and approvals may
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be subject to periodic renewal and generally are not transferable. The
regulatory authorities may at any time revoke, suspend, condition, limit or
restrict a license, approval, or finding of suitability for any cause they
deem reasonable. Fines for violations may be levied against the Holder of a
license and in some jurisdictions gaming operation revenues can be forfeited
to the state under certain circumstances. The laws, regulations and procedures
pertaining to gaming are subject to the interpretation of the regulatory
authorities and may be amended. Any changes in such laws or regulations, or
their current interpretations, could have a material adverse effect on the
Company.
LOUISIANA GAMING REGULATIONS
In 1991 the Louisiana legislature enacted the Louisiana Riverboat
Economic Development and Gaming Control Act, La. Rev. Stat. Ann 4:501, et seq.
(the "Louisiana Gaming Act"). The Louisiana Gaming Act authorized the
licensing of up to 15 riverboats to conduct gaming on designated rivers and
waterways. Pursuant to the Louisiana Gaming Act, the Riverboat Gaming
Commission (the "Louisiana Commission"), was created within the Department of
Public Safety and Corrections for the State of Louisiana. Additionally, a
riverboat gaming regulatory group within the Louisiana State Police (the
"State Police") was created. The Louisiana Commission and the State Police
were authorized to and did promulgate the existing rules and regulations
governing the licensing and operations of riverboats.
The Louisiana legislature in the First Extraordinary Session, 1996,
enacted new legislation (the "Louisiana Board Act") which transferred the
regulatory oversight of most gaming operations in Louisiana, including
riverboat gaming, to the Gaming Control Board (the "Louisiana Board"),
effective as of May 1, 1996. The Louisiana Commission was abolished as of that
same date. The Louisiana Board will consist of nine members appointed by the
Governor of Louisiana. As of December 31, 1996, the chairman and five members
of the Louisiana Board have been appointed, which constitutes a quorum
necessary for the Louisiana Board to conduct business.
The Louisiana Board is empowered to regulate four forms of gaming
activities and operations in the state: riverboat, video poker, the land-based
casino in New Orleans, and all state regulated aspects of Indian gaming
(excluded is the regulation and oversight of horse racing and off-track
betting, the state lottery, and charitable gaming). Accordingly, the
Louisiana Board has all regulatory authority, control, and jurisdiction,
including investigation, licensing, and enforcement, and all power incidental
to or necessary for such regulatory authority, control and jurisdiction, over
all aspects of gaming activities and operations as authorized pursuant to the
provisions of the Louisiana Gaming Act, the Louisiana Economic Development and
Gaming Corporation Act (Land-Based Casino in New Orleans), and the Video Draw
Poker Devices Control Act.
The Louisiana Board has been authorized to promulgate rules and
regulations to govern the aforesaid types of gaming in Louisiana; however, all
administrative rules and regulations promulgated by entities whose powers have
been transferred to the Louisiana Board are to be considered valid and remain
in effect until repealed by the Louisiana Board.
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The construction, ownership and operation of riverboat gaming vessels
will now be subject to regulation by the Louisiana Board. The independent
authority previously granted to the State Police by the Louisiana Gaming Act
has been significantly reduced by the Louisiana Board Act. The State Police
will now conduct investigations and audits regarding the qualifications of
applicants for licenses or permits requiring suitability determinations,
submit all investigative reports to the Louisiana Board, conduct audits to
assist the Louisiana Board, issue certain licenses and permits in accordance
with rules adopted by the Louisiana Board, and perform all other duties and
functions necessary for the efficient and thorough regulation and control of
gaming activities and operations under the Louisiana Board's jurisdiction.
The Louisiana Board Act did not repeal the Louisiana Gaming Act, the
original 1991 statute authorizing riverboat gaming in Louisiana, but rather
amended it to transfer licensing and regulatory authority to the Louisiana
Board and to redefine the authority of the State Police. Otherwise the
Louisiana Gaming Act remains in effect. Accordingly, the Louisiana Gaming Act
continues to authorize up to 15 licenses to conduct gaming activities on
riverboats, with no more than six licenses to be granted to riverboats
operating in any one parish.
Local regulation remains restricted to the imposition of an admission fee
of up to $2.50 per passenger ($3.00 per passenger in Shreveport and Bossier
City).
The voters of the State of Louisiana, in a September 1996 statewide
election, approved the Constitutional Amendment. The Amendment requires a
local option elections in parishes before new forms of gaming could be
conducted therein or before existing forms of gaming may be conducted in new
areas. For example, the Constitutional Amendment requires a local option
referendum before an additional riverboat could move into a parish, regardless
of whether such parish has authorized the continuation of riverboat gaming in
such parish. On November 5, 1996, voters in both Caddo and Bossier parishes
approved a continuation of riverboat gaming in such parishes; voters in all
other Louisiana parishes in which riverboat gaming is currently conducted also
approved a continuation of that form of gaming in their respective parishes.
Licenses may be and have been issued for dockside riverboat gaming along
the Red River in the Bossier City/Shreveport area. Dockside gaming is
presently prohibited at other locations in the state. A riverboat gaming
license has an initial term of five years, with subsequent annual renewals
thereafter. Pursuant to the decision of the State Police at a hearing held on
April 30, 1996, the Louisiana riverboat gaming license acquired by the Company
has an unexpired term of five years less the sixty-five days that the previous
licensee conducted riverboat gaming operations. The unexpired term of the
license has recommenced as of October 4, 1996, the date that the Company began
riverboat gaming operations in Bossier City. Upon expiration of the Company's
Louisiana license, the Company must apply for renewal. The application for
renewal consists of a sworn statement of all changes in information, including
financial information, provided in any previous applications. The transfer of
a license is prohibited. The Louisiana Board may restrict, suspend or revoke a
license or permit. Suspension or revocation of the Company's license would
have a material adverse effect upon the business of the Company.
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Pursuant to the existing laws, rules and regulations, the Company must
submit detailed financial, operating and other reports to the Louisiana Board
periodically. Substantially all loans, leases, private sales of securities,
extensions of credit and similar financing transactions entered into by any of
the Regulated Persons must be reported to the Louisiana Board within thirty
days after the consummation of any such transactions. The Louisiana Board is
required to investigate all reported loans or extensions of credit, and to
either approve or disapprove the same. If disapproved, the pertinent loan or
extension of credit must be rescinded by the appropriate Regulated Person. The
Company's Note Offer was approved by the Louisiana Board on October 29, 1996.
The Company is also required to periodically submit detailed financial and
operating reports to the Louisiana Board and furnish any other information
which the Louisiana Board may require.
The applicant for a gaming license, its directors, officers, key
personnel, partners, and persons holding a 5% or greater equity interest in
the applicant will be required to be found suitable by the Louisiana Board.
This requires the filing of an extensive application to the Louisiana Board
disclosing personal, financial, criminal, business and other information. The
applicant is required to pay all costs of investigation. There can be no
assurance that such person will be found suitable by the Louisiana Board. An
application for licensing of an individual may be denied for any cause deemed
reasonable by the Louisiana Board. Any individual who is found to have a
material relationship to or a material involvement with the Company may be
required to be investigated in order to be found suitable or be licensed as a
business associate of an applicant. Key employees, controlling persons or
others who exercise significant influence upon the management or affairs of
the Company may also be deemed to have such a relationship or involvement.
If the Louisiana Board were to find a director, officer or key employee
unsuitable for licensing or unsuitable to continue having a relationship with
an applicant, the applicant would have to suspend, dismiss and sever all
relationships with such person. The applicant would have similar obligations
with regard to any person who refuses to file appropriate applications. Each
gaming employee must obtain a gaming employee permit which may be revoked upon
the occurrence of certain specified events.
The sale, assignment, transfer, pledge or disposition of securities which
represent 5% or more of the total outstanding equity shares issued by a
corporate licensee is subject to Louisiana Board approval. After a license is
granted, any person acquiring an economic interest of 5% or more in a license
must obtain the Louisiana Board's prior approval for the transaction. Failure
to obtain that approval is grounds for license revocation. A security issued
by a corporate licensee must generally disclose these restrictions.
If the Louisiana Board finds that an individual Holder of a corporate
licensee's securities or a director, partner, officer or manager of the
licensee is not qualified pursuant to the existing laws, rules and
regulations, and if as a result the licensee is no longer qualified to
continue as a licensee, it can propose action necessary to protect the public
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interest, including the suspension or revocation of a license or permit. It
may also issue, under penalty of revocation of license, a condition of
disqualification naming the person and declaring that such person may not (a)
receive dividends or interest on securities of the licensee, (b) exercise any
right conferred by securities of the licensee, (c) receive remuneration or any
other economic benefit from the licensee or continue in an ownership or
economic interest in the licensee or remain as a director, partner, officer,
or manager of the licensee.
Fees for riverboat gaming include a $50,000 first-year operation fee for
each riverboat increasing to $100,000 per year per riverboat thereafter, plus
18.5% of net gaming proceeds.
FEDERAL REGULATION
On August 3, 1996, President Clinton signed a bill creating a nine-member
National Gambling Impact Study Commission to study the economic and social
impact of gaming and report its findings to Congress and the President within
two years after the first meeting of the Commission. The Commission could
recommend changes in state or federal gaming policies. The President, House
Speaker and Senate Majority Leader each select three of the Commission's
members. Additional federal regulation of the gaming industry could occur as a
result of investigations or hearings by the committee, which legislation could
have a material adverse affect on the Company.
NON-GAMING REGULATION
The Company is subject to certain federal, state and local safety and
health laws, regulations and ordinances that apply to non-gaming businesses
generally, such as the Clean Air Act, Clean Water Act, Occupational Safety and
Health Act, Resource Conservation Recovery Act and the Comprehensive
Environmental Response, Compensation and Liability Act. The Company has not
made, and does not anticipate making, material expenditures with respect to
such environmental laws and regulations. However, the coverage and attendant
compliance costs associated with such laws, regulations and ordinances may
result in future additional costs to the Company's operations. For example, in
1990 the U.S. Congress enacted the Oil Pollution Act to consolidate and
rationalize mechanisms under various oil spill response laws. The Department
of Transportation has proposed regulations requiring owners and operators of
certain vessels to establish through the U.S. Coast Guard evidence of
financial responsibility in the amount of $5.5 million for clean-up of oil
pollution. This requirement would be satisfied by either proof of adequate
insurance (including self-insurance) or the posting of a surety bond or
guaranty.
Traditional riverboats capable of cruising, including those that are not
required to cruise, must comply with U.S. Coast Guard requirements as to boat
design, on-board facilities, equipment, personnel and safety. Each of them
must be approved by the American Bureau of Shipping ("ABS") for stabilization
and flotation, and may also be subject to local zoning and building codes, if
such local codes have been implemented at the berthing site. They must hold
Certificates of Documentation and Inspection issued by the U.S. Coast Guard.
The U.S. Coast Guard requirements establish design standards, set limits on
the operation of the vessels and require individual licensing of all personnel
involved with the operation of the vessels. Loss of a vessel's ABS approval or
of its Certificates of Documentation and Inspection would preclude its use as
a floating casino.
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All shipboard employees of the Company, even those who have nothing to do
with the actual operation of the vessel, such as dealers, waiters and security
personnel, may be subject to the Jones Act which, among other things, exempts
those employees from state limits on workers' compensation awards.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The Company, drawing upon the gaming and development expertise of Casino
Magic, has assembled an experienced management team to oversee the development
and operation of Casino Magic-Bossier City. The name, age and respective
position of each director and executive officer of the Company, each of whom
holds a comparable position with Casino Magic, are as follows:
NAME AGE POSITION
----- ---- ---------
Marling F. Torguson .........51 Chairman of the Board
James E. Ernst .............45 President, Chief Executive Officer
and a Director
Jay S. Osman ...............35 Executive Vice President, Chief
Financial Officer and Treasurer
Robert A. Callaway .........48 Vice President/General Counsel
and Secretary
Juris Basens ...............40 Vice President/Chief Operating Officer
Ken Schultz ................46 Vice President/Construction and
Development
David L. Paltzik ...........52 Vice President/Marketing
Allen Kokesch ..............44 Director
Roger H. Frommelt ..........60 Director
E. Thomas Welch ............57 Director
Marlin F. Torguson. Mr. Torguson has been Casino Magic's Chairman of
the Board since December 1, 1994 and has served in the same capacity for the
Company since May 1996. Mr. Torguson was President and Chief Executive Officer
of Casino Magic from April 1992 through November 1994, and, from April 1992 to
February 1993, Mr. Torguson also served as Casino Magic's Chief Financial
Officer and Treasurer. Mr. Torguson has been a 50% owner and a Vice President
of G.M.T. Management Co. since December 1983. G.M.T. Management Co. was
responsible for the operation and management of the Jackpot Junction Casino
from December 1983 until January 1, 1992. Jackpot Junction Casino is a gaming
casino owned by the Mdewakanton band and the Sioux Indian tribe, located in
Morton, Minnesota, approximately 120 miles west of Minneapolis, Minnesota.
James E. Ernst. Mr. Ernst became Casino Magic's President, Chief
Executive Officer and a director in December 1995 and has served in the same
capacity for the Company since May 1996. From June 1992 until September 1995,
Mr. Ernst served as President and Chief Executive Officer of Casino America,
Inc., a casino developer and operator which has gaming operations in
Mississippi and Louisiana, including a Bossier City casino developed during
his tenure with that company. From June 1991 to June 1992, Mr. Ernst was
President of Steamboat Development Co., an operator of riverboat casinos in
Iowa. From 1976 to June 1991, Mr. Ernst was with the public accounting firm of
McGladrey & Pullen in their Davenport, Iowa office; Mr. Ernst was a partner
with such firm from 1982 through his departure.
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Jay S. Osman. Mr. Osman became Casino Magic's Executive Vice President,
Chief Financial Officer and Treasurer, in October 1995 and has served in the
same capacity for the Company since May 1996. Mr. Osman served as Corporate
Director of Financial Planning, Budgets and Analysis at Boyd Gaming
Corporation, a casino developer and operator based in Las Vegas, Nevada, from
August 1995 to October 1995. Mr. Osman served as Vice President of Finance and
Administration, Chief Financial Officer and Assistant Secretary of Belle
Casinos, Inc., a casino developer and operator based in Biloxi, Mississippi,
from June 1993 through August 1995. From December 1989 through May 1993, Mr.
Osman acted as Manager of Financial Analysis for Bally's Park Place, an
Atlantic City, New Jersey-based casino operator and developer which is a
subsidiary of Bally Entertainment Corporation. In August 1994, Belle Casinos,
Inc. filed a bankruptcy proceeding under Chapter 11 in the United States
Bankruptcy Court in Biloxi, Mississippi, which was subsequently converted into
a liquidation proceeding. As a related matter, a lawsuit was brought by
certain creditors of Belle Casinos, Inc. against its directors and executive
officers, including Mr. Osman; Mr. Osman has been dismissed without prejudice
as a defendant in such lawsuit.
Robert A. Callaway. Mr. Callaway has been Casino Magic's Vice
President/General Counsel since September 1994 and its Secretary since
December 1994 and has served in the same capacity for the Company since May
1996. Prior to joining Casino Magic, Mr. Callaway was a partner in the law
firm of Beckley, Singleton, DeLanoy, Jemison & List, in Reno and Las Vegas,
Nevada. Mr. Callaway's association with the firm, where his practice focused
on legal and regulatory issues relating to the gaming industry, began in 1987.
For the five years immediately prior to joining such firm, Mr. Callaway served
with the office of the Attorney General of the State of Nevada as counsel for
the Nevada State Gaming Control Board and Nevada Gaming Commission.
Juris Basens. Mr. Basens became Casino Magic's Vice President and Chief
Operating Officer in July 1996 and has also served the Company in such
capacity since that date. Prior to joining Casino Magic, Mr. Basens served as
Vice President and Chief Operating Officer of Casino America, Inc. from July
1994 until July 1996. From March 1993 through June 1994, Mr. Basens was the
General Manager of the Isle of Capri Casino in Bossier City. From October 1991
to March 1993, Mr. Basens was the General Manager of the Par-A-Dice Riverboat
Casino in East Peoria, Illinois. From August 1990 to October 1991, Mr. Basens
was the General Manager of Steamboat Development Corporation's Diamond Lady
Riverboat Casino in Bettendorf, Iowa. From 1989 to 1990, Mr. Basens was
employed in various management positions at Carnival's Crystal Palace Casino
in Nassau, Bahamas. From 1978 to 1989, Mr. Basens was employed in various
management positions at Resorts International Casino Hotel.
Ken Schultz. Mr. Schultz joined Casino Magic as Vice
President/Construction and Development in June 1996 and has also served the
Company in such capacity since that date. Mr. Schultz served as Vice President
of Construction and Development for Casino America, Inc. from July 1995 to
June 1996. Prior to joining Casino America, Inc. Mr. Schultz had been involved
in the development and construction of the Isle of Capri Casino-Bossier City,
Louisiana, the Isle of Capri Casino-Lake Charles, Louisiana, and the Isle of
Capri Casino Crowne Plaza Resort-Biloxi, Mississippi through DeBartolo
Property Management, Inc. He had been associated with DeBartolo Property
Management, Inc. as Vice President of Construction Services since 1989.
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David L. Paltzik. Mr. Paltzik joined Casino Magic as Vice
President-Marketing in July 1996 and has also served the Company in such
capacity since that date. From June 1992 until joining Casino Magic, Mr.
Paltzik was Vice President-Marketing at Casino America, Inc., where he was
Vice President-Marketing of Riverboat Services, Inc., a wholly owned
subsidiary of Casino America, from May 1991 until June 1992.
Allen J. Kokesch. Mr. Kokesch has served as a director of Casino Magic
since August 1992 and has served as a director of the Company since May 1996.
Mr. Kokesch served as Executive Vice President of Casino Magic from December
1992 through December 1994 and as Casino Magic's general manager from April
1992 to December 1992. From September 1984 to April 1992, Mr. Kokesch was the
general manager of Jackpot Junction Casino located in Morton, Minnesota.
Roger H. Frommelt. Mr. Frommelt has served as a director of Casino
Magic since October 1992 and has served as a director of the Company since May
1996. Mr. Frommelt served as Casino Magic's Secretary from May 1993 until
December 1994 when he was appointed Casino Magic's Assistant Secretary. Mr.
Frommelt is the President and a principal shareholder of Frommelt & Eide,
Ltd., a law firm located in Minneapolis, Minnesota. He has been engaged in the
private practice of law in Minneapolis, Minnesota since 1965, practicing with
Frommelt & Eide, Ltd. and its predecessor partnership since 1974.
E. Thomas Welch. Mr. Welch has served as a director of Casino Magic
since May 1993 and has served as a director of the Company since May 1996. Mr.
Welch has been the President of Resource Bank & Trust, located in Minneapolis,
Minnesota since March 1987. Mr. Welch is also a member of the Board of
Directors of Eastcliff Funds, Inc., a mutual fund company located in
Minneapolis, Minnesota.
MANAGEMENT AGREEMENT AND EXECUTIVE COMPENSATION
Each of the foregoing executive officers of the Company is also a
full-time salaried employee of Casino Magic and in accordance with the
Management Agreement will not be compensated by the Company but will provide
management services to the Company with respect to the operations of Casino
Magic-Bossier City. See "Business-Management Agreement" and "-Casino Magic
Executive Compensation."
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CASINO MAGIC EXECUTIVE COMPENSATION
The following table sets forth certain compensation information for: (i)
each person who served as the Chief Executive Officer of Casino Magic at any
time during the year ended December 31, 1995, regardless of compensation
level; (ii) Casino Magic's four most highly compensated executive officers,
other than the Chief Executive Officer, serving as executive officers at
December 31, 1995; and (iii) two former executive officers who would have been
included in (ii) above but for the fact that each such person's employment
with Casino Magic terminated prior to December 31, 1995. The foregoing persons
are collectively referred to herein as the "Named Executive Officers."
Compensation information is shown for fiscal years 1993, 1994 and 1995.
Annual Other Securities All
Compen- Annual Restricted Underlying Other
Name/ sations Compen- Stock Options/ Compen-
Principal Salary Bonus sation Awards SARs sation
Position Year ($) ($) ($) ($) (#) ($)
- --------- ----- ------- ----- ------- ------- ------- --------
James E. Ernst... 1995(1) 13,792 12,970(2) --(3) -- -- 590,000
President and
Chief Executive
Officer
Marlin F. Torguson
Chairman of 1995 425,000 -- --(3) -- -- 2,832(4)
the Board 1994 408,654 174,573 --(3) -- -- 1,500(5)
1993 160,000 965,460 -- -- -- --
Robert A.
Callaway ....... 1995(1) 181,154 -- -- -- 40,000 481(5)
Vice President/ 1994 51,040 -- --(3) -- 35,000 4,650(6)
General Counsel
and Secretary
Dual B. Cooper... 1995(7) 425,500 63,623(8) -- -- -- --(11)
Former President 1994 230,192 -- --(3) 396,875(9) 150,000(10) --
and Chief
Operating Officer
Joseph E
Anderson ....... 1995 102,461 -- -- -- -- 1,281(5)
Former Chief 1994 104,015 7,000 -- -- -- 1,110(5)
Accounting 1993 72,000 26,875 -- -- -- --
Officer
Leonard S Krick 1995 125,000 -- -- -- -- 1,500(5)
Former Senior 1994 129,169 7,000 -- -- -- 1,362(5)
President of 1993 77,000 38,875 --(3) -- -- --
Development
Patrick M.
Sidders 1995(1) 170,493 70,833 -- -- -- --
Former Executive 1994 153,846 -- --(3) 396,875(11) 150,000(12) --
Vice President,
Treasurer and
Chief Financial
Officer
Hugh J. Shaddick 1995(1) 277,309 -- -- -- -- --
Former Managing 1994 236,635 -- --(3) 396,875(13) 150,000(14) --
Director and
President of
Casino Magic B.V.
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(1) No compensation information is provided for prior year(s), as the Named
Executive Officer first joined Casino Magic during the earliest year for which
compensation information is provided.
(2) Includes partial forgiveness of indebtedness owed by Mr. Ernst to
Casino Magic in the amount of $8,208 and approximately $1,631 in compensation
resulting from an interest-free loan by Casino Magic to Mr. Ernst which
assumes a 10% annual market rate of interest. See "-Employment and
Termination."
(3) Did not receive perquisites and other personal benefits from Casino
Magic in excess of $50,000 or 10 percent of the Named Executive Officer's
total annual salary and bonus paid for the years indicated.
(4) Contributions to Casino Magic's 401(k) plan made by Casino Magic in the
amount of $1,500 and an automobile allowance of $1,332.
(5) Contributions to Casino Magic's 401(k) plan made by Casino Magic on
behalf of the Named Executive Officer.
(6) Living allowance.
(7) Although the Board of Directors of Casino Magic did not elect a Chief
Executive Officer in 1995 prior to December, pursuant to the terms of the
by-laws Mr. Cooper was deemed to be Casino Magic's Chief Executive Officer by
virtue of his position as Casino Magic's President.
(8) Includes a $25,000 bonus paid in accordance with the terms of an
agreement between Casino Magic and Mr. Cooper which relates to Mr. Cooper's
resignation, a relocation allowance of $20,000 and forgiven indebtedness of
$18,623.
(9) Mr. Cooper was awarded a total of 25,000 restricted shares of Casino
Magic common stock in 1994 that were to vest over five years. As of December
31, 1995, 8,750 restricted shares had vested, and the balance had been
canceled.
(10) Options to purchase 75,000 shares of Casino Magic common stock
exercisable at $15.75 per share granted to Mr. Cooper in March 1994 that were
canceled and reissued at an exercise price of $7.20 per share in July 1994. At
December 31, 1995, Mr. Cooper held options to purchase a total of 25,000
shares of Casino Magic common stock exercisable at $7.20 per share and the
balance had been canceled.
(11) Mr. Sidders was awarded a total of 25,000 restricted shares of Casino
Magic common stock in 1994 that were to vest over five years. As of December
31, 1995, 3,750 restricted shares had vested and the balance had been
canceled.
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(12) Consists of: (i) options to purchase 31,000 shares of Casino Magic
common stock exercisable at $16.00 per share granted to Mr. Sidders in March
1994 that were canceled and repriced at an exercise price of $7.20 per share
in July 1994; and (ii) options to purchase 44,000 shares of Casino Magic
common stock exercisable at $15.75 per share granted to Mr. Sidders in March
1994 that were canceled and reissued at an exercise price of $7.20 per share
in July 1994. As of December 31, 1995, all of Mr. Sidders' options had been
terminated.
(13) Mr. Shaddick was awarded a total of 25,000 restricted shares of Casino
Magic common stock in 1994 that were to vest over five years. As of December
31, 1995, 3,750 restricted shares had vested, and the balance had been
canceled.
(14) Includes: (i) options to purchase 31,000 shares of Casino Magic common
stock exercisable at $13.50 per share granted to Mr. Shaddick in January 1994
that were canceled and reissued at an exercise price of $7.20 per share in
July 1994; and (ii) options to purchase 44,000 shares of Casino Magic common
stock exercisable at $14.25 per share granted to Mr. Shaddick in February 1994
that were canceled and reissued at an exercise price of $7.20 per share in
July 1994. At December 31, 1995, Mr. Shaddick held options to purchase a total
of 12,800 shares of Casino Magic common stock at an exercise price of $7.20
per share, 6,200 of which have since been terminated.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table provides certain information regarding the number of
stock options to purchase shares of Casino Magic's common stock granted to the
Named Executive Officers during the year ended December 31, 1995.
Percentage of
Total Options
Granted to Potential Realizable
Number of Employees Value at Assumed
Securities in Per Share Annual Rates of Stock
Underlying Fiscal Exercise Price Appreciation
Options Year or Base Expiration for Option Term
Name Granted 1995 Price(1) Date 5% 10%
----- -------- ----- ------- -------- -------------------
James E. Ernst 490,000 68% $4.75 12/19/01 $643,045 1,420,962
100,000 14% $4.75 12/20/01 $131,234 289,992
Robert A. Callaway 40,000 6% $5.30 11/10/01 $ 58,572 129,428
__________________
(1) The exercise price of such options was repriced in 1996 to $3.63.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
The following table provides certain information regarding the exercise
of stock options to purchase shares of Casino Magic's common stock during the
year ended December 31, 1995, by the Named Executive Officers, and the fiscal
year-end value of stock options held by such officers.
Number of Securities
Underlying Unexercised Value of Unexercised In-
Options/SARs at the-Money Options/SARs
Number of Shares Fiscal Year End (#) at Fiscal Year End ($)
Acquired
Name On Exercise Exercisable Unexercisable Exercisable
Unexercisable
------ ----------- ----------- ------------- --------- -------------
Marlin F. Torguson None 360,000 240,000 $614,880 $409,920
James E. Ernst None None 590,000 0 0
Robert A. Callaway None 9,250 65,750 0 0
Dual B. Cooper None 15,450 9,600 0 0
Joseph E. Anderson None 45,000 30,000 $ 79,110 $ 52,740
Leonard S. Krick None 126,000 84,000 $126,756 $ 84,504
Patrick M. Sidders None None None 0 0
Hugh J. Shaddick None 12,800 0 0 0
________________
(1) Based on a fiscal year end of December 31, 1995, and a closing Casino
Magic common stock price of $3.125 per share on December 29, 1995. The value
of in-the-money options is calculated as the difference between the fair
market value of the Casino Magic common stock underlying the options at fiscal
year end and the exercise price of the options. Exercisable options refer to
those options that are exercisable as of December 31, 1995, while
unexercisable options refer to those options that become exercisable at
various times thereafter.
DIRECTOR COMPENSATION
Each non-employee member of the Casino Magic Board of Directors is
entitled to receive $2,000 for attendance at each Board of Directors meeting
and $500 for attendance at each meeting of a Committee of the Board of
Directors, or of the non-employee directors, provided that if a meeting of the
Board of Directors and a Committee or non-employee director meeting were
attended by a Director on the same day, the maximum compensation for
attendance at such meetings was $2,000 per day. Certain independent members of
the Board of Directors were compensated at the rate of $150 per hour for
special services as requested by the Board of Directors. Casino Magic has
granted stock options to non-employee members of the Board of Directors.
However, no such grants were made in 1995.
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EMPLOYMENT AND TERMINATION
Marlin F. Torguson. Mr. Torguson, Casino Magic's Chairman of the Board,
originally entered into an employment agreement with Casino Magic in June
1992, which has since been amended. Salaries and bonuses under the agreement
became discretionary in 1994, and the Compensation Committee authorized Mr.
Torguson to receive a salary at the annual rate of $425,000. Mr. Torguson is
entitled to (i) an annual family travel allowance and (ii) a bonus payable in
such amounts and under such terms and conditions as the Board of Directors or
the Compensation Committee may determine. Casino Magic also provides Mr.
Torguson with an automobile allowance. The employment agreement is terminable
by Casino Magic or Mr. Torguson upon four weeks' prior written notice.
However, if terminated by Casino Magic without cause, Casino Magic will be
obligated to pay Mr. Torguson a severance allowance equal to one year's salary
at the rate being paid at termination.
James E. Ernst. Mr. Ernst, Casino Magic's President and Chief Executive
Officer, entered into an employment agreement dated December 20, 1995, which
provides for, among other things, an initial annual base salary of $425,000,
and a $500,000 loan subject to partial repayment by Mr. Ernst based on the
number of days he is employed by Casino Magic during the two-year period
beginning December 20, 1995. Under the terms of the repayment formula,
approximately $684 of the original $500,000 loan to Mr. Ernst is forgiven each
day over the two-year period. Interest at an annual rate of 8% is payable on
the outstanding balance of the loan, beginning as of the date Mr. Ernst's
employment is terminated. Additionally, pursuant to the agreement, Casino
Magic granted to Mr. Ernst a non-statutory option to purchase up to 490,000
shares of Casino Magic's common stock at a price of $4.75 per share vesting
over a five-year period at the rate of 98,000 shares per year. Mr. Ernst also
received an incentive stock option to purchase up to 100,000 shares of Casino
Magic's common stock, which vests over a five-year period at the rate of
20,000 shares per year. The exercise price of such options is $3.63 per share.
The initial term of the employment agreement is two years and is terminable by
Casino Magic or the employee upon 30 days' prior written notice. However, if
terminated by Casino Magic without cause, Casino Magic will be obligated to
pay Mr. Ernst a severance allowance equal to six months' salary at the rate
being paid at termination.
Jay S. Osman. Mr. Osman became Casino Magic's Executive Vice President,
Chief Financial Officer and Treasurer in October 1995. Mr. Osman and Casino
Magic entered into a two-year employment agreement in October 1995, which
agreement has been extended through October 18, 1998. Under the agreement Mr.
Osman is currently paid an annual base salary of $210,000, received a $20,000
bonus paid upon commencement of employment and the right to participate in any
bonus plan established for executives of Casino Magic. Additionally, the
agreement obligates Casino Magic to grant to Mr. Osman a restricted stock
award of 25,000 shares of Casino Magic's common stock which vest over a
four-year period, and an option to purchase 75,000 shares of Casino Magic's
common stock which vests over a four-year period. The exercise price of such
options is $3.63 per share.
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Robert A. Callaway. Mr. Callaway, Casino Magic's Vice President/General
Counsel and Secretary, entered into a two-year employment agreement with
Casino Magic in September 1994, which agreement has been extended through
September 18, 1997. Under the agreement Mr. Callaway is currently paid an
annual salary of $210,000, received a one-time bonus of $10,000 and has the
right to participate in any bonus plan established by Casino Magic for its
employees. In connection with such agreement, Casino Magic granted Mr.
Callaway an option to purchase 35,000 shares of Casino Magic's common stock.
The Company subsequently granted Mr. Callaway options to purchase an
additional 40,000 shares of Casino Magic's common stock. Each such option
vests over a four year period. The exercise price of such options is $3.63 per
share. Casino Magic has also subsequently agreed to grant Mr. Callaway a
restricted stock award of 25,000 shares of Casino Magic's common stock, which
vest over a four-year period.
Juris Basens. Mr. Basens became Casino Magic's Vice President/Chief
Operating Officer in July 1996, and Mr. Basens and Casino Magic entered into a
two-year employment agreement at the time of Mr. Basens' commencing
employment. The agreement provides, among other things, for an initial annual
base salary of $200,000 and the right to participate in any bonus plan
established for executives of Casino Magic. Additionally, the agreement
obligates Casino Magic to grant to Mr. Basens a restricted stock award of
25,000 shares of Casino Magic's common stock to vest over a four-year period,
and an option to purchase 75,000 shares of Casino Magic's common stock at or
above fair market value to vest over a four-year period. Mr. Basens received a
signing bonus of $20,000.
Kenneth N. Schultz. Mr. Schultz became Casino Magic's Vice President in
charge of Construction and Development on June 25, 1996, and Mr. Schultz and
Casino Magic entered into a two-year employment agreement at the time of Mr.
Schultz' commencing employment. The agreement provides for, among other
things, an initial annual base salary of $200,000 and the right to participate
in any bonus plan established for executives of Casino Magic. Additionally,
the agreement obligates Casino Magic to grant to Mr. Schultz a restricted
stock award of 25,000 shares of Casino Magic's common stock to vest over a
four-year period, and an option to purchase 75,000 shares of Casino Magic's
common stock at or above fair market value to vest over a four-year period.
Mr. Schultz received a signing bonus of $82,500.
David L. Paltzik. Mr. Paltzik became Casino Magic's Vice
President/Marketing in July 1996, and Mr. Paltzik and Casino Magic entered
into a two-year employment agreement at the time of Mr. Paltzik's commencing
employment. The agreement provides for, among other things, an initial annual
base salary of $200,000 and the right to participate in any bonus plan
established for executives of Casino Magic. Additionally, the agreement
obligates Casino Magic to grant to Mr. Paltzik a restricted stock award of
25,000 shares of Casino Magic's common stock to vest over a four-year period,
and an option to purchase 75,000 shares of Casino Magic's common stock at or
above fair market value to vest over a four-year period. Mr. Paltzik received
a signing bonus of $20,000.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1995, E. Thomas Welch and W. William
Bednarczyk served as members of the Compensation Committee. During 1995, no
member of Casino Magic's Compensation Committee was an officer, former officer
or employee of the Company or any of its subsidiaries. No executive officer of
Casino Magic served as a member of: (i) the compensation committee of another
entity in which one of the executive officers of such entity served on Casino
Magic's Compensation Committee; (ii) the Board of Directors of another entity
in which one of the executive officers of such entity served on Casino Magic's
Compensation Committee; or (iii) the compensation committee of another entity
in which one of the executive officers of such entity served as a member of
Casino Magic's Board of Directors, during the year ended December 31, 1995.
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PRINCIPAL SHAREHOLDERS
Casino Magic is the sole shareholder of Jefferson Corp. which is the sole
shareholder of the Company. The following table sets forth certain information
as of August 15, 1996 with respect to the beneficial ownership of Casino Magic
common stock by: (i) each director of the Company; (ii) each executive officer
of the Company; (iii) each other person known to hold 5% or more of the
outstanding shares of Casino Magic common stock; and (iv) all current
executive officers (regardless of salary and bonus level) and directors of the
Company as a group. Unless otherwise indicated, the persons listed in the
table below have sole voting and investment powers with respect to the shares
indicated.
Number of
Shares of Casino Magic Percentage of
Common Stock Casino Magic
Name of Beneficial Owner Beneficially Owned Common Stock Outstanding
- ------------------------ -------------------- ------------------------
Marlin F. Torguson ......... 9,275,000 (1) 25.7%
James E. Ernst ............. 115,000 *
Allen Kokesch .............. 1,087,000 (2) 3.1%
Roger H. Frommelt .......... 103,000 (3) *
E. Thomas Welch ............ 63,000 (4) *
Robert A Callaway .......... 50,250 (5) *
Jay S. Osman ............... 45,000 (6) *
Grand Casinos, Inc. (7) .... 2,125,000 6.0%
13795 First Avenue North
Minneapolis, MN 55441
All current executive ...... 10,813,250 (8) 29.6%
officers and directors
as a group (11 persons)
*Less than one percent
(1) Includes 600,000 shares subject to options that are currently
exercisable or will become exercisable within 60 days and 60,000 shares owned
of record by an Individual Retirement Account established for the benefit of
Mr. Torguson.
(2) Includes 201,500 shares owned of record by the spouse of Mr. Kokesch
of which Mr. Kokesch disclaims beneficial ownership.
(3) Includes 100,000 shares subject to options that are currently
exercisable or will become exercisable within 60 days.
(4) Includes 60,000 shares subject to options that are currently
exercisable or will become exercisable within 60 days.
(5) Includes 23,750 shares subject to options that are currently
exercisable or will become exercisable within 60 days and restricted stock
awards for 25,000 shares.
(6) Includes 15,000 shares subject to options that will become exercisable
within 60 days and restricted stock awards for 25,000 shares.
(7) The shares are held of record by GCA Acquisition Subsidiary, Inc., a
wholly owned subsidiary of Grand Casino, Inc.
(8) Includes the shares described in notes (1)-(7) above.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Concurrently with the closing of the Note Offering, the Company entered
into a Management Agreement with Casino Magic and the Manager for a term
through August 22, 2006, pursuant to which Casino Magic will license the
"Casino Magic" name to the Company and the Manager will provide management
services to the Company. Casino Magic is the direct parent corporation of
Jefferson Corp. which holds a 100% beneficial ownership interest in the
Company. In consideration for the services provided under the Management
Agreement, the Company has agreed to pay the Manager a management fee equal to
10% of Adjusted Consolidated Cash Flow, subject to certain limitations set
forth in the Indenture. See "Business-Management Agreement" and "Management."
The Company and Jefferson Corp. are and all future subsidiaries of the
Company will be, parties to a Tax-Sharing Agreement (as defined herein)
between Casino Magic and each of its domestic subsidiaries (the "Consolidated
Group") pursuant to which Casino Magic will file a consolidated federal income
tax return on behalf of the Consolidated Group and timely pay the Consolidated
Group's federal income tax liability and the Company, Jefferson Corp. and each
such future subsidiary will pay Casino Magic an amount equal to their
respective share of the Consolidated Group's federal income tax liability
calculated in the manner prescribed in such Tax-Sharing Agreement.
The acquisition of the Company and the land upon which Casino
Magic-Bossier City is located, as well as the Company's other development
stage activities, were initially funded by capital contributions and advances
from Casino Magic, and the issuance or assumption of certain indebtedness,
most of which was repaid with proceeds from the Note Offering. Jefferson Corp.
acquired the initial 20 acres of the Casino Magic-Bossier City site for a
total purchase price of $12.7 million, paid through the issuance of $5.3
million in Casino Magic common stock, $0.6 million in cash and the issuance of
the $6.8 million Louisiana Land Note. In May 1996, Jefferson Corp. acquired
the Company for a purchase price of $50.0 million, of which $15.0 million was
paid in cash and the remainder was funded through the issuance of $35.0
million of Louisiana Notes, plus the assumption of equipment financing, of
which $5.7 million was outstanding at September 30, 1996. In July 1996, the
Company acquired an additional three acres of land which are contiguous with
or within the boundaries of the 20-acre site. This subsequent land acquisition
was funded with a $0.9 million advance from Casino Magic. Through the date of
closing of the Note Offering, the total advances from Casino Magic to the
Company for Casino Magic-Bossier City construction and development activities
were $3.4 million (this amount is exclusive of $20.9 million for Casino
Magic's original capital contributions, consisting of real estate acquired for
Casino Magic common stock and $15 million in cash). Of this $3.4 million
advance, $1.4 million was contributed as capital and the balance was repaid to
Casino Magic in August 1996 from the proceeds of the sale of the Series A
Notes.
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DESCRIPTION OF NOTES
GENERAL
On August 22, 1996, the Company issued $115,000,000 principal amount of
Series A Notes under an indenture (the "Indenture") among the Company,
Jefferson Corp. and First Union Bank of Connecticut, as trustee (the
"Trustee"), in a private transaction. The Series B Notes will evidence the
same debt as the Series A Notes, and together with the Series A Notes will
constitute one class under the Indenture, a copy of which has been filed as an
exhibit to the Registration Statement of which this Prospectus constitutes a
part. The form and terms of the Series B Notes are substantially identical to
the Series A Notes in all material respects, except that the Series B Notes
will be registered under the Securities Act, and therefore will not bear
legends restricting the transfer thereof. The terms of the Notes include
those stated in the Indenture, the Collateral Documents and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Notes are subject to all such terms, and Holders
of Notes are referred to the Indenture, the Collateral Documents and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture and the Collateral Documents, while summarizing
the material terms of such Indenture, does not purport to be complete and is
qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below, and such Collateral
Documents. A copy of the proposed form of Indenture and each of the Collateral
Documents are available as set forth under "-Additional Information." The
definitions of certain terms used in the following summary are set forth below
under "-Certain Definitions."
The Notes will be senior secured obligations of the Company and will rank
pari passu in right of payment with any existing and future senior
Indebtedness of the Company. The Notes will rank senior in right of payment to
all subordinated Indebtedness of the Company, if any. The Notes are and, upon
issuance pursuant to the Exchange Offer, the Series B Notes will be guaranteed
on a senior secured basis by Jefferson Corp. (the "Jefferson Guarantee") and
all future Subsidiaries of the Company (the "Subsidiary Guarantees" and,
together with Jefferson Guarantee, the "Guarantees"). As of September 30,
1996, the total senior Indebtedness of the Company was approximately $120.7
million.
GUARANTEES
The Indenture provides that (i) Jefferson Corp. and (ii) if the Company
or any of its Subsidiaries shall acquire or create another Subsidiary after
the date of the Indenture, then such newly acquired or created Subsidiary,
shall execute a Guarantee and deliver an opinion of counsel, containing
customary qualifications, limitations and exceptions, relating to the
enforceability and authorization of such Guarantee in accordance with the
terms of the Indenture, pursuant to which Jefferson Corp. or such newly
acquired or created Subsidiary, as the case may be, shall become a Guarantor,
on a senior secured basis, of the Company's obligations under the Series B
Notes and the Indenture. The obligations of each Guarantor under its Guarantee
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will be limited so as to reduce the risk that such obligations would be found
to constitute a fraudulent conveyance under applicable law. See, however,
"Risk Factors-Fraudulent Conveyance Considerations."
The Indenture provides that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes, pursuant to a supplemental indenture and appropriate
Collateral Documents in form and substance reasonably satisfactory to the
Trustee, all the obligations of such Guarantor under the Notes, the Indenture
and the Collateral Documents; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; (iii) such Guarantor, or
any Person formed by or surviving any such consolidation or merger, would have
Consolidated Net Worth (immediately after giving effect to such transaction),
equal to or greater than the Consolidated Net Worth of such Guarantor
immediately preceding the transaction; (iv) the Company would be permitted by
virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately
after giving effect to such transaction, to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
covenant described below under the caption "-Certain Covenants-Incurrence of
Indebtedness and Issuance of Preferred Stock"; (v) the Fixed Charge Coverage
Ratio of such Guarantor, or any Person formed by or surviving any such
consolidation or merger, for the Reference Period immediately preceding the
date on which such consolidation or merger occurred, determined on a pro forma
basis (including a pro forma application of the proceeds therefrom) as if such
consolidation or merger had occurred at the beginning of such Reference
Period, would be no less than 85% of such Guarantor 's or such Person's Fixed
Charge Coverage Ratio for such Reference Period prior to giving effect to such
consolidation or merger; (vi) such transaction would not result in the loss or
suspension or material impairment of any Gaming License (unless a comparable
replacement Gaming License is effective prior to or simultaneously with such
loss, suspension or material impairment); and (vii) such transaction would not
require any Holder or beneficial owner of Notes to obtain a Gaming License or
be qualified under the laws of any applicable gaming jurisdiction; provided,
that such Holder or beneficial owner would not have been required to obtain a
Gaming License or be qualified under the laws of any applicable gaming
jurisdiction in the absence of such transaction; provided, further, however,
that the requirements set forth in the preceding clauses (iii), (iv) and (v)
will not prohibit any merger or consolidation among the Company and one or
more Wholly Owned Subsidiaries of the Company.
The Indenture provides that in the event of a sale or other disposition
of all or substantially all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the
Capital Stock of any Guarantor, then such Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of such Jefferson Corp.) will be released and relieved of
any obligations under its Guarantee and the Collateral Documents; provided
that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "-Repurchase
at the Option of Holders-Asset Sales."
However, as of the date of the Indenture and as of September 30, 1996
Jefferson Corp. had no material assets other than the capital stock of the
Company, had no material liabilities other than the Jefferson Guarantee, had
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no subsidiaries other than the Company, and had no independent operations,
the Jefferson Guarantee having been granted primarily to more effectively
secure the Notes rather than to provide financial credit support; in addition,
because of restrictions imposed upon the business activities of Jefferson
Corp. under the Indenture it is not likely that Jefferson Corp. will have
significant assets at any time in the future.
So long as any of the Notes are outstanding, Jefferson Corp. is prohibited
under the Indenture from conducting any business or investment activities
other than; (a) to hold its investment in the Company, (b) to be a Guarantor
under the Indenture and to do all things necessary or incident thereto (c) to
make payments, dividends, or distributions to Casino Magic from funds or
property received by Jefferson Corp. from the Company in accordance with the
terms of the Indenture, and (d) otherwise exist as subsidiary of Casino Magic
acting as a holding company of the Company, including all activities
incidental or related to any the foregoing, including without limitation, (i)
performing its obligations under the Tax Sharing Agreement, (ii) receiving
funds from Casino Magic in the form of capital contributions which may be
contributed as a capital contribution to the Company, (iii) owning and voting
the capital stock of the Company, and (iv) preparing financial statements and
other reports.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $115 million
and will mature on August 15, 2003.
Interest on the Notes will accrue at the rate of 13% per annum (the
"Fixed Interest") and will be payable semi-annually in arrears on February 15
and August 15, commencing on February 15, 1997, to Holders of record on the
immediately preceding February 1 and August 1. Fixed Interest on the Notes
will accrue from the most recent date to which such interest has been paid or,
if no such interest has been paid, from the date of original issuance. Fixed
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
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In addition, the Notes will bear Contingent Interest, calculated as
described below, from the Commencement Date to the date of payment of the
Notes. Installments of accrued or deferred Contingent Interest will become due
and payable semi-annually on each February 15 and August 15 after the
Commencement Date to the Holders of record at the close of business on the
preceding February 1 or August 1; provided that all or a portion of such
installment of Contingent Interest is not permitted to be deferred on such
date; and provided further, that no Contingent Interest is payable with
respect to any period prior to the Commencement Date. Additionally, all
installments of accrued or deferred Contingent Interest will become due and
payable (and may not be further deferred) with respect to any principal amount
of the Notes that matures (whether at stated maturity, upon acceleration, upon
redemption, upon maturity of repurchase obligation or otherwise) upon such
maturity of such principal amount of the Notes.
The Company, at its option, may defer payment of all or a portion of any
installment of Contingent Interest then otherwise due if, and only to the
extent that, (a) the payment of such portion of Contingent Interest will cause
the Company's Adjusted Fixed Charge Coverage Ratio for the Company'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 (but may not defer such portion, which, if
paid, would not cause such Adjusted Fixed Charge Coverage Ratio to be less
than 1.5 to 1.0) and (b) the principal amount of the 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
repurchase obligation or otherwise). Contingent Interest that is deferred
shall become due and payable, in whole or in part, on the earlier of (i) the
next succeeding interest payment date on which all or a portion of such
Contingent Interest is not permitted to be deferred, and (ii) upon the
maturity of the corresponding principal amount of the Notes (whether at stated
maturity, upon acceleration, upon redemption, upon maturity of repurchase
obligation or otherwise). No interest will accrue on any Contingent Interest
deferred and which does not become due and payable. To the extent permitted by
law, interest will accrue on overdue Fixed Interest or Contingent Interest at
the same rate as the Fixed Interest plus one percent (1%) per annum.
Each installment of Contingent Interest is calculated to accrue (an
"Accrual Period") from, but not including, the most recent date to which
Contingent Interest has been provided for or which Contingent Interest had
been calculated and deferred (or from and including the Commencement Date if
no installment of Contingent Interest has been paid, provided for or deferred)
to, and including, either (a) in the case of Contingent Interest payable on
the first Interest Payment Date subsequent to the Commencement Date (i)
December 31, 1996, if the Commencement Date ends during the Semiannual Period
ending on December 31, 1996, and (ii) June 30, 1997, if the Commencement Date
occurs during the Semiannual Period ending on June 30, 1997 and (b) in all
other cases, (i) the last day of the next Semiannual Period if the
corresponding principal amount of the Notes has not become due and payable on
(ii) the date of payment if the corresponding principal amount of the Notes
has become due and payable (whether at stated maturity or upon acceleration,
redemption or maturity of repurchase obligation or otherwise). With respect to
each Accrual Period, interest will accrue daily on the principal amount of
each Note outstanding during such period as follows: (i) for any portion of an
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Accrual Period which consists of all or part of a Semiannual Period that ends
during such Accrual Period, 1/180 of the Contingent Interest with respect to
such principal amount for such Semiannual Period until fully accrued and (ii)
for any other portion of an Accrual Period, 1/180 of the Contingent Interest
with respect to such principal amount for the most recently completed
Semiannual Period that began after the Commencement Date.
Any reference in this Prospectus to "accrued and unpaid interest" on the
Notes includes the amount of Fixed Interest, unpaid Contingent Interest and
Liquidated Damages, if any, due and payable thereon.
"Adjusted Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Adjusted Consolidated Cash Flow of such
Person and its Subsidiaries for such period to the Fixed Charges of such
Person and its Subsidiaries for such period (calculated in the same manner as
the Fixed Charge Coverage Ratio is calculated); provided that the amount of
Contingent Interest on a pro forma basis shall equal the Contingent Interest
accrued and reflected in the financial statements for the last two Semiannual
Periods with respect to which Contingent Interest was accruable or payable or,
if two such Semiannual Periods have not occurred, then the amount accrued and
reflected in the financial statements with respect to the most recently
completed Reference Period beginning after the Commencement Date.
"Contingent Interest" means with respect to any principal amount of Notes
as of any date after the Commencement Date, an amount equal to the product of
(i) 5% of the Company's Adjusted Consolidated Cash Flow for the Accrual Period
last completed times (ii) a fraction, the numerator of which is the amount of
such principal and the denominator of which is $115.0 million.
"Commencement Date" means the first day on which Casino Magic-Bossier
City becomes Operating.
"Semiannual Period" means each period that begins on July 1 and ends on
the next succeeding December 31 or each period that begins on January 1 and
ends on the next succeeding June 30.
Principal, premium, if any, interest and Liquidated Damages, if any, on
the Notes will be payable at the office or agency of the Company maintained
for such purpose within the City and State of New York or, at the option of
the Company, payment of interest and Liquidated Damages, if any, may be made
by check mailed to the Holders of the Notes at their respective addresses set
forth in the register of Holders of the Notes; provided that all payments with
respect to (i) Global Notes and (ii) $5.0 million or more in principal amount
of Certificated Notes the Holders of which have given wire transfer
instructions to the Company will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
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. The
Notes will be issued in denominations of $1,000 and integral multiples
thereof.
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OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to August
15, 2000. Thereafter, the Notes will be subject to redemption at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on August 15 of the years indicated below:
YEAR PERCENTAGE
------ --------------
2000 106.500%
2001 104.332%
2002 102.166%
Notwithstanding the foregoing or any other provision of the Indenture, if
any Gaming Authority requires that a Holder or beneficial owner of the Notes
must be licensed, qualified or found suitable under any applicable Gaming Law
in order to maintain any or obtain any applied-for Gaming License or franchise
of the Company or any of its Subsidiaries under any applicable Gaming Law, and
such Holder or beneficial owner fails to apply for a license, qualification or
finding of suitability within 30 days after being requested to do so by such
Gaming Authority (or such lesser period that may be required by such Gaming
Authority or Gaming Law) or if such Holder or beneficial owner is not so
licensed, qualified or found suitable by such Gaming Authority (a
"Disqualified Holder"), the Company shall have the right, at its option, (i)
to require such Disqualified Holder or beneficial owner to dispose of such
Disqualified Holder's or beneficial owner's Notes within 30 days of notice of
such finding by the applicable Gaming Authority that such Disqualified Holder
or beneficial owner will not be licensed, qualified or found suitable as
directed by such Gaming Authority (or such earlier date as may be required by
the applicable Gaming Authority or Gaming Law) or (ii) to call for redemption
of the Notes of such Holder or beneficial owner at a redemption price equal to
the lesser of 100% of the principal amount thereof or the price at which such
Holder or beneficial owner acquired such Notes together with, in either case,
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
earlier of the date of redemption or the date of the finding of unsuitability
by such Gaming Authority, which may be less than 30 days following the notice
of redemption if so ordered by such Gaming Authority. In connection with any
such redemption, and except as otherwise may be required by a Gaming
Authority, the Company shall comply with the procedures contained in the
Indenture for redemption of the Notes. Immediately upon a determination of
unsuitability, the Disqualified Holder shall have no further rights whatsoever
with respect to the Notes (i) to exercise, directly or indirectly, through any
trustee, nominee or any other Person or entity, any right conferred by the
Notes or (ii) to receive any interest or any other distribution or payment
with respect to the Notes, or any remuneration in any form from the Company
for services rendered or otherwise, except the redemption price of the Notes.
Under the Indenture, the Company is not required to pay or reimburse any
Holder or beneficial owner of Notes who is required to apply for such license,
qualification or finding of suitability for the costs of such application
including investigator costs. Such expenses will, therefore, be the obligation
of such Holder or beneficial owner. See "Risk Factors-Gaming and Other
Government Regulation" and "Regulatory Matters."
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MANDATORY REDEMPTION
The Indenture provided that if the voters in the November 5, 1996
Louisiana Referendum disapproved the continuation of riverboat gaming in
either Bossier Parish or Caddo Parish, Louisiana, then within 90 days after
the end of each Operating Year, the Company would have been required to make
certain Excess Cash Flow Redemptions (as defined in the Indenture) with
respect to the Notes. On November 5, 1996, voters in both Caddo and Bossier
parishes approved a continuation of riverboat gaming in their respective
parishes. Accordingly, such Excess Cash Flow Redemptions will not be required
under the Indenture.
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 equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
repurchase (the "Change of Control Payment"). 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 Notes pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) 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 (iii) 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 repurchased
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, 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 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 source of funds for any repurchase of Notes upon a Change of Control
will be the Company's cash or cash generated from operations or other sources,
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including borrowings or sales of assets; however, there can be no assurance
that sufficient funds will be available at the time of any Change of Control
to make any required repurchases of the Notes tendered in response to an offer
made as a result of a Change in Control. Any failure by the Company to
repurchase Notes tendered pursuant to a Change of Control Offer will
constitute an Event of Default which, during the continuation thereof, would
entitle the Trustee or the Holders of at least 25% in principal amount of the
then outstanding Notes to declare the Notes to be due and payable immediately
and to pursue any and all available remedies under the Indenture and
Collateral Documents. See "Events of Default and Remedies."
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 repurchases 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 Casino Magic or the Company and their
respective 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 New York law, which is the law
governing the Indenture and the Notes. Accordingly, the ability of a Holder of
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 Casino Magic or the Company and their respective Subsidiaries, taken
as a whole, to another Person or group may be uncertain.
Asset Sales
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, engage in an Asset Sale unless (i) the Company or the
Subsidiary, as the case may be, receives consideration at the time of such
Asset Sale at least equal to the fair market value (evidenced by a resolution
of the Board of Directors of the Company set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) (a) with respect to an Asset Sale of the
Crescent City Riverboat, at least 25% of the consideration received by the
Company therefor is in the form of Cash Equivalents and the remaining
consideration is in the form of Permitted Securities or (b) with respect to
any Asset Sale of any other asset, at least 85% of the consideration therefor
received by the Company or such Subsidiary is in the form of Cash Equivalents;
provided, that the amount of (x) any liabilities (as shown on the Company's or
such Subsidiary's most recent balance sheet) of the Company or any Subsidiary
(other than contingent liabilities and liabilities that are by their terms
subordinated in right of payment to the Notes or any Guarantee thereof) that
are assumed by the transferee of any such assets pursuant to an agreement that
releases and indemnifies the Company or such Subsidiary from further liability
with respect thereto and (y) any notes or other obligations received by the
Company or any such Subsidiary from such transferee that are within 30 days
converted by the Company or such Subsidiary into cash or as to which the
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Company or such Subsidiary has received at or prior to the consummation of the
Asset Sale a commitment from a nationally recognized investment, merchant or
commercial bank to convert into cash within 90 days of the consummation of
such Asset Sale unless not actually converted into cash within such 90-day
period (to the extent of the cash received), shall be deemed to be Cash
Equivalents for purposes of this provision. Notwithstanding the foregoing, the
Company shall not engage in any transfer, lease, conveyance or disposition,
other than a sale, of the Crescent City Riverboat.
Within 180 days after the receipt by the Company or any of its
Subsidiaries of any Net Proceeds from an Asset Sale, the Company or such
Subsidiary, as the case may be, may (i) apply such Net Proceeds to the making
of a capital expenditure or the acquisition of long-term assets, in either
case, which shall be owned by the Company or such Subsidiary and be used by or
useful to the Company or such Subsidiary in any line of business in which the
Company or such Subsidiary is permitted to be engaged pursuant to the covenant
described under "-Certain Covenants-Line of Business," or (ii) contractually
commit to apply such Net Proceeds to the payment of the costs of construction
of real property improvements (including, without limitation, to commit to
apply Net Proceeds from an Asset Sale of the Crescent City Riverboat to the
construction of the Casino Magic-Bossier City Hotel), which improvements shall
be owned by the Company or such Subsidiary and be used by or useful to the
Company or such Subsidiary in any line of business in which the Company or
such Subsidiary is permitted to be engaged pursuant to the covenant described
under "-Certain Covenants-Line of Business;" provided, however, that the Net
Proceeds from an Asset Sale of the Crescent City Riverboat may be applied only
to the making of a capital expenditure or the acquisition of long-term assets
or the payment of the costs of construction of real property improvements, in
any case, to be used by the Company at Casino Magic-Bossier City or the Casino
Magic-Bossier City Hotel; provided, further, that, in any case, the Company or
such Subsidiary, as the case may be, grants to the Trustee, on behalf of the
Holders, a first priority perfected security interest on any such properties
or assets acquired or constructed with the Net Proceeds of any such Asset Sale
on the terms set forth in the Indenture and the Collateral Documents. Pending
the final application of any such Net Proceeds, the Company or such Subsidiary
shall invest such Net Proceeds in Cash Equivalents which shall be pledged to
the Trustee as security for the Notes. Any Net Proceeds from an Asset Sale
(other than Net Proceeds from an Asset Sale of the Crescent City Riverboat)
that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $10.0 million, the Company will be required
to make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase
the maximum principal amount of Notes that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 101% (or, to the
extent that the Excess Proceeds relate to an Asset Sale of the Crescent City
Riverboat, 100%) of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase,
which date shall be no less than 30 or more than 60 days from the date of such
Asset Sale Offer, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company may, subject to the provisions in the Indenture
and the Collateral Documents, use any remaining Excess Proceeds for any
general corporate purpose. If the
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aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes to be purchased
in the manner described below under the caption "-Selection and Notice." Upon
completion of an Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
Event of Loss
The Indenture provides that within 360 days after any Event of Loss with
respect to any Note Collateral comprising Casino Magic-Bossier City on the
date that it becomes Operating with a fair market value (or replacement cost,
if greater) in excess of $1.0 million, the Company or the affected Subsidiary
of the Company, as the case may be, may apply the Net Loss Proceeds from such
Event of Loss to the rebuilding, repair, replacement or construction of
improvements to Casino Magic-Bossier City, with no concurrent obligation to
make any purchase of any Notes; provided that (i) the Company delivers to the
Trustee within 90 days of such Event of Loss a written opinion from a
reputable architect that Casino Magic-Bossier City with at least the Minimum
Facilities can be rebuilt, repaired, replaced, or constructed and Operating
within 180 days of such Event of Loss, (ii) an Officers' Certificate
certifying that the Company has available from Net Loss Proceeds or other
sources sufficient funds to complete such rebuilding, repair, replacement or
construction, and (iii) the Net Loss Proceeds are less than $25.0 million. If
the Net Loss Proceeds to be used for such rebuilding, repair, replacement or
construction exceeds $12.0 million, then such Net Loss Proceeds shall be
deposited in the Construction Disbursement Account and disbursed in accordance
with the Cash Collateral and Disbursement Agreement. Any Net Loss Proceeds
from an Event of Loss with respect to any Note Collateral comprising Casino
Magic-Bossier City on the date that it becomes Operating that are not
reinvested or are not permitted to be reinvested as provided in the first
sentence of this paragraph will be deemed "Excess Loss Proceeds." When the
aggregate amount of Excess Loss Proceeds exceeds $10.0 million, the Company
shall make an offer to all Holders (an "Event of Loss Offer") to purchase the
maximum principal amount of Notes that may be purchased out of the Excess Loss
Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase, which date shall not be less
than 30 or more than 60 days from the date of such Event of Loss Offer, in
accordance with the procedures set forth in the Indenture. If the aggregate
principal amount of Notes tendered pursuant to an Event of Loss Offer exceeds
the Excess Loss Proceeds, the Trustee will select the Notes to be purchased in
the manner described below under the caption "-Selection and Notice." To the
extent that the aggregate amount of Notes tendered pursuant to any Event of
Loss Offer is less than the Excess Loss Proceeds, the Company may, subject to
the other provisions of the Indenture and the Collateral Documents, use any
remaining Excess Loss Proceeds for general corporate purposes. Upon completion
of any such Event of Loss Offer, the amount of Excess Loss Proceeds shall be
reset at zero. Pending any permitted rebuilding, repair, replacement or
construction or the completion of any Event of Loss Offer, the Company or the
affected Subsidiary, as the case may be, shall pledge to the Trustee as
additional Note Collateral any Net Loss Proceeds or other cash on hand
required for such permitted rebuilding, repair, replacement or construction
pursuant to the terms of the Collateral Documents relating to Casino
Magic-Bossier City. Such pledged funds will be released to the Company to pay
for or
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reimburse the Company for the actual cost of such permitted rebuilding,
repair, replacement or construction, or such Event of Loss Offer, pursuant to
the terms of the Collateral Documents relating to Casino Magic-Bossier City.
Pending the final application of the Net Loss Proceeds, such proceeds shall be
invested in Cash Equivalents which shall be pledged to the Trustee as security
for the Notes. The Indenture also requires the Company or such Subsidiary to
grant to the Trustee, on behalf of the Holders, a first priority lien, subject
to Permitted Liens, on any properties or assets rebuilt, repaired, replaced or
constructed with such Net Loss Proceeds on the terms set forth in the
Indenture and the Collateral Documents.
The Indenture also provides that with respect to any Event of Loss
pursuant to clause (iii) of the definition of "Event of Loss" that has a fair
market value (or replacement cost, if greater) in excess of $5.0 million, the
Company (or the affected Subsidiary, as the case may be), will be required to
receive consideration at least (i) equal to the fair market value (evidenced
by a resolution of the Board of Directors of the Company set forth in an
Officers' Certificate delivered to the Trustee) of the assets subject to an
Event of Loss and (ii) at least 90% of which is in the form of Cash
Equivalents.
SELECTION AND NOTICE
If less than all of the Notes are to be purchased in an Asset Sale Offer
or Event of Loss Offer, or redeemed at any time, selection of Notes for
purchase or redemption will be made by the Trustee 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 such other method as the Trustee shall deem fair and appropriate
(and in such manner as complies with applicable legal requirements); provided,
that no Notes of $1,000 or less shall be purchased or redeemed in part.
Notices of purchase or redemption shall be mailed by first class mail, postage
prepaid, except as otherwise provided in the Indenture, at least 30 but not
more than 60 days before the purchase or redemption date to each Holder of
Notes to be purchased or redeemed at such Holder's registered address. If any
Note is to be purchased or redeemed in part only, any notice of purchase or
redemption that relates to such Note shall state the portion of the principal
amount thereof that has been or is to be purchased or redeemed. A new Note in
principal amount equal to the unpurchased or unredeemed portion of any Note
purchased or redeemed in part will be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the purchase or
redemption date, unless the Company defaults in payment of the purchase or
redemption price, interest and Liquidated Damages, if any, shall cease to
accrue on Notes or portions thereof purchased or called for redemption.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger or consolidation involving the
Company) or to the direct or indirect Holders of the Company's Equity
Interests in any capacity (other than dividends or distributions payable in
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Equity Interests (other than Disqualified Stock) of the Company or dividends
or distributions payable by a Wholly Owned Subsidiary or Substantially Owned
Subsidiary of the Company or any Wholly Owned Subsidiary or Substantially
Owned Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire
or retire for value any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate of the Company (other than
any such Equity Interests owned by the Company or any Wholly Owned Subsidiary
or Substantially Owned Subsidiary of the Company that is a Guarantor); (iii)
make any principal payment on, or purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness that is pari passu with or
subordinated in right of payment to the Notes (other than Notes), in each case
except at final stated maturity and, in the case of pari passu Indebtedness,
except in accordance with any sinking fund or mandatory redemption provisions
thereof; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the voters in the Louisiana Referendum have approved the continuation
of riverboat gaming in both Bossier Parish and Caddo Parish, Louisiana, a
condition which has been satisfied as of November 5, 1996; and
(c) all Contingent Interest accrued through the interest payment date
immediately preceding the date of such Restricted Payment has been paid; and
(d) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable Reference Period, have been permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant described
below under caption "-Incurrence of Indebtedness and Issuance of Preferred
Stock"; and
(e) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries after the
date of the Indenture (excluding Restricted Payments permitted by clauses (A)
(1), (2), (3), (5) and (B) of the next succeeding paragraph), is less than the
sum of (i) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing prior to the date of the Indenture to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by the
Company from the issue or sale since the date of the Indenture of Equity
Interests of the Company or of debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
convertible debt securities) sold to a Subsidiary of the Company and other
than Disqualified Stock or debt securities that have been converted into
Disqualified Stock), plus (iii) to the extent that any Restricted Investment
that was made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition, if
any) and (B) the initial amount of such Restricted Investment.
(A) If (i) no Default or Event of Default has occurred and is continuing,
or would occur as a consequence thereof, and (ii) the voters in the Louisiana
Referendum have approved the continuation of riverboat gaming in Bossier
Parish and Caddo Parish, Louisiana, (a condition which has been
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satisfied as of November 5, 1996.) and (iii) all Contingent Interest accrued
through the interest payment date immediately preceding the date of such
Restricted Payment has been paid, the foregoing provisions will not prohibit
(1) the payment of any dividend within 60 days after the date of declaration
thereof, if at such date of declaration such payment would have complied with
the provisions of the Indenture; (2) the redemption, repurchase, retirement or
other acquisition of any Equity Interests of the Company in exchange for, or
out of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of other Equity Interests of the Company (other
than any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement or
other acquisition shall be excluded from clause (e) (ii) of the preceding
paragraph; (3) the defeasance, redemption or repurchase of Indebtedness that
is pari passu with or subordinated in right of payment to the Notes with the
net cash proceeds from an incurrence of applicable Permitted Refinancing
Indebtedness or the substantially concurrent sale (other than to a Subsidiary
of the Company) of Equity Interests of the Company (other than Disqualified
Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement or other acquisition
shall be excluded from clause (e) (ii) of the preceding paragraph; (4) the
payment of Restricted Payments not otherwise permitted in an aggregate amount
not to exceed $10.0 million; provided that the Fixed Charge Coverage Ratio for
the Company's most recently ended Reference Period preceding the date on which
such Restricted Payment is made would have been at least 2.5 to 1.0,
determined on a pro forma basis, as if the Restricted Payment had been made at
the beginning of such Reference Period; (5) the payment on a monthly basis of
Management Fees to the Manager pursuant to the covenant described below under
the caption "-Restrictions on Payment of Management Fees" in an amount not to
exceed 10% of the Adjusted Consolidated Cash Flow of the Company for the
Company's most recently ended Reference Period; (6) repurchases by the Company
of its outstanding Capital Stock which are required to be made under
applicable Gaming Law; provided, however, that the declaration of each
dividend paid in accordance with clause (1) above and each payment, redemption
or repurchase made under clauses (4) or (6) shall each be counted for purposes
of computing amounts expended pursuant to clause (e) in the immediately
preceding paragraph, and (B) if no Default or Event of Default has occurred
and is continuing, or would occur as a consequence thereof, the foregoing
provisions will not prohibit payments to Casino Magic pursuant to the Tax
Sharing Agreement.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (in the case of any individual Restricted Payment or series of
related Restricted Payments in an amount greater than $100,000), evidenced by
a resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) on the date of the Restricted Payment of the
asset(s) proposed to be transferred by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. Not less than once each
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fiscal quarter, the Company shall deliver to the Trustee an Officers'
Certificate stating that each Restricted Payment made during the prior fiscal
quarter was permitted and setting forth the basis upon which the calculations
required by the covenant "-Restricted Payments" were computed, which
calculations may be based upon the Company's latest available financial
statements.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guaranty or otherwise become directly or indirectly liable, contingently or
otherwise (collectively, "incur"), with respect to any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock
or other Disqualified Stock; provided, however, that so long as no Default or
Event of Default has occurred or is continuing the Company may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock
if:
(i) the Fixed Charge Coverage Ratio of the Company for the Company's most
recently ended Reference Period immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.5 to 1.0, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such Reference Period; and
(ii) the final maturity of such Indebtedness is beyond the maturity date
of the Notes and the Weighted Average Life to Maturity of such Indebtedness is
greater than the remaining Weighted Average Life to Maturity, of the Notes.
So long as no Default or Event of Default has occurred and is continuing,
the foregoing provisions will not apply to:
(i) the incurrence by the Company and its Subsidiaries of Indebtedness
represented by the Notes or a Guarantee or obligations arising under the
Collateral Documents, to the extent that such obligations would constitute
Indebtedness;
(ii) the incurrence by the Company of Permitted Refinancing Debt in
exchange for, or the net proceeds of which are used to extend, refinance,
renew, replace, defease or refund, Indebtedness that was permitted by the
Indenture to be incurred;
(iii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Substantially Owned Subsidiaries; provided, however, that (A) such
Indebtedness is expressly subordinate to the payment in full of all
Obligations with respect to the Notes, or the Guarantees, as the case may be,
(B)(1) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Company or a
Substantially Owned Subsidiary and (2) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Substantially
Owned Subsidiary shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Subsidiary, as the case may be, and
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(C) if any Subsidiary is the obligor on such Indebtedness, such Indebtedness
is represented by a Subsidiary Intercompany Note that is pledged to the
Trustee as security for the Notes;
(iv) the incurrence by the Company of Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate risk with respect
to any floating rate Indebtedness that is permitted by the terms of the
Indenture to be outstanding;
(v) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this paragraph) in an aggregate
principal amount (or accreted value, as applicable) at any time outstanding
not to exceed $5.0 million;
(vi) the incurrence by the Company of Indebtedness, the proceeds of which
are utilized solely to purchase FF&E; provided, however, that (A) the
principal amount of such Indebtedness does not exceed the cost (including
sales and excise taxes, installation and delivery charges and other direct
costs of, and other direct expenses paid or charged in connection with, such
purchase) of the FF&E purchased with the proceeds thereof and (B) the
aggregate principal amount of such Indebtedness does not exceed $7.5 million
outstanding at any time prior to the opening of the Casino Magic-Bossier City
Hotel and $10.0 million thereafter; and
(vii) the incurrence by the Company of secured Indebtedness to finance
the Project Costs of the Casino Magic-Bossier City Hotel in an aggregate
principal amount at any time outstanding not to exceed 50% of the aggregate
Project Costs of such Casino Magic-Bossier City Hotel if the Fixed Charge
Coverage Ratio of the Company for the Company's most recently ended Reference
Period immediately preceding the date on which such additional Indebtedness is
incurred would have been at least 2.5 to 1.0, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred at the beginning of such Reference
Period.
Liens
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (1) on its Capital
Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any Indebtedness owed to the Company or
any of its Subsidiaries, (ii) make loans or advances to the Company or any of
its Subsidiaries or (iii) transfer any of its properties or assets to the
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Company or any of its Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (a) the Indenture, the Notes or
the Collateral Documents, (b) applicable law or (c) by reason of customary
non-assignment provisions in leases entered into in the ordinary course of
business.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to
another corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes, the Indenture and the Collateral
Documents pursuant to a supplemental indenture or other documents or
instruments in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; (iv)
such transaction would not result in the loss or suspension or material
impairment of any Gaming License unless a comparable replacement Gaming
License is effective prior to or simultaneous with such loss, suspension or
material impairment; (v) except in the case of a merger of the Company with or
into a Wholly Owned Subsidiary of the Company, the Company or the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated
Net Worth of the Company immediately preceding the transaction, (B) will, upon
the consummation of such transaction and after giving pro forma effect thereto
as if such transaction had occurred at the beginning of the applicable
Reference Period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "-Incurrence
of Indebtedness and Issuance of Preferred Stock" and (C) will have a Fixed
Charge Coverage Ratio for the Reference Period immediately preceding the date
on which such transaction occurred, determined on a pro forma basis (including
a pro forma application of the proceeds therefrom) as if such transaction had
occurred at the beginning of such Reference Period, that is no less than 85%
of the Company's or such Person's Fixed Charge Coverage Ratio for such period
prior to giving effect to such transaction; and (vi) such transaction would
not require any Holder or beneficial owner of Notes to obtain a Gaming License
or be qualified or found suitable under the law of any applicable gaming
jurisdiction; provided, that such Holder or beneficial owner would not have
been required to obtain a Gaming License or be qualified or found suitable
under the laws of any applicable gaming jurisdiction in the absence of such
transaction.
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Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, 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 contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Subsidiary than those that would have been obtained in
a comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the Board
of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of
the Board of Directors and (b) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $5.0 million, an opinion as to the fairness to the Holders of such
Affiliate Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing; provided, however,
that (w) payments made pursuant to the Tax Sharing Agreement or the Management
Agreement, (x) any employment or indemnification agreement entered into by the
Company or any of its Subsidiaries in the ordinary course of business on terms
customary in the gaming industry, (y) transactions between or among the
Company and/or its Subsidiaries, and (z) Restricted Payments and Permitted
Investments that are permitted by the provisions of the Indenture described
above under the caption "-Restricted Payments," in each case, shall not be
deemed Affiliate Transactions.
Construction
The Indenture provides that the Company will cause construction of Casino
Magic-Bossier City, including the furnishing, fixturing and equipping thereof,
to be prosecuted with diligence and continuity in a good and workmanlike
manner substantially in accordance with the Plans and within the Construction
Budget. The Indenture also provides that the Company will cause Casino
Magic-Bossier City to be Operating by the Operating Deadline.
Limitations on Use of Proceeds
As required by the Indenture, the Company used $20 million of the net
proceeds from the Note Offering to purchase the Bossier Riverboat pursuant to
the Vessel Purchase Agreement, free and clear of any Liens, and to grant to
the Trustee for the benefit of the Notes a first priority perfected security
interest in the Bossier Riverboat and, of the remaining Net Proceeds from the
Note Offering, the Company deposited approximately $45.2 million in the Cash
Collateral Accounts, including $7.3 million in the Interest Reserve Account,
$3.2 million in the Operating Reserve Account, $29.7 million in the
Construction Disbursement Account, and $5.0 million in the Completion Reserve
Account, in each case to be disbursed only in accordance with the Cash
Collateral and Disbursement Agreement.
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Limitation on Status as Investment Company
The Indenture prohibits the Company and Jefferson Corp. from being
required to register as an "investment company" (as that term is defined in
the Investment Company Act of 1940, as amended), or from otherwise becoming
subject to regulation under the Investment Company Act of 1940.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company may enter into a sale and leaseback transaction if
(i) the Company could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "-Incurrence of Additional
Indebtedness and Issuance of Preferred Stock" and (b) incurred a Lien to
secure such Indebtedness pursuant to the covenant described above under the
caption "-Liens," (ii) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as determined in good
faith by the Board of Directors of the Company and set forth in an Officers'
Certificate delivered to the Trustee) of the property that is the subject of
such sale and leaseback transaction and (iii) the transfer of assets in such
sale and leaseback transaction is permitted by, and the Company applies the
proceeds of such transaction in compliance with, the covenant described above
under the caption "-Repurchase at the Option of Holders-Asset Sales."
Restrictions on Preferred Stock of Subsidiaries
The Indenture provides that the Company will not permit any of its
Subsidiaries to issue any preferred stock, or permit any Person to own or hold
an interest in any preferred stock of any such Subsidiary, except for
preferred stock issued to the Company or a Wholly Owned Subsidiary of the
Company.
Limitation on Issuances and Sales of Capital Stock of Wholly Owned
Subsidiaries
Except with respect to transactions in which a Wholly Owned Subsidiary
becomes a Substantially Owned Subsidiary, the Indenture provides that the
Company (i) will not, and will not permit any Wholly Owned Subsidiary of the
Company to, transfer, convey, sell, lease or otherwise dispose of any Capital
Stock of any Wholly Owned Subsidiary of the Company to any Person (other than
the Company or a Wholly Owned Subsidiary of the Company), unless (a) such
transfer, conveyance, sale, lease or other disposition is of all the Capital
Stock of such Wholly Owned Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in
accordance with the covenant described above under the caption "-Repurchase at
the Option of Holders-Asset Sales," and (ii) will not permit any Wholly Owned
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Subsidiary
of the Company.
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Line of Business
The Indenture provides that the Company will not, and will not permit any
Subsidiary to, engage in any business or investment activities other than the
gaming business and such business activities as are incidental or related
thereto including, without limitation, related hotel, sports and entertainment
activities and food services; provided that such incidental or related
business activities are engaged only at or in conjunction with any Gaming
Facility owned and operated by the Company or any Substantially Owned
Subsidiary of the Company. Notwithstanding any other provision of the
Indenture, the Company shall not, and shall not permit any of its Subsidiaries
to, engage in any business, development or investment activity other than at
or in conjunction with Casino Magic-Bossier City until Casino Magic-Bossier
City is Operating and the Casino Magic-Bossier City Hotel is an Operating
Hotel.
Advances to Subsidiaries
The Indenture provides that all advances (other than equity contributions
of not more than $1,000) to Subsidiaries made by the Company from time to time
after the date of the Indenture will be evidenced by unsecured Subsidiary
Intercompany Notes in favor of the Company that will be pledged to the Trustee
as Note Collateral to secure the Notes. Each Subsidiary Intercompany Note will
be payable upon demand, and will bear interest at the same rate as the Notes.
A form of Subsidiary Intercompany Note will be attached as an exhibit to the
Indenture. Repayments of principal with respect to any Subsidiary Intercompany
Note may be used by the Company, subject to the other provisions of the
Indenture and the Collateral Documents for any general corporate purpose.
Payments for Consent
The Indenture provides that neither the Company nor any of its
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any
of the terms or provisions of the Indenture or the Notes unless such
consideration is offered to be paid or is paid to all Holders of the Notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the SEC (and within 15 days of the date that is or would be
prescribed thereby) so long as any Notes are outstanding, the Company will
furnish to the Holders of Notes (i) all annual and quarterly financial
information that would be required to be contained in a filing with the SEC on
Forms 10-K (without exhibits) and 10-Q if the Company were required to file
such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial condition
and results of operations of the Company and its Subsidiaries 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
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required to be filed with the SEC on Form 8-K if the Company were required to
file such reports. In addition, whether or not required by the rules and
regulations of the SEC, the Company will file a copy of all such information
and reports with the SEC for public availability (unless the SEC will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, the Company and
Jefferson Corp. have agreed that, for so long as any Series A Notes remain
outstanding, they 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.
Insurance
The Indenture provides that the Company will, and will cause its
Subsidiaries to, maintain insurance with responsible carriers against such
risks and in such amounts as is customarily carried by similar businesses with
such deductibles, retentions, self insured amounts and coinsurance provisions
as are customarily carried by similar businesses of similar size, including,
without limitation, property and casualty, and, with respect to insurance on
the Note Collateral, shall have provided insurance certificates evidencing
such insurance to the Trustee prior to the Issuance Date and shall thereafter
provide such certificates prior to the anniversary or renewal date of each
such policy, which certificate shall expressly state the expiration date for
each policy listed. Customary insurance coverage shall be deemed to include
the following:
(i) workers' compensation insurance to the extent required to comply with
all applicable state, territorial, or United States laws and regulations, or
the laws and regulations of any other applicable jurisdiction;
(ii) comprehensive general liability insurance with minimum limits of
$1.0 million;
(iii) umbrella or excess liability insurance providing excess liability
coverages over and above the foregoing underlying insurance policies up to a
minimum limit of $25.0 million;
(iv) business interruption insurance (which, with respect to the Bossier
Riverboat, covers reasonable continuing expenses for loss attributable to the
loss or damage to the Bossier Riverboat); and
(v) property insurance protecting the property against loss or damage by
fire, lightning, windstorm, tornado, water damage, vandalism, riot,
earthquake, civil commotion, malicious mischief, hurricane, and such other
risks and hazards as are from time to time covered by an "all-risk" policy or
a property policy covering "special" causes of loss. Such insurance shall
provide coverage in not less than the lesser of 120% of the outstanding
principal amount of the Notes plus accrued and unpaid interest and 100% of
actual replacement value (as determined at each policy renewal based on the
F.W. Dodge Building Index or some other recognized means) of any improvements
customarily insured consistent with industry standards and with a deductible
no greater than 2% of the insured value of Casino Magic-Bossier City or such
greater amount as is available on commercially reasonable terms (other than
earthquake or flood insurance, for which the deductible may be up to 10% of
such replacement value).
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All insurance with respect to the Note Collateral required under the
Indenture (except worker's compensation) shall name the Company and the
Trustee as additional insurers or loss payees, as the case may be, with losses
in excess of $10.0 million payable jointly to the Company and the Trustee
(unless a Default or Event of Default has occurred and is then continuing, in
which case all losses are payable solely to the Trustee), with no recourse
against the Trustee for the payment of premiums, deductibles, commissions or
club calls, and for at least 30 days notice of cancellation. All such
insurance policies will be issued by carriers having an A.M. Best & Company,
Inc. rating of A or higher and a financial size category of not less than X,
or if such carrier is not rated by A.M. Best & Company, Inc., having the
financial stability and size deemed appropriate by an opinion from a reputable
insurance broker. The Indenture will provide that the Company will deliver to
the Trustee on the Issuance Date and each anniversary thereafter a certificate
of an insurance agent stating that the insurance policies obtained by the
Company and its Subsidiaries comply with this covenant and the related
applicable provisions of the Collateral Documents.
Collateral Documents
The Indenture provides that neither the Company nor any of its
Subsidiaries will amend, waive or modify, or take or refrain from taking any
action that has the effect of amending, waiving or modifying any provision of
the Collateral Documents, to the extent that such amendment, waiver,
modification or action could have an adverse effect on the rights of the
Trustee or the Holders of the Notes; provided, that: (i) the Note Collateral
may be released or modified as expressly provided in the Indenture and in the
Collateral Documents; (ii) any Guarantee and pledges may be released as
expressly provided in the Indenture and in the Collateral Documents; and (iii)
the Indenture and any of the Collateral Documents may be otherwise amended,
waived or modified as set forth under the caption "-Amendment, Supplement and
Waiver."
Restriction on Payment of Management Fees
The Company shall not, directly or indirectly, pay to Casino Magic or any
of its Affiliates any Management Fee except pursuant to the Management
Agreement and in accordance with the Indenture. No payment of Management
Fees, either current or accrued, shall be made if at the time of payment of
such Management Fees, (i) a Default or an Event of Default shall have occurred
and be continuing or shall occur as a result thereof or (ii) the Company's
Fixed Charge Coverage Ratio for the Reference Period immediately preceding the
date of such payment would have been less than 1.5 to 1.0 (calculated on a pro
forma cash basis after only deducting such fees to the extent paid in cash and
not deferred for such period including any fees deferred from a prior period
to be paid in cash during such period and not deducting any such fees to the
extent deferred and not paid in cash during such period). Any Management Fees
not permitted to be paid pursuant to this covenant will be deferred and will
accrue and may be paid only at such time that they would otherwise be
permitted to be paid hereunder. The right to receive payment of the Management
Fee shall be subordinate in right of payment to the right of the Holders of
the Notes to receive payment pursuant to the Notes. The terms of the
Management Agreement cannot be amended to increase amounts to be paid
thereunder, or in any other manner which would be adverse to the Company or
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the Holders of the Notes, including without limitation, to amend the
requirement that the Management Fee payable thereunder be based on the
Company's Adjusted Consolidated Cash Flow; provided, however, that the
foregoing shall not prohibit any amendment required under any Gaming Law or by
any Gaming Authority.
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any of its Subsidiaries
shall acquire or create another Subsidiary after the date of the Indenture,
then such newly acquired or created Subsidiary shall execute a Guarantee and
deliver an opinion of counsel, in accordance with the terms of the Indenture.
Further Assurances
The Indenture provides that the Company will (and will cause each of its
Subsidiaries to) do, execute, acknowledge, deliver, record, re-record, file,
re-file, register and re-register, as applicable, any and all such further
acts, deeds, conveyances, security agreements, mortgages, assignments,
estoppel certificates, financing statements and continuations thereof,
termination statements, notices of assignment, transfers, certificates,
assurances and other instruments as may be required from time to time in order
(i) to carry out more effectively the purposes of the Collateral Documents,
(ii) to subject to the Liens created by any of the Collateral Documents any of
the properties, rights or interests required to be encumbered thereby, (iii)
to perfect and maintain the validity, effectiveness and priority of any of the
Collateral Documents and the Liens intended to be created thereby, and (iv) to
better assure, convey, grant, assign, transfer, preserve, protect and confirm
to the Trustee any of the rights granted now or hereafter intended by the
parties thereto to be granted to the Trustee or under any other instrument
executed in connection therewith or granted to the Company under the
Collateral Documents or under any other instrument executed in connection
therewith.
SECURITY
Subject to Permitted Liens, the Notes and the Guarantees are secured by a
first lien on the Note Collateral owned by the Company or any Guarantor,
respectively, whether now owned or hereafter acquired. The Note Collateral
securing the Notes includes, without limitation, and subject to Permitted
Liens (i) a pledge of the Pledged Securities and any funds deposited and held
in the Interest Reserve Account until such time as such funds are disbursed in
accordance with the terms of the Cash Collateral and Disbursement Agreement,
(ii) a pledge of the funds held in the Construction Disbursement Account,
Operating Reserve Account, and Completion Reserve Account, which proceeds will
be held in such accounts until disbursed in accordance with the terms of the
Cash Collateral and Disbursement Agreement, (iii) the fee simple interest in
all of the real property comprising Casino Magic-Bossier City, additions and
improvements and component parts related thereto, issues and profits
therefrom, furniture, fixtures, machinery and equipment forming a part thereof
or used in connection therewith, (iv) the Bossier Riverboat, the Crescent City
Riverboat and all other vessels and related improvements and personal property
related thereto held by the Company, (v) all of the Company's accounts
receivable, general intangibles, inventory and other personal property and
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(vi) certain construction contracts, operating agreements, the Management
Agreement, other agreements, licenses and permits entered into by, or granted
to the Company or any Guarantor in connection with the development,
construction, ownership and operation of Casino Magic-Bossier City. Such liens
and security interests may be subordinate or junior to mechanics' liens, which
under applicable Louisiana law may have priority over the mortgage of the real
property comprising Casino Magic-Bossier City and additions, improvements and
component parts relating thereto; provided, however, that, as the Indenture
requires, the title insurance obtained for the benefit of the Holders insures
against losses from the enforcement of such mechanics' liens. In addition, the
lien of the Holders may be subordinate to, or may not include (if precluded by
the terms of such security interests) security interests granted in connection
with indebtedness incurred to purchase FF&E. Holders of the Notes will have a
preferred ship's mortgage in the Bossier Riverboat and the Crescent City
Riverboat. Secured lenders of indebtedness incurred to purchase FF&E may be
granted a limited preferred ship's mortgage in the Bossier Riverboat for the
sole purpose of perfecting such lenders' security interest in such FF&E.
Subject to the restrictions in the Indenture, including pro forma
compliance with the covenant described under the caption "-Certain
Covenants-Incurrence of Indebtedness and Issuance of Preferred Stock," the
Company is permitted to incur indebtedness to finance the costs of
constructing the Casino Magic-Bossier City Hotel. In the event that the
Company determines to incur such indebtedness on a secured basis, the
Indenture provides that (i) the Trustee will release the land on which the
hotel is to be built from the lien for the benefit of the Notes and (ii) the
Company will have the right to grant a security interest for the benefit of
the new lender in such real property and all improvements constructed thereon,
including the hotel. Under such circumstances the Holders will have no
security interest in the hotel or the land on which it is constructed.
The Jefferson Guarantee is secured by a pledge of all of the Capital
Stock of the Company and secured by a first priority security interest in
substantially all existing and future assets of such entity. In addition, the
Notes will be secured by a pledge of the Capital Stock of each Subsidiary now
or hereafter owned by the Company and of any Subsidiary Intercompany Notes
held by the Company unless such pledge would in any way jeopardize obtaining
or maintaining a Gaming License or would require the Trustee or a Holder or
beneficial owner of the Notes to be licensed, qualified or found suitable by
any applicable Gaming Authority.
So long as no Default or Event of Default shall have occurred and be
continuing, and subject to certain terms and conditions in the Indenture and
the Collateral Documents, the Company and its Subsidiaries will be entitled to
receive all cash dividends, interest and other payments made upon or with
respect to the Note Collateral pledged by them (other than interest earned on
the Pledged Securities in the Interest Reserve Account except in accordance
with the Cash Collateral and Disbursement Agreement) and to exercise any
voting and other consensual rights pertaining to the Note Collateral pledged
by them. Upon the occurrence and during the continuance of a Default or Event
of Default, (a) all rights of the Company and its Subsidiaries to exercise
such voting or other consensual rights shall cease, and all such rights shall
become vested in the Trustee which, to the extent permitted by law, shall have
the sole right to exercise such voting and other consensual rights and (b) all
rights of the Company and its Subsidiaries to receive all cash dividends,
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interest and other payments made upon or with respect to the pledged
collateral will cease and such cash dividends, interest and other payments
will be paid to the Trustee, and (c) the Trustee may sell the pledged
collateral or any part thereof in accordance with the terms of the Collateral
Documents. All funds distributed under the Collateral Documents and received
by the Trustee for the benefit of the Holders of the Notes will be distributed
by the Trustee in accordance with the provisions of the Indenture.
Under the terms of the Collateral Documents, the Trustee will determine
the circumstances and manner in which the pledged collateral shall be disposed
of, including, but not limited to, the determination of whether to release all
or any portion of the pledged collateral from the Liens created by the
Collateral Documents and whether to foreclose on the pledged collateral
following a Default or Event of Default. Moreover, upon the full and final
payment and performance of all Obligations of the Company under the Indenture
and the Notes, the Collateral Documents shall terminate and the pledged
collateral shall be released. In addition, in the event that the Capital Stock
of any Subsidiary of the Company is sold and the Net Proceeds are applied in
accordance with the terms of the covenant entitled "-Repurchase at the Option
of Holders-Asset Sales," the Trustee shall release the Liens in favor of the
Trustee in the assets sold; provided, that the Trustee shall have received
from the Company an Officers' Certificate certifying that such Net Proceeds
have been or will be so applied.
The proceeds of any sale of the Note Collateral in whole pursuant to the
Indenture and the related Collateral Documents following an Event of Default
may not be sufficient to satisfy payments due on the Notes. In addition, the
ability of the Holders of the Notes to realize upon the Note Collateral may be
limited pursuant to gaming laws, in the event of a bankruptcy and pursuant to
other applicable laws, including securities laws, all as described below. See
"-Remedies Upon Default Under Notes" below, and "Risks Factors-Ability to
Realize on Collateral; Bankruptcy Considerations," "-Mechanics' Liens," and
"-Fraudulent Conveyance Considerations."
The Indenture provides that the Net Proceeds of all Asset Sales (if
unapplied Net Proceeds of Asset Sales exceed $2.0 million at any time) and the
Net Loss Proceeds of all Events of Loss of any Note Collateral other than Note
Collateral existing on the date that Casino Magic-Bossier City began Operating
(other than Permitted Investments), as well as Excess Proceeds, shall be
promptly and without any commingling deposited with the Trustee subject to a
lien in favor of the Trustee for the benefit of the Holders of the Notes
unless and until applied as permitted under the covenant described under
"-Repurchase at the Option of Holders-Asset Sales" or "-Event of Loss," as the
case may be. The Trustee shall release to the Company any Excess Proceeds or
Excess Loss Proceeds, as the case may be, that remain after making an offer to
purchase the Notes in compliance with the covenant described under
"-Repurchase at the Option of Holders-Asset Sales" or "-Event of Loss," as
the case may be. Amounts so paid to the Trustee shall be invested or released
in accordance with the provisions of the Indenture.
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Certain Gaming Law Limitations
The Trustee's ability to foreclose upon the Note Collateral will be
limited by relevant gaming laws, which generally require that persons who own
or operate a casino or purchase, possess or sell gaming equipment hold a valid
gaming license. No person can hold a license in the State of Louisiana unless
the person is found qualified or suitable by the relevant Gaming Authorities.
In order for the Trustee or a purchaser at or after foreclosure to be found
qualified or suitable, such Gaming Authorities would have discretionary
authority to require the Trustee, any or all of the Holders of the Notes and
any such purchaser to file applications, be investigated and be found
qualified or suitable as an owner or operator of gaming establishments. The
applicant for qualification, a finding of suitability or licensing must pay a
filing fee and all costs of such investigation. If the Trustee is unable or
chooses not to qualify, be found suitable, or licensed to own, operate or sell
such assets, it would have to retain or sell to an entity licensed to operate
or sell such assets. In addition, in any foreclosure sale or subsequent resale
by the Trustee, licensing requirements under the relevant gaming laws may
limit the number of potential bidders and may delay any sale, either of which
events would have an adverse effect on the sale price of the Note Collateral.
Therefore, the practical value of realizing on the Note Collateral may,
without the appropriate approvals, be limited.
Certain Bankruptcy Limitations
The right of the Trustee to repossess and dispose of the Note Collateral
upon the occurrence of an Event of Default is likely to be significantly
impaired by applicable bankruptcy law if a bankruptcy proceeding were to be
commenced by or against the Company or a Guarantor prior to the Trustee having
repossessed and disposed of the Note Collateral. Under the Bankruptcy Code, a
secured creditor such as the Trustee is prohibited from repossessing its
security from a debtor in a bankruptcy case, or from disposing of security
repossessed from such debtor, without bankruptcy court approval. Moreover, the
Bankruptcy Code permits the debtor to continue to retain and to use collateral
(and the proceeds, products, offspring, rents or profits of such collateral)
even though the debtor is in default under the applicable debt instruments,
provided that the secured creditor is given "adequate protection." The meaning
of the term "adequate protection" may vary according to circumstances, but it
is intended in general to protect the value of the secured creditor's interest
in the collateral and may include, if approved by the court, cash payments or
the granting of additional security for any diminution in the value of the
collateral as a result of the stay of repossession or the disposition or any
use of the collateral by the debtor during the pendency of the bankruptcy
case. The court has broad discretionary powers in all these matters, including
the valuation of the Note Collateral. In addition, since the enforcement of
the Lien of the Trustee in cash, deposit accounts and cash equivalents (other
than the Construction Disbursement Account) may be limited in a bankruptcy
proceeding, the Holders of the Notes may not have any consent rights with
respect to the use of those funds by the Company or any of its Subsidiaries
during the pendency of the proceeding. In view of these considerations, it is
impossible to predict how long payments under the Notes could be delayed
following commencement of a bankruptcy case, whether or when the Trustee could
repossess or dispose of the Note Collateral or whether or to what extent
Holders of the Notes would be compensated for any delay in payment or loss of
value of the Note Collateral.
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CASH COLLATERAL AND DISBURSEMENT AGREEMENT
Pursuant to the Cash Collateral and Disbursement Agreement entered into
among the Company, the Trustee and First National Bank of Commerce (the
"Disbursement Agent") in connection with Casino Magic-Bossier City,
approximately $45.2 million of the net proceeds of the sale of the Series A
Notes was placed into the Cash Collateral Accounts and invested in Cash
Equivalents or Pledged Securities, to be disbursed pursuant to the Cash
Collateral and Disbursement Agreement.
Interest Reserve Account
Of such net proceeds deposited in the Cash Collateral Accounts,
approximately $7.3 million was deposited in the Interest Reserve Account and
used to purchase Pledged Securities which, upon receipt of scheduled interest
and principal payments thereon will, in the opinion of the Chief Financial
Officer of the Company as set forth in an Officer's Certificate, provide for
payment in full of the interest payments due on the Notes through February 15,
1997. The Pledged Securities are pledged by the Company to the Trustee for the
benefit of the Holders of Notes pursuant to the Cash Collateral and
Disbursement Agreement and will be held by the Disbursement Agent in the
Interest Reserve Account. Pursuant to the Cash Collateral and Disbursement
Agreement, immediately prior to the first interest payment due on the Notes,
the Disbursement Agent shall release from the Interest Reserve Account funds
sufficient to pay interest then due. In the event that any funds remain in the
Interest Reserve Account after all such interest payments are made, the
Trustee will release such funds to the Company.
Interest earned on the Pledged Securities will be added to the Interest
Reserve Account. In the event that the aggregate amount of funds and Pledged
Securities held in the Interest Reserve Account exceeds the amount sufficient
in the opinion of the Chief Financial Officer as set forth in an Officer's
Certificate to provide for payment in full of the interest payments due on the
Notes through February 15, 1997, the Disbursement Agent will deposit such
excess amount into the Construction Disbursement Account.
Operating Reserve Account
In addition, approximately $3.2 million of the net proceeds of the Note
Offering was deposited in the Operating Reserve Account. Funds held in the
Operating Reserve Account are pledged to the Trustee for the benefit of the
Holders of the Notes and invested in Cash Equivalents by the Disbursement
Agent in accordance with the Company's instructions until needed from time to
time to fund the operations of Casino Magic-Bossier City. All such funds will
be held in the Operating Reserve Account until disbursed in accordance with
the Cash Collateral and Disbursement Agreement. The Disbursement Agent will
authorize the disbursement of funds from the Operating Reserve Account only
upon the satisfaction of the disbursement conditions set forth in the Cash
Collateral and Disbursement Agreement. Such conditions generally include the
requirement that the Company deliver a certificate certifying as to, among
other things, the application of the funds to be disbursed which may include
application to payroll obligations, gaming losses and other operating expenses
at Casino Magic-Bossier City (but in no event will any such funds be permitted
to be used to pay for any construction related expenses) and the absence of an
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Event of Default under the Indenture. In addition, the Cash Collateral and
Disbursement Agreement will provide (a) that funds may be disbursed from the
Operating Reserve Account only during the period from the commencement of
gaming operations at the Casino Magic-Bossier City casino, which occurred on
October 4, 1996, (b) that subsequent to the initial disbursement of funds from
the Operating Reserve Account, the Company will provide the Disbursement Agent
with an Officers' Certificate certifying that all previous disbursements from
the Operating Reserve Account were used in substantially the manner certified
by the Company and (c) after giving effect to the requested disbursement, no
more than $1.0 million in funds from the Operating Reserve Account will have
been disbursed at any one time prior to receipt of the certificate described
in subparagraph (b) above. The Cash Collateral and Disbursement Agreement also
provides that if any funds remain in the Operating Reserve Account at the time
Casino Magic-Bossier City becomes Operating and no Event of Default exists
under the Cash Collateral and Disbursement Agreement, the Disbursement Agent
shall, upon the direction of the Company, subject to certain exceptions set
forth in the Cash Collateral and Disbursement Agreement, disburse all
remaining funds, if any, in the Operating Reserve Account.
Completion Reserve Account
Approximately $5.0 million of the net proceeds of the Note Offering was
deposited in the Completion Reserve Account. As of October 18, 1996, the
Company finalized all plans and specifications for Casino Magic-Bossier City,
agreed upon a guaranteed maximum price of $19.4 million with its general
contractor for completion of the principal structural improvements at Casino
Magic-Bossier City (the landside pavilion, parking garage and certain of the
site improvements) in accordance with such plans and amended the construction
budget to an extent that required, in addition to the $29.7 million deposited
in the Construction Disbursement Account (as defined in the Indenture), an
additional $4.0 million funded from the Completion Reserve Account. Funds
held in the Completion Reserve Account are pledged to the Trustee for the
benefit of the Holders of the Notes and invested in Cash Equivalents by the
Escrow Agent in accordance with the Company's instructions until needed from
time to time to ensure completion of construction of Casino Magic-Bossier
City. All such funds will be held in the Completion Reserve Account until
disbursed in accordance with the Cash Collateral and Disbursement Agreement.
The Disbursement Agent will authorize the disbursement of funds from the
Completion Reserve Account to the Construction Disbursement Account only upon
the satisfaction of the disbursement conditions set forth in the Cash
Collateral and Disbursement Agreement. Such conditions generally include the
requirement that the Company deliver to the Disbursement Agent and the
Independent Construction Consultant, in form satisfactory to the Disbursement
Agent, evidence that (a) the funds will not be applied in violation of the
terms of the Indenture, (b) such funds will be used for the sole purpose of
completion of Casino Magic-Bossier City, (c) an explanation of the
circumstances causing the cost of completing Casino Magic-Bossier City to
exceed the amounts previously forecast in the Construction Budget therefor,
and evidence that such circumstances were not reasonably expected as of the
last date of amendment of the Construction Budget (or if none, the date of
issuance of the Notes), (d) an amendment to the Construction Budget confirming
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the revised estimated costs to complete Casino Magic-Bossier City (which
amendment shall satisfy the conditions for Construction Budget amendments as
provided below), and (e) evidence that after giving effect to the requested
disbursements, the funds in the Construction Disbursement Account will be
sufficient to complete Casino Magic-Bossier City in accordance with the
Construction Budget, as amended, on or before the Operating Deadline. In
addition, the Disbursement Agent shall have received from the Independent
Construction Consultant a certification stating that the Independent
Construction Consultant has reviewed such disbursement request, that the
Independent Construction Consultant has inspected Casino Magic-Bossier City
during the previous month and that the Independent Construction Consultant
concurs with certain of the certifications made by the Company in such
disbursement request. Following disbursement of funds from the Completion
Reserve Account to the Construction Disbursement Account, the Company must
comply with all requirements of the Cash Collateral and Disbursement Agreement
relating to disbursement of funds from the Construction Disbursement Account.
Construction Disbursement Account
Approximately $29.7 million of the net proceeds of the Note Offering was
deposited in the Construction Disbursement Account; as of December 31, 1996,
approximately $29.4 million had been withdrawn therefrom in connection with
the development of Casino Magic-Biloxi City and the balance and is being held
in escrow and invested in Cash Equivalents by the Disbursement Agent in
accordance with the Company's instructions until needed from time to time to
fund the construction of Casino Magic-Bossier City. All such funds will be
held in the Construction Disbursement Account until disbursed in accordance
with the Cash Collateral and Disbursement Agreement. Subject to certain
exceptions set forth in the Cash Collateral and Disbursement Agreement, the
Disbursement Agent will authorize the disbursement of funds from the
Construction Disbursement Account for the payment of costs for the
construction of improvements only upon the satisfaction of the disbursement
conditions set forth in the Cash Collateral and Disbursement Agreement. Such
conditions generally include the requirements that the Company deliver to the
Disbursement Agent and the Independent Construction Consultant, in form
satisfactory to the Disbursement Agent, (a) certification that no Event of
Default exists under the Indenture, (b) evidence of the conformity with the
Plans of the construction undertaken to the date of the request, (c)
appropriate lien releases and title insurance endorsements assuring the
continuing priority of the lien in favor of the Holders on the Casino
Magic-Bossier City real property, and confirmation that such disbursements are
appropriate given the percentage of construction completed and the amount of
stored materials, (d) a description of the purposes to which the requested
funds will be applied following disbursement, (e) confirmation that the
Construction Budget as in effect continues to accurately portray in all
material respects all costs to be incurred in completing Casino Magic-Bossier
City and (f) evidence that after giving effect to the requested disbursement,
the funds in the Construction Disbursement Account will be sufficient to
complete Casino Magic-Bossier City (and the component parts thereof) in
accordance with the aggregate amounts (and line items) set forth in the
Construction Budget, as amended to date, on or before the Operating Deadline.
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In addition, the Disbursement Agent shall have received from the Independent
Construction Consultant a certification stating that the Independent
Construction Consultant has reviewed such disbursement request, that the
Independent Construction Consultant has inspected Casino Magic-Bossier City
during the previous month and that the Independent Construction Consultant
concurs with certain of the certifications made by the Company in such
disbursement request.
In connection with the disbursement of funds from the Construction
Disbursement Account for the payment of all costs set forth in the
Construction Budget other than costs for the construction of improvements
related to Casino Magic-Bossier City, the Disbursement Agent will authorize
the disbursement of such funds only upon the satisfaction of the disbursement
conditions set forth in the Cash Collateral and Disbursement Agreement. Such
conditions generally include the requirements that the Company deliver to the
Disbursement Agent and the Independent Construction Consultant, in form
satisfactory to the Disbursement Agent, (a) certification that no Event of
Default exists under the Indenture, (b) a description of the purposes to which
the requested funds will be applied following disbursement, (c) confirmation
that, after giving effect to the requested disbursement, the remaining amounts
in the line item not yet disbursed are sufficient to cover all costs within
said line item to be paid or incurred on or before the Operating Date, (d) an
Officers' Certificate certifying that all previous disbursements for the
payment of costs set forth in the Construction Budget other than costs for the
construction of improvements related to Casino Magic-Bossier City were
disbursed in the manner certified by the Company and (e) after giving effect
to the requested disbursement, no more than $500,000 of such funds will have
been disbursed at any one time prior to receipt of the certificate described
in subparagraph (d) above. In addition, the Disbursement Agent shall have
received from the Independent Construction Consultant a certification stating
that the Independent Construction Consultant has reviewed such disbursement
request, that the Independent Construction Consultant has inspected Casino
Magic-Bossier City during the previous month and that the Independent
Construction Consultant concurs with certain of the certifications made by the
Company in such disbursement request.
The Cash Collateral and Disbursement Agreement provides that the
Construction Budget may be amended only upon the satisfaction of certain
conditions set forth in the Cash Collateral and Disbursement Agreement. Such
conditions generally include that the Company deliver to the Disbursement
Agent and the Independent Construction Consultant, in form satisfactory to the
Disbursement Agent, (a) a description of the circumstances giving rise to the
amendment, and that the circumstances were not reasonably expected as of the
date of the last amendment of the Construction Budget (or if none, the date of
issuance of the Notes), (b) evidence that after giving effect to the
amendment, the Construction Budget will in all material respects accurately
portray all costs to be incurred in completing Casino Magic-Bossier City, and
(c) evidence that after giving effect to the amendment, the funds in the
Construction Disbursement Account will be sufficient to complete Casino
Magic-Bossier City (and the component parts thereof) in accordance with the
aggregate amounts (and line items) set forth in the Construction Budget and on
or before the Operating Deadline. In addition, the Disbursement Agent shall
have received from the Independent Construction Consultant a certification
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stating that the Independent Construction Consultant has reviewed such
proposed Construction Budget amendment, that the Independent Construction
Consultant has inspected Casino Magic-Bossier City during the previous month
and that the Independent Construction Consultant concurs with certain of the
certifications made in the Construction Budget amendment certification
submitted by the Company to the Disbursement Agent and the Independent
Construction Consultant. In addition, the Cash Collateral and Disbursement
Agreement will provide that construction line items may only be reduced upon
delivery to the Disbursement Agent, in form satisfactory to the Disbursement
Agent, of evidence that the completion of the work represented by said line
item will be completed for a total cost less than the amount set forth in the
Construction Budget, and that any such savings may be reallocated (by
amendment to the Construction Budget) to other line items.
In making the certifications called for above, the Independent
Construction Consultant may rely (so long as such reliance is in good faith)
upon certificates from the material contractors, architects and engineers
involved in the construction of Casino Magic-Bossier City confirming the
fundamental facts necessary for such certifications.
The Cash Collateral and Disbursement Agreement also provides that if any
funds remain in the Construction Disbursement Account or the Completion
Reserve Account on the date that Casino Magic-Bossier City is Operating (which
shall have occurred on or before the Operating Deadline) and Casino
Magic-Bossier City shall have generated Consolidated Cash Flow in an amount
equal to or greater than the amount remaining in the Construction Disbursement
Account, the Disbursement Agent shall, upon the direction of the Company,
subject to certain exceptions set forth in the Cash Collateral and
Disbursement Agreement, disburse all remaining funds, if any, in the
Completion Reserve Account to the Construction Disbursement Account and in the
Construction Disbursement Account to any account or accounts specified by the
Company.
Events of Default Under the Cash Collateral and Disbursement Agreement
The Cash Collateral and Disbursement Agreement also provides that an
event of default shall exist thereunder if any of the following shall occur:
(i) an Event of Default occurs and is continuing under the Indenture; (ii) the
Independent Construction Consultant, after appropriate consultation with the
Company, is unable to deliver a certificate in connection with a requested
disbursement or an amendment to the Construction Budget; (iii) the Independent
Construction Consultant reviewing prior disbursements reports an exception
within a certain amount of days after each disbursement request and such
exception continues for a period of 10 days; (iv) any representation,
warranty, certification or statement by the Company in the Cash Collateral and
Disbursement Agreement or any certificate required to be delivered therein is
untrue in any material respect on the date given or made and such
untruthfulness continues for a period of 5 business days after notice thereof;
(v) if at any time the amount remaining in the Construction Disbursement
Account or the Completion Reserve Account, is less than the amount required in
the Construction Budget to cause Casino Magic-Bossier City to be Operating on
or before the Operating Deadline and such deficiency continues for a period of
30 days; and (vi) the Company fails to deliver certain other documents
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necessary to perfect the Trustee's security interest in the Construction
Disbursement Agreement and investments therein and such failure continues for
a period of 10 days. If an event of default exists under the Cash Collateral
and Disbursement Agreement, the Disbursement Agent will not be permitted to
authorize the disbursement of funds from the Construction Disbursement
Account, the Completion Reserve Account or the Operating Reserve Account,
provided that the Disbursement Agent may continue to disburse funds from the
Construction Reserve Account, the Completion Reserve Account or the Operating
Reserve Account, (a) in an amount up to $4 million if necessary to prevent the
condition of Casino Magic-Bossier City from deteriorating or to preserve work
completed on Casino Magic-Bossier City, (b) to pay for work already completed
or materials already purchased or (c) to pay for retainage amounts if an Event
of Default continues for more than 3 months.
All funds in the Cash Collateral Accounts are pledged as security for the
repayment of the Notes.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes or under any Guarantee;
provided, that payments of Contingent Interest that are permitted to be
deferred as provided in the Notes will not become due for this purpose until
such payment is required to be made pursuant to the terms of the Notes; (ii)
default in payment when due of the principal of or premium, if any, on the
Notes; (iii) failure by the Company to comply with the provisions described
under the captions "Mandatory Redemption," "Repurchase at the Option of
Holders-Change of Control," "Asset Sales," "Event of Loss," "Certain
Covenants-Restricted Payments," "Incurrence of Indebtedness and Issuance of
Preferred Stock," "-Merger, Consolidation or Sale of Assets" or "-Limitation
on Use of Proceeds" or certain covenants of the First Preferred Ship Mortgage
on the Bossier Riverboat or the Crescent City Riverboat; (iv) failure by the
Company for 30 days after notice to comply with any of its other agreements in
the Indenture or the Notes; (v) 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 the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or any of
its Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the Indenture, 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
$5.0 million or more; (vi) failure by the Company or any of its Subsidiaries
to pay final judgments aggregating in excess of $5.0 million, which judgments
are not paid, discharged or stayed for a period of 60 days; (vii) breach by
the Company or any Guarantor of any material representation or warranty set
forth in the Collateral Documents, or failure by the Company or any Guarantor
for three business days after notice to comply with any covenant set forth in
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the Collateral Documents requiring the payment of money or failure by the
Company or any Guarantor for 30 days after notice to comply with any other
covenant set forth in the Collateral Documents, or repudiation by the Company
or any Guarantor of its obligations under the Collateral Documents or the
unenforceability of the Collateral Documents against the Company or any
Guarantor for any reason; (viii) certain events of bankruptcy or insolvency
with respect to the Company or any of its Significant Subsidiaries; (ix)
revocation, termination, suspension or other cessation of effectiveness of any
Gaming License which results in the cessation or suspension of gaming
operations for a period of more than 90 consecutive days at any Gaming
Facility of the Company or any of its Subsidiaries; (x) the failure of Casino
Magic-Bossier City to be Operating by the Operating Deadline or to remain
Operating thereafter, except as the hours of operation of Casino Magic-Bossier
City may be limited by any Gaming Authority or Gaming Law; or (xi) except as
permitted by the Indenture, any Guarantee shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be
in full force and effect or any Guarantor, or any Person acting on behalf of
any Guarantor, shall deny or disaffirm its obligations under its Guarantee.
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 immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Significant
Subsidiary of the Company or any group of Subsidiaries of the Company that,
taken together, would constitute a Significant Subsidiary of the Company, all
outstanding Notes will become due and payable without further action or
notice. Holders of the Notes 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.
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 the Company 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
August 15, 2000, 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 August 15, 2000, then the
premium specified in the Indenture shall also become immediately due and
payable to the extent permitted by law upon the acceleration of the Notes.
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 or Liquidated Damages, if any, on, premium, if any, or the
principal of, the Notes.
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The Company is required to deliver to the Trustee annually a statement
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.
REMEDIES UPON DEFAULT UNDER NOTES
Specific rights and remedies of the Trustee, as the secured party under
the Collateral Documents, include the right of the Trustee under federal or
state law to foreclose upon and sell Note Collateral encumbered thereby and to
apply the net proceeds realized upon such Note Collateral to the Indebtedness
evidenced by the Notes in accordance with the terms of the Indenture and the
Collateral Documents. The Collateral Documents generally provide for the
application of the internal laws of the state in which the Collateral is
located or federal admiralty law, while the Indenture, the Notes and the
Guarantees of Jefferson Corp. and of any future subsidiaries of the Company
provide or will provide, with certain exceptions, for the application of the
internal laws of the state of New York. There is no certainty that the
stipulated governing law would be applied by any court with respect to the
enforcement of remedies under the Notes, the Indenture, the Guarantees, or the
Collateral Documents.
Enforcement of rights under certain of the Collateral Documents requires
that the Trustee initiate a judicial foreclosure against the Note Collateral.
In such event, the Trustee would be required to file a suit in the appropriate
local court. If the court found in favor of the Trustee, judgment of
foreclosure and order of sale would be entered, and the court would order the
sale of the affected Note Collateral, and such foreclosure would be subject to
certain notice and other procedural limitations. With respect to vessels
constituting Note Collateral, or leasehold or other interests therein, the
Trustee may be required to foreclose through a federal admiralty court
proceeding. Such a proceeding would entail compliance with notice and other
procedural requirements and could require posting of a substantial bond with
the United States Marshal. After application of proceeds of such sale to the
Indebtedness, the Trustee may be entitled to a deficiency judgment under
certain circumstances; however, there can be no assurance that the Trustee
would be successful in obtaining any deficiency judgment, what the amount of
any such judgment if obtained might be, or that the Company or the Guarantors
would be able to satisfy any such judgment, if obtained.
Due to the legal restrictions on the ability to engage in gaming
activities in gaming jurisdictions, the Trustee may incur delays or possibly
frustration in its efforts to sell all or a portion of the Note Collateral.
Operators of gaming facilities are required to be licensed by Gaming
Authorities and may be required by Gaming Authorities to file applications, to
be investigated and to be found suitable as owners or landlords of a gaming
establishment. Such requirements for approval by Gaming Authorities may delay
or preclude a sale of the Note Collateral to a potential buyer at a
foreclosure sale or sales. This may effectively limit the number of potential
bidders and may delay such sales, either of which could adversely affect the
sale price of the Note Collateral. In addition, the disposition of Note
Collateral consisting of gaming devices may be subject to the prior approval
of the applicable Gaming Authority. Moreover, the gaming industry could become
subject to different or additional regulations during the term of the Notes,
which could further adversely affect the practical rights and remedies that
the Trustee would have upon the occurrence of an event of default under the
Notes or the Indenture.
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In addition to being subject to gaming law restrictions, the Trustee's
ability to foreclose upon and sell Note Collateral will be subject to the
procedural and other restrictions of state real estate law or the Uniform
Commercial Code or, in the case of gaming vessels, certain federal admiralty
law statutes. Further, certain limitations exist under federal admiralty law
statutes on the ability of non-U.S. citizens to realize upon Note Collateral
consisting of vessels documented under the laws of the United States. In
addition, the Note Collateral includes stock of a company, and may in the
future include stock of other companies, that is not publicly traded and may
only be sold in compliance with applicable Federal and state securities laws.
This may effectively limit the number of potential bidders for such stock or
other Note Collateral and may delay such sales, either of which could
adversely affect the sale price of such Note Collateral. In addition, certain
direct or indirect leasehold interests, contracts and other assets may not be
sold without the consent of certain third parties.
With regard to proceeding against any Guarantor and its assets, the
Trustee may either foreclose upon any intercompany loans made by the Company
to such Guarantor and pledged by the Company to secure the Notes or proceed
under the Guarantee of such Guarantor, or both. If the Trustee chooses to
foreclose upon intercompany loans, the necessity of first foreclosing on the
pledge of such loans might result in delay and increase the risk that a
petition for relief under bankruptcy or insolvency law could be filed by or
against any one or more of the Company and Guarantor. If, on the other hand,
the Trustee chooses to proceed by demand and foreclosure upon a Guarantee of a
Guarantor, its ability to realize upon Note Collateral could be limited by the
invocation of state-law suretyship defenses and fraudulent transfer laws.
The ability to foreclose upon and dispose of Note Collateral directly or
indirectly securing the Notes is also likely to be significantly impaired or
delayed by applicable bankruptcy laws if a bankruptcy case were to be
commenced by or against the Company or Guarantor owning the Note Collateral.
Under applicable bankruptcy laws, the Trustee and the Holders of Notes would
be prohibited from foreclosing upon, taking possession or disposing of the
Note Collateral absent bankruptcy court approval. Moreover, the Company or
such Guarantor would be permitted to retain and use Note Collateral as long as
the Trustee and the Holders of Notes are being provided "adequate protection"
in the form of a cash payment or periodic cash payments or an additional or
replacement lien or in some other form approved by the court in its
discretion. While this requirement is generally intended to protect the value
of the security, it cannot be predicted what form of "adequate protection"
might be approved by the court in the particular case. The court has broad
discretionary powers in all these matters, including the valuation of Note
Collateral. In view of these considerations, it is not possible to predict for
how long payments on the Notes would be delayed following the filing of a
bankruptcy case, whether or when the Trustee could foreclose upon or take
possession of or sell the Note Collateral or to what extent the Holders of the
Notes would be compensated for any delay in payment or loss of value of the
Note Collateral.
The Indenture provides that the Company will, and will cause each
Guarantor to, execute, acknowledge, deliver, record, re-record, file, re-file,
register and re-register, any and all such further acts, deeds, conveyances,
security agreements, mortgages, assignments, estoppel certificates, financing
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statements and continuations thereof, termination, statements, notice of
assignment, transfers, certificates, assurances and other instruments as
reasonably may be required from time to time in order (i) to carry out more
effectively the purposes of the Collateral Documents, (ii) to subject to the
Liens created by any of the Collateral Documents any of the properties, rights
or interests required to be encumbered thereby, (iii) to perfect and maintain
the validity, effectiveness and priority of any of the Collateral Documents
and the Liens intended to be created thereby and (iv) to better assure,
convey, grant, assign, transfer, preserve, protect and confirm to the Trustee
any and all rights granted or now or hereafter intended by the parties thereto
to be granted to the Trustee or the Company under the Collateral Documents, or
under any other instrument executed in connection therewith.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the
Company or the Guarantors, as such, shall have any liability for any
obligations of the Company or the Guarantors under the Notes, the Indenture,
any Guarantee or the Collateral Documents, as applicable, 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. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the SEC that such a waiver is
against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
and the Guarantors' obligations discharged with respect to the outstanding
Notes ("Legal Defeasance") except for (i) the rights of Holders of outstanding
Notes to receive payments in respect of the principal of, premium, if any, and
interest and Liquidated Damages, if any, on such Notes when such payments are
due from the trust referred to below, (ii) 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,
(iii) the rights, powers, trusts, duties and immunities of the Trustee, and
the Company's obligations in connection therewith and (iv) 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 such obligations 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" will no longer
constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
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
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Liquidated Damages, if any, on the outstanding Notes on the stated date for
payment thereof 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; (ii) in the case of Legal Defeasance, 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 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; (iii) in the case of Covenant Defeasance, 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; (iv) 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 borrowing
of funds to be applied to such deposit) or 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; (v) 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 Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) 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, insolvency, reorganization or similar
laws affecting creditors' rights generally; (vii) 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 (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that all conditions precedent provided for 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.
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AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs, the
Indenture, the Notes, the Guarantees or the Collateral Documents 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 the Holders of at least 85% in aggregate principal
amount of the Notes then outstanding, an amendment or waiver may not affect
the Liens in favor of the Trustee and the Holders of the Notes created under
the Collateral Documents in a manner adverse to the Holders (other than
pursuant to the release of Note Collateral in accordance with the provisions
of the Indenture and of the applicable Collateral Documents) or release all or
substantially all of the Note Collateral.
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder): (i) reduce
the principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) 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-Change of Control" and
"-Asset Sales," which shall require the consent of the Holders of at least
662/3% in principal amount of the Notes then outstanding), (iii) reduce the
rate of or change the time for payment of interest on any Note, (iv) waive a
Default or Event of Default in the payment of principal of or premium, or
Liquidated Damages, 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), (v) make any Note payable in money other
than that stated in the Notes, (vi) 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, premium or Liquidated Damages, if
any, or interest on the Notes, (vii) waive a redemption payment with respect
to any Note (other than a payment required by one of the covenants described
above under the caption "-Repurchase at the Option of Holders"), or (viii)
make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Notes, the Company and the Trustee may amend or supplement the Indenture, the
Notes, the Guarantee or the Collateral Documents 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
and the Guarantors' 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 or the Collateral Documents of any such
Holder, or to comply with requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
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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 SEC 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. Subject to such provisions, 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.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture,
the Collateral Documents and Registration Rights Agreement without charge by
writing to Casino Magic of Louisiana, Corp., 711 Casino Magic Drive, Bay St.
Louis, Mississippi, 39520, Attention: Corporate Secretary.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Series B Notes to be
resold as set forth herein will initially be issued in the form of one or more
Global Notes (collectively, the "Global Note"). The Global Note will be
deposited on the date of the closing of the sale of the Series B Notes offered
hereby (the "Closing Date") with, or on behalf of, The Depository Trust
Company (the "Depositary") and registered in the name of Cede & Co., as
nominee of the Depositary (such nominee being referred to herein as the
"Global Note Holder").
Series B Notes that are issued as described below under "-Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Upon the transfer of Certificated Securities,
such Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Series B Notes being
transferred.
The Depositary is a limited-purpose trust company that was created to
hold securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies,
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clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary's Indirect Participants") that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only thorough the Depositary's
Participants or the Depositary's Indirect Participants.
Ownership of the Notes evidenced by the Global Note will be shown on, and
the transfer of ownership thereof will be effected only through, records
maintained by the Depositary (with respect to the interests of the
Depositary's Participants), the Depositary's Participants and the Depositary's
Indirect Participants. Prospective purchasers are advised that 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 Notes
evidenced by the Global Note will be limited to such extent. For certain other
restrictions on the transferability of the Notes, see "Notice to Investors."
So long as the Global Note Holder is the registered owner of any Notes,
the Global Note Holder will be considered the sole Holder under the Indenture
of any Notes evidenced by the Global Note. Beneficial owners of Notes
evidenced by the Global Note will not be considered the owners or Holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the Trustee thereunder.
Neither the Company nor the Trustee will have any responsibility or liability
for any aspect of the records of the Depositary or for maintaining,
supervising or reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of Notes. The Company believes, however, that it is currently the
policy of the Depositary to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
Certificated Securities
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
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the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). In addition, if (i) the Company notifies the
Trustee in writing that the Depositary is no longer willing or able to act as
a Depositary and the Company is unable to locate a qualified successor within
90 days or (ii) the Company, at its option, notifies the Trustee in writing
that it elects to cause the issuance of Notes in the form of Certificated
Securities under the Indenture, then, upon surrender by the Global Note Holder
of its Global Note, Notes in such form will be issued to each person that the
Global Note Holder and the Depositary identify as being the beneficial owner
of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
Same-Day Settlement and Payment
The Indenture will require that payments in respect of the Notes
represented by the Global Note (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. If
requested by a Holder who holds $5.0 million or more in principal amount of
Certificated Notes, and with respect to all Global Notes, 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. Secondary trading
in long-term notes and debentures of corporate issuers is generally settled in
clearing-house or next-day funds. In contrast, the Notes represented by the
Global Note 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 Notes will, therefore, be required
by the Depositary to be settled in immediately available funds. The Company
expects that secondary trading in the Certificated Securities will also be
settled in immediately available funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchasers entered into the Registration
Rights Agreement on August 22, 1996. Pursuant to the Registration Rights
Agreement, the Company agreed to file with the SEC the Exchange Offer
Registration Statement on the appropriate form under the Securities Act with
respect to the Series B Notes. Upon the effectiveness of the Exchange Offer
Registration Statement, the Company will offer to the Holders of Transfer
Restricted Securities pursuant to the Exchange Offer who are able to make
certain representations the opportunity to exchange their Transfer Restricted
Securities for Series B Notes. If (i) the Company is not required to file the
Exchange Offer Registration Statement or permitted to consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or SEC
policy or (ii) any Holder of Transfer Restricted Securities notifies the
Company within the specified time period that (A) it is prohibited by law or
SEC policy from participating in the Exchange Offer or (B) that it may not
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resell the Series B Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales
or (C) that it is a broker-dealer and owns Series A Notes acquired directly
from the Company or an affiliate of the Company, the Company will file with
the SEC a Shelf Registration Statement to cover resales of the Series A Notes
by the Holders thereof who satisfy certain conditions relating to the
provision of information in connection with the Shelf Registration Statement.
The Company will use its best efforts to cause the applicable registration
statement to be declared effective as promptly as possible by the SEC. For
purposes of the foregoing, "Transfer Restricted Securities" means each Series
A Note until (i) the date on which such Note has been exchanged by a person
other than a broker-dealer for a Series A Note in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of a Series A
Note for a Series B Note, the date on which such Series B Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Series A Note has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement or (iv) the date on which such Series A Note is
distributed to the public pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Company will file
an Exchange Offer Registration Statement with the SEC on or prior to 60 days
after the Closing Date, (ii) the Company will use its best efforts to have the
Exchange Offer Registration Statement declared effective by the SEC on or
prior to 100 days after the Closing Date, (iii) unless the Exchange Offer
would not be permitted by applicable law or Commission policy, the Company
will commence the Exchange Offer and use its best efforts to issue on or prior
to 30 business days after the date on which the Exchange Offer Registration
Statement was declared effective by the SEC, Series B Notes in exchange for
all Series A Notes tendered prior thereto in the Exchange Offer and (iv) if
obligated to file the Shelf Registration Statement, the Company will use its
best efforts to file the Shelf Registration Statement with the SEC on or prior
to 30 days after such filing obligation arises (and in any event within 190
days after the Closing Date) and to cause the Shelf Registration to be
declared effective by the SEC on or prior to 60 days after such obligation
arises.
Although the Company has filed this registration statement to satisfy the
obligations described above, there can be no assurance that such registration
statement will become effective. If (a) the Company fails to file any of the
Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the SEC on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) the
Company fails to Consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the Registration Rights Agreement
(each such event referred to in clauses (a) through (d) above a "Registration
Default"), then the Company will pay Liquidated Damages to each
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Holder of Notes, with respect to the first 90-day period immediately following
the occurrence of such Registration Default in an amount equal to $.05 per
week per $1,000 principal amount of Notes held by such Holder. The amount of
the Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Notes 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 Notes. All
accrued Liquidated Damages will be paid by the Company on each Damages Payment
Date to the Global Note Holder by wire transfer of immediately available funds
or by federal funds check and to Holders of Certificated Securities by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the
cure of all Registration Defaults, the accrual of Liquidated Damages will
cease.
Holders of Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
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.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Adjusted Consolidated Cash Flow" means, with respect to the Company for
any period, the Consolidated Cash Flow of the Company for such period plus an
amount equal to the aggregate Management Fees paid or accrued by the Company
for such period, to the extent such Management Fees were deducted in computing
Consolidated Net Income for purposes of computing such Consolidated Cash Flow.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of
a Person shall be deemed to be control.
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"Asset Sale" means, for any person, (i) the sale, transfer, lease,
conveyance or other disposition (or series thereof) (including, without
limitation, by merger or consolidation or by exchange of assets whether by
operation of law or otherwise or by way of a sale and leaseback) of any assets
of such person, including, without limitation, assets consisting of Capital
Stock held by such person) other than a disposition of inventory in the
ordinary course of business; provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "-Repurchase at the Option of
Holders-Change of Control" and/or the provisions described above under the
caption "-Certain Covenants-Merger, Consolidation or Sale of Assets" and not
by the provisions of the Asset Sale covenant, (ii) the issue or sale by the
Company or any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of clauses (i) or (ii), for net proceeds of, or with
a fair market value in excess of $250,000 with respect to each disposition or
series of related dispositions and (iii) an Event of Loss with respect to any
assets of the Company or any of its Subsidiaries other than Note Collateral
existing on the date that Casino Magic-Bossier City becomes Operating.
Notwithstanding the foregoing, (i) a transfer of assets by the Company to a
Substantially Owned Subsidiary of the Company or by a Substantially Owned
Subsidiary of the Company to the Company or to another Substantially Owned
Subsidiary of the Company, (ii) an issuance of Equity Interests by a
Substantially Owned Subsidiary of the Company to the Company or to another
Substantially Owned Subsidiary of the Company, (iii) a Restricted Payment that
is permitted by the covenant described above under the caption "-Certain
Covenants-Restricted Payments," (iv) the sale of a Restricted Investment and
(v) any Event of Loss with respect to Note Collateral comprising Casino
Magic-Bossier City on the date that it becomes Operating, in each case, will
not be deemed to be an Asset Sale.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bossier Riverboat" means that certain riverboat gaming vessel "Mary's
Prize" Official No. 1028011 purchased by the Company from Boyd Gaming
Corporation pursuant to that certain Buy-Sell Agreement dated August 2, 1996.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participation, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
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"Cash Collateral Accounts" means collectively, the Construction
Disbursement Account, the Completion Reserve Account, the Interest Reserve
Account, the Operating Reserve Account and the Escrow Account.
"Cash Collateral and Disbursement Agreement" means the Cash Collateral
and Disbursement Agreement among the Company, the Trustee, and the
Disbursement Agent, in connection with Casino Magic-Bossier City.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case with any
domestic commercial bank having capital and surplus in excess of $500 million
and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having one of the two highest ratings obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Ratings Group and in each case
maturing within six months after the date of acquisition, and (vi) investment
funds investing solely in securities of the types described in clauses (ii),
(iii), (iv) or (v) above.
"Casino Magic" means Casino Magic Corp., a Minnesota corporation.
"Casino Magic-Bossier City" means the project to develop, construct,
equip and open the Casino Magic-Bossier City dockside riverboat casino,
substantially as described in this Prospectus, which is located on an
approximately 23-acre site along the Red River in Bossier City, Louisiana, and
which will consist of, among other things, (i) a recently constructed
riverboat which measures 254 feet long and 78 feet wide, and contains
approximately 58,000 square feet of interior space, including 30,000 square
feet of gaming space with approximately 984 slot machines and 50 table games,
(ii) a 37,000 square foot entertainment pavilion, and related amenities
(including a 350-seat buffet restaurant, a gift shop, a bar and lounge area
and a stage area designed to showcase live entertainment, including dance
productions, bands and individual performers with an open seating area that
will accommodate up to 300 people) and (iii) covered parking for 1,550 cars,
and any future developments or improvements in connection therewith. For
purposes of this definition, the phrase "substantially as described" with
respect to any of the numbers herein shall be deemed to have been satisfied if
the actual number is at least 85% of the respective number listed herein, in
each case, with the same overall qualities and amenities as provided in the
Construction Budget and Plans.
"Casino Magic-Bossier City Hotel" means the planned future hotel with at
least 325 rooms and related amenities adjacent to Casino Magic-Bossier City,
including without limitation, the real property on which such hotel is
located.
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"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) under the Exchange Act) is or becomes the beneficial owner (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person will be
deemed to have "beneficial ownership" of all securities that such person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time) directly or indirectly of more than 30% of the
total combined voting power of the outstanding Voting Stock of Casino Magic,
if the Permitted Holders (i) beneficially own a lower percentage of the
combined voting power of the outstanding Voting Stock of Casino Magic than
such other person or group on such date and (ii) do not have the then
effective right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of Casino Magic;
(b) Casino Magic consolidates with, or merges with or into, another person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of the assets of Casino Magic and its Subsidiaries taken as
a whole to any person, or any person consolidates with, or merges with or
into, Casino Magic, pursuant to a transaction in which the outstanding Voting
Stock of Casino Magic is converted into or exchanged for cash, securities
(other than Voting Stock of Casino Magic) or other property; (c) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Boards of Directors of Casino Magic and the Company (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the stockholders of Casino Magic or the Company, as
the case may be, was approved by a vote of 662/3% of the directors 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 Directors of Casino Magic or
the Company, as the case may be, then in office; (d) any order, judgment or
decree shall be entered against Casino Magic or the Company decreeing the
dissolution or split up of Casino Magic and such order shall remain
undischarged or unstayed for a period in excess of 60 days; (e) the sale,
assignment, conveyance, transfer, lease or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions,
of all or substantially all of the assets of the Company and its Subsidiaries
taken as a whole to any person other than Casino Magic or a Wholly Owned
Subsidiary of Casino Magic; or (f) at any time the Company or Jefferson Corp.
ceases to be a Wholly Owned Subsidiary of Jefferson Corp. or Casino Magic,
respectively.
"Collateral Documents" means, collectively, that certain Mortgage by and
between the Company and the Trustee, that certain First Preferred Ship
Mortgage on the whole of the Bossier Riverboat by and between the Company and
the Trustee, that certain First Preferred Ship Mortgage on the whole of the
Crescent City Riverboat, that certain Security Agreement by and between the
Company and the Trustee, that certain Security Agreement by and between
Jefferson Corp. and the Trustee, that certain Stock Pledge and Security
Agreement by and between Jefferson Corp. and the Trustee, that certain
Accounts Pledge Agreement by and between the Company, the Disbursement Agent
and the Trustee, that certain Collateral Assignment by and between the Company
and the Trustee, the Cash Collateral and Disbursement Agreement, Uniform
Commercial Code financing statements, or any other agreements, instruments,
documents or filings that evidence, set forth or limit the Lien of the Trustee
in the Note Collateral (as such terms are defined in the Indenture).
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"Company" means Casino Magic of Louisiana, Corp., a Louisiana
corporation.
"Completion Reserve Account" means that certain account to be maintained
by the Disbursement Agent pursuant to the terms of the Cash Collateral and
Disbursement Agreement, into which approximately $5.0 million of the proceeds
from the sale of the Notes was deposited.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based
on income or profits of such Person and its Subsidiaries for such period, to
the extent that such provision for taxes was included in computing such
Consolidated Net Income, plus (iii) Consolidated Interest Expense of such
Person and its Subsidiaries for such period, to the extent that any such
expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation and amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) of such Person and its Subsidiaries for such period to the
extent that such depreciation or amortization was deducted in computing such
Consolidated Net Income, in each case, on a consolidated basis and determined
in accordance with GAAP, plus (v) preopening expenses, if any, related to
Casino Magic-Bossier City, to the extent that such preopening expenses were
included in computing such Consolidated Net Income. Notwithstanding the
foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization of, a Subsidiary of the referent Person shall be
added to Consolidated Net Income to compute Consolidated Cash Flow only to the
extent (and in same proportion) that the Net Income of such Subsidiary was
included in calculating the Consolidated Net Income of such Person and only if
a corresponding amount would be permitted at the date of determination to be
dividended to such Person by such Subsidiary without prior governmental
approval (that has not been obtained), and without direct or indirect
restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, (i) the consolidated interest expense of such
Person and its 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 Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financing, and net payments (if any)
pursuant to Hedging Obligations) and (ii) the consolidated interest expense of
such Person and its Subsidiaries that was capitalized during such period, and
(iii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Subsidiaries or secured by a Lien on
assets of such Person or one of its Subsidiaries (whether or not such
Guarantee or Lien is called upon), and (iv) to the extent not included above,
Contingent Interest, whether paid or accrued, to the extent such expense was
deducted in computing Consolidated Net Income.
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"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall
be included only to the extent of the amount of dividends or distributions
paid in cash to the referent Person or a Wholly Owned Subsidiary thereof that
is a Guarantor, (ii) the Net Income of any Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar distributions
by that Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of
such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified 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 (x) 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 date of the
Indenture in the book value of any asset owned by such Person or a
consolidated Subsidiary of such Person, (y) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except,
in each case, Permitted Investments), and (z) all unamortized debt discount
and expense and unamortized deferred charges as of such date, all of the
foregoing determined in accordance with GAAP.
"Construction Budget" means itemized schedules setting forth on a line
item basis all of the costs (including financing costs) estimated to be
incurred in connection with the financing, design, development, construction,
equipping and opening of Casino Magic-Bossier City, as such schedules are
delivered to the Disbursement Agent on the Issue Date and as amended from time
to time in accordance with the terms of the Cash Collateral and Disbursement
Agreement.
"Construction Disbursement Account" means that certain account, to be
maintained by the Disbursement Agent pursuant to the terms of the Cash
Collateral and Disbursement Agreement, into which approximately $29.7 million
of the proceeds from the sale of the Series A Notes was deposited.
"Crescent City Riverboat" means the riverboat gaming vessel "Crescent
City Queen," Official Number 1028319, measuring approximately 430 feet by 100
feet with a total area of approximately 88,000 square feet spread across three
decks, owned by the Company on the date of the Indenture.
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"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.
"Disbursement Agent" means First National Bank of Commerce.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the Holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature.
"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 Loss" means, with respect to any property or asset (tangible or
intangible, real or personal), any of the following: (i) any loss, destruction
or damage of such property or asset; (ii) any actual condemnation, seizure or
taking by exercise of the power of eminent domain or otherwise of such
property or asset, or confiscation of such property or asset or the
requisition of the use of such property or asset; or (iii) any settlement in
lieu of clause (ii) above or with respect to the institution of any
proceedings for any such condemnation, seizure, taking, confiscation or
requisition.
"Excess Cash Flow" means, with respect to the Company for any Reference
Period, the Consolidated Cash Flow of the Company and its Subsidiaries for
such Reference Period, minus (i) provision for taxes based on income or
profits of the Company and its Subsidiaries for such Reference Period, to the
extent that such provision for taxes was included in computing such
Consolidated Cash Flow, minus (ii) consolidated interest expense of the
Company and its Subsidiaries for such Reference Period, whether paid or
accrued and whether or not capitalized (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 Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers acceptance
financing, and net payments (if any) pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated Cash
Flow, minus (iii) up to $1.5 million in combined capital expenditures of the
Company and its Subsidiaries that are actually made during such Reference
Period (excluding any capital expenditures made with the proceeds from the
sale of the Notes), minus (iv) principal payments on Indebtedness permitted to
be incurred pursuant to the covenant described under the caption "-Certain
Covenants-Incurrence of Indebtedness and Issuance of Preferred Stock," minus
(v) non-interest payments in respect of Capital Lease Obligations, in each
case, on a consolidated basis and determined in accordance with GAAP.
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"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Subsidiaries for such period to the Fixed Charges of such Person and its
Subsidiaries for such period. In the event that the Company or any of its
Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other
than revolving credit borrowings) or issues preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to
such incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable Reference Period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
Reference Period or subsequent to such Reference Period and on or prior to the
Calculation Date shall be deemed to have occurred on the first day of the
Reference Period and Consolidated Cash Flow for such Reference Period shall be
calculated without giving effect to clause (iii) of the proviso set forth in
the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the Calculation Date,
shall be excluded, and (iii) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
"Fixed Charges" means, with respect to any Person for any period, without
duplication, the sum of (i) the Consolidated Interest Expense and (ii) the
product of (a) all cash dividend payments (and non-cash dividend payments in
the case of a Person that is a Subsidiary) on any series of preferred stock or
Disqualified Stock of such Person, 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.
"FF&E" means furniture, fixtures or equipment used in the ordinary course
of the business of the Company and its Subsidiaries.
"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 have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
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"Gaming Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States of America or foreign government, any state, province or any
city or other political subdivision, whether now or hereafter existing, or any
officer or official thereof, including without limitation, the Louisiana
Gaming Control Board and any other agency with authority to regulate any
gaming operation (or proposed gaming operation) owned, managed or operated by
the Company or any of its Subsidiaries.
"Gaming Facility" means any tangible vessel, building or other structure
used or expected to be used to enclose space in which gaming business is
conducted and (i) wholly or partially owned, directly or indirectly, by the
Company or any of its Subsidiaries or (ii) any portion or aspect of which is
managed or used, or expected to be managed or used, by the Company or any of
its Subsidiaries.
"Gaming Law" means the gaming laws of any jurisdiction or jurisdictions
to which the Company, any of its Subsidiaries or any of Guarantors is, or may
at any time after the date of the Indenture, be subject.
"Gaming License" means every license, franchise or other authorization
required to own, lease, operate or otherwise conduct gaming activities of the
Company or any of its Subsidiaries, including without limitation, all such
licenses granted under the Louisiana Riverboat Economic Development and Gaming
Control Act and regulated under the Louisiana Gaming Control Law, the
regulations promulgated pursuant to each such law, and other applicable
federal, state, foreign or local laws.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money
(including accrued and unpaid Contingent Interest) or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance
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sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether
or not such indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Subsidiary Guarantee by such Person of any
indebtedness of any other Person.
"Independent Construction Consultant" means that certain independent
construction consultant to be retained in connection with the construction of
Casino Magic-Bossier City.
"Interest Reserve Account" means that certain account, to be maintained
by the Disbursement Agent pursuant to the terms of the Cash Collateral and
Disbursement Agreement, into which approximately $7.3 million of the proceeds
from the sale of the Notes were deposited and used to purchase the Pledged
Securities.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates), including, without limitation,
in the form of direct or indirect loans (including guarantees of Indebtedness
or other obligations), advances or capital contributions (excluding
commission, travel and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP; provided that an acquisition of
assets, Equity Interests or other securities by the Company for consideration
consisting of common equity securities of the Company shall not be deemed to
be an Investment. If the Company or any Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of.
"Issue Date" means the closing date for the sale and original issuance of
the Series A Notes.
"Jefferson Corp." means Jefferson Casino Corporation, a Louisiana
corporation.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Louisiana Referendum" means the local option elections held on November
5, 1996 on a parish-by-parish basis in the State of Louisiana to determine
whether to continue to permit existing forms of gaming authorized by law to be
conducted in each such parish. Voters in both Caddo and Bossier parishes
approved a continuation of riverboat gaming in such parishes.
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"Management Agreement" means that certain Management Agreement dated as
of the date of the Indenture among Casino Magic, the Manager and the Company
relating to the license of the Casino Magic name and the management of Casino
Magic-Bossier City, as in effect on the date of the Indenture.
"Management Fees" means any management fees payable to a subsidiary of
Casino Magic for services rendered pursuant to the Management Agreement.
"Manager" means Casino Magic Management Services, Inc., a wholly owned
subsidiary of Casino Magic.
"Minimum Facilities" means, with respect to Casino Magic-Bossier City, a
riverboat casino with at least 810 operating slot machines and 40 operating
table games (but in no event less than 1,050 total gaming positions), a 35,000
square foot entertainment pavilion, related amenities (including a buffet
restaurant, a gift shop, a bar and lounge area, and a stage area with an open
seating area) and covered parking for at least 1,255 cars.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b)
the disposition of any securities by such Person or any of its Subsidiaries or
the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Loss Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Event of Loss, including,
without limitation, insurance proceeds from condemnation awards or damages
awarded by any judgment, net of the direct costs in recovery of such Net Loss
Proceeds (including, without limitation, legal, accounting, appraisal and
insurance adjuster fees and any relocation expenses incurred as a result
thereof), amounts required to be applied to the repayment of Indebtedness (to
the extent, in the case of revolving credit Indebtedness, such Indebtedness is
permanently reduced) secured by a Lien on the asset or assets that were the
subject of such Event of Loss, and any taxes paid or payable as a result
thereof.
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation
expenses incurred as a result thereof, taxes paid or payable as a result
thereof (after taking into account any available tax credits or deductions and
any tax sharing arrangements), amounts required to be applied to the repayment
of Indebtedness (to the extent, in the case of revolving credit Indebtedness,
such Indebtedness is permanently reduced) secured by a Lien on the asset or
assets that were the subject of such Asset Sale and any reserve for adjustment
in respect of the sale price of such asset or assets established in accordance
with GAAP.
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"Note Collateral" means all assets, now owned or hereafter acquired, of
the Company or any Guarantor pledged or assigned to the Trustee in the
Collateral Documents, which will initially include all real estate,
improvements and all personal property owned by the Company, all accounts held
by or for the benefit of the Company, in each case with certain exceptions,
and the Capital Stock of the Company.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Operating" means, with respect to Casino Magic-Bossier City, the time
that (i) all Gaming Licenses have been granted and have not been revoked or
suspended, (ii) all Liens (other than the Liens created by the Collateral
Documents or Permitted Liens) related to the construction of Casino
Magic-Bossier City have been paid or, if payment is not yet due or if such
payment is contested in good faith by the Company, sufficient funds remain in
the Construction Disbursement Account to discharge such Liens or such Liens
have been bonded with bonds in form and substance sufficient to satisfy such
Liens, (iii) the contractor, the project architect and the Independent
Construction Consultant of Casino Magic-Bossier City shall have delivered a
certificate to the Trustee certifying that Casino Magic-Bossier City is
complete in accordance with the Plans therefor and all applicable building
laws, ordinances and regulations, (iv) Casino Magic-Bossier City is in a
condition (including installation of furnishings, fixtures and equipment) to
receive guests in the ordinary course of business, (v) gaming and other
operations in accordance with applicable law are open to the general public
and are being conducted at Casino Magic-Bossier City, (vi) a permanent or
temporary certificate of occupancy has been issued for Casino Magic-Bossier
City by the parish in Louisiana in which Casino Magic-Bossier City will
operate, (vii) a notice of completion of Casino Magic-Bossier City has been
duly recorded, (viii) the Bossier Riverboat has been documented by the U.S.
Coast Guard in the name of the Company and the U.S. Coast Guard has issued a
final Certificate of Inspection for the Bossier Riverboat.
"Operating Deadline" means April 30, 1997.
"Operating Hotel" means, with respect to the Casino Magic-Bossier City
Hotel, the time that (i) all Liens (other than Permitted Liens) related to the
construction of the Casino Magic-Bossier City Hotel have been paid or, if
payment is not yet due or if such payment is contested in good faith,
sufficient funds have been escrowed to discharge such Liens or such Liens have
been bonded with bonds in form and substance sufficient to satisfy such Liens,
(ii) the project manager and the project architect shall have delivered a
certificate to the Trustee certifying that the Casino Magic-Bossier City Hotel
is complete in accordance with the plans therefor and all applicable building
laws, ordinances and regulations, (iii) the Casino Magic-Bossier City Hotel is
in a condition (including installation of furnishings, fixtures and equipment)
to receive guests in the ordinary course of business, and (iv) hotel
operations are open to the general public and are being conducted at the
Casino Magic-Bossier City Hotel.
"Operating Reserve Account" means that certain account, to be maintained
by the Disbursement Agent pursuant to the terms of the Cash Collateral and
Disbursement Agreement, into which approximately $3.2 million of the proceeds
from the sale of the Notes were deposited.
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"Operating Year" means (i) the period beginning on the date that gaming
operations commence at the Casino Magic-Bossier City casino through December
31, 1997 and (ii) thereafter, each succeeding full fiscal year of the Company.
"Permitted Holders" means (i) Mr. Marlin F. Torguson and Mr. Allan J.
Kokesch, (ii) any lineal descendants of any person described in the preceding
clause (i), (iii) the spouse of any person described in the preceding clauses
(i) or (ii), (iv) any controlled Affiliate of any person described in the
preceding clauses (i), (ii) or (iii) and (v) any trust solely for the benefit
of any person described in clauses (i) , (ii) or (iii) of this definition.
"Permitted Investments" means (a) any Investment in the Company or in any
Substantially Owned Subsidiary of the Company that is evidenced by Capital
Stock or Subsidiary Intercompany Notes that are pledged to the Trustee as
Collateral for the Notes; (b) any Investment in Cash Equivalents; (c) any
Investment by the Company or any Subsidiary of the Company in a Person that is
evidenced by Capital Stock or Subsidiary Intercompany Notes that are pledged
to the Trustee as Collateral for the Notes, if as a result of such Investment
(i) such Person becomes a Substantially Owned Subsidiary of the Company and a
Guarantor that is engaged in the same or a similar line of business as the
Company and its Subsidiaries were engaged in on the date of the Indenture or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated
into, the Company or a Substantially Owned Subsidiary of the Company that is a
Guarantor and that is engaged in the same or a similar line of business as the
Company and its Subsidiaries were engaged in on the date of the Indenture; (d)
any Investment made as a result of the receipt of non-cash consideration from
an Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "-Repurchase at the Option of Holders-Asset
Sales"; and (e) deposits and accounts with, and certificates of deposit issued
by, domestic banks of recognized standing and having capital, surplus and
undivided profits of at least $25 million (which are not affiliated with the
Company) doing business in the jurisdictions in which the Company or any
Subsidiary does business.
"Permitted Liens" means (i) Liens in favor of the Company; provided, that
if such Liens are on any Note Collateral, that such Liens are either
collaterally assigned to the Trustee or subordinate to the Lien in favor of
the Trustee securing the Notes or any Guarantee; (ii) Liens on property of a
Person existing at the time such Person is merged into or consolidated with
the Company or any Subsidiary of the Company; provided that such Liens were in
existence prior to the contemplation 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 Subsidiary; (iii) Liens on property
existing at the time of acquisition thereof by the Company or any Subsidiary
of the Company, provided that such Liens were in existence prior to the
contemplation of such acquisition and do not extend to any assets other than
those of the Subsidiary so acquired; (iv) 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; (v)
Liens existing on the date of the Indenture; (vi) Liens for taxes, assessments
or governmental charges or claims 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
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provision as shall be required in conformity with GAAP shall have been made
therefor; (vii) statutory Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other like Liens arising in
the ordinary course of business and with respect to amounts not yet delinquent
or being contested in good faith by an appropriate process of law, and for
which a reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made, and, with respect to such Liens arising in
connection with Casino Magic-Bossier City, for which the Company has obtained
the title insurance endorsements required under the Cash Collateral and
Disbursement Agreement; (viii) Liens on FF&E to secure Indebtedness permitted
by clause (vi) of the second paragraph of the covenant described under the
caption "-Certain Covenants-Incurrence of Indebtedness and Issuance of
Preferred Stock"; (ix) Liens on assets comprising the Casino Magic-Bossier
City Hotel to secure secured Indebtedness permitted by clause (vii) of the
second paragraph of the covenant described under the caption "-Certain
Covenants-Incurrence of Indebtedness and Issuance of Preferred Stock";
provided, that the Holder of such Lien enters into a reciprocal easement
agreement in the form attached as an exhibit to the Indenture; (x) Liens
securing obligations in respect of the Indenture, the Notes or Guarantees;
(xi) pledges or deposits in the ordinary course of business to secure lease
obligations or nondelinquent obligations under workers' compensation,
unemployment insurance or similar legislation; (xii) easements, rights-of-way,
restrictions, minor defects or irregularities in title and other similar
charges or encumbrances not interfering in any material respect with the
business of the Company or any Subsidiary incurred in the ordinary course of
business; and (xiii) Liens arising from filing UCC financing statements for
precautionary purpose in connection with true leases of personal property that
are otherwise permitted under the Indenture and under which the Company or any
Subsidiary is lessee.
"Permitted Refinancing Debt" means any Indebtedness of the Company or any
of its Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries; provided that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable) of the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of related prepayment
penalties, fees and reasonable expenses incurred in connection therewith);
(ii) such Permitted Refinancing Indebtedness has a final maturity date 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, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Notes, such Permitted Refinancing Indebtedness has a final maturity date 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 extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred by the Company.
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"Permitted Securities" means, with respect to an Asset Sale of the
Crescent City Riverboat, (i) notes or other obligations issued by the
transferee to the Company that (A) mature no later than the date that the
Notes mature, (B) bear interest at a rate no lower than the rate per annum
equal to 350 basis points over the average rate for United States Treasury
Securities of comparable maturity, (C) are secured by a first priority ship
mortgage in favor of the Company and (D) are issued by an issuer whose Fixed
Charge Coverage Ratio for its most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding
the date of such issuance is not less than 1.75 to 1.0 and (ii) voting equity
securities that are (A) issued by an issuer that (1) has a class of equity
securities that is traded on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq Stock Market, (2) has equity market value as of the
date of the consummation of such Asset Sale of $100,000,000 or more, provided,
that such voting equity securities constitute no more than 3% of the total
outstanding voting equity securities of such issuer, and (3) has senior
unsecured debt securities rated in a ratings category equal to or higher than
the Notes, as rated by both of Moody's Investors Service and Standard & Poor's
Ratings Group and (B) registered and freely tradable by the Company under
applicable state and federal securities laws and listed for trading on a
national securities exchange or the Nasdaq Stock Market.
"Plans" means the plans and specifications for Casino Magic-Bossier City,
as delivered to the Company by the architect for Casino Magic-Bossier City on
or before the date of the Indenture, including without limitation, preliminary
plans so delivered, and as finalized, amended, supplemented or otherwise
modified from time to time in accordance with the terms of the Cash Collateral
and Disbursement Agreement.
"Pledged Securities" means the securities purchased by the Company with a
portion of the proceeds from the sale of the Notes, which shall consist of
Government Securities, deposited or to be deposited in the Interest Reserve
Account.
"Project Costs" means, with respect to the development, construction and
opening of the Casino Magic-Bossier City Hotel, the aggregate costs required
to complete such development, construction and opening in accordance with the
budget and the plans therefor and applicable legal requirements, as set forth
in an Officers' Certificate submitted to the Trustee, setting forth in
reasonable detail all amounts theretofore expended in connection with such
development, construction and opening, including direct costs related thereto
such as construction management, architectural, engineering and interior
design fees, site work, utility installations and hook-up fees, construction
permits, certificates and bonds, land acquisition costs, costs of furniture,
fixtures, furnishings, machinery and equipment, non-construction supplies and
pre-opening payroll, but excluding principal or interest payments on any
Indebtedness (other than interest which is required to be capitalized in
accordance with GAAP, which shall be included in determining Project Costs).
"Reference Period" means, with respect to any Person, the four full
fiscal quarters (or, with respect to the Company, such lesser number of full
fiscal quarters as have ended after the commencement of gaming operations at
Casino Magic-Bossier City casino) ended immediately prior to any date upon
which any determination is to be made.
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"Restricted Investment" means an Investment other than a Permitted
Investment.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Exchange Act, as such Regulation is in effect on
the date hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"Subsidiary Intercompany Notes" means the intercompany notes senior to
any subordinated debt of, and pari passu with, all existing Senior Debt of the
issuing Subsidiary, issued by Subsidiaries of the Company in favor of the
Company to evidence advances by the Company, in each case, in the form
attached as an exhibit to the Indenture.
"Substantially Owned Subsidiary" of any Person means a Subsidiary of such
Person at least 80% of the outstanding Capital Stock or other ownership
interests of which (other than directors' qualifying shares) shall at the time
be owned by such Person or by one or more Wholly Owned Subsidiaries of such
Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
"Tax Sharing Agreement" means the Tax Allocation Agreement, dated as of
October 14, 1993, as in effect on the Issue Date except for the contemplated
addition of Subsidiaries, among Casino Magic Finance Corp., Casino Magic,
Biloxi Casino Corp., Mardi Gras Casino Corp. and each of the other existing or
future direct or indirect domestic Subsidiaries of Casino Magic.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the Holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the Board of Directors, managers
or trustees of any persons (irrespective of whether or not, at the time, stock
of any other class or classes will have, or might have, voting power by reason
of the happening of any contingency).
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
142
<PAGE>
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
143
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
consequences expected to result from the Exchange Offer. This summary is
based on current provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), applicable Treasury Regulations, judicial authority, and current
administrative rulings and pronouncements of the Internal Revenue Service (the
"Service"). There can be no assurance that the Service will not take a
contrary view, and no ruling from the Service has been or will be sought.
Legislative, judicial, or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions set
forth herein. Any such changes or interpretations may or may not be
retroactive and could affect the tax consequences to Holders.
The tax treatment of a Holder of Notes may vary depending upon such
Holder's particular situation. Certain Holders (including, but not limited
to, certain financial institutions, insurance companies, broker-dealers,
tax-exempt organizations, foreign corporations, persons who are not citizens
or residents of the United States, and persons holding the Notes as part of a
"straddle," "hedge" or "conversion transaction") may be subject to special
rules not discussed below. This discussion is limited to Holders who will
hold the Notes as "capital assets" (generally, property held for investment)
within the meaning of Section 1221 of the Code.
EXCHANGE
The exchange of a Series A Note for a Series B Note pursuant to the
Exchange Offer should be treated as a modification of the Series A Notes that
does not constitute a material change in its terms. In that event, (i) a
Series B Note would be treated as a continuation of the corresponding Series A
Note, (ii) an exchanging Holder would not recognize any gain or loss on the
exchange, (iii) the holding period for the Series B Note would include the
holding period for the Series A Note and (iv) the basis of the Series B Note
would be the same as the basis of the Series A Note.
The Exchange Offer will result in no Federal income tax consequences to a
nonexchanging Holder.
INVESTORS CONSIDERING THE EXCHANGE OFFER SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE EXCHANGE OF THE
NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR FOREIGN
TAX LAWS.
RECOGNITION OF INTEREST INCOME
On June 11, 1996, the Service issued final Treasury Regulations (the
"Final Regulations") governing the treatment of debt instruments issued on or
after August 13, 1996 that provide for one or more contingent payments.
144
<PAGE>
Because the Notes provide for one or more contingent payments of
interest, the Final Regulations will apply to the Notes. Pursuant to the Final
Regulations, the Company has constructed a projected payment schedule for the
Notes and Holders generally must recognize interest income on a constant yield
basis (similar to the method prescribed for including original issue discount
("OID") in income) based on the projected payment schedule, with certain
adjustments if actual payments differ from projected payments.
Pursuant to provisions of the Internal Revenue Code of 1986 relating to
original issue discount and treasury regulations published thereunder, the
Company determined that (1) the Notes are being issued with original issue
discount in the amount of $1,018.76 per $1,000 of principal amount due at
maturity; (2) the issue price of the Notes is $1,000 per $1,000 of principal
amount due at maturity; (3) the issue date of the Notes is August 22, 1996;
(4) the "comparable yield" to maturity of the Notes (within the meaning of
Treasury Regulation 1.1275-4) is as follows:
Date Amounts per $1,000 Date Amount per $1,000
2/15/97 $66.38 8/15/00 $73.26
8/15/97 $73.26 2/15/01 $73.26
2/15/98 $73.26 8/15/01 $73.26
8/15/98 $73.26 2/15/02 $73.26
2/15/99 $73.26 8/15/02 $73.26
8/15/99 $73.26 2/15/03 $73.26
2/15/00 $73.26 8/15/03 $73.26
The projected payment schedule has been determined by including all
noncontingent payments and the "expected value" of all contingent payments on
the Notes. The projected payment schedule must produce the "comparable yield,"
which is the yield at which the Company would issue a fixed rate debt
instrument with terms and conditions similar to those of the Notes. The
Company intends to take the position that the "comparable yield" is 14.51%.
The amount of interest that accrues each accrual period is the product of the
"comparable yield" and the Note's "adjusted issue price" at the beginning of
each accrual period (generally, the six month period ending on each interest
payment date). The "adjusted issue price" of a Note is equal to the price
first paid for a substantial amount of the Notes, increased by interest
previously accrued on the Note (determined without adjustments), and decreased
by the amount of any noncontingent payments and the projected amount of any
contingent payments previously made on the Note. Except for adjustments made
for differences between actual and projected payments, the amount of interest
included in income by a Holder of a Note is the sum of the "daily portions" of
interest income with respect to the Note for each day during the taxable year
(or portion thereof) on which such Holder held such Note. The "daily portions"
of interest income are determined by allocating to each day in any accrual
period a ratable portion of the interest income allocable to that accrual
period. If actual payments differ from projected payments, then Holders will
generally be required in any given taxable year either to include additional
interest in gross income (in the case the actual payments exceed projected
payments in such taxable year) or to reduce the amount of interest income
otherwise accounted (in case the actual payments are less than the projected
payments in such taxable year).
145
<PAGE>
If the Notes are sold or otherwise disposed of when there are remaining
contingent payments under the projected payment schedule, then any gain
recognized upon such sale or other disposition will be ordinary interest
income. Any loss recognized will be ordinary loss to the extent the Holder's
total interest inclusions on a Note exceed the total amount of ordinary loss
the Holder took into account pursuant to the adjustments described in the
second preceding sentence.
Thus, under the rules described in the preceding paragraph, based upon
the "comparable yield" and "expected value" used to determine the projected
payment schedule, Holders of Notes may be required to include amounts in
income prior to the receipt of cash payments attributable to such income.
Holders are strongly urged to consult their tax advisors with respect to the
application of the contingent payment rules described above to the Notes.
SALE, RETIREMENT OR OTHER TAXABLE DISPOSITION
Except as provided for above, a Holder in general will recognize gain or
loss upon the sale, redemption, retirement, or other taxable disposition of
such Note in an amount equal to the difference between (i) the amount of cash
and the fair market value of property received in exchange therefor (except to
the extent attributable to the payment of accrued interest or original issue
discount, which generally will be taxable to a Holder as ordinary income) and
(ii) the Holder's adjusted tax basis in such Note. A Holder's tax basis in a
Note generally will be equal to the price paid for such Note, increased by the
amount of original issue discount, if any, included in gross income prior to
the date of disposition, and decreased by the amount of any cash payments of
such original issue discount on such Note received prior to disposition. To
the extent not treated as ordinary income or loss as described above, any gain
or loss recognized on the sale, redemption, retirement, or other taxable
disposition of a Note generally will be capital gain or loss. Any such capital
gain or loss generally will be long-term capital gain or loss if the Note had
been held for more than one year.
LIQUIDATED DAMAGES
The Company intends to take the position that the Liquidated Damages, if
any, described above under "Description of Notes-Registration Rights;
Liquidated Damages" will be taxable to the Holder as ordinary income in
accordance with the Holder's method of accounting for federal income tax
purposes. The Service may take a different position, however, which could
affect the timing of both the Holder's income and the Company's deduction with
respect to the Liquidated Damages.
BACKUP WITHHOLDING
A Holder of Notes may be subject to backup withholding at the rate of 31%
with respect to interest paid on, original issue discount accrued on and gross
proceeds from a sale or other disposition of the Notes unless (i) such Holder
is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (ii) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. A Holder of Notes who does not provide the Company with his
or her correct taxpayer identification number may be subject to penalties
imposed by the Service.
146
<PAGE>
The Company will report to the Holders of the Notes and the Service the
amount of any "reportable payments" (including any original issue discount
accrued on the Notes) and any amount withheld with respect to the Notes during
the calendar year.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Series B 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 Series B Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with any resale of Series B Notes
received in exchange for Series A Notes where such Series A Notes were
acquired as a result of market-making activities. The Company has agreed that
for a period of one year from the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until April , 1997 (90 days
from the date of this Prospectus), all dealers effecting transactions in the
Series B Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Series B Notes
by broker-dealers. Series B 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 Series B Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market 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 and/or the purchasers of any such Series B Notes. Any
broker-dealer that resells Series B 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 Series B Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Series B 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 as required, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of one year from the Expiration Date, the Company will send
a reasonable number of 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 pay all the expenses
incident to the Exchange offer (which shall not include the expenses of any
Holder in connection with resales of the Series B Notes). The Company has
agreed to indemnify Holders of the Notes, including any broker-dealers
participating in the Exchange Offer, against certain liabilities, including
liabilities under the Securities Act.
147
<PAGE>
LEGAL MATTERS
Certain legal matters regarding the Series B Notes and the Exchange Offer
will be passed upon for the Company by Akin, Gump, Strauss, Hauer & Feld,
L.L.P., San Antonio, Texas.
EXPERTS
The financial statements as of and for the period ending June 30, 1996,
included in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and
auditing.
148
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CONTENTS PAGES
- ------------------------------------------------------------ -------
Report of Independent Public Accountants F-2
Financial Statements:
Consolidated Statements of Operations for the period
May 13, 1996 (date of inception) through September 30, 1996 and
May 13, 1996 (date of inception) through June 30, 1996 F-3
Consolidated Balance Sheets as of September 30, 1996 and June 30, 1996 F-4
Consolidated Statement of Cash Flows for the period
May 13, 1996 (date of inception) through September 30, 1996 and
May 13, 1996 (date of inception) through June 30, 1996 F-5
Notes to Consolidated Financial Statements F-6
Exhibit I-Consolidating Balance Sheet as of September 30, 1996 I-1
Exhibit II-Consolidating Statement of Operations for the period
May 13, 1996 (date of inception) through September 30, 1996 I-3
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Jefferson Casino Corporation:
We have audited the accompanying consolidated balance sheet of Jefferson
Casino Corporation (a Louisiana corporation in the development stage and a
wholly owned subsidiary of Casino Magic Corp.) and subsidiary (see Note 1) as
of June 30, 1996 and the related consolidated statement of cash flows for the
period from inception (May 13, 1996) then ended. These financial statements
and the exhibit referred to below are the responsibility of Jefferson's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides 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 Jefferson Casino
Corporation and subsidiary as of June 30, 1996, and the results of their
development stage activities and their cash flows for the period from
inception (May 13, 1996) then ended, in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The consolidating balance sheet as of
June 30, 1996 (Exhibit I) is presented for purposes of additional analysis and
is not a required part of the basic financial statements. This information has
been subjected to the auditing procedures applied in our audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana,
July 30, 1996 (except with
respect to certain matters
discussed in Note 6,
as to which the date is
November 5, 1996)
F-2
<PAGE>
JEFFERSON CASINO CORPORATION AND ITS SUBSIDIARY
CASINO MAGIC OF LOUISIANA, CORP.
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
MAY 13, 1996 MAY 13, 1996
(INCEPTION) (INCEPTION)
THROUGH THROUGH
SEPTEMBER 30, JUNE 30,
1996 1996
------------- ------------
(UNAUDITED) (AUDITED)
COSTS AND EXPENSES:
General and administrative $ 20,047 -
--------- ----------
Total costs and expenses 20,047 -
OTHER (INCOME) EXPENSE:
Interest income (59) -
Interest expense 3,131,562 -
Capitalized interest (2,392,220) -
---------- ---------
Total other expense 739,283 -
---------- ---------
(LOSS) BEFORE INCOME TAXES: (759,330) -
---------- ---------
INCOME TAX EXPENSE (BENEFIT) - -
---------- ---------
NET (LOSS) $ (759,330) -
========== =========
NET INCOME (LOSS) PER COMMON SHARE $ (759.33)
- -
========== =========
See notes to condensed financial statements.
F-3
<PAGE>
JEFFERSON CASINO CORPORATION AND ITS SUBSIDIARY
CASINO MAGIC OF LOUISIANA, CORP.
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, JUNE 30,
1996 1996
ASSETS (UNAUDITED) (AUDITED)
Current assets: ------------ ------------
Cash and cash equivalents $ - $ -
Restricted cash 37,816,861 -
Other current assets 384,111 125,070
---------- -----------
Total current assets 38,200,972 125,070
---------- -----------
Property and equipment:
Land and improvements 13,756,398 12,792,619
Barges and improvements 20,292,055 -
Crescent City Riverboat 30,650,575 30,650,575
Furniture and equipment 10,559,653 9,476,783
Construction in progress 7,299,917 892,416
----------- -----------
82,558,598 53,812,393
Less accumulated depreciation and amortization - -
----------- -----------
Total property and equipment, net 82,558,598 53,812,393
----------- -----------
Other long-term assets:
Deferred gaming license cost 16,841,976 16,214,011
Debt issuance costs 4,735,184 15,381
Preopening costs 2,902,723 478,943
Other long-term assets 123,993 362
----------- -----------
Total other long-term assets 24,603,876 16,708,697
----------- -----------
$145,363,446 $70,646,160
============ ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt $ 931,458 $ 2,277,254
Accounts payable 1,102,622 977,564
Accrued interest 1,721,466 648,823
Advances from affiliated companies 1,447,942 621,348
----------- -----------
Total current liabilities 5,203,488 4,524,989
----------- -----------
Other long-term liabilities 206,399 -
----------- -----------
Long-term debt, net of current maturities 119,787,488 45,195,770
----------- -----------
Commitments and contingencies
Common stock, no par value, 10,000 shares authorized,
1,000 shares issued and outstanding - -
Additional paid-in capital 20,925,401 20,925,401
Retained earnings (deficit) (759,330) -
----------- -----------
Total shareholder's equity 20,166,071 20,925,401
----------- -----------
$145,363,446 $70,646,160
============ ===========
See notes to consolidated financial statements.
F-4
<PAGE>
JEFFERSON CASINO CORPORATION AND ITS SUBSIDIARY
CASINO MAGIC OF LOUISIANA, CORP.
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF CASH FLOWS
MAY 13, 1996 MAY 13, 1996
(INCEPTION) (INCEPTION)
THROUGH THROUGH
SEPTEMBER 30, JUNE 30,
1996 1996
------------- -----------
(UNAUDITED) (AUDITED)
Cash flows from development stage activities:
Net income (loss) (759,330) $ -
(Increase) decrease in net, assets/liabilities 188,464 (107,150)
----------- -----------
Net cash used by development
stage activities (570,866) (107,150)
----------- -----------
Cash flows from investing activities:
Acquisitions of property and equipment (29,220,440) (624,572)
Acquisition of Crescent City Riverboat (70,944) (70,944)
Acquisition of gaming license (15,000,000) (15,000,000)
Expenditures for preopening costs (2,902,723) (368,220)
Other, net (84,798) (362)
-----------
Net cash used in investing activities (47,278,905) (16,064,098)
------------ -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable and
long-term debt 116,725,457 -
Principal payments from issuance of notes payable
and long-term debt (43,479,535) -
Advances from affiliated companies 1,447,942 621,348
Capital contributions received 15,550,000 15,550,000
Debt issue costs (4,735,184) -
Other, net 157,952 (100)
----------- -----------
Net cash provided by financing activities 85,666,632 16,171,248
---------- -----------
Net increase in cash and cash equivalents 37,816,861 -
Cash and cash equivalents, beginning of period - -
----------- -----------
Cash and cash equivalents, end of period $ 37,816,861 $ -
========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental schedule of non-cash investing and financing activities:
Property and equipment financed with long-term
debt or capital contributions $ 47,891,812 $51,806,355
Construction in progress and preopening costs
included in accounts payable 2,271,198 977,564
Gaming license acquisition financed
with long-term debt 1,841,976 1,042,070
See notes to consolidated financial statements.
F-5
<PAGE>
JEFFERSON CASINO CORPORATION AND ITS SUBSIDIARY
CASINO MAGIC OF LOUISIANA, CORP.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DATA WITH RESPECT TO SEPTEMBER 30, 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION:
On May 13, 1996 ("Inception"), Jefferson Casino Corporation, a Louisiana
corporation and a wholly owned subsidiary of Casino Magic Corp. ("Casino
Magic"), commenced development stage activities by acquiring all of the
outstanding capital stock of Crescent City Capital Development Corporation, a
Louisiana corporation. Immediately following the acquisition, the name of
Crescent City Capital Development Corporation ("Crescent City") was changed to
Casino Magic of Louisiana, Corp. ("Louisiana Corp."). The consolidated
financial statements include the accounts of Jefferson Casino Corporation
("Jefferson Corp.") and Louisiana Corp., its wholly owned subsidiary. All
significant intercompany accounts and transactions have been eliminated.
Jefferson Corp., together with its consolidated subsidiary, is referred to as
"Jefferson" or the "Company". Jefferson through Louisiana Corp., is
developing a new dockside riverboat casino and entertainment complex in
Bossier City, Louisiana ("Casino Magic-Bossier City"). Casino Magic-Bossier
City opened on October 4, 1996, using a temporary facility. Prior to October
4, 1996, Jefferson had no material revenues or expenses other than interest
income and expense.
Prior to Inception, Jefferson Corp. no business activities and Crescent
City was a wholly owned subsidiary of Capital Gaming International, Inc. with
which Jefferson Corp. had no affiliation. Crescent City obtained a gaming
license from the State of Louisiana and on April 4, 1995, began operations on
a riverboat casino, the Crescent City Queen (the "Crescent City Riverboat"),
docked on the Mississippi River at New Orleans, Louisiana. On June 9, 1995
Crescent City ceased gaming operations and subsequently converted an
involuntary bankruptcy proceeding to a voluntary petition under Chapter 11 of
the U.S. Bankruptcy Code in the United States Bankruptcy Court. A plan of
reorganization was developed, and was confirmed by the U.S. Bankruptcy Court
on April 29, 1996 (the "Plan of Reorganization"). Pursuant to the Plan of
Reorganization, Crescent City was discharged from substantially all of its
liabilities prior to the acquisition. The purchase of the outstanding capital
stock of Crescent City by Jefferson Corp. was effected as part of the Plan of
Reorganization. Although the substance of the transaction was an acquisition
of certain assets, the acquisition was structured as a stock purchase to
satisfy Louisiana gaming license requirements. Crescent City had discontinued
all gaming activities after only 65 days of operations in the New Orleans
market and its only significant assets consisted of the Crescent City
Riverboat, a Louisiana gaming license, and the furniture, fixtures and gaming
equipment located on the Crescent City Riverboat. As a result of the foregoing
factors, management believes that the financial position and operating results
of Crescent City prior to the acquisition are not meaningful and are therefore
not presented because Jefferson will be operating in a different market, with
a different vessel and facility, under different management and ownership and
using a different name and marketing theme.
F-6
<PAGE>
JEFFERSON CASINO CORPORATION AND ITS SUBSIDIARY
CASINO MAGIC OF LOUISIANA, CORP.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(DATA WITH RESPECT TO SEPTEMBER 30, 1996 IS UNAUDITED)
The original agreement to acquire Crescent City was entered into by
Jefferson Corp. and C-M of Louisiana, Inc., the latter being another wholly
owned subsidiary of Casino Magic. C-M of Louisiana, Inc. was the fee owner of
approximately 20 acres of land with 900 feet of shoreline on the Red River in
Bossier City, Louisiana (the property that will be used as the gaming site for
Casino Magic-Bossier City). Another wholly owned subsidiary of Casino Magic,
Coastal Land of Florida, Inc., held a 99-year lease on the Casino
Magic-Bossier City property. Casino Magic had acquired C-M of Louisiana, Inc.
and Coastal Land of Florida, Inc. on October 26, 1995 in anticipation of
obtaining a gaming license and establishing gaming operations at the Bossier
City property. Immediately prior to or as part of the acquisition of Crescent
City, the lease was canceled and C-M of Louisiana, Inc. was merged into
Jefferson Corp. As a result, when the acquisition of Crescent City was
completed, Jefferson Corp. held all ownership interests in the Bossier City
property and all of the capital stock of Crescent City (which, renamed, is
Louisiana Corp.). In August 1996, Jefferson Corp. contributed all of its
Bossier City property, which constituted its only material assets other than
the capital stock of Louisiana Corp., to Louisiana Corp., its subsidiary, and
Louisiana Corp. assumed and paid the only significant liability of Jefferson
Corp.
PREOPENING COSTS:
Preopening costs are initially capitalized and then expensed when the
related business commences operations. From Inception to September 30, 1996,
the Company has been developing the gaming and entertainment complex in
Bossier City, and as such, all normal operating costs have been capitalized as
preopening costs.
INCOME TAXES:
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." Under the asset and liability method of SFAS No. 109, 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 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 No. 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company is a party to a tax sharing agreement between Casino Magic Corp.
and each of its domestic subsidiaries (the "Consolidated Group") pursuant to
which Casino Magic Corp. will file a consolidated federal income tax return on
behalf of the Consolidated Group and timely pay the Consolidated Group federal
income tax liability and the Company will pay Casino Magic Corp. an amount
equal to their respective share of the Consolidated Group's federal income tax
liability.
F-7
<PAGE>
JEFFERSON CASINO CORPORATION AND ITS SUBSIDIARY
CASINO MAGIC OF LOUISIANA, CORP.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(DATA WITH RESPECT TO SEPTEMBER 30, 1996 IS UNAUDITED)
INCOME TAXES (CONTINUED):
No federal income tax benefit has been shown on the financial statements
due to a valuation allowance that has been recorded in the amount of the
federal income tax benefit.
RECENT PRONOUNCEMENTS:
In March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles to be held and used be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Additionally, long-lived assets and
certain identifiable intangible assets to be disposed of are required to be
reported at the lower of carrying amount or fair value, less selling costs.
SFAS No. 121 is effective for fiscal years beginning after December 15, 1995.
The adoption of this statement will not have a material impact on the
financial statements of Jefferson.
CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES:
Gaming regulation licensing. Jefferson's ability to conduct gaming
operations in the State of Louisiana depends on the continued licensability or
qualification of Casino Magic, Jefferson Corp. and Louisiana Corp. under
Louisiana Gaming Regulations. Such licensing and qualifications will be
reviewed periodically by the gaming authorities in Louisiana.
Competition. The gaming industry is extremely competitive and Jefferson
will face competition from developments in both the Bossier City/Shreveport
area and other jurisdictions.
Substantial leverage and ability to service debt. Jefferson is highly
leveraged, with substantial debt service in addition to construction and
operating expenses.
Construction risks. Any construction project entails significant
construction risks, including, but not limited to, cost overruns, delays in
receipt of governmental approvals, shortages of materials or skilled labor,
labor disputes, unforeseen environmental or engineering problems, work
stoppages, fire and other natural disasters, construction scheduling problems
and weather interferences, any of which, if it occurred, could delay
construction or result in substantial increases in costs to Jefferson. Such
risks may be compounded by Jefferson's decision to construct Casino
Magic-Bossier City on an accelerated schedule.
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 disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
F-8
<PAGE>
JEFFERSON CASINO CORPORATION AND ITS SUBSIDIARY
CASINO MAGIC OF LOUISIANA, CORP.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(DATA WITH RESPECT TO SEPTEMBER 30, 1996 IS UNAUDITED)
2. PROPERTY AND EQUIPMENT AND OTHER ASSETS:
Property and equipment are stated at cost. Depreciation will be computed
using the straight-line method over the estimated useful lives of the property
and equipment. Normal repairs and maintenance will be charged to expense when
incurred. Expenditures which materially extend the useful life of property and
equipment will be capitalized.
The Crescent City Riverboat is stated at its estimated fair value.
Included under other assets is "Deferred gaming license cost." Deferred
gaming license costs represent the estimated fair value of the Louisiana
gaming license, an asset acquired in conjunction with the purchase of Crescent
City. This cost will be amortized on a straight-line basis over twenty five
years, the estimated period to be benefited by the license, commencing at the
time gaming operations begin at Casino Magic-Bossier City.
The balances associated with these costs are comprised of the cost to
acquire Crescent City, additional costs incurred to operate and maintain the
Crescent City Riverboat and capitalized interest. Jefferson Corp. acquired
Crescent City for $50.0 million, of which $15.0 million was paid in cash and
the remainder was financed through the issuance of $35.0 million in long-term
notes (discussed in Note 3 below). The acquisition of Crescent City by
Jefferson Corp. was accounted for as a purchase.
The Crescent City Riverboat is currently being used to store Louisiana
Corp.'s gaming equipment and is located in a shipyard in Morgan City,
Louisiana. Louisiana Corp. anticipates selling the Crescent City Riverboat,
although management has not announced an intention to do so.
The allocation of the fair value of the acquired assets are subject to
revisions within a one-year period from the date of acquisition based on
subsequent events in accordance with the principles of purchase accounting.
Interest is capitalized during construction at the Company's weighted
average interest rate of 13% per annum. Interest is also capitalized on
deferred gaming license cost at 13% per annum as the license is an integral
part of the riverboat casino and entertainment complex under development. For
the period from Inception through September 30, 1996, approximately $1,500,000
and $800,000 of interest cost was capitalized related to property and
equipment and deferred gaming license cost, respectively. For the period from
Inception through June 30, 1996, approximately $428,000 and $172,000 of
interest cost was capitalized related to property and equipment and deferred
gaming license cost, respectively.
F-9
<PAGE>
JEFFERSON CASINO CORPORATION AND ITS SUBSIDIARY
CASINO MAGIC OF LOUISIANA, CORP.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(DATA WITH RESPECT TO SEPTEMBER 30, 1996 IS UNAUDITED)
3. LONG-TERM DEBT:
Long-term debt consists of the following:
SEPTEMBER 30, JUNE 30,
1996 1996
------------- -----------
Note payable, bank(a) $ 1,700,000 $ 1,700,000
Equipment note(b) 3,973,024 3,973,024
Louisiana Land Note(c) - 6,800,000
Louisiana Notes(d) - 35,000,000
Louisiana First Mortgage Notes(e) 115,000,000 -
Other(f) 45,922 -
------------ ----------
120,718,946 47,473,024
Less current maturities (931,458) (2,277,254)
------------ -----------
$119,787,488 $45,195,770
============= ===========
_____________
(a) Note collateralized by gaming equipment. The first payment is due 60
days following the opening of Jefferson's gaming facility. The note is payable
in thirty-six monthly payments of $53,463.49, including interest at prime plus
1/4% (8.5% at September 30, 1996).
(b) Note collateralized by gaming equipment. The first payment is due 60
days following the opening of Jefferson's gaming facility. The note is payable
in thirty-six monthly payments of $135,788.17, including interest at prime
plus 1% (9.25% at September 30, 1996).
(c) Note collateralized by land (the "Louisiana Land Note"). The first
payment of $800,000 principal amount plus accrued interest was due within 60
days following the opening of Jefferson's gaming facility. The remaining
$6,000,000 was to be paid in fifty-eight monthly installments of $118,873.04,
including interest, beginning thirty days after the initial payment. The
Louisiana Land Note bore interest at 5.8%. The Louisiana Land Note was paid
in full with proceeds from the Louisiana First Mortgage Notes.
(d) In effecting the purchase of Crescent City, Jefferson Corp. caused
Louisiana Corp. to issue $35,000,000 in 111/2% senior secured notes (the
"Louisiana Notes"). The Louisiana Notes were issued under an indenture dated
May 13, 1996 (the "Louisiana Indenture"), between Louisiana Corp. as the
Company, Jefferson Corp. as Guarantor and First Trust National Association,
St. Paul, Minnesota, as the trustee (the "Louisiana Indenture Trustee"). The
Louisiana Indenture Trustee also acted as the Paying Agent and registrar for
the Louisiana Notes. The Louisiana Notes accrued interest at the rate of
111/2% per annum, compounded semi-annually, and were due three years following
the
F-10
<PAGE>
JEFFERSON CASINO CORPORATION AND ITS SUBSIDIARY
CASINO MAGIC OF LOUISIANA, CORP.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(DATA WITH RESPECT TO SEPTEMBER 30, 1996 IS UNAUDITED)
3. LONG-TERM DEBT (CONTINUED):
"Commencement Date" which was defined as the earlier of November 9, 1996
or the date that Jefferson's casino in Bossier City opens for gaming
operations. The Louisiana Notes would also have come due as a result of an
adverse State of Louisiana action as defined in the Louisiana Indenture.
Interest was payable quarterly on the 15th day following each fiscal quarter
of Jefferson. Amount was paid in full with proceeds from the Louisiana First
Mortgage Notes.
The Louisiana Notes were paid in full with proceeds from the
Louisiana First Mortgage Notes.
(e) On August 22, 1996, the Company sold $115,000,000 million aggregate
principal amount of 13%, First Mortgage Notes securities due in 2003 ("Series
A Notes") with contingent interest. The Company is required to offer to
exchange up to an aggregate of $115,000,000 principal amount of 13% Series B
First Mortgage Notes due 2003 with Contingent Interest (the "Series B Notes"
and, together with the Series A Notes, the "Notes") for such Series A Notes.
Contingent Interest is payable on the Notes, on each interest payment
date, in an aggregate amount equal to 5% of Adjusted Consolidated Cash Flow
(as defined in the Indenture) for the Accrual Period (as defined in the
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
Indenture). Payment of all or a portion of any installment of Contingent
Interest may be deferred, at the option of the Company, if, and only to the
extent that, (i) the payment of such portion of Contingent Interest will cause
the Company's Adjusted Fixed Charge Coverage Ratio (as defined in the
Indenture) for the Company'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 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.
F-11
<PAGE>
JEFFERSON CASINO CORPORATION AND ITS SUBSIDIARY
CASINO MAGIC OF LOUISIANA, CORP.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(DATA WITH RESPECT TO SEPTEMBER 30, 1996 IS UNAUDITED)
3. LONG-TERM DEBT (CONTINUED):
The Series A Notes were issued to consolidate the funding necessary to
development the Casino Magic-Bossier City project. This included the
repayment of the Louisiana Land Note and the Louisiana Notes.
The Notes are secured by a first priority security interest, subject to
permitted liens, in substantially all of the existing and future assets of the
Company, including the Bossier Riverboat and substantially all of the other
assets that will comprise Casino Magic-Bossier City, the Crescent City
Riverboat, and an assignment of the construction contracts pursuant to which
Casino Magic-Biloxi City is being constructed. The Jefferson Guarantee will
be secured by a pledge of all of the capital stock of the Company.
The Notes are governed by an Indenture (the " Indenture"). The Indenture
pursuant to which the Notes have been issued contains certain covenants that
will limit the ability of the Company 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.
(f) Consists of various collateralized notes payable through the year
2000.
The interest rates on these notes vary from 12.95% to 13.25% fixed
rates.
Maturities of long-term debt, as of September 30, 1996, are as follows:
PERIOD ENDING SEPTEMBER 30,
----------------------
1997 $ 931,458
1998 2,925,821
1999 1,854,120
2000 7,547
2001 -
Thereafter 115,000,000
-----------
$120,718,946
===========
The fair value of Jefferson's long-term debt approximates its carrying
value at September 30, 1996.
F-12
<PAGE>
JEFFERSON CASINO CORPORATION AND ITS SUBSIDIARY
CASINO MAGIC OF LOUISIANA, CORP.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(DATA WITH RESPECT TO SEPTEMBER 30, 1996 IS UNAUDITED)
4. RELATED PARTY TRANSACTIONS:
As Jefferson is in the development stage, no revenues have yet been
generated with which to pay preopening costs. Preopening costs through August
22, 1996, advanced by Casino Magic and affiliated companies and such advances
were classified as advances from affiliated companies in the accompanying
balance sheet. These advances will be converted to a contribution of capital
from Casino Magic.
5. CONTRACTUAL AGREEMENTS
In August 1996, the Company entered into a management agreement (the
"Management Agreement") with Casino Magic and a wholly owned subsidiary of
Casino Magic (the "Manager") for a term of 10 years. In consideration for the
license of the "Casino Magic" name and the services provided under the
Management Agreement, the Company has agreed to pay a management fee equal to
10% of adjusted consolidated cash flow, as defined in the Management
Agreement. Payment of the management fee will be subject to certain
restrictions contained in the Indenture.
6. SUBSEQUENT EVENTS:
On October 4, 1996, Louisiana Corp. began gaming operations, using a
temporary facility in Bossier City, Louisiana.
On November 5, 1996, voters in Caddo and Bossier parishes passed a
referendum allowing for the continuation of riverboat gaming in both parishes.
F-13
<PAGE>
EXHIBIT I JEFFERSON CASINO CORPORATION AND SUBSIDIARY
CASINO MAGIC OF LOUISIANA, CORP.
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 1996
ASSETS
(UNAUDITED)
Jefferson Louisiana
Corp. Corp. Eliminations Consolidated
---------- ----------- ------------ ------------
Current assets:
Cash and cash equivalents $ - $ - $ - $ -
Restricted cash - 37,816,861 - 37,816,861
Other current assets - 384,111 - 384,111
---------- ----------- ------------ ------------
Total current assets - 38,200,972 - 38,200,972
---------- ----------- ------------ ------------
Property and equipment:
Land and improvements - 13,756,398 - 13,756,398
Barges and improvements - 20,292,055 - 20,292,055
Crescent City Riverboat - 30,650,575 - 30,650,575
Furniture and equipment - 10,559,653 - 10,559,653
Construction in progress - 7,299,917 - 7,299,917
---------- ----------- ------------ ------------
- 82,558,598 - 82,558,598
Less accumulated depreciation - - - -
---------- ----------- ------------ ------------
Total property and
equipment, net - 82,558,598 - 82,558,598
---------- ----------- ------------ ------------
Other long-term assets:
Investment in subsidiary 21,614,013 - (21,614,013) -
Deferred gaming license cost - 16,841,976 - 16,841,976
Debt issuance costs - 4,735,184 - 4,735,184
Preopening costs - 2,902,723 - 2,902,723
Other long-term assets - 123,993 - 123,993
----------- ------------ ------------ ------------
Total other long-
term assets 21,614,013 24,603,876 (21,614,013) 24,603,876
----------- ------------ ------------ ------------
$21,614,013 $145,363,446 $(21,614,013) 145,363,446
=========== ============ ============= ===========
See notes to consolidated financial statements.
I-1
<PAGE>
EXHIBIT I JEFFERSON CASINO CORPORATION AND SUBSIDIARY
CASINO MAGIC OF LOUISIANA, CORP.
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 1996
LIABILITIES AND SHAREHOLDER'S EQUITY
(UNAUDITED)
Jefferson Louisiana
Corp. Corp. Eliminations Consolidated
---------- ----------- ------------ ------------
Current liabilities:
Current maturities
long-term debt $ - $ 931,458 $ - $ 931,458
Accounts payable - 1,102,622 - 1,102,622
Accrued interest - 1,721,466 - 1,721,466
Advances from affiliates 1,447,942 - - 1,447,942
----------- ------------ ------------ ------------
Total current
liabilities 1,447,942 3,755,546 - 5,203,488
----------- ------------ ------------ ------------
Other long-term liabilities - 206,399 - 206,399
----------- ------------ ------------ ------------
Long-term debt, net of
current maturities - 119,787,488 - 119,787,488
----------- ------------ ------------ ------------
Commitments and contingencies
Shareholder's equity:
Common stock $0.01 par,
10,000 shares
authorized, 1,000
shares issued and
outstanding - 1 (1) -
Additional paid-in
capital 20,925,401 22,353,295 (22,353,295) 20,925,401
Retained earnings (deficit) (759,330) (739,283) 739,283 (759,330)
----------- ------------ ------------ ------------
Total shareholder's
equity 20,166,071 21,614,013 (21,614,013) 20,166,071
----------- ------------ ------------ ------------
$21,614,013 $145,363,446 $(21,614,013) $145,363,446
=========== ============ ============= ===========
See notes to consolidated financial statements. I-2
<PAGE>
EXHIBIT II JEFFERSON CASINO CORPORATION AND SUBSIDIARY
CASINO MAGIC OF LOUISIANA, CORP.
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 13, 1996 (INCEPTION) TO SEPTEMBER 30, 1996
(UNAUDITED)
Jefferson Louisiana
Corp. Corp. Eliminations Consolidated
---------- ----------- ------------ ------------
Costs and expenses:
General and administrative 20,047 - - 20,047
---------- ----------- ------------ ------------
Total operating expenses 20,047 - - 20,047
Other (income) expense:
Loss on subsidiary 739,283 - (739,283) -
Interest income $ - $ (59) $ - $ (59)
Interest expense 121,021 3,010,541 - 3,131,562
Capitalized interest (121,021) (2,271,199) - (2,392,220)
---------- ----------- ------------ ------------
Total other expense 739,283 739,283 (739,283) 739,283
---------- ----------- ------------ ------------
(Loss) before income taxes: (759,330) (739,283) 739,283 (759,330)
Income tax expense (benefit) - - - -
Net (loss) (759,330) (739,283) 739,283 (759,330)
========== ============= ========= ===========
See notes to consolidated financial statements.
I-3
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE NOTES OFFERED BY THIS PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY IN ANY
JURISDICTION IN WHICH 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 OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER WILL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
____________________________
TABLE OF CONTENTS
PAGE
Summary ................................... 7
Risk Factors............................... 19
The Exchange Offer......................... 33
Use of Proceeds............................ 43
Capitalization............................. 47
Selected Financial Data.................... 48
Management's Discussion and Analysis
of Financial Condition and Results of
Operations.............................. 50
Business................................... 56
Regulatory Matters......................... 68
Management................................. 74
Principal Shareholders..................... 84
Certain Relationships and Related
Transactions............................ 85
Description of Notes....................... 86
Certain Federal Income Tax
Considerations.......................... 144
Plan of Distribution....................... 147
Legal Matters.............................. 148
Independent Public Accountants............. 148
Index to Financial Statements.............. F-1
___________________________
PROSPECTUS
___________________________
Offer to Exchange $1,000 principal amount of its 13% Series B First Mortgage
Notes due 2003 with Contingent Interest which have been registered under the
Securities Act for each $1,000 principal amount of its outstanding 13% Series
A First Mortgage Notes due 2003 with Contingent Interest
CASINO MAGIC OF LOUISIANA, CORP.
February 4, 1997
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 83 of the Louisiana Business Corporation Law ("LBCL") provides in part
that a corporation may indemnify any director, officer, employee or agent of
the corporation against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or her
in connection with any action, suit or proceeding to which he or she is or was
a party or is threatened to be made a party (including any action, suit or
proceeding to which he or she is or was party or is threatened to be made a
party (including any action by or in the right of the corporation), if such
action arises out of his or her acts in behalf of the corporation and he or
she acted in good faith and not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
The indemnification provisions of the LBCL are not exclusive; however, no
corporation may indemnify any person for willful or intentional misconduct. A
corporation has the power to obtain and maintain insurance, or to create a
form of self-insurance on behalf of any person who is or was acting for the
corporation, regardless of whether the corporation has the legal authority to
indemnify the insured person against such liability.
The Registrants' Articles of Incorporation and By-laws provide for
indemnification for directors, officers, employees and agents or former
directors, officers, employees and agents of the Registrants to the full
extent permitted by Louisiana law.
The Registrants' may obtain an insurance policy covering the liability of its
directors and officers for actions taken in their official capacity.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provision or otherwise, the Registrants
have been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
EXHIBIT
NUMBER DESCRIPTION
- --------- ----------------------------------------------------------------
3.1** Amended and Restated Certificate of Incorporation of Casino Magic
of Louisiana, Corp.
3.2** By-laws of Casino Magic of Louisiana, Corp. (the "Company")
3.3* Certificate of Incorporation of Jefferson Casino Corporation.
3.4* By-laws of Jefferson Casino Corporation.
4.1* Form of the Company's 13% Notes due 2003 with Contingent Interest
in the aggregate principal amount of $115,000,000.
4.2* Form of Guarantee issued on August 22, 1996 by Jefferson Casino
Corporation.
4.3* Indenture dated as of August 22, 1996 by and among the Company,
First Union Bank of Connecticut, as Trustee, and the Guarantors named therein,
for the Company's $115,000,000 of 13% First Mortgage Notes due 2003 with
contingent interest.
4.4* Registration Rights Agreement dated as of August 22, 1996 by and
among the company, the Guarantors named therein and the Initial Purchasers
named therein.
4.5* Cash Collateral and Disbursement Agreement dated August 22, 1996 by
and among the Company, First Union Bank of Connecticut, as Trustee, and First
National Bank of Commerce, as disbursement agent.
4.6* Security Agreement dated as of August 22, 1996 by and between First
Union Bank of Connecticut, as Trustee, and the Company, as Guarantor.
4.7* Stock Pledge and Security Agreement dated as of August 22, 1996 by
and between First Union Bank of Connecticut, as Trustee, and Jefferson Casino
Corporation, as Pledgor.
4.8* Security Agreements dated as of August 22, 1996 by and between
First Union Bank of Connecticut, as Trustee, and Jefferson Casino Corporation.
4.9* First Preferred Ship Mortgage dated as of August 22, 1996 executed
in favor of First Union Bank of Connecticut, as Trustee, by the Company.
4.10* First Preferred Ship Mortgage dated as of August 22, 1996 executed
in favor of First Union Bank of Connecticut, as Trustee, by the Company.
4.11* Mortgage of the Company dated as of August 22, 1996 executed in
favor of First Union Bank of Connecticut, as Trustee.
4.12** Form of Accounts Pledge Agreement.
4.13* Note Purchase Agreement dated August 16, 1996.
4.14* Collateral Assignment dated August 22, 1996.
5.1** Legal Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
5.2** Legal Opinion of Hoffman Sutterfield Ensenant
10.1* Management Agreement
10.2* Tax-Sharing Agreement
21* List of Subsidiaries
23.1** Consent of Arthur Andersen, L.L.P
II-2
<PAGE>
23.2** Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
Exhibit 5.1)
23.3** Consent of Hoffman Sutterfield Ensenant (included in Exhibit 5.2)
24** Powers of Attorney of certain directors
25.1* Statement of Eligibility and Qualification on Form T-1 under the
Trust Indenture Act of 1939 of First Union Bank of Connecticut, as Trustee
under the Indenture relating to the 13% First Mortgage Notes due 2003 with
contingent interest.
25.2** Report of Financial Condition of Trustee (Exhibit 7 to T-1)
27 Financial Data Schedule (filed electronically only)
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
99.3* Form of Letter to Securities Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.4* Form of Letter to Clients
99.5* Guidelines of Certification of Taxpayer Identification Number on
Form W-9
* Previously filed as an exhibit to this Registration No 333-14535
** Filed herewith
II-3
<PAGE>
(b) Financial Statement Schedules
None.
All schedules are omitted because the required information is not present
in amounts sufficient to require submission of the schedule or because the
information required is included in the financial statements or notes thereto.
ITEM 22. UNDERTAKINGS
A. Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the foregoing provisions,
or otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrants of expenses incurred or paid by a
director, officer or controlling person of the Registrants in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrants 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 Securities Act and will be governed
by the final adjudication of such issue.
B. The undersigned Registrants hereby undertake:
(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
Securites Act of 1993;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment therof) 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 a 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(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-4
<PAGE>
(2) That for the purpose of determining any liability under the
Securities Act of 1933, as amended, each post-effective amendment that
contains a form of prospectus 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.
C. (1) The undersigned Registrants hereby undertake as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The Registrants undertake that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes 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."
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
undersigned Registrants certify that each of them has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-4 and has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized , in the City of Bay
St. Louis, State of Mississippi on the fourth day of February, 1997.
CASINO MAGIC OF LOUISIANA, CORP.
By : /s/ James E. Ernst
---------------------------------
James E. Ernst
President and Chief Executive Officer
JEFFERSON CASINO CORP.
By : /s/ James E. Ernst
---------------------------------
James E. Ernst
President and Chief Executive Officer
Power of Attorney
Know all men by these presents, that each individual whose signature appears
below constitutes and appoints James E. Ernst, Jay S. Osman and Robert
Callaway and each of them, his true and lawful attorneys-in-fact and agents
with full power of substitution, for him and in his name, place and stead in
any and all capacities, to sign any and all amendments to this Registration
Statement, including post-effective amendments, and to file same, with all
exhibits thereto, and all documents in connection therewith, with such changes
as they may deem appropriate, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them full power
and authority to do and perform each and every act and thing requisite and
necessary to be done to comply with the provisions of the Securities Act 1933,
as amended, and all rules, regulations and requirements of the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact and agents and each of them, and their or his substitutes,
may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated.
II-6
<PAGE>
SIGNATURE TITLE DATE
Applicable in each case to both
Jefferson Casino Corp. and
Casino Magic of Louisiana Corp.
- ---------------------------- --------------------------- ----------------
/s/ Marlin F. Torguson Chairman of the Board February 4, 1997
- ----------------------------
/s/ James E. Ernst President and Chief February 4, 1997
- ---------------------------- Executive Office (principal
executive officer)
/s/ Jay S. Osman Chief Financial Officer, February 4, 1997
- ---------------------------- Executive Vice President
and Treasurer (principal
financial and accounting
officer)
/s/ Allen J. Kokesch Director February 4, 1997
- ----------------------------
/s/ Roger H. Frommelt Director February 4, 1997
- ----------------------------
/s/ E. Thomas Welch Director February 4, 1997
- ----------------------------
II-7
UNITED STATES OF AMERICA
STATE OF (brown pelican graph) LOUISIANA
Fox Mckeithen
SECRETARY OF STATE
As Secretary of State, of the State of Louisiana, I do hereby Certfity that
a copy of an Amendment to the Articles of Incorporation of
CRESCENT CITY CAPITAL DEVELOPMENT CORPORATION
A Louisiana corporation domiciled at Baton Rouge, changing the corporate
name-to
CASINO MAGIC OF,-LOUISIANA, CORP.
Said Amendment being by Act before a Notary Public in and for the County of
Atlantic, State of New Jersey, on May 9, 1996, the date Amendment became
effective,
Was filed and recorded in this office on May 10, 1996, in the Record of
Charters Book 345,
In testimony whereof, I have hereunto set
my hand and caused the Seal of my Office, (LOUSIANA STATE
SEAL)
to be affixed at the City of Baton Rouge on
May 10, 1996
/s/ Fox McKeithen
TAG
<PAGE>
UNITED STATES OF AMERICA
STATE OF (brown pelican graph) LOUISIANA
Fox McKeithen
SECRETARY OF STATE
As Secretary of State, of the State of Louisiana, I do hereby Certify that
the annexed transcript was prepared by and in this office from the record
on file, of which purports to be a copy and that it is full, true and correct.
In testimony where, I have hereunto set
my hand and caused the Seal of my Office
to be affixed at the City of Baton Rouge on, (LOUISIANA STATE
seal)
May 10, 1996
/s/ Fox McKeithen
Secretary of State
<PAGE>
AMENDMENT TO ARTICLES OF INCORPORATION
OF
CRESCENT CITY CAPITAL DEVELOPMENT CORPORATION
STATE OF NEW JERSEY
COUNTY OF ATLANTIC
BEFORE ME,, the undersigned authority, personally came and appeared EDWARD M.
TRACY, President, and WILLLAM S. PAPAZIAN, Assistant Secretary of and acting
for CRESCENT CITY CAPITAL DEVELOPMENT CORPORATION, a corporation organized
and the under the laws of the State of Louisiana. who declare, that pursuant
to the Unanimous Written Consent by all shareholders of this corporation held
on the 9th day of May 1996, a certified copy of said Unanimous Consent
being attached hereto, that they do now appear for the purpose of effecting an
amendment to the Articles of Incorporation, as follows:
I.
The article entitled "FIRST" be amended to reflect the following:
FIRST: The name of the corporation shall be:
CASINO MAGIC OF LOUISLANA, CORP.
They further declare the the original date of incorporation was June 9, 1993.
II
That in lieu of a meeting and vote of shareholders, the sole shareholder of
the corporation has written consent to said amendment in accordance with the
provisions of R.S. 12:76 La. Rev. Stats, 1950.
<PAGE>
THUS DONE AND SIGNED in my office in the City of W. Atlantic City, County of
Atlantic, State of New Jersey, on this 9th day of May, 1996, in the presence
of the undersigned competent witnesses and me, Notary Public, after due
reading of the whole.
WITNESSES:
/s/ Sylvia DeSantis - DeCamp /s/ Edward M. Tracy
Edward M. Tracy, President
/s/ Suzanne L. Glass /s/ William S. Papazian
William S. Papazian, Asst. Secretary
/s/ Rochelle
NOTARY PUBLIC
My commission expires: ______________
ROCHELLE KIRSCHNER
A NOTARY PUBLIC OF NEW JERSEY
MY COMMISSION EXPIRES 12/6/99
<PAGE>
UNANIMOUS WRITTEN CONSENT OF THE SOLE SHAREHOLDER OF
CRESCENT CITY CAPITAL DEVELOPMENT CORPORATION
The undersigned, constituting all of the shareholders of the corporation known
as CRESCENT CAPITAL DEVELOPMENT CORPORATION, a Louisiana corporation, do
hereby consent to the adoption of the following resolution effective
immediately:
RESOLVED that Edward M. Tracy, President, and William S. Papazian, Asst.
Secretary, are hereby authorized to amend the Articles of Incorporation as
follows:
I
The article entitled "FIRST" shall be amended to reflect the following:
FIRST: The name of the corporation shall be:
CASINO MAGIC OF LOUIIANA, CORP.
They further declare that the original date of incorporation was June 9, 1993.
RESOLVED that-Edward M. Tracy, President, and William S. Papazian,
Asst.Secetary, are authorized to execute any
and all documents necessary or incidental for the amendment to the Articles of
Incorporation.
THUS DONE EFFECTIVE this 9th day of May, 1996.
CAPITAL GAMING INTERNATIONAL, INC.
BY: /s/ Edward M. Tracy
Edward M. Tracy, President
<PAGE>
ARTICLES OF INCORPORATION
OF
CRESCENT CITY CAPITAL DEVELOPMENT CORPORATION
We, the undersigned, each capable of contracting, for the purpose of
forming a corporation pursuant to Chapter 1 of Title 12 of the Louisiana
Revised Statutes, do hereby certify:
FIRST: The name of the corporation is Crescent City Capital
Development Corporation.
SECOND: The address (and zip code) of this corporation's
initial registered office is
8550 United Plaza Boulevard
Baton Rouge, Louisiana 70809
and the name of this corporation' s initial registered agent at such
address is
CT Corporation System
THIRD: The purposes for which this corporation is organized
are:
(a) To engage in any activity within the purposes for which corporations
may be organized under the Louisiana Business Corporation Law, including
without limitation, to license, construct, develop, own and operate a
riverboat casino in Orleans Parish, Louisiana.
(b) The foregoing and following clauses shall be construed as objects
and powers in furtherance and not in limitation of general powers conferred by
the laws of the State of Louisiana, and it is hereby expressly provided that
the foregoing and following enumeration of specific powers shall not be held
to limit or restrict in any manner the powers of this corporation and that
this corporation may do all and everything necessary,, suitable or proper for
the accomplishment of any of the purposes or objects hereinabove enumerated,
either alone or in association with other corporations, firms or individuals
to the same extent and as fully as individuals might or could do as
principals, agents, contractors or otherwise.
FOURTH: The duration of the corporation is perpetual.
FIFTH: The aggregate number of shares which the corporation
shall have authority to issue is Two Hundred (200) Shares, $.01 par
value.
SIXTH: The first Board of Directors of the corporation shall consist of
three (3) Directors and the name and post office address of each person who is
to serve as such a Director is as follows:
NAME ADDRESS
I.G. Davis, Jr. c/o Capital Gaming International, Inc.
Bayport One, Suite 250
8025 Black Horse Pike
West Atlantic City, NJ 08232
Edward M. Tracy c/o Capital Gaming International, Inc.
Bayport One, Suite 250
8025 Black Horse Pike
West Atlantic City, NJ 08232
Col. Clinton Pagano c/o Capital Gaming International, Inc.
Bayport One, Suite 250
8025 Black Horse Pike
West Atlantic City, NJ 08232
SEVENTH: The name and address of each incorporator is as
follows:
NAME ADDRESS
I.G. Davis, Jr. c/o Capital Gaming International, Inc.
Bayport One, Suite 250 8025 Black Horse Pike West
Atlantic City, NJ 08232
EIGHTH: Pursuant to the provisions of Section 24 of the Louisiana
Business Corporation Law, any director or officer of this corporation shall
not be personally liable to the corporation or its shareholders for damages
for breach of any duty owed to the corporation or its shareholders, except
that this provision shall not relieve a director or officer of liability for
any breach of duty based upon an act or omission (a) in breach of such
person's duty of loyalty to the corporation or its shareholders; (b) for any
action not taken in good faith, involving intentional misconduct or in knowing
violation of law; (c) amounting to an unlawful distribution or other violation
of R.S. 12:92(D); or (d) resulting in receipt by such person of an improper
personal benefit.
NINTH:
(a) Right to Indemnification. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a director or
officer of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by the
corporation to the fullest extent authorized by the Louisiana Business
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment) , against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators: provided, however, that, except as provided in
paragraph (b) hereof, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the corporation. The right to indemnification conferred
in this Section shall be a contract right and shall include the right to be
paid by the corporation the expenses incurred in defending any such proceeding
in advance of its final disposition; provided, however, that, if the Louisiana
Business Corporation Law, the payment of such expenses incurred by a director
or officer in his or her capacity as a director or officer (and not in any
other capacity in which services were or are rendered by such person while a
director or officer, including, without limitation, service to any employee
benefit plan) in advance of the final disposition of a proceeding, shall be
made only upon delivery to the corporation of an undertaking, by or on behalf
of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Section or otherwise. The corporation may, by action
of its Board of Directors, provide indemnification to employees and agents of
the corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of
this Section is not paid in full by the corporation within thirty (30) days
after a written claim has been received by the corporation, the claimant may
at any time thereafter bring suit against the corporation to recover the
unpaid amount of the claim ' and, if successful, in whole or in part, the
claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce
a claim for expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any is required, has been
tendered to the corporation) that the claimant has not met the standards of
conduct which make it permissible under the Louisiana Business Corporation Law
for the corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the corporation. Neither the
failure of the corporation (including its Board of Directors, independent
legal counsel, or its shareholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she had met the applicable standard of conduct
set forth in the Louisiana Business Corporation Law, nor an actual
determination by the corporation (including the Board of Directors,
independent legal counsel, or its shareholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to an action or create
a presumption that the claimant has not met the applicable standard of
conduct.
(c) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation, by-law, agreement, vote of
shareholders or disinterested directors or
otherwise.
(d) Insurance. The corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such
expense, liability or loss under the New Jersey Business Corporation Act.
TENTH: This corporation reserves the right to amend, alter, change or
repeal any provision contained in these articles in the manner now or
hereafter prescribed by statute, and all rights conferred upon shareholders
herein are granted subject to this reservation.
IN WITNESS WHEREOF, I the undersigned, capable of cont. Vacting, have
hereunto affixed my signature on this the 4th day of June 1993.
/s/ I.G. Davis, Jr.
I.G. Davis, Jr., Chairman and CEO
<PAGE>
STATE OF NEW JERSEY)
)
COUNTY OF MERCER )
BE IT KNOWN, That on this 4th day of the month of June, in the year of
our Lord, 1993, before me, the undersigned, a Notary Public in and for the
County and State aforesaid duly commissioned and qualified, there came and
appeared I.G. Davis, Jr., known to me, Notary, and known by me to be the
person whose name appears upon the foregoing instrument and said appearer
declared and acknowledged unto me, Notary, that he executed the said
instrument for the uses and purposes therein set forth and apparent.
IN WITNESS WHEREOF, said appearer has signed these presents, and I have
hereunto set my official hand and seal on the day and date first hereinabove
written.
(Notarial Seal)
/s/ L. Maria Vazquez
Notary Public
L. Maria Vazquez
A Notary Public of New Jersey
My Commission Expires Oct. 22, 1997
BY-LAWS
OF
CASINO MAGIC OF LOUISIANA, CORP.
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE.
The principal office of the corporation shall be at 1701 Old Minden
Road,
in the City of Bossier, Parish of Bossier, State of Louisiana.
SECTION 2. OTHER OFFICES.
The corporation may also have offices in such other places, both
within and without the State of Louisiana, as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II.
SHAREHOLDERS
SECTION 1. ANNUAL MEETING.
An annual meeting of the shareholders, commencing with the year
1997, shall be held each year on the first Tuesday of the third month
following the end of the corporation's fiscal year for income tax purposes for
the purpose of electing Directors and transacting such other business as may
properly be brought before the meeting. If the election of Directors is not
held on the day designated herein for any annual meeting of the shareholders
or any adjournment thereof, the Board of Directors shall cause the election to
be held at a special meeting of the shareholders as soon thereafter as
conveniently may be done.
SECTION 2. SPECIAL MEETING.
Special meeting of the shareholders for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the President or by
the Board of Directors, and shall be called by the President or by the Board
of Directors, and shall be called by the President at the written request of
the holders of a majority of all of the outstanding shares of the corporation,
entitled to vote at the meeting.
SECTION 3. PLACE OF MEETING.
The Board of Directors may designate any place, either within or
without the State of Louisiana, as the place of meeting for the annual meeting
or any special meeting called by the Board of Directors; provided, however,
that if the special meeting is called at the written request of shareholders,
the meeting shall be held at the registered office of the corporation. A
waiver of notice signed by all shareholders entitled to vote at the meeting
may designate any place, either within or without the State of Louisiana, as
the place for the holding such meetings. If no designation is made or if a
special meeting be otherwise called, the place of meeting shall be the
registered office of the corporation in the State of Louisiana.
SECTION 4. NOTICE OF MEETINGS.
Written or printed notice stating the place, day and hour of the
meeting, and in case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than 10 nor more than 50
days before the date of the meeting, either personally or by mail, to each
shareholder of record to vote at such meeting. If mailed, such notice shall
be deemed to be delivered when deposited in the United States Mail, addressed
to the shareholder at his address as it appears on the stock transfer books of
the corporation, with postage prepaid. If the meeting is called by written
request of the shareholders, the date of the meeting shall be not less than 15
nor more than 60 days after receipt of request.
SECTION 5 RECORD DATES.
For the purpose of determining shareholders entitled to notice of or
to vote at any meeting of shareholders or any adjournment thereof, or for the
purpose of determining shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
corporate purpose, the Board of Directors may fix in advance a date as the
record date for any such determination, such date in any cast to be not more
than 60 days, and in the case of a shareholders' meeting not less than 10
days, prior to the date on which the particular action requiring determination
is to be taken. If no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders, or
for the determination of shareholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed, or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for the determination.
SECTION 6. LIST OF SHAREHOLDERS.
Prior to every election of Directors, a complete list of
shareholders having voting power present or represented by proxy shall decide
any question brought before the meeting unless the question is one which by
express provisions of the statutes of Louisiana or the Articles of
Incorporation of the corporation or by these By-Laws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
SECTION 7. PROXY.
At all shareholders' meetings, each shareholder having the right to
vote shall be entitled to vote in person or by proxy appointed by a written
instrument subscribed by such shareholder and bearing a date not more than
three years prior to the meeting, unless the instrument specifically provided
for a longer period.
ARTICLE III.
DIRECTORS
SECTION 1. GENERAL.
The property and business of the corporation shall be managed by a
Board of Directors exercising all powers of the corporation and empowered to
do all such lawful acts and things as are not by statute or by the Articles of
Incorporation or by these By-Laws directed or required to be exercised or done
by the shareholders.
SECTION 2. NUMBER OF DIRECTORS.
The Board shall consist of the number of directors designated in the
Articles of Incorporation. Except as hereinabove provided, the Directors
shall be elected at the annual meeting, or at a special meeting called for
that purpose, and each Director so elected shall hold office for a period of
one year or until his successor shall be entitled to vote at the election,
arranged in alphabetical order, with the residence of each and the number of
voting shares held by each, shall be prepared by the Secretary. Such list
shall be open for examination by any shareholder at the corporation's
principal office during the ten days immediately preceding the election and
shall be produced and kept at the time and place of election during the whole
time thereof, and subject to the inspection of any shareholder.
SECTION 3. QUORUM.
The holders of a majority of the shares of stock issued and
outstanding and entitled to vote threat, present or represented by proxy,
shall be requisite for and shall constitute a quorum at all shareholders'
meetings for the transaction of business, except as otherwise provided by
statute, by the Articles of Incorporation, or by these By-Laws. If less than
a majority of the outstanding share are represented at a meeting, however, a
majority of the outstanding shares so represented may adjourn the meeting from
time to time without notice, other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting where a
quorum shall be present or represented any business may be transacted which
might have been transacted at the meeting as originally called.
SECTION 5. VOTE.
When a quorum is present at a meeting, the vote of the holders of a
majority of the stock elected and shall qualify. Directors need not own
stock.
SECTION 6. VACANCIES.
If any vacancies occur in the Board caused by death, resignation,
retirement, disqualification, or removal from office of any director, a
majority of the directors then in office, though less than a quorum, may
choose a successor or successors, and the directors so chosen shall hold
office until the next annual election and until their successor are duly
elected and shall qualify, unless sooner displaced. If there are no directors
in office, then an election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy, the directors then in office
shall constitute less than a majority of the whole Board, the proper court
may, upon application of any shareholder or shareholders holding at least ten
percent of the total number of the shares at the time outstanding having the
right to vote for such directors, summarily order an election to be held to
fill such vacancies, or to replace the directors chosen by the directors then
in office.
MEETING OF THE BOARD
SECTION 7. PLACE.
The Directors of the corporation may hold their meetings, both
regular and special, either within or outside the State of Louisiana.
SECTION 8. FIRST MEETING.
The first meeting of each newly elected Board shall be held at such
time and place as shall be fixed by the vote of the stockholders at the annual
meeting and no notice of such meeting shall be necessary to the newly elected
Directors in or to legally constitute the meeting provided a quorum shall be
present; or, the Directors may meet in such place, and at such time, as shall
be fixed by the consent in writing of all the said Directors.
SECTION 9. REGULAR MEETINGS.
Regular meetings of the Board may be held without notice at such
time and place as shall be from time to time determined by the Board.
SECTION 10. SPECIAL MEETINGS.
Special meetings of the Board may be called by the President on 48
hours notice to each Director, either personally or by mail or telegram;
special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of any two Directors.
SECTION 11. QUORUM.
At all meetings of the Board, a majority of the Directors shall
constitute a quorum for transaction of business, except as otherwise provided
by statute or in the Articles of Incorporation of the corporation. If less
than such majority is present at a meeting, a majority of the Directors
present may adjourn the meeting from time to time without further notice until
a majority is present.
SECTION 12. COMPENSATION.
By resolution of the Board of Directors, the Directors may be paid
their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a regular sum fixed by them for attendance at each
meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the corporation in any other
capacity and receiving compensation therefor.
SECTION 14. WRITTEN CONSENT.
Unless otherwise restricted by the Articles of Incorporation or
these By-Laws, any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
COMMITTEES OF DIRECTORS
SECTION 15. MINUTES.
The Board of Directors may, by resolution passed by a majority of
the whole Board, designate one or more committees, each committee to consist
of two or more of the Directors of the corporation, which, to the extent
provided in said resolution, shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
corporation, and may have power to authorize the seal of the corporation to be
fixed to all papers which may require it. Any such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors.
SECTION 16. MINUTES.
The committees shall keep regular minutes of their proceedings and
report the same to the Board when required.
ARTICLE IV.
NOTICE
SECTION 1. METHOD
Whenever notice is required to be given by any Director or
shareholder under provisions of the laws of Louisiana or of the Articles of
Incorporation of the corporation or of these By-Laws, such notice shall not be
construed to mean personal notice, but may be given in writing, by mail,
addressed to such Director or shareholder in such address as appears on the
books of the corporation, and such notice shall be deemed to be given at the
time mailed.
SECTION 2. WAIVER OF NOTICE.
Whenever any notice is required to be given under the provisions of
the laws of Louisiana or of the Articles of Incorporation or these By-Laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto, and such waiver need not specify the purpose of or the
business to be transacted at the meeting.
ARTICLE V.
OFFICERS
SECTION 1. DESIGNATION.
The officers of the corporation shall be a Chairman of the Board, a
President, one or more Vice-Presidents, a Secretary and a Treasurer, each of
whom shall be elected by the Board of Directors. Any two offices may be held
by the same person except that no one may hold the offices of President and
Treasurer at the same time.
SECTION 2. ELECTION.
The Board of Directors at its first meeting after each annual
meeting of shareholders shall choose a President from among its members, and
shall choose one or more Vice-Presidents, a Secretary and a Treasurer, none of
whom need be member of the Board.
SECTION 3. AGENTS.
The Board may appoint such agents on behalf of the corporation as
it shall deem necessary, for such terms and to exercise such powers and
perform such duties as shall be determined from time to time by the Board, and
not conflicting with these By-Laws or the Articles of Incorporation of the
corporation.
SECTION 4. SALARIES.
The salaries of all officers and agents of the corporation shall be
fixed by the Board of Directors.
SECTION 5. TERM.
The officers of the corporation shall hold office until their
successors are chosen and qualify, unless sooner removed or displaced. Any
officer elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the whole Board of Directors
whenever in their judgement the best interest of the corporation would be
served thereby.
SECTION 6. VACANCY.
Vacancy in any office because of death, resignation, removal,
qualification or otherwise may be filled by the Board of Directors for the
unexpired portion of the terms.
CHAIRMAN OF THE BOARD
SECTION 7. DUTIES.
It shall be the duty of the Chairman of the Board of this
corporation, if present, to preside at all meetings of the Board of Directors
and the Executive Committee and exercise and perform such other powers and
duties as may from time to time be assigned to him by the Board of Directors
or prescribed by the By-Laws.
PRESIDENT
SECTION 8. DUTIES
The President shall be the chief executive officer of the
corporation and subject to the control of the Board of Directors, shall, in
general, supervise and control all of the business and affairs of the
corporation. He shall, when present, preside at all shareholders' meetings
and shall be an exofficio member of all standing committees. He shall have
general and active management of the business of the corporation and shall see
that all orders and resolutions of the Board are carried into effect. The
president may sign certificates for shares of the corporation and any deeds,
mortgages, bonds, contracts or other instruments which the Board of Directors
has authorized to be executed, except in cases where the signing and execution
thereof may be expressly delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the corporation or shall be required
by law to be otherwise signed or executed.
VICE-PRESIDENT
SECTION 9. DUTIES.
The Vice-President shall, in the absence or disability of the
President, perform the duties and exercise the powers of the President, and
shall perform such other duties as the Board of Directors shall prescribe.
SECRETARY
SECTION 10. DUTIES.
The Secretary of the corporation shall attend all shareholders'
meetings and Board of Directors' meetings and keep the minutes in one or more
books provided for that purpose. He shall also: (1) see that all notices are
duly given in accordance with the provisions of these By-Laws as required by
law; (2) custodian of the corporate records and of the seal of the corporation
and see that the seal of the corporation is affixed to all documents the
execution of which on behalf of the corporation under its seal is duly
authorized; (3) keep a register containing the post office address of each
stockholder which shall be furnished to the Secretary of such stockholder; (4)
sign, with the President, certifies for shares of stock in the corporation,
the issuance of which shall have been authorized by resolution of the Board of
Directors; (5) have general charge of the stock transfer books of the
corporation; and (6) in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
TREASURER
SECTION 11. DUTIES.
The Treasurer of the corporation shall have the custody of
corporate funds and securities and shall keep belonging to the corporation and
shall deposit all monies and other valuable effects in the name of and to the
credit of the corporation in such depositories as may be designated by the
Board of Directors. He will also in general perform all the duties incident
to the office of Treasurer and such other duties as from time to time may be
assigned to him by President or by the Board of Directors.
SECTION 12. ACCOUNTING.
He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and he
shall render to the President and Directors, at the regular meetings of the
Board, or whenever they may require it, an account of all his transactions as
Treasurer, and of the financial condition of the corporation.
SECTION 13. BOND.
If required by the Board of Directors, he shall give the corporation
a bond in such sum and with such surety or sureties as shall be satisfactory
to the Board for the faithful performance of the duties of his office and of
the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the corporation.
ASSISTANTS
SECTION 14. DUTIES.
One or more Assistant Secretaries and/or Assistant Treasurers may be
designated and chosen by the Board of Directors and shall have such duties as
may be delegated to them by the Board of Directors.
ARTICLE VI.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Any and all directors and officers and former directors and
officers of the corporation or any person who may have served at the request
of the corporation as a director or officer of another corporation in which
the corporation owns shares of capital stock or of which the corporation is a
creditor (and the heirs, executors and administrators of any such director or
officers or former director or officer or person), shall be indemnified by the
corporation against all costs and legal or other expenses, including costs and
amounts paid in settlement, reasonably incurred by or imposed upon them, or
any of them, in connection with or resulting from any claim, action, suit or
proceeding, whether civil or criminal, in which they, or any of them, are made
parties, or a party, by reason of being or having been directors or officers
or a director or officer of the corporation or of such other corporation.
Such right of indemnification shall not apply, however, in relation to matters
as to which any such director or officer or former director or officer shall
be finally adjudged in such action, suit or proceeding to be liable for
negligence or misconduct in the performance of his duty to the corporation or
such other corporation, unless the proper court shall determine that despite
such adjudication of liability, such officer or director is fairly and
reasonably entitled to indemnify for such expense as the court shall deem
proper. If any such claim, action, suit or proceeding is settled (whether by
agreement entry of judgement by consent, or otherwise), the determination in
good faith by the Board of Directors of the corporation that such claim,
action suit or proceeding did not arise out of negligence or misconduct in the
performance of duty by the director or officer or former director or officer
or person indemnified and that such director or officer or former director or
officer or person would not be held liable for the claims, suit or proceeding
in question, shall be necessary and sufficient to justify indemnification.
The right of indemnification herein provided shall not be exclusive under any
statute, By-Law, agreement, vote of shareholders, or otherwise.
ARTICLE VIII.
REIMBURSEMENT OF DISALLOWED DEDUCTIONS
Any payments made to an officer or director of the corporation such
as salary, commissions, bonus, interest, rent or expenses which shall be
disallowed in whole or in part as a deductible expense of the purpose of
corporate tax reporting by the Internal Revenue Service, shall be reimbursed
by such officer to the corporation to the full extent of such disallowance.
The Board of Directors shall take all necessary steps to enforce this
repayment. In lieu of repayment by the officer or directors the Board of
Directors may withhold appropriate amounts from the officer's or director's
future compensation until the payment has been recovered; provided that the
amount withheld is sufficient t extinguish the indebtedness within five (5)
years.
ARTICLE VIII.
CERTIFICATES OF STOCK
SECTION 1. FORM.
Certificates representing shares of stock in the name of the
corporation shall be in such form as determine by the Board of Directors. All
certificates shall be signed by,or in the name of the corporation, the
President or Vice-President, and by the Secretary or Treasurer. All
certificates for such shares shall be consecutively numbered, and the name and
address of the person to whom the shares represented thereby are issued,
together with the name of shares and date of issue shall be entered on the
stock transfer books of the corporation.
SECTION 2. TRANSFER AGENTS, REGISTRARS.
Where a certificate is countersigned (1) by a transfer agent other
than the corporation or its employee, or, (2) by a registrar other than the
corporation or its employee, any other signature on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
SECTION 3. LOST CERTIFICATES.
Any person claiming a certificate of stock to be lost or destroyed
shall make an affidavit or affirmative of that fact and shall give the
corporation a bond, in such sum as the Board of Directors may require to
indemnify the corporation against any claim that may be made against it on
account of the alleged loss of the certificate. The Board of Directors may
accept the affiant's personal bond if it should appear that he possesses
unencumbered property of sufficient value to assure indemnification. A new
certificate of the same tenor and for the same number of shares as the one
alleged to be lost or destroyed shall then be issued.
SECTION 4. TRANSFER OF STOCK.
Upon surrender to the corporation or the transfer agent of the
corporation of this certificate for share, duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, to cancel the old certificate and to record the transaction
on its books.
SECTION 5. HOLDER.
The corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof and shall not be
bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Louisiana.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 1. DIVIDENDS.
Dividends upon the capital stock of the corporation, subject to any
provisions of the Articles of Incorporation may be declared by the Board of
Directors at any regular or special meeting, pursuant to law. Dividends may
be paid in cash, in property, or in shares of the capital stock, subject to
the provisions of the Articles of Incorporation.
SECTION 2. RESERVE FOR CONTINGENCIES.
Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
Directors may from time to time, in their discretion, deem proper as a reserve
fund to meet contingencies or for repairing or maintaining the property of the
corporation, or for such purposes as the Directors shall deem to be in the
best interest of the corporation. The Directors may modify or abolish any
such reserve in the manner in which it was created.
SECTION 3. FISCAL YEAR.
The fiscal year of the corporation shall begin on the first day of
January, and end on the 31st day of December of each year.
SECTION 4. CHECKS.
All checks or demands for money and notes of the corporation shall
be signed by such officer or officers or such other person or persons as the
Board of Directors from time to time designates.
SECTION 5. CORPORATE SEAL.
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the State of incorporation and "Corporate Seal".
ARTICLE X.
AMENDMENTS
These By-Laws may be altered, amended, or repealed and new By-Laws
adopted by two-thirds (2/3) affirmative vote of the shareholder voting power
or by the written consent of the shareholders possessing this power.
CERTIFICATE
I CERTIFY that the foregoing By-Laws were unanimously adopted by the
Board of Directors of this corporation at their duly called meeting on the
day of
___________________, _________________
/s/Robert A. Callaway
Secretary
ATTEST:
/s/ James E. Ernst
President
t:\gtimms\casmagic\pledgeag.04 02/03/97 5:30PM
8
ACCOUNTS PLEDGE AGREEMENT
THIS ACCOUNTS PLEDGE AGREEMENT (the "AGREEMENT") is made and
entered
into as of August 22, 1996 by Casino Magic of Louisiana, Corp., a Louisiana
corporation (the "DEBTOR"), whose address is 711 Casino Magic Drive, Bay St.
Louis, Missouri 39520, in favor of First Union Bank of Connecticut, a
Connecticut state banking corporation (the "SECURED PARTY") whose address is
10 State Street Square, Hartford, Connecticut 06103-3698, for the benefit of
the holders ("HOLDERS") of the $115,000,000 First Mortgage Notes due 2003
With Contingent Interest (the "NOTES").
WITNESSETH
WHEREAS, the Debtor is the issuer of the Notes pursuant to that
certain Indenture dated as of the date hereof (the "INDENTURE"), by and
among the Debtor, Jefferson Casino Corporation and Secured Party.
WHEREAS, the Debtor and the Secured Party have entered into that
certain Cash Collateral and Disbursement Agreement dated as of the date hereof
(the "DISBURSEMENT AGREEMENT"), with First National Bank of Commerce (said
Party, or any successor "Disbursement Agent" under the Disbursement Agreement,
hereinafter referred to as the "Agent") providing for (a) the Debtor to escrow
the proceeds of the issuance of the Notes into certain accounts to be held by
the Agent in trust for the benefit of the Debtor and pledged to the Secured
Party and (b) the disbursement of funds held in such accounts. When
capitalized and used herein, terms defined in the Disbursement Agreement and
not otherwise defined herein shall have the meanings ascribed to them in the
Disbursement Agreement; and
WHEREAS, the Secured Party has required, as a condition precedent to
entering into the Disbursement Agreement, that the Debtor shall have made the
pledge contemplated by this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and in order to
induce the Secured Party to enter into the Disbursement Agreement, the Debtor
agrees with the Secured Party for its benefit as follows:
Pledge. The Debtor hereby pledges to the Secured Party for
its benefit, and grants to the Secured Party for the benefit of the holders of
the Notes, a security interest in the following collateral (the "PLEDGED
COLLATERAL"): Pledge. The Debtor hereby pledges to the Secured Party
for its benefit, and grants to the Secured Party for the benefit of the
holders of the Notes, a security interest in the following collateral (the
"PLEDGED COLLATERAL"):
all of Debtor's right, title and interest in and to the
Accounts (including without limitation the Interest Reserve Account, the
Construction Disbursement Account, the Completion Reserve Account, the
Operating Reserve Account, the Escrow Account and the Disbursement Funds
Account) and all funds, assets, securities, accounts or investments from time
to time credited thereto or deposited therein (the "PLEDGED SECURITIES"),
together with all additions to, replacements of or substitutions for such
Accounts and Pledged Securities and other assets, and all income, interest,
and dividends (stock or otherwise) thereon; all of Debtor's right,
title and interest in and to the Accounts (including without limitation the
Interest Reserve Account, the Construction Disbursement Account, the
Completion Reserve Account, the Operating Reserve Account, the Escrow Account
and the Disbursement Funds Account) and all funds, assets, securities,
accounts or investments from time to time credited thereto or deposited
therein (the "PLEDGED SECURITIES"), together with all additions to,
replacements of or substitutions for such Accounts and Pledged Securities and
other assets, and all income, interest, and dividends (stock or otherwise)
thereon;
all cash, instruments and other rights, property or
proceeds or products from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Accounts or the
Pledged Securities; all cash, instruments and other rights, property or
proceeds or products from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Accounts or the
Pledged Securities;
all other claims of any kind or nature, and any
instruments, certificates, chattel paper or other writings evidencing such
claims, whether in contract or tort and whether arising by operation of law,
consensual agreement or otherwise, at any time acquired by Debtor as owner of
any Account or Pledged Security; and all other claims of any kind or
nature, and any instruments, certificates, chattel paper or other writings
evidencing such claims, whether in contract or tort and whether arising by
operation of law, consensual agreement or otherwise, at any time acquired by
Debtor as owner of any Account or Pledged Security; and
to the extent not included in any of the foregoing, all
proceeds and products of the foregoing. to the extent not included in any
of the foregoing, all proceeds and products of the foregoing.
Security for Obligations. The Pledged Collateral secures and
shall hereafter secure (i) the payment by Debtor to the Holders or Secured
Party of all indebtedness now or hereafter owed to the Holders or Secured
Party by Debtor in connection with the transactions related to the Notes and
the Indenture (the "BOSSIER CITY FINANCING"), whether at stated maturity, by
acceleration or otherwise, including, without limitation, Debtor's obligations
under the Indenture, the Notes or any related documents securing the
obligations thereunder, together with any interest thereon, payments for early
termination, fees, expenses, increased costs, indemnification or otherwise, in
connection therewith and extensions, modifications and renewals thereof, (ii)
the performance by Debtor of all other obligations and the discharge of all
other liabilities of Debtor to the Holders or Secured Party of every kind and
charac-ter arising from the Bossier City Financing, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, joint, several, joint and several (i.e., solidary), and
whether created under this Agreement or any other agreement to which Debtor
and Secured Party are parties, (iii) any and all sums advanced by Secured
Party in order to preserve the Pledged Collateral or preserve Secured Party's
security interest in the Pledge Collateral (or the priority thereof), and (iv)
the expenses of retaking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Pledged Collateral, of any
proceeding for the collection or enforcement of any indebtedness, obligations
or liabilities of Secured Party referred to above, or of any exercise by
Secured Party of its rights hereunder, together with reasonable attorneys'
fees and disbursements and court costs (collectively, the "OBLIGATIONS"). All
payments and performance by Debtor with respect to any Obligations shall be in
accordance with the terms under which said indebtedness, obligations and
liabilities were or are hereafter incurred or created.
Security for Obligations. The Pledged Collateral secures and shall
hereafter secure (i) the payment by Debtor to the Holders or Secured Party of
all indebtedness now or hereafter owed to the Holders or Secured Party by
Debtor in connection with the transactions related to the Notes and the
Indenture (the "BOSSIER CITY FINANCING"), whether at stated maturity, by
acceleration or otherwise, including, without limitation, Debtor's obligations
under the Indenture, the Notes or any related documents securing the
obligations thereunder, together with any interest thereon, payments for early
termination, fees, expenses, increased costs, indemnification or otherwise, in
connection therewith and extensions, modifications and renewals thereof, (ii)
the performance by Debtor of all other obligations and the discharge of all
other liabilities of Debtor to the Holders or Secured Party of every kind and
charac-ter arising from the Bossier City Financing, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, joint, several, joint and several (i.e., solidary), and
whether created under this Agreement or any other agreement to which Debtor
and Secured Party are parties, (iii) any and all sums advanced by Secured
Party in order to preserve the Pledged Collateral or preserve Secured Party's
security interest in the Pledge Collateral (or the priority thereof), and (iv)
the expenses of retaking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the Pledged Collateral, of any
proceeding for the collection or enforcement of any indebtedness, obligations
or liabilities of Secured Party referred to above, or of any exercise by
Secured Party of its rights hereunder, together with reasonable attorneys'
fees and disbursements and court costs (collectively, the "OBLIGATIONS"). All
payments and performance by Debtor with respect to any Obligations shall be in
accordance with the terms under which said indebtedness, obligations and
liabilities were or are hereafter incurred or created.
Perfection of Security Interest. The Debtor shall take all
steps necessary or appropriate in order to evidence, perfect and protect the
security interest herein granted to the Secured Party as a first priority
security interest in the Pledged Collateral. Such steps shall include without
limitation the steps described in Section 2 of the Disbursement Agreement, and
any further steps reasonably requested by the Disbursement Agent.
Perfection of Security Interest. The Debtor shall take all steps necessary
or appropriate in order to evidence, perfect and protect the security interest
herein granted to the Secured Party as a first priority security interest in
the Pledged Collateral. Such steps shall include without limitation the steps
described in Section 2 of the Disbursement Agreement, and any further steps
reasonably requested by the Disbursement Agent.
Further Assurances. The Debtor agrees that at any time and
from time to time, at the expense of the Debtor, the Debtor will promptly
execute and deliver and will cause the Agent to execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Secured Party or Agent may request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Secured Party to exercise and enforce its
rights and remedies hereunder with respect to any Pledged Collateral and to
carry out the provisions and purposes hereof. Further Assurances.
The Debtor agrees that at any time and from time to time, at the expense of
the Debtor, the Debtor will promptly execute and deliver and will cause the
Agent to execute and deliver all further instruments and documents, and take
all further action, that may be necessary or desirable, or that the Secured
Party or Agent may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Secured
Party to exercise and enforce its rights and remedies hereunder with respect
to any Pledged Collateral and to carry out the provisions and purposes hereof.
Subsequent Changes Affecting Collateral; Transfers and Other
Liens; Additional Indebtedness. Subsequent Changes Affecting Collateral;
Transfers and Other Liens; Additional Indebtedness.
The Debtor represents to the Secured Party that the Debtor
has made its own arrangements for keeping informed of changes or potential
changes affecting the Pledged Collateral, and the Debtor agrees that the
Secured Party shall have no responsibility or liability for informing the
Debtor of any such changes or potential changes or for taking any action or
omitting to take any action with respect thereto. The Debtor represents to
the Secured Party that the Debtor has made its own arrangements for keeping
informed of changes or potential changes affecting the Pledged Collateral, and
the Debtor agrees that the Secured Party shall have no responsibility or
liability for informing the Debtor of any such changes or potential changes or
for taking any action or omitting to take any action with respect thereto.
The Debtor agrees that it will not, except as permitted by
the Disbursement Agreement, (i) sell or otherwise dispose of, or grant any
option with respect to, any of the Pledged Collateral or (ii) create or permit
to exist any lien upon or with respect to any of the Pledged Collateral except
pursuant to this Agreement. The Debtor agrees that it will not, except as
permitted by the Disbursement Agreement, (i) sell or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral or (ii) create
or permit to exist any lien upon or with respect to any of the Pledged
Collateral except pursuant to this Agreement.
The Debtor agrees that it will (i) cause the obligors or
issuers thereunder not to issue any other debt or other securities in
substitution for the Pledged Collateral except to the Debtor (or, in the event
that such Pledged Collateral is credited to or deposited into an Account, to
such Account), and (ii) deliver hereunder to the Agent immediately upon its
acquisition (directly or indirectly) thereof, any and all writings evidencing
any additional Pledged Collateral. The Debtor agrees that it will (i)
cause the obligors or issuers thereunder not to issue any other debt or other
securities in substitution for the Pledged Collateral except to the Debtor
(or, in the event that such Pledged Collateral is credited to or deposited
into an Account, to such Account), and (ii) deliver hereunder to the Agent
immediately upon its acquisition (directly or indirectly) thereof, any and all
writings evidencing any additional Pledged Collateral.
The Debtor agrees that any or all payments and
distributions made under the Pledged Collateral shall be deposited directly in
the applicable Account. The Debtor agrees that any or all payments and
distributions made under the Pledged Collateral shall be deposited directly in
the applicable Account.
If received by the Debtor, such payments and distributions
shall be received in trust for the benefit of the Secured Party, shall be
segregated from other property or funds of Debtor and shall forthwith be
deposited into the Account in the same form as so received (with any necessary
endorsement). If received by the Debtor, such payments and distributions
shall be received in trust for the benefit of the Secured Party, shall be
segregated from other property or funds of Debtor and shall forthwith be
deposited into the Account in the same form as so received (with any necessary
endorsement).
Secured Party Appointed Attorney-in-Fact. The Debtor hereby
appoints the Secured Party the Debtor's attorney-in-fact, with full authority
in the place and stead of the Debtor and in the name of the Debtor or
otherwise, from time to time in the Secured Party's discretion, to take any
action and to execute any instrument which the Secured Party may deem
necessary or advisable to accomplish the purposes of this Agreement.
Secured Party Appointed Attorney-in-Fact. The Debtor hereby appoints the
Secured Party the Debtor's attorney-in-fact, with full authority in the place
and stead of the Debtor and in the name of the Debtor or otherwise, from time
to time in the Secured Party's discretion, to take any action and to execute
any instrument which the Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement.
Secured Party May Perform. If the Debtor fails to perform
any agreement contained herein, the Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of the Agent incurred in
connection therewith shall be payable by the Debtor. Secured Party May
Perform. If the Debtor fails to perform any agreement contained herein, the
Secured Party may itself perform, or cause performance of, such agreement, and
the expenses of the Agent incurred in connection therewith shall be payable by
the Debtor.
Default and Remedies. Default and Remedies.
It shall Constitute an "EVENT OF DEFAULT" hereunder if
an Event of Default occurs under the Disbursement Agreement. It shall
Constitute an "EVENT OF DEFAULT" hereunder if an Event of Default occurs
under the Disbursement Agreement.
Upon the occurrence of an Event of Default, the Secured
Party may exercise in respect of the Pledged Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it, all the
rights and remedies of a secured party under the Uniform Commercial Code (the
"CODE") in effect in the State of Louisiana at that time, and the rights and
remedies provided in the Indenture, the Secured Party may also, without notice
except as specified below, (i) perform any of the Debtor's obligations under
this Agreement for the Debtor's account. Any money expended or obligations
incurred in doing so, including reasonable attorney's fees and interest at the
rate provided in the Notes, will be charged to the Debtor and added to the
obligation secured by this Agreement; (ii) take immediate possession of the
Pledged Collateral; and (iii) sell the Pledged Collateral or any part thereof
in one or more parcels at one or more public or private sales, at any
exchange, broker's board or at any of the Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Secured Party may deem commercially reasonable. The Debtor
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable to the seller than if such sale were a public sale.
The Debtor agrees that, to the extent notice of sale shall be required by
law, at least ten days' notice to the Debtor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Secured Party, in its discretion, if
permitted by law, may bid (which bid may be, in whole or in part, in the form
of cancellation of indebtedness) for and purchase for its account the whole or
any part of the Pledged Collateral at any public sale or sale on any
securities exchange or other recognized market. Notwithstanding the
foregoing, the Secured Party shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. The
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
Each purchaser at any such sale shall acquire the property sold free and clear
of any claim or right of the Debtor or the Agent. Upon
the occurrence of an Event of Default, the Secured Party may exercise in
respect of the Pledged Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights and remedies
of a secured party under the Uniform Commercial Code (the "CODE") in effect
in the State of Louisiana at that time, and the rights and remedies provided
in the Indenture, the Secured Party may also, without notice except as
specified below, (i) perform any of the Debtor's obligations under this
Agreement for the Debtor's account. Any money expended or obligations
incurred in doing so, including reasonable attorney's fees and interest at the
rate provided in the Notes, will be charged to the Debtor and added to the
obligation secured by this Agreement; (ii) take immediate possession of the
Pledged Collateral; and (iii) sell the Pledged Collateral or any part thereof
in one or more parcels at one or more public or private sales, at any
exchange, broker's board or at any of the Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Secured Party may deem commercially reasonable. The Debtor
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable to the seller than if such sale were a public sale.
The Debtor agrees that, to the extent notice of sale shall be required by
law, at least ten days' notice to the Debtor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Secured Party, in its discretion, if
permitted by law, may bid (which bid may be, in whole or in part, in the form
of cancellation of indebtedness) for and purchase for its account the whole or
any part of the Pledged Collateral at any public sale or sale on any
securities exchange or other recognized market. Notwithstanding the
foregoing, the Secured Party shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. The
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
Each purchaser at any such sale shall acquire the property sold free and clear
of any claim or right of the Debtor or the Agent.
Any cash held by the Secured Party as Pledged Collateral
and all cash proceeds received by the Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral may, in the discretion of the Secured Party, be held by the Secured
Party as collateral for, and/or then or at any time thereafter applied (after
payment of an amounts payable to the Secured Party pursuant to the Indenture)
in whole or in part by the Secured Party against all or any part of the
Obligations for the ratable benefit of the holders of the Notes. Any
cash held by the Secured Party as Pledged Collateral and all cash proceeds
received by the Secured Party in respect of any sale of, collection from, or
other realization upon all or any part of the Pledged Collateral may, in the
discretion of the Secured Party, be held by the Secured Party as collateral
for, and/or then or at any time thereafter applied (after payment of an
amounts payable to the Secured Party pursuant to the Indenture) in whole or in
part by the Secured Party against all or any part of the Obligations for the
ratable benefit of the holders of the Notes.
The provisions of this Subsection 8(d) shall, without
limiting the generality of any other provision of this Agreement, be
applicable in the event any foreclosure shall take place in Louisiana on any
Pledged Collateral or, in connection with any foreclosure hereunder, Louisiana
law shall otherwise be applicable. Secured Party, instead of exercising the
power of sale herein conferred upon it, may proceed by a suit or suits at law
or in equity to foreclose this Agreement and sell the Pledged Collateral, or
any portion thereof,
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
Attorneys At Law
A Registered Limited Liability Partnership
Including Professional Corporations
Washington, D.C. 1500 NationsBank Plaza Brussels, Belgium
Dallas, Texas 300 Convent Street Moscow, Russia
Austin, Texas San Antonio, Texas 78205
Houston, Texas (210) 270-0800
New York, New York Fax (210) 224-2035
January 27, 1997
Casino Magic of Louisiana, Corp.
Jefferson Casino Corporation
1701 Old Minden Road
Bossier City, Louisiana 71111
Gentlemen:
We have acted as counsel to Casino Magic of Louisiana, Corp., a Louisiana
corporation (the "Company"), and its parent corporation, Jefferson Casino
Corporation ("Jefferson Corp." or the "Guarantor"), a Louisiana corporation,
in connection with the Indenture dated August 22, 1996 among the Company,
Jefferson Corp. and First Union Bank of Connecticut as Trustee (the
"Indenture"), the Registration Rights Agreement dated August 22, 1996 (the
"Registration Rights Agreement") among the Company, the Guarantor and
Wasserstein Perella Securities, Inc., Jefferies & Company, Inc. and Deutsche
Morgan Grenfell (the latter three persons collectively the "Initial
Purchasers") and the exchange offer (the "Exchange Offer") pursuant to the
Registration Rights Agreement of up to $115 million aggregate principal amount
of 13% Series B First Mortgage Notes Due 2003 with Contingent Interest (the
"Series A Notes") and together with the Series B Notes, the "Notes"). Any
capitalized term used in this opinion letter which is not defined herein shall
have the meaning attributed to same in the Indenture. We have also acted as
counsel to the Company and Guarantor in connection with a registration
statement on Form S-4 (No. 333-14535) filed on October 21, 1996 with the
Securities and Exchange Commission (the "Registration Statement"), as required
by the Registration Rights Agreement, and we hereby consent to the filing of
this opinion as an exhibit to the Registration Statement and to the reference
to this firm in the prospectus included in the Registration Statement under
the caption "Legal Matters."
This firm is a registered limited liability partnership organized under
the laws of the State of Texas. The opinions hereinafter set forth are
limited to questions arising under the laws of the State
of New York and the Federal Laws of the United States of America, and no
opinion is expressed as to the laws of any other jurisdiction.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
Casino Magic of Louisiana, Corp.
January 27, 1997 -- Page 2
In connection with this opinion letter we have examined copies of the
following (the "Transaction Documents").
1. Purchase Agreement between Casino Magic of Louisiana, Corp., and
Wasserstein Perella Securities, Inc., Jefferies & Company, Inc. and Deutsche
Morgan Grenfell/C.J. Lawrence, Inc. as Initial Purchasers of the $115,000
First Mortgage Notes due 2003 (the "Purchase Agreement").
2. The Indenture and the forms of Notes attached thereto.
3. The Registration Rights Agreement.
4. Stock Pledge and Security Agreement by Jefferson Casino
Corporation in favor of First Union Bank of Connecticut as trustee for the
benefit of the holders of the Notes (the "Stock Pledge and Security
Agreement") (collectively, such documents, Nos. 1-4 above, referred to as the
"New York Documents"). We have also examined copies of certain of the other
Collateral Documents.
In addition, we have examined originals or photostatic, certified or
conformed copies of all such agreements, documents, instruments, corporate
records, certificates of public officials, public records and certificates of
officers of the Company and Jefferson Corp. as we have deemed necessary or
appropriate in the circumstances. In our examination, we have assumed (i) the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies thereof, and the
authenticity of the originals of such certified or photostatic copies; (ii)
the due authorization, execution and delivery of all agreements and documents
by all parties other than the Company or Jefferson Corp.; (iii) the legal
right, power, and authority of all such parties other than the Company or
Jefferson Corp. under all applicable laws and regulations to enter into,
execute and deliver such agreements and documents and to consummate the
transactions contemplated thereby; and (iv) that the New York Documents and
the Collateral Documents are legal, valid and binding obligations of the
Initial Purchasers, the Trustee, and any other Person or party thereto other
than the Company or Jefferson Corp., enforceable against such persons in
accordance with their respective terms. In addition, we have relied upon
factual representations made to us by the Company and Jefferson Corp. and the
assumptions set forth herein.
Based upon and subject to the foregoing and subject to the
qualifications, exceptions, assumptions and limitations set forth below, we
are of the opinion that:
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
Casino Magic of Louisiana, Corp.
January 27, 1997 -- Page 3
1. The Series B Notes (including the guarantee thereon by the
Guarantor), when authenticated by the Trustee and issued and delivered in
accordance with the terms of the Exchange Offer and the Indenture, will have
been duly and validly authenticated, issued and delivered and will constitute
valid and binding obligations of the Company and Jefferson Corp., enforceable
against the Company and Jefferson Corp. in accordance with their terms and
entitled to the benefits provided by the Indenture.
2. The Indenture has been duly executed and delivered by the Company
and Jefferson Corp. and constitutes a valid and binding obligation of the
Company and Jefferson Corp., enforceable against the Company and Jefferson
Corp. in accordance with its terms.
3. The Stock Pledge Agreement has been duly executed and delivered by
Jefferson Corp. and constitutes a valid and binding obligation of Jefferson
Corp., enforceable against Jefferson Corp.
The foregoing opinions are subject to the following qualifications,
exceptions, assumptions and limitations:
A. The enforceability of the Indenture and the Series B Notes may be
(a) limited by and subject to applicable liquidation, conservatorship,
bankruptcy, insolvency, reorganization, fraudulent transfer or conveyance,
moratorium or other similar laws affecting creditors' rights generally from
time to time in effect; (b) subject to general principles of equity,
commercial reasonableness and conscionability (regardless of whether applied
in a proceeding in equity or at law); and (c) limited by or subject to the
powers of courts to award damages in lieu of equitable remedies.
B. We express no opinion as to the enforceability of any provision
purporting to (i) waive the benefits of any statute of limitation or any
applicable bankruptcy, insolvency, stay, extension, waiver or usury law or
waive any rights under any applicable statutes or rules hereafter enacted or
promulgated; (ii) covenant to take actions, the taking of which is
discretionary with or subject to the approval of a third party or which are
otherwise subject to a contingency, the fulfillment of which is not within the
control of the party so covenanting; (iii) restricting access to legal or
equitable remedies (including without limitation, proper jurisdiction or
venue).
C. The phrase "to our knowledge" as used in this opinion letter means
the current actual factual knowledge of the lawyers in the San Antonio and New
York offices of this firm who have given substantive legal representation to
the Company or Jefferson Corp. (collectively, the "Participating Attorneys").
We reiterate that our opinions as to matters of law are limited to laws
specified in the second paragraph of this opinion letter.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
Casino Magic of Louisiana, Corp.
January 27, 1997 -- Page 4
D. The opinions expressed as to the enforceability of the choice of
law as between the contracting parties is qualified to the extent that the
following matters relating to the New York Documents or rights or obligations
of a party thereunder may be governed by the laws of states other than New
York: (i) title to assets, due formation and existence of the Company and
Jefferson Corp., their corporate power to enter into such documents, the
authorization of such documents by all necessary action on the part of the
Company and Jefferson Corp. and similar matters governed by applicable laws of
the State of Louisiana or other states where the assets are located; and (ii)
laws of jurisdictions other than the State of New York applicable to the
assignment, conveyance or other transfer of property of the Company and
Jefferson Corp.
This letter and the matters addressed herein are as of the date hereof,
and we undertake no, and hereby disclaim any, obligation to advise you of any
change in any matter set forth herein occurring after the date hereof. This
letter is solely for your benefit and no other persons shall be entitled to
rely upon the opinions herein expressed. This letter is limited to the
matters stated herein and no opinion is implied or may be inferred beyond the
matters expressly stated. Without our prior written consent, this letter may
not be quoted in whole or in part or otherwise referred to in any documents
and may not be furnished to any other person or entity, except that you may
furnish copies hereof (a) to your independent auditors and attorneys, (b) to
any state or federal authority having regulatory jurisdiction over you, (c)
pursuant to order or legal process of any court or government agency; or (d)
in connection with any legal action to which you are a party arising out of
the above transactions.
Very truly yours,
/s/ Akin, Gump, Strauss, Hauer & Feld, L.L.P.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
HOFFMAN
SUTTERFIELD
ENSENAT
A Professional Law Corporation
Baton Rouge, LA 70821-4407
P.O. Drawer 4407
2431 South Acadian Thruway
Suite 600
New Orleans, LA 70130-6121 Telephone (504)928-6800 Houston, TX 770002
Suite 2100 Poydras Center Fax (504) 923-0573 Texas Commerce Tower
650 Poydras Street 600 Travis, Ste 2860
Telephone (504) 523-1385 Tel (713) 227-5505
Fax (504) 524-6891 Fax (713) 227-2733
January 28, 1997
Casino Magic of Louisiana, Corp.
Jefferson Casino Corporation
1701 Old Minden Road
Bossier City, LA 71111
RE: Opinion Letter - Casino Magic of Louisiana, Corp.
$115,000,000 13% First Mortgage Notes due 2003
Our File No. C0622-010
Gentlemen:
We have acted as special counsel to Casino Magic of Louisiana, Corp., a
Louisiana corporation ("CM-LA") and Jefferson Casino Corporation ("JCC"), a
Louisiana corporation, in connection with the issuance and sale of
$115,000,000 First Mortgage Notes Due 2003 in August 1996 (the "Series A
Notes") and deliver this opinion at your request in connection with the
exchange offer (the "Exchange Offer") pursuant to which up to $115,000,000
First Mortgage Notes due 2003 with Contingent Interest ( the "Series B Notes")
are being offered by CM-LA (guaranteed like the Series A Notes by JCC) in
exchange for the Series A Notes. The Series B Notes are substantially
identical to the Series A Notes except that we understand the Series B Notes
are being registered under the Securities Act of 1933, as amended (the
"Securities Act") pursuant to a Form S-4 registration (No. 333-14535) (the
"Registration Statement"), The Series A Notes and Series B Notes are
collectively referred to herein as the "Notes". The Series B Notes, like the
Series A Notes, will be issued pursuant to the Indenture dated August 22,
1996, between CM-LA, JCC and First Union Bank of Connecticut, the Trustee (the
"Trustee"). We understand that in connection with the Registration Statement,
the Indenture is being qualified under the Trust Indenture Act of 1939, as
amended (the "TIA") and, although we are not securities law counsel for CM-LA
and do not otherwise opine pursuant hereto as to compliance with the
Securities Act or the TIA, we render this opinion at your request with respect
to the matters expressly set forth herein in compliance with requirements of
the TIA. We further consent to the filing of
this Opinion by you as an exhibit to the Registration Statement. We
understand that the Notes were issued for the development, construction,
equipping and
Casino Magic of Louisiana, Corp.
January 28, 1997
Page 2
opening of a new dockside riverboat casino and entertainment complex located
in Bossier City, Louisiana ("Casino Magic-Bossier City"). All terms not
defined in this Opinion shall have the same meaning as that provided for in
the Indenture.
In the capacity described above and to the extent described above, we
have examined the following:
A. Mortgage by CM-LA in favor of First Union Bank of Connecticut
as trustee for the benefit of the holders of the Notes.
B. Security Agreement between CM-LA, as debtor, and First Union
Bank of Connecticut, as trustee for the benefit of the holders of the Notes.
C. Security Agreement between JCC, as debtor, and First Union
Bank of Connecticut, as trustee for the benefit of the holders of the Notes.
D. Collateral Assignment by and among CM-LA in favor of First
Union Bank of Connecticut as trustee for the benefit of the holders of the
Notes.
E. Contracting Party's Consent to Assignment for the benefit of
First Union Bank of Connecticut, as trustee for the benefit of the holders of
the Notes.
F. Stock Pledge and Security Agreement by JCC in favor of First
Union Bank of Connecticut as trustee for the benefit of the holders of the
Notes.
G. Cash Collateral and Disbursement Agreement by and among the
Disbursement Agent, First Union Bank of Connecticut, as trustee for the
benefit of the holders of the Notes, the Independent Construction Consultant
and CM-LA.
H. Accounts Pledge Agreement by CM-LA as Debtor in favor of
First Union Bank of Connecticut, as trustee for the benefit of the holders of
the Notes, and the Agent.
I. I have examined UCC-1 filings which were necessary for
confirmation of the transactions contemplated by the Indenture, Notes and
Purchase Agreement.
J. First Preferred Ship Mortgage granted by CM-LA in favor of
First Union Bank of Connecticut as trustee for the benefit of the holders of
the Notes on the M/V Mary's Prize, Official Number 1028011.
K. First Preferred Ship Mortgage granted by Casino Magic of
Louisiana, Corp. in favor of First Union Bank of Connecticut,
Casino Magic of Louisiana, Corp.
January 28, 1997
Page 3
as trustee for the benefit of the holders of the Notes on the
M/V Crescent City Queen, Official Number 1028319.
L. Title Commitments dated July 19, 1996 issued by Louisiana
Title to JCC, No. LT 16190-A, B, C and D, covering property in Bossier/Caddo
Parishes, Louisiana.
M. Indemnity Agreement between Stewart Title Company, JCC, CM-LA
and Casino Magic Corp.
N. Indenture by CM-LA as issuer, JCC as guarantor and First
Union Bank of Connecticut as trustee for the benefit of the holders of the
Notes, and the forms of Notes attached thereto.
O. Department of Transportation, U. S. Coast Guard, General
Index or Abstract of Title for M/V Crescent City Queen, Official Number
1028319 dated the 19th day of August, 1996.
P. Department of Transportation, U. S. Coast Guard, General
Index or Abstract of Title for M/V Mary's Prize dated the 29th day of July,
1996.
Q. Louisiana Uniform Commercial Code Certificate of Search on
Business Name "Casino Magic of Louisiana, Corp.".
R. Louisiana Uniform Commercial Code Certificate of Search on
Business Name "Jefferson Casino Corporation".
Documents shown in (L) through (R) are collectively referred to as "the
Transaction Documents". The documents reflected in (A) through (K) above are
collectively referred to as "the Collateral Documents". All documents listed
above are collectively called Documents.
Basing the opinions set forth in this Opinion on "our knowledge", the
words "our knowledge" signify that, in the course of our representation of
CM-LA and JCC, no facts have come to our attention that would give us actual
knowledge or actual notice that any such opinions or other matters are not
accurate or that any of the Documents are not accurate and complete. Except
as otherwise stated in this Opinion, we have undertaken no investigation or
verification of such matters. Further, the words "our knowledge" and similar
language used in this Opinion are intended to be limited to the actual
knowledge of the attorneys within our firm who have been directly involved in
representing CM-LA and JCC in connection with the Indebtedness or who we
reasonably believe have knowledge of the affairs of CM-LA and JCC.
In reaching the opinions set forth below, we have assumed, and to our
knowledge there are no facts inconsistent with, the following:
(1) Each of the parties to the Documents, other than CM-LA and
JCC, has or will duly and validly execute and deliver each
Casino Magic of Louisiana, Corp.
January 28, 1997
Page 4
such instrument, document, and agreement to be executed in
connection with Casino Magic - Bossier City to which such party is a
signatory, and such parties' obligations set forth in the Documents are its
legal, valid and binding obligations, enforceable in accordance with their
respective terms.
(2) Each person, other than CM-LA and JCC, executing any of the
Documents, whether individually or on behalf of an entity, is duly authorized
to do so.
(3) Each natural person executing any of the Documents is
legally competent do to so.
(4) All signatures of parties other than CM-LA and JCC on the
Documents are genuine.
(5) We have relied on the representations and warranties as to
factual matters made by CM-LA, JCC and their officers as being true and
complete.
(6) Documents submitted to us as originals are authentic, all
Documents submitted to us as certified or photostatic copies conform to the
original document, and all public records reviewed are accurate and complete.
(7) The terms and conditions of the Notes and Indenture as
reflected in the Documents have not been amended, modified or supplemented by
any other agreement or understanding of the parties or waiver of any of the
material provisions of the Documents.
(8) The terms of the Indenture and the Notes will apply to and
prevail over conflicting provisions in the Collateral Documents.
(9) The Trustee is a properly appointed trustee pursuant to the
TIA.
(10) That CM-LA has and will continue to timely perform all of
the conditions and requirements of and under its Certificate of Preliminary
Approval from the Louisiana Riverboat Gaming Commission; its operator's
license from the Department of Public Safety and Correction, Office of State
Police Riverboat Gaming Enforcement Division and all other conditions and
requirements imposed by the Louisiana Gaming Control Board and its rules and
regulations in Louisiana.
We have no knowledge that any of the assumptions are untrue, but have
performed no investigation or verification of such assumption.
Casino Magic of Louisiana, Corp.
January 28, 1997
Page 5
Based on and subject to the assumptions, exceptions, limitations, and
qualifications set forth herein, it is our opinion that:
a. CM-LA and JCC each have the requisite corporate power and
authority to execute, deliver and perform its obligations under the
Transaction Documents to which it is a party; each of the Transaction
Documents to which it is a party has been duly authorized, executed and
delivered by or on behalf of CM-LA and JCC, as the case may be.
b. All necessary corporate action has been taken to authorize
the execution, delivery and performance under the Documents by CM-LA and JCC.
The individual or individuals who have executed the Documents on behalf of
CM-LA and JCC have the authority to bind CM-LA and JCC to the terms and
conditions and to the performance of their obligations under the Documents.
c. No authorization, consent, approval or other action by, and
no further notice to or filing with, any state or federal court, governmental
authority or regulatory body, including the Louisiana Department of Public
Safety and Corrections, Riverboat Gaming Enforcement Division of the Office of
State Police ("Division"), the Louisiana Riverboat Gaming Commission
("Commission") or the Louisiana Gaming Control Board ("Board"), is required
for the due execution, performance, validity, enforceability, and delivery by
CM-LA and JCC of the Documents except as may be limited by Sections AAA, BBB,
CCC, and DDD of this opinion.
d. The Collateral Documents governed by the laws of the State of
Louisiana, have been duly executed and delivered by the CM-LA and JCC, to the
extent they are a party thereto and (assuming the due authorization, execution
and
delivery by the other parties thereto) constitute legally valid
and binding obligations of CM-LA or JCC, as the case may be, enforceable
against CM-LA or JCC, as the case may be, in accordance with their respective
terms except as enforceability may be limited by Louisiana gaming law and
applicable bankruptcy, insolvency, reorganization, moratorium on similar laws
affecting the enforcement of creditors' rights generally and general
principals of equity regardless of whether such enforcement may be sought in a
proceeding in equity or at law.
e. The Mortgage creates (1) a valid mortgage lien on the
portions of the Mortgaged Property described therein consisting of immovable
property and all fixtures (component parts), (2) a valid pledge lien of the
right to receive proceeds attributable to the insurance loss of such Mortgaged
Property and (3) a valid collateral assignment lien on the
Casino Magic of Louisiana, Corp.
January 28, 1997
Page 6
presently existing and anticipated future leases of such
Mortgaged Property and the rents therefrom (collectively the "Louisiana
Mortgage Lien"), all in favor of the Trustee for the ratable benefit of the
holders of the Notes, as the security intended to be created by the Mortgage
for the payment of the obligations under the Indenture, the Notes and the
Guarantee. The Mortgage is in appropriate form for recording in the immovable
property records of a Louisiana parish. The Mortgage has been filed in the
mortgage records of the Clerks of Court of Bossier and Caddo Parishes,
Louisiana; by such recordation, the Louisiana Mortgage Lien created by the
Mortgage has been duly perfected; and such recordation is the only action,
recording or filing necessary to perfect the validity of the Louisiana
Mortgage Lien and
f. The M/V Crescent City Queen and the M/V Mary's Prize are
documented in the name of CM-LA. The Ship Mortgages constitute valid
preferred mortgage liens on the Vessels (including all appurtenances thereof)
pursuant to Chapter 313 of Title 46 of the United States Code (the "Ship
Act"), prior to all other liens other than those expressly granted priority
under the Ship Act over the lien of such preferred mortgages or tort
claimants.
g. The (1) execution of the Stock Pledge and Security Agreement
by JCC, (2) filing of JCC's Financing Statements in the Office of the
Louisiana Secretary of State and the payment of fees due in respect thereof
and (3) obtaining and maintaining possession of any instruments not
constituting part of chattel paper in accordance with Article 9 of the UCC, or
the taking and maintaining of possession of any certificated securities in
accordance with Article 8, have caused the Trustee, for the ratable benefit of
the holders of the Notes, to have, as security for the payment of obligations
under the Indenture, the Notes and the Guarantee, a valid and perfected
security interest or lien in that portion of the Collateral located in
Louisiana and described therein and intended to be created by such Documents,
all of which are capable of being perfected by the filing of a UCC-1 Financing
Statement in favor of the Trustee or by being held in the possession of the
Trustee, as the case may be, and the actions, recordings and filings described
in clauses (1) and (2) are the only actions, recordings and filings necessary
to publish notice of the validity of such security interests or liens
resulting from such filing and to perfect such security interests or liens as
may be perfected by filing, and the possession described in (3) is the only
action necessary to perfect such security interest as may be perfected by
possession.
h. The (1) execution of the Security Agreement by CM-LA, (2)
filing of CM-LA's Financing Statements in the Office of any parish Clerk of
Court in Louisiana and the filing by that
Casino Magic of Louisiana, Corp.
January 28, 1997
Page 7
Clerk of Court in the office of the Louisiana Secretary of
State and (3) payment of fees due in respect thereof, caused the Trustee, for
the ratable benefit of the holders of the Notes, to have, as security for the
payment of obligations under the Indenture, the Notes and the Guarantee, a
valid and perfected security interest or lien in that portion of the
Collateral located in Louisiana and described therein and intended to be
created by such Documents all of which are perfected by the filing of a UCC-1
Financing Statement in favor of the Trustee, and the actions, recordings, and
filings described in clauses (1), (2) and (3) are the only actions, recordings
and filings necessary to publish notice of the validity of such security
interests or liens resulting from such filing and to perfect such security
interests or liens as may be perfected by filing.
i. Assuming the Disbursement Agent will duly comply with
requirements of Section 2 of the Disbursement Agreement, the Trustee for the
benefit of Noteholders, shall at all times through the payments of the Notes
in full will possess a valid and perfected first priority security interest in
the "Accounts" created under the Disbursement Agreement (other than the
Disbursed Funds Account") and all funds, assets, or other investments credited
thereto or deposited therein.
j. The Collateral Assignment executed by CM-LA and the Trustee
creates a valid and binding assignment of CM-LA's right, title and interest in
all of the agreements subject to such Collateral Assignment upon proper
execution of the Contracting Party's Consent to Assignment.
k. The (1) deposit of the proceeds from the sale of the Notes
into the Interest Reserve Account, the Operating Reserve Account, the
Construction Disbursement Account and the Completion Reserve Account, (2)
execution of the Cash Collateral and Disbursement Agreement and the Account
Pledge Agreement by CM-LA and (3) filing of CM-LA's Financing Statements in
any parish Clerk of Court in Louisiana and the filing by that Clerk of Court
in the Office of the Louisiana Secretary of State, caused the Trustee, for the
ratable benefit of the holders of the Notes, to have, as security for the
payment of obligations under the Indenture, the Notes and the Guarantee, a
valid and perfected security interest or lien in the proceeds from the sale of
the Notes deposited in the Interest Reserve Account, the Operating Reserve
Account, the Construction Disbursement Account, and the Completion Reserve
Account, and the investment of such proceeds and the actions and filings
described in clauses (1), (2) and (3) are the only actions and filings
necessary to publish notice of the validity of such security interests or
liens and to
Casino Magic of Louisiana, Corp.
January 28, 1997
Page 8
perfect such security interest or liens as may be perfected by
filing.
In addition to the assumptions set forth above, the opinions set forth
above are also subject to the following qualifications:
I. We express herein no opinion with respect to the Indenture,
First Mortgage Notes, Purchase Agreement or Registration Rights Agreement to
be executed other than the authority of CM-LA and JCC to execute and deliver
these documents.
II. We express no opinions as to the laws of any jurisdiction
other than the laws of the State of Louisiana and the laws of the United
States of America. We assume no obligation to supplement this Opinion if any
applicable laws change after the date of this Opinion, or if we become aware
of any facts that might change the opinions expressed above after the date of
this Opinion.
III. In rendering such opinion, counsel has relied as to matters
of fact, to the extent such counsel deems proper, on certificates of
responsible officers of CM-LA and JCC and certificates or other written
statements of officers of departments of various jurisdictions having custody
of documents respecting the existence or good standing of CM-LA.
We confirm that:
(i) we do not have any financial interest in the Project, or the
Agreement, other than fees for legal services performed by us, payment for
which has been provided;
(ii) other than as counsel for CM-LA and JCC, we have no
interest in them and do not serve as a director, officer or employee of CM-LA
and/or JCC. We have no undisclosed interest in the subject matter of this
Opinion.
The following are Exceptions, Qualifications, Limitations and
Assumptions:
AAA. We know that the Louisiana gaming licenses, permits and
approvals are issued only for a limited term and are by nature revocable
privileges and that the maintenance of a license is subject to a continuing
approval of the issuing agencies.
BBB. The enforceability of the obligations under the Collateral
Documents may be limited by the applications of the Louisiana gaming laws and
of general principals and materiality, reasonableness, fair dealing and good
faith and we express no
Casino Magic of Louisiana, Corp.
January 28, 1997
Page 9
opinion regarding the availability of the remedy of specific
performance, self-help, or any other equitable remedy or relief to enforce any
right under the Collateral Documents or any other agreement or document.
CCC. We call it to your attention the fact that further filing,
re-filing, recordation, registration, or re-registration may be required to
preserve and maintain to the extent established and perfected the security
interests in the Vessels. These subsequent requirements may include, among
others, filing required to be made by CM-LA to change its location and
application for approval of the United States Maritime Administration prior to
the sale of stock, security or ownership interest in CM-LA or the company that
would result from CM-LA's failure to meet the requirements of 46 U.S.C. 802.
DDD. With respect to the Ship Mortgages, we express no opinion
as to (1) the right of Trustee to operate the Vessels; (2) the validity,
creation or perfection of any lien purported to be granted, created or
perfected under the Ship Mortgages other than under Title 46, United States
Code, Chapter 313; (3) the right to enforce the Ship Mortgages in any court
other than the appropriate U. S. District Court; (4) the right to sail the
Vessels pursuant to a Power of Attorney; (5) the right of unlimited access to
the Vessels, and (6) whether the Ship Mortgages create a lien on rates,
leases, rents, earnings, revenues and proceeds arising out of gaming
operations, such lien may not be governed by 46 U.S.C. Chapter 313 nor by
Louisiana law.
EEE. Insofar as they relate to the creation, perfection and
effect of perfection or non-perfection of a security interest, in personal
(movable) property, the opinions set forth in this letter are limited to
collateral which is governed by Louisiana law for the creation, perfection and
effect of perfection or non-perfection of a security interest in personal
(movable) property, as set forth in the Louisiana UCC. We express no opinion
as to laws of any other states other than the State of Louisiana by the
creation, perfection and effect of perfection or non-perfection of a security
interest in collateral subject to the laws of any other state or the United
States except for the Ship Mortgages. We note that the Trustee's rights to
enforce a lien and foreclose on, possess and/or exercise any rights or
remedies with respect to any collateral pursuant to the terms of the
Collateral Documents maybe limited, prescribed and prohibited under the gaming
laws of the State of Louisiana and the rights of the Trustee are subject to
these gaming laws with respect to any assignment, transfer, enforcement,
foreclosure, sale, inspection and/or possession. In this connection we note
that the gaming laws require that the transfer of a gaming
Casino Magic of Louisiana, Corp.
January 28, 1997
Page 10
license or a transfer by any person who owns five (5%) percent
or more of the economic interest of such gaming license along with the
approval for the proposed transferee must be approved by the Louisiana Gaming
Control Board before such transfer shall be effective. Additionally, we note
that the gaming laws provides that a gaming license is revocable and can be
issued for only a maximum five (5) year term. With respect to any security
interest in a gaming license or approvals required therefor, we express no
opinion as to any general intangible which by its terms cannot be transferred,
prohibits the transfer thereof, or in which Louisiana law prohibits the
transfer of a security interest.
FFF. We express no opinion as to the enforceability of (1) any
provision of the Collateral Documents purporting to establish any evidentiary
standard or to waive either legality as a defense to the performance of a
contract, obligations or any other defenses to such performance which cannot,
as a matter of law, be effectively waived; (2) any indemnity provisions
contained in the Collateral Documents; (3) the right of the Trustee or other
party for compensation for services as keeper or receiver without appointment
and approval by the appropriate judicial proceeding; (4) any provisions in the
Collateral Documents purporting to establish jurisdiction or venue with
respect to the parties thereto; (5) any waiver of jury trial contained in the
Collateral Documents; (6) any provisions which confer self-help or equitable
remedies; (7) any provisions which establish methods for service of process or
notice of sale contains any submissions or consents to jurisdictions or
otherwise restricts limits or denies access to courts or to legal or equitable
remedies (8) any provision which allows or authorizes the delay or omission of
enforcement of any remedy, indemnity or consent judgment to the extent the
delay or mission is contrary to a course of dealing or conduct established by
the parties, (9) any provision which establishes non-culpability for actions
taken by or on behalf of any party thereto or any other person, (10) any
provision which provides for the appointment of a receiver or consent guardian
to the extent the appointment of a receiver or consent guardian is governed by
applicable statutory requirements and to the extent of such provision of any
of the Documents may not be in compliance with any such statutory
requirements, (11) any provision which provides for the grant of an
irrevocable power of attorney, (12) any provision which restricts or prohibits
the further encumbrance of any property other than insofar as failure to
comply with any such provision may constitute an Event of Default, (13) any
provision which defines rights relating to exculpation, subrogation (other
than the waiver thereof), waiver or ratification of future acts, trespass,
conversions, negligence or fraud, (14) any provision which permits the Trustee
to accelerate the maturity of the Notes evidenced and
Casino Magic of Louisiana, Corp.
January 28, 1997
Page 11
governed by the Collateral Documents without notice to Casino
Magic of Louisiana or JCC, (15) any provision which establishes standards for
commercial reasonableness as to the extent such standards are manifestly
unreasonable, (16) any provision which prohibits the amendment of any
agreements other than with respect to the creation of an Event of Default or
(17) any provision which provides for the severability of any provision of any
of the Documents where the severed provision is material to such Documents.
GGG. Perfection of the Lien and perfection of a security
interest in movable collateral may lapse by passage of time under Louisiana
Law and may require additional filing or re-filings to extend the perfection
of these liens.
HHH. In light of such exceptions and assumptions as those set
forth above, we note that certain provisions of the Documents are or may be
unenforceable in whole or in part under the laws of the State of Louisiana,
but the inclusion of such provisions does not affect the validity of the
Collateral Documents and the Collateral Documents contain adequate provisions
for enforcing payment of the obligations secured by the Documents and for the
realization of the principal rights and benefits afforded thereby.
The foregoing opinions are for your exclusive reliance and no other
person shall be entitled to rely upon the opinions herein expressed. Without
our prior written consent, this letter may not be quoted in whole or in part
or otherwise referred to in any documents and may not be furnished to any
other person or entity, except that you may furnish copies hereof (a) to your
independent auditors and attorneys, (b) to any state or federal authority
having regulatory jurisdiction over you, including, as noted above, through
the filing of this opinion as an exhibit to the Registration Statement or (c)
pursuant to order or legal process of any court or government agency; or (d)
in connection with any legal action to which you are a party arising out of
the above transactions.
Sincerely,
/s/ Hoffman Sutterfield Ensenat
HOFFMAN SUTTERFIELD ENSENAT
DKR/lla
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
New Orleans, Louisiana
February 4, 1997
EXHIBIT 7
Federal Financial Institutions Examination Council
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
OMS NUMBER: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
OFFICE OF THE Comptroller of the Currency
OMB Number: 1557-008 1
Expires March 31, 1999
PLEASE refer to page i, 1
Table of Contents, for
the required disclosure
OF estimated burden.
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices - FFIEC 031
(960331)
Report at the close of business March 31, 1996 (RCRIS999)
This report is required by law: 12 U.S.C. 324 (State member banks); 12 U.S.C.
1817 (State nonmember banks); and 12 U.S.C. 161 (National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for
State member and National banks.
I, Anthony R. Burriesci, EVP
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and
Income (including the supporting schedules) have been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority
and are true to the best of my knowledge and belief.
/s/ Anthony R. Burriesci
Signature of 0fficer Authorized to Sign Report
April 29, 1996
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
We, THE undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) 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 appropriate
authority and is true and correct.
/s/__________________
Director (Trustee)
/s/ Albert ___________
Director (Trustee)
_______________________
Director (Trustee)
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return THE original and one COPY to the
appropriate Federal Reserve District Bank.
State Nonmember Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
National Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
FDIC Certificate Number 0923O
(RCRI9050)
Banks should affix the address label in this space.
First Union Bank of Connecticut
Legal Title of Bank (TEXT 9010)
P. O. Box 700
City (Text 9130)
Stamford, CT 06904
State Abbrev. (TEXT 9200) ZIP Code (TEXT 9220)
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Call Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Consolidated Report of Income
for the period January 1, 1996-March 31, 1996
PAGE RI-1
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
Schedule RI--Income Statement
I480
Dollar Amounts in Thousands RIAD Bil Mil Thou
1. Interest income:
a. Interest and fee income on loans:
(1) In domestic offices:
(a) Loans secured by real estate 4011 27,812 1.a.(1)(a)
(b) Loans to depository institutions 4019 0 1.a.(1)(b)
(c) Loans to finance agricultural production
and other loans to farmers 4024 3 1.a.(1)(c)
(d) Commercial and industrial loans 4012 7,224 1.a.(1)(d)
(e) Acceptances of other banks 4026 0 1.a.(1)(e)
(f) Loans to individuals for household, family,
and other personal expenditures:
(1) Credit cards and related plans 4054 284 1.a(1)(f)(1)
(2) Other 4055 2,190 1.a.(1)(F)(2)
(g) Loans to foreign governments and official
institutions 4056 0 1.a.(1)(g)
(h) Obiigations (other than securities and Leases)
of states and political subdivisions in the U.S.:
(1) Taxable obligations 4503 7 1.a.(1)(h)(1)
(2) Tax-exempt obligations 4504 100 1.a.(1)(h)(2)
(i) All other loans in domestic offices 4058 43 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement
subsidiaries, and IBFs 4059 0 1.a.(2)
b. Income from lease financing receivables:
(1) Taxable leases 4505 0 1.b.(1)
(2) Tax-exempt leases 4307 0 1.b.(2)
c. Interest income on balances due from
depository institutions:(l)
(1) In domestic offices 4105 530 1.c.(1)
(2) In foreign offices, Edge and Agreement
subsidiaries, and IBFs 4106 0 1.c.(2)
d. Interest and dividend income on securities:
(1) U.S. Treasury securities and U.S.
Government agency and corporation
obligations 4027 1,714 1.d.(1)
(2) Securities issued by states and
political subdivisions in the U.S.:
(a) Taxable securities 4506 0 1.d.(2)(a)
(b) Tax-exempt securities 4507 9 1.d.(2)(b)
(3) Other domestic debt securities 3657 1,403 1.d.(3)
(4) Foreign debt securities 3658 5 1.d.(4)
(5) Equity securities (including
investments in mutual funds) 3659 0 1.d.(5)
e. Interest income from trading assets 4069 0 1.e.
(1) Includes interest income on time certificates of deposit not held
for trading.
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: Po BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
SCHEDULE RI--Continued
Call Date: 3/31/96 ST-SK: 09-1563 FFIEC 031
Page RI-2
Dollar Amounts in Thousand Year-to-date
RIAD Bil Mil Thou
I. Interest income (continued)
f. Interest income on federal funds sold and
securities purchased under agreements to resell
in domestic offices of the bank and of its Edge
and Agreement subsidiaries, and in IBFs 4020 3,345 1.f.
g. Total interest income (sum of items l.a
through l.f) 4107 44,669 1.g.
2. Interest expense:
a. Interest on deposits:
(1) Interest on deposits in domestic offices:
(a) Transaction accounts (NOW accounts, ATS accounts,
and telephone and preauthorized transfer accounts) 4508 772 2.a.(1)(a)
(b) Nontransaction accounts:
(1) Money market deposit accounts
(MMDAS) 4509 2,438 2.a.(1)(b)(1)
(2) Other savings deposits 4511 1,959 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or
more 4174 1,147 2.a.(1)(b)(3)
(4) All other time deposits 4512 6,207 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge
and Agreement subsidiaries, and IBFs 4172 0 2.a.(2)
b. Expense of federal funds purchased and securities
sold under agreements to repurchase in domestic offices
of the bank and of its Edge and Agreement subsidiaries,
and in IBFs 4180 2,434 2.b.
c. Interest on demand notes issued to the U.S.
Treasury, trading liabiLities, and other
borrowed money 4185 0 2.c.
d. Interest on mortgage indebtedness and
obligations under capitalized leases 4072 0 2.d.
e. Interest on subordinated notes and debentures 4200 0 2.e.
f. Total interest expense (sun of items 2.a
through 2.e) 4073 15,002 2.f.
3. Net interest income (item l.g minus 2.f) RIAD 4074 29,667 3.
4. Provisions:
a. Provision for loan and lease losses RIAD 4230 (20,000)
4.a.
b. Provision for allocated transfer risk RIAD 4243 0 4.b.
5. Noninterest income:
a. Income from fiduciary activities 4070 3,103 5.a.
b. Service charges on deposit accounts in
domestic offices 4080 2,984 5.b.
c. Trading revenue (must equal Schedule RI,
sum of Memorandum items 8.a through 8.d) A220 12 5.c.
d. Other foreign transaction gains (losses) 4076 0 5.d.
e. Not applicable
f. Other noninterest income:
(1) Other fee income 5407 1,606 5.f.(1)
(2) All other noninterest income* 5408 320 5.f.(2)
g. Total noninterest income (sum of items
5.a through 5.f) RIAD 4079 8,025 5.g.
6. a. Realized gains (losses) on held-
to-maturity securities RIAD 3521 (1,429)
6.a.
b. Realized gains (losses) on available-
for-sale securities RIAD 3196 0
6.b.
7. Noninterest expense:
a. Salaries and employee benefits 4135 10,086 7.a.
b. Expenses of premises and fixed assets
(net of rental income) excluding salaries
and employee benefits and mortgage interest) 4217 3,999 7.b.
c. Other noninterest expense* 4092 5,398 7.c.
d. Total noninterest expense (sum of
items 7.a through 7.c) RAID 4093 19,483
7.d.
8. Income (loss) before income taxes and
extraordinary items and other adjustments
(item 3 plus or minus items 4.a, 4.b, 5.g,
6.a, 6.b, and 7.d) RIAD 4301 36,780
8.
9. Applicable income taxes (on item 8) RIAD 4302 13,021
9.
10. Income (loss) before extraordinary
items and other adjustments (item 8 minus 9) RIAD 4300 23,759
10.
4.
*DESCRIBE on SCHEDULE RI-E--ExpLanations.
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: Po BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Schedule RI--Continued
Call Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RI-3
Year-to-date
Dollar Amounts in Thousands RIAD BiL MiL
Thou
11. Extraordinary items and other adjustments:
a. Extraordinary items and other adjustments,
gross of income taxes* . 4310 0 ll.a.
b. Applicable income taxes (on item ll.a)* 4315 0 ll.b.
c. Extraordinary items and other adjustments,
net of income taxes
(item ll.a minus ll.b) RIAD 4320 0
11.c.
12. Net income (loss) (sum of items 10 and ll.c) RIAD 4340 23,759
12.
Memoranda I481
Year to date
DOLLAR AMOUNTSin Thousands RIAD Bil Mil
Thou
1. Interest expense incurred to carry tax-
exempt securities, loans, and leases
acquired after August 7, 1986, that is not
deductible for federal income tax purposes 4513 0 M.1.
2. Income from the sale and servicing of
mutual funds and annuities in domestic
offices (included in Schedule RI, item 8) 8431 0 M.2.
3.-4. Not applicable
5. Number of full-time equivalent employees
on payroll at end of current period Number
(round to nearest whole number) 4150 958 M.5.
6. Not applicable
7. If the reporting bank has restated its
balance sheet as a result of applying push down MM DD YY
accounting this calendar year, report the date
of the bank's acquisition 9106 00/00/00 M.7.
8. Trading revenue (from cash instruments
and off-balance sheet derivative instruments)
(sum of Memorandum items 8.a through 8.d
must equal Schedule RI, item 5.c): Bil Mil Thou
a. Interest rate exposures 8757 0 M.8.a.
b. Foreign exchange exposures 8758 12 M.8.b.
c. Equity security and index exposures 8759 0 M.8.c.
d. Commodity and other exposures 8760 0 M.8.d.
9. Impact on income of off-balance sheet
derivatives held for purposes other than trading:
a. Net increase (decrease) to interest income 8761 (6) M.9.a.
b. Net (increase) decrease to interest expense 8762 107 M.9.a.
c. Other (noninterest) allocations 8763 0 M.9.c.
10. Credit losses on off-balance sheet
derivatives (see instructions) A251 0 M.10.
5.
*Describe on Schedule RI-E--ExpLanations.
LEGAL TITLE OF Bank: FIRST UNION BANK OF CONNECTICUT
ADDRESS: PO BOX 700
CITY, STATE Zip: STAMFORD, CT 06904
FDIC CERTIFICATE NO.: 09230
Call Date: 3/31/96 ST-BK:09-1563
Page RI-4
SCHEDULE RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses.
Call Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RI-4
I483
DollarAMOUNTS IN THOUSANDS
RIAD Bil Mil Thou
1. Total equity capital originally
reported in the December 31, 1995,
Reports of Condition and Income 3215 274,179 1.
2. Equity capital adjustments from amended
Reports of Income, net* 3216 0 2.
3. Amended balance end of previous calendar
year (sum of items 1 and 2) 3217 274,179 3.
4. Net income (loss) (must equal Schedule RI,
item 12) 4340 23,759 4.
5. Sale, conversion, acquisition, or retirement
of capital stock, net 4346 0 5.
6. Changes incident to business combinations, net 4356 0 6.
7. LESS: Cash dividends declared on preferred stock 4470 0 7.
8. LESS: Cash dividends declared on common stock 4460 45,000 8.
9. Cumulative effect of changes in accounting
principles from prior years* (see instructions
for this schedule) 4411 0 9.
10. Corrections of material accounting errors
from prior years* (see instructions for this schedule) 4412 0 10.
11. Change in net unrealized holding gains (losses)
on available-for-sale securities 8433 1,202 11.
12. Foreign currency translation adjustments 4414 0 12.
13. Other transactions with parent holding company*
not included in items 5, 7, or 8 above) 4415 0 13.
14. Total equity capital end of current period
sum of items 3 through 13) (must equal Schedule
RC, item 28) 3210 254,140 14.
*Describe on Schedule RI-E--Explanations.
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part 1. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs ard recoveries through
the allocated transfer risk reserve.
I486
(Column A) (Column B)
Charge-offs Recoveries
Calendar year-to-date
Dollar Amounts in Thousand RIAD Bil Mil Thou RIAD Bil Mil
Thou
1. Loans secured by real estate:
a. To U.S. addressees (domicile) 4651 1,200 4661 338 1.a.
b. To non-U.S. addressees (domicile) 4652 0 4662 0 1.b.
2. Loans to depository institutions and
acceptances of other banks:
a. To U.S. banks and other U.S.
depository institutions 4653 0 4663 0 2.a.
b. To foreign banks 4654 0 4664 0 2.b.
3. Loans to finance agricultural production
and other loans to farmers 4655 0 4665 0 3.
4. Commercial and industrial Loans:
a. To U.S. addressees (domicile) 4645 1,101 4617 519 4.a.
b. To non-U.S. addressees (domicile) 4646 0 4618 0 4.b.
S. Loans to individuals for household, family,
and other personal expenditures:
a. Credit cards and related plans 4656 0 4666 0 5.a.
b. Other (includes single payment, installment,
and all student loans) 4657 275 4667 60 5.b.
6. Loans to foreign governments and official
institutions 4643 0 4627 0 6.
7. All other loans 4644 0 4628 0 7.
B. Lease financing receivables:
a. Of U.S. addressees (domicile) 4658 0 4668 0 8.a.
b. Of non-U.S. addressees (domicile) 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8) 4635 2,576 4605 917 9.
6
.
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Call Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RI-5
SCHEDULE RI-B--Continued
Part 1. Continued
(Column A) (Column B)
Charge-offs Recoveries
Memoranda Calendar year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
1-3. Not applicable
4. Loans to finance commercial real estate,
construction, and land development
activities (not secured by real estate)
included in Schedule RI-B, part I, items
4 and 7, above 5409 0 5410 0 M.4.
5. Loans secured by real estate in domestic
offices (included in Schedule RI-8, part 1,
item 1, above):
a. Construction and land development 3582 18 3583 0 M.5.a.
b. Secured by farmland 3584 0 3585 0 M.5.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4
family residential properties and extended
under lines of credit 5411 64 5412 2
M.5.c.(1)
(2) All other loans secured by 1-4 family
residential properties 5413 395 5414 1
M.5.c.(2)
d. Secured by multifamily (5 or more) residential
properties 3588 0 3589 0 M.5.d.
e. Secured by nonfarm nonresidential properties 3590 723 3591 335 M.5.e.
Part 11. Changes in Allowance for Loan and Lease Losses
Dollar Amounts in Thousands RIAD Bil Mil Thou
1 .Balance originally reported in the
December 31, 1995, Reports of Condition
and Income 3124 73,006 1.
2. Recoveries (must equal part 1, item 9,
column 8 above) 4605 917 2.
3. LESS: Charge-offs (must equal part 1,
item 9, column A above) 4635 2,576 3.
4. Provision for loan and lease losses
(must equal Schedule RI, item 4.a) 4230 (20,000) 4.
5. Adjustments* (see instructions for this
schedule) 4815 0 5.
6. Balance end of current period (sum of
items 1 through 5) (must equal Schedule RC,
item 4.b) 3123 51,347 6.
*DESCRIBE ON SCHEDULE RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
SCHEDULE RI-C IS TO BE reported with the December REPORT of INCOME.
I489
Dollar Amounts in Thousands RIAD Bil Mil Thou
1. Federal 4780 N/A 1.
2. State and Local 4790 N/A 2.
3. Foreign 4795 N/A 3.
4. Total (sum of items 1 through 3)
(must equal sum of Schedule RI, items 9 and ll.b) 4770 N/A 4.
5. Deferred portion of item 4 RIAD 4772 N/A 5.
7.
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: P O BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
SCHEDULE RI-D--INCOME from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or
IBFs where international operations account for more than 10 percent of
total revenues, total assets, or net income.
Part I. Estimated Income from International Operations
I492
Year-to-date
DOLLAR AMOUNTS INThousands RIAD Bil Mil Thou
1. Interest income and expense booked at
foreign offices, Edge and Agreement
subsidiaries, and IBFS:
a. Interest income booked 4837 N/A 1.a.
b. Interest expense booked 4838 N/A 1.b.
c. Net interest income booked
foreign offices, Edge and Agreement
subsidiaries, and IBFs (itern I.a minus l.b) 4839 N/A 1.c.
2. Adjustments for booking location of
international operations:
a. Net interest income attributable to
international operations booked at
domestic offices 4840 N/A 2.a.
b. Net interest income attributable to
domestic business booked at foreign
offices 4841 N/A 2.b.
c. Net booking location adjustment
(item 2.a minus 2.b) 4842 N/A 2.c.
3. Noninterest income and expense
attributable to international operations:
a. Noninterest income attributable to
international operations 4097 N/A 3.a.
b. Provision for loan and lease losses
attributable to international operations 4235 N/A 3.b.
c. Other noninterest expense attributable to
international operations 4239 N/A 3.c.
d. Net noninterest income (expense)
attributable to international operations
(item 3.a minus 3.b and 3.c) 4843 N/A 3.d.
4. Estimated pretax income attributable to
international operations before capital
allocation adjustment (sum of items l.c, 2.c,
and 3.d) 4844 N/A 4.
5. Adjustment to pretax income for internal
allocations to international operations to
reflect the effects of equity capital on
overall bank funding costs 4845 N/A 5.
6. Estimated pretax income attributable to
international operations after capital allocation
adjustment (sum of items 4 and 5) 4846 N/A 6.
7. Income taxes attribtitable to income from
international operations as estimated in item 6 4797 N/A 7.
S. Estimated net income attributable to
international operations (item 6 minus 7) 4341 N/A 8.
Memoranda
Dollar Amounts in Thousands RIAD Bil Mil Thou
1. Intracompany interest income included in
item l.a above..................................4847 N/A M.1.
2. Intracompany interest expense included
item l.b above 4848 N/A M.2.
Part 11. Supplementary Details on Income from International operations
Required by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
Year-to-date
Dollar Amounts in Thousand RIAD Bil Mil Thou
1. Interest income booked at IBFs 4849 N/A 1.
2. Interest expense booked at IBFs 4850 N/A 2.
3. Noninterest income attributable to
international operations booked at domestic
offices (excluding IBFS):
a. Gains (losses) and extraordinary items 5491 N/A 3.a.
b. Fees and other noninterest income 5492 N/A 3.b.
4. Provision for loan and lease losses
attributable to international operations
booked at domestic offices (excluding IBFS) 4852 N/A 4.
5. Other noninterest expense attributable to
international operations booked at domestic
offices (excluding IBFS) 4853 N/A 5.
8.
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No. :09230
Call Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RI-7
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date
basis.
Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items
and other adjustments in Schedule RI, and all significant items of other
noninterest income and other noninterest expense in Schedule RI. (See
instructions for details.)
I495
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
1. All other noninterest income
(from Schedule RI, item 5.f.(2))
Report amounts that exceed 10% of
Schedule RI, item 5.f.(2):
a. Net gains on other reat estate
owned 5415 0 1.a.
b. Net gains on sales of loans 5416 0 1.b.
c. Net gains on sales of premises
and fixed assets 5417 0 1.c.
Itemize and describe the three largest
other amounts that exceed 10% of Schedule RI, item 5.f.(2):
d. TEXT 4461 Corporate Owned Life Insurance - CSV 4461 253 1.d.
e. TEXT4462 4462 1.e.
f. TEXT 4463 4463 1.f.
2. Other noninterest expense (from Schedule RI,
item 7.c):
a. Amortization expense of intangible assets 4531 757 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c:
b. Net losses on other real estate owned 5418 0 2.b.
c. Net losses on sales of loans 5419 0 2.c.
d. Net losses on sales of premises and fixed assets 5420 0 2.d.
Itemize and describe the three largest other
amounts that exceed 10% of Schedule RI, ite(n 7.c:
e. TEXT 4464 4464 2.e.
f. TEXT 4467 4467 2.f.
g. TEXT 4468 4468 2.g
3. Extraordinary items and other adjustments (from
Schedule RI, item ll.a) and applicable income tax
effect (from Schedule RI, item ll.b) (itemize and
describe all extraordinary items and other
adjustments):
a. (1) TEXT 4469 4469 3.a.(1)
(2) Applicable income tax effect RIAD 4486 3.a.(2)
b.(1) TEXT 4487 4487 3.b.(1)
(2) ApplicabLe income tax effect RIAD 4488 3.b.(2)
c.(1)TEXT 4489 4489 3.c.(1)
(2) Applicable income tax effect RIAD 4491 3.c.(2)
4. Equity capital adjustments from
amended Reports of Income (from
Schedule RI-A, item 2) (itemize and
describe all adjustments):
a. TEXT 4492 4492 4.a.
b. TEXT 4493 4493 4.b.
Cumulative effect of changes in accounting
5. principles from prior years (from Schedule RI-A,
item 9) (itemize and describe all changes in
accounting principles):
a. TEXT 4494 4494 5.a.
b. TEXT 4495 4495 5.b.
6. Corrections of material accounting errors
from prior years (from Schedule RI-A,
item 10) (itemize and describe all corrections):
a. TEXT4496 4496 6.a.
b. TEXT 4497 4497 6.b.
9.
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
CALL Date: 3/31/96 ST-SK: 09-1563 FFIEC 031
Page RI-8
Schedule RI-E--Continued
Year-to-date
Dollar Amounts in Thousands
7. Other transactions with parent holding company (from Schedule RI-A,
item 13) (itemize and describeall such transactions):
a. TEXT 4498 4498 7.a.
b. TEXT 4499 4499 7.b.
8. Adjustments to allowance for loan and lease losses (from Schedule
RI-B, part 11, item 5) (itemize and describe all adjustments):
a. TEXT 4521 4521 8.a.
b. TEXT 4522 4522 8.b.
9. Other explanations (the space below is provided for I498 I499
the bank to briefly describe, at its option, any other
significant items affecting the Report of Income):
No comment X (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
10.
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Call Date:
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 10191213101
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
C400
Dollar Amounts in Thousands RCFD Bil Mil Thou
ASSETS
1 .Cash and balances due from depository
institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency
and coin(l) 0081 344,456 1.a.
b. Interest-bearing batances(2) 0071 18,933 1.b.
2. Securities;
a. Held-to-maturity securities (from
Schedule RC-8, column A) 1754 8,370 2.a.
b. Available-for-sate securities (from
ScheduLe RC-B, column D) 1773 74,226 2.b.
3. Federal funds sold and securities
purchased under agreements to resell
domestic offices of the bank and of its Edge
and Agreement subsidiaries, and in IBFS:
a. Federal funds sold 0276 0 3.a.
b. Securities purchased under agreements to resell
4. Loans and lease financing receivables: 0277 154,000 3.b.
a. Loans and leases, net of unearned income
(from Schedule RC-C) RCFD 2122 1,966,808 4.a.
b. LESS: Allowance for loan and lease losses. RCFD 3123 51,347 4.b.
c. LESS: Allocated transfer risk reserve RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus
4.b and 4.c) 2125 1,915,461 4.d.
5.Trading assets (from Schedule RC-D) 3545 0 5.
6.Premises and fixed assets (including
capitalized leases) 2145 33,160 6.
7.Other real estate owned (from Schedule RC-M) 2150 5,056 7.
8.Investments in unconsolidated subsidiaries and
associated companies (from ScheduLe RC-M) 2130 86 8.
9.Customers' LiabiLity to this bank on
acceptances outstanding 2155 7,307 9.
10. IntangibLe assets (from Schedule RC-M) 2143 38,151 10.
11. Other assets (from ScheduLe RC-F) 2160 80,650 11.
12. Total assets (sum of items 1 through 11) 2170 2,679,856 12.
(1) Includes cash items in process of cotlection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
CALL Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RC-2
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
SCHEDULE RC--Continued
Dollar Amounts in Thousands Bil Mil Thou
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of
columns A and C from Schedule RC-E, part 1) RCON 2200 2,053,371 13.a.
(1) Noninterest-bearing(l) RCON 6631 535,084 13.a.(1)
(2) Interest-bearing RCON 6636 1,518,287 13.a.(2)
b. In foreign offices, Edge and Agreement
subsidiaries, and IBFs (from Schedule RC-E, part II) RCFN 2200 0 13.b.
(1) Noninterest-bearing RCFN 6631 0 13.b.(1)
(2) Interest-bearing RCFN 6636 0
13.b.(2)
14. Federal funds purchased and securities sold under agreements to
repurchase in domestic offices of the bank and of its Edge and Agreement
subsidiaries, and in IBFS:
a. Federal funds purchased RCFD 0278 313,409 14.a.
b. Securities sold under agreements to repurchase RCFD 0279 5,800 14.b
15. a. Demand notes issued to the U.S. Treasury RCON 2840 0 15.a.
b. Trading liabilities (from Schedule RC-D) RCFD 3548 0 15.b.
16. Other borrowed money:
a. With a remaining maturity of one year or less RCFD 2332 76 16.a.
b. With a remaining maturity of more than one year RDFD 2333 0 16.b.
17. Mortgage indebtedness and obligations under
capitalized leases RCFD 2910 0 17.
18. Bank's liability on acceptances executed and
outstanding RCFD 2920 7,307 18.
19. Subordinated notes and debentures RCFD 3200 0 19.
20. Other liabilities (from Schedule RC-G) RCFD 2930 45,753 20.
21. Total liabilities (sum of items 13
through 20) RCFD 2948 2,425,716 21.
22. Limited-life preferred stock and related
surplus RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus RCFD 3838 0 23.
24. Common Stock RCFD 3230 14,424 24.
25. Surplus (exclude all surplus related to
preferred stock) RCFD 3839 200,511 25.
26. a. Undivided profits and capital reserves RCFD 3632 39,325 26.a.
b. Net unrealized holding gains (Losses) on
available-for-sale securities RCFD 8434 (120) 26.b.
27. Cumutative foreign currency translation
adjustments RCFD 3284 0 27.
28. Total equity capital (sum of items 23
through 27) RCFD 3210 254,140 28.
29. Total liabilities, Limited-.life preferred
stock, and equity capital (sum of items 21,
22, and 28) RCFD 3300 2,679,856 29.
Memorandum
To be reportd only with the March Report of Condition.
1 Independent audit of the bank conducted in accordance with generatly
accepted auditing standards by a certified public accounting firm which
submits a report on the bank Independent audit of the bank's parent
holding company conducted in accordance with generally accepted auditing
standards by a certified public accounting firm which submits a report on
the consolidated holding company (but not on the bank separately)
Memorandum
To be reported only with the March Report of Condition.
1.Indicate in the box at the right the number of the statement below that
best describes the most comprehensive level of auditing work performed for
the bank by independent external auditors as of any date during
Number 1995.................................................RCFD 6724
1 M.l.
1 Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding
company (but not on the bank separately)
3 Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority)
4 Directors' examination of the bank performed by other external auditors
(may be required by state chartering-authority)
5 Review of the bank's financial statements by external auditors
6 Compilation of the bank's financial statements by external auditors
7 Other audit procedures (excluding tax preparation work)
8 No external audit work
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
12
Legal TitLe of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 10191213101
Call Date: 3/31/96 ST-BK: 09-1563
SCHEDULE RC-A--CASH and Balances Due From Depository Institutions
Exclude assets held for trading.
C405
(Column A) (Column B)
Consolidated Domestic
Bank Offices
Dollar Amounts in Thousand RCFD Bil Mil Thou RCON Bil Mil Thou
1. Cash items in process of collection,
unposted debits, and currently and coin 0022 120,436 1.
a. Cash items in process of collection and
unposted debits 0020 65,720 1.a.
b. Currency and coin 0080 54,716 1.b.
2. Balances from depository institutions
in the U.S 0082 156,180 2.
a. U.S. branches and agencies of foreign
banks (including their IBFS) 0083 0 2.a.
b. Other commercial banks in the U.S. and
other depository institutions in the U.S.
(including their IBFS) 0085 156,180 2.b.
3. Balances due from banks in foreign
countries and foreign central banks 0070 18,933 3.
a. Foreign branches of other U.S. banks 0073 18,933 3.a.
b. Other banks in foreign countries and
foreign central banks 0074 0 3.b.
4. Balances due from Federal Reserve Banks 0090 67,840 0090 67,840 4.
5. Total (sum of items 1 through 4) (total
of column A must equal Schedule RC, sum of
items l.a and l.b) 0010 363,389 0010 363,389 5.
Memorandum Dollar Amounts in Thousands RCON Bil Mil Thou
1. Noninterest-bearing balances due from
commercial banks in the U.S. (included in item 2,
column 8 above) 0050 156,130 M.1
............................................................................ .
Schedule RC-B--Securities
Exclude assets held for trading.
C410
Held-to-maturity Available-for-sale
(Column A) (Column B) (Column C) (Column
D)
Amortized Cost Fair VaLue Amortized Cost Fair
VaLue(l)
Dollar Amounts in RCFD Bil RCFD Bil RCFD Bil Mil RCFD
Bil
Thousands Mil Thou Mil Thou Thou Mil Thou
1. U.S. Treasury
securities 0211 0 0213 0 1286 40,711 1287 40,455 1.
2. U.S. Government
agency and corporation
obligations (exclude
mortgage-backed securities):
a.Issued by U.S. Govern-
ment agencies(2) 1289 0 1290 0 1291 0 1293 0 2.a.
b. Issued by U.S. Gover@t-sponsored
agencies(3) 1294 0 1295 0 1297 2,227
1298 2,231 2.b.
(1) Includes equity securities without readily determinable fair values
at historical cost in itein 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool
Certificates," U.S. Maritime Admininistration obligations, and Export-Import
Bank participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, the Financing
Corporation, Resolution Funding Corporation, the Student Loan Marketing
Association, and the Tennessee Valley Authority.
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
SCHEDULE RC-B--Continued
Call Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RC-4
Held-to-maturity AvaiLabLe-for-sale
(Column A) (CoLumn B) (Column C) (Column D)
Amortized Fair Amortized Fair
Cost Value Cost Cost Value(l)
Dollar Amounts
in Thousands RCFD Bil RCFD Bil RCFD Bil RCFD Bil
Mil Thou Mil Thou Mil Thou Mil Thou
3. Securities issued by
states and political
subdivisions in the
U.S.:
a. General obligations 1676 291 1677 294 1678 0 1679 0 3.a.
b. Revenue obligations 1681 230 1686 230 1690 0 1691 0 3.b.
c. Industrial development
and similar obligations 1694 0 1695 0 1696 0 1697 0 3.c.
4. Mortgage-backed
securities (M8S):
a. Pass-through
securities:
(1) Guaranteed by
GNMA 1698 0 1699 0 1701 0 1702 0 4.a.(1)
(2) Issued by FNMA
and FHLMC 1703 7,602 1705 7,617 1706 0 1707 0 4.a.(2)
(3) Other pass-through
securities 1709 0 1710 0 1711 0 1713 0
b. Other mortgage-backed
securities (include CMOs,
REMICS, and stripped
MBS):
(1) Issued or guaranteed
by FNMA, FHLMC,
or GNMA 1714 0 1715 0 1716 30,861 1717 30,936
4.b.(1)
(2) Collateratized by
MBS issued or guaranteed
by FNMA, FHLMC,or GNMA 1718 0 1719 0 1731 0 1732 0
4.b.(2)
(3) All other mortgage-
backed securities 1733 0 1734 0 1735 603 1736 594
4.b.(3)
5. other debt securities:
a. Other domestic debt
securities 1737 0 1738 0 1739 0 1741 0 5.a.
b. Foreign debt
securities 1742 247 1743 247 1744 0 1746 0 5.b.
6. Equity securities:
a. Investments in mutual
funds 1747 10 748 10 6.a.
b. Other equity securities
with readily determin-
able fair values 1749 0 1751 0 6.b.
c. All other equity
securities(l) 1752 0 1753 0 6.c.
7. Total (sum of item 1
through 6) (total of
colum A must equal
Schedute RC, item 2.a)
(total of column D
must equal Schedule RC,
itern 2.b) 1754 8,370 1771 8,388 1772 74,412 l773
74,226 7.
(1) Includes equity securities without readily determinable fair values
at historical cost in item 6.c, column D.
14
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Schedule RC-B--Continued
Call Date: 3/31/96 ST-BK: 09-1563
Memorandum
C412
Dollar Amounts in Thousands RCFD Bil Mil Thou
Pledged securities(2) 0416 78,898 M.1.
2. Maturity and repricing data for
debt securities(2),(3),(4) (excluding
those in nonaccrual status):
a. Fixed rate debt securities with a
remaining maturity of:
(1) Three months or Less 0343 33 M.2.a.(1)
(2) Over three months through 12 months 0344 20,344 M.2.a.(2)
(3) Over one year through five years 0345 22,806 M.2.a.(3)
(4) Over five years 0346 39,122 M.2.a.(4)
(5) Total fixed rate debt securities
(sum of Memorandum items
2.a.(l) through 2.a.(4) 0347 82,305 M.2.a.(5)
b. Floating rate debt securities with
a repricing frequency of:
(1) Quarterly or more frequently 4544 0 M.2.b.(1)
(2) Annually or more frequently, but less
frequently than quarterly 4545 281 M.2.b.(2)
(3) Every five years or more frequently,
but less frequently than annually 4551 0 M.2.b.(3)
(4) Less frequently than every five years 4552 0 M.2.b.(4)
(5) Total floating rate debt securities
(sum of Memorandum items 2.b.(l) through
2.b.(4)) 4553 281 M.2.b.(5)
c. Total debt securities (sum of Memorandum
items 2.a.(5) and 2.b.(5)) (must equal total
debt securities from schedule RC-B, sum of
items 1 through 5, columns A and D, minus
nonaccrual debt securities included in
Schedule RC-N, item 9, column C) 0393 82,586 M.2.c.
3. Not applicable
4. Held-to-maturity debt securities rest
structured and in compliance with modified
terms (included in Schedule RC-B, items 3
through 5, column A, above) 5365 0 M.4.
5. Not applicable
6. Floating rate debt securities with a
remaining maturity of one year or
Less(2),(4) (included in Memorandum
items 2.b.(l) through 2.b.(4) above) 5519 0 M.6.
7. Amortized cost of held-to-maturity
securities sold or transferred to
available-for-sale or trading securities
during the calendar year-to-date (report
the amortized cost at date of sale
or transfer) 1778 0 M.7.
8. High-risk mortgage securities (included
in the held-to-maturity and available-for-sale
accounts in schedule RC-8, item 4.b):
a. Amortized cost 8780 400 M.8.a.
b. Fair value 8781 400 M.8.b.
9. Structured notes (included in the
held-to-maturity and available-for-sale
accounts in schedule RC-B, items 2, 3,
and 5):
a. Amortized cost 8782 0 M.9.a.
b. Fair value 8783 0 M.9.b.
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds,
Federal Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks
that must complete supplemental schedule RC-J.
5
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Schedule RC-C--Loans and Lease Financing Receivables
Call Date: 3/31/96 ST-SK: 09-1563
Part I. Loans and Leases
Do not deduct the allowance for loan and lease losses from amounts
reported in this schedule. Report total loans and leases, net of
unearned income. Exclude assets held for trading.
C415
(Column A) (Column B)
Consolidated Domestic
Bank Offices
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
1. Loans secured by real estate 1410 1,392,410 1.
a. Construction and land development 1415 9,139 1.a.
b. Secured by farmland (including farm
residential and other improvements) 1420 0 1.b.
c. Secured by 1-4 family residential
properties:
(1) revolving, open-end Loans secured
by 1-4 family residential properties
and extended under Lines of credit 1797 133,805 1.c.(1)
(2) All other loans secured by 1-4
family residential properties:
(a) Secured by first Liens 5367 734,672 1.c.(2)(a)
(b) Secured by junior Liens 5368 41,578 1.c.(2)(b)
d. Secured by multifamily (5 or more)
residential properties 1460 57,246 1.d.
e. Secured by nonfarm nonresidential
properties 1480 415,970 1.e.
2. Loans to depository institutions:
a. To commercial banks in the US 1505 3,930 2.a.
(1) To U.S. branches and agencies of
foreign banks 1506 0 2.a.(1)
(2) To other commercial banks in the US 1507 3,930 2.a.(2)
b. To other depository institutions in
the US 1517 688 1517 688 2.b.
c. To banks in foreign countries 1510 906 2.c.
(1) To foreign branches of other U.S. banks 1513 0 2.c.(1)
(2) To other banks in foreign countries 1516 906 2.c.(2)
3. Loans to finance agricultural production
and other loans to farmers 1590 119 1590 119 3.
4. Commercial and industrial Loans:
a. To U.S. addressees (domicile) 1763 456,230 1763 456,230 4.a.
b. To non-U.S. addressees (domicile) 1764 0 1764 0 4.b.
5. Acceptances of other banks:
a. Of U.S. banks 1756 0 1756 0 5.a.
b. Of foreign banks 1757 0 1757 0 5.b.
6. Loans to individuals for household,
family, and other personal expenditures
(i.e., consumer Loans) (includes
purchased paper) 1975 96,970 6.
a. Credit cards and related plans
(includes check credit and other
revolving credit plans) 2008 50 6.a.
b. Other (includes single payment,
installment, and all student Loans) 2011 96,920 6.b.
7. Loans to foreign governments and
official institutions (including foreign
central banks) 2081 0 2081 0 7.
8. Obligations (other than securities
and Leases) of states and political
subdivisions in the U.S. (includes
nonrated industrial development obligations) 2107 4,465 2107 4,465 8.
9 Other Loans 1563 11,876 9.
a. Loans for purchasing or carrying securities
(secured and unsecured) 1545 95 9.a.
b. All other loans (exclude consumer loans) 1564 11,781 9.b.
10. Lease financing receivables (net of
unearned income) 2165 0 10.
a. Of U.S. addressees (domicile) 2182 0
10.a.
b. Of non-U.S. addressees (domicile) 2183 0 10.b.
11. LESS: Any unearned income on Loans
reflected in items 1-9 above 2123 786 2123 786 11.
12. Total loans and leases, net of unearned
income (sum of items 1 through 10 minus
item 11) (total of column A must equal
schedule RC, item 4.a) 2122 1,966,808 2122 1,966,808 12.
16.
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Schedule RC-C--Continued
Part 1. Continued
Memoranda
Call Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RC-7
Dollar Amounts in Thousands
(Column A) (Column B)
Consolidated Domestic
Bank Offices
RCON Bit Nit Thou RCON Bil Mil Thou
1. Commercial paper included in Schedule
RC-C, part 1, above 1496 0 1496 0 M.1.
2. Loans and leases restructured and in
compliance with modified terms
(included in Schedule RC-C, part 1,
above and not reported as past due or
nonaccrual in schedule RC-N, Memorandum item 1):
a. Loans secured by real estate:
(1) To U.S. addressees (domicile) 1687 0 M.2.a.(1)
(2) To non-U.S. addressees (domicile) 1689 0 M.2.a.(2)
b. All other loans and all lease financing
receivables (exclude Loans to individuals
for household, family, and other personal
expenditures) 8691 0 M.2.b.
c. Commercial and industrial loans to
and lease financing receivables
of non-U.S. addressees (domicile) included
in Memorandum item 2.b above 8692 0 M.2.c.
3. Maturity and repricing data for Loans and
Leases(l) (excluding those in nonaccrual status):
a. Fixed rate Loans and leases with a
remaining maturity of:
(1) Three months or Less 0348 24,648 M.3.a.(1)
(2) Over three months through 12 months 0349 51,801 M.3.a.(2)
(3) Over one year through five years 0356 307,644 M.3.a.(3)
(4) Over five years 0357 544,708 M.3.a.(4)
(5) Total fixed rate loans and Leases
(sum of Memorandum items 3.a.(l)
through 3.a.(4)) 0358 928,801 M.3.a.(5)
b. Floating rate Loans with a repricing
frequency of:
(1) quarterly or more frequently 4554 578,411 M.3.b.(1)
(2) annually or more frequently, but Less
frequently than quarterly 4555 409,216 M.3.b.(2)
(3) Every five years or more frequently,
but less frequently than annually 4561 17,032 M.3.b.(3)
(4) Less frequently than every five years 4564 6,519 M.3.b.(4)
(5) Total floating rate Loans (sum of
Memorandum items 3.b.(l) through 3.b.(4)) 4567 1,011,178 M.3.b.(5)
c. Total loans and leases (sum of
Memorandum items 3.a.(5) and 3.b.(5))
(must equal the sum of total Loans and
leases, net, from Schedule RC-C, part I,
item 12, plus unearned income from
Schedule RC-C, part 1, item 11, minus total
nonaccrual loans and leases from Schedule
RC-N, sum of items 1 through 8, column C) 1479 1,939,979 M.3.c.
d. Floating rate Loans with a remaining
maturity of one year or Less (included
in Memorandum items 3.b.(l) through 3.b.
(4) above) A246 275,277 M.3.d.
4. Loans to finance commercial real estate,
construction, and land development activities
(not secured by real estate) included in
Schedule RC-C, part 1, items 4 and 9,
column A, page RC-6(2) 2746 48,074 M.4.
5. Loans and leases held for sale (included
in Schedule RC-C, part 1, above) 5369 0 M.5.
6. adjustable rate closed-end loans secured
by first liens on 1-4 family residential
properties (included in schedule RC-C, RCON Bil Mil Thou
part 1, item l.c.(2)(a), column 8, page RC-6) 5370 462,486 M.6.
(1) Memorandum item 3 is not applicable to savings banks that must complete
Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part 1, item 1, column A.
17
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
CALL Date: 3/31/96 ST-SK: 09-1563 FFIEC 031
Page RC-8
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in
total assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule
RC-L, items 14.a through 14.e, columns A through D).
C420
Dollar Amounts in Thousand Bil Mil Thou
ASSETS
1. U.S. Treasury securities in domestic
offices RCON 3531 0 1.
2. U.S. Government agency and corporation
obligations in domestic offices (exclude
mortgage backed securities) RCON 3532 0 2.
3. Securities issued by states and political
subdivisions in the U.S. in domestic offices RCON 3533 0 3.
4. Mortgage-backed securities (MBS) in
domestic offices:
a. Pass-through securities issued or
guaranteed by FNMA, FHLMC, or GNMA RCON 3534 0 4.a.
b. Other mortgage-backed securities issued
or guaranteed by FNMA, FHLMC, or GNMA
(include CMOs, REMICS, and stripped MBS) RCON 3535 0 4.b.
c. All other mortgage-backed securities RCON 3536 0 4.c.
5. other debt securities in domestic offices RCON 3537 0 5.
6. Certificates of deposit in domestic offices RCON 3538 0 6.
7. Commercial paper in domestic offices RCON 3539 0 7.
8. Bankers acceptances in domestic offices RCON 3540 0 8.
9. Other trading assets in domestic offices RCON 3541 0 9.
10. Trading assets in foreign offices RCFN 3542 0 10.
11. Revaluation gains on interest rate,
foreign exchange rate, and other commodity and
equity contracts:
a. In domestic offices RCON 3543 0 11.a.
b. In foreign offices RCFN 3544 0 11.b.
12. Total trading assets (sum of items 1
through 11) (must equal Schedule RC, item 5) RCFD 3545 0 12.
LIABILITIES Bil Mil Thou
13. Liability for short positions RCFD 3546 0 13.
14. Revaluation losses on interest rate,
foreign exchange rate, and other commodity
and equity contracts RCFD 3547 0 14.
15. Total trading liabilities (sum of
items 13 and 14) (must equal schedule RC,
item 15.b) RCFD 3548 0 15.
18
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Schedule RC-E--Deposit Liabilities
Part 1. Deposits in Domestic Offices
Call Date: 3/31/96 ST-SK: 09-1563
C425
Nontransaction
Transaction Accounts Accounts
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
Accounts (including demand deposits nontransaction
deposits) column A) (including MMDAs)
Dollar Amounts in Thou RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil
Thou
Deposits of:
1. individuals, partnerships, and
corporations 2201 550,405 2240 492,348 2346
1,443,990 1.
2. U.S. Government 2202 628 2280 628 2520
0 2.
3. States and political subdivisions
in the US 2203 24,658 2290 21,879 2530
13,461 3.
4. Commercial banks in the US 2206 3,846 2310 3,846 2550
0 4.
5. other depository institutions
in the US 2207 2,012 2312 2,012 2349
0 5.
6. Banks in foreign countries 2213 131 2320 131 2236
0 6.
7. Foreign governments and official
institutions (including foreign
central banks) 2216 0 2300 0 2377
0 7.
8. Certified and official checks 2330 14,240 2330 14,240
8.
9. Total (sum of items 1 through 8)
(sum of columns A and C must equal
schedule RC, item 13.a) 2215 595,920 2210 535,084 2385
1,457,451 9.
Memoranda
Dollar Amountsin Thousands RCON Bil Mil Thou
1. Selected components of total deposits
(i.e., sum of item 9. columns A and C
a. Total Individual Retirement Accounts
(IRAs) and Keogh Plan accounts): 6835 207,618 M.1.a.
b. Total brokered deposits 2365 0 M.1.b.
c. Fully insured brokered deposits (included
in Memorandum item l.b above):
(1) Issued in denominations of Less than
$100,000 2343 0 M.1.c.(1)
(2) Issued either in denominations of $100,000
or in denominations greater than $100,000 and
participated out by the broker in shares of
$100,000 or Less 2344 0 M.1.c.(2)
d. Maturity data for brokered deposits:
(1) Brokered deposits issued in denominations
of Less than S100,000 with a remaining maturity
of one year or less (included in Memorandum
item l.c.(l) above) A243 0 M.1.d.(1)
(2) Brokered deposits issued in denominations
of $100,000 or more with a remaining maturity
of one year or Less (included in Memorandum
item l.b above) A244 0 M.1.d.(2)
e. Preferred deposits (uninsured deposits of
states and political subdivisions in the U.S.
reported in item 3 above which are secured or
collateralized as required under state Law) 5590 31,591 M.1.e.
2. Components of total nontransaction accounts
(sum of Memorandum items 2.a through 2.d must
equal item 9, column C above):
a. Savings deposits:
(1) Money market deposit accounts (MMDAS) 6810 513,270 M.2.a.(1)
(2) Other savings deposits (excludes MMDAS) 0352 341,605 M.2.a.(2)
b. Total time deposits of less than $100,000 6648 508,325 M.2.b.
c. Time certificates of deposit of
$100,000 or more 6645 94,251 M.2.c.
d. Open-account time deposits of
$100,000 or more 6646 0 M.2.d.
3. ALL NOW accounts (included in
column A above) 2398 60,836 M.3.
4. Not applicable
19
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Schedule RC-E--Continued
Part 1. Continued
Memoranda (continued)
Call Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RC-10
Dollar Amounts in Thousand RCON Bil Mil Thou
5. Maturity and repricing data for time
deposits of less than S100,000 (sum
of Memorandum items 5.a.(l) through 5.b.
(3) must equal Memorandum item 2.b above):
(l)
a. Fixed rate time deposits of less than
$100,000 with a remaining maturity of:
(1) Three months or Less A225 160,219 M.5.a.(1)
(2) Over three months through 12 months A226 197,375 M.5.a.(2)
(3) Over one year A227 144,850 M.5.a.(3)
b. Floating rate time deposits of Less than
$100,000 with a repricing frequency of:
(1) Quarterly or more frequently A228 5,881 M.5.b.(1)
(2) Annually or more frequently, but Less
frequently than quarterly A229 0 M.5.b.(2)
(3) Less frequently than annually A230 0 M.5.B.(3)
c. Floating rate time deposits of Less
than $100,000 with a remaining maturity
of one year or less (included in Memorandum
items 5.b.(l) through 5.b.(3) above) A231 0 M.5.c.
6. Maturity and repricing data for time
deposits of $100,000 or more (i.e., time
certificates of deposit of $100,000 or more
and open-account time deposits of $100,000
or more) (sum of memorandum items 6.a.
(l) through 6.b.(4) must equal the sum of
Memorandum
items 2.c and 2.d above):(J)
a. Fixed rate time deposits of S100,000 or
more with a remaining maturity of:
(1) Three months or Less A232 45,977 M.6.a.(1)
(2) Over three months through 12 months A233 19,485 M.6.a.(2)
(3) Over one year through five years A234 25,966 M.6.a.(3)
(4) Over five years A235 2,823 M.6.a.(4)
b. floating rate time deposits of $100,000
or more with a repricing frequency of:
(1) Quarterly or more frequently A236 0 M.6.b.(1)
(2) annually or more frequently, but Less
frequently than quarterly A237 0 M.6.b.(2)
(3) Every five years or more frequently,
but Less frequently than annually A238 0 M.6.b.(3)
(4) Less frequently than every five years A239 0 M.6.b.(4)
c. Floating rate time deposits of $100,000
or more with a remaining maturity of
one year or less (included in Memorandum
items 6.b.(l) through 6.b.(4) above) A240 0 M.6.c.
(1) Memorandum items 5 and 6 are not applicable to savings
banks that must complete supplemental Schedule RC-J.
20
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO 3OX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Call Date: 3/31/96 ST-BK: 09-1563
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFS)
Dollar Amounts in ThousandsRCFNBil Mil Thou
Deposits of:
1. Individuals, partnerships, and
corporations 2621 0 1.
2. U.S. banks (including IBFs and
foreign branches of U.S. banks) 2623 0 2.
3. Foreign banks (including U.S.
branches and agencies of foreign banks,
including their IBFS) 2625 0 3.
4. Foreign governments and official
institutions (including foreign central
banks) 2650 0 4.
5. Certified and official checks 2330 0 5.
6. All other deposits 2668 0 6.
7. total (sum of items 1 through 6) (must
equal schedule RC, item 13.b) 2200 0 7.
Memorandum
Dollar Amounts in Thousand RCFN Bil Mil Thou
1. Time deposits with a remaining maturity
of one year or less (included in Part 11, item
7 above) A245 0 M.1.
Schedule RC-F--Other Assets
C430
Dollar Amounts in Thousands Bil Mil Thou
1. Income earned, not collected on loans RCFD 2164 14,740 1.
2. Net deferred tax assets(l) RCFD 2148 8,179 2.
3. Excess residential mortgage servicing fees
receivable RCFD 5371 0 3.
4. Other (itemize and describe amounts that exceed
25% of this item) RCFD 2168 57,731 4.
a. TEXT 3549 Officer Life Insurance - CSV RCFD 3549 21,526 4.a.
b. TEXT 3550 Prepaid Pension Plan RCFD 3550 22,166 4.b.
c. TEXT 3551 RCFD 3551 4.c.
5. Total (sum of items 1 through 4) (must equate
Schedule RC, item 11) RCFD 2160 80,650 5.
C430
Dollar Amounts in Thousand Bil Mil Thou
Memorandum Dollar Amounts in Thousands Bil Mil Thou
1. Deferred tax assets disallowed for regulatory
capital purposes RCFD 5610 0 M.1.
Schedule RC-G--Other Liabilities
Dollar Amounts in Thousands Bil Mil Thou I
1. a. Interest accrued and unpaid on deposits
in domestic offices(2) RCON 3645 5,521 1.a.
b. Other expenses accrued and unpaid (includes
accrued income taxes payable) RCFD 3646 35,009 1.b.
2. Net deferred tax liabilities(l) RCFD 3049 0 2.
3. Minority interest in consolidated subsidiaries RCFD 3000 0 3.
4. Other (itemize and describe amounts that exceed
25% of this item) RCFD 2938 5,223 4.
a. TEXT 3552 Funds Management-Automated RCFD 3552 3,445 4.a.
b. TEXT 3553 RCFD 3553 4.b.
c. TEXT 3554 RCFD 3554 4.c.
5. Total (sum of items 1 through 4) (must
equal Schedule RC, item 20) RCFD 2930 45,753 5.
(1) SEE DISCUSSION OF DEFERRED income TAXES in GLOSSARY ENTRY on "income
taxes.'
(2) FOR SAVINGS BANKS, include "dividends" ACCRUED and UNPAID on deposits.
21
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Call Date: 3/31/96 ST-BK: 09-1563
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
C440
Domestic Offices
Dollar Amounts in Thousands RCON Bil Mil Thou
1. Customers' liability to this bank on
acceptances outstanding 2155 7,307 1.
2. Bank's Liability on acceptances
executed and outstanding 2920 7,307 2.
3. federal funds sold and securities
purchased under agreements to resell 1350 154,000 3.
4. federal funds purchased and securities
sold under agreements to repurchase 2800 319,209 4.
5. Other borrowed money 3190 76 5.
EITHER
6. Net due from own foreign offices, Edge
and Agreement subsidiaries, and IBFs OR 2163 0 6.
7. Net due to own foreign offices, Edge and
Agreement subsidiaries, and IBFs 2941 N/A 7.
8. Total assets (excludes net due from
foreign offices, Edge and Agreement
subsidiaries, and IBFS) 2192 2,679,856 8.
9. Total liabilities (excludes net due to
foreign offices, Edge and Agreement
subsidiaries, and IBFS) 3129 2,425,716 9.
Items 10-17 include held-to-maturity and available-for-sale securities in
domestic offices.
RCON Bil Mil Thou
10. U.S. Treasury securities 1779 40,455 10.
11. U.S. Government agency and corporation
obligations (exclude mortgage-backed
securities) 1785 2,231 11.
12. Securities issued by states and political
subdivisions in the US 1786 521 12.
13. Mortgage-backed securities (MRS):
a. Pass-through securities:
(1) Issued or guaranteed by FNMA,
FHLMC, or GNMA 1787 7,602 13.a.(1)
(2) Other pass-through securities 1869 0 13.a.(2)
b. Other mortgage-backed securities (include
CMOs, REMICS, and stripped MBS):
(1) Issued or guaranteed by FNMA, FHLMC,
or GNMA 1877 30,936 13.b.(1)
(2) All other mortgage-backed securities 2253 594 13.b.(2)
14. Other domestic debt securities 3159 0 14.
15. Foreign debt securities 3160 247 15.
16. Equity securities:
a. Investments in mutual funds 3161 10 16.a.
b. Other equity securities with readily
determinable fair values 3162 0 16.b.
c. All other equity securities 3169 0 16.c.
17. total held-to-maturity and available-for-sale
securities (sum of items 10 through 16) 3170 82,596 17.
Memorandum (to be completed only by banks with IBFs and other "foreign"
offices)
Dollar Amounts in Thousands RCON Bil Mil Thou
EITHER
1. Net due from the IBF of the domestic
offices of the reporting bank............3051 N/A M.1.
OR
2. Net due to the ISF of the domestic
offices of the reporting bank 3059 N/A M.2.
22
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Schedule RC-I--Selected Assets and Liabilities of IBFS
To be completed only by banks with IBFs and other "foreign" offices.
CALL Date: 3/31/96 ST-BK: 09-1563
Dollar Amounts in Thousand RCFN Bil Mil Thou
1. Total ISF assets of the consolidated
bank (component of Schedule RC, item 12) 2133 N/A 1.
2. Total ISF Loans and lease financing
receivables (component of schedule RC-C,
part 1, item 12, column A) 2076 N/A 2.
3. IBF commercial and industrial loans
(component of schedule RC-C, part 1, item 4,
column A) 2077 N/A 3.
4. Total IBF liabilities (component of
Schedule RC, item 21) 2898 N/A 4.
5. IBF deposit liabilities due to banks,
including other IBFs (component of Schedule
RC-E, part 11, items 2 and 3) 2379 N/A 5.
6. Other IBF deposit liabilities (component
of Schedule RC-E, part II, items 1, 4, 5,
and 6) 2381 N/A 6.
Schedule RC-K--Quarterly Averages(l)
C455
Dollar Amounts in Thousand Bil Mil Thou
ASSETS
1. Interest-bearing balances due from
depository institutions RCFD 3381 32,508 1.
2. U.S. Treasury securities and U.S.
Government agency and corporation obligations(2) RCFD 3382 228,044 2.
3. Securities issued by states and political
subdivisions in the U.S.(2) RCFD 3383 521 3.
4. a. Other debt securities(2) RCFD 3647 14,831 4.a.
b. Equity securities(3) (includes investments
in mutual funds and Federal Reserve stock) . RCFD 3648 10 4.b.
5. Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and of its Edge and Agreement
subsidiaries, and in IBFs RCFD 3365 247,566 5.
6. Loans:
a. Loans in domestic offices:
(1) Total loans RCON 3360 1,906,670 6.a.(1)
(2) Loans secured by real estate RCON 3385 1,363,876 6.c.(2)
(3) Loans to finance agricultural production
and other loans to farmers RCON 3386 130 6.a.(3)
(4) Commercial and industrial Loans RCON 3387 428,777 6.a.(4)
(5) Loans to individuals for household,
family, and other personal expenditures RCON 3388 114,017 6.a.(5)
b. Total loans in foreign offices, Edge and
Agreement subsidiaries, and IBFs RCON 3360 0 6.b.
7. Trading assets RCFD 3401 0 7.
8. Lease financing receivables (net of unearned
income) RCFD 3484 0 8.
9. total assets(4) RCFD 3386 2,693,316 9.
LIABILITIES
10. Interest-bearing transaction accounts in
domestic offices (NOW accounts, ATS accounts,
and telephone and preauthorized transfer
accounts) (exclude demand deposits) RCON 3485 137,426 10.
11. Nontransaction accounts in domestic
offices:
a. Money market deposit accounts (MMDAS) RCON 3486 423,512 11.a.
b. Other savings deposits RCON 3487 353,387 11.b.
c. Time certificates of deposit of $100,000
or more RCON 3345 90,663 11.c.
d. All other time deposits RCON 3469 563,912 11.d
12. Interest-bearing deposits in foreign
offices, Edge and Agreement subsidiaries,
and IBFs RCFN 3404 0 12.
13. Federal funds purchased and securities
sold under agreements to repurchase in domestic
offices of the bank and of its Edge and Agreement
subsidiaries, and in IBFs RCFD 3553 309,685 13.
14. Other borrowed money RCFD 3355 22 14.
(1) For all items, banks have the option of reporting either (1) an average
of daily figures for the quarter, or
(2) An average of weekly figures (i.e., the Wednesday of each week of the
quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt
securities (not held for trading) at amortized cost, equity securities
with readily determinable fair values at the Lower of cost or fair value,
and equity securities without readily determinable fair values at
historical cost.
23
LEGAL TITLE OF BANK: FIRST UNION BANK OF CONNECTICUT
ADDRESS: PO BOX 700
CITY, STATE Zip: STAMFORD, CT 06904
FDIC CERTIFICATE NO.: 09230
CALL DATE: 3/31/96 ST-BK: 09-1563
Schedule RC-L--Off-Balance Sheet Items
PLEASE read carefully the instructions for THE preparation of schedule
RC-L. Some of the amounts reported in Schedule RC-L are regarded as volume
indicators and not necessarily as measures of risk.
Dollar Amounts in Thousands RCFD Bil Mil Thou
1. Unused commitments:
a. revolving, open-end lines secured
by 1-4 family residential properties, e.g.
, home equity Lines 3814 162,550 1.a.
b. Credit card Lines 3815 0 1.b.
c. commercial real estate, construction,
and Land development:
(1) Commitments to fund loans secured by
real estate 3816 5,049 1.c.(1)
(2) Commitments to fund loans not secured
by real-estate 6550 0 1.c.(2)
d. Securities underwriting 3817 0 1.d.
e. Other unused commitments 3818 161,018 1.e.
2. financial standby letters of credit and
foreign office guarantees 3819 32,572 2.
a. Amount of financial standby letters of
credit conveyed to others RCFD 3820 0 2.a.
3. Performance standby letters of credit and
foreign office guarantees 3821 1,663 3.
a. Amount of performance standby letters of
credit conveyed to others RCFD 3822 0 3.a.
4. Commercial and similar letters of credit 3411 3,412 4.
5. Participators in acceptances (
as described in the instructions)
conveyed to others by the reporting bank 3428 0 5.
6. Participation in acceptances (as
described in the instructions) acquired
by the reporting (nonaccepting) bank 3429 0 6.
7. Securities borrowed 3432 0 7.
8. Securities lent (including customers'
securities lent where the customer is
indemnified against Loss by the reporting
bank) 3433 0 8.
9. Loans transferred (i.e., sold or swapped)
with recourse that have been treated as sold
for Call Report purposes:
a. FNMA and FHLMC residential mortgage
loan pools:
(1) Outstanding principal balance of
mortgages transferred as of the report date 3650 0 9.a.(1)
(2) Amount of recourse exposure on these
mortgages as of the report date 3651 0 9.a.(2)
b. Private (nongovernment-issued or
- -guaranteed) residential mortgage Loan
pools:
(1) Outstanding principal balance of
mortgages transferred as of the report date 3652 0 9.b.(1)
(2) Amount of recourse exposure on these
mortgages as of the report date 3653 0 9.b.(2)
c. Farmer Mac agricultural mortgage loan
pools:
(1) outstanding principal balance of
mortgages transferred as of the report date 3654 0 9.c.(1)
(2) Amount of recourse exposure on these
mortgages as of the report date 3655 0 9.c.(2)
d. Small business obligations transferred
with recourse under Section 208 of the
Riegle Community Development and Regulatory
Improvement Act of 1994:
(1) Outstanding principal balance of small
business obligations transferred as of the
report date A249 0 9.d.(1)
(2) Amount of retained recourse on these
obligations as of the report date A250 0 9.d.(2)
10. When-issued securities:
a. Gross commitments to purchase 3434 0 10.a.
b. Gross commitments to sell 3435 0 10.b.
11. Spot foreign exchange contracts 8765 0 11.
12. All other off-balance sheet
liabilities (exclude off-balance sheet
derivatives) (itemize and describe each
component of this item over 25% of
Schedule RC, item 28, "total equity capital") 3430 0 12.
a TEXT 3555 RCFD 3555 12.a.
b.TEXT 3556 RCFD 3556 12.b.
c TEXT 3557 RCFD 3557 12.c.
d TEXT 3558 RCFD 3558 12.d.
24
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Schedule RC-L--Continued
CALL Date: 3/31/96 ST-BK: 09-1563
Dollar Amounts in Thousands RCFD Bil Mil Thou
13. All other off-balance sheet assets (exclude off-balance sheet
derivatives) (itemize and describe each component of this item over
25% of schedule RC, item 28, "total equity capital") 5591 0 13.
TEXT 5592 RCFD 5592 13.a.
TEXT 5593 RCFD 5593 13.b.
TEXT 5594 RCFD 5594 13.c.
TEXT 5595 RCFD 5595 13.d.
C461
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thous Interest Foreign Equity Commodity
Rate Exchange Derivative and Other
Contracts Contracts Contracts Contracts
Off-balance Sheet
Derivatives Position
Indicators Tril Bil Tril Bil Tril Bil Tril Bil
Mil Thou Mil Thou Mil Thou Mil Thou
14. Gross amounts
(e.g., notional amounts)
(for each column, sum
of item 14.a through
14.e must equal sum of
item 15, 16.a, aM 16.b):
a. Futures contracts 0 0 0 0
14.a.
RCFD 8693 RCFD 8694 RCFD 8695 RCFD
8696
b. Forward contracts 3,181 0 0 0
14.b.
RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700
c. Exchange-traded
option contracts:
(1) Written options 0 0 0
014.c.(1)
RCFD 8701 RCFD 8702 RCFD 8703 RCFD
8704
(2) Purchased options 0 0 0
014.c.(2)
RCFD 8705 RCFD 8706 RCFD 8707 RCFD
8708
d. Over-the-counter option contracts:
(1) Written options 0 0 0
014.d.(1)
RCFD 8709 RCFD 8710 RCFD 8711 RCFD
8712
(2) Purchased options 8,214 0 0 0
14.d.(2) .
RCFD 8713 RCFD 8714 RCFD 8715 RCFD
8716
e. Swaps 67,057 0 0 0
14.e.
RCFD 3450 RCFD 3826 RCFD 8719 RCFD 8720
15. Total gross notional
amount of derivative
contracts held for trading 0 0 0 0 15.
RCFD A126 RCFD A127 RCFD 8723 RCFD
8724 16.
Total gross notional
amount of derivative
contracts held for purposes
other than trading:
a. Contracts market to market 0 0 0 0
16.a.
RCFD 8725 RCFD 8726 RCFD 8727 RCFD
8728
b. Contracts not marked
to market 78,452 0 0
0 16.b.
RCFD 8729 RCFD 8730 RCFD 8731 RCFD
8732
25
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
SCHEDULE RC-L--Continued
CALL Date: 3/31/96 ST-BK: 09-1563
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Foreign Equity Commodity and
Rate Exchange Derivative Other
Contracts Contracts Contracts Contracts
17. Gross fair values of
derivative contracts:
a. Contracts held for
trading:
(1) Gross positive
fair value 8733 0 8734 0 8735 0 8736 0 17.a.(1)
(2) Gross negative
fair value 8737 0 8738 0 8739 0 8740 0 17.a.(2)
b.Contracts held for purposes other than trading that are marked to market:
(1) Gross positive
fair value 8741 0 8742 0 8743 0 8744 0 17.b.(1)
(2) Gross negative
fair value 8745 0 8746 0 8747 0 8748 0 17.b.(2)
c.Contracts held for purposes other than trading that are not marked to
market:
(1) Gross positive
fair value 8749 1,732 8750 0 8751 0 8752 0 17.c.(1)
(2) Gross negative
fair value 8753 62 8754 0 8755 0 8756
0 17.c.(2)
MEMORANDA Dollar Amounts in Thousands RCFD Bil Mil Thou
1.-2. Not applicable
3. Unused commitments with an original
maturity exceeding one year that are
reported in Schedule RC-L, items l.a
through l.e, above (report only the unused
portions of commitments that are fee paid
or otherwise legally binding) 3833 144,805 M.3.
a. Participation in commitments with an
original maturity exceeding one year
conveyed to others RCFD 3834 0 M.3.a.
4. To be completed only by banks with
$1 billion or more in total assets:
Standby letters of credit and foreign
office guarantees (both financial and
performance) issued to non-U.S. addressees
(domicile) included in schedule RC-L,
items 2 and 3, above 3377 139 M.4.
5. Installment loans to individuals for
household, family, and other personal
expenditures that have been securitized
and sold without recourse (with servicing
retained), amounts outstanding by type
of loan:
a. Loans to purchase private passenger
automobiles (to be completed for the
September report only) 2741 N/A M.5.a.
b. Credit cards and related plans
(TO BE COMPLETED QUARTERLY) 2742 0 M.5.b.
c. All other consumer installment credit
(including mobile home loans)(to be
completed for the September report only) 2743 N/A M.5.c.
26
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Schedule RC-14--Memoranda
Call Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RC-17
C465
Dollar Amounts in Thousands RCFD Bil Mil Thou
1. Extensions of credit by the reporting
bank to its executive officers, directors,
principal shareholders, and their related
interests as of the report date:
a. Aggregate amount of all extensions of
credit to all executive officers, directors,
principal shareholders, and their related
interests 6164 15 1.a.
b. Number of executive officers, directors,
and principal shareholders to whom the
amount of all extensions of credit by the
reporting bank (including extensions of credit
to
related interests) equals or exceeds the lesser
of $500,000 or 5 percent Number
of total capital as defined for this purpose
in agency regulations. RCFD 6165 0 1.b.
2. federal funds sold and securities
purchased under agreements to resell
with U.S. branches and agencies of
foreign banks(l) (included in schedule RC,
items 3.a and 3.b) 3405 0 2.
3. Not applicable.
4. Outstanding principal balance of
1-4 family residential mortgage Loans
serviced for others (include both
retained servicing and purchased servicing):
a. Mortgages serviced under a GNMA contract 5500 0 4.a.
b. Mortgages serviced under a FHLMC contract:
(1) Serviced with recourse to servicer 5501 0 4.b.(1)
(2) Serviced without recourse to servicer 5502 48,228 4.b.(2)
c. Mortgages serviced under a FNMA contract:
(1) Serviced under a regular option contract 5503 13,351 4.c.(1)
(2) Serviced under a special option contract 5504 0 4.c.(2)
d. Mortgages serviced under other servicing
contracts 5505 0 4.d.
5. To be completed only by banks with $1
billion or more in total assets:
Customers, liability to this bank on
acceptances outstanding (sum of items
5.a and 5.b must equal Schedule RC, item 9):
a. U.S. addressees (domicile) 2103 7,307 5.a.
b. Non-U.S. addressees (domicile) 2104 0 5.b.
6. intangible assets:
a. Mortgage servicing rights 3164 550 6.a.
b. Other identifiable intangible assets:
(1) Purchased credit card relationships 5506 0 6.b.(1)
(2) All other identifiable intangible
assets 5507 0 6.b.(2)
c. Goodwill 3163 37,601 6.c.
d. Total (sum of items 6.a through 6.c)
(must equal schedule RC, item 10) 2143 38,151 6.d.
e. Amount of intangible assets (included
in item 6.b.(2) above) that have been
grandfathered or are otherwise
qualifying for regulatory capital
purposes 6442 0 6.e.
7. Mandatory convertible debt, net
of common or perpetual preferred stock
dedicated to redeem the debt 3295 0 7.
(1) Do not report federal funds sold and securities purchased under
agreements to resell with other commercial banks in the U.S. in this item.
27
LEGAL TITLE OF BANK: FIRST UNION BANK OF CONNECTICUT
ADDRESS: PO BOX 700
CITY, STATE Zip: STAMFORD, CT 06904
FDIC Certificate NO.: 09230
Call Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RC-17
Schedule RC-M--Continued
Dollar Amounts in Thousand Bil Mil Thou
8. a. Other real estate owned:
(1) Direct and indirect investments
in real estate ventures RCFD 5372 0 8.a.(1)
(2) All other real estate owned:
(a) Construction and land development
in domestic offices RCON 5508 0 8.a.(2)(a)
(b) Farmland in domestic offices RCON 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties
in domestic offices RCON 5510 2,257 8.a.(2)(c)
(d) multifamily (5 or more) residential
properties in domestic offices RCON 5511 129 8.a.(2)(d)
(e) Nonfarm nonresidential properties
in domestic offices RCON 5512 2,670 8.a.(2)(e)
(f) In foreign offices RCON 5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(l) and 8.a.
(2)) (must equal schedule RC, item 7) RCFD 2150 5,056 8.a.(3)
b. Investments in unconsolidated
subsidiaries and associated companies:
(1) Direct and indirect investments in
real estate ventures RCFD 5374 0 8.b.(1)
(2) All other investments in
unconsolidated subsidiaries and
associated companies RCFD 5375 86 8.b.(2)
(3) Total (sum of items 8.b.(l) and
8.b.(2)) (must equal schedule RC, item 8) RCFD 2130 86 8.b.(3)
c. total assets of unconsolidated
subsidiaries and associated companies RCFD 5376 86 8.c.
9. Noncumulative perpetual preferred
stock and related surplus included in
Schedule RC, item 23, "Perpetuate
preferred stock and related surplus" RCFD 3778 0 9.
10. Mutual fund and annuity sales in
domestic offices during the quarter
(include proprietary, private table,
and third party products):
a. Money market funds RCON 6441 30,520 10.a.
b. Equity securities funds RCON 8427 2,258 10.b.
c. Debt securities funds RCON 8428 1,913 10.c.
d. Other mutual funds RCON 8429 304 10.d.
e. Annuities RCON 8430 0 10.e.
f. Sales of proprietary mutual funds
and annuities (included in items 10.a
through 10.e above) RCON 8784 34,292 10.f
Memorandum Dollar Amounts in Thousands RCFD Bil Mil Thou
1. Interbank holdings of capital instruments (to be completed for the
December report only):
a. reciprocal holdings of banking
organizations, capital instruments.... 3836 N/A M.1.a.
b. Nonreciprocate holdings of banking
organizations, capital instruments...... 3837 N/A M.1.b.
28
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets
Call Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RC-19
The FFIEC regards the information reported in
all of memorandum item 1, in items 1 through 10,
column A, and in Memorandum items 2 through 4,
column A, as confidential.
C470
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
Dollar Amounts in Thous. RCFD Bil RCFD Bil RCFD Bil
Mil Thou Mil Thou Mil Thou
1. Loans secured by real
estate:
a. To U.S. addressees
domicile) 1245 27,692 1246 10,912 1247 17,596
1.a.
b. To non-U.S. addressees
(domicile) 1248 0 1249 0 1250 0 1.b.
2. Loans to depository
institutions and acceptances
of other banks:
a. To U.S. banks and other
U.S. depository
institutions 5377 0 5378 0 5379 0 2.a.
b. To foreign banks 5380 0 5381 0 5382 0 2.b.
3.Loans to finance
agricultural production
and other loans to
farmers 1594 0 1597 0 1583 0 3.
4. Commercial and industrial Loans:
a. To U.S. addressees
(domicile) 1251 4,828 1252 382 1253 10,019 4.a.
b. To non-U.S. addressees
(domicile) 1254 0 1255 0 1256 0 4.b.
5.Loans to individuals
for household, family,
and other personal
expenditures:
a. Credit cards and
related plans 5383 0 5384 0 5385 0 5.a.
b. Other (includes single
payment, installment,
and all student loans) 5386 4,254 5387 1,662 5388 0 5.b.
6. Loans to foreign
governments and official
institutions 5389 0 5390 0 5391 0 6.
7. All other Loans 5459 0 5460 0 5461 0 7.
8. Lease financing
receivables:
a. Of U.S. addressees
(domicile) 1257 0 1258 0 1259 0 8.a.
b. Of non-U.S. addressees
(domicile) 1271 0 1272 0 1791 0 8.b.
9. Debt securities and
other assets (exclude
other real estate owned
and other repossessed
assets) 3505 0 3506 0 3507 0
9.
Amounts reported in items 1 through 8 above include guaranteed and
unguaranteed portions of past due and nonaccrual loans and leases.
Report in item 10 below certain guaranteed loans and leases that have
already been included in the amounts reported in items 1 through 8.
RCFD Bil RCFD Bil RCFD Bil
Mil Thou Mil Thou Mil Thou
10. Loans and leases
reported in items 1
through 8 above which
are wholly or
partially guaranteed
by the U.S. Government 5612 1,753 5613 1,438 5614 0 10.
a. Guaranteed portion
of loans and leases
included in item 10
above 5615 1,753 5616 1,438 5617 0 10.a.
29
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO Box 700
City, State Zip: Stamford, CT 06904
FDIC Certificate No.: 09230
CALL Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RC-20
Schedule RC-N-Continued
C473
(Column A) (Column B) (Column C)
Past due Past due 90 nonaccrual
30 through 89 days or more
days and still and still
Memoranda accruing
Dollar Amounts in Thous. RCFD Bil RCFD Bil RCFD Bil
Mil Thou Mil Thou Mil Thou
1. Restructured loans and
Leases included in Schedule
RC-N, items 1 through 8, above
(and not reported in schedule
RC-C, part I, Memorandum
item 2) 1658 0 1659 0 1661 0 M.1.
2. Loans to finance commercial
real estate, construction, and
land development activities
(not secured by real estate)
included in Schedule RC-N,
items 4 and 7, above 6558 83 6559 20 6560 0 M.2.
3. Loans secured by real estate
in domestic offices RCON Bil RCON Bil RCON Bil
Mil Thou Mil Thou Mil Thou
(included in Schedule RC-N,
item 1, above):
a. Construction and land
development 2759 0 2769 0 3492 816 M.3.a.
b. Secured by farmland 3493 0 3494 0 3495 0 M.3.b.
c. Secured by 1-4 family
residential properties:
(1) revolving, open-end
Loans secured by 1-4 family
residential properties and
extended under lines of
credit 5398 3,992 5399 2,395 5400 332 M.3.c.(1)
(2) All other loans secured
by 1-4 family residential
properties 5401 1,434 5402 8,295 5403 1,893 M.3.C.(2)
d. Secured by multifamily
(5 or more) residential
properties 3499 2,104 3500 0 3501 0 M.3.d.
e. Secured by nonfarm
nonresidential properties 3502 20,162 3503 222 3504 14,555 M.3.e.
(Column A) (Column B)
Past due 30 Past due 90
through 89 days days or more
RCFD Bil RCFD Bil
Mil Thou Mil Thou
4. Interest rate, foreign
exchange rate, and other
commodity and equity contracts:
a. Book value of amounts
carried as assets 3522 0 3528 0 M.4.a.
b. Replacement cost of
contracts with a
positive replacement cost 3529 0 3530 O M.4.b.
30
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Call Date: 3/31/96 ST-BK: 09-1563
Schedule RC-0--Other Data for Deposit Insurance Assessments
C475
Dollar Amounts in Thousands RCON Bil Mil Thou
1. Unposted debits (see instructions):
a. actual amount of all unposted debits 0030 N/A 1.a.
OR
b. Separate amount of unposted debits:
(1) actual amount of unposted debits to
demand deposits 0031 0 1.b.(1)
(2) actual amount of unposted debits to
time and savings deposits(l) 0032 0 1.b.(2)
2. Unposted credits (see instructions):
a. Actual amount of all unposted credits 3510 3,845 2.a.
OR
b. Separate amount of unposted credits:
(1) Actual amount of unposted credits to
demand deposits 3512 N/A 2.b.(1)
(2) actual amount of unposted credits to
time and savings deposits(l) 3514 N/A 2.b.(2)
3. Uninvested trust funds (cash) held in
bank's own trust department (not included
in total deposits in domestic offices) 3520 0 3.
4. Deposits of consolidated subsidiaries
in domestic offices and in insured branches
in Puerto Rico and U.S. territories and
possessions (not included in total deposits):
a. Demand deposits of consolidated
subsidiaries 2211 0 4.a.
b. Time and savings deposits(l) of
consolidated subsidiaries 2351 0 4.b.
c. Interest accrued and unpaid on deposits
of consolidated subsidiaries 5514 0 4.c.
5. Deposits in insured branches in Puerto
Rico and U.S. territories and possessions:
a. Demand deposits in insured branches
(included in Schedule RC-E, Part II) 2229 0 5.a.
b. Time and savings deposits(l) in
insured branches (included in Schedule
RC-E, Part II) 2383 0 5.b.
c. Interest accrued and unpaid on deposits
in insured branches (included in Schedule
RC-G. item l.b) 5515 0 5.c.
Item 6 is not applicable to state
nonmember banks that have not been
authorized by the
Federal Reserve to act as pass-through
correspondents.
6. Reserve balances actually passed
through to the federal Reserve by the
reporting bank on behalf of its respondent
depository institutions that are also
reflected as deposit liabilities
of the reporting bank:
a. Amount reflected in demand deposits
(included in schedule RC-E, item 4 or 5,
column B) 2314 0 6.a.
b. Amount reflected in time and
savings deposits(l) (included in
Schedule RC-E, item 4 or 5, column A
or C, but not column B) 2315 0 6.b.
7. Unamortized premiums and discounts
on time and savings deposits:(l)
a. Unamortized premiums 5516 0 7.a.
b. Unamortized discounts 5517 0 7.b.
8. To be completed by banks with
"Oakar deposits."
Total --Adjusted Attributable
Deposits" of All institutions
acquired under Section 5(d)(3)
of the Federal Deposit Insurance
Act (from most recent FDIC Oakar
Transaction Worksheet(s) 5518 206,288 8.
9. Deposits in LifeLine accounts............. 5596 9.
10.Benefit-responsive "Depository
Institution Investment Contracts"
(included in total deposits in
domestic offices) 8432 0 10.
(1) For FDIC insurance assessment purposes, "time and savings deposits"
consists of nontransaction accounts and all transaction accounts other than
demand deposits.
31
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
CALL Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RC-22
Schedule RC-0--Continued
Dollar Amounts in Thousands RCONBil Mil Thou
11. Adjustments to demand deposits in
domestic offices reported in schedule
RC-E for certain reciprocal demand balances:
a. Amount by which demand deposits would
be reduced if reciprocal demand balances
between the reporting bank and savings
associations were reported on a net basis
rather than a gross basis in Schedule RC-E 8785 0 11.a.
b. Amount by which demand deposits would
be increased if reciprocal demand balances
between the reporting bank and U.S. branches
and agencies of foreign banks were reported
on a gross basis rather than a net basis
in schedule RC-E A181 0 11.b.
c. Amount by which demand deposits would be
reduced if cash items in process of collection
were included in the calculation of net
reciprocal demand balances between the
reporting bank and the domestic offices of
U.S. banks and savings associations in
Schedule RC-E A182 0 11.c.
Memoranda (to be completed each quarter except as noted)
Dollar Amounts in Thousands RCONBil Mil Thou
1. Total deposits in domestic offices of the bank (sum of Memorandum items
1.a.(1) and 1.b.(1) must equal Schedule RC, item 13.a):
a. Deposit accounts of $100,000 or less:
(1) Amount of deposit accounts of
$100,000 or less 2702 1,528,422 M.1.a.(1)
(2) Number of deposit accounts of
$100,000 or less (to be completed Number
for the June report only) RCON 3779 N/A M.1.a.(2)
b. Deposit accounts of more than
$100,000
(1) Amount of deposit accounts of more
than $100,000 2710 524,949 M.1.b.(1)
(2) Number of deposit accounts of Number
more than $100,000 RCON 2722 2,261 M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by
multiplying the number of deposit accounts of more than $100,000 reported in
Memorandum item 1.b.(2) above by $100,000 and subtracting the result from the
amount of deposit accounts of more than $100,000 reported in Memorandum item
1.b.(1) above.
Indicate in the appropriate box
at the right whether your bank has a
method or procedure for determining a
better estimate of uninsured deposits YES NO
than the estimate described above 6861 X M.2.a.
b. If the box marked YES has been checked,
report the estimate of uninsured deposits
determined by using your bank's method or RCON Bil Mil Thou
procedure 5597 N/A M.2.b.
Person to whom questions about the Reports of Condition and Income should be
directed: C477
THOMAS J. MEYER, VICE PRESIDENT
Name and Title (TEXT 8901)
(201 565-3401
Area code/phone number/extension (TEXT 8902)
32
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Call Date: 3/31/96 ST-SK: 09-1563 FFIEC 031
Page RC-23
Schedule RC-R--Regulatory Capital
This schedule must be completed by all banks as follows: Banks that
reported total assets of $1 billion or more in Schedule RC, item 12,
for June 30, 1995, must complete items 2 through 9 and Memoranda
items 1 and 2. Banks with assets of Less than $1 billion must complete
items 1 through 3 below or Schedule RC-R in its entirety, depending
on their response to item 1 below.
1. Test for determining the extent to which Schedule RC-R must be
completed. To be completed only by banks with total assets of less
than $1 billion. Indicate in the appropriate box at the right C480
whether the bank has total capital greater thank or equal YES NO
to eight percent of adjusted total assets RCFD6056 1.
For purposes of this test, adjusted total assets equals total-assets less
cash, U.S. Treasuries, U.S. Government agency obligations, and 80 percent of
U.S. Government-sponsored agency obligations plus the allowance for loan and
lease losses and selected off-balance sheet items as reported on schedule
RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to
complete items 2 and 3 below. If the box marked NO has been checked,
the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's
actual risk-based capital ratio is less than eight percent or that the
bank is not in compliance with the risk-based capital guidelines.
Items 2 and 3 are to be completed by all banks.
Dollar Amounts in Thousand
(Column A) (Column B)
Suborinated Debit(1) Other
and Intermediate Limited-Life
Term Preferred Stock Capital
Instruments
RCFD BiI Mil Thou RCFD Bil Mil Thou
2. Subordinated debt(l) and other limited-life capital instruments (original
weighted average maturity of at least five years) with a remaining maturity
of:
a. One year or Less 3780 0 3786 0 2.a.
b. Over one year through
two years 3781 0 3787 0 2.b.
c. Over two years through
three years 3782 0 3788 0 2.c.
d. Over three years through
four years 3783 0 3789 0 2.d.
e. Over four years through
five years 3784 0 3790 0 2.e.
f. Over five years 3785 0 3791 0 2.f.
3. Amounts used in calculating regulatory capital ratios (report amounts
determined by the bank for its own internal regulatory capital analyses):
RCFD Bil Mil Thou
a. Tier 1 capital 8274 216,604 3.a.
b. Tier 2 capital 8275 23,088 3.b.
c. Total risk-based capital 3792 239,692 3.c.
d. Excess allowance for loan and lease losses A222 28,259 3.d.
e. Risk-weighted assets A223 1,819,341 3.e.
f. "Average total assets" A224 2,648,212 3.f.
Items 4-9 and Memoranda items 1 and 2 are to be completed by banks that
answered NO to item 1 above and by banks with total assets of $1 billion or
more.
(Column A) (Column B)
Assets Credit Equiv-
Recorded agent Amount
on the of Off-Balance
Balance Sheet Sheet Items (2)
RCFD BiI Mil Thou RCFD Bil Mil Thou
4. Assets and credit equivalent amounts of off-balance sheet items
assigned to the Zero percent risk category:
a. Assets recorded on the balance sheet:
(1) Securities issued by, other
claims on, and claims
unconditionally guaranteed by,
the U.S. Government and its
agencies and other OECD central
governments 3794 196,089 4.a.(1)
(2) All other 3795 122,556 4.a.(2)
b. Credit equivalent amount of off-balance sheet items
3796 4.b.
(1) Exclude mandatory convertible debt reported in ScHedule RC-M, item 7.
(2) Do not report in column 8 the risk-weighted amount of assets reported
in column A.
33
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Call Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RC-24
Schedule RC-R--Continued
Dollar Amounts in Thousand
(Column A) (Column B)
Assets Credit Equiv-
Recorded agent Amount
on the of Off-Balance
Balance Sheet Sheet Items (1)
RCFD Bil Mil Thou RCFD Bil Mil Thou
5. Assets and credit equivalent
amounts of off-balance sheet items
assigned to the 20 percent risk
category:
a. Assets recorded on the bal-
ance sheet:
(1) Claims conditionally guaranteed by
the U.S. Government and its agencies
and other OECD central governments
3798 42,311 5.a.(1)
(2) Claims collateratized by securities
issued by the U.S. Government and its
agencies and other OECM central
governments; by securities issued
by U.S. Government-sponsored agencies;
and by cash on deposit
3799 0 5.a.(2)
(3) All other 3800 286,865 5.a.(3)
b. Credit equivalent amount
of off-balance sheet items 3801 2,349 5.b.
6. Assets and credit equivalent
amounts of off-balance sheet items
assigned to the 50 percent risk category:
a. Assets recorded on the
balance sheet 3802 735,331 6.a.
b. Credit equivalent amount
of off-balance sheet items 3803 2,349 6.b.
7. Assets and credit equivalent
amounts of off-balance sheet
items assigned to the 100
percent risk category:
a. Assets recorded on the
balance sheet 3804 1,348,236 7.a.
b. Credit equivalent amount
of off-balance sheet items 3805 106,488 7.b.
8. On-balance sheet asset
values excluded from the
calculation of the risk-
based capital ratio(2) 3806 (185) 8.
9. Total assets recorded on
the balance sheet (sum of
items 4.a, 5.a, 6.a,
7.a, and 8, column A)
(must equal Schedule RC, item
12 plus items 4.b and 4.c) 3807 2,731,203 9.
Memoranda
Dollar Amounts in Thousands RCFD Bil Mil Thou
1. Current credit exposure across all off-balance sheet
derivative contracts covered by the risk-based capital
standards 8764 1,670 M.1.
With a remaining maturity of
(Column A) (Column B) (COLUMN C)
One year or Less Over one year Over five years
through five years
RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou
2. Notional principal amounts of
off-balance sheet derivative contracts(3):
a. Interest rate contracts
3809 1,000 8766 48,257 8767 29,195 M.2.a.
b. Foreign exchange contracts
3812 0 8769 0 8770 0 M.2.b.
c. Gold contracts
8771 0 8772 0 8773 0 M.2.c.
d. Other precious metals contracts
8774 0 8775 0 8776 0 M.2.d.
e. Other commodity contracts
8777 0 8778 0 8779 0 M.2.e.
f. Equity derivative contracts
A0000 0 A001 0 A002 0 M.2.f.
(1) Do not report in column B the risk-weighted amount of assets reported in
column A.
(2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of these
securities in items 4 through 7 above. Item 8 also includes on-balance sheet
asset values (or portions thereof) of off-balance sheet interest rate, foreign
exchange rate, and commodity contracts and those contracts (e.g., futures
contracts) not subject to risk-based capital. Exclude from item 8 margin
accounts and accrued receivables as well as any portion of the allowance for
loan and lease losses in excess of the amount that may be included in Tier 2
capital.
(3) Exclude foreign exchange contracts with an original maturity of 14 days
or less and all futures contracts.
34
Legal Title of Bank: FIRST UNION BANK OF CONNECTICUT CALL
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 09230
Call Date: 3/31/96 ST-BK: 09-1563 FFIEC 031
Page RC-25
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on March 31, 1996
FIRST UNION BANK OF CONNECTICUT STAMFORD CONNECTICUT
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit
a brief narrative statement on the amounts reported in the
Reports of Condition and Income. This optional statement will
be made available to the public, along with the publicly available
data in the Reports of Condition and Income, in response to any
request for individual bank report data. However, the information
reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to
the public. BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT
SHOULD ENSURE THAT THE STATEMENT DOES NOT CONTAIN THE
NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS,
REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS
IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING
TO HAVE MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR
CUSTOMERS. Banks choosing not to make a statement may check the "No
comment" box below and should make no entries of any kind in the
space provided for the narrative statement; i.e., DO NOT enter in
this space such phrases as "No statement," "Not applicable," "N/A,"
"No comment," and
"None."
The optional statement must be entered on this sheet. The statement
should not exceed 100 words. Further, regardless of the number of words,
the statement must not exceed 750 characters, including punctuation,
indentation, and standard spacing between words and sentences. If any
submission should exceed 750 characters, as defined, it will be truncated
at 750 characters with no notice to the submitting bank and the truncated
statement will appear as the bank's statement both on agency computerized
records and in computer-file releases to the public.
All information furnished by the bank in the narrative statement
must be accurate and not misleading. Appropriate efforts shall be
taken by the submitting bank to ensure the statement's accuracy.
The statement must be signed, in the space provided below, by a
senior officer of the bank who thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted
for the data reported in the Reports of Condition and Income, the
existing narrative statement will be deleted from the files, and
from disclosure; the bank, at its option, may replace it with a
statement, under signature, appropriate to the amended data.
The optional narrative statement will appear in agency records and in
release to the public exactly as submitted (or amended as described in
the preceding paragraph) by the management of the bank (except for the
truncation of statements exceeding the 750-character limit described
above). THE STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE
SUPERVISORY AGENCIES FOR ACCURACY OR RELEVANCE. DISCLOSURE OF THE
STATEMENT SHALL NOT SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY HAS
VERIFIED OR CONFIRMED THE ACCURACY OF THE INFORMATION CONTAINED THEREIN. A
STATEMENT TO THIS EFFECT WILL APPEAR ON ANY PUBLIC RELEASE OF THE
OPTIONAL STATEMENT SUBMITTED By THE MANAGEMENT OF THE REPORTING BANK.
No comment x (RCON 6979) C471 I C472
BANK MANAGEMENT STATEMENT (please type of print clearly):
(TEXT 6980)
/s/ Anthony R. Burriesci
Signature of Executive officer of Bank Date of Signature
35
Legal title of Bank:FIRST UNION BANK OF CONNECTICUT
Address: PO BOX 700
City, State Zip: STAMFORD, CT 06904
FDIC Certificate No.: 3 0
Call Date: 3/31/96 ST-Bk: 09-1563
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
- ----------------------------------------------------------------------
NAME AND ADDRESS OF BANK OMB No. For OCC: 1557-0081
OMB No. For FDIC: 3064-0052
OMS No. For Federal Reserve: 7100-0036
Expiration Date: 3/31/96
PLACE LABEL HERE SPECIAL REPORT
(Dollar Amounts in Thousands)
CLOSE OF BUSINESS FDIC Certificate Number
DATE
3/31/96 09230 C-700
LOANS TO EXECUTIVE OFFICERS (Complete as of each call Report Date)
- ------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but
does not constitute a part of the Report of Condition. With each Report of
Condition, these Laws require all banks to furnish a report of all loans or
other extensions of credit to their executive officers made since the date
of the previous Report of Condition. Data regarding individual Loans or other
extensions of credit are not required. If no such loans or other extensions
of credit were made during the period, insert "none" against subitem (a).
(Exclude the first $15,000 of indebtedness of each executive officer under
bank credit card plan.) See Sections 215.2 and 215.3 of Title 12 of the Code
of Federal Regulations (Federal Reserve Board Regulation 0) for the
definitions of "executive officer" and "extension of credit", "respectively."
Exclude loans and other extensions of credit to directors and principal
shareholders who are not executive officers.
- -----------------------------------------------------------------------
a. Number of loans made to executive officers since the previous Call Report
date RCFD 3561 0 a.
b. Total dollar amount of above loans (in thousands of dollars)
RCFD 3562 0 b.
c. Range of interest charged on above loans
(example: 9 3/4% = 9.75) RCFD 7701 0.00 % to RCFD 7702 0.00 % c.
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT
/s/ Anthony R. Burriesci
DATE (Month, Day, Year)
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903)
THOMAS J. MEYER, VICE PRESIDENT
AREA CODE/PHONE NUMBER/EXTENION
(TEXT 8040)
(201) 565-3401
DIC 8040/53 (6-95)
36
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1996, CONSOLIDATED FINANCIAL STATEMENTS OF JEFFERSON CASINO CORPORATION AND
ITS SUBSIDIARY CASINO MAGIC OF LOUISIANA, CORP. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 37,816,861
<SECURITIES> 0
<RECEIVABLES> 18,591
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 38,200,972
<PP&E> 82,558,598
<DEPRECIATION> 0
<TOTAL-ASSETS> 145,363,446
<CURRENT-LIABILITIES> 5,203,488
<BONDS> 115,000,000
0
0
<COMMON> 0
<OTHER-SE> 20,166,071
<TOTAL-LIABILITY-AND-EQUITY> 145,363,446
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 20,047
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 739,283
<INCOME-PRETAX> (759,330)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (759,330)
<EPS-PRIMARY> (759.33)
<EPS-DILUTED> (759.33)
</TABLE>
